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Archive for the ‘Small Business’ Category

Taking Shortcuts in Order to Secure Investment Funds Is the Pursuit of Fools Gold and Insures Failure

Thursday, August 29th, 2013

by: Geoff Ficke

Just today, on a single Linked-In group I visit, I have seen at least five naked pitches seeking funding for a new consumer product, concept or invention. This occurs almost every day on these sites. The efforts are always clumsy, transparent, sophomoric, and can only lead to futility.

How do I know these attempts to secure investment funds lead to futility? Because they continue for weeks and typically become more desperate and shrill sounding. As a consultant who has worked in the Venture Capital and Investment Banking space for many years I can state with certainty that if an item or project is as good as claimed, this is not the way to excite a funding round from sophisticated, serious investors.

Social media is a wonderful new vehicle for spreading and gaining knowledge, acquaintances and opening exciting new doors but only if handled professionally. The same steps that must be accomplished when seeking funding from traditional sources must be followed in this new world unless the offer is to be dismissed as that of a carnival barker. Here are just a few tips.

  • Support the appeal for funding with a compelling set of bullet pointed factoids that reflect that you have performed essential due diligence.

This type of support is almost never on offer. Claims to wondrous product benefits are stated with no supporting research offered.

  • Offer to provide a customized Business Plan after completing a Non-Disclosure Agreement that will confirm the assumptions stated in the appeal for funding.

The shortcut most indicative of a project built on dreams and whimsy is one without a well constructed plan that demonstrates how funds will be used and the realistic return on Investment that can potentially be realized.

  • Be very careful not to scare off possible targets of opportunity with claims of scientific breakthroughs.

Just today I read an appeal for $1.5-3 million for a technology that targeted cures for numerous serious physical maladies. These maladies included the “O” word: oncology! Cancer centric treatments require hundreds of millions of dollars to pass unbelievably rigorous testing hurdles. A few million dollars would not buy enough Bunsen burners to start a project.

  • Research and create a customized Marketing Strategy and Sales Model that will support the assumptions needed to interest funding sources in investing in the project.

A perceived good consumer product idea is of no use unless there is a strategy in place to fully commercialize the good or service in the frenetic retail marketplace. This kind of professional service is readily available from consultants, universities and local government agencies. What is the Unique Selling Proposition that separates the item from competition? Who is the competition? What is the needed profit margin necessary to prosper in the space? These and dozens of other questions and issues will ultimately need to be addressed.

  • In order to raise awareness and interest from serious funding sources have perfected prototypes, manufacturing sources, logistics, dead net landed cost of goods per mass production of the item and pricing models available.

Many of the requests I review in social media have one or several of these steps nailed down. However, almost never do they have the full flotilla that would indicate that the prospective entrepreneur is serious and viable. This is a shortcut that we see in every form of funding request that we review.

  • The hardest money to raise, in social media, cloud investing or traditional Venture Capital is small amount requests.

Investors, whether individual or sophisticated groups, like to see sweat equity from entrepreneurs and this includes that they have money on the table. Small requests for $10,000 or $25,000 are referred to as 3-F money. These are funds that come from friends, family or fools. Typically this level of funding is much too small to be of interest to traditional sources of Venture Capital.

There are a near endless number of deals and projects seeking a finite amount of capital. If you seriously believe your project deserves consideration for funding then fully demonstrate your passion. Do not take shortcuts. If you do you simply obviate yourself and your project from any possibility of success.

First-Mover Disadvantages Must Be Carefully Guarded Against When a Consumer Product Is Truly Novel

Thursday, August 22nd, 2013

by: Geoff Ficke

Every business school student, entrepreneur or consumer product marketer knows and understands the advantages and importance of being the First-Mover in a given
product category. Even those not actively participating in the space instinctively understand that it is best to be first to market with a breakthrough product. First-Mover Advantage (FMA) has become popularized with the dawn of the internet age. However, the concept has been around as long as we have been packaging and selling goods.

An easily explained example of FMA was the introduction of disposable baby diapers to the consumer product marketplace by Proctor & Gamble. P&G discovered a synthetic fiber then only available in Europe. The acquisition of the proprietary fiber enabled disposable diapers to be massed produced at prices that were exceedingly popular with parents. This created a new category and P&G enjoyed a FMA in the disposable diaper space that the Company exploits to this day.

While we instinctively know why a FMA is desirable and of premium value to a product, we often do not anticipate the pressures that can be applied to such a novel new product. This is called a First-Mover Disadvantage (FMD).

One paramount concern is Free-Riders. These are businesses that study a breakthrough product, its Research and Development, manufacturing processes, formula, marketing, etc. and replicate without exposing themselves to the upfront risks that are endemic in launching any breakthrough item. Imitation costs are much lower than
innovation costs. There are successful firms that specialize in this technique.

The Limited was amazingly successful at replicating the style and the detail of couture ladies fashion dress and suit designs, streamlining production, lowering costs and moving customers from boutiques and department stores to their own eponymous shops. RIM, created the Blackberry, a smashing success, only to be almost fully displaced by Apple and Samsung products that studied, improved and advanced on their technology.

Another FMD is the assumption of marketing risk. It can be expensive and difficult to educate retailers and consumers to the features and benefits of a new product.  Innovators often exhaust their resources in the development and introduction of their product(s) only to expire before they can be successfully commercialized. The initial mover assumes all of the market creation risk. Subsequent Free-Riders can often fill the void with a version of the alpha product and often are more successful.

Technology shifts often create a changing consumer. Remember the VHS video player? The cassette tapes these bulky units played were an entertainment tsunami. That was until the DVD format was developed and introduced. The smaller compact DVD discs and superior quality literally crushed the purveyors of VHS products within months. Especially with technology, you are never the greatest only the latest. Brother’s typewriters, Eastman Kodak and Polaroid are examples to consider.

Incumbent inertia is another FMD to be guarded against. Some management’s become inflexible, rigid or content to operate the way they have always operated even as markets change. Simply search the list of national and regional retailers that has disappeared in the last 40 years. It is stunning. Major department stores have been bankrupted or merged into more aggressive groups. Sears, once the largest and most successful retailer in the world, is on life support as I write this. They could easily go the way of Montgomery Ward, Circuit City, Mervyns and countless others.

Another sign of incumbent inertia is the inability, or conscious decision not to cannibalize an existing product. The Ford Motor Company was the most successful industrial enterprise in history in the first third of the 20th century. Henry Ford was brilliant but inflexible. The consumer could buy a Model T in any color, as long as it was black. As a result, his firm was displaced by General Motors and its brilliant maestro Alfred Sloan. Sloan designed a stair step series of marketing and brand platforms that moved
consumers from Chevrolet, to Pontiac, to Buick, then Oldsmobile and ultimately to Cadillac as they moved from various stages of life and success.

Charles Revson did the same with Revlon cosmetic, fragrance and skin care products. Revlon in the mid-20th century was the most successful beauty brand in the world. Rather than sit on his laurels Mr. Revson introduced the higher priced Ultima II line and then, for exclusive specialty stores, Etherea was launched. Estee Lauder Cosmetics has accomplished the same with her brands stepping to Clinique, Bobbi Brown, MAC, and Origins among others to successfully fill market niches. Contemporary beauty product and fragrance lines of the day like Erno Laszlo, Imperial Formula and Frances Denney atrophied to nothing as they did not innovate and adapt to market changes.

We advise many of our clients when customizing their Business Plan to anticipate the cannibalization of their product by themselves. If an item is successful it will be copied by others. It is incumbent on innovative entrepreneurs to maximize all possible returns on their investment, creativity and hard work. Replicate and reposition your product before others do!

By garnering the smallest niche within a huge category a product can be hugely successful. This FMA may be tiny but it can be lucrative. Just remember that success breeds copycats. Anticipate that you will experience Free-Riders and plan the appropriate strategy to maximize and safeguard protection for your hard work.

Drop the Dreams and Establish Solid Goals and Plans In Order to Succeed in Start-up Business

Wednesday, October 3rd, 2012

by: Geoff Ficke

Drop the Dreams and Establish Solid Goals and Plans In Order to Succeed in Start-up Business

Recently I watched a television show which featured Inventions, Small Business Start-ups and Entrepreneurship as central program topics. A panel of experts reviewed product submissions and interviewed the prospective entrepreneurs about various aspects of their projects. The interplay was interesting, and disappointing.

The word that was most commonly used by these first time would-be business owners was “dream”. They each seemed to be enamored of their dream. The dream element was imbued and layered into many aspects of their commercial opportunity. Unfortunately the panel of experts never made the point that dreaming is not doing, and doing is what successful entrepreneurs must aspire to do.

Every successful entrepreneur I have ever counseled has been goal driven. They set realistic goals. These goals may require climbing seemingly difficult hurdles but successful small business start-ups possess the ability to meet and overcome every market challenge. And the challenges are many.

If it were easy to commercialize an invention or launch a small business there would be exponentially more successful, rich entrepreneurs. The fact that it is difficult to convert an idea into a profitable venture is a natural culling device employed by markets to stop those not possessing the necessary makeup from taking the difficult plunge into entrepreneurship. It is hard to start a business from scratch and compete in a cluttered marketplace and it should be.

For every successful entrepreneur that we work with there are at least a hundred that approach, discuss, attempt to sell their concept and are turned away. Virtually all we decline to work with have one thing in common: they are dreamers. It only takes a few e-mail questions or a minute on a phone call to discover if we are talking to the 1% (goal driven) or the 99% (dreamers).

The goal driven inventor, entrepreneur or small business candidate might not possess the knowledge or necessary skill sets necessary to immediately commercialize their plans.  But they recognize their shortcomings and are fully committed to working, studying and researching their way toward gaining that knowledge. Whether they are
self-taught, or contract for professional consulting talent successful entrepreneurs innately understand the importance of proper due diligence and having a well vetted plan.

The term “American Dream” is as old as the republic. Whenever we hear the term used colloquially we immediately recognize the speaker as referring to the successes deemed so important in our culture: owning a home or business, education, career choice, etc. These goals are invariably gained through hard work, not dreaming. Success at almost all of life’s enterprises is attained by setting solid goals and having a plan. That the American Dream is achieved by doing, not dreaming, is ironic.

College Campuses Are Amazing Resources for Entrepreneurs to Utilize When Launching a Business

Wednesday, August 15th, 2012

by: Geoff Ficke

College Campuses Are Amazing Resources for Entrepreneurs to Utilize When Launching a Business

Recently I read about a new cosmetic product that was launched on a college campus. This bootstrapped product was taking advantage of a resource that can be available to all, but is rarely accessed by any. The entrepreneurs behind the novel lip balm Kisstixx offer an example of just one way to leverage the benefits that are present in abundance on university campuses everywhere.

Shake Smart natural smoothies are another example of a start-up bootstrapped on a university campus. Clever entrepreneurs for this breakthrough concoction looked closely at their personal environment and realized that many, if not all, of the assets they needed to perfect, test and launch their product was on offer within their schools facilities.

The modern university is an amazing amalgam of talent, facilities, knowledge, money and energy. Students are almost universally ambitious. Faculty is experienced and keen to see their student charges succeed in their chosen fields. College administrators are excited to leverage their facilities and resources in ways that drive institutional reputations and endowments. This is the perfect confluence of opportunity and assets for innovators seeking to commercialize their novel business concepts.

Let’s start with the student body. Each member is majoring in an offered course of study. Each is driven to gain as much education as possible in their field of study and compliment this knowledge with practical, complimentary work experience; Thus, the scramble for internships.

For our client consumer product development projects we often visit college deans and ask for student participation in accomplishing specific research and development tasks. Inevitably the dean is happy to recommend one or more students. The students are thrilled for the opportunity to add to their credentials with a hands-on work
experience that can be detailed for future employers to consider. Our clients always are amazed at the enthusiasm and quality of the work product provided by
their interns.

We all read about the technology advances that are born in some university and then become massive commercial successes. Universities across the country have taken notice of this opportunity and almost all have Technology Transfer programs established or in development. They actively seek ideas that can be patented and commercialized by utilizing the massive resources, and fixed overheads, that are a constant in every college. Entrepreneurs are encouraged to approach these programs with their concepts and ideas for review, consideration and possible joint venture collaboration.

We have utilized the resources of colleges and universities on a number of our Consumer Product projects. Schools are not only keen to develop science and technology opportunities. They are aggressively seeking products and services that can be perfected and launched in many areas. For one client we used the Nutrition and Dietary college program to develop a gluten and sugar free line of bakery goods. Focus Groups and test markets conducted at colleges are ideal venues for gauging market sentiment about key elements of Branding, Packaging, taste, pricing, etc.

Business Schools today almost universally emphasize an Entrepreneurial course of study. A capstone class requirement to qualify for a degree is that each student must write or collaborate on creating a customized Business Plan. Let these eager students work on your Business Plan.

Many inventors approach us seeking help in designing, prototyping and engineering their product idea. Many colleges possess every tool needed to create CAD art, scale models, assembly and engineering plans. The College of Engineering is a wonderful tool to access when needing prototype work completed on a small budget and with professionalism.

Wellness drinks and supplements, skin care, oral care, exercise and sporting goods products, fashion design and juvenile products are all product areas in which we have used the assets that are available, and FREE, at a local college or university. Students, faculty and administrations actually welcome the chance to apply their theoretical knowledge to gain practical project experience from working on real world product development. Take advantage of this wonderful resource. After all, as a taxpayer you are
paying for these excellent resources.

Differentiate Your Small Business from Competitors by Making Yourself the Go-To Authority in Your Field

Thursday, June 14th, 2012

by: Geoff Ficke

Differentiate Your Small Business from Competitors by Making Yourself the Go-To Authority in Your Field

A question I am often asked by entrepreneurs starting a new business operation is, “How do I stand out from my competition”. There are a number of options that can be
chosen to accomplish this goal. Resources and actual experience go far in determining which route to take.

If financial resources are not an issue, and it almost universally is, smothering your target market with advertising is the most commonly chosen method to make you and your enterprise stand out from the pack. But there are better paths for those working with minimal assets. Here are a few to consider.

Write a Blog

Let’s assume that you are an insurance agency owner. I live in a very tiny community and even here we have at least six insurance agents in the county. Insurance agents are ubiquitous. By writing a Blog, and constantly updating the content, an agent can become identified as a purveyor of tips and information that makes the purchase of insurance less painful. Whatever the field of endeavor try to impart knowledge that is of value to consumers. Do not overtly attempt to sell a product or service.

Perfect the Advertorial

An Advertorial is an advertisement that looks and reads like an editorial. A question is posed that pertains to your particular business entity. You answer the question with clarity and an air of studied knowledge. This subtly reinforces your bona fides as an expert in your field.

We have used Advertorials successfully for years to build our clients reputations as experts. People love to receive information and tips. They do not like to be sold. The Advertorial, if properly written and executed, will not only build a professional reputation they will be a driver of sales and traffic to your business.

We have used the Advertorial strategy to promote Wellness and Weight Loss Clinic owners, Beauty Salon and Day Spa businesses, Gourmet Food and Beverage marketers, Cosmetic, Skin Care, Fashion, Perfumers, Pet Products, Hunting and Fishing, Sporting Goods, DIY, and Jewelry start-ups, local merchants and service providers. This technique can be made to work to fit almost any Sales Promotion budget.

Public Relations

If you hire a new employee announce the appointment in a Publicity Release. If you launch a new product, open a branch office, add an account, attend a Trade Show, take a continuing education course, or experience any positive activity relating to your business write and circulate a Publicity Release.

The local media in your trading area loves these types of notices and publication is FREE! There are numerous FREE on-line services which publish PR Releases. Trade journals are awash in industry specific announcements that are generated by PR Releases and are published for FREE! Build a data base of clients, past customers and send them PR Releases announcing positive news. Visit my web-site www.DuquesaMarketing.com and click on the Public Relations tab. The format we utilize for the Releases that you can view is the standard PR industry template which you should use for your PR’s.

Public Speaking

Offer to speak to local service clubs such as the Chamber of Commerce, Rotary, Lions, Forrester’s, etc. The announcement that you will be speaking on a topic that is in your professional wheelhouse reinforces that you are the “pro from Dover” in this space. Church, civic and philanthropic groups are always seeking knowledgeable speakers to enrich their meetings.

Network

In order to speak to groups as described above, join them. The best advertisement and strategy to make you and your business known is to participate in local and industry specific groups and boards.

Have a Fresh Web-site

I am a believer that way too many people have web-sites. If content is not exciting a site can actually signify that your business is poorly run. People with new business concepts, but no ability to conduct commerce, put up sites that only serve to tip off competitors about their intentions before they are market ready.

A bright, contemporary, well managed web-site does not have to cost a fortune or be cumbersome for even the smallest Micro-Business to handle. There are numerous service firms that can build sites inexpensively and will constantly add blog and PR updates. Search engines will crawl web-site pages every few weeks and if a site is key search term enriched it will move higher in page rankings.

Write Articles

Let’s assume you operate a Prototype Design facility. There is a good bit of mystery to creating working, production quality Prototypes. These units are essential in  discovering manufacturing logistics, engineering quirks, cost of goods, and much more. If an Industrial or Design Engineer wishes to distinguish themselves there is no better way than to regularly publish 400 or more word articles on topics germane to modeling Prototypes.

Article Submission firms abound on the web-site. Many publish for FREE. Some charge a small publishing fee. A few can be utilized for targeting specific demographic groups or industries. When you publish an article you will be perceived as a person with a level of expertise in your field of work.

These are only a few of the many strategies that can be employed to separate you and your business from a swarm of competitors. As you execute these types of self-promotional elements you will discover that they become easier as you perfect your skill sets. There is an old adage among writers: “Writers write”. There is a similar maxim for entrepreneurs: “Successful businesses self-promote”.

3 Sisters Restorasis™ Announces Double Trade Show Launch for North American Market June 19-21, 2012

Thursday, June 14th, 2012

Duquesa Marketing

www.duquesamarketing.com

Press Release

For Immediate Release

Contact: Geoff Ficke

859-567-1609

gficke@msn.com

3 Sisters Restorasis™ Announces Double Trade Show Launch for North American Market June 19-21, 2012

Medical Aesthetic Hydro BioMimetic Skin Therapy Line to Co-Introduce at HBA Splash and Spa & Resort Expo at Javits Center, New York City

Frederick, MD Meg Comer, General Manager of the famous Sylvana Wellness Institute announced today the North American consumer market introduction of 3 Sisters Restorasis Hydro BioMimetic Skin Therapy products at the HBA Splash trade show and concurrent Spa & Resort Expo, June 19-21 at the Javits Center in New York City.

“We decided that the line was too important to only take a bite at half a loaf”, said Ms. Comer. “Each show is offers unique exclusivity in their targeted retail audiences and these are exactly the upscale retailers, serving discerning clienteles that love the Medical Aesthetic provenance we have created with the Brand”.

“Dr. Jeanne O’Connell and her sisters Meg Comer and Kateri Delaney have created an elegantly simple, but ingenious formulary”, said Geoff Ficke, President of Duquesa Marketing, Florence, KY based Managing Consultants for the project. “Their 100% Organic, Self-Sterilizing Lipid Complex provides dermal performance unrivaled, and in reality thought impossible in the past”.

“3 Sisters Restorasis will be located in the special Splash Pavilion at HBA, Stand #1556 CB, Level 3”, said Kateri Delaney RN. “The line will be shown at Stand #474 at the Spa & Resort Expo. Our team will be performing our proprietary “Restor-Imaging” demonstration at each location for the entirety of the shows”.

 

Geoff Ficke to Be Interviewed on WEGP 1390 AM Radio It’s Your Life Show on June 11th, at 11:00 AM ET

Monday, May 7th, 2012

Duquesa Marketing

www.duquesamarketing.com

Press Release

For Immediate Release

Contact: Geoff Ficke

859-567-1609
gficke@msn.com

Geoff Ficke to Be Interviewed on WEGP 1390 AM Radio It’s Your Life Show on June 11th, at 11:00 AM ET

Duquesa Marketing Founder and Expert to Discuss the Most Useful Technique for Funding a Business Startup is Bootstrapping

Florence, KY  Nancy Ficke, General Manager, announced today that her Branding and Product Development firm Duquesa Marketing has scheduled another in a series of national radio interviews for Company President and Founder Geoff Ficke.

“Geoff Ficke will appear on WEGP 1390 AM radio It’s Your Life Show with Host Tami Kilcollins June 11th at 11:00 AM Eastern time”, said Mrs Ficke. “The discussion will be about the opportunity for entrepreneurs, inventors or small businesses to Bootstrap their new enterprises”.

“We work with hundreds of inventors, small and micro-businesses and entrepreneurs every year”, said Nancy Ficke. For many of these aspiring business owners their primary concern is the funding requirements they believe will be required to enable execution of a proper launch. Many assume they need to raise funding from angel investors, venture capital or banking sources. Very few will succeed by taking this path. There are many options but the simplest, and oldest is the concept of “Bootstrapping”.

Duquesa Marketing has assisted numerous individuals and enterprises start and expand Consumer Product opportunities over the past four decades. The award winning firm has vast experience in all Sales and distribution channels in the United States and internationally.

 

Consider the Menu of Services a Project Will Require Before Interviewing Professional Consultants

Saturday, May 5th, 2012

by: Geoff Ficke

Consider the Menu of Services a Project Will Require Before Interviewing Professional Consultants

Google the word “Consultant” and millions of links immediately pop on to your computer screen. Refine the search term and a smaller, but still massive army of sites will become available for search. Consultants are everywhere and offering every imaginable service.

How does a business or entrepreneur in need of acquiring professional skills go about winnowing down and selecting the right team for their specific need? I am asked this question often while performing my work as a Consumer Product Development and Marketing Consultant. There seem to be two key elements to consider when making this calculation.

The first is to consider what skills you, or your group, possess in the area in which you desire assistance. If you are an excellent writer, and are seeking to build a web-site, preparing the copy and visual layout for the site might be work you could handle by yourself. In that case, the need for a web-master for construction and a site manager to control your PPC and SEO
campaign may be the totality of the help you need.

More detailed projects require different and more comprehensive skill sets. Does your team have the ability to create a Business Model, a Business Plan and execute each work element required to successfully push a product or service into the marketplace? Unless the answer to this question is a hard “yes” you should be interviewing Managing Consultants.

The second important consideration is to assemble a menu of services the project will require. Do the consultants you are interviewing have the capability to manage the whole project, or are they going to specialize in their area of expertise and hand off important work elements to others.

We work internationally, with large multi-national companies, and increasingly with entrepreneurs, inventors and small and micro-businesses. Large clients typically hire our firm for a specific piece of project work. Smaller clients tend to want us to act as Managing Consultants. Many people have successful businesses and careers, family responsibilities and, for
course, mortgages. They often want and need to stay with their chosen work.

A Managing Consultant should be able to take a project from idea or concept stage, to market launch. The capacity to manage product development, prototype and product design work, source manufacturing, organize fulfillment and logistics, create customized Marketing Strategies, handle Public Relations, produce creative elements, packaging design, develop funding possibilities, and Sales Models are only a few of the work product elements that successful Managing Consultants should be able to provide to their clients.

The Managing Consultant’s job is to provide their client with the best options for each item on the work product menu. We typically provide these options and then detail why, if this were our business, we would choose option No. 2 over options No. 1 and 3. We work for the client and all final decisions are made by them.

A good consultant should save clients Time, Money and Mistakes. Experience, professional contacts, a long rolodex and instinct are what separate the really successful consultants from the out of work, down sized corporate manager that has real experience only in structured environments. In the current economy, the market is chock full of this type of consultant. Performing proper due diligence when selecting Consulting help will make or break your projects chance for achieving success.

Geoff Ficke to Be Interviewed on KWYD 1580 AM The Business For Breakfast Show on May 8 at 8:30 MT

Tuesday, May 1st, 2012

Duquesa Marketing

www.duquesamarketing.com

Press Release

For Immediate Release

Contact: Geoff Ficke

859-567-1609

gficke@msn.com

Geoff Ficke to Be Interviewed on KWYD 1580 AM The Business For Breakfast Show on May 8 at 8:30 MT

Duquesa Marketing Founder and Expert to Discuss Personality Traits to Success as well as The Best Jobs for Your Future – Creating Your Own

Florence, KY  Nancy Ficke, General Manager, announced today that her Branding and Product Development firm Duquesa Marketing has scheduled another in a series of national radio interviews for Company President and Founder Geoff Ficke in the Colorado Springs area.

“Geoff Ficke will appear on The Business For Breakfast Show with Hosts Marc Mandel, Harriet Fox and Roger Cridlebaugh May 8th at 8:30 am MT”, said Mrs Ficke. “The discussion will be about the best jobs for your future – creating your own. There are opportunitities to take hold of your life and career options by exploring Entrepreneurial opportunities that people find around themselves in their hobbies, homes or jobs”.  There are also certain personality traits within each person that will determine their success.

“We work with hundreds of inventors, small and micro-businesses and entrepreneurs every year”, said Alexis Bruning, V.P. of New Business Development at Duquesa  arketing. “Many of these people carve out successful enterprises by capitalizing on things they experience in their environment. This is a topic that Geoff is passionate about and is always happy to share with an audience”.

Duquesa Marketing has assisted numerous individuals and enterprises start and expand Consumer Product opportunities over the past four decades. The award winning firm has vast experience in all Sales and distribution channels in the United States and internationally.

Sourcing and Defining Volume Pricing Is an Absolute Must for Aspiring Consumer Product Entrepreneurs

Thursday, April 26th, 2012

by: Geoff Ficke

Sourcing and Defining Volume Pricing Is an Absolute Must for Aspiring Consumer Product Entrepreneurs

I have been mentoring a young female entrepreneur for several months. She is not a client of my Consumer Product Branding and Marketing Consulting firm. This earnest lady has a very interesting concept in the Infant and Juvenile product space. Like so many aspiring first time business owners she is confused about how to best organize her enterprise and move from a hobby project to a fully commercial model.

As we discuss her projects status she states that her cost of goods is too high. This is because she is producing in very low volumes and utilizing domestic manufacturing sources. The test marketing and focus groups she has conducted are thus flawed. In order to gain proper due diligence from which to construct an accurate Sales Model, entrepreneurs must be able to ascertain an absolutely tight Cost of Goods.

Short run, hobby business-like volumes represent a distortion of the Sales Model. Unless the entrepreneur wishes to operate a low volume artisanal business it is vitally important to find the best sources of supply and manufacturing and to develop the accurate cost of mass production in hand with the chosen supplier.

We ask our sources of supply for dead-net Cost of Goods pricing for production runs that would approximate mass market distribution models. Dead-net Cost of Goods includes the total amount charged to fully assemble and package an item, plus international freight, customs, duties (if any) and local freight to a Fulfillment center.

The young lady I am mentoring has made the very common mistake of utilizing the much higher Cost of Goods she is currently absorbing based on low volume production and trying to force her Infant travel accessory items to market at a price point that is not viable. Test markets are only useful if the data received is based on solid Marketing fundamentals. Most test markets are not conducted with a goal of making profit. They are laboratories to learn about consumer acceptance, pricing objections, Branding effectiveness, etc. Test marketing saves time, money and mistakes when a product is finally launched after alterations to Marketing Strategies are made.

Take a simple component such as a 12 ounce plastic food bottle. The purchase of a stock Boston Round bottle in quantities of one hundred for testing might be $.25. In purchase volumes of 25,000 the price may drop to $.15 per unit. This type of differential, when applied to every component listed on a Consumer Product’s Bill of Materials will reflect a huge pricing differential. This has a massive effect on the ultimate optimal retail price that consumers will pay for the product.

One of the reasons usually stated for not obtaining a mass production Cost of Goods is a lack of knowledge. The entrepreneur does not know of specific factories or sources of supplies. The internet, social media and business directories today make this work so much easier than when I started my first business 36 years ago. The information and networks exist that actually make this process straightforward today.

Unless pricing for a full channel of distribution is not gleaned none of the assumptions that are used to create a business model will hold up. Sales projections, Business Plan elements, procuring investment from Venture capital sources,  Marketing Strategies and many more enterprise building blocks will crumble. Take the time and expend the energy to diligently uncover the most accurate Cost of Goods for your products.