Monday, November 30, 2009

Dirty Hands: Understanding the Consumer Products Sales Process

Engineer-type brains sometimes like to get their hands dirty, but understanding the mess that is consumer product sales may be dirtier than many engineers are comfortable with. I'll try to explain some of the basics, then tell you the dirty truths about consumer product sales.

The Basics:
1.) The consumer buys your products from: a.) you, or b.) a channel
2.) There are dozens of kinds of channels... here is the top 4:: retail, e-tail (e-tailer), System Integrator, VAR
3.) These channels buy from either: a.) you, or b.) a distributor
4.) The distributor buys from either: a.) you, or b.) an aggregater (or aggregator), or c.) a rep firm.
5.) The aggregator buys from either: a.) you, or b.) a rep firm.

So, the most direct route...
The longest route...

And there is the rub... there are many e-tailers and most retailers who will no 'buy from you direct', especially if you are small.
Instead, you have to work with a distributor... funny, there are many (most) distributors who will not work with you directly.
So, you have to work with a rep firm or aggregator or both.

That can be a lot of hands in the pie! It is only just the beginning. In addition to the margin points that every step needs to take, each will want your marketing dollars to help make their channel/distribution succeed.

Messy yet?

Many channels require these marketing dollars (called Market Development Funds or MDF) or they will delist your product, regardless of how many you are selling.

So, how do you navigate this maze?

Very carefully, and hopefully with a lot of margin built in to your product.

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