What does ‘Build Direct Channels to Your Customers’ mean?

admin January 13, 2020 0 Comments

If you have a product to sell, you have to reach your customers

If you want to reach your customers, you have two options

  1. Use someone else’s channels to reach your customers
  2. Build your own channels to reach your customers

This applies to all of the following

  1. Marketing & Advertising to Your Customers
  2. Selling to Your Customers
  3. Selling Additional Products to Your Customers
  4. Strengthening the Relationship with Your Customers
  5. Staying in touch with your customers and updating them on what’s going on with you

Either you build your own channels and reach your customers directly

OR

You worth with someone who has channels that reach your customers, and you utilize those external channels

The Basic Problems with Someone else Owning the Direct Channels to Your Customers

  1. You usually have to pay a ‘toll’ to reach your customers. Every time you want to reach your customers you have to pay a toll
  2. You usually have to pay a ‘cut’ when selling a product to your customers. Every single time you sell them something this cut has to be paid
  3. You have to follow the ‘rules’ that this entity/company has. Rules about what you can sell, how often you can sell, what you can communicate, how often you can communicate, whether or not you can sell additional things
  4. Other people can sell the exact same product as you, using the very same channels
  5. It is in this company’s benefit to reduce their dependency on you, and encourage other people to sell the same product as you
  6. It is in this company’s benefit to prevent you from becoming dominant when it comes to selling this product, as you might become so big you can set up your own channels and not need them
  7. It is in this company’s fears that you might leave them and start working with a competing company that also offers similar channels to your customers. So they are naturally incentivized to slow down your success

At best, you have to pay a toll and face increased competition. At worst, the toll starts taking up most of your profits, and the ‘forced’ competition starts taking up most of your market share

That’s not all. Unfortunately, things can get much worse

The Additional Problems with Someone else Owning the Direct Channels to Your Customers

  1. It is in this company’s interests to keep increasing the ‘toll’ you pay it
  2. If the product you sell has a very high profit margin, then the company might decide to start selling the same product itself
    1. As it already owns the channels to your customers, it can sell to them easily
    2. At best, it will sell to them in direct competition with you
    3. At worst, it will just kick you out or hide you, and take over the entire market
  3. This company might simply kick you out
  4. A competitor might ‘bribe’ this platform/company and marginalize you and your products
  5. This company might manipulate the results and show less sales than there really are. This is particularly true for digital products where you don’t have to ship anything and there is no ‘physical’ count
  6. If you produce a product made of parts supplied by other companies, your partner company might strike a direct deal with them. There is nothing stopping them from cutting you out of the equation completely
  7. The company might decide that it is not worth the effort to continue to support you. If the tolls are not worth it, the highway gets closed

Most of these will lead to the end of your career

A Brief Interlude

Now that we have seen the various downsides of someone else controlling your access to your customers, let’s look at what it really means to ‘Build Direct Channels to Customers’

Building Direct Channels to Your Customers

The only true long term solution, if you’re selling products to customers, is to find some combination of

  1. A very honest, trustable company such as Apple or Microsoft which does not screw over its partners
  2. Building your own direct channels to customers

The former is getting increasingly difficult to find. Look at the all the most recent big companies

  1. You have the trifecta of Google, Amazon, Facebook that are doing all sorts of shady stuff
  2. You have a newer breed of companies such as Uber and WeWork that have the double distinction of not only being shady, they also are incompetent at actually making any profits. They might not survive as companies for very long

So, you have to look at old school companies which grew up in a world where you did not stab your partners in the back and try to steal their business – companies like Apple, Microsoft, IBM, Oracle, Intel, etc

The latter (building your own direct channels to your customers) is also difficult. It is not at all easy to build your own channels to customers. However, it has the very real upside of giving you 100% Control of Your Destiny

What Direct Channels to Customers can you Build?

There are free and very good channels you can build

  1. Your own blog. Many blog companies offer a free blog. Just make sure to pay the $10 or $20 a year it takes to have it on a domain name you own yourself
  2. Your own website. Again, many website companies will offer you a free website. Again, you must make sure you own the domain name for your website
  3. Each book that you write. If you do it right, each book is a direct channel to your customers

There are not free and very good channels you can build

  1. Your Email List. This is one of the best ways to have a direct link with your customers
  2. Your App. If you can afford to build a dedicated app for your customers, this is a very good option

Having your customers on your email list and on your App means you get two very powerful channels – Email List to their Inbox, App to their phone

There are free and not very good channels you can build

  1. Any Social Media channel. These are useless when you are starting off because they are hard to build and the social media company controls everything
    1. However, after you get successful, these are good. The social media company needs you to attract more people to their platform
    2. Until you are successful and/or famous, be wary when putting effort into these

The above 6 channels should give you a taste/idea of what you can build and how to evaluate each

Why it is Imperative to Build Direct Channels to Your Customers

If you connect the dots it should be clear what the book stores are doing

  1. Leveraging self published authors and small Publishers to weaken Large Publishers
  2. Using subscription programs to commoditize books and writing
  3. Building their own Publishing imprints
  4. Creating a race between everyone else, and in the confusion slowly building up their own books portfolio
  5. Making sure no authors become too big

Their ideal end state is – 70% to 90% of every book sale going to them, all authors making a small amount of money, all authors being interchangeable

Remember, before Apple came in and forced Amazon and B&N to give authors 70% of ebook sales, these two companies were only giving authors 35% of every ebook sale

The long term future will be

  1. Authors and Publishers who have direct channels to customers and make 50% to 70% to 80% of each book sale
  2. All other authors and publishers, who are dependent on middlemen, and make only 30% of each book sale
    1. Furthermore, they have to take a cut of that and spend that on advertising and marketing, bringing down their actual take home cut to just 15% of every book sale
  3. A smattering of other channels, offering better rates and yet not being large enough to really be an option

If you do not build Your Own Direct Channels to Your Customers, instead of 70% of each book sale, you will make only 15% (as you would also have to pay for advertising and marketing on the channels)

What do you want – 70% of each book sale, or 15% of each book sale?

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