getting to a bold goal

Bryan Pate, Co-Founder and Co-President, of ElliptiGO has set some aggressive growth goals for his $2MM company which manufactures and sells a fitness apparatus that provides a low-impact outdoor running experience – it’s essentially an outdoor elliptical machine.

He laid out his plans at a recent MIT Enterprise Forum, a unique educational seminar-type business gathering in which a company leader presents his/her organization’s challenges and hears advice from a panel of experts, while attendees of the seminar get to listen and then offer up their own feedback and questions.

In less than a year, ElliptiGO has gone from selling its first product to distributing through 85 doors nationwide and even more internationally.  They’ve benefited from the endorsement of running greats like Dean Karnazes and good PR exposure on shows like Good Morning America.  And the company has an experienced, committed leadership team.  So Pate’s vision to grow the channel mix to 75% retail (from 5% today) and to add 3 models and a host of accessories to the current single product line-up doesn’t seem that unreasonable.

However there are a few things he should think about – they are points that every entrepreneur with a bold goal would benefit from considering.

And it all starts with who is ElliptiGO’s best target.  Currently ElliptiGO is primarily targeted to injured runners. It makes sense – most runners reach a certain point when their bodies can’t keep up with the demands of running.   These people want a way to replicate all the things they love about running (being outdoors, getting an intense workout, covering some distance, etc.) without the problems caused by impact.  ElliptiGO solves the issue brilliantly.

Pate also talked about other target groups like fitness enthusiasts who love elliptical trainers, recreational bicyclists, and cross-training athletes – but I would caution him from pursuing these groups.  The product’s price tag ($2,200) limits its appeal to a relatively narrow target.  And, the product is far too geeky-looking and –feeling to appeal to the mainstream.

Pate may have a vision of “building elliptical biking into a sport and industry like mountain biking,” but his company must first get to $50MM and it can do so by focusing on injured runners as the target. (According to Running USA’s State of the Sport 2010 Report, nearly 467,000 finished a marathon in 2009.  If we count that as the true “core runner” population, less than 5% of that market would need to purchase a ElliptiGO to get to that $50MM milestone.)

In 3-5 years, it may make sense to broaden the target, but right now it’s best to focus on the near-term potential market opportunity of those who are highly committed to running but who are limited by current or past injury.  Focusing on a single, niche target is important because:

  • when sales and marketing resources are limited, it’s easier to reach a smaller market and you get a stronger ROI on your spend.
  • a solid base must be established for an innovative product before it has any chance of crossing the adoption chasm (see related post).
  • decisions which need to be made now must be guided by the reality of now.  For example, if the company is willing to focus on this target, then the right distribution approach becomes clearer:

Pate asked how best to manage the shift from online sales to a retail model and explained that he’s been retailing through bike shops and fitness equipment retailers.  But I question whether either of these are the right fit.

Runners – especially hard core ones who would spend over $2,000 on a single product to support their passion – are a special breed.   Salespeople who are used to selling bikes and home gyms can’t properly relate to them.  Case in point:  Pate described how one fitness equipment retailer reported 400 people came into the store after seeing a news segment about the product – but only 20 people ended up buying one.

ElliptiGO’s current distribution strategy suggests that Pate and his team are approaching their channel strategy through the lens of existing retailers instead of the target and their lifestyle and behaviors.  Injured runners are most likely using doctors, physical therapists, and/or trainers to help them with their injuries – and they probably place a lot of trust in these experts. The company should get these players to prescribe or recommend the ElliptiGO.  An aggressive, robust affiliate program may be very productive – and far more cost-effective than a mainstream retail approach.

Other runners are another affiliate source.  Runners are always sharing tips and recommending products with each other.  Since Dean Karnazes has bought 4 or 5 ElliptiGOs, why not sign him up to recommend the product and allow him to get a cut of the sales?!  The company should develop a network of athlete-affiliates who can credibly demonstrate the product, explain the benefits, and ultimately facilitate sales.

Finally I’m not sure why Pate and his team don’t keep their focus on direct sales – especially with online communities and commerce so prevalent and influential now.  They can develop a strong event participation strategy to increase awareness and trial and then drive prospects to the web or phone to order.

At this point in the company lifecycle, they don’t need retailers (the retail channel does provide a venue for repairs and service, but it seems an authorized service provider network would suffice for the expected sales volume.)  And by foregoing the channel, they avoid the issues and costs involved with setting up a sales force and managing cash flows to support working capital – while maintaining control over a highly-educational sales process.

I’m sure there are nuances about the business which we didn’t have a chance to get into at the Forum so my recommendations are probably best viewed as initial reactions from a dispassionate observer.  I do hope they’re helpful to Pate and other entrepreneurs who are searching for a path to achieving their bold visions.

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