This lecture offers a strategic perspective of the distribution channel options available to start-ups. It emphasizes the development of the right criteria for choosing and managing channels. Learn about the pros and cons of different channels such as inside sales, direct sales, distribution, e-commerce, franchises and integrators. Integrating sales across multiple channels is often a challenge for technology companies. A case study illustrates these points. Part of Entrepreneurship 101 http://www.marsdd.com/events/details.html?uuid=cadf3216-9614-44b1-a73e-2b7dff582447

2. E101: Distribution
Mark Zimmerman
MaRS
email: mzimmerman@marsdd.com
twitter: @markzim

3. Product
Price
Place
Promotion
3
The Four “P”s

4. The Four
“P”s
Product
Price
Distributio
n
Promotion
4

5. 5
3 Parts: Delivery, Sales, Service

6. It’s OK and often optimal to mix &
match.
6
2 Flavours: Direct, Indirect

7. 7
How to Choose?

8. 8
Market type;
Existing, Re-segmented, New

9. 9
Market Stage

10. 10
Complexity

11. 11
Price

12. 12
Customer Preference

13. “Default” Choices
13
Channel
Type
Direct
Indirect
Market
Type
New
Re-
Existing
segmented
Market
Stage
Early
Midstage
Mature
Product
Complexity
Complex
Simple
Price
Expensive
Cheap

14. Other
Factors
Size of market
Diversity/complexity
of market
“Proximity” of market
Completeness of
offering
Cost of channel
Speed to market
14

15. 15
Not just a tactic...

16. 16
Amazon
Dell
...for some a Strategy
Zappos
Apple

17. 17

18. 18

19. 1970 - Invented
1976 - Patented
1986 - Launched
Sold as a complete solution,
machines & coffee for a per
cup price to restaurants and
offices.
19
Background

20. 1970 - Invented
1976 - Patented
1986 - Launched
Sold as a complete solution,
machines & coffee for a per
cup price to restaurants and
offices.
1988 - Acknowledged dud,
Nestle considers shutdown.
20
Background

21. 1989 - Jean Paul Gaillard named
Commercial Director.
“Pivots”
21
Background

22. 22
Separate machine & coffee.
Sell to consumers.

23. Made and serviced by 3rd
parties.
Sold through independent
retail stores.
Manufacturers handle
delivery and stocking.
Nespresso handles sales
training.
23
Machines

24. Sold online and over the phone
direct to members of the
Nespresso Club.
Delivered direct to consumers in
24 hours or less.
24
Coffee

25. As market matured Nespresso
added their own brand machines
made by an OEM.
Added it’s own retail boutiques to
further control the sales message.
Created Nespresso Pro channel to
serve the office market.
25
Later

26. ~$3
billion in
annual
revenue
30%
CAGR
over 10
years
50
countries
20 billion
capsules
12
million 26
machines
Results

27. Questions?
Comments?
Suggestions?
27
Thanks!
Mark Zimmerman, mzimmerman@marsdd.com @markzim