Interpersonal Business

Dear Managers,
In a recent issue of INTERPERSONAL I discussed risk and the role of consultants in the development of new products. With this month’s issue, I would like to take this topic a bit further by addressing the dynamics and challenges faced in the birth and marketing of a new product.

This month’s issue is dedicated to those hardy souls who, against all odds and the best advice possible, are committed to taking a risk. Be it the individual who mortgages his home to follow his dream, or the seasoned entrepreneur making a “tactical product expansion,” the chances for success are a percentage point or two above slim. Often, the only difference is the depth of ones pockets! With these thoughts in mind, let’s take a run at increasing those odds.

A BLIND EYE
If you or your company are considered to be successful, you have most likely been asked by those seeking success, “What do you think of this?” or “What would you do if you were me?” When an individual asks my advice, I feel the responsibility to be realistic first and enthusiastic second (a few questions early in our conversation to determine their resolve will tell me just how enthusiastic I should be). There seems to be a common thread with these individuals: they have at least one blind eye.

These conversations bring back vivid memories of my own carefree and very naive early years in business. Had I had a conversation with the wrong person, (who may have actually given me very good advice,) I might never have taken the risk of getting started. Certainly, personal drive and natural abilities will promote success in varied endeavors, yet how many times have we heard, “If I only new then what I know now…”

Regardless, I find myself proceeding with guarded optimism for all individuals willing to take the plunge. Who am I to determine if their concept or product is meant to succeed?

HOW BAD DO YOU WANT IT?
With very few exceptions, the common denominator for the success of all new products is the “do-whatever-it-takes” factor. Is this person serious and committed to the project, or is this a hobby? If this is the case, fine. Don’t invest the farm in something to which you have no intention of giving your very best effort. Keep your day job, enjoy the process, minimize your investment and allow your product to develop to its own level. Worst case, you have learned from the process with limited cost, best case it may become more apparent that a greater personal and financial investment is required. The highest priority for any new product is to first determine:

DOES ANYONE CARE?
I have often met with individuals who have rushed head-long into a product’s development prior to determining if there is actually a market or established need for their product. They present their product to me and state, “I have a garage full of these, what do I do now?” Their practical alternatives have now been lost. I believe this to be the ultimate hazard of the blind eye.

TEST ME, TEST ME, TEST ME!
Prior to ordering a garage full, (or on a larger scale a warehouse full) order a minimal run at a higher unit cost to determine a product’s feasibility. As I suggest to these individuals, there are ample resources to market test your products. Yet, I would be willing to guess that less than one in ten has taken advantage of this opportunity. Good-natured friends and family (or fellow managers) have encouraged their spirit, regardless of their market knowledge or its ultimate consumer value.

In general, business people and retailers are more than willing to help you determine the market value of your product. There is a definite energy in participating in the launch of something new, which plays very well in developing an interest and the needed support for your test.

Next, determine a retail price based on your costs of a full production run, adding a very reasonable profit and what your retail/business advisors feel the market will bear. In many cases, your unit cost for the minimum run will only cover the wholesale price. At this stage it makes absolutely no difference.

Your sole objective at this point is to determine your product’s potential in the market and to develop valued advisors and business contacts. Profits in the early stages should be of no consideration. Minimizing and control of potential loss through miscalculation is your sole objective.

Products in their first phase will need at least minor adjustments, and often major changes, prior to going into full production. These changes may include meeting a standardized size established by the market, a reduction or increase in pieces per single price point, packaging, the use of additional color or adjusting the suggested retail price, to name a few. Now is the time to determine the dynamics of your specific market.

Ask to test your products at fifteen to twenty places of business. Be willing to offer your product on a consignment or no cost basis to insure a significant test. In most cases you will want to establish these business relationships personally. Project a very professional and sincere image of yourself and your product. Your personal enthusiasm, and the fact that it is your product, will go a long way toward encouraging their support and assistance in your test.

Determine the specific placement for your product, a time frame for the test, and your plan for follow up. In a much larger test, you may also wish to experiment with two or three price points in various areas to establish the suitable and/or maximum retail pricing. The most critical aspect of your test will come from your professional follow up. If you are unwilling to establish a commitment toward your product and its future, why should anyone else?

The learning curve in this first phase will ultimately determine the success or failure of your product. In your follow up conversations, ask for a candid evaluation of your product from your various test locations. Insist upon their sincere opinions, rather than a favorable spin to feed your ego. Be sure to ask for their perception relating to your product’s rate of sale and potential as compared to similar products they are familiar with. Only when you have gained this information can you make the calculated decisions on your product’s future.

After sixty to ninety days you will have collected a substantial amount of data to review, in most cases at a very reasonable cost. You are now in a position to determine the adjustments and improvements that will need to be made, as well as your willingness and ability to bring your product to market.

MILK’S TOO CHEAP TO BUY A COW
This is one of my favorite quotes, as it seems to define so many aspects of business. All too often I see business people purchase machinery, equipment, lease a building or vehicle long before it is absolutely required. If you occasionally need a truck, rent a truck! Devote phase one resources to minimizing expenses and maximizing the investment into product knowledge. Your investment in equipment will never determine the fate of your project’s future, the investment in your product absolutely will.

With each conversation of this type, I find myself much closer to using these basics in decisions for my own company. As managers, we must determine our own resolve and implement the fundamental strategies that will increase our odds of success. The marketplace does unusual things to one’s thought process, let alone one’s memory. We have only our own experience to thank for an insightful perspective on the blind eye of the entrepreneur.

Personal Regards,
Keenan

INTERPERSONAL© is published by INTERPERSONALBIZ.COM, Keenan Longcor, Editor, ©2008. Duplication of this publication is permitted for both personal and business use. Excerpts may only be quoted with acknowledgment of INTERPERSONAL and/or INTERPERSONALBIZ.ORG as the source. For re-publication rights, please contact the editor at KEENAN@INTERPERSONALBIZ.COM