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What’s your go-to-market strategy for your new product?

What’s your go-to-market strategy for your new product?

Launching a new product, whether it’s your first or hundredth, requires you plan how you’re going to sell your product. You’ve got three basic selling channels: direct to consumer, through retailers, and via distribution. Each has it’s pros and cons.

Lots of businesses start online via Amazon, Ebay, Etsy, etc.

Today, it’s rather easy to start a business selling products online. Find a supplier or create things from scratch, set up a store front, and start selling. Lots of suppliers will even drop ship direct for you - so you don’t even need to deal with inventory or shipping logistics. You can just start selling. Amazon will even handle your fulfillment for you; so if you are manufacturing a product, you simply have to ship it to Amazon to stock - you don’t even need a warehouse. The barrier to retailing direct is fairly low today.

Selling direct offers the best profit margin

There are lots of entrepreneurs that find success selling online directly. But the challenge with selling direct via third parties is it’s on your shoulders to build the brand and to attract the customers.You have to advertise, promote, and support the entire process. The reward is you receive the most profit selling direct. But the downside is you’ll likely need to commit lots of time or money – or both – to enable rapid success.

Your product may also be easy to copy and it will attract competitors if it’s successful. You’re also targeting only one or more specific outlets – where your target customers may or may not be looking for you. You’re also not in complete control of your destiny since on third party platforms the customer isn’t truly yours. Not to mention...one bad review has the potential to hamper sales.

Selling to retailers - less profit but a more targeted customer base

The benefit of selling via retailers is you still make out fairly well profit-wise. You can generally double, triple, or quadruple your money. Better yet, retailers have targeted demographics so you can pick those that align with your customer profile. Target and sell to these retailers and their customers will be more likely to buy your products. Retailers also generally offer promotional opportunities to market your products to their customers (for a fee or percentage off). So you have tailored, targeted marketing opportunities.

But of course, discovering and getting an appointment with – and being stocked by – retailers can be a lengthy process. Most retailers sell via cycles, bringing on new products usually twice a year. So if you score a meeting with a buyer, even if they love your product – you may need to wait months before it’s on their shelves. Smaller retailers can present greater opportunities, but won’t necessarily provide the working capital with large orders. They’re also more likely to take a risk on smaller, unknown brands to start. And it doesn’t have to be brick-and-mortar stores – there are plenty of smaller, successful online retailers serving various niches. Some may even be on Amazon or similar third party sites, but they manage the sales & marketing process for their online stores so you don’t have to.

Of course, selling to retailers also carries risk. Getting your first order is terrific - but if you’re not continuing to build your brand (creating demand) or helping to drive sales through their stores - it’s unlikely you’ll get a second order. So bear in mind that making the first sale to a retailer is only the first step in a long process if you want to build a successful relationship. And if the retailer is a larger organization you may have to invest in various “solutions” sooner than you planned – such as officially registering your UPCs so you can share inventory data electronically, as well as spending on EDI (electronic data interchange) solutions too.

Selling via distribution - lower margins, higher volume, more opportunity

Distribution can help companies grow or expand more quickly. You trade slimmer profit margins for more opportunity. While knocking on the doors of retailers can work, it can often take months or years. Plus you have to negotiate with each retailer independently, support each one, and so on. Often the quicker route is to deal with a distributor. Retailers often trust their distributors to bring them new products regularly. So gaining distribution can open the door to lots of retailers quickly.

The tradeoff? You still have to actively market your product too to keep building interest in your brand or product niche. It’s a push pull strategy where consumer interest/demand equals retailers looking for a product to meet customer requests. So you do generally need to keep marketing your product to consumers. Plus, with distribution you’ll want to participate in their marketing activities. Many have promotional catalogs, email blasts, and other marketing opportunities that connect with their retailers. Be sure you budget for distributor marketing so you’ll get noticed by retailers.

So what is your go-to-market strategy?

Generally new entrepreneurs will cycle through the three sales channels above to one degree or another. Unless you’re established and have relationships with distributors or retailers you’ll likely start out selling direct to consumers. Then once you’ve got a good sales history and can demonstrate demand for your product, you can approach retailers and/or distributors.

Then at some point, you’ll have to make a decision on your ongoing operational push. You can sell direct, you can sell to retailers, you can sell to distributors – but it’s difficult to do all three well over the long term. Each requires different strategies and effort, so most businesses eventually align themselves with one or two sales channels; typically this ends up being retail and distribution.

These channels are easier to support, scale, and allow you to concentrate on growing your business and brand to help support sales through those channels. Sure, you’ll probably keep selling direct as well, but less time and effort will be devoted to it long-term – since you don’t want to undercut nor compete with your distributors and retailers.

That’s not to say you can’t find great success simply selling direct. Fortunes have been made selling direct, so it really depends on how you want to build your business long-term. But what you should have is a plan and strategy from the start for taking your product to market.

Mar 05, 2015
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