Getting started in business is tough. Winning the confidence of your customer and essentially creating a brand that positions you as a reliable supplier is where we all aspire to be.
But once the hard work is done, the rest is not so difficult.
The common name for the means by which a product or service gets from your business to your customer is the “channel”. Unfortunately many of us fail to recognise the real value of this channel and our customer relationship.
In both the product and services innovation matrices one of the “Seeds” (or fundamentals of building a business) is referred to as “Channel Enhancement”. This “Seed” asks you to leverage your channel to the fullest and take advantage of the trusted relationship you have with your customer.
Indeed in many businesses the real value lies in the channel, not the products being sold.
There are numerous examples of larger companies taking over smaller ones that have developed a valuable channel, not because these larger companies want the products of the targets. What they want is access to the channel, the customers and the database.
This is a smart low risk corporate play we see time and again where corporate giants essentially purchase a market. Buying a market or a business that owns a channel is a measurable cost that can be assessed well in advance of a purchase. Compare that with the risk of trying to create a market from scratch. The uncertainties are really impossible to forecast, so too the cost and even the likelihood of success or failure.
SME’s with a narrow offering are ideally positioned
SME’s are in the ideal position to develop “channel enhanced” products and services as a low risk means of expansion and perhaps even to position themselves as takeover targets.
A simple example
Let us suppose we have built our business making hardware products such as hinges for cupboard doors. Once we have established that as an ongoing self sufficient business it’s time to turn your attention to other needs your customer may have.
To best do this you need to find products that:
- Fit well with your core competency and thus are not technically a “stretch” to introduce;
- Have synergies with your present market offering and thus give your customer confidence you can deliver because you are familiar with the “space”;
- Allows your customer to reduce the number of individual vendors they have to work with; and
- Can provide real value to both your business and that of your customer.
For example in the case of door hinges, what is the opportunity to also sell screws, then door catches and door handles and so on?
All these add on products are ones your customer can relate to and since you are already a trusted supplier, introducing these channel enhancements may be a lot easier than you think.
A Brand is also a Channel
The company “Chanel” started life as haute couture business and developed a high profile brand and a relationship with customers wanting their sought after products, or perhaps their brand.
It does not require much of a leap of imagination to explore the terrain of opportunities that could ride on the brand of the original Chanel offering, again appealing to the high value customers it originally serviced with its apparel range.
Louis Viutton now with watches and clothing and Porsche now lending the brand to all manner of products are other examples. The list is endless if one cares to search.
Capturing your Customer
Petrol service stations are a good example where a customer is literally captured by the supplier and where there is no means of short term escape.
When filling your car with petrol you are captive at the petrol pump. What an opportunity this is to be selling you other things? This is being done to a small extent with petrol pump advertising, but one wonders where this could ultimately go?
Imagine if there was a snack vending machine associated with the petrol pump, or perhaps a cold drink dispenser, what a bonanza this would be and all because you have been held captive by the channel for a few minutes with no escape.
But for petrol stations it even gets even better!
When you have filled you car you then go into the shop to pay. What a great opportunity this is for further exploiting your presence with up sells and some products sold at many times supermarket prices. And we often buy them, either from impulse or convenience.
Put a small team together and explore the opportunity for “Channel Enhancement”. It’s a great way to build a business!