In March, I spent some hours consulting and proffering support to startup founders and management teams from all over (pro bono). Some of you signed up; I hope you found it beneficial and insightful. I have decided to share some of the interesting outcomes or lessons from this session to hopefully help others. Today, I want to share a bit about the Distribution Challenge early-stage startups face.
Many first-time founders spend a lot of time solving the problem or creating solutions, which is great by the way. There is a lot of energy put into the product or services, a pure fascination to watch. I found out a few have spent time thinking about the distribution of the solution (product/service), which is important to monetizing and doing that at scale. For your startup to grow really big, it must (1) make something lots of people want, and (11) reach and serve all those people. The distribution challenge addresses the later.
To put some context, during the initial stage (MVP), you do things that don’t scale because your goal is to entice customers, get your product-market fit, test your assumptions and learn the market. To achieve this you focus on a deliberately narrow market. This is important to fix things like customer retention, a great example being Facebook staying a Havard Campus for a while.
In this pilot phase, it is important to learn and engage your client. Steve Jobs is a great example of this. I love the street stories of founders like Ismael Belkhayat of Chari a Fintech from Morocco, sharing his hands-on experience being out there chatting with clients/customers, learning the market, fixing things like customer retention. By customer retention I mean the % of new paying customers who are still customers 3-6 months later. Please, don’t think about growth/scaling if you have not fixed retention.
Once you have the MVP or product-market fit, it is time to think “Go-To-Market strategy”. This is when the rubber hits the road as investors start to want to see distribution. In this phase you are probably seeking more distribution channels than use for MVP. Things like Growth and Payback start becoming important. So, getting the growth requires volume transactions and, to do that, you must find distribution channels that are cost-effective and can give you volumes.
This is necessary if you are looking at horizontal growth (growing by going to new markets or reaching out to new industries) or vertical growth (launching new product lines); you must still consider the best distribution channel. A channel that worked for one product line might not be effective for another. A great example is that for a B2C product, you may use agents and direct channels. To launch a B2B product line, you may realize that using agents is not working or is no longer effective. You may need a Field Sales team for the direct channels.
Finally consider below when choosing a distribution channel ;
- Speed: Do clients need it fast or quickly and the middle man is just limiting this.
- Complexity: Is it a complex service /Solution that requires well trained and high skilled resources that is best served directly from your team?
- Value: Will the use of middle men ( wholesalers, retailers, distributors, Partners) bring value to the clients/Consumers ? .Also consider
- Cost; Is there a cost effective way to get your products in the hands of clients/consumers. A great example is using the digital platforms for e-commerce business to sell directly or a Resturant chain using online food aggreagators like e.g Just Eat, Uber eats, Deliveroo to reach consumers.