Now that you have a product that you’ve done your homework on by going through countless iterations while getting feedback from every potential customer you could, it’s nearly time for these past few months or years of hard work to pay off!
By this time in the product development cycle, you should have:
- Identified an idea
- Verified your idea with potential customers outside of your friends and family.
- Done market research to determine if the market is large enough to make your product viable.
- Done an initial patent search.
- Developed and fabricated a minimum viable product (MVP) prototype.
- Tested your MVP with potential customers to confirm your hypothesis while potentially iterating on your design.
- Received confirmation for your MVP hypothesis from potential customers. This includes confirming the products value.
- Obtained a Provisional or Utility, Design, or Plant Patent.
Once all of the above is done, its time to start the launch preparation phase! Getting launch ready requires doing the following:
Part 1 – Covered in the post:
- Proceed or pivot
- Choosing your launch method
- Determining your budget and business plan
- Making a sales/marketing plan
Part 2 – Covered in next weeks post:
- Sourcing production
- Lining up fulfillment
- Pricing your product
Proceed or Pivot
Once you decide that it’s time to go to the market, your spending requirements will increase dramatically. Between the upfront cost of your first production run, and the cost that a successful sales and marketing campaign requires, your cash burn rate will increase dramatically. This is why it’s critical to review all previous information to determine whether or not you’re ready to place your bet and launch.
Prior to launching its critical to make sure everyone in your team is ready to go all in. Your business plan should be reviewed, product pricing should be agreed upon, product advantages and sales points outlined, potential negative feedback determined, market advantages reviewed and more. Once you finish your pre-launch preparation meeting if the agreement is unanimous to move forward then its time to proceed to start becoming launch ready.
It should be mentioned that some may never feel ready to take the plunge to launch and while you can always do more homework at some point there are negligible returns with more effort. It’s impossible to know with 100% confidence that your product will be a success, all you can do is prepare adequately and work hard to make it succeed. It’s also good to get in the mentality to be prepared to hear “no” a lot. Launching a new brand and product requires a lot of grit. Most successful founders had to get used to hearing “no” or “not at this time” over and over again from retail buyers and those who are established in the market or may have other brand loyalties during the start of their companies. Luckily for founders, many times it only takes one “yes” from a serious customer or buyer to get off the ground and what you learn from getting to the “yes” is crucial in building your business and brand moving forward.
Today’s market is very skeptical of change including new brands or new solutions. This is why it was important to get out the door during the development phase to test your hypothesis with as many potential customers as you can in order to gather honest feedback so that you can proceed through the initial rejections most face while entering the market with more confidence. In the end the most important component for a launch team is to completely believe in the product with strong market reasoning and data. Should there be good reasoning to change your product offering for example, you can target a larger market by making a simple change, or you need to allow more competitive pricing through designing for manufacturability, then you may want to look into pivoting prior to proceeding to the next phase. However, every time you pivot you are also eating into your budget that could have been spent on marketing and sales efforts or production, and it further delays your launch which is why its important to weigh the pros and cons of the pivot to determine whether its worth it or if you should move forward to launching.
Choosing Your Launch Method
Congratulations, you’ve reached the point at which you’re deciding to go all in on your launch! Take a deep breath, celebrate your accomplishments by treating yourself for getting this far and get ready to begin moving to the next phase.
Today there are three primary launch options.
Crowdfunding is becoming a popular choice today with Kickstarter, Indiegogo, RocketHub, Crowdfunder, and many others. Today the crowdfunding market is a $1 Billion industry and is still quickly growing at 10% annually. With the largest crowdfunding campaign, Pebble Time, having raised $20 million and the average raising $5,500.
- Crowdfunding Pros
- Retain 100% ownership of your company in most cases by raising money through reward-based platforms instead of equity.
- Determine product/market fit by pre-selling your product prior to needing to pay for your initial production run.
- Gain access to a large groups of early adopters who unlike the majority of consumers get excited for supporting new brands and ideas.
- Gain sales numbers to defend your idea while talking to investors, buyers, and others.
- Crowdfunding Cons
- Crowdfunding typically requires campaigns to reach 50% of their goal within the first 3 days of launch in order to be successful. This requires you to have secured acknowledgement from potential backers for about 50% of your goal prior to launch in order to have a successful campaign, which means you need significant marketing and sales efforts prior to launch.
- Many professional media companies won’t cover unreleased products.
- Typically need to offer a discount to backers as an incentive.
- Many times all production and fulfillment costs aren’t understood completely prior to campaign launch leading to major financial difficulties in order to fulfill successful campaigns.
- Other Important Points
- It’s common to have venture capitalists and angel investors require a startup to prove market demand with a crowdfunding campaign as its a low-risk way to determine demand.
- Many who launch successful crowdfunding campaigns also seek venture funding to raise further cash for launch and growth.
Venture funding is becoming huge today. With billion-dollar startup exits in the spotlight and Shark Tank becoming a popular show many are looking for ways to join the excitement by building a startup or through becoming an angel investor.
- Venture Fundraising Pros
- Ability to raise significant funding for launch and rapid growth.
- Gain access to additional resources and experienced advisors with market influence.
- Investors can many times introduce you to key people within an industry, whether they’re successful salespeople, marketers, buyers, customers, or other investors.
- Venture Fundraising Cons
- Requires selling company equity.
- Typically makes you plan an exit strategy in the form of either being bought out (more common) or an IPO (rare).
- Doesn’t allow for making a lifestyle company.
- Other Important Points
- Be prepared to need to raise multiple rounds including a seed round, Series A, Series B and potentially more.
- Many predatory venture capitalists take control of companies to best increase their profit margins while potentially eliminating your vision.
- Ensure that your visions are aligned with an investor prior to accepting funding.
Another popular option that has allowed many companies to exist today including the majority of lifestyle businesses is bootstrapping. Bootstrapping is when you raise funds for your launch and growth out of your pocket and from friends and family.
- Bootstrapping Pros
- Retain full ownership and control of your business.
- Allows for creating a lifestyle company that isn’t profit driven.
- Allows you to focus entirely on growing your business and your customers without needing to worry about investors.
- Bootstrapping Cons
- Reduced access to funds for rapid growth through marketing and sales efforts.
- Harder to find experienced advisors to help with business decisions.
- Other Important Points
- This method typically has slower initial growth but also allows you to make business decisions that better align with your vision even if it means sacrificing profits.
- This is the most common method for starting new companies.
Determine Your Budget And Business Plan
Once you have a launch method chosen, its time to look at your overall required budget and form your business plan.
Crowdfunding requires heavy investment in marketing, sales, and PR starting about 4 months prior to campaign launch and then continuing throughout your campaign then slowing down significantly while working to fulfill initial crowdfunding orders.
High growth venture capital launches require heavy marketing spending starting about only a month prior to launch to gain momentum and then tapering off to a steady stream of marketing starting about a month or so after launch.
Bootstrap launches typically are lower profile as most money is spent on production leaving minimal funds for marketing and sales. Most successful founders who bootstrap their initial growth get creative with gaining initial sales and have to be the first salesperson for their company knocking on customer doors.
To come up with your budget, you will need to determine the minimum amount you will need to successfully launch and grow your company. Understanding your cost per conversion or the amount of money you need to spend to gain a new customer and the average anticipated value of the customer can help significantly when laying out a budget. Successful products will typically have a sales conversion cost of between 20% and 50% of the manufacturer suggested retail price (MSRP). With time after you collect data and gain early adopters, the sales conversion cost should decrease due to word of mouth sales growing, early skepticism declining, and refining of your sales and marketing tactics.
Production costs will also be a major portion of your budget and depend upon initial anticipated volume, minimum unit order sizes, and manufacturing requirements. While some products can be made in the founder’s garage or kitchen, other products have significantly greater requirements. If you’re lucky enough to have a product that doesn’t require significant up-front investment to fulfill early orders then you can get started right away at making your launch inventory. If your product requires more advanced manufacturing methods or upfront costs such as a plastic injection molding then you will have to add these costs to your initial budget.
If your product requires more advanced manufacturing requirements, we can assist you with our manufacturing support services to line you up with a qualified suppliers and provide engineering documents that will be required for manufacturing.
Making Your Sales and Marketing Plan
Your sales and marketing plan will greatly depend upon your product and the market you’re targeting. Is your product a lower cost business to consumer (B2C) product, or is it a high-cost business to business (B2B) enterprise product?
Low-cost product marketing typically targets wider audiences through the use of magazine ads and digital marketing. It’s also good to get out the door to sell your product and get one on one contact time with your customers. This will help develop your selling points and make you aware of any negative feedback customer have. Using this information you can further optimize your marketing content, target demographics and more.
High-cost B2B enterprise products require sales teams that can get meetings with decisions makers at companies large enough to afford your solution. These sales can require significant product research to show strong data backing claims, long wait times as they research the costs vs benefits of adopting your solution, and significant upfront costs as you manufacture and deliver a product on what could be as much as net-90 payment terms.
There are many marketing and sales options, and the best choice will depend upon your market, product, goals, and target demographic.
Public Relations (PR)
Public relations involves contacting relevant publications and news organizations with a strong and likable story about your company in exchange for exposure. The publications and news organizations can be local or even national, though be prepared to have many turn you down.
It’s also important to offer something more than “I have a shiny new product”, that works for companies such as Apple with a large consumer backings, but for new companies it’s much better to tell a story. For example, did you come up with this product out of a personal need and is there a story behind that? Or perhaps you’re a family ran business trying to make ends meet. Or maybe you’re trying to help your community by donating part of your profits to a group in need because of a life experience. In the end, publications and news organizations need stories to run and if you can offer a compelling one that can reach their viewers you’re a lot more likely to be aired or published.
Many companies also do PR stunts as an effort to get media attention. Richard Branson, the founder of Virgin, is famous for PR stunts and I strongly recommend looking up some of his. Organizing a PR stunt can be a fun and creative exercise for your team, but they can also be high risk and time-consuming in the case that media organizations don’t take notice.
This should go without saying, but when you contact news and media organizations be sure to treat them as another person and not someone whose job is to simply tell the world about your product. There needs to be a quid pro quo when working with them and they also deserve respect. Tell them why you believe it can be a good fit, do your research on whether they typically write about the story your imagining, approach them with respect as you should with everyone, and don’t overload them with information. It’s best to keep initial emails short and sweet, about 3 lines max, and wait for a response prior to giving them more information. Forming a good relationship with writers can help your brand significantly with future PR efforts.
Influencer marketing is similar to PR, however in this case you’re looking for individuals who have influence over your target customers decision making. Influencers also vary significantly in both influence over their audience and audience size. One common observation is that as an influencers reach grows, their influence over their entire audience decreases. Many times it can be better to target 10 influencers with only 5,000 followers than it is to target one influencer with 50,000 followers.
The goal with an influencer marketing campaign is to give potential customers a clear and trustworthy review of your product. In my opinion, this may require declining to offer payment for a review which often comes with strings attached. Instead of paying influencers, at least initially, seek those who have a real use for your product and offer it to them for free in exchange for an honest review after they’ve had ample time to use it.
These campaigns can range significantly in cost from either being free minus shipping and product costs to costing hundreds or even thousands every time the influencer advertises the product. There is also a wide range of influencer platforms to choose from including Youtube, blogs, Instagram, Podcasts, and more.
Referral marketing is becoming very common today. It’s the strategy used when companies offer discounts or give a free gift when you refer a friend. Referral marketing has proven to be extremely effective at driving significant growth. This is because people trust those they’re closest to the most. While potential customers may remain skeptical about a new product while only seeing ads online, many times someone they know can bring down their skeptical barrier by explaining how much they enjoy the product or service and recommending it to you. By running a referral marketing campaign you create an incentive for people who are already your customers to go out and recommend your product or service to those who they have significant influence over in exchange for an initial discount.
Another common practice today is giving away a trial of the product or service. 3D printer companies typically give away sample prints, ride share customers receive their first ride for free, many online subscription services offer a free month trial and more. Trial offers are a great way to gain early customers. Depending upon your product and reach these offers will look different. While ride share companies can offer your first ride for free, a company selling a $100 single time purchased product couldn’t just give away their product. One option is to offer a trial period of your product to early adopters nearby your location where you can pick up the sample at the end of the trial period or offer it to them for sale at a slight discount.
Digital marketing involves paid ads on platforms such as Facebook, YouTube, Instagram (owned by Facebook), Snapchat, Linkedin, Google AdWords, search engine optimization (SEO), Bing, and more. Digital marketing is great for low budgets as the minimum price for an ad on Facebook is only $1/day. However, like all other ads, digital marketing success requires having a strong understanding of your target demographic, determining what content is appropriate for the platform, running A/B marketing tests, and more. A digital marketing campaign can be very powerful at a low cost, but it requires a strong understanding of how to run a proper campaign.
While newspapers and magazines seem are being replaced with online media, publications may still be a great place to reach your market at an affordable rate. If you have a tight budget you can look for last-minute empty slots that publications are willing to give away at significant discounts (can be discounted as low as 50% of their standard rate). There are also still many professional magazines that are given away for free to professionals within an industry. For instance, Modern Steel Construction is given away to all AISC and ASCE members which include the majority of civil engineers and heavy steel fabricators.
Radio Ads can be a great marketing option for local businesses such as restaurants, clubs, stores, dealerships and more. Like any other advertising method, creating an effective radio ad requires understanding your target demographic and the radio stations audience.
Trade shows can be very effective are generating powerful leads if done properly. Preparing for a trade show should start almost a year in advance when you reserve your booth. At this time you should note down all of the important deadlines and included offerings which may include things like new product announcements, press releases, white paper submissions, speaker applications and more. You will also want to look for any of the top potential customers, and buyers who you would like to target during the trade show and find out if they will be attending the show and who to contact to schedule a meeting. Many top buyers and large customers will book their entire show schedule months in advance so it’s important to start on this as soon as you can. Some buyers will also simply wander trade shows looking to discover new products while keeping their name tag concealed to prevent being bothered. Submitting a white paper and becoming a speaker can also significantly increase the credibility of you and your brand. This is one of the ways that 23andme went from their initial sales of only 10 units per day to where they are today.
After the trade show, you will want to have about two weeks cleared to follow up with all of the leads obtained during the trade show. Also be sure to note on your lead capture device any requested content or information that you agreed to provide to a lead. Many times exhibitors don’t follow through with promises to potential customers and buyers, so following through can be the start of a strong business relationship.
Most companies never took off with crazy growth and required time and effort to grow to what they are today. Some companies are profitable immediately and others require significant time to grow to a large enough scale prior to becoming profitable. Sales and marketing strategies will vary widely depending on your product. Its always a good idea to get familiar with your customers by getting out the door and speaking with them.
Please leave a comment if you have any questions regarding getting ready for your launch. If you are also looking for engineering services to help bring your idea to life, contact us today to learn how we can help!
Stay tuned for next weeks blog post on part 2 of launch preparation.