---
title: "The Three Steps for Distributors to Develop the Market"
description: "Distributors need stable, sustained market growth more than anything else. The process from new product development to a stable market involves three stages: single product breakthrough, forming a product group, and forming a product structure."
author: "New Distribution"
publisher: "New Distribution"
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telephone: "+8615854817671"
published: "2014-08-12"
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---

# The Three Steps for Distributors to Develop the Market

> Distributors need stable, sustained market growth more than anything else. The process from new product development to a stable market involves three stages: single product breakthrough, forming a product group, and forming a product structure.

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**Stable market growth is more important than anything else**
As agents of manufacturers in regional markets, what is the goal of distributors in the market? Some think it is sales volume, some think it is market share, and some think it is profit.
If I tell distributors that many of them have achieved these goals but later lost them, they would not be surprised, because such things happen almost every day around them.
Distributors need sales volume, but they need stable sales volume.
Distributors need market share, but they need stable market share.
Distributors need profit, but they need stable profit.
Distributors do not need a flash in the pan market boom; what they need most is stable and sustained market growth.

The evolution of a stable market
From developing a new market with new products to forming a stable market, it generally goes through three stages:

**Stage 1: Single product breakthrough**
Generally speaking, in the early stage of market development, manufacturers and distributors cannot simultaneously promote multiple products, so they have to rely on the impact of a single product to make a good start in the market. A single product breakthrough requires the following work:

First, select a mass-market product that can achieve high sales volume. The purpose of a single product breakthrough is, first, to form a sales network; only products that can achieve high sales volume can form a complete sales network. Second, to build brand awareness; only products that can achieve high sales volume have brand influence.

Second, explosive distribution to achieve market coverage. Explosive distribution requires speed, large distribution volume, and high market coverage rate. Explosive distribution can achieve the following effects: first, catch competitors off guard and complete distribution quickly before they introduce policies; second, rapid distribution at the terminal creates momentum and gives confidence to second-tier distributors, terminals, and consumers.

Third, stable high profit incentives for second-tier distributors. In markets dominated by second-tier distributors, especially in townships and below, second-tier distributors play a crucial role. The only motivation for second-tier distributors to promote unknown new products is profit margin. If the new product does not offer a higher profit margin than other products, it cannot pass the second-tier distributors, and the product cannot reach the terminal, thus losing the opportunity to meet consumers.

Fourth, strong terminal merchandising. Old and well-known products can "sell themselves," and consumers often buy habitually. How can new products that consumers are unfamiliar with be sold? Mainly through strong recommendations at the terminal. If the staff at retail terminals do not recommend, the manufacturer or distributor must send people to the terminal for merchandising.

Fifth, short-term high-density advertising in regional markets (such as county-level markets). A common strategy for second- and third-tier brands is to become a strong brand in a regional market, giving consumers in the regional market the image of a first-tier brand. Since advertising costs in regional markets (such as county-level markets) are extremely low, tens of thousands of yuan in advertising can start a market. Therefore, while distributing, high-density advertising should be carried out, combining "push" and "pull" to start the market.

Sixth, conduct no fewer than three waves of strong promotional activities within six months. Do not expect a single large-scale promotional activity to fully start the market. Many new markets fail to start due to insufficient push. Therefore, three consecutive waves of strong promotion are very necessary.

**Stage 2: Forming a product group**
First, extend new products around the main brand that has achieved a single product breakthrough, to share the pressure of the dominant product's excessive proportion. A single product is vulnerable to competitor attacks, and when attacked, there is no effective strategy to fight back—if you ignore the attack, the market will be affected; if you fight back, profit margins will decline. After forming a product group, you can use the product group for strategic counterattacks. For example, use one product to compete with competitors while other products make profits.

Second, new products should enter the market with a "high open, low go" approach. Remember, according to the requirements of most salespeople and distributors (higher quality, more beautiful packaging, lower price, better policies), new product promotion is bound to fail. To extend the product life cycle, you must leave enough room for retreat—price space. Therefore, when new products enter the market, the price should be higher.

Third, through the "product group," form a "well-known brand" rather than a "well-known variety." If a single product is too strong, it will create a phenomenon of "brand equals variety," which is an obstacle to promoting new products. Multiple varieties under one brand umbrella can enjoy the protection of the brand umbrella and provide consumers with choices—if they are not satisfied with one variety, they can choose another.

Fourth, the "product group" also makes it difficult for competitors to introduce targeted policies. Competitors generally do not attack the entire product line; they usually choose the variety with the largest sales volume or the greatest threat. If the product is single, all attack power is concentrated on one product, and that product may become a sacrifice. Under the "product group," the sacrifice of any product will not lead to a total collapse.

**Stage 3: Forming a product structure**
A "product group" is generally an extension of products of the same grade, while a "product structure" is an extension of grades.

Although many companies have succeeded by sticking to a single product grade, especially high-end products such as high-end clothing, this strategy may be effective. However, in the mass consumer goods field, a single-grade product structure is still problematic.

First, only with a structure can there be a strategy. Companies should regularly make strategic combinations of products to meet the needs of consumers at different levels.

Low-end products can achieve high sales volume but have limited profitability. Their functions are: first, to open up the network and form market coverage; second, to form brand influence because low-end products have many consumers; third, to share sales expenses; fourth, to form economies of scale; fifth, to support personnel.

Mid-end products have both sales volume and profit, and their function is to form stable cash flow and stable profits.

High-end products have limited sales volume but high profit margins, and can form the corporate image.

Second, a market with a single product or product group is unstable. The outcome of single product competition is either losing money or exiting the market.

Third, the key to winning price wars (policy wars) is an effective product structure. In the Chinese market, price wars in low-end products are inevitable, determined by consumer demand characteristics and market competition characteristics—unless you exit the low-end product competition. Companies must not avoid price; they should proactively initiate price wars or welcome them. At the same time, they should use price wars to defeat competitors and make money in price wars. The only way to achieve both goals simultaneously is to use the profits from mid- and high-end products to support low-end products in price wars.

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