Distribution is King
33m
·
Smith Sense
·
This week Antony and I discuss a topic that’s too often overlooked by entrepreneurs: distribution. Whether you’re selling beef jerky or digital services, getting your product in front of your customers at the time when they need it most can mean the difference between success and failure. Companies that focus too much on their product and brand (or owning a specific distribution channel) leave themselves open to disruption from newcomers.
Show highlights:
1:25 - Distribution trumps product utility and brand.
“Incumbents get beaten by upstarts when the upstarts discover new ways to distribute their product or service.”
3:21 - Distribution defined.
“It’s that intersecting moment when your customer is likely to consider you because it fits within the context of what they're doing in their normal day.”
5:12 - The principles of distribution apply the same in a physical or digital world.
“The limited attention and time that people have is true in a retail environment, and it’s true in a virtual environment, too. What you are able to see when you’re going through the physical aisle is not unlike Netflix screen. You can only see so much on it at a time. The catalog is enormous, but your choice set is very limited because human attention is not that broad.”
8:00 - How upstarts succeed with distribution.
“Where you see upstarts take market share away from other companies is, as these new methods of distribution emerge, if they are early to adopt them, if they take it advantage with them first, if they are more nimble, then they can find a way to get market share where basically it didn’t exist before.”
12:30 - How an upstart YouTuber beat a true expert who was at it much longer.
13:40 - Playbooks for getting great distribution,
“In order to experience business growth, what you should do is focus on where your product could be distributed: How do you shape your business, your product or your marketing in such a way that you can increase the distribution? And by doing that, by changing the distribution, you can double the growth of your business in a way that you wouldn’t be able to do organically by focusing on just trying to dial in better the one distribution strategy you have.”
16:00 - Looking outside your existing channels
“Most of the time people are only aware of competitors that exist in the channel they already are in. Looking outside of that channel for new distribution is the key.”
18:00 - Why Apple went into retail.
“When Apple decided to open retail stores it was looked at by everybody — from Wall Street analysts to their customer base to retail partners — as a stupid mistake. And yet it turned out that, over a period of time, they were the most profitable per square foot retail in America.”
20:00 - Total control vs. no control.
“Any ideology that says ‘I don’t need to have an owner control platform’ is wrong. And any ideology that says ‘I have to have everything on my platform so that I have total control’ is also wrong.”
23:20 - Take vs protect.
28:30 - How a baby bathtub business that Matt invested in grew distribution, and what it did next.
30:00 - Your list is the most important thing.
“In marketing, I always think of it as the list is most important, then the offer is second, and the copy is third. Without the list, none of the other stuff even matters.”
The episode Distribution is King from the podcast Smith Sense has a duration of
33:53. It was first published
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Distribution is King
This week Antony and I discuss a topic that’s too often overlooked by entrepreneurs: distribution. Whether you’re selling beef jerky or digital services, getting your product in front of your customers at the time when they need it most can mean the difference between success and failure. Companies that focus too much on their product and brand (or owning a specific distribution channel) leave themselves open to disruption from newcomers.
Show highlights:
1:25 - Distribution trumps product utility and brand.
“Incumbents get beaten by upstarts when the upstarts discover new ways to distribute their product or service.”
3:21 - Distribution defined.
“It’s that intersecting moment when your customer is likely to consider you because it fits within the context of what they're doing in their normal day.”
5:12 - The principles of distribution apply the same in a physical or digital world.
“The limited attention and time that people have is true in a retail environment, and it’s true in a virtual environment, too. What you are able to see when you’re going through the physical aisle is not unlike Netflix screen. You can only see so much on it at a time. The catalog is enormous, but your choice set is very limited because human attention is not that broad.”
8:00 - How upstarts succeed with distribution.
“Where you see upstarts take market share away from other companies is, as these new methods of distribution emerge, if they are early to adopt them, if they take it advantage with them first, if they are more nimble, then they can find a way to get market share where basically it didn’t exist before.”
12:30 - How an upstart YouTuber beat a true expert who was at it much longer.
13:40 - Playbooks for getting great distribution,
“In order to experience business growth, what you should do is focus on where your product could be distributed: How do you shape your business, your product or your marketing in such a way that you can increase the distribution? And by doing that, by changing the distribution, you can double the growth of your business in a way that you wouldn’t be able to do organically by focusing on just trying to dial in better the one distribution strategy you have.”
16:00 - Looking outside your existing channels
“Most of the time people are only aware of competitors that exist in the channel they already are in. Looking outside of that channel for new distribution is the key.”
18:00 - Why Apple went into retail.
“When Apple decided to open retail stores it was looked at by everybody — from Wall Street analysts to their customer base to retail partners — as a stupid mistake. And yet it turned out that, over a period of time, they were the most profitable per square foot retail in America.”
20:00 - Total control vs. no control.
“Any ideology that says ‘I don’t need to have an owner control platform’ is wrong. And any ideology that says ‘I have to have everything on my platform so that I have total control’ is also wrong.”
23:20 - Take vs protect.
28:30 - How a baby bathtub business that Matt invested in grew distribution, and what it did next.
30:00 - Your list is the most important thing.
“In marketing, I always think of it as the list is most important, then the offer is second, and the copy is third. Without the list, none of the other stuff even matters.”
Killing Innovation
The economic fallout from COVID-19 is highlighting one challenge that entrepreneurs face all time: regulation stifles innovation.
Entrenched interests
You don’t have to look farther than the recipient list of Paycheck Protection Program (PPP) loan program to see how even well intentioned regulations — in this case, to protect small businesses from collapsing — end up serving entrenched interests far more than the people they purport to help. Among the list are Kanye West, Grover Norquist’s Americans for Tax Reform Foundation, perhaps most galling, the Ayn Rand Institute.
Especially in a crisis, people look to regulations as the solution. But added regulation almost never helps the entrepreneur just starting out who wants to build a better economic future for their family. Instead, it favors the entrenched interests who can afford to lobby government officials.
Via negativa
Most often the solution is not additive. Rather, it’s what Nassim Taleb calls via negativa — it’s removing something often actually makes things more possible rather than adding another benefit to people.
I couldn’t schedule a dentist appointment for a period of time here in Colorado, but I could go to the pot shop. That’s the result of lobbying power. That regulation is not protecting my health as much as it’s protecting the entrenched interests of the pot industry.
CEO bailout
We bailed out the airlines, and in exchange they agreed to keep all employees on until the end of September, at which point they’ll lay them off. So we essentially took Americans’ money and set it on fire by filtering the dollars through the airlines.
Theoretically it helps employees, but only a little bit and for a little period of time. In reality it helps the CEOs who’ve made terrible decisions for a decade.
Resources
Three Felonies a Day, by Harvey Silverglate