4 Unique Sales and Marketing Channel Strategies for Hardware Startups

Written by Michael Michelini

Welcome to the age of technology and information! We are here behind our computers making our products, prototypes, and having fun. But so many hardware entrepreneurs forget that they need to sell the product to keep making new ones! If you want to take your basement prototype startup to a full time gig, then you’re in luck! Today we have 4 unique ways to build out your sales and marketing channel strategy to grow your business.

There’s More Than Kickstarter and Amazon

Before we dig in, I want to make sure hardware entrepreneurs realize there is more to life than Amazon and Kickstarter. Don’t get me wrong, use them! They are great platforms to get more exposure and sales for your product. But to build a long term business, you will need to expand and have multiple sales and marketing channel strategies. 

Why?

Being reliant on one or two sales channels for your income is risky. If you want to raise money from investors, they will see this as a red flag many times. Even you, as the owner, should think like these investors. You want to have multiple streams of sales and marketing channels selling and distributing your product. You will sleep better at night knowing that if there is a listing problem or account problem in one of these channels - you still have other channels to make up for it.

So if you are looking to build a long term, sustainable product brand, you will need to branch out and build channels. Now let’s dig in to some:

1. Affiliates

Want to get influencers and bloggers around the world to represent your product? There are a lot of spins you can put on approaching them, but one that is often attractive to many is offering them an affiliate program.

An affiliate program is a way where you give this blogger a unique tracking URL on your website and let them sell. When they send traffic through this link - you pay them a commission on any sales that come from it.

Many people like this, because it is equal and win-win. For you, you don’t need to pay them upfront for posting an advertisement on their website. And on their side - if they bring you a lot of customers- they will earn much more than just that advertisement fee they received.

Where to put your affiliate program? While Amazon has their own affiliate program (Associates), don't send traffic that way. You should instead start an affiliate on your own website and shopping cart and get your own affiliates. Some of the common affiliate networks and solutions you can consider are:

Many times, when you want to get an influencer to blog about your product - there are a few ways to incentivize them. One of them being your affiliate program. You should get them to test your product and make sure they are comfortable promoting it before just blinding doing so. But having bloggers getting some commission for promoting your product is often win-win.  An example of this would be with when going on podcasts. You can give a coupon code to the people who listened to the show - and this coupon code would give a discount on your product, as well as a commission to the podcast host.

Next time you listen to a podcast, and at the end of the interview they have a special offer, many times that is tracked back to the podcast and commission is granted.

2. Building A Drop Ship Channel

Drop shipping is a bit more involved than the previous affiliate program. A drop ship program is where you, as the product owner and supplier, allow third party sellers to sell your product on their websites. Their website visitors purchase the product from them, give them the money, and then you deliver it.

This is where the keyword “drop ship” comes from. These third party sellers don’t have your product in their warehouse, instead they will turn to you to ship this order to the customer direct. The seller gets a price between the wholesale price and the retail price. Thus the drop shipper can make a living selling other people’s products without needing to buy inventory. There are 3 ways you can fulfill this order.

  1. Blind Ship: This is where the shipping packaging doesn’t show it was coming from you. It also doesn’t show it is coming from the third party seller. Thus the blind word, it is a generic name and packaging labeling setup on the shipping, and the packing slip will have the bare minimum. This is an easy solution to have a lot of different third party sellers. Its because you don't need to make separate packing slips and return labels with either of their company’s information. More scalable if you will have a lot of sellers.
  2. Ship with their label: If you want to keep your drop shippers happy, you can package the shipment as if it came from their own warehouse. You can put their name on the packaging, as the “from” on the shipping box and the packing slip. This will be more work for you as the brand owner, as you need to keep track of which order came from which seller. Some suppliers only allow those drop shippers who have a high volume of orders to use this method.
  3. Ship with your label: Not recommended, but some suppliers don’t hide the fact that you shipped it direct from your warehouse. They don’t show the price that the seller paid, but they do show that they sent it direct from the brand owner. Maybe this doesn’t matter to the drop shipper, but why risk it? They may get upset and even drop your product as they could feel you are trying to steal their return business opportunities.

Of course on all these situations - you don’t tell the end customer what price the drop ship seller paid! It would be pretty awkward if the end customer saw that the website paid $5 dollars but they paid $10 bucks for it! So this is why you don’t put any financial information in the shipment. Just put a simple packing slip without pricing.

I used the dropship method many times in my kitchen and bartending supply business. I was busy selling on eBay, and didn’t have time to list on various channels or reach other audiences. I opened a drop ship program and many entrepreneurs were interested to offer my product line to their customer base. These new drop shippers added it to their e-commerce stores and marketed on their blogs and email lists. This reached new customers that I would not have been able to reach otherwise. But there is a word of warning - sometimes you may not allow drop shippers to compete with you on certain channels. Say for example they are also an Amazon seller, and you’re selling on Amazon - this may create competition in the marketplace and drive your prices down.

So if you are going to go this route, it is best to have terms up front about which channels these new drop shippers can sell on. You should also be clear on the ability to change your terms and your program later, as business changes and so may your distribution strategy.

3. Manufacturers Sales Reps

Here is a bit of a dinosaur strategy, but still is in existence - having sales reps. This can be as simple as finding a top fan in your customer base who wants to represent your product in their country or region. It can get as complex as a complex network of established sales agencies pushing your product to their client base.

The main idea of this program is that you grant them territory on your product. Let’s say you have the hottest new product since sliced bread - but you’re based in France. You could open a sales office in New York City to go door to door selling these to various buyers, or you could make a deal with a sales agency. You make a contract ensuring them that they are the exclusive seller in that market (to protect their work), and they then represent your product in that region.

Many Asian brands have done this to reach the US market. They accept the fact that they are clueless on how the market works and how they can penetrate it - so they find partners.

A good partnership is also built on trust. If you are a supplier and partner with a sales rep, don’t think you can undercut them later. It is about creating win win relationships in the B2B space. You can also apply this to hiring in-house sales reps. Whether they are in-house sales reps or outside sales reps, they will be numbers driven. You don’t want to have your own sales force competing for the same customers - it is a waste of resources. By dividing and conquering, you will win, as well as keep your sales team happy.

You can implement this by having a new lead for B2B tell you their business location. Then internally (or via software) when that lead comes in, it is assigned to the sales rep covering that country / territory. For external sales reps, you should also list them on your website as an official distributor, and even push them traffic. The internet has made this strategy more complicated, as you are selling on Amazon and your own website already. So how should they treat those sales? Don't worry about those. Because they are just focusing on wholesale accounts for bigger retail chains and distributors.

You may be wondering, are there formal companies doing this? While there aren’t massively famous companies doing this, in each industry you can find distributors. Distributors often are also manufacturer sales reps and vice versa. When I was in the kitchen and bar supplies industry, I would talk to the manufacturer and they would tell me to go to the distributor. These reps would be companies, often 5 to 10 people, mainly sales reps, covering different geographic regions and taking orders.

The main point here is you need to have the inventory ready to ship to their customers. They are not buying from you, but rather representing you and getting your product into new sales channels. Once they make a new sale, they will send you the order and it’s your job to ship it to the customer. Keeping quality and smooth supply chain is of the utmost importance to keep these reps happy and selling.

4. Promotional Market

Does your product have the opportunity for use in a company promotion or giveaway? Depending on the price point and the uniqueness and utility of your product, this may be!  You may be able to tap into the massive promotional market.

There are various ways to attack this market, but the most common is allowing some space on your product for a company logo. They then buy it from you to give away to their customers. Its used as promotional and branding opportunities at events, or as big tickets gifts they can send their top customers.

You like these orders because they are bigger blocks of stock. They may ask  you to re-brand the packaging, or not even bother with the packaging at all. The most important part is the focus of the product is their company name and logo - not your brand. They want those people who receive this product to remember them, not you.

While this may not help you get more exposure for your product, it will help  you in getting more turnover. Plus much needed revenue at the early stages of your hardware startup. You need to be careful on this strategy. While it can help get cashflow upfront - your customers will never know you and your brand. It is something Asian suppliers have done for decades, and just recently are making their own brands or “going direct”.

The main advantage of this strategy is get cash in the door fast, learn how to make your product on a larger scale, and then branch out. Each business and industry is different, so I would caution this is a more short term / cash flow play versus a long term brand building exercise.

Be Creative

Drop shipping and others here don’t have to be a pure online and e-commerce method either! You can have door to door salesmen take orders and then send them to you for fulfillment. Get creative in building out multiple distribution strategies.

As a hardware startup, we know you love building unique and cool products! But those products that stand the test of time build out multiple sales & marketing channels to protect them for the long term. While you may think everyone and their mother is buying on Amazon - there are still a lot of people buying in other ways - get as many of these people as you can!

About The Author

Michael Michelini

Michael Michelini

Asia Marketing & Business Development Consultant

Michael Michelini is podcast host at Globalfromasia.com, helping business owners grow their businesses starting right in Asia! He is also business development manager of Enterchina.co a members forum for those manufacturing in China.

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