Ready Or Not?
This story appears in the January 1998 issue of Startups. Subscribe »
Just what is a good idea? For most inventors, the answer is a product they would like to have themselves. But that's not enough for a successful introduction. An inventor has to be able to profitably develop a product for customers who will buy it. This is a difficult task.
When I evaluate an idea, I look for products an inventor with limited resources can introduce to the marketplace and sell for a profit. I've worked with inventors for more than 20 years as both a marketing manager and a marketing consultant and have helped them introduce more than 25 industrial and consumer products.
I've worked with hundreds of inventors, some of whom had less than $100 to invest and some who had raised more than $1 million from investors to launch their products. I've learned that what counts is not how much money an inventor has but how well the inventor can fit his or her product into a market niche that's open to small, single-line companies.
I use five key criteria when I evaluate an idea. Rarely do products immediately meet all five criteria, so the inventor's job is to rework the idea and marketing strategy until the criteria are met.
Devee Govrik, an inventor in St. Paul, Minnesota, who sells about 25,000 of her Junk Drawer Organizers each month, is a good example of how inventors can profit by meeting the five key criteria. Govrik designed and produced an injection-molded plastic tray with compartments for scissors, tape, pens and all the other items people keep in their junk drawers. Her product was successful, partly because she was a hard worker and partly because her product satisfied the five key criteria.
1. The product is easy to distribute. An under-financed inventor needs an easy-to-penetrate distribution network that's open to products from small companies.
Govrik considered selling to large discount mass merchants, hardware stores, supermarkets, variety stores, and kitchen- and closet-organizing stores either directly or through manufacturers' representatives. Because she didn't have a lot of money in this start-up phase, she decided to sell directly and not use manufacturers' representatives, thus saving a 10-percent to 15-percent commission fee.
She then made a list of all retailers who might be interested in selling her product and called them to qualify her leads and identify the buyers that she could direct her pitch letters to. By eliminating those stores that weren't interested in her product and identifying the buyers, she was able to send out a more effective mass mailing.
Through this aggressive approach, Govrik was able to land Target as her first account. And by successfully penetrating that market, she gained the resources to expand into other markets, such as organizing stores. Although there were only about 50 organizing stores nationwide at the time she introduced her product, they were easy to find through trade magazines and the Yellow Pages, and the store buyers were looking for new products with which to stock their shelves.
Although inventors typically need representatives in markets where store buyers have many salespeople calling on them--the representatives have contacts and can get appointments where inventors can't--in markets with fewer suppliers, inventors can usually talk to store buyers relatively easily.
2.The technology is simple. Most inventions call for at least two or three prototypes and anywhere from five to 10 product changes. An inventor may be able to afford that for a simple product, but they'll go broke trying to modify a complex one. Govrik's product was an injection-molded tray with decals and shrink-wrapping--the type of product that's economical to develop.
The difference between a simple and a complex invention depends on the inventor's skills. Your product can be considered simple if you can either make the product or the prototype by yourself or if a model shop can build a prototype for you for less than $1,000.
If your product is more complex than you can handle yourself, you should find an engineer or industrial designer willing to work with you in exchange for a small royalty or for a percentage of your future profits. Or you can find a manufacturer that's running below 60-percent capacity; they often look for contract manufacturing jobs, such as building products for inventors. For such manufacturers, the extra production can mean the difference between making and losing money. They'll often be willing to help you produce prototypes to pick up future business. Be warned, however: If the prototype development expense is high, the manufacturer may also ask for a percentage of the eventual profits.
3. The product isunique. Sellers in the distribution channel don't like taking on new vendors; they'll only do it for a product that's clearly different. Consumers, too, tend to buy products they're familiar with and only break their traditional patterns when a product is outstanding.
The Junk Drawer Organizer is not that different from other products made by Rubbermaid and other plastic products companies. But Govrik did three things to set her product apart. First, she sold her product to kitchen- and closet-organizing stores, where Rubbermaid didn't have a dominant presence; second, she put picture decals in the bottom of each compartment so people could see what items went in each compartment--a tactic competitors weren't using; and third, she chose a name that clearly explained her product: Junk Drawer Organizer. Well-chosen names, striking visual appeal and innovative packaging can all help differentiate a product in the marketplace.
4. The benefit is obvious. The Junk Drawer Organizer is simply a plastic tray with compartments. Consumers may not be able to figure out the product without the clear name and illustrative decals. You have to connect with your audience in some way. Govrik's product made sense to her customers immediately; virtually everyone has a kitchen junk drawer.
5. The product can be sold at four to five times its manufacturing cost. The truest statement in the invention business is that the inventor gets paid last. Retailers and distributors get their profits on every item they sell, and suppliers have to be paid before a company makes any profit. The hard reality is, an inventor won't make any money unless his or her product sells for four or five times its production cost.
Govrik didn't consciously try to meet all five criteria, but her product and marketing efforts happened to meet them. I've seen such scenarios over and over again. Success doesn't come just from hard work or having an imaginative idea; it also depends on a product being easy to sell. The criteria are not meant to make a go/no-go decision for you. They're meant to tell you when a product is ready to be introduced. You'll need to continually rework your idea until it meets the criteria to have a real chance at a successful product introduction.
Don Debelak, author of Bringing Your Product to Market (John Wiley & Sons, $19.95, 800-225-5945) is a marketing consultant specializing in bringing new products to market.
This Is Only A Test
By Don Debelak
Question: I'm getting ready to sell my consumer product. The packaging supplier will sell me 5,000 packages for just twice the price of 500 packages. I don't have much cash, and I'm wondering if it would be worthwhile to purchase the larger quantity.
Answer: You need to consider all your sales efforts to be test marketing until you've successfully sold your product through distribution channels such as stores, manufacturers' representatives or mail order catalogs.
When test-marketing a product, you must conserve your cash. You can't be sure your idea will sell, and you may need to make product or packaging changes before you can market your product on a larger scale.
In the test-marketing phase, expect to lose money on each product you sell because you're forced to buy low quantities of supplies. That's OK; that's what test marketing is for. Too often, inventors are swayed by their own optimism and try to make money in the test-marketing phase. The result is usually that they invest heavily in inventory and don't have money left to make product adjustments.
Stick with the 500 packages, and don't be concerned about the per-unit price at this stage. Your goal for now is to preserve as much cash as possible.
