by: Geoff Ficke
The hundreds of entrepreneurs, inventors and small businesses that approach my marketing consulting firm each year with new product ideas all confront the same, basic hurdles in attempting to achieve commercial success. Issue number one, they perceive, is how to fund the project. Issue number two, how to market their product.
Let’s review the marketing options. Invariably, the bulk of the entities we work with approach marketing with the belief that they need to immediately place their product in big box retailers. This is a laudable long-term goal, but almost always would be the kiss of death for new products and startup companies.
Big box retailers are exceedingly demanding in requiring huge levels of logistical support. The technology required to simply process orders, data entry, shipping, receiving and billing is highly technical and specific to each chain. The software and systems required to communicate with these giants can be prohibitively expensive for new, small vendors. These are just the logistical hurdles. The sell-through and marketing challenges are much more difficult to conquer.
The alternative to running off to Best Buy or Wal-Mart is to utilize “guerilla marketing” strategies to mitigate expense, lower risk and insure that the new product has a fair opportunity to achieve success. In recent years we have begun to use a “backdoor strategy” to push products into big box store distribution without confronting the up-front challenges that are so daunting for new companies.
Here is an example. Recently we had a dentist approach our consulting firm with a very novel stylized toothbrush. He had deduced from his dental practice that people typically did not brush for three minutes, twice daily, as recommended by the American Dental Association. They really did not know how long they brushed, but the gum and tooth problems he was confronting in his patients indicated they were not brushing enough each day. His new toothbrush was cleverly designed to address this deficiency in oral wellness.
The dentist typically wanted us to create a marketing strategy for the toothbrush that would place the units on mass-market store shelves for the launch. We explained the difficulties, risks and expenses involved in such a strategy and why he should consider alternatives. This was when we described the “backdoor” option.
Big box chains have local and regional management structures. Most people believe that all new items are purchased through home office buyers or merchants. For example, Bentonville, AK is the home office for Wal-Mart. Troy, MI is the buying office for K-Mart. JC Penney is bought out of Plano, TX. Walgreen is located in Deerfield, IL. The Kroger Company is located in Cincinnati, OH.
Each of these, and other national chains in every retail category, have local managers that have the authority to bring product into their doors on a local basis. Few people realize this. These local, regional managers can cut purchase orders and by-pass the national buying process that can be so vexing.
We packaged the novel toothbrush, had our graphic designer create a pop-up shelf display with a header card, created sales collateral and presented the item to the regional manager of a national drug store chain. He was responsible for 36 stores in two southeastern states. He loved the item and even commented, “we love to show the home office that they miss on too many neat products”. We left the meeting with a hand written purchase order for 144 pieces of the toothbrush for each store.
To support the launch of the product we wrote copy for a 30-second television spot with a tag for the drug chain. We went to the local cable television studio and they produced the spot for nothing, in lieu of our buying a small cable spot schedule. The dentist, in his smock, was the on air expert detailing the product.
The product was shipped to the 36 individual stores and the regional manager had forwarded a merchandising directive to each store manager. He advised the product was scheduled for delivery, end cap display was to be provided and that there was cable television buy to support the launch. We hired a college student to get to the stores and make sure the merchandise was prominently displayed and rotated.
Every few days we checked in with the regional manager and he provided sales updates. Within a week, he was able to project turnover and re-order needs. As soon as we secured re-orders, we had the regional manager call the home office with his sell-through report. Within two months we were invited into the buying office for a corporate presentation and to plan a national product launch.
We have used this “backdoor approach” a number of times with different products in different retail channels. It works. Local managers love to take successes, their discoveries, to the home office to prove their mettle. Our clients are in a much stronger position to negotiate terms with national retailers when we have already proven sell-through success on local, test market basis. It also enables us to extrapolate chain wide sales projections based on hard numbers, not best guess assumptions. This is a powerful strategy and many more entrepreneurs should take advantage of this approach that mitigates their exposure.
Licensing, bootstrapping, partnering, joint venturing and receivable financing/factoring are other alternative strategies that can be employed to launch new products. The most successful entrepreneurs overturn every stone to find the one route that will get their idea into play. Keeping all options open is essential if you are to realize your goals.