Evolution of Go to Market Strategy

Group 02
Akshara Meena | Sandeep N | V Bhala Kumar | Arun Kumar V | Pala Sriram

Cisco
Systems
Established in 1984
Core competency:
Product design &
development
DOTCOM
BUBBLE

Target Markets
Enterprise accounts

Volume based to Value based Model

Suppliers

1300

Small and medium

business a/c

Channel Partners

Telecommunications

Product models
24000

Consumer Markets

420

6000

3000

33000

Agenda
Evolution of distribution channels

We will
take you
through

Channel Management by Cisco

Pyramid Model
VoIP business decision

Channel Evolution Initial

Phase
1984 - 1990s

1990 - 2000s
Direct
channel
75%
sales
Indirect
channel
25%
sales

Customers : one who had Ciscos technology

Evolution phase led to more direct control

2001 - 2003

End
Custom
er

Channel Evolution Growth

Phase
1984-1990s

1990 2000s

2001 - 2003

Direct channel
10%
sales
System Houses/IT
(turnkey solutions)
25 - 30%
sales
Telecommunication
(voice, video, data)
25 - 30%
Valuesales
Added Resellers
(networking prod &
serv)
30 - 35%
sales
Business expansion: Ciscos inability to expand in house sales
force rapidly
Channel partners were cost effective solution Divide & grow

End
Custom
er

Channel Evolution
Consolidation Phase
1984-1990s

1990 2000s

2001 - 2003

Direct channel
System Houses/IT
Telecommunication
2 Tier
Distributors

Custome
rs

Value Added
Resellers
Retailers
Online channels

Small customers requiring standardized products

Distributors provided logistics, stocking and order fulfilment
Emergence of online channel - Rise of many channel conflicts

Consum
ers

Evaluation of Channel ManagementVolume based

C
C

C
C
D
D

D
D

B
B
A
A

E
E
00

Grades
E-A Best
Best
ABCDE

EfficiencyB
Cost effectiveness is low
due to high volume and
box pushing
The extent of Capacity to
handle is high

C
C
D
D

B
B
A
A

E
E
00

Grades
E-A Best
Best
ABCDE

Effectiveness
A
Coverage, geographically
is high
Control is low due to
pressure of sales
Competence to handle
various issues are low

B
B
A
A

E
E
00

Grades
E-A Best
Best
ABCDE

Adaptabil D
ity

Flexibility to adopt to
new changes are low
and rigid
Vitality to any
problem will be very
low.

Volume based to
Value Based
RESELLER DISTRIBUTIONVOLUME BASED
TOTAL 6000 Resellers

RESELLER PYRAMID

GOLD

5%

-42%

RESELLER DISTRIBUTION- VALUE

BASED
TOTAL - 3000 reseller

15
%

DISC
OUNT

5%

90
%

SILVER- 40%
DISCOUNT

PREMIER 38% DISCOUNT

10
%

75
%

Evaluation of Channel ManagementValue based

C
C

C
C
D
D

D
D

B
B
A
A

E
E
00

Grades
E-A Best
Best
ABCDE

Efficienc B
y
Cost effectiveness is
higher comparatively to
volume based.
Capacity is reduced due
to 2001 dot com bubble.

C
C
D
D

B
B
A
A

E
E
00

Grades
E-A Best
Best
ABCDE

Effective
ness

B
B
A
A

E
E
00

Grades
E-A Best
Best
ABCDE

Coverage geographically is the

same or even less.
Control over the reseller is
usually high in the value based
model due to ratings based
discount.

Adaptabilit A
y
Flexibility and
Vitality would be at
the peak due to the
fact of value
engagement.

Pyramid Model- Go to market

strategy
Customer

A
B
C
D
E

Degree of
Channel
Interface

Product
Marketin
complex
g Support
ity

Top 100
enterprise
accounts+ 25
service
providers

Intense

Very high

No

125-10k
enterprise
accounts

High degree

high

Low

Next 10k- 100k

accounts

Medium
degree

Medium

Medium

1 million Small
business
customers

Low level

MediumLow

High

10 million
customers

No interface

Low

Very High

Sales
Model
CustomizedDirect
(high
margin)

Indirect +
direct sales
Standardize
dRetail/online
(less

Pyramid Model- Go to market

strategy
Volume to Value transition is in line for the above pyramid model
But now since it is moving to adjacent markets the transition is tough and the entire 5 tier
model has to be adjusted

Levels of
distribution

Touch

Reach

Margins

Experience

0-level

High

Low

High

Consultative

Low

High

Low

Transactional

B
C
D
E

1-level

2-level

VOIP Market
Ciscos IP technology targeted $750 billion telecommunications and equipment market
Single network infrastructure to transmit voice, data and video communications

Advantages of IP technology
1. Cheaper than traditional phone switches
2. Lower calling costs
3. Easier to manage
Disadvantages of IP technology
4. Data networks are less reliable than traditional telephone networks
5. Issues with voice quality and reliability existed

Cisco

Competitors

Data VARs

Voice VARs

Margins -12
to20%

Margins -20%+

Impact of competitors on Cisco

Growth rate dropped from 40% to 23%
Strategic moves to 5 other markets consistent with high technology and
high touch culture

Two paths available for Cisco

Low margins

Access to new
markets

Growth
Target path

High margins

High profits

Profit Target
path

Cisco

Comparison of Data and Voice VARs as

channel for VOIP
Use of Data VARs

Derived demand for VOIP

VOIP technology is highly
compatible
Difficult to reach target customers

Use of both Data and

Voice VARs

Reach will higher

Access to new product category
But margins should be negotiated

Recommendati
ons
Existing margin incentives should be kept as it is
Use the existing DATA VARs to provide a service bundle with incorporated
VOIP solution
Should also add the Certifications for Voice telephony in the value added
reseller pyramid

Thank
You

Partner program structure before

and after
Status
Premie
r

Silver

Status
Gold
Sales
Volume
Requiremen
ts

Sales
Volume
Requireme
nts
Discount
Level
Engineerin
g
requiremen
ts

Premier

38%

40%

Min 3
Min 8
Individua individua
ls
ls

Specializati
ons

Optional

Lab
Equipment

Demo
$ 40,000
Capabiliti per year
es

42%
Min 16
individu
als

$100,00
0 per
year

Discount
Level

Silver

Gold

None

38%

40%

Engineering
Min 3
Min 8
requiremen Individual individual
ts
s
s

42%
Min 16
individual
s

Specializati
ons

20 points

60 points 100 points

Lab
Equipment

Demo
Capabiliti
es

$ 40,000
per year

$100,000
per year

8*5

8*5

24*7

Support