Unorthodox Distribution Strategy

Using an unorthodox distribution strategy leads to a successful introduction of a new research laboratory diagnostic tool in a competitive market.

Situation

A small biotechnology company developed a research laboratory diagnostic tool that could be used globally. The tool, designed with a new cutting edge technology, appeared to offer an advantage over comparable tools. However, without proof of the advantage, it was hard to differentiate it within the marketplace.  With decreasing market prices and high manufacturing costs, the profit margin was low. The company had no internal sales division, nor distribution channels. Its competitors in this rapidly growing multi-million dollar market were well-established industry leaders, with one of them holding 70 percent market share.

Challenge

To enter a competitive market without a proven advantage and without distribution channels required the development of a strategic distribution plan.  The two options were either to establish an internal sales division or to seek a well-established distribution partner.  An internal sales division would require substantial financial resources, but would allow the company to maintain complete control over its product, and would build the company’s reputation in the field.  Partnering with a well-established distributor would be cost effective, but the company would give up the opportunity to emerge as a competitive player in the field.

Action Taken

A PharBeyond team member assessed the pros and cons of each option using sales forecasts, penetration rates, P&L and numerous other sales-related parameters, and established a distribution strategy.  Working closely with the executive management team, he guided them through the decision matrix.  A combined approach was implemented which included the creation of a distribution partnership along with the establishment of an internal sales support team.

Results

A successful distribution agreement was reached with a partner who was well-established in worldwide markets and an expert in the laboratory diagnostic tools field.  The internal sales support team worked integrally with the distributor helping to establish a strong presence in the market.  Within a few years the product sales reached 30 percent market share and multi-million dollar yearly revenue.  The biotechnology company emerged as a major player in the field.