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GETTING YOUR PRODUCT TO MARKET |
The product road to riches is not without its potholes, detours, and dead ends! The route is usually unpaved, unsure, and unpredictable. Despite these challenges, the entrepreneurial spirit continues to drive individuals and businesses into marketing new widgets, gadgets, and novel inventions.
For years I've consulted with those seeking a road other than their forty-hour work week. Often they were tired of saying, "I'm too busy earning a living to make a million dollars." They'd concluded that they needed to multiply themselves through a product instead of their hourly service, and then perhaps they'd have a chance at the 'pot of gold.' I've often agreed by adding, "Your time makes a poor product choice because you're always running out of inventory." Though this can provide motivation to start traveling the product road, it is wise to keep your eyes open and map in hand. Too many inspired, creative people make common mistakes and fail to ask very important questions.
Since the trip is already challenging enough, it is my desire to be of help by giving you two lists that I have found valuable in the process of getting a product to market. The first is a list of Ten Common Mistakes and the second is Ten Key Questions that beg attention. If you or someone you know is about to create and/or market a product, it could save thousands of dollars to keep and use this information, which took me years to discover&emdash;not through textbooks, but through personal experience.
An example of the first mistake on the list will demonstrate how important just one of these items can be. Years ago, a female artist in her 30s came to me asking how to sell her beautiful, full-colored greeting cards. People ask me for advice at all stages of their journey showing anything from enthusiasm to fear on their faces. She was obviously full of anxiety, so I knew she had hit at least a pothole or two, but it was worse than that.
Her cards were beautiful, creatively unique, and truly the work of a talented artist. They were printed with full-color on the outside and with one-colored greetings inside. They were cut, folded, and ready to use. However, she told me that she had been unable to sell her garage full of cards. I was frustrated to know I could have saved her over $10,000 had she talked to me sooner. We could have tested her concept without investing in the actual inventory. Even if she had insisted on producing the cards before having orders in hand, I would have recommended leaving most of the cards uncut and temporarily blank inside. This would have allowed flexibility for change based upon future feedback. To this day, I believe she still has enough cards to last her and all her friends and relatives several lifetimes. She did no testing, she created a product that was frozen in a design that wouldn't sell, and she built up inventory far too early. (By the way, premature inventory buildup is an incredibly common mistake, and it's usually the most costly, too.)
There is another item in the list that deserves special attention. Most people know the three key words in real estate investment are location, location, and location. However, I often tell clients that the three key words for success in getting a product to market are test, test, and test. The reason that testing is so important is rather simple. Your boss is the consumer, and though everyone has an opinion, you must ultimately satisfy the person who buys the product&emdash;the person who will put up actual money without your verbal encouragement. Unfortunately, many people rely on the opinions of friends and relatives versus actual tests on genuine, potential consumers. Friends are a great source for ideas and support, but not for guidance.
Though I have many opinions, I must remind myself that even with all my experience, "I don't know!" It's the consumer who knows, and there are testing methods to help form an intelligent perception of what your "true" boss thinks. Knowing that you don't know is one of the keys to your success. Remember, your greatest risk is if your first test occurs after you've already built up inventory. Your cash-flow clock is ticking, your approach is relatively frozen, yet the road you've chosen may be a dead end.
When you're working for someone else, your employer usually gives plenty of direction. It's like driving on a freeway with many large signs leading the way. However, once you leave the freeway and delve into your own product development and marketing, it's like finding yourself wandering around on surface streets without a map (I did that once in L.A., but never again). Though you've won the freedom from being told what to do, your new "boss" is the consumer, and you may soon realize that the silence of your new boss can be costly.
When I first entered the gift industry, it took me five years before I discovered many answers to tough questions&emdash;the hard way. Just discovering what questions I should be asking turned out to be as important as finding the answers. Sometimes even the order of the questions was important. For example, people often focus prematurely on the question, "How can I produce my new product in large quantities?" However, they neglect and delay asking the question, "How can I find out if my product will actually sell at a quantity and price that will make it worth the effort?"
After finally getting enough of the right answers to the right questions for my own product, sales finally started "taking off." It was exhilarating to watch the growth. In the next few years, over a million packages of my stationery and party-supply product sold in all states to over 2,700 gift stores. The sales force consisted of more than 17 "gift-rep'ing" companies using more than 100 sales representatives. I wrote my own automated accounting system and limited the in-house operations to control activities such as order processing, collections and inventory control. Packaging, shipping and manufacturing was delegated to contractors to keep the in-house employee count to a minimum (three people). Investments in product image helped create a large-company look and the confidence needed for product sales. Other people started asking for advice, and for years I've shared what I've learned.
Perhaps one or more of the following items will help you on your own product road. I generally give the lists to my clients in a paper titled, "Knowing What You Don't Know." May your travels lead to riches, while you remember: the journey can be as rewarding as the destination.
Ten Common Mistakes in Getting a Product to Market |
1) Producing product and inventory before market research, testing, and receiving advance orders.
2) Inadequate testing for pricing, product refinement, and feasibility.
3) Not getting the right feedback about your product, pricing, packaging, and plans from the right people, at the right time.
4) Letting ego or emotional attachment make decisions, instead of relying on your actual study of how best to serve the consumer.
5) Making the assumption that you "know" versus realizing that it is an opinion.
6) Treating the production of logos, product packaging, literature and order forms as an expense to be minimized, rather than recognizing this as a critical investment with the potential for great return on the dollar.
7) Having insufficient funds to reach a point of sufficient positive cash flow.
8) Underestimating the importance of instilling confidence and establishing credibility for your company and product with sales representatives and store managers.
9) Launching the production, order-fulfillment, and operations too far ahead of sufficient sales, thus diverting attention and investment money into expense items instead of marketing-related investments.
10) Not knowing "what you don't know" and not asking for needed directions from someone who has traveled the road before.
Ten Key Questions for Getting Your Product to Market |
1) How can I find out if my product will sell before risking larger sums of money?
2) How can I test my product before I create an inventory?
3) How do I determine a profitable price that will also maximize sales volume?
4) How can I protect my product idea from being "knocked off" (used) by another company?
5) How do I decide if I should proceed with this venture or search for a better one?
6) How do I obtain sales representatives?
7) How can I minimize my risk of start-up inventory costs by getting advance orders?
8) How can I keep the number of employees to a minimum and still meet growing production demands?
9) How can I give credit to stores all across the country and minimize non-payments?
10) How can I get good placement of my product in most stores?
INVEST IN YOUR PRODUCT |
You have a product idea with hopes of making lots of money. Whether you have $5,000 or $100,000 for start up capital, you want stretch it as far as possible, right? So far, so good - no one can fault a person for wanting to conserve resources. However, many people treat all money spent as an expense and therefore try to minimize every expenditure. This can cost you more money in the long run and I'll tell you why.
Imagine a money machine in a make-believe world that accepts dollar bills, five dollar bills and hundred dollar bills. Each time you walk near the machine you have to insert one or more bills of your choice in a slot. To lower expenses, you would probably feed it only one dollar at a time. However, what if you learned that if you came back in three months, the machine would return ten times what you put into it? Ah indeed, this is a distinction between an expense and an investment. How differently would you react to putting money into the machine with this new knowledge of "investing?"
The difference between a financially successful entrepreneur and a "want-to-be," is the skill in identifying and limiting true expenses while abundantly feeding areas of true investment.
Please re-read the last sentence several times. It is vital to success.
An example of treating an investment as an expense appears in the U.S. education system. While obtaining my B.A. in Education, I developed some appreciation for the challenges in this area. Though the commitment to educating all our children is one of the investments that continues to make our nation strong, a growing number of people over the years treat education as an expense. From that mindset, the tendency is to cut back and trim instead of investing in smaller class sizes, counseling, equipment, technology, resources and educators. The lack of investment in our children is showing - within the last ten years, for the first time in the history of the U.S., we crossed over to spending more money in law enforcement than in education. Do you think there is a connection between the rise in crime and less investment in our children?
Labeling something incorrectly as an expense can be costly in the long run. Some people view product literature, (even when it is vital to increased sales) as an expense rather than an investment. They skimp and pinch pennies on the use of color and professional design and then wonder why sales figures are low. Often times, just a few more sales would return much more than the investment for enhanced literature.
Treating every dollar as an investment can also get you into trouble. What if the money machine had another slot that just takes money with no return? The key is deciding what is an expense and what is an investment. Then, resources can be allocated to maximize results within the budget.
Sounds simple in theory, but in the real world it can be challenging. It reminds me of when I taught myself to sail using a book that showed where to position the sails based on the direction of the wind. I rented a single-sail 14-foot boat and set off for my first sailing adventure. With the book in my left hand and the tiller in my right, I observed the big black arrow on page 4 showing the direction of the wind. Suddenly I realized I couldn't tell the true direction of the wind within 40 degrees! I was barely able to get the boat back to the dock, and then I ended up ramming it pretty hard. After many rentals, mishaps and tips from experienced sailors, I was finally able to detect wind direction within a few degrees.
Until you get some time in the boat of experience, don't sail too close to the rocks. I've done that in a sail boat and with getting products to market and don't recommend it. Perhaps I can offer some tips and examples for identifying a few investments and expenses.
2) Inventory buildup is an expense. Often mistaken for an investment by the novice, money is many times prematurely poured into inventory buildup. Treat this like an expense, (while obviously meeting the quality needed for sales) and build up inventory just in time to meet shipping demands from firm orders (or future orders that have high reliability for being firm). Use prototypes and product literature to generate sales. By the way, premature or excessive inventory buildup is one of the quickest unnecessary drains on your capital and creates high risk. It often solidifies product design, reduces the capability to respond to new knowledge about the needs and wants of potential customers, and limits investment money for advertising and marketing vital to increased sales.
3) Research, design, and product development are investments. You've probably heard the famous advice on how to get rich - "Find a need and fill it." Research is an investment in knowledge of customer needs and wants, the viability of the market place, the competition, the chances of success, and the approach to take for suitable testing. Design and product development takes all of the considerations into account in addition to meeting mass production and profit margin requirements. Unfortunately, too many first-time entrepreneurs neglect these critical investment areas.
Just as finding the accurate wind direction in the sailing example is subjective and difficult at first, there are plenty of vague areas in allocating money for maximum results. For example, though product literature is basically an investment, there is a point where excess money will not produce a corresponding return. This excess then becomes an expense. If you have areas that are not clear cut and you are not sure whether to consider it an investment or an expense, it's okay to seek advice. This is not like school where getting information from someone else is cheating, instead it is wise.
In closing, here is a fundamental guideline that might help you "invest in your product." If the money used has a great chance of saving or returning more money than you spent, it is most likely an investment. Yet if the return on the investment falls beyond your cash-flow time line, it can quickly become very expensive and even risk the success of your entire enterprise.
By distinguishing between investments and expenses, hopefully you can have your own money machine return many times what you put into it. Invest wisely and prosper!