Just as important as choosing what to sell, is deciding how to sell it. Your route to marketing strategy (RTM strategy) is how you intend to get your product in front of your customers. There is no right or wrong answer here – different routes to market will suit different kinds of products and services.
The secret is to make it as simple and straightforward as possible for your customers to discover what you are selling – and then to buy it. Identifying the most effective sales channels for your product will maximise your sales and grow your company.
This guide will help you to decide the best possible routes to market for your business through the following sections:
- Considering your RTM options
- Starting with the customer
- The common routes to market (with pros, cons and case studies)
- Things to consider when choosing a route to market
- Final thoughts & case studies
Considering your RTM options
To decide which sales route would be best for your business, you first need to consider:
- Are you selling to consumers, other firms or national/local government?
- Do your customers have to be actively persuaded to buy your product or do they need to buy it anyway?
- Are you selling a product or a service?
- Do your customers need to inspect your products before they buy them?
- Will customers see your product or service as a major purchase, a mid-range purchase or an incidental purchase?
- Where are you primarily targeting your product or service – locally, regionally, nationally or internationally?
- Does the product or service need to be installed or fitted at the customer’s premises?
These answers should influence your route to market. Selling a product may be easier to do through a third party, whereas you might need to sell your service directly to a customer. If your consumers need to see, feel or touch your product to consider purchasing, online sales won’t be right for you. Whatever you think at this stage, the crucial starting point is your consumer.
Starting with the customer
Customer research is critical when choosing the best route to market. If you don’t know your customers, you can’t hope to understand how best to reach them. Firstly, hone your product to suit the customer need and demand. Interact directly with your customers to conduct your market research, using focus groups, customer surveys, prototype testing and interviews.
Next, you need to see how they want to buy your product. There are two types of sales channels, usually divided into direct and indirect:
- Direct channels include sales reps, physical shops, e-Commerce websites, mail order and exhibitions
- Indirect channels include sales agents, distributors and franchisees.
Again, use direct interaction with your customers to figure out what channels they use most often. Consumer buying habits vary from industry to industry and from product to product. If you’re looking to sell a book to an end consumer, you’ll need to go through channels such as an online store, which will differ hugely from trying to sell a complex IT solution to big digital companies. For the latter, you might need a telephone call or even an in-person sales pitch.
Create surveys for your customers, conduct focus groups and ask for feedback after purchases. You can look to what your competitors are doing to suss out the best tactics, too. Companies dominating the market know what they’re doing, so observing their strategies is a good place to start. However, bear in mind that how well a channel does depends on multiple factors, including the strength of the brand, the copy and the method used. Therefore, listen to the market research above anything.
The common routes to market
Here’s a list of the top sales channels you might consider to get your products to market.
1. Selling online
The value of online sales has soared in the past couple of years as internet connections have become faster, and payment transactions have become more secure. Now it is the preferred method of buying for many people, and there is very little that you cannot buy online.
One nice tweak to selling online is Click and Collect, as pioneered by Asda but now taken up by John Lewis and others. Customers order or reserve goods online but then go to a physical shop to collect them. This process saves them delivery charges and also gives customers greater flexibility on when they can get hold of their goods. Depending on your business, you might choose to allow customers to reserve without obligation, as Asda does, or to buy and pay before collection, as John Lewis does.
- It’s quick, easy and open for business 24/7 – location and distance barriers disappear, and no travel or parking is required. Direct to customer sales usually generate the highest margin, too.
- You also have maximum control over your sales ledger. You can keep your customers close, build lasting customer relations. Retaining this control also plays a significant role in your brand identity – you don’t have to worry about any negative PR from third-party involvement gone wrong.
- Customers may be deterred from buying goods they can’t see, feel or try on before they buy them. Some customers are also reluctant to buy things online for fear of fraud.
- Direct sales mean more work for you. You’ll be responsible for everything, from product marketing, completing the sale, shipping, as well as after-sales support and handling returns.
2. Opening a retail shop
The traditional way to do it, and still useful for goods that customers need to see and touch before they buy, or for products that they need to buy instantly – food and household goods, for example.
- Opening a shop allows for personal interaction with customers and the ability to satisfy requests immediately. A pleasant shopping environment can encourage people to browse and therefore buy more than they might have otherwise.
- If you can get well-located shops, you can also benefit from high volumes of footfall. Having a high-street presence also helps increase brand awareness.
- Having a physical premise means big overheads – from rent, business rates and furnishings to staff and maintenance outgoings. Unless you’re a chain, your customer reach will be severely limited by geographical location and your opening hours.
3. Trade shows or exhibitions
One way to reach a considerable amount of potential customers is so attend trade shows and exhibitions. Not only can you directly contact many end-consumers, but it can also be an excellent way to make valuable network connections. Linking with the supermarket giants or big retailers can be a very effective route to market if that’s the kind of product you’re selling.
Trade shows are particularly useful for marketing services. Expensive services, such as engineering machinery or sophisticated firewall software, require face-to-face explanation and discussion to reach a sale. Targeting shows in the right industry is an excellent way to meet the right professionals in person when you might otherwise struggle to reach them via phone or email.
- Trade shows allow for great exposure and offer a lot of opportunity for networking, which may help you reach big retailers. It’s also fantastic for selling services which require a face-to-face sale.
- Putting a face to your brand can help boost the brand identity and create a lasting impact on your customers. It’s also an opportunity to engage with your potential clientele and carry out crucial market research.
- In the same vein, you’ll have exposure to all your competition, which is an easy way to evaluate what they do well, and what you need to watch out for in the market.
- Paying for a spot at a trade show can be extremely expensive. The bigger the show, the bigger the likelihood of a better pay off – but it can be a risk. Do your research to make sure you’re attending the right show for your product or industry.
- Setting up at a trade show can also pitch you directly against your competitors. If you’re new to the market, it might not be a good idea to set up next to an established brand in your area.
- Trade shows are a commitment, and you’ll have to pay staff for the duration of the show. There’s also a lot of logistical preparations involved to get your company to a show, and you need to factor in costs such as accommodation, travel and food for you and your team.
4. Pop-up shops
Pop-up shops are temporary shops which you can set up in any empty space for a day, a few days or a few weeks. There are two main types of pop-up shop — those held in vacant retail premises, and those in non-traditional venues, which can be anything from a village hall to a garage, to an artist’s studio.
The idea and big appeal are that they are not around for long – from a day to several weeks; a season at most. That gives the venture both an element of surprise, and one of urgency. As they’re only there for a limited period, a strategic location is vital. Target high footfall areas to generate the most customer traffic.
If you’re going down the pop-up shop route, be sure to exploit your social media channels to spread the word and create some excitement around the pop-up. Depending on your product, consider partnering with a relevant social media influencer to build some hype around the store’s arrival.
- A pop-up store is cheap and low risk, requiring few overheads. It’s an excellent opportunity to experiment with selling different types of products. As it’s only a temporary investment, it can give you an insight into whether your business model would work having a permanent premise of its own.
- It’s also a fantastic way to establish real-life links with customers: you will receive instant feedback from end consumers, and you can carry out some market research at the same time.
- There’s little opportunity to build a long-term loyal customer base, as you won’t be sticking around. It can also require a significant amount of planning, sometimes requiring months of logistical preparations for what is just a two-day event.
5. Selling to retailers
You may choose to sell your product to retailers such as a high street supermarket or department store, which will then display it on their shelves and sell it to their customers. You can also sell to online retailers, some of which will take the order for you, for you to then fulfil – cutting out the transfer of goods from you to the retailer.
- Established retailers offer high visibility for your product. Owing to their trusted brand reputation and loyal customer base, you are likely to see a boost in your own brand recognition. Selling through supermarkets has the potential to quickly build a high-volume business: if your product sells well, you can very quickly and easily expand to more stores and supply more volume. Over time, it’s also easier to deal with several large retail customers than thousands of smaller ones.
- The retailer is in a powerful position to beat you down on price, and you are likely to have to operate on a small profit margin. As a general rule, retailers expect to mark up the products they buy by at least 100% which means you will have to sell to them at half the price you would sell directly to customers via your website.
- If you are supplying the retailer for their own label range, there will be no opportunity to build your brand. Relying on one or two customers for most of your business also puts you in a vulnerable position – supermarkets have a hard-line policy when it comes to slow-moving products. If sales ease off, they can easily pull you off the shelves, which could lose your primary source of revenue.
6. Selling to wholesalers or distributors
Wholesalers and distributors act as a middleman between suppliers and the end customer, whether that is retailers or large businesses. Wholesalers usually specialise in a particular industry or product, so clinching a deal with one in the right market can be a fantastic way into a specific market for your product.
A distributor adds an extra step in between you and wholesaler. They usually demand an exclusivity agreement for a particular area and will sell into wholesalers or retailers or their own sales channels. Be wary of exclusivity agreements – if you sign with somebody who then doesn’t purchase the volume you expect, you’ll be wholly restricted to their custom with no way of growing your sales. If you do sign an exclusivity agreement, be sure that it includes a minimum volume agreement, so you don’t find yourself in hot water.
- Selling to wholesalers and distributors is another easy way to sell large volumes – it is much simpler to deliver 300 units to one wholesaler than one unit each to 300 retailers. Distributors also absorb much of the risk of selling, removing a significant amount of responsibility from the process. They can also help you access overseas markets, which can be fantastic if you’re looking to expand, without the admin of setting up abroad.
- Wholesalers need to make a profit too, so your selling price will be considerably lower than selling directly to a customer, or even to a retailer. For distributors, there’s an added level in the process which translates to even lower profit margins.
- Your product will be very much a commodity – there will be no opportunity to build a personal relationship with the end-user. Because you are not selling directly to the end-user, it will also be difficult to establish a brand name.
- Make sure your wholesalers are reliable, as your brand image is dependent on their actions. If the wholesaler fails to fulfil an order, delivers it late or makes an error, your brand reputation can take the hit even if you played no part in the mistake.
7. Selling via mail-order catalogues
You can distribute catalogues to prospective customers – they then ring or go online to place orders. It’s a popular method of selling to other businesses because it makes it so much easier for them to see what you sell.
- Mail-order catalogues are a great way of showing prospective customers the range of products you sell. High-quality catalogues will be kept and noticed and so used over and over again.
- It can be costly to produce a high-quality catalogue, and many of those you distribute will not hit their target, often quickly thrown away or discarded. It’s a rather old-fashioned method of buying things, likely to appeal to an older generation who’s less accustomed to buying things online.
8. Using sales agents
Sales agents are generally freelance, self-employed people who work on a commission basis – in other words, they only get paid if they sell. They usually operate in their own specialist sectors and have an established portfolio of business-to-business customers.
- Sales reps are a quick and cheap way to get your product in front of lots of potential customers without having to spend time and resources recruiting your own sales force. Sales agents are experienced sellers, which makes it a great solution if sales aren’t your strong point. It’s a particularly useful option for new products which the sales agent will be able to demonstrate and explain in person to the potential customer.
- You have little control over how your products are described or explained, which leaves you relatively powerless when it comes to the portrayal of your brand in the field. Third parties also have their eyes set on immediate sales rather than establishing long-standing relationships with customers, which may hinder your sales later on.
Things to consider when choosing a route to market
If you are starting a business without much money, you need to choose a route to market your customers already feel comfortable using to minimise your risk. If you have to educate potential customers about how to buy your product, it will take time and money that you probably don’t have.
How important is brand control to your business? When you start selling through third-party channels, you’re putting your brand’s name in other people’s hands. If the reseller messes up orders or a distributor is sloppy on timing, likely, the end consumer will only remember your brand name.
Negative PR can be painstaking to reverse – some end customers will refuse to work with you again, even if you change your distributor. If your brand mission is crucial to the business, as is usually the case with high-cost, low volume products, consider retaining the control. If you are going to use a third party, make sure they’re reliable and won’t compromise your brand’s reputation.
Direct sales, aka selling directly to your target market through either online sales or your own retail outlets, is often the go-to method for many businesses starting out. Although this may seem like a more efficient way to achieve sales, usually representing higher margins, its worth evaluating these higher margins against the number of sales you can achieve yourself, through these methods.
Keep monitoring sales
Once you’ve settled on the sales channels you think are best based on your market research, put them into practice. Market them to your customers – consider using paid ads to promote your website, create flyers or invest in an email marketing campaign.
When you’ve got your sales channels off the ground, consistently measure the number of sales and enquiries you receive from each channel. By looking at which routes generate the most sales, you will be able to see which methods are worth investing more time and money into and which ones to scrap. You need to focus on working out the return on investment to work out the real cost of a particular route to market. Invest only in the channels that make you a good return.
To maximise your profitability, consider an aggressive use of low-cost channels. An email campaign, for example, is a cheap method. Although the response rate is low, you can reach a vast number of customers for very little money, which may complement other routes.
Which methods you choose must depend on the product you are selling. Never lose sight of profitability – is it all very well shifting thousands of units of stock, but if the marketing channel is disproportionately expensive, you aren’t likely to make much money. For cost-based products, avoid sales reps or a field sales force – low-cost channels such as the Internet will see you the highest return and are also likely to better reflect the preferred channels of the customer for commodity products.
Don’t be fooled by bigger margins
Bigger margins don’t necessarily translate into more profit. You might sell dramatically less due to the higher price, or you may struggle to shift anywhere near the same amount as an established retailer. Per unit, you may make more money selling 1,000 units directly to customers than you would selling 1,000 units in bulk to a retailer. Still, if it takes you triple the amount of time to shift the units, your profitability will be far lower.
Let’s take an example: if you sell £1 million of your product with a margin of 60%, you will generate a gross profit of £600K. However, if you sold £3 million over the same period to retailers for a lower margin of 30%, you’d make £900K in the same amount of time, despite the lower margin.
Other things to consider when it comes to using direct sales methods are significantly increased net overhead costs. Fulfilling each individual sale involves time and human resources, not to mention increased marketing costs to reach all your individual customers. These overheads may add up the same price, or even more, as fulfilling a bulk order to a trade reseller.
Consider unusual routes to market
Sometimes a business can become really successful in selling well-known goods and services in an unusual way. Tupperware parties and Ann Summer parties are both classic examples – the idea of selling plastic storage boxes or lingerie via gatherings of friends in people’s homes was considered extraordinary when the idea was first launched. Don’t be afraid to be innovative as it can result in huge pay-off.
Setup multiple and complementary routes
Have multiple routes to market. Sell via retailers and also via your own website, for example. Or sell via a market stall and also by mail order. That way, you will reach different groups of people and can find out which routes work best for your business. Additionally, you have a fallback option so that if one route to market fails to work, you can still reach your customers and continue to make sales.
Deciding on a route to market/s for your business is no easy feat, and there is no one-size-fits-all strategy for most companies. To find the right route/s to market for your company will take time and is a fluid exercise that should constantly be reviewed to optimise the way your business reaches its customers. Still stuck on figuring out your routes to market, take a look at the case studies below.
Case study: Pop-up shops
Kate Ward and her sister Sarah Loader have found the idea of temporary venues so appealing that they have swapped their bricks and mortar tea shop for a pop-up version. The pair used to run The Silver Apples – a vintage tea room in West Didsbury, Manchester. But after three years they were so fed up of seeing their profits being eaten up by rent and rates that they closed their doors and hit the road with a pop-up version of their tea room.
Their temporary tea room can be created in both indoor and outdoor spaces. The two of them go to great lengths to make it look exactly like a proper English traditional tea room, bringing tables, chairs, a counter, cake stands, linen and vintage crockery with them to decorate the space. They play period music on a record player and to complete the look the pair dress up in old-fashioned tea dresses when they’re waitressing.
Ward said: “We can really transform a space and make it look gorgeous, and that is what we like about it. People love it because it looks like a proper tea room. They like the thought which has gone into it to make it nice for them.” Now every weekend the sisters load up their van and head for venues such as the market hall at Altrincham, Cheshire, where they create their tea room for the monthly vintage fair.
Customers can find out where they will be next by checking on their website. The tearoom also promotes the sisters’ catering company, which makes the cakes they serve, and they don’t intend on ever going back to using permanent premises.
Case study: Supplying a large retailer
Michael Hall owns Fallen Fruits – a giftware and gardening business in Ludlow, Shropshire. He had been selling his children’s horse-shaped swings – made from a recycled tyre – through garden centres when he contacted the buyers at John Lewis two years ago.
Within three months, Hall had received an order for the swings, which sell at £79.95. Since then, John Lewis has asked Hall to make a dinosaur swing, which went on sale last year, while he is also working on a wooden version. Now John Lewis accounts for most of his firm’s production.
Apart from the many forms that need to be filled in, supplying a large retailer has been very straightforward, Hall said. “The fact that we get the orders so far in advance has been fantastic for us. We look after them, and they look after us.”
Case study: Multiple routes to market
Charles Hunt started a mail-order business at the age of 26 with £500, selling bed linen and towels from his flat in Battersea, South London. It took off and did well for eight years, reaching annual sales of £6 million. But the business was dealt a fatal blow in 2005 when a postal strike prevented catalogues from reaching customers during the valuable pre-Christmas sales period.
Hunt said: “They sat at Royal Mail from the end of November to the end of December and so we lost our entire Christmas trade. We lost hundreds of thousands of pounds in revenue.” The business struggled on for a while but never recovered and went into administration at the beginning of 2007.
Even worse, Charles had personally guaranteed the businesses debt and so was left owing the bank more than £500,000. Fortunately, Hunt has since bounced back with a new online venture, Duvet and Pillow Warehouse, which has a turnover of £5 million. But the experience taught him a valuable lesson: “We had too much in one basket. We had everything banked on catalogues and Royal Mail distributing them, so it took only one incident like that to knock down the business.”