As I work with more companies that are just beginning their path in wholesale to retail for consumer products, I am often asked for a spending formula for Sales and Marketing or some rough equivalent. I have always backed away from that “formula” because frankly, no two businesses have the same goals and therefore every formula is going to be slightly different. Plus new businesses need to invest differently than more established ones. Call my version a recipe which can be adjusted according to taste.
So here I very loosely define the three areas that in my view are the bulk of discretionary spending for your consumer product business, not just two as in P&L terms;
Sales, everything you do that is for your Customers, the retailers. Commissions, trips to meetings, proposals, etc. along with promotional efforts on the retailers behalf that you may pay for as a Deduct from Invoice (DFI) in dollars or percentage, but, they execute. In essence all of the efforts and dollars that you put into a specific relationship. 3 parts of this topmost important category.
Marketing, everything you do that is for the trade in general like trade shows, advertising in trade magazines, Point of Sale Display development or costs, promotions to enhance the buy-in or positioning of your products (free freight with your first order) in the stores and the like. 2 parts of this category because it is what leads to the topmost category.
Lastly, the broad based consumer aimed efforts, which might include blog outreach, social media, consumer education, placement in consumer magazines, reviews by consumer driven media, things to enhance sales at your website, etc. 1 part of this category because most of the effort in this area will want to be driven through the retailers in order to enhance their businesses.
Why so little in consumer efforts? Because at the outset, when stores are sparse and brand name is invisible, the highest visibility is in the stores. Supporting stores with most of your efforts, to enhance the retail sell through, is paramount to success. The retailers are your Customers. Find them, support them, listen to them. Make your product work for them. As they succeed making money with your product, you succeed. If they fail to make money with your product you fail. Half your overall effort should be in this area.
Too many people confuse a consumer product company with being a retailer. The retailer is the Customer. Dabbling in consumer direct activity relies on trickle down (or up) economics. If there are no outlets in Florida, that’s a sales problem not a demand problem. Sure getting 100 people in Florida is helpful, but, they won’t live in the same community. I would prefer to spend my energy on getting 100 STORES in Florida and then support them to find 100 consumers each. And if I have product in Home Depot or Office Max or Target, I want to do everything I can to make sure they succeed NO MATTER WHAT. Your company/brand will grow fastest by adding doors, not adding consumers.