Sales channels to reach your customers
Selling through retailers, wholesalers and other distributors
Selling through an intermediary may be a more cost-effective way of reaching your end-customers than selling to them directly.
If you are targeting business customers who prefer to deal with large suppliers, selling directly to them may not be a realistic option. Instead, you might aim to supply wholesalers who have existing relationships with those businesses.
If individual consumers buy low value quantities of your products, the best option might be to target retailers that sell similar products. Or you might choose to focus your efforts on a relatively small number of wholesalers who can in turn supply your products to many retailers.
Other distribution channels may also reach your end-customers. For example, technology suppliers often sell to resellers who can configure and install the technology to suit end-users’ particular needs.
Managing your distributors
You need distributors who will value your product. If they sell competing products, what will make them push yours?
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Think about how you set your prices. Distributors will be more enthusiastic if they can make a large profit – but setting too low a price will eat into your own margins.
Effective advertising and promotions can be vital. As well as marketing to the distributor, you can promote your products directly to end-customers. Distributors will be keener to stock and sell products that their customers are asking for.
The key terms of the supply relationship should be covered in a written contract. Key issues might include:
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how much stock the distributor will hold
what the distributor will do to promote your products
how quickly you can resupply and minimum order levels
whether the distributor has exclusive rights to your product (for example, in a particular territory)
what happens if either you or the distributor want to end the relationship
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Business Model Innovation
Home » Business Model » Business Model Innovation
April 18, 2013 Ervin Quinto Business Model Tags: business, business innovation, business model
Because our website is dedicated to showing you the basics of business in terms of both theory and practice, we thought many of you might find it useful to learn more about business model innovation. This concept can be useful in any type of business that looks to reinvent itself and come up with new practices, or new products or services. A business model is the template, or the skeleton of a business, and it shows that business philosophy and means of achieving its goals. Thus, business model innovation refers to the creation, innovation or reinvention of a given business model.
The purpose of this practice is to expand the business, to find new avenues of activity, to attract new customers or business partners, or to change the modus operandi in a way that plies to new concepts, new needs or a new market. Other purposes may include surpassing or eliminating competition by coming up with a formula they cannot beat at the moment. There are four key principles of business model innovation and, if applied together, they can result in a successful company:
Customer value proposition A company becomes successful when it manages to create something of value for its customers; this usually refers to a service rather than a product, and it is supposed to be a service many if most people need and require. Thus, a companys goal should be delivering said service at the best possible quality and the lowest possible cost, thus reducing competition and increasing the overall value of its service.
Profit formula This is similar to the business model; it is actually just a part of it and it calculates the costs a company should suffer, together with the estimated profits. The profit formula should include the following concepts: revenue model, margin model, cost structure and resource velocity. The formula is successful when it all adds up to profit for the company.
Key resources A company is nothing without its resources, and these are usually the people, the products, the equipment, technology, research, facilities and a brand. All these resources must work together to create the value product or service that the company intends on selling. As for the brand, it helps make the product or service recognizable, it creates an image or identity that the customer can relate to and which makes it trustworthy.
Key processes These refer to the managerial and operational processes that any company has to deal with in order to be in constant growth. These key processes have to do with marketing, budgeting, development, planning, training, manufacturing, selling and so on.
Business model innovation is, in fact, starting to gain more and more advantage, and leading people in the business industry have stated that they see it becoming even more important in the future, so much so that it will surpass the importance of creating new products or services. A related concept in business says that you create the market or audience for your product instead of creating a product for an existing market. For example, most of the companies that sought business model innovation were focused on finding solutions to providing products or services to areas of the market that generally find them expensive. Such is the Indian conglomerate Tata Group, which now prepares an automobile that could be so cheap it would present as a major competition to all auto manufacturers.
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