Go-to-Market Strategy

Whether a start-up or an existing business, determining the go-to-market strategy for any venture is an important decision. There are many ways to get a product into the hands of the customer. There are pros and cons to each approach, and the costs and risk factors vary from channel to channel. Some of the more common and traditional methods include:

Retail

Probably the most tried-and-true method for selling product is to set up a storefront location, merchandise the goods and sell directly to the public. This approach provides customers with the opportunity to touch and feel the product and gives the business owner the ability to directly interact with the customer. Signage is displayed for all current and potential customers to see, so the physical store presence provides inherent marketing benefits. However, the retail store is also the most expensive means of generating sales. Retail rents can be costly, and a well-stocked and merchandised store requires a significant investment in inventory. Depending how quickly the inventory can be turned, there is a large capital outlay required. End of life and seasonal inventory are also a challenge when operating in a retail environment.

Direct sales

An alternative to a retail location and having customers come to you, direct selling involves maintaining a sales force of either inside or outbound sales representatives, or a combination of the two. This option allows a business to extend its reach to customers beyond the physical location. Because the direct sales model does not require a showroom or retail location, the business can reduce facility-related expenses by operating out of an office tower, or commercial or industrial area. This strategy requires logistical considerations such as timely communication with the customer, reliable order fulfillment and shipping processes, and establishing credit terms with customers.

Ecommerce

Ecommerce enables a company to sell directly to consumers (B2C) or directly to other businesses (B2B) through an online virtual store. Maintaining inventory is still required but the ecommerce channel eliminates expensive real estate costs. The product is shipped from a warehouse location or is housed and shipped utilizing third party intermediaries. While there can be operational savings with this option, there can be a sizable investment required to build and maintain a comprehensive and reliable ecommerce website. Building a brand and attracting and maintaining customers using this strategy requires extensive marketing efforts and can be very expensive.

Wholesale/Distribution

Instead of selling and marketing the product directly to the end user, many companies utilize the reach of a distributor. Distributors have established sales operations and existing efficient warehousing and shipping logistics already in place and can market both competing and complementary products within a specific industry to all potential customers. In addition to conducting the marketing and sales for your product, they also take and manage the credit risks involved. Although the business owner sacrifices some margin, utilizing a distributor can be cost effective as it eliminates the need to maintain a large sales force and manage the logistics of shipping product to many customers.

OEMs

As a manufacturer of a component rather than the finished product, a business may opt to sell exclusively to an OEM (original equipment manufacturer). An example of this may be an automotive brake pad manufacturer who chooses to sell directly to an automobile maker for integration into a new car rather than to sell directly to consumers or through an automotive parts retailer. Like the distribution model, this method takes away much of the credit risk. This B2B option requires less marketing expenditure as there are far fewer customers but does result in a lack of brand awareness.

There are numerous internal and external considerations when assessing the best marketing channel for your venture. In addition to the above options, owners need to consider their management experience and staffing capabilities as well as their geographic proximity to customers, market size, competitors’ positions, and marketing costs. If the product has mass appeal, selling through a single retail location may limit the number of potential customers to those residing nearby. Conversely, if you sell a technical product that is targeted at a very specific customer set, then a retail location may be perfect as it provides an opportunity for the sales team to demonstrate the product in a face-to-face selling environment. Choosing the most efficient sales channel should be done by conducting a thorough analysis of the market, target customers, and internal business strengths and weaknesses.

Mark Jamieson is the Co-ordinator of the Orangeville & Area Small Business Enterprise Centre. He can be reached at [email protected], 519-941-0440 Ext. 2270 or via cell phone at 519-942-6334.