The method of distribution selected from start-ups marketing program may not generate sales at a low marketing cost.
Distribution problems in startups occur at any time, from product launch prep, to LIVE launch to post-launch activity. The startup’s management team must identify the distribution problem within the startup before they occur.
You can prepare and prepare but at some point in time, you have to execute. And that’s typically when all the issues arise.
I’ve been working in the marketing industry for over 25 years now. And when I say you have to execute I mean it. I see a lot of self-proclaimed gurus, professional marketers, and freelancers say they can create a marketing ROI and know what they are doing?Distribution Is 80% of Your Problem! Click To Tweet
Most of them are really good at developing strategies plans and ideas, but when it comes time to execute everything falls apart. Don’t let that happen to you.
Introduction to distribution problems in startups
A selection of a distribution channel or distribution channels for your startups can be an overwhelming task. First, you have to find a distribution channel that will produce the most sales. Then you have to build a relationship with the channel members and convince them of your value to help them. It’s a two-way street.
This whole process can take more than five years for a complex industry to less than 5 minutes. It’s a simple formula lower the complexity of the decision process quicker the distribution channel can be set up.
This depends on the complexity of your industry, the complexity of the buying decision, and the resources within the distribution channel to take on your products.
Uber started with $200,000 of seed money. On July of 2016, Morgan Stanley added another $1.15 billions dollars of debt financing. Don’t scrimp on the product launches. But to your homework and test the market. And guess what? Morgan Stanley is leading their IPO.
Wrong distribution channels selected
A market test for a startup, or a company launching a new product in the new market, sometimes reveals that the method of distribution selected for the company’s marketing program will not generate sales at a sufficiently low marketing cost.
There’s an old saying that my father used to tell me, “takes money to make money.” If you’re working in a startup, you know that it takes money the launch a product. That price tag could range from $50 to $500,000.
The price of launching a NEW product depends on a lot of parameters. Things like the competition, your products adoptability rate, the industry, and your market preparedness.
I’ve launched hundreds of products. As a product manager, there are a lot of moving parts and it’s critical to get it right. When I develop distribution channels, I wanted market access, quick distribution, and we simply didn’t have the resources to build a direct sales team quickly.
It is hard to predict everything that could potentially go wrong. Unless you are a fortune teller. Then call me. Or you can read “How to Recover From a Failed Product Launch for Startups.”
Some products can only be sold through a distribution channel
Distribution problems show up quickly and market test. If your company is attempting to sell directly to end users when it should be using distributors, your prospects will often tell you that they only buy products such as yours exclusively from a certain distributor. “I don’t buy from Individual vendors.”
For the prospect, this is a choice that is easily justified. Many company purchasing departments prefer the advantage of having just one vendor to order from, and to pay, for certain types of products. Therefore they will only deal with a single, exclusive distributor.
Electronic components, food and grocery products, beverages, books, and retail software (it there any left?) are examples of product lines usually sold only through established industrial distributors.
Common distributor problems
Your organization may have identified a handful of distributors, dealers, or independent sales reps for your individual market test or a new product launch, and it experiences poor market response.
Often, the problem is the dealer, distributor, or sales rep firm. They simply are not devoting sufficient time and effort to promote your company’s product.
Here are some other major reasons for poor distributor performance.
Product depth for your distributors
Your distributor may carry thousands of products, many of which, unlike your company’s new product are proven, sellers. Distributors, dealers, and sales rep firms will usually spend the most time selling the products that are the easiest to sell, or have the biggest profit margin or sales commission.
Distribution issues in startups with distributors account size
As a startup or new customer of the distributor, the distributor sees you as a small account relative to the other, more well-established accounts generate most of their sales volume.
While professing an interest to work with your small company, distributors will often push the products of their larger, more influential, suppliers.
Your distributor inertia
You distribution problems in startups is often caused by the
Sales reps at the distributor, especially for well-established distributors in mature industries, become glorified order takers for their accounts—your potential customers.
These kinds of distributors won’t push your product by themselves. You must generate the demand on your own (through advertising and other marketing programs) stimulate prospects at their accounts to buy from your distributor.
Wrap up for distributor problems in startups
So you just join the startup and you’re the vice president of marketing. Your first task is to set up a distribution channel to launch your new startup’s NEW product, drive web traffic, nurture leads, and get sales moving. So where do you begin?
Setting up and solving distributor problems can sometimes feel like you’re overwhelmed. You should walk through the steps that are required to set up a distribution channel, identify the key players within the channels, engage with your prospect distributors, and began developing relationships and see if your product is a fit.
Getting your startup out into your target markets is critical and digital marketing for startups is essential. Do this right and you distribution problems in startups can be minized.
The challenges are greater today than three years ago. Today, it costs more to bring a new product to market. Product innovation is becoming more targeted while supply chain complexity is rising. So get a plan and do it!