Basic business textbooks will always cover the four 'P's - product, promotion, price and place. These are the key factors in the marketing mix that will determine whether a good or service finds demand among customers. Yet, as is nearly always the case, there's a big difference between theory and practice, and the traditionally touted processes aren't always viable for SMEs.
This is arguably most true when it come to 'place', or distribution - what I consider to be the least sexy of the four 'P's. It's quite often the most expensive of the four 'P's and, if done badly, can bring a business to its knees.
A bloke I was talking to about this very issue is Tim Pethick, founder of boutique juice maker Nudie. Tim learned his lesson the hard way and now refers to the transportation infrastructure his company purchased as "dumb assets".
Dumb because in hindsight it would have been more cost-effective for Nudie to outsource its distribution to logistics experts and stick to what it did best: making juice and marketing it.
Of course, at the micro and small end of the SME market, where we’re usually talking about relatively small amounts of product, the distribution challenge is different again. It often sits somewhere in the middle of not having enough time to take care of the supply side yourself, and not making and selling enough product to make outsourcing it feasible.
I’ve met countless operators who are in this position and working themselves into the ground trying to do it all. Deep down, they know there must be a better way, but they’re terrified they’ll drop the ball if they spend too much time looking for it. This is where thinking outside the square can mean the difference between controlled business growth and complete personal burnout.
But back to Tim. We asked him to help a fresh pet food business find ways to distribute its frozen product, after reaching the point where the owner could no longer manage deliveries alone. The obvious solution was to contract a transport company with refrigerated trucks to pick up the product and carry door-to-door on the owner’s behalf.
Yet to do this would have meant hiking up the price of the product significantly to cover the increased freight costs – and almost certainly losing customers as a result. Tim suggested finding other businesses already using chilled transport and slotting into their distribution networks.
So the owner spoke with butchers and found a handful that were thrilled at the opportunity to offer the product in their store. They were just as thrilled at the opportunity to lower their own freight costs – even if only slightly – by filling gaps in their trucks with small amounts of pet food product.
The owner is now able to promote the product to new customers and also give current customers the option of picking up from their local butcher and saving on shipping fees.
Taking the same creative approach to distribution can work for just about any product. The key is to do your homework and find other businesses to build relationships with, which will result in cost and time savings for both parties.
For more business building tips from Kochie, tune into KBB 11am Sundays on Channel 7!