Innovation thrives from the ability to recognize a problem that needs to be solved or a desire that needs to be met. The reason why companies keep launching new products and updates is that consumers are never truly satisfied. There’s always that one product that might catch on and become a global phenomenon, but which product would that be?
We may discover a product that has an enormous amount of potential, but that’s the thing… having potential and realizing that potential are two different things. If you’re thinking about introducing a product into the market, you’ve probably already created a success scenario in your head. You think that just because you see the untapped potential of a product, that everyone else will too. However, that’s usually not the case. You see, the key to a successful product lies in the strategy with which it is implemented. Having a great idea isn’t enough. You have to be prepared to answer difficult questions about your strategy and shift gears in case something goes wrong.
To illustrate what I’m talking about, let’s go through the step-by-step process of introducing a product into the market from a distributor’s perspective.
Let’s say that you stumble upon a product that has the potential to become the next ‘big thing.’ You think that if you can manage both the distribution and the promotion of the item, success is inevitable. However, no one has heard of the product before, so how can you create demand for something that doesn’t exist in the minds of consumers? Keep in mind that you’re not the manufacturer, so you also need to consider what your role is in the supply chain.
After giving it some thought, you decide to approach the manufacturer as a distributor. As a middle man, you have to ensure that your role in the supply chain is secure for a certain amount of time; or else the manufacturer will get rid of you once he doesn’t need you anymore. Ideally, if you’re acting as a distributor I recommend seeking an agreement where the manufacturer agrees to grant you exclusivity within a certain area.
Now that you’ve worked out an agreement with the manufacturer and have the product in-hand, how are you planning to sell it? Are you going to reach out to retailers and boutiques to purchase your product as part of their inventory? Are you going to sell the product directly to the customer? Whatever option you choose will impact your business model and ultimately, how much money you earn.
On one hand, if you choose to sell to retail stores directly, they often require a profit margin of 35-40%. For example, if you obtain the product for eight dollars and choose to sell it to the retailer for 15 dollars per unit, the retailer must be able to sell it to the customer for $20.25. In that case, the only way you can make money is based on the volume you sell to the retailer. On the other hand, if you choose to sell it to the end customer you have to think about two things: 1) how you’re going to reach them and 2)how much can you charge them for a product that will take care of your fixed costs and your ‘salary’ while generating a profit.
Once you’ve chosen which model you want to pursue, you have to think about how you’re going to generate buzz. The tricky part of this whole process is generating demand where there is none. Also, since the product is new, you have to inform your audience on what they’re buying, the benefits they’re receiving and why they should purchase it. Educating your customers has to be one of the most frustrating experiences you’ll ever encounter in your career, because they don’t learn or listen. They’ll question you on why the product is priced so high and how it’s different from everything else that already exists.
Not only do you have to build a relationship with the customer from the ground up, but you also have to push them to take action. You have to be the clingy one in the relationship always reminding them how much you care, what you can do for them and how both of you can mutually benefit from staying together. Trust me, attaining and keeping loyal customers is a tricky business.
Once you’ve built a name for yourself and your product seems to take off, it’s time to think about expanding. If you initially chose to sell to customers directly, you have to think of where you would like to position the product. What I mean is that you have to choose which stores will best fit your product and your goals. If you’ve already sold your product at a particular store, you have to find new ones. After you’ve done that, you have to start thinking of customization, advertising, variety etc. Basically, the process goes on forever.
As you can see, introducing a product into the market is a long process. There are countless decisions that have to be made before you can celebrate your success. Unless you have the time and the dedication, I don’t recommend getting involved in this mess. However, if you chose to do it (like I did), there are numerous benefits that can come from it.