Preselling products at both levels of the distribution chain, retail and wholesale.
First-time entrepreneurs might fantasize that their fabulous new products will be the ones to jump right off the store shelves. But wholesalers, distributors, and retailers have heard it all before. The reality is that lots of people stand between you and your customer, and they all have to be sold. The entrepreneur's job, as Sheryl Leach and Kathy Parker of The Lyons Group, in Dallas, now know, is to figure out who those intermediate customers are and how to sell them.
Leach and Parker created Barney, a purple dinosaur who cavorts with a pack of real kids in a half-hour song-filled video aimed at the preschool set. A couple of years ago, the team had assumed Barney's fortune was made after they had persuaded Toys "R" Us to put "Barney and the Backyard Gang" videos on their shelves for a market test in New York and New Jersey. "It was a dismal failure," says Leach.
Barney bombed back then because no matter how cute the reptile seemed to its creators, kids didn't know about him, so the distribution network didn't care. If Barney was going anywhere, The Lyons Group had to create demand. And Parker and Leach had to be sure that the demand penetrated the entire distribution chain. Disney and other corporate giants can create demand with money. Small companies like The Lyons Group (a start-up subsidiary of Developmental Learning Materials, a $50-million Dallas company) have to do it with smarts.
The Lyons Group strategy, after the Toys "R" Us debacle, boiled down to this: to presell the product at both levels of the distribution chain, retail and wholesale.
To get retail stores to stock the tapes, Parker and Leach had to presell consumers -- kids, and through them their parents. So Leach sent free Barney videos to day-care centers in selected areas. The centers showed the tapes, and the kids were hooked. At the same time, Leach used part-time telemarketers to tell area retailers what she was doing. When several had agreed to buy a few tapes to stock, she sent the preschools a list of places where Barney was sold locally. Kids would nag parents, who would buy, which began the demand.
Then Leach told retailers they could get Barney from their regular distributors if they'd help her persuade those distributors to buy from her. Retailers did -- with letters, calls, and orders for Barney tapes -- which was the best sales argument Leach could bring to the wholesalers.
The sales process was a little more complicated with national retail chains, where Leach first had to sell local buyers, then get them to help her sell to national buyers, who then dealt with the next level of distribution. But the principle was the same: to presell the customer's customer.
Now Barney tapes are sold in practically every major video outlet, as well as toy stores, catalogs, supermarkets, drugstores, and bookstores. Last year, TV Guide named Barney one of its top 10 kidvids. The Lyons Group has spent about $675,000 over three years to nudge Barney and the Backyard Gang to national stardom.
A lot of money? Yes, but consider that just one 30-second TV spot can cost an advertiser $100,000 or more -- before production costs. Smarter is cheaper. -- Tom Richman