What’s Channel Stuffing and Why is it Problematic?

May 29, 2010 by  Filed under: Sales 

How much do you actually sell? How profitable are your sales? How accurately can you forecast your sales results? How many ‘returns’ do you receive? How often do you need to discount? How often are you left with old stock? What are your sales cycles? Are your sales people rewarded on volume only or on margin, account growth, account retention, and customer satisfaction?

The answers to these and other key questions will tell you just how effective a sales force is functioning, how they measure their effectiveness, how they think about their business, their customers, their careers, and how likely they are to deliver profitable, sustainable sales results.

Through our observations quite a few companies still only measure their sales results by revenue not what they get back by way of product returns, faulty product recalls, lost business, margins, length of sales cycle, etc. This singular measurement approach doesn’t take into account the real cost of sale or the true sales results that the business is experiencing. This is a common mistake often made by start-ups and new businesses and if left unchecked can lead to unprofitable and unproductive behaviours and compromised relationships with business who take advantage of your situation.

Although not illegal, the challenges this business practice sets up can have catastrophic effects on business performance. How a business measures its sales results and how sales people are rewarded can have a dramatic impact on channel stuffing behaviours. For instance, if sales people are only rewarded on the volume of sales they send into the market, are tied to unrealistic sales quotas that do not match market expectations combined with no accountability for margins, returns, accurate forecasting, account maintenance and retention, then the ideal conditions for a channel stuffing are in play and we are in real trouble.

To avoid falling into this trap, you may like to analyse the following amongst other things:

  • True cost of sale
  • Margins and volume discounting arrangements
  • Returns policy
  • Product recall conditions
  • Trading terms and conditions
  • Sales incentive schemes
  • Sales performance expectations
  • Customer service policy
  • Length of sales cycle

With you and your sales people being very clear about what is expected and checking for any competing motivations which may create undesirable behaviors will help you from falling foul of the channel stuffing nightmare.

Remember everybody lives by selling something.

Sue Barrett endorses the propositions that ‘everybody lives by selling something’ and people buy from people they trust. Sue is founder and managing director of BARRETT, and specialises in 21st century sales training, sales coaching, sales leadership, sales capability, and sales culture transformation. Sue is one of the few prominent female voices commenting on sales today. You don’t have to be a sales person to benefit from her knowledge and insight. If you have an idea, capability, product, service or opportunity that you want to take to market then Sue says you need to be able to sell – ethically, honourably, and effectively. Sue practices as a coach, advisor, speaker, facilitator, consultant and writer and works across all market segments with her skillful team at BARRETT.

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Sue V Barrett - EzineArticles Expert Author

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