The following are two short articles that may be of particular interest to managers/owners or small or medium sized business. Both Jamie Burton and Jim Stewart are Principals with The Osborne Group (http://www.osborne-group.com/).

A New Business or Product/Service Launch Requires Careful Analysis and Planning

By Jamie Burton

Like all aspects of a good marketing strategy, distribution channels need to be carefully selected for each phase of an organization’s projected growth. Although channel selection often receives little attention from planners, a well thought out distribution system (which can include retail outlets, wholesale outlets, a sales force, direct mail, telemarketing, e-commerce, and cable TV) is critical to the successful marketing or products or services.

Sometimes the distribution strategy appears obvious or intuitive. But a thorough analysis may help you crystallize – or uncover – the best channels for your product, both now and at later stages of your company’s growth.

Check Out The Competition

 The best way to begin planning your strategy is to identify the ways your competitors’ products are sold in the marketplace. Compare the effectiveness of the various methods used, thinking about what works for each competitor and why. How could their distribution methods be improved? Then analyze the merits and detractors as they pertain to your situation. Do you have any distribution ideas that are not currently being used by the competition?

SWOT Analysis

The next step is to perform a SWOT analysis of your organization. SWOT stands for: Strengths, Weaknesses, Opportunities, and Threats. Realistically examining your business should provide some insight into the distribution channels that make the most sense for your company. If, for example, your company were lacking in funds, then distribution via cable TV would likely not be an option. On the other hand, if you own a building in a desirable shopping area, you may be sitting on a ready-made distribution channel.

Cost of Channels

Needless to say, cost comes into play when examining your options. If your company is in start-up mode, chances are you will not have the funds to match the distribution channels of your competitors. But in spite of the expense, all options should be reviewed with an eye to using them at a later stage in the company’s growth. An alternative that may not be feasible at start-up could be both possible and crucial before too long.

Matching Results to Overall Marketing Strategy

 At this point, you should take all the information you have developed, and match the potential options to your overall marketing strategy. For example, selling high-end products using low-cost distribution channels – although cost-effective – may destroy your growth potential. On the other hand, if your overall marketing strategy is based on high-volume sales, then the need to consider low-cost channels will be quite strong. Product or service-specific characteristics will obviously affect the decision to a large degree.

Prioritize

 Finally, you have to prioritize. Taking into account your competitors (and how they operate); your company’s strengths, weaknesses, opportunities, and threats; and the associated costs – the right channels of distribution can be readily identified.

With some products or services, the choice is relatively simple. If you’re going to start a retail store, the initial channel of distribution is obvious. But by making the effort to thoroughly analyze all of the available options, you might gain some insight as to if and when you might consider direct mail, telemarketing, or the rapidly expanding realm of e-commerce. It’s also important to decide upon the level of quality you require in a distribution channel.

As with any component of a marketing strategy, investigating and carefully selecting your channels of distribution is time well spent. After all, the key to market success is to outwork your competitors. Going the extra mile to find that unique combination of approaches will not only provide you sustained growth in the marketplace – it might be the competitive edge you need to outpace your rivals.

Effective Market Research is Critical

by Jim Stewart

Information is critical. If you’re thinking about opening a new business or taking on a franchise, you need to learn all about the potential market – so you know exactly what you are getting into. One option is to hire a consultant and/or market research firm. Another is to do the research yourself, bringing in the specialists only if necessary. So what do you need to know, and how do you find it out?

Segmenting the Market

The first step is to determine who will buy your product or service. Your potential customers will have certain common characteristics, which separate them from the general population. For example, if your product is a device that speeds up older computers, it might appeal to ‘empty nesters’ (parents whose kids have left home). This could be based on a desire to stay in touch with their children via e-mail, without being forced to upgrade to the latest computer technology. Determining your potential customers is called market segmentation, and there are several benefits to doing it.

For one thing, it helps gauge if your business is viable. You need to know that there are enough potential customers to ensure your sales will cover your costs and provide a worthwhile profit in the long-term. You can use your Chamber of Commerce, public library, or trade associations to access existing data that will help you determine the total size of your potential market.

Another benefit of market segmentation is that it helps you hone in on your target. Once you identify your potential customers, you can carry out some research. This can tell you if members of your target group are likely to buy your product – and how much they’ll pay for it. You can also find out how they’ll buy your product – through a middleman or directly – and whether mass media (newspapers, TV, radio) or other promotional methods such as seminars or personal selling will be most effective.

Start by designing a simple questionnaire. Then you can conduct interviews with members of your potential target market by telephone, in the street, or at shopping malls. Analyze the data you collect very carefully. You might consider having a marketing specialist help design your questionnaire and analyze the results; it isn’t as easy as it sounds.

The Uncontrollables

At this point, you’ll have gathered information about the things that you can control. You’ll also want to know about those factors that will impact your product or business, but remain outside your control.

Economic Considerations 

If you are selling an item which consumers consider a luxury, it will be difficult to get started if unemployment is high and economic growth is lagging. Or if you’re looking to get into the moving industry, you should keep an eye on mortgage rates – people tend to renovate existing homes rather than move when mortgage rates are high. To become aware of economic conditions that may affect your business, you can access regular forecasts published by your local bank or trade association.

Competitors 

Make a list of all companies that will compete with you. If you are in the retail or food business, visit them. Watch for your competitors’ advertising, send for their literature, visit their Web sites, speak to their salespeople at trade shows and attend their speaking engagements. Over time you will build a firm understanding of their strategies, which will help you stay ahead of them. Remember – products or services that can be substituted for yours also represent competition.

The Legal Ins and Outs 

Seek out both a lawyer and accountant who have built their reputations helping start-up businesses. Begin by asking other members of your Chamber of Commerce or business association for recommendations.  You lawyer should be able to apprise you of how government legislation – Trade Practices Acts, Health and Safety Acts, etc. – will impact your potential business. Your accountant may be able to suggest applying for government incentives if you are, for example, on the leading edge of technology in your field, or planning to become an exporter. 

Political/Cultural Factors 

Finally, you must consider both the political and cultural environments. Will your marketing approach be effective and appropriate in our multi-cultural society? Does it meet current attitudes toward consumerism, environmentalism, health and fitness, feminism, and so on?

Don’t be afraid to spend a lot of time – and money, if necessary – conducting a thorough survey of your market. It could prevent you from making a far more costly mistake!

For further information: contact Barbara Burton at The Osborne Group – (416) 498-1550 or mailto:toronto@osborne-group.com