Transcript

Introduction

Announcement

00:05

Welcome to the Small Business Marketing Huddle. Our show is all about taking action. We equip you with the marketing knowledge and confidence you need to make real progress. So let's huddle up and listen in to the latest episode with your host, Lily Richmond. 

Lily

Host

00:30

Hey, this is Lily. Thank you for being here today. If you're already subscribed to the show, thank you very much. I do really appreciate you being here and I'm really stoked that you are taking some proactive steps to take control of your marketing. Now, if this is your first time here, don't forget to hit the follow or subscribe button in your favourite podcast player because today, as in every episode, I'm going to cover a marketing topic that I think you've really got to learn if you want to master your marketing. And make sure you listen until the end, because I'm going to share the key actions that you can take to get your distribution strategy sorted and, of course, get your product or service to market, which is what we're all here to do. So let's get into the episode. 

01:18

So today is part six of seven in my series on where to start with your marketing when you are just starting up in business. We are getting close to the end. It has been a bit of a marathon, but, yeah, we've covered some great topics. So let me quickly recap what we've covered so far. In part one, we covered how to make your product or service totally irresistible to your consumer. In part one, we covered how to make your product or service totally irresistible to your consumer. In part two, we uncovered who your target market was and your ideal customer. Then, in part three, we crafted a single-minded statement on how you make your customer's life better. In part four, we demystified how to set pricing so that you can win business and make a profit. And part five, I talked all about brand strategy and how you can distil down your brand essence into three words. And then today, as I've already alluded to at this top of the episode, we are going to talk about a really exciting aspect of marketing. Well, I think it's exciting, and that's distribution strategy. Or, put really simply, it's how you get your product or service to market. So by the end of today's episode, you are going to have nailed down what your distribution strategy is going to be and then the actions that you're going to need to go away and take in order to make that happen. So let's get cracking, because there's a bit of terminology and quite a lot to cover. 

02:51

So, if distribution is how you get your product or service to market, what are the different types of distribution strategies and how should you distribute your offering to maximize your sales and, ultimately, your profitability? And what is it that you need to watch out for? Well, these are all of the things that we're going to cover today. So distribution, firstly, should be thought of as all the activities that support you getting your product or service into your ideal customer's hot little hands. And what could some examples of these activities be? Well, there is your supply chain, right, so that is how your product or service that has been produced gets delivered to where it is going to be sold. So who is physically going to sell your product or service? Is it you or is it a retailer, for example? And then, another thing that you need to consider is what is needed at the point of sale when you are selling that product or service. Maybe it's a display stand, or you maybe need a delivery policy, or, if you're, say, an electrician, for example, it could be the van that's sign written that you turn up to a job to. That's the way you are distributing your service. Now, your distribution strategy is going to be closely linked to your ideal customer, who they are, where they buy, what their expectations are of when they go through that purchase process and the nature of the product or service that you are actually selling, your pricing strategy and the brand experience you want to create. So can you see how all of these various facets of marketing that we've been talking about in this series are all really linked together. So everything links and everything influences each other, and if you change one part of your strategy around some of this, you might have to go back and revisit some of the other aspects that we've covered. So when we talk about distribution today, it is going to become clearer as we work through Now there are some differences between services and products when it comes to distribution strategy. 

05:02

First up, and typically products have a longer distribution model or strategy with more people involved. Let's think about it using, let's use the idea of a writer's journal or a notebook. Let's imagine you're a brand that sells notebooks. There is the person who makes the notebook, and this is called the manufacturer. That's pretty simple. Then there might be a distributor or a wholesaler and an end retailer. Now a distributor is normally a company that you would engage to sell your manufactured notebooks in bulk, and they would then essentially take control of all of the on-selling of those notebooks to wholesalers and possibly direct to retailers as well, depending on the market, and they would then essentially take control of all of the on-selling of those notebooks to wholesalers, and possibly direct to retailers as well, depending on the market. So ordinarily, a distributor already has a large database of wholesalers and retailers that they can just tap into straight away, quickly and easily, and then, when a wholesaler or a retailer wants to reorder, they just go straight back to the distributor, not to your company or the company that's had the notebooks made for you if it wasn't you. So you then get removed from that whole process. Once it goes to the distributor, they take it from there. Now the next role is a wholesaler. Now they might buy direct from the manufacturer or they buy from a distributor, and their goal is to sell to retailers. And then finally, there is the retailer. So they are the ones that sell the notebook to me, the consumer, either via a bricks and mortar store or through an online channel. 

06:36

So does the difference between a wholesaler and a distributor seem confusing to you? Why are both of these types of parties in a distribution chain? Why are they even needed? Well, distributors normally deal in very large volumes, and they often will deal with manufacturers who only want to sell really large quantities of product. They often have exclusive supply agreements in place as well. So a manufacturer will only sell to one distributor in a particular market, and so using a distributor is very common. If you're trying to get your product into an international market, they have the relationships, the contacts and the market context for that particular market that ultimately could take you as a business owner years and years for you to get a handle on if you were going to do it yourself. And often some retailers, wholesalers they will only deal with a distributor as well. So if you're trying to get into a particular market, you might find that it's really difficult for you to actually get straight to a wholesaler, for example. So distributors can be quite big gatekeepers. Now a wholesaler might also go direct to the manufacturer Okay, so if that manufacturer is maybe smaller and is not selling huge volumes so let's use this notebook example again. 

07:56

Say you were physically going to manufacture your own notebooks at your small local factory that you have you might not be able to or want to supply volumes that are large enough to work with a distributor. So in that case you would work with wholesalers. Or, to confuse things more, you might decide that you want to sell direct to retailers yourself and you're effectively the manufacturer and the wholesaler at the same time and you're selling direct to retailers or differently. Again, you might decide that you want to sell direct to the consumer, and there are pros and cons of each of these different strategies and we will cover that off. So sit tight. Okay, so market context also plays a really big role here as to how your product is going to get to market. Typically, the bigger the market and the volume that you want to sell will dictate whether you use a distributor, wholesaler, or go direct to the retailer or sell directly yourself. 

08:53

Okay, so me explaining manufacturer, distributor, wholesaler and retailer is all well and good, but the world has changed dramatically for many industries. So think about, you know, globalization and the internet. They've created what we call, in the biz, disintermediation. So I told you that we marketers, we love some complicated jargon. Basically, all this means is that globalization and the internet have cut out the middleman in a lot of cases. 

09:23

So let's use our notebook example again. You could still manufacture your notebooks at your local factory, but you might become an Amazon seller. So you're the manufacturer working directly with one of the biggest online retail brands to get your product straight to market. Of course, this isn't free, but you've cut out all those middlemen along the way that clip the ticket, so to speak. Or you might set up a Shopify website and sell direct to your consumers, and that might be the only way that you plan to sell your products. And we'll cover that a little bit more when we get into the strategies. 

09:54

So you can see that these old models, they're getting turned on their heads. It is so much easier now to find manufacturers who will work with small minimum quantities. You can work direct with distributors offshore to import products. You can drop ship. You know, this is where you never even see the end product that you're selling. The consumer orders it from your website and your supplier sends that product direct to your consumers. Now you might be feeling a bit confused. You know what way should you go. Well, I'll share some insights on this shortly, but for now let's move on to the distribution of services. 

10:26

So, as I've mentioned, services work a little bit differently. So let's use the electrician example again from earlier in the episode. So you deliver your service direct to your consumer. In this case, what would your distribution channels actually be? And this could include what I would call your owned distribution. So think your website, telephone, your customer service email address, and then there's the physical service that is delivered from your van, where you rock up to rewire someone's house. Now you might have some other methods, though, of distributing your electrical services, and I like to call this third party channels. So this is where your service is distributed via a third party that you have a relationship with. So, for example, you might be a preferred provider for a home insurance brand, or you might have set up your own referral partnerships with local home renovation companies or builders. You might have contractual partnerships with large construction firms. So all of these examples are third parties who essentially get your service to the market and in front of the end customer. So in this case, your focus isn't so much in selling direct to the consumer that needs the electrician. It's selling your business and your capability to that third party who are then going to have the end customer who needs the electrical services supplied. 

11:55

Now, episode four of the podcast on buyer roles is a really great one to listen to if you want to understand more about who you really need to be influencing and marketing to, especially when it isn't direct to the end consumer, like the examples that I've just talked through. So that's a rundown on services very quickly, and now let's move on to some of the different strategies and the things that you need to consider. So now you know the basics of how products and services get distributed. What type of distribution strategy should you be employing? Now? I want to keep this really simple. I'm going to talk about two direct and indirect. Okay, so let's cover direct first. This is where you are distributing the product or service direct to your consumer. There is nobody in the middle. So this is our notebook manufacturer who is selling directly to the end consumer, say, on their website. Okay, so you've got a website set up. Or this is the electrician who books electrical maintenance jobs direct with consumers who inquire on their website. Those are both examples of direct distribution strategy. 

13:00

Now what are the pros and cons of this? The pros are you have complete control over the customer experience. You get direct feedback from the customer about what works and what doesn't, and you get to build the relationship direct with that consumer. The cons of a direct distribution strategy is that you have to manage everything and this can require a lot of resources and time on things like let's think about it customer servicing, complaints, product returns, chasing, invoice payments, having to develop skills and expertise in your business that you might not have, like marketing communications, setting up digital marketing campaigns, website management, inventory management. I think you get the picture. Direct can be quite a lot of work. Now, financially, with this distribution strategy, you get to keep all of the margin because there are no middlemen who want a slice of that margin. Okay, but conversely, you will have more costs in your business. Someone has to answer the phones, carry out training, post-purchase servicing, all of those sorts of things. So the upshot is a direct distribution strategy is perfect when you want or you need to have tighter control over the sales, customer or brand experience. 

14:18

Moving on to the second strategy, this is called indirect. This is where you sell your products and services via a third party, like a distributor, a wholesaler or a retailer, or maybe it's a franchise partner, you know. For services it might be a preferred or a contractual partner that you sell through. Now, the pros of this approach you are not responsible for the end customer relationship. You don't have to worry about selling or marketing your product to get the sales Although, it's important to note, you might have to invest in growing your brand so that there is awareness of it in the marketplace. You might still have to do that, but there is no dealing with returns, customer inquiries, that sort of thing. That's taken care of by the other parties in your distribution relationship. 

15:06

Sounds perfect, doesn't it? You don't have to have any of the control at all, but that is where some of the cons come in. When you use an indirect distribution strategy, you do lose some control because someone else is taking care of getting your product into the consumer's hands. So you get removed from your customer and that can be quite hard for you to get feedback on what works and what doesn't, and you might only hear that third hand through the retailer or the wholesaler. And if you want to create a particular customer and brand experience, it can be really hard to do when you are not in control of that selling process. To that end consumer Okay. 

15:37

So financially, with an indirect distribution strategy, you do make less margin per unit you sell, and that's because you have to share that margin with, potentially, the wholesaler and the retailer right or the distributor. So the upshot is is that when you sell indirectly, you have to sell more units to hit the same revenue target, but you have to offset the fact that you're also avoiding costs and resource commitments by not having to do all the marketing to get the sales to answer phone calls or provide that after sales support. That's why you have to share the margin, because someone else is taking on some of the operations and the cost for you. So indirect distribution strategies are great when you don't want to be doing all the heavy lifting, selling and servicing or you want to access the relationships of, say, a distributor or a contractual partner. Think of that electrician who works under contract for a commercial construction company. This frees up your business to focus on what it's good at and it doesn't have to get spread too thin trying to develop a sales channel and a sales pipeline because that commercial partner is doing that for you. So that's the two core strategies explained. 

16:46

But there's an important aside here if you're a product-based business and you choose an indirect distribution strategy, it's really key to consider how exclusive or mass you want to go with distributing your product. Again, let's think about those notebooks. Is your goal to have mass appeal and be in every bookstore across your country, or is it to be more selective than that? You only want it to be stocked in, say, high-end homeware boutiques because it's a premium product with a high retail price? Or would it be something only you would stock exclusively with one retailer? The point here is that your choice to be mass, selective or exclusive directly correlates to your pricing, your branding and your positioning that you want to achieve. That's where it's key for you to maybe go back through the earlier episodes and the work that you've done on those to think about well, what's my pricing strategy going to be? What kind of brand do I want to be? What sort of brand experience am I wanting to create? That might dictate the type of approach you take. If you're doing indirect distribution, you know, do you want to be in every supermarket or do you want to be in high-end stores? That's quite a key decision for you to make, because that's going to influence how your brand actually appears in the marketplace. 

17:58

Okay, so after the break, I'm going to share a series of actions with you that you can take right away that are going to help you come up with the distribution strategy that is right for your business so you can get to market. Okay, so let's get you to market Now. As I work through these actions, you might find it easier to work along with a workbook, so I'm going to drop a link in the show notes for you to access distribution strategy that gets you to market. That's the workbook. Or you can head to my website can grab it there. The URL is https://marketingondemand.co/startup6. 

18:42

Action number one I want you to list out all the ideas you have around where your customer would be able to purchase your product or service in an ideal world. So just do a bit of freeform brainstorming there. Action number two I would then want you to map out the chain of events, right from how the product or service is made, who it passes through and how it gets to the places that customer is going to buy from, and I want you to highlight which ones of these are your owned channels versus third-party channels, and there's kind of a sub-action within here. If you have some owned channels in that list, I need you to make a note of these to ensure that you've got those set up for when your business launches. You know I'm thinking things like your website, your retail store. Maybe it's your online customer booking engine or a phone hotline. It really does depend on your individual business, but if you've got those owned channels, make sure that they are set up and ready to go when your business is ready to go live. 

19:39

If you have some third-party channels, I want you to go away and do some research on how you would get access to these. For example, if you want to sell to wholesalers, well, who are those key wholesalers in your market that you need to approach? If you've got a particular retailer in mind, for example, it might pay to find out how they purchase the products that you might want to have stocked in their store. You know you might have to go through a distributor. You might have to go through a wholesaler. You might realize that you're going to have to start producing in a certain amount of volume to be able to get into that distributor or wholesaler, to get to that end retailer that you want to. So you need to do some research here to understand what is actually required. 

20:19

Action number three Once you've done that research, I want you to narrow down which distribution channels are going to be your priority and if it was me and my business, I would be focusing on those where the most sales are going to come from, as a starting point, and you can build out other channels at a later date. But when you're just getting started out, you need to get as many sales in as possible. So it's a good idea to start with where the bulk of your sales might come from, and a good hint of where this might be is really the primary place that your consumer would expect to go and buy your product or service. Now action number four. This is where I want you to make a pretty honest assessment of the channels that you've selected here. 

21:00

Realistically, what parts of the distribution chain do you want to be doing? You know, and what do you have the capabilities to do so? For example, you might like the idea of taking the full margin for a product you sell by creating a website and selling your products direct to the consumer. Awesome. But do you really want to be a retailer? Do you want to be dealing with order fulfilment, inquiries, returns, complaints, keeping a website updated? You know you get the picture. You know you can outsource this. You can also hire staff to do it, of course, but it's a strategic decision for you to be in retail and as a business. 

21:35

Is that what you want to be? 

21:38

Do you want to be a retailer? 

21:39

Do you want to be a wholesaler? Do you want to just be the person who manufactures the product. If you're a service based business, you know if you have to get out there and do loads of business development to sell your services and you hate it, then maybe you need to get into some partnerships with other people who could do that heavy lifting for you, who could refer you to other people, or you have a contractual arrangement with them. You have to be really honest about what you are capable of doing and what you want to be doing as part of your overall business strategy, because distribution is key and if you're not committed to it or you don't have the right resources in place, that's where it can fall over. 

22:14

And finally, action number five I want you to write out what your distribution strategy is going to be. You know that my service-based business is going to use an indirect distribution strategy. This is how I'm going to do it. These are the key players and this is how the service will get to my end consumer. And it's the same for product right. I'm going to use an indirect distribution strategy. I'm going to use an indirect distribution strategy. I'm going to sell into those wholesalers and they are going to sell to my end consumer. So I want you to be able to just map that out and write that out what is your final distribution strategy going to be? And then you can create an action list of everything that you need to tackle and do to be able to turn that distribution strategy into a reality and something that's operational in your business from day one. 

Well, ultimately you need to have it ready before day one. 

23:06

So get cracking on that. It's a really important part of your business and distribution often gets overlooked. I've got to say A lot of people don't really think about how they're going to get their product to market and it all falls over if distribution doesn't work properly or that experience is really clunky for the consumer. So take the time. It's a really important part of marketing and I think it's one of the exciting ones because it's actually it's. You know, it's where the rubber hits the road. And a great campaign, a great looking brand, you know it's an amazing thing, but it's only amazing if it's backed up with that experience of when someone goes to buy the product or service. They have a great experience, it's what they expect and it works how they expect it to. So keep that in mind. Okay, so that is everything for the huddle today. Thank you so much for joining me. I hope you enjoyed this episode and you are a little bit wiser and you've got some clearer ideas on how you are going to tackle distribution strategy for your new business and your startup phase. 

24:09

And next time on the Small Business Marketing Huddle and I have to say for the last episode, it's going to be a cracker of an episode because we're going to talk about how you put it all together with your communications, how you actually get out there and tell the story about your business. So we're going to talk about marketing calendars. We're going to talk about initiative plans. What sorts of communication channels should you be using? It's going to be action packed. 

24:36

So make sure you are subscribed to the podcast and then you won't miss that episode. Now, remember there is a workbook from today's episode and you can grab that in the show notes. I will drop a link there or you can head to my website and you can grab it. The URL is https://marketingondemand.co/startup6. Thank you so much for listening and I'll catch you at the next episode of the Small Business Marketing Huddle. Now for the legal jargon. This podcast is for information and education purposes only. We make no business performance claims or guarantees in the information shared. The podcast content is general in nature and does not constitute advice for your unique business situation.