Distribution refers to the process of getting your product into the hands of your target customer, whether that is an individual consumer or a business user. Entrepreneurs need to identify effective distribution channel(s) to reach their target customer.
If your startup is following Steve Blank’s Customer Development Model, distribution is initially part of the customer discovery process. You will later re-examine and verify your assumptions about distribution channel effectiveness in the customer validation process.
Distribution is one of the four main elements of the marketing mix (the other three are product, pricing, and promotion).
As part of his Lean LaunchPad course, Blank notes two key considerations for startups when first identifying effective channels for their product. Entrepreneurs must weigh the following: 1
1. How will customers want to buy your product? Considerations for the customer may include:
2. How do you want to sell the product? Your preference may be to sell it:
Blank also notes that like products or services themselves, distribution channels can be web-based (e.g., e-commerce, app stores) or physical (e.g., original equipment manufacturers [OEMs], retailers, direct sales).2 And depending on the channel, sales can be direct, indirect or through licensing.1 In the case of indirect channels, correctly understanding who your customer actually is will be critical for your startup—your customer may be the OEM, the VAR (value-added reseller), or the distributor.
In evaluating a potential channel for its effectiveness, entrepreneurs need to gauge the following financial considerations:3
If your startup has reached the stage of developing a distribution strategy, then you will also be working to build a pricing structure. For more information on distribution channels and pricing structures, see:
1. Blank, S.G., Feiber, J. & Burke, J. (2011, October 25). The Lean LaunchPad: Class 4—Distribution Channels. [PowerPoint presentation]. Retrieved from http://www.slideshare.net/sblank/lecture-4-distribution-channels
2. Blank, S.G. (2014, August 28). What You Need to Know About Distribution Channels Today. [Video]. Retrieved from http://www.inc.com/steve-blank/what-you-need-to-know-about-distribution-channels.html
3. Blank, S.G. (2005). The Four Steps to the Epiphany. Self-published: Cafepress.com.