Start With Distribution

Yeah, and half them bitches sold ‘fore they off the table
Gotta look, nigga wantin’ my half, I’m gonna split it

– 50 Cent (Major Distribution)

Every few weeks I talk with someone who is thinking about leaving their corporate job, or graduating from their MBA program, and starting a company. More often than not the product idea and space are decent but their ideas around distribution are complete crap. It has been helpful to lead them down a thought process around different potential distribution models and the cost structures around each.

When you think about this, it’s not a huge surprise that they have trouble with distribution. Normally they are coming from big company environments where any product that is created gets instant users, global distribution and some press. Here are a few basic distribution models that are common in technology startups.

  1. Inside sales – You create a funnel to capture contact information from potential customers (usually this is through a content strategy or buying prospective customer lists). You hire a young sales team to call the customers and get them to purchase the product.
  2. Outside sales – You create a list of your potential customers and hire national, regional or local sales managers or contractor representatives to go “door-to-door” to their connections and sell your product.
  3. Freemium – You build an amazing product and give people a taste of what it does and sell a premium package to users who want the true value. Don’t get stuck giving away all the value in the free product and expect people to upgrade for piddly add-on features that you created just for monetization.
  4. Classic eCommerce – You have products and sell products while trying to do some fun things to differentiate yourself and your buying experience
  5. Advertise on your massively popular website – You’ll experience The Struggle more than most, but power to you if you can make it work
  6. Viral – Your product has inherent “virality” which whenever it is used gets your name and value proposition in front of new prospective clients. Think about when you sent your first email from your iPhone and it had “Sent from my iPhone” at the bottom of the message, you were part of Apple’s viral strategy.
  7. Arbitrage with digital advertising spend – If it costs you less to acquire a customer through search engine and/or social media marketing than each conversion then you can exploit this and grow your business by purchasing customers. In most cases where this is true, the total potential revenue from this channel isn’t huge, so you’ll likely need other channels to really gain scale.

I didn’t talk about Franchising even though it’s the subject of the introductory lyrics because it’s not that common with startups that I’ve seen, although I’m sure it’s used (and probably in some very interesting ways). In any case, let me know if there are some other models that should be covered here.

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Start With Distribution

2 thoughts on “Start With Distribution

  1. Along the line of inside sales you can do some kind of partnered distribution with an existing reputable company. Often difficult to negotiate, but if you can get yourself in, you’re golden. This is most applicable if you’re innovating as an entrepreneur within an organization.

  2. brianshaffer says:

    Along the line of inside sales you can do some kind of partnered distribution with an existing reputable company. Often difficult to negotiate, but if you can get yourself in, you’re golden. This is most applicable if you’re innovating as an entrepreneur within an organization.

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