Distribution as a competitive advantage for B2C startups
There are 3 things to be aligned when hitting product-market fit.
User problems
The Product
Distribution
If one of these parameters fails — Product market fit fails.
Most startups do focus on product and user needs first. Distribution is usually the last puzzle that needs to be solved.
But distribution could be the hardest piece of all.
The 4 distribution categories
This is because there are only limited ways in which potential customers can hear about a new product or service.
To be exact there are only 3 scaleable groups of distribution categories in which a consumer can hear of a new product:
- paid advertisments
- word of mouth (referrals)
- organic content
Each of these distribution categories has limitations and opportunities. Some of them might be simply blocked. Meaning: it’s extremly difficult to get traction through these distribution channels.
As a startup that is looking to get product-market fit, testing and validating distribution is a high priority.
The issue with paid ads
Competition is great — through competition products get better over time.
Competition is terrible from the perspective of paid advertising
Imagine you are a baker and the ingredients of your product initially cost 0,1 € and suddenly the price of the ingredients spike to 4€ the day after.
But as a baker you will only be notified the morning you want to produce the products.
Doesn’t sound like a very sustainable business to me.
That’s pretty much how paid ads can work. Because competition will drive the price and the startup that has the most money for the longest time will outbuy any other startup on this distribution channel.
That’s a clear problem because in the long term the startup with the most aggressive cash reserves will be able to dominate a market.
The solution: owning distribution channels
As always with any challenge there come opportunities as well.
Distribution channels can be owned.
One example (non obviouse) would be Google’s mega-deal with Apple. Google pays Apple billions of dollars for only 1 distribution deal: being the native search engine on Safari iOs.
It is estimated that google generates billions in revenue through this deal.
This makes distributing search products like Google to iOs Users extremely difficult.
The result: A competitive advantage caused by distribution.
If you want to know more about distribution and user acquisition as a startup feel free to say hi via LinkedIn.
P.S.: We have currently an open batch where we select 3 startups for finding a better distribution model. Just contact me via LinkedIn
