It is easy to focus on the new product idea that you are deeply passionate about, after all it is exciting and rewarding. But equally important is the question of how are you going to sell it? The route to market should not be an afterthought and depending on your product idea, it could influence the design of the product. In this article the key routes to market are outlined and the relative merits for each are discussed.
Two important questions to consider are: What type of product are you developing? and Where would someone normally buy this product from? since for your product to sell you need to get it in front of the target market. For example, if your product is consumer focused, say a gardening tool, you might expect this product to be available to purchase at a garden centre or DIY shop. Whereas, if the product is a business tool such as a card reader to accept payments, you would expect to buy this as part of a service from a company like PayPal or iZettle.
The answer to the second question might have many answers - you could buy the gardening tool from Amazon or Kickstarter. This illustrates how the route to market is not always straight forward. Then try adding in the fact that your new product is innovative and people do not really know that they need it yet, so need educating about its unique benefits. It is important to develop a strategy and consider what is the right route for your product and this could, of course, be multi-layered.
Highlighted below are some of the key routes to market to help provide an initial overview.
Crowdfunding
Discussed in our blog post “How to fund your new product idea” one of crowdfunding’s unique benefits is the ability to raise money whilst simultaneously marketing your new product and potentially capturing a base of customers that fall within your target market. Reward based crowdfunding platforms like Kickstarter and Indiegogo could be a good route to market for your business initially. Then once established other potential routes could be explored. Successful crowdfunding campaigns are not guaranteed however, so other routes alongside this approach should be considered.
Direct-to-consumer
There has been a boom in direct-to-consumer (D2C) brands in recent years. These brands design, manufacture and ship their products directly to the consumer. This approach gives greater flexibility in controlling pricing, marketing and distribution of products. This model cuts off the middlemen and allows these companies to be disruptive, especially with offering lower prices. D2C brands such a Harry’s razors or MADE.com are great examples of companies who have chosen this approach and have had huge success. An essential element of this route to market is an effective digital marketing strategy to promote your product and drives consumers to your e-commerce site.
Wholesale/Distribution
Wholesale or distribution may be a suitable route to market for your business but this can largely depend on your product. Wholesalers are companies who purchase large volumes of products from a manufacturer (i.e. your business) and then sell in bulk to retailers with an added margin. The retailers would need to apply their own margin and sell to consumers at the recommended retail price (RRP).
The wholesale/distribution sales channel may suit your product if you need to sell in high volume. Forming lots of relationships with retailers and small businesses to sell low volumes is time consuming. Specialist wholesalers have established networks and infrastructure to do this efficiently, to allow you focus on developing and improving your product and marketing. This allows your business to grow quicker and perhaps better suit your own skills or the resources within your company.
Direct to retailer
This is an option whereby you increase brand awareness and visibility of your product by selling directly to retailers. Most retailers now pursue an omni channel strategy to retail; selling via physical brick and mortar stores as well as via online marketplaces all in a connected way in order to give the consumer a flexible and seamless user experience. Retailers, as a rule, add a 100% margin to the product cost, so you would need to sell your product to them at half of the RRP. If your product sells well then retailers with large chains or popular online marketplaces have the ability to sell high volumes.
Online only retailers
For start-ups with unique and niche products or if you plan to bootstrap your business (as discussed in our blog post “How to fund your new product idea”) and build the business organically without significant investment, you could choose to offer your products through online only marketplaces. There are a growing number of online marketplaces such as Amazon (including Amazon Launchpad), eBay, Instagram shop and not on the high street. Each marketplace operates different models so you would need to explore which option would be best suited to your business. Whilst some of these companies will actively promote some products, you would need to develop your own marketing strategy to promote and generate sales.
Licensing
Licensing your product idea is a very different route to take compared with the previous routes to market discussed. You need to consider whether you would like to form a company to commercialise your product idea or license your product idea to an established business in exchange for royalties. Neither path is easier than the other. According to Starupnation.com much less than 10% of product ideas are successfully licensed. But if successful the rewards can be just as high as starting your own business to launch your product. It really comes down to a personal choice of which approach appeals to you.
There are many different types of license. The licensee is the company who is licensing the product from you, the licensor. You would work with the licensee to establish a licensing agreement. The licensee will generally require your product to have an issued patent to protect the IP and you will likely need capable legal assistance in negotiating the various licensing and confidentiality agreements to ensure all parties are ensured and protected.
Another area of licensing that is worth mentioning that maybe relevant to your product idea is brand licensing. This is where a licensor licenses a brand to a licensee. A good example of this is where a company like Disney (licensor) would license the licensee (you in this case) to use one of the brands such as Frozen. So, say your product idea is a children’s bag that transforms into a beach chair, you could license the Frozen brand to apply to your product. The strength and popularity of the dismay frozen brand would undoubtedly lead to increased sale and reach for your product.
Selling your Intellectual property (IP)
Similar in some ways to licensing your product idea, which in effect is your intellectual property (IP), it is possible to sell your intellectual property rights (IPR). This is a complex area and valuing your IP is not straightforward. Selling your IPR is not often a common route to market, but often chosen as a more strategic option to pivot an existing business in a new direction. It can form part of a sale of business, for example, if as a start-up you create a range of new innovative products and begin to gain traction in the market, other larger more established businesses may want to acquire your IP/business to increase their product portfolio and avoid the risk of a newcomer taking their market share.
