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How do you expand on success? For Graham Kjestrup, an entrepreneur in Stanton, California, the answer was inventing a new product. Kjestrup's company, National Sign Display Manufacturers Inc., produces signs that real estate agents can place in the lawns of homes for sale. In 1999, the company had grown to $3.4 million in sales and was selling its products through about 10,000 sign stores nationwide. Sounds like a picture of success-especially with sales increasing 10 to 15 percent per year-but after 13 years in business, Kjestrup wanted the company to grow even faster. Says the 38-year-old, "There was a cap on just how big the company could grow from the real estate market."
Kjestrup decided that the fastest way to boost business would be to invent a new product. So in 1999, he developed the SandScrew, a corkscrew-type piece of lightweight steel that screws into any ground surface and holds beach umbrellas, volleyball poles and flag poles. The product had great market-research results, and best of all, Kjestrup could produce it using his existing equipment.
Soon, though, a challenge presented itself: how to sell this innovation to an entirely new market-drugstores, mass merchants and sporting goods stores. After all, Kjestrup was just a small vendor with one SKU. Sales were slow in summer 2000. Earlier this year, however, Longs Drugs, a 400-store chain on the West Coast, picked up the $9.99 SandScrew. And just recently, Kjestrup received approval from Wal-Mart and Ron Jon Surf Shop as well as interest from Albertson's and other grocery store chains. Although the SandScrew has only generated about $150,000 in sales to date, Kjestrup expects profits from the product to triple next year.
A Fresh Start
The road to success isn't easy, and Kjestrup worked hard to get the SandScrew into big retail stores. Here are some of the steps he took:
Learn the industry. Kjestrup's first advice for entrepreneurs seeking success in a new market is to educate themselves. "Our product is seasonal, and most of the sales for the following summer are made by November," Kjestrup explains. "This is different from the sign business, where orders come in every week. [Retail] stores also mark our product up by 100 percent, while sign shops typically only use a 50 percent markup." Kjestrup also learned that building strong sales in smaller regional stores helped ease mass merchants' resistance to taking on a one-line company.
Find the key. Research showed Kjestrup that packaging was the most important factor in selling his product. "Without [the right packaging], SandScrew was just a steel tube with a hole," he says. In fact, Kjestrup spent nearly a year perfecting his packaging before he pursued retail stores.
|The Web offers a
plethora of information for first-time inventors. Here are some of
the best sites:|
Don't count on help. At first, Kjestrup attempted to find a broker to market the product through a series of agents nationwide. But that strategy flopped. "The agents didn't make enough money from our product, so they didn't spend any time on it," he says. In the end, Kjestrup and his sales manager had to promote the product themselves. Kjestrup hopes to use agents later, once there's a proven demand for the product.
Be patient. Buyers place most orders for seasonal items during just two months of the year, and many like for products to be around for a while before giving them a chance. The result, says Kjestrup, is that "you have to make a commitment to the new product and give it at least two or three years to develop." That's quite a contrast to the immediate impact on sales Kjestrup can often see in the sign business.
Don't expect size to matter. "People in this new market didn't care that we had been in business and had substantial sales," says Kjestrup. "They just saw us as a one-line company. The only time our size mattered was in Wal-Mart's final evaluation, when [the retailer] wanted to be sure we could deliver a large order."
Don't ignore your initial market. While innovating his new product, Kjestrup continued to pay attention to his original customers. He still seeks out new ideas for the real estate market. In fact, his customers suggested the idea for another product, a clear box with a pull-down front that sits atop the "home for sale" sign and holds sales fliers. That latest invention's in the running for an order from Home Depot.
Back to the Future
According to Kjestrup, the biggest adjustment in targeting a new market is learning how to work backward. Most companies work forward, meaning they create and develop a product and then figure out a sales and marketing strategy. Working backward, in contrast, means learning what the customer and retailer want before finalizing the design of the product.
When you don't know your market, working forward is dangerous-a business faces too many unknown requirements. Kjestrup's sign shops don't worry about packaging, UPC codes, how a product fits on the shelf, when orders need to be in, discount structure, advertising programs or product liability insurance. But those are all worries in Kjestrup's new market. And while the SandScrew may have limited direct competition, there are hundreds of companies vying for coveted shelf space as summer seasonal items.
|Are you trying to launch a product in a new market? Before you go too far, learn all you can about the industry by subscribing to trade magazines, contacting trade associations and visiting at least one major industry trade show. The best industry directories can be found at your local library. The three to ask for, from Gale Research, are: Gale's Directory of Publications and Broadcast Media, Gale's Encyclopedia of Associations and Trade Shows Worldwide.|
Working backward is a good idea for independent inventors. Often, the biggest mistake inventors make is to wait until their products are ready-after huge investments-before finding out what their distribution channels want. Some inventors think knowing what end users want is enough. Problem is, they usually don't have enough extra money after development to recover when their products need changes. Knowing what the customer and the retailer want first, before spending too much money, is the best route for any new product.
Almost all growing businesses have tried, usually without success, to branch out into new markets. It's not uncommon for a company to have five, 10 or even 20 products that never made it. Such companies never really have a chance at success-they don't properly commit to their products. That commitment starts, just as Kjestrup found, with discovering what the new market wants. Follow his advice, and you could be launching the first in a long stream of winning products in new markets.
- National Sign Display Manufacturers Inc.