Distribution is king because without it, your product is like a tree falling in the woods.

If no one’s around to see it, does it even exist?

Distribution is King

• Why Read:

  • This article provides critical insights for startup founders on the importance of distribution strategy.

• Featuring:

  • Evan Armstrong (@itsurboyevan), Lead Writer at Every Inc.

• Link: 

  • “Paramount’s Dilemma: Content Isn’t King—Distribution Is”

Key Concepts and Tactics:

• Understanding the Historical Importance of Distribution in Media:

  • Point: Recognize that controlling distribution, not just content, has historically been key to media success.

  • "If you own the distribution, you own the profit... For nearly 100 years, it rode each technological wave by capturing unique, defensible distribution."

• Adapting to Technological Shifts in Media Distribution:

  • Point: Be prepared to adapt to new distribution technologies as they emerge.

  • "The 20th century saw four major entertainment distribution and technological shifts: feature films, radio, television, and the internet. Each of the first three of these evolutions had hard constraints on the amount of distribution available."

• Recognizing the Unique Challenges of Internet Distribution:

  • Point: Understand that internet distribution requires a different strategy due to unlimited competition.

  • "The internet was wholly different. It simultaneously featured unlimited distribution—where you could broadcast your content to anyone in the world—and universal competition, where you were competing not just with other entertainment options, but with everything else."

• Focusing on Distribution Advantages in the Digital Age:

  • Point: Prioritize building distribution advantages rather than relying solely on content quality.

  • "Content can only briefly be king. In the long term, distribution advantages enable you to get paid for both your shitty content as well as your hits. Content-first companies are only as good as their next amazing product."

• Leveraging Existing IP and Franchises:

  • Point: Utilize narrative network effects by owning and exploiting popular franchises.

  • "If you don't have distribution (i.e., if you aren't a tech platform or Netflix), the best bet has historically been to utilize narrative network effects by owning the rights to popular franchises. Then, you use that IP in as many ways as possible."

• Considering Alternative Strategies for Content Companies:

  • Point: Explore strategies that have allowed content producers to succeed without owning distribution.

  • "Content producers have built enterprise value without owning unique distribution channels. A24, of Everything Everywhere All At Once fame, just raised $75 million from Thrive Capital at a $3.5 billion valuation."

• Recognizing the Limitations of Content-Only Strategies:

  • Point: Understand that reaching significant scale requires more than just content production.

  • "There has never, ever, in the history of media, been a company to reach that size without some kind of distribution engine."

Making B2B Referrals Work

Why Read: 

• Critical insights for startup founders on the unique challenges and strategies for driving B2B referral growth, which can be a powerful but complex acquisition channel.

Featuring:

• Elena Verna (@ElenaVerna), Head of Growth & Data at Dropbox

• Link:

• “3 mistakes when setting up B2B referrals—and how to avoid them.”

Key Concepts and Tactics:

1. Understanding the High Cost of B2B Referrals:

   • Point: Recognize that B2B referrals require significantly higher incentives than B2C referrals.

   • "B2B referrals are an order of magnitude more expensive than B2C referrals"

   • "B2C has well established incentivized loops such as 'Get $10 by giving $10' or 'Refer a friend and get $20' or 'Refer a friend and get a free month.' This doesn't quite translate to B2B: 'Tell a coworker – Get $20!" feels… off."

   • "B2B referrals risk professional relational capital: If your friend doesn't like the product you shared with them, no big deal. But if you recommend a CRM to a former coworker and it flops, it looks bad on YOU. And 20 bucks is most definitely not going to incentivize me to put my reputation on the line."

2. Offering Meaningful Incentives for B2B Referrals:

   • Point: Provide substantial incentives that justify the risk to professional relationships.

   • "Offer meaningful incentives. The value of referral-based conversions will likely be much higher than your general SEM sign-up, since referral sign-ups have strong 3rd party validation and almost always convert and retain better than users from other sources. So you have to be prepared to pay a high CAC for it."

   • "A good example of this is Gusto: They offer $400 total—$300 for you and $100 for them."

   • "Another one of my favorite examples is Brex: They offer $500 total—$250 for you and $250 for them."

3. Building a Foundation for Referrals:

   • Point: Establish organic word-of-mouth growth before implementing a referral program.

   • "Like many things in Growth, referrals are not a tactic that you can just slap onto your product. Just because you have a referral program doesn't mean that users will start evangelizing your product, if no one was before."

   • "Build an organic Word of Mouth (WOM) loop, first"

   • "Some triggers to look for: NPS: This survey is literally asking for willingness to refer, so it's a natural proxy. Scores of 70+ indicate you have a true WOM loop on your hands."

4. Focusing on Intrinsic Motivation:

   • Point: Cultivate genuine user appreciation for your product to encourage referrals.

   • "Although financial referral programs focus on the extrinsic motivation, building the intrinsic motivation is often necessary for the foundation."

   • "Being able to tap into intrinsic motivation generally depends on your users genuinely caring about your product. It has to not only truly solve their problem or make them better at their job, but also evoke an emotion."

5. Aligning Referral Requests with User Experience:

   • Point: Present referral opportunities at the right moments in the user journey.

   • "This is an overall component of your marketing and design, but properly understanding your customers' journey can also allow you to present a referral at the right moment. For instance, Cello reports a significant lift from aligning around 'Moments of Delight,' like reaching an Aha! moment in the product."

Subscribe to Tactician:

Tactics and strategies for building tech startups from industry-leading Founders, Operators and Investors.

No spam. Unsubscribe anytime.