Distribution channels for services: Big ideas, big payoffs

Last week James talked about the unglamorous but important topic of distribution channels. It’s one of the “4 Ps” (“placement”), but many marketers and smaller companies don’t think about it as often as they should. And it’s potentially the most important strategy in your arsenal.

When you sell a physical product, it’s easy to keep distribution strategy and channels at the top of the priority list. You may have a direct sales team, a network of resellers & VARs, a retail presence, a catalog and/or an e-commerce website.

But what about distribution options for intangibles like services?

Most service firms in the U.S. are small businesses under $1 million in revenue. Many are caught in the E-Myth — the founders are working in the business with little time to work on the business. And when you’re stuck in the E-Myth, it’s tough to find time to lead your company to hyper-growth.

For these businesses, a new distribution channel can be just the ticket. The opportunities may not be obvious, but they’re there when you apply your creativity.

Here are some key questions to get you started:

1. List other products or services your customers use.

• What problem are your customers trying to solve when they buy from you?
• Are there complementary services or products that come before or after they join you?
• What else may be on your decisionmaker’s plate at the time they buy from you?

2. Find organizations who already have access to your prospects. Think broadly about

• Media they consume (online content, podcasts, industry publications, newspapers, etc.)
• Services they subscribe to
• Consultants or vendors they work with
• Companies they buy from regularly
• Organizations they belong to
• Events they attend

The organizations you’ve listed are potential distribution partners or channels for you!

Here are a few case studies to inspire you as well.

Strategy #1: Buck tradition

Logoworks uses a non-traditional distribution strategy for their industry with enormous success.

There are thousands of graphic designers & firms in every city. They compete for the same business and it’s difficult to gain leverage over their time.

Instead of setting up shop and knocking on local doors, Logoworks distributes their design services via the internet. They use search engine marketing (both organic and paid search), online ad campaigns and ongoing online publicity to gain clients all over the world. It’s possible for them because they also distribute their product – logo designs – via the web.

This distribution strategy also gives them a more compelling value proposition: operational efficiency. By using a pool of virtual designers, Logoworks is able to provide clients multiple design options at a much lower cost than a traditional firm.

Their internet distribution model has been extremely successful, and this spring, H-P acquired the company. Why? H-P wants to use the Logoworks offering as a value-add to their small-business customers.

That’s a smart distribution strategy.

Strategy #2: Hang out with your customers

Here’s another distribution option: partner with a company whose customers need your service.

Geek Squad

Let’s say you’re launching a new tech support service. You could knock on doors and market your services locally. Or you could raise millions and spend it on marketing, physical locations and overhead.

Instead, Geek Squad partnered with Best Buy to offer their services right inside their stores. When Best Buy sells a computer, customers know that Geek Squad can service it if they have any problems. They even promote the Geek Squad brand in the parking lot.

This partnership was so successful that Best Buy acquired Geek Squad in 2002.

Jigsaw

Companies that create software widgets can find great success partnering with bigger software companies that have a critical mass of users.

Jigsaw founders Jim Fowler and Garth Mouton were a pair of high-tech sales pros frustrated with the amount of time they spent searching for contact information. So they created Jigsaw, an online directory of more than five million business cards.

Now they needed access to salespeople, so they joined Salesforce.com’s App Exchange program, offering their service to any Salesforce user.

Salesforce.com is a major distribution channel for Jigsaw, giving them access to tens of thousands of potential customers.

They’re now one of the 10 top App Exchange applications.

Home Depot

How about a non-technical case study? Consider all of the vendors who provide service via Home Depot.

When you hand over your credit card for granite countertops, flooring or a new garage door, you don’t have to DIY. Home Depot will sell you installation services if you need them, but they don’t provide those services directly.

Instead, they have teams of subcontractors in each market to perform those jobs. Home Depot is a distribution partner for those contractors, giving them access to a large pool of customers who need their services right now.

Get serious about distribution!

Developing a new distribution strategy, then creating and managing the program can be tough work – particularly if you’re a service company with limited resources.

But if you’re looking for new ways to gain leverage and build your business, take a serious look at your distribution strategy. You can start small with a single partnership and work up from there.

Still reading? I must have hit on something valuable! How does your company think about distribution? Have you considered new strategies in the last year? What’s worked and what hasn’t? Please share your thoughts in the comment area below.

If you have a marketing question, feel free to ask a Marketing M.O. expert. We’ll send you a detailed response, and it’s free.