Consumer Adoption Curve

Product Development – Launching & Growing Your Product

Now that you’ve put in the countless hours perfecting your initial product and preparing for launch, it’s finally time to launch your product!

What should be done thus far

If you have any questions about how to get to this point please refer to one of the following previous blog posts.

Product Development – Pre-Launch Checklist
  • Identify a problem
  • Determine and design your initial Minimal Viable Product (MVP)
  • Build a prototype MVP
  • Test your prototype MVP with potential customers and gain feedback
  • Iterate on your MVP or proceed
  • Choose your launch method
  • Determine your budget and business plan
  • Build your sales and marketing plan
  • Source production
  • Line up fulfillment
  • Price your product

Launch Your Product!

Launching your product may be one of the most anti-climatic experiences of your life or one of the most stressful depending upon the existing demand for your product. With the exception of the rare brilliantly positioned products that have massive market demand on day 1, most products don’t fly off the shelves during launch. Instead, most products and brands take years of hard work building market demand and educating the market on product advantages.

Note: If you are launching with a large crowdfunding campaign you will need to meet about half of your goal within the first 48 hours of launch to gain the momentum it takes to succeed. Please refer to “Crowdfunding” under “Choosing Your Launch Method” in Launch Preparation – Part 1.

Start Growing Your Product and Brand

Now that your product is launched, its time to drive traffic, make sales, and build your brand!

Before you get started its good to understand how new products are adopted by consumers. Initially you’ll be targeting only a small segment of your total potential customers. The following consumer adoption curve is an approximation of typical market behavior, your experience may vary.

Consumer Adoption Curve
Consumer Adoption Curve
Innovators – 2.5% of total potential customers

Customers that fit the innovator profile are a small but critical segment. Innovators will be your very first target customers and typically have the following profile:

  • Actively search the market for new products
  • Want to be the first to try new products
  • A high risk tolerance allowing them to adopt technologies and products that may fail
  • Greater financial resources to help absorb taking on risks with new products
  • Closest contact to scientific sources and interaction with other innovators
  • Enjoy researching products and technology
  • Strong interest in data and evidence
  • Highest social status
  • Highly educated
  • Disagreeable going against the accepted norm

*Your typical super backer on Kickstarter and other crowdfunding sites are innovators.

Early Adopters – 13.5% of total potential customers

Once you begin selling to early adopters your sales should see a substantial increase as your customer base roughly increases by 6x. Early Adopters are the second fastest customers to adopt new products and solutions.

  • Highest degree of opinion leadership
  • Great influence over others
  • Higher social status
  • Financial resources that allow them to accept moderate risk
  • Typically have advanced degrees and are open to rationalize new technologies and products
  • More discreet in adoption choices of new products and technologies than innovators
Crossing the Chasm

The chasm is a hard to cross growth barrier that typically occurs between a technology being adopted by early adopters and the early majority, though it may also occur during the early adopter segment.

Crossing the chasm requires convincing the skeptical majority, who are less inclined to accepting risk, of the benefits of your product or technology. During this time you may face push back from dissatisfied early customers, tough competitors, and unhappy investors.

In order to cross the chasm you may need to increase your marketing and branding efforts to win the approval of influencers within the market. Once enough influencers accepts the product or technology it will begin gaining traction and start to become the new paradigm. After you cross the chasm growth typically explodes as you now have access to a much larger market and can expect a substantial word of mouth campaign.

Early Majority – 34% of total potential customers

Now that you have successfully crossed the chasm you will have access to the majority of the market who less accepting of risk.

  • Wait until a technology or product has been proven
  • Only buy from established brands
  • Above average social status
  • In contact with early adopters
  • Financially better off than late majority
  • Comfortable with their ability to master new technology and products
Late Majority – 34% of total potential customers

The late majority share many similar characteristics to the early majority. The major difference between the late majority and early majority is ability to accept risk and confidence to master new technologies and products.

  • Wait for products to be developed and designed for the mass market
  • More interested in user-friendly products with a low learning curve
  • Lower financial resources make them more risk averse
Laggards – 16% of total potential customers

Now that you have saturated the market with a new solution, the last to adopt it are laggards. Laggards many times only buy into a new solution if it has become so pervasive in the market that they have no choice but to use it. They typically do not offer strong profit margins as they require low prices, and a lot of support in training.

  • Strong resistance to change
  • Only adopt a solution if required by the market

Initiate Your Sales & Marketing Plan

With your product launched and available for purchase its time to tell the world. Don’t expect anyone to simply stumble across your product because it’s on your website. If you aren’t actively getting out your message and product advantages then it might just as well not be released at all. Your sales & marketing plan should have been made while preparing for launch.

If you have any questions about different sales & marketing options, please refer to the launch preparation – part 1 post.

Grow Your Brand

Have you ever wondered why you have never seen a soft drink supplier surpass Coca-Cola® and Pepsi®? It’s because of how strong their brands are. Building a strong brand requires a lot of time and effort, but offers massive returns. With a strong brand, you can launch new products and reach the majority of the market far faster thanks to lowered skepticism due to consumers being comfortable with your brand.

Having a weak brand can also be detrimental to future success. If you don’t outright lose a customer forever due to a bad experience, it can take about twenty good experiences with your brand to counteract one bad experience. This is why customer satisfaction should be at the forefront of your strategy. When a customer feels that their experience was above their expectations they are far more likely to recommend your brand to those they have high influence over. However, a customer who had a bad experience will also go out of their way to warn others to stay away and can destroy your ability to grow.

By building a strong brand that customers have associated with consistently exceeding their expectations you can grow a strong word of mouth campaign and earn life long customers.

Congratulations on launching and growing your product!

We wish you the best of luck in your journey to market adoption.

If you have a product idea and are in need of engineering assistance, our experienced mechanical design and analysis engineers are ready to assist you make your idea a reality with our engineering services!

Please comment below if you have any recommendations on specific topics to be covered in the future.

Product Development – Launch Preparation Part 2

Get excited because you’re getting closer to your anticipated product launch!

Part 1 – Covered in last weeks post

  • Proceed or pivot
  • Choosing your launch method
  • Determining your budget and business plan
  • Making a sales/marketing plan

Part 2 – Covered in this weeks post

  • Sourcing production
  • Attaining proper documentation
  • Product packaging
  • Lining up fulfillment and shipping
  • Pricing your product

Please note that you don’t have to follow any specific order while completing these tasks. For instance, you may find it necessary to determine that you can source production of your product prior to even determining whether you should proceed or pivot. Everyone’s situation and product is unique and therefore you should follow the path that best suits your needs.

Sourcing Production

Production is one of the most critical decisions in your business, after all without product inventory you won’t have anything to sell. One of the biggest decisions when sourcing production is deciding whether to outsource production or to keep production in-house.

Outsourcing vs In-House Production

Who is going to manufacture your product? Will you keep manufacturing in-house or will you outsource manufacturing.

Outsourcing Production

Pros

  • Less work to worry about during what can be a very stressful work period during product launch.
  • Gain access to large production facilities with advanced manufacturing equipment and expert manufacturers.
  • Large manufacturers place large order volumes for material allowing them to secure lower prices.

Cons

  • You are removed from the manufacturing process preventing experience that could lead to design improvements to increase manufacturability and reduce your product cost.
  • Delays product iteration from customer feedback due to large initial inventory.
  • Need to pay for overhead and profit margins for the manufacturer.

In-House Production

Pros

  • Easily iterate on your design based on customer feedback.
  • Prevent excessive inventory from cluttering up warehouse space and hogging initial funding.
  • Gain a better understanding to the manufacturing process to allow for making better business decisions.
  • Scale production with demand.
  • Stronger intellectual property protection.

Cons

  • Typically prevents access to advanced manufacturing methods without investing large amounts in equipment which can limit design and manufacturing options.
  • Lack of access to experienced manufacturers without hiring.
  • Lower production rates due to a smaller workforce and lacking of manufacturing equipment.

In-House Production To Outsource Production Recommendation

  • Initially launch with in-house production if possible.
  • Iterate on your design to improve manufacturability and satisfy initial customer feedback.
  • Once sales demand increases beyond your capability and is adequate to justify placing an order volume that meets with the manufacturers minimum order volume then look to outsource all or part of the manufacturing of you product. Many brands keep assembly in-house while outsourcing the manufacturing of components.

Note: Save yourself a lot of work by looking for Original Equipment Manufacturer (OEM) provided components that can be used in your design and procured at low cost and volumes prior to redesigning the wheel.

Instead of placing an initial order of thousands of units to meet manufacturer minimum order volumes prior to understanding market demand, begin with in-house production and then shift to outsourcing production as demand grows beyond your capabilities. By keeping initial production in-house you will gain insights into your products manufacturing process. Understanding your manufacturing process allows you to make better decisions down the road. Keeping manufacturing in-house initially also allows for rapid design revision in response to customer feedback giving you the ability to quickly implement product improvements to better meet market demand and impress early customers with responsiveness.

Most products and brands do not sell high volumes during their launch and take significant time and effort to scale sales before reaching demand that is adequate to satisfy even a minimum order volume from manufacturers. This is because many minimum order volumes from manufacturers are in the thousands of units while most products start with struggling to only get their first sale and then begin scaling in volume with market acceptance and time. Unless if you have a large marketing budget, a rare product that goes viral, industry or PR connections, or a large retail order chances are that you won’t have the initial demand required to move thousands of units within a reasonable amount of time.

Once your product has market acceptance and increased demand that you’re having trouble keeping up with, then its time to decide whether you want to outsource production, invest in in-house fabrication capabilities or do both. Outsourcing production will allow for access to advanced fabrication equipment along with expert manufacturers that can rapidly turn around high volume. Investing in in-house production can keep manufacturing costs lower in the long run because you don’t need to pay for your manufacturers overhead and profit, but it requires higher up front investment to acquire fabrication equipment.

One common solution that I recommend is to outsource the manufacturing of components which have significant advantages from using high cost fabrication equipment, such as injection molds and stamping presses, while investing in an in-house assembly process which is typically more unique to a product and may require designing and fabricating custom tooling.

On-Shore or Off-Shore Manufacturing

Should you decide to outsource the manufacturing of your product or components you will need to make the important decision of whether you want to manufacture on-shore (domestically) or off-shore (internationally).

On-Shore

Pros

  • Gain greater oversight on your production.
  • Eliminate the long shipping times.
  • Gain the marketing value that comes with a Made in the USA product (be cautious of using OEM components if you’re seeking Made in the USA status).
  • Retain stronger intellectual property (IP) protection to reduce the risk of copycat products.
  • Prevents delays due to customs or weather transoceanic during shipping.

Cons

  • Typically significantly higher cost

Off-Shore

Pros

  • Typically significantly lower cost

Cons

  • Can lead to quality nightmares due to lack of production oversight.
  • Long shipment times with the potential for significant delays due to weather, customs and other uncontrollable factors.
  • Weaker intellectual property protection increasing the likelihood for copycats.

Whether you should manufacture your product on-shore or off-shore will greatly depend upon your product. If cost is a driving factor in potential customer purchasing decisions you may find yourself forced to go off-shore to meet pricing requirements. However, if you have a product with strict quality and performance requirements that also has high margins it may be more beneficial to keep manufacturing on-shore to allow for improved oversight.

Another factor to keep in mind is that if you sell through retailers they expect punctual delivery. If you’re late retailers typically reserve the right to cancel the order. A canceled order can lead to significant losses and hurt your relationship with the retailer. Retailers do typically allow for you to specify delivery date, however the faster your delivery turnaround the happier the retailer is and the sooner you will get paid since retailer payment is typically set at net-90 payment terms meaning you get paid 90 days after delivery. By Keeping manufacturing on-shore you will be able to reduce shipment time and avoid potential delays. During transoceanic shipping, delays can occur from oceanic weather and customs. You can avoid these potential delays by manufacturing onshore. If you do decide to manufacture offshore these potential delays will have to be included in your lead time.

At ASR, we offer services including manufacturing support, tooling design, product life-cycle supportproduct design, engineering analysis, and more. Whether you need engineering help with your design, want to optimize product for unit cost or performance, or need help sourcing manufacturing, we have the experience and capabilities to help drive your success.

Attaining Proper Product Documentation

Documentation requirements will depend on your product and market. Two things all products require are a Universal Product Number (UPC) symbol and a Stockkeeping Unit (SKU). Depending on your product you may also need a Safety Data Sheet (SDS), Product Certification, and more.

Universal Product Number (UPC) Symbol

The UPC symbol is the most common barcode in the United States. UPC symbols are assigned by GS1 which is a non-profit organization. You will want to obtain two UPC symbols for each product, a 12 or 13 digit Product UPC Code and a 14 digit Case UPC Code. UPC codes are used in all retail and are unique to each product.

Stockkeeping Unit (SKU)

SKU’s are internal item identifiers and are unique to any organization. SKU’s are used to track individual units of a product. You will want to create an internal SKU system to track inventory, keep track of manufacturing errors, prevent copycats and more. Since SKUs are unique to a given organization its common for retailers to create their own SKUs for your products that are different from your own. Many manufacturers use lasers to label individual units with unique SKUs.

Safety Data Sheet (SDS) Form

If your product uses hazardous chemicals you will have to track down SDS forms which are provided by the chemical manufacturer. Refer to OSHA for more information on SDS forms and requirements.

Product Certification

Depending upon your product it may require certification. If your product failing can put lives at risk, lead to significant damages, or is hazardous for any other reason then its likely that your product will require a form of certification. For instance fall protection products require meeting with OSHA 1926.502, ANSI A10.32, ANSI Z359.14 and more.

If you have a product that requires testing and certification, then ASR’s analysis services can help ensure your product meets required specifications prior to expensive certification testing by using advanced computer modeling. ASR also offers product testing and validation services to help get your product the certification it needs.

Product Packaging

Depending upon your product and sales channels, product packaging can be a critical component to your success. Some products are susceptible to damage during shipment and need to have packaging designed that can keep products safe if they are dropped. Packaging design and unboxing experience is also critical to sales and branding.

ASR offers analysis services and testing and validation services to ensure that your product packaging is adequate to prevent your product from being damaged during shipping.

If you have plans on selling your product on the shelf of a retailer then your packaging will need to stick out against the competition in order to generate sales. With the typical consumer only looking at your product for a few seconds your packaging will have to stand out to earn a chance at converting customers. For this reason we recommend hiring out packaging design to a professional. We can work with the designer you have chosen to ensure packaging meets with strength requirements to prevent your product from arriving damaged.

Lining Up Fulfillment and Shipping

There are a few options when it comes to fulfilling orders. You can use a 3rd party fulfillment services that will warehouse and fulfill orders for a price. You can also fulfill orders in house. If you fulfill orders in house then you will need to procure packaging material for shipping including shipping boxes, fill material, packing tap, and a shipping label printer and paper. Depending upon shipment volume you will also want to look into creating a packaging station with a packing table to increase productivity.

If you plan on shipping directly to customers you will have to determine shipping costs. Start by researching different shipping companies such as USPS, UPS, FedEx, and DHL. I have found USPS flat rate shipping which includes free boxes to be the most affordable, easiest to manage and the fastest for shipping initial lower volume orders. However, you will want to research all of your options for shipping prior to settling on a shipping service. You may also decide to offer multiple options to your customers at varying price points. If you decide to ship internationally you will also have to research international shipping costs and any custom requirements. As your volume increases different shipping companies can become more competitive as you receive volume based pricing.

If you’re selling through retail then its typical that the retailer will cover shipping costs as long as you use their requested shipping provider and account. It’s also common for suppliers to cover shipping should a minimum order volume be made which is specified by the supplier as an incentive for larger order volume.

You may also decide to include the cost of shipping in your product pricing in order to offer free shipping.

Pricing Your Product

Product pricing is one of the most critical components of your business model. Should you price your product too low you can be losing necessary profit for growth or even selling at a loss once all costs are accounted for. Should your price be too high potential customers may not even consider it for purchase.

Determining Your Minimum Price

In order to determine the minimum price of your product you will have to first determine your product’s unit cost and required margins for reasonable growth and development.

The unit cost of a product is the cost incurred by a company to produce, store and sell one unit. Common things included in unit cost include but are not limited to:

  • Manufacturing & assembly
  • Shipping to warehouse, assembly line, etc..
  • Warehousing
  • Packaging & packaging materials
  • Payroll

You will also want to determine the necessary minimum amount to cover single time expenses and business growth and development. Typically this will be between 18% and 35% of the Manufactured Suggested Retail Price (MSRP) of your product. This is what you pull from for your advertising budget, single time expenses such as manufacturing equipment, and overhead costs. You will also have to add in the retail margin which is typically about 50% of MSRP which is also known as keystone pricing. In practice retail margins vary depending upon the product, retailer volume, market and more.

A good equation to determine your minimum MSRP is:

MSRP >= 2*(0.18*MSRP + Unit Cost)

Where:

  • 2* represents keystone pricing
  • 0.18*MSRP represent the minimum amount a company needs for growth and other expenses without risking losing money on an order

Using the above equation your minimum cost to the retailer would be.

Retail Cost >= 0.18*MSRP + Unit Cost

Determining Your Final Pricing

Now that you know the absolute minimum price, its time to determine the price that you will actually charge. Outside of determining a minimum cost, the unit cost of a product should have little to do with it’s pricing. Instead you should use your market research that you did while finding your idea and beta testing to help determine the best price of your product. You will also want to take another close look at the market and current pricing of similar products to ensure that you’re competitive. Should you price your product too low, customers may assume that it is too cheap and overlook it. Should you price your product too high, customers will overlook it as it is outside of what they have gotten used to as the value for such a product. You may also look into more complicated pricing strategies to better satisfy different potential customer expectations. If you are unsure about pricing it is typically better to error on the high side during launch. Customers are more accepting of price reduction compared to price increases after launch.

Once you have determine a reasonable price that your believe the market will accept check that it is greater than your minimum MSRP. If the price determined is not greater than the minimum MSRP then you will have to revisit a previous step to work on lowering unit cost or increasing product value.

Please comment below with any questions. Launching your product will be covered in next weeks blog post!

Product Development – Launch Preparation Part 1

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.

If you have questions regarding any of the above, please visit our previous blog posts on finding an idea and prototyping and beta testing.

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

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 Fundraising

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.

Bootstrapping

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

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

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.

  • Trial Offers

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

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.

  • Publication Ads

    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

    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

    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.

Afterthoughts

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.

Product Development – Prototyping & Beta Testing

Make Something

Now that you’ve gone through the process of talking to potential customers and developing an initial design as covered in our previous blog post, its time to make something. Initial prototypes are rarely polished products, in fact they shouldn’t be. Your initial goal should be to make something that only addresses the features required of your minimum viable product (MVP). Depending upon your product this may require assistance from a manufacturer, or your may be able to put together something in your garage. Don’t be intimidating by your initial prototyping lacking the polished finish of products on the market, you will get to that later, for now you are simply finding out if you’re on the right path.

If you need assistance with having your prototype manufactured. We offer manufacturing support services and have access to a network of expert prototype manufacturers to assist with delivering the prototype you need.

Show It Off

Now that you have an initial prototype of your MVP, its time to put your hypothesis to the test. Get back out the door and visit your target customers. In order to seperate the consistently desirable traits of the market from traits that only one customer may want, its important to visit as many potential customers as you can. The number of customers you visit will depend upon your target market, however I recommend showing your prototype to at least 5 target customers during this phase.

During these visits be sure to note the following:

  • Any design changes to make to your MVP
    • Can be removing unneeded features, or adding necessary features
  • Things that customers will need to be educated about
    • Understanding these points will be critical during your marketing and content creation efforts.
  • Customer feedback
  • Anything preventing your solution from being easy and intuitive to use
    • The more intuitive and easy your solution is to understand, the more affordable entering the market will be.
  • Any misconceptions your previously had
  • Value of your solution
    • Understanding the average potential customers perceived value of your solution will guide future development to ensure the final product is profitable.

Its a good idea to also observe the current solution in use to give a good reference to compare your solution to. Create a list of pros and cons of your solution compared to the current solution.

Interacting with your potential customers will guide the development of your prototype so that it best fits the market you are targeting. Without potential customer interaction its common for inventors, entrepreneurs, and development teams to go down rabbit holes of design complications which add no significant value in the eyes of the customer.

Note: During this time, if you do not have a provisional or utility patent filed yet then its critical to keep the development of your product on a need to know basis. Should your product idea get published online or elsewhere, you may lose the opportunity to patent your idea.

Back To The Drawing Board

Now that you’ve gotten feedback on your initial prototype from potential customers, its time to review what you learned and iterate on your design and prototype. Keep in mind during this phase that it is likely that you won’t be able to address ever desired feature that every individual customer wants. The goal here is to identify the key elements that make your product viable and to get rid of any product elements that are unnecessary. For this reason you’re looking for trends in product use and customer needs that are consistent among all or most target customers.

Once you’ve identified the key elements for your MVP and eliminated anything unnecessary, its time to update your product design to reflect these changes. Developing your design is covered within our previous blog post.

To assist with the development of your product design, ASR offers a wide range of services including mechanical engineering design and analysis, manufacturing support, product testing and validation, and business support.

Iterate Until Launch

This design – Build – Test – Review iteration process will continue until you’re comfortable that the product meets market demand. Due to the high cost of doing a production run and product launch, you will want to ensure that your product best meets your target customers needs and perceived value prior to launch. This may require going through multiple development iterations and can take months or even years depending upon the product and your resources.

When To Get Launch Ready

One of the best ways to determine if your product is ready is to get out and sell a few. While its great to have a target customer say they want to buy something, its impossible to know if your assumptions about perceived value and the MVP are correct until you actually sell it.

Build some more prototypes and visit the target customers you’ve been working with and offer to sell them the solution that you’ve been working with them to create. Ask them if they know anyone else who may also be potentially interested.

Discover how much they truly value your product. Go with a price in mind, which should be profitable during a larger scale production run (we will cover the basics of pricing in a future blog post). To sweeten the deal for them, you can offer to replace the prototypes with the production run products for free of charge when the run finishes.

The goal of these sales are to test your hypothesis. Given that the manufacturing cost of prototypes will likely be greater than the customer’s perceived value, the goal of these sales are to gather information on whether or not customers will pay for the product instead of gathering revenue. Revenue will come after the product launches.

Once you’re comfortable with the product and its perceived value, its finally time to get launch ready!

How to get ready for your product launch will be covered in next weeks blog post.

Finding Your Big Idea.

Product Development – Finding Your Big Idea

Over the next few weeks, I will be covering product development from idea generation through launch and scaling. Product development is a long process with many hurdles to get over, however, if you approach it correctly and do your homework it can be an exciting ride as you create something from just an idea and watch it grow in sales and market acceptance. I will guide you through product development best practices and show how to avoid common and costly mistakes.

  1. Identify A Problem

    The best products are created out of a need to solve an irritating problem that many people experience. Whether you’re a business looking to create a new product line or an entrepreneur looking to launch a new startup, the first step in product development is identifying an irritating problem. There are many ways to go about doing this.

    1. Personal Experience

      In your work or hobbies, you may have found an experience that is irritating where you ask “why has no one come up with a better way?”

      One example of this is Spanx®. In 2000, Sara Blakely got frustrated with the current offerings of pantyhose after being unable to find a pair that didn’t have seemed toes or rolled up her legs. While many others had surely experienced this same problem, Sara was the first to decide to do something about it. She immediately began work on a prototype and secured her patent. She then began developing Spanx® to the where it is today, generating over $250 million in revenue. Spanx® is just one of many examples of an individual entrepreneur finding a frustrating problem that is widely known and turning it into a life-changing opportunity with years of work.

    2. Get Out The Door

      If you work for an already established company or are an inventor in need of inspiration then its time to get out the door and talk to people. Your customers and people within your target industry have problems that are in need of better solutions. Not only does getting out and talking to people provide great insights into product opportunities, but it will also help build brand loyalty by listening to your customers.

      Before visiting those in your target industry, you will want to create a customer discovery report card to fill out during your visit. Below is an example customer discovery report card to use that can be revised to better suit your needs.

      Example Customer Discovery Report Card

      One example of this is DeWalt®. With approximately 12,000 members in their product testing community, DeWalt® gains insights into the current frustrations with products which allows them to act on opportunities. Thanks to the insights DeWalt® had gained through their program they were able to act on the need for a miter saw that could cut commonly used 11-1/4″ deep lumber sections in one single pass. Although their first 12″ double-bevel sliding compound miter saw came with a high sticker price of $400 in a market filled with $150 miter saws, thanks to advantages of the increased depth and power, sales of their new miter saw took off. Contractors no longer needed to rotate long lumber sections to get a full cut which significantly increased productivity making the high cost easy to swallow. Since DeWalt® began their program, other tool companies have begun to also start tool tester programs of their own in order to keep up in a highly competitive market.

  2. Find A Solution – Identify The Minimum Viable Product (MVP)

    Now that you’ve identified a problem in the market its time to find a solution to it. To do this create a minimum feature list that is needed to solve the problem you’re addressing. Also include other product properties that may be crucial to the product’s success such as weight, ease of use, and more. Once you have a minimum viable product features list get out the door again and talk to more potential customers to determine the accuracy of your list. At this time it is common to go through multiple iterations prior to reaching a feature list that accomplishes your goal while not having any extra features that could complicate the product and increase costs without adding value.

    It may be tempting at this time to add features that are only requested by individual potential customers. However, in order to keep costs low and to simplify your first product, it is critical to focus on only features that are absolutely needed to solve the potential problem. With time and future iterations, product features can be added to incorporate user demand.

    During this time you will also want to perform an initial patent search. We recommend using both patents.google.com and www.uspto.gov for your patent search. The broader your patent can be, the stronger the patent is. It’s critical to not publish your idea prior to filing a provisional patent. Publishing your idea can disqualify it from being patented due to no longer being considered “novel”. Provisional patents are more affordable patents that give an inventor one year to develop and market their idea prior to filing a more expensive and complete utility patent. While a patent attorney will include a patent search in their services, if you’re looking to save money it’s critical to perform a patent search yourself prior to seeking our an attorney. Attorneys also are not perfect with patent searches and do occasionally miss patents that may disqualify your idea from being patent-able or may require it to become more specific and therefore weaker. Also know that as your idea and product develop, your patent may need to develop alongside it.

  3. Develop An Initial Design

    With the minimum viable product feature list determined its time to generate an initial product design. To do this you can begin by sketching out basic designs of the MVP. If you also have Computer-Aided Design (CAD) Software such as Autodesk Fusion 360, Autodesk Inventor, or SolidWorks you can begin creating a 3D design of your initial prototype. Most manufacturers will require drawings which are typically developed through the use of CAD software. For quality prototypes, you will also want the capability to use Computer Numerical Control (CNC) machining which requires a Computer-Aided Manufacturing (CAM) file. Quality manufacturing processes require fully specified components. In order to generate fully specified components and eliminate the potential for clearance issues we strongly recommend using CAD software to generate component and assembly models of your prototype.

    If your product experiences any loading as most products do, an analysis is required to deliver a quality design that can withstand use. The alternative to performing an analysis is to iterate with a guess and check method which can add significant costs and time to the product development phase and doesn’t output an optimized design.

    To assist with the development of the initial design, ASR offers a wide range of services including mechanical engineering design and analysis, manufacturing support, product testing and validation, and business support. We will work with you to develop an initial design for your product based on a supplied feature list and any other material you can provide. We will generate CAD renderings, manufacturing drawings, and a presentation which you can show to your potential customers for additional feedback. Once we are given direction to continue our design process we can generate an advanced computer model of your product to analyze it for potential loading scenarios in order to optimize the design to deliver adequate durability while minimizing manufacturing costs. Once we have developed an optimized initial design for your product, we can move forward with support for manufacturing prototypes.

Common Mistakes To Avoid

  • Be cautious of biases in product ideas. While you may believe a product idea could be the next big thing to hit the market, it’s critical to first get feedback from those in your target market. You may be surprised by what you find when you start talking to potential customers.
  • Always get unbiased feedback on a product before trying to go to market. While many people will tell their product ideas only to their friends and family, it’s uncommon to receive quality feedback on your product idea from those close to you.
  • Make sure you can deliver your product for a price people are willing to pay. Observe market pricing trends and perceived value of features and solutions. While occasionally something big comes around that completely changes the pricing of a market such as Starbucks charging $4.00 for a cup of coffee in a market used to only pay $1.00. These big market shifts in pricing are the exception and not the rule. What’s far more common is being directly compared to your competitors on price and if you aren’t in the same ballpark, customers will simply move on before looking closer at your advantages.
  • Competing on price is very difficult. While you may believe that if you can just reduce the price of a product or solution by 10 or 20% in order to win over customers on lower cost alone. Established brands have a huge lead in manufacturing experience of their product giving them significant advantages in manufacturing efficiency. Brand recognition is also crucial when dealing with retail and gaining customers. Offering a new innovative solution that fixes a painful problem does far more to building your brand compared to simply reducing the price of an already successful product that another brand is known for supplying.
  • Don’t focus on winning just 1% of a market. While it can be tempting to look at a multi-billion dollar market and saying “if I can just get 1% of that market then we could make it”. In practice, this is far harder than it sounds. Either your product is going to be a great solution to a problem for a market or it won’t be. When a market identifies a great solution to a painful problem something magical happens, word of mouth can begin to spread increasing your sales. For all of these reasons, gaining the first 1% or even 0.1% of a market can be the most challenging. Earning 1% of a market still requires having a viable solution and communicating your advantages over your competition. It’s far better to be growth driven. Focus on gaining compound growth by providing great solutions, earning a strong brand reputation, executing on your idea and promises, and being consistent with your work.

Read our next post in the product development series covering prototyping and beta-testing.