According to Peter Thiel, “poor distribution — not product — is the number one cause of failure.” Here’s a smart way to think about your distribution strategy.
My favourite lecture at Stanford GSB was Marketing with Jim Latten. It stuck with me not just because he’s a rockstar professor, but because the main idea was so simple.
Before Stanford, the art of distribution was a bit of a black box. It was complicated with different channels, promotions, campaigns, partnerships etc. So when asked about customer acquisition, I replied with the standard response of: “Facebook Ads, PR and a bit of social media”.
Inevitably, Facebook Ads turn out to be more expensive than I’d planned, PR proved highly unreliable, and social media — well, let’s not mention social media again ok? I suddenly felt way out of my depth.
A simple way to think about ‘go-to-market’
Jim’s approach to go-to-market is so simple that you’d be forgiven for underestimating it. It’s incredibly powerful. The whole idea is summed up with a single equation.
Distribution = Eco-system Participants + Incentives — Tweet this.
Here’s a quick explanation.
1. Map out your customer’s ecosystem
Park your product to one side and think about the world your customer lives in. Who are the people, places and companies that they interact with in their everyday life? Who is in their ‘field of vision’?
Take a large piece of paper and start mapping out all the participants. Here are some general categories — but you’re looking for specifics and lots of them.
- Offline services
- Online services
- Finance and banking
- Education and training
- Retail staff
- Social influencers
2. Draw arrows in the direction of influence
Ask yourself who influences who? I’m not just talking about those people on Instagram that post selfies all day. Who already has access to your customer today and, if incentivized, could present your product to them on your behalf?
Draw arrows to represent the strength of the relationship — the thicker the arrow, the stronger the influence. If you need to, add in more participants that ‘influence’ the main influencers. Customer ecosystems are typically highly complex.
3. Design incentives for the key eco-system participants
As Charlie Munger, Warren Buffet’s business partner, says:
“Show me the incentive and I will show you the outcome”
A great distribution strategy matches incentives to the most influential participants to get other people to present your product to your customer. You can group incentives into two buckets: financial incentives and non-financial incentives.
Financial incentives are common. For example, you can pay Facebook money and they will show your product ad. You can pay salespeople a commission and they will close the sale for you. You can give people extra credits and they will invite their friends.
The area that most companies don’t fully capitalise on is non-financial incentives.
In order to grow faster for less, it’s worth thinking about ways to incentivise the key influencers without using money. What can you offer someone who already reaches your customers that costs you nothing?
To get the creative juices flowing, here are some ideas:
- Can you offer additional features or services? — Dropbox gives 25GB of extra cloud storage for those that share with a friend or share on social media.
- Can you give out status or titles ?— Tinder appointed ‘ambassadors’ at universities and gave them a budget to hold parties to publicise their dating app.
- Can you provide early/free access? — Facebook gave early ‘exclusive’ access to selected developers before launching their new AR platform.
- Can you throw a useful event or party?— social marketplace Fyre organised a festival with Ja Rule to publicise their startup.
- Can you give out merchandise? — Apple made its iconic iPod earbuds white so they were visible to people nearby.
- Can you tell a great story? — PR is essentially incentivising journalists with a great story they can write which will increase their page views.
The earlier you think about distribution, the more scope you have to build it into your product design and business model. Once you’ve established the key influencers in your customer’s ecosystem, speak to them early to understand what motivates them.
Money isn’t your only resource. Creative non-financial incentives can be just as powerful and much more scalable as paying people off. What can you give someone that’s valuable to them and easy for you to provide?
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About Dave Bailey:
I coach CEOs of funded, early-stage tech companies to help them reach Series A. I’m a Venture Partner at Downing Ventures in London, Mentor at Google Launchpad and a serial startup founder. Previously, I built and sold tech businesses in the UK, US and Brazil. I studied at Oxford University, Stanford Graduate School of Business and Singularity University. For more info, check out Dave-Bailey.com. https://medium.com/swlh/how-to-create-a-genius
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