CPG Product or Business

Foreign.

Welcome everybody to another edition of the CPG Insiders. I'm your host Mark Young with co host Justin Girard. A little under the weather today, Justin. My voice is a little off. You can tell that.

I, I mean I just think you've got your late night radio DJ voice on now.

It is because I can get very close to the microphone and I can talk like this.

See, we're playing some smooth jam.

That's right, baby. See.

Exactly.

So we're going to, we are going to talk about a subject today that you and I get exposed to from time to time. And the topic is, do you have an item or do you have a business?

Yes, yes. Well, especially now, Mark. I think it, I feel anyway that this is something that we have run into a lot more in the last few years with the emergence of Amazon because Amazon created the ability for people to start making money off of items.

Items. Yes.

Right. But not necessarily have something that you can build a long lasting business or brand against. And, and, and there's a lot of confusion between. Right.

You can, you can come up with a chicken shredder and put it on Amazon and sell 25 pieces a day and make a nice little side hustle.

Exactly, exactly. But, and we get calls all the time. Hey, I'm, I'm, you know, I've, I've sold, you know, a few thousand of these things on Amazon. I want to go to Walmart. And it's like, well, hold on, hold on. Is that really the right opportunity here?

Right. So first off, let me explain something to people. I want to explain the difference between short tail and long tail retail.

Yep.

When we think about long tail and short tail. So I want you to imagine in your mind right now an XY graph. And on the left side of the graph we're starting way up high on the page. And then our graph slowly, you know, kind of rapidly at first, rapidly slopes down toward the bottom of the page. Then it takes kind of a hard right turn and it runs very parallel to the bottom of the graph for a long time. So let me tell you what I'm explaining here. Let's say that we're talking about book sales.

Yep.

So if we go to Costco, Costco sells a lot of books. But if we go to Costco, Costco probably only has 150 book titles. That's probably the max that they have in book titles. Yeah, that's called the short tail. So when we look at this graph, we see that to the left of the graph is where the Majority of the volume is. That's the big volume. So Amazon or Costco will have their 150 books. And their 150 books probably represent 80% of all book sales this month nationally. Now we start to run down the long tail that's called Amazon, where 150books is in Costco, Amazon has millions of books.

Infinite selection.

Infinite selection. Because Amazon has the luxury of being able to sell one. Now, the problem here with retail is retail has a limitation on it. And that limitation is called atoms. Because a t o m s.

Right. Physical thing. Yes.

Brick and mortar is made out of physical things. And even in the case of Amazon, Amazon doesn't even need to carry all those books because Amazon can even do print on demand.

Oh, absolutely, absolutely.

But in the case of Costco, Costco needs to carry a large quantity of those books because they sell so many of them and they only carry the top 50. Top hundred, top 150 titles. And that's the extent of it. So because of this long tail environment, everybody can sell something. A thing that I find fascinating. Of all the millions of songs that are on itunes, I read a stat that says every song on itunes sells at least one. One copy a month. Now think about that. Tens of millions of songs on itunes, but everybody sells at least one. But if we were to look at the biggest sellers, where are they at? Well, they're listed to the Billboard top top 100.

Right.

Billboard top 100 is going to be 90 plus percent of all the volume. So 100 songs will make up 90% of all the business. And 10 million other songs will make up the other 10% of the business. So this is the difference between long tail and short tail marketing. And it's why long tail marketing creates these wonderful opportunities.

Oh, absolutely.

Because I came up with a cake decorating glitter kit or my chicken shredder, or, you know, whatever the item is. And I can go to Amazon and I can show my cake decorating kit and there will be some people who are really into baking who will see my cake decorating kit and they'll call and order it.

Right, right.

When we're limited to brick and mortar because of this whole problem with atoms, we're limited to items that have to be in the short tail column. So now we're looking with items that have to be on that far left of our XY graph.

Yep.

So the equivalent of your item needs to be the equivalent of a Billboard Top 50.

Right, right.

Or. Or the, you know, New York Times bestseller list. It needs to be the equivalent of that in its category.

And so I guess the transition then, I mean, I'll ask the initial obvious question, which is how do I tell if I have a business or an item? I mean, I'm making money on it, but how do I know the difference?

Well, this almost becomes like the Supreme Court's old ruling on pornography that we'll know it when we see it. I would say for many times you and I will look at a product and we will say that's an item, not a business.

Well, and, and I think even take it larger, right? If you're, if you're going to create a business, you need to have a, a product or even service, right? That provides a unique value that either surpasses what's currently in the marketplace or something that doesn't even exist in the marketplace. And that value can be in different things. But that's the key, right? And that can be either through unique technology, unique ip, it could even. It, it has been done in the past, right, with, with simply a unique messaging or unique value statement that connects with consumers in a way that other things are. But it has to be able to create more value than what is currently in the marketplace for consumers.

So I'm going to give you an example of items that tend to be items and not businesses. They are products who, who I think tend to fall into the area of accessories. So I had a delightful woman brought me her invention that she made and she made a device that stopped, that you could put on the easel of a picture frame that would stop the picture, picture frame from sliding down and the photo falling over.

I remember this. I remember. Yep, it worked.

It solved a problem. And it was a $5 item, if that.

Right?

So the problem is you have $1.5 product that goes to a category we'll call picture frames. That only solves a problem for a small percentage of the people who buy picture frames. So when we look at picture frames, we already have to say not a, not a huge category at Walmart, okay, they carry some picture frames. Not a big, not a big category. Now, of all the people buying picture frames, what percentage of those people will identify the picture frame falling over as an issue? So now this market's getting very narrow. Now we have the issue of it's a five dollar item, which means you have no money to advertise, and Walmart is looking at bringing in an item that if it sold, would make them $2. So in this particular case, the hard reality of it, for this particular caller that came to us Was you need to find a picture frame company who's willing to buy your ip because as an accessory to a line of picture.

Frames, it's, it's great, it's a great extension, right?

Because I have 10 picture frames in Walmart and now I can sell this accessory that'll fit all 10 of them. And Walmart might give me some extra shelf space because I already have 10 spaces on their shelf. So to get one more accessory in isn't such a big deal. But for me to go to Walmart and get Walmart to open up a new vendor agreement for a vendor who might sell one product a week per store for $5, Walmart's not going to do that.

Nope. So right there. So one of the, again, what I'm hearing in that example comes down to market size and market opportunity, right? So whether that's currently what the category looks like from a size standpoint, what are people buying in this type of category or even potential, right? Like, hey, this is untapped category. It doesn't exist. We're creating it. But is there actually a demand for this large enough to explore? You also talked about margin, right?

Margin.

If there's not enough margin to be able to market it and grow it and that everybody essentially can make a profit off of it, then, then there is no opportunity for it. And then the other one you just mentioned is opportunity for expansion. Again, it's a, there's nowhere to go. It's a one trick pony right now.

I had another couple came to me and they made a great item. This is the other end of the spectrum. They made a very expensive pry bar.

I was just gonna, I was gonna bring this one up too. This is the first one that came to my mind.

So we're Talking about an items 150, $200. A pry bar, folks, is something that you use when you're doing demolition in a house. You're tearing walls down, you're tearing floors down, you're taking shingles off a roof. This guy was in construction, he made a better pry bar.

Oh yeah, it was a great tech. It really was.

Years ago, when I was a young man, when I was a kid, I grew up in a construction business. And when I was in the construction business as a kid, I would have wanted one of these. Now here's the problem with it. It's a $200 item. Not that many do it yourselfers are going to buy a $200 pry bar. Because as a do it yourselfer. I'm probably only going to demolish something one time in my life, right, I'm going to take up the kitchen floor.

Exactly.

So for 200 bucks, I'll just fight along with the chisel and what I've got. So you're going to really need to sell this to people who use pry bars for a living, which means demo contractors, ceramic tile contractors, roofing contractors. Where do you find these people? Where are you going to find these people? In supply houses, Home Depot, Lowe's, Menards. Okay, how many of those people are out there? That's a limited number. How many of them, out of all the contractors need a pry bar? The number is getting smaller. How many of them need a pry bar that does this and are willing to spend an extra $200? The market just got smaller, and now comes the issue of how do I find that group of people and market to them in an affordable fashion so they know this pry bar even exists? Now, in this particular case, our advice to this couple was you need to get Ridgid or Stanley Tool to add this to their list of pry bars. So now I go to Home Depot, and I'm in the pry bar market, and Craftsman or Milwaukee or whoever rigid has five pry bars. Getting Home Depot to bring in the sixth. Better, more expensive one is doable. But getting Home Depot to start shelf space for my single pry bar that has no brand recognition is impossible. Now, I can also tell you, as a contractor, as a former contractor, we all tended to be brand loyal. So I grew up in the plumbing, heat, and air conditioning business. So what? Rigid tools were everything. Rigid tools is the brand for plumbers, and Milwaukee power tools is the brand for plumbers. So I had all rigid hand tools. I had all Milwaukee power tools. So if I was going to buy this and rigid made it okay, this is pretty good because I know my rigid tail, my rigid tools hold up. And this is a true statement. I've literally broken rigid wrenches before, and I walk back in, and Richard gives.

Me a new one, right?

Literally walk back in with a wrench and two pieces, and they hand me another one. So I'm going to stay loyal to that. I'm not going to be loyal to John Smith's pry bar. Even if it looks clever and looks like it'll do things. It's like, yeah, but I wonder what this guy made it out of. I wonder if it's really going to hold up with what I do, because I'm going to beat the crap out of this thing. So this is where we. We try to focus on, do you Have a business or an item. Another way to know do you have a business? Is where is it you want this product to live? So let's say you want this product to live at Walmart. Well, if you're probably going to live at Walmart, it needs to sell roughly $40 a day per store or $40 a week per store. So we have four, 600 stores times $40. Okay, is your brand, is your product capable? Is there enough consumers looking for that Item to equal $40 times 4600@ all the Walmart stores? Let's say you want to be at Costco. If I want to be at Costco, I need to sell $900 per SKU per week at Costco. Is your product, does it have a big enough market for that? Now, when I'm saying big enough market, I'm not even saying have you built a brand yet? We can advertise the brand and pump the brand up. What I'm saying is, is the demand for this category big enough to support you? There's only so many items you can put into a category.

Absolutely. Well, and even as you talked about earlier, even if you are going to be, you've got a product that doesn't quite neatly fit into a new category that you would be creating your own, that's fine, that's possible, as long as you can prove there's enough consumer demand for this type of item and this type of problem, whatever that case may be. But then you also have to understand that if you're creating a new category, a lot more energy has to be put behind it to create a new category. Because there is no frame of reference for the consumer. Doesn't exist. No one's naturally looking for it yet.

So let me give you the. I'm going to give you the poor man's way to do some market research. Go to Walgreens, Walmart, cvs, wherever it is you think your product should go. Go look at the category and see how many items are in the category. If you're looking at topical analgesics, pain creams, there's going to be 60, 70, 80 items in the category. If you go to the category and you look at toenail fungus, there's six items in the category. There are other categories you can look at where there's only one or two items in the category. So now you have to ask yourself a question. Is the category that reduced due to market dominance of a key player? So my example would be Preparation H, right? Or Sensodyne toothpaste. Sensodyne just dominates the sensitive toothpaste business. There's very few other competitors because cine has spent so much money, Preparation H, they just have a stranglehold on the category. So now you have to ask yourself, first question is, is it a big category dominated by one major player? And if that is a yes, then what is the unique IP I have that will make people take notice? You know, do I have this unique ip? So my example would be Preparation H dominated category. We came in with Recticare, which was the first product with 4% L cane. And we became number two because preparation H made tissue shrink. But we had something that killed the pain immediately. So we had something they didn't have. Okay. So we had ip. So that's the first question. The second question is, are you going to the category? And you only see one or two products there because it's just a tiny category and the retailer just carries one or two items for the. For sake of convenience to their customers. So another one that is a great example is ketchup. You notice how you can go to the mustard category, and there's a hundred different mustards go to ketchup. And there's one.

Yeah.

Heinz ketchup.

Yeah. Private label. That's about all that's in the category.

Yeah. Now, why is that the case? You might get a sugar free, you know, ketchup now, but it's Heinz ketchup. Now, why is that? Because Heinz has the perfect formula. Heinz has the perfect combination of salt, sugar, fat, sour, sweet. They've got the perfect formula that tickles everybody's taste buds. You can't improve on it. So they just dominate the category. And they dominate it with advertising on top of that.

Mm.

So if you're coming up with a new ketchup, good luck to you.

Right.

Meanwhile, you could come up with a new mustard. And that's a different game because you look and you see. Well, people like experimenting with mustards, just like they like experimenting with hot sauces.

Yep.

Or with pasta sauce. Well, I had Ragu. I'm going to try Rao, and I'm going to try Botticelli, and maybe I'll go try Michaels. Right. Because I'm looking for a new experience. But there are certain things people are not looking for a new experience in. Very rarely is anybody looking for a new experience with the ketchup.

Exactly. Well, and I think you bring up a good point, too, is you can also. It's understanding who your consumer is. And yes, the more money you have, the more access to what we'll call, you know, qualitative data you can get. But outside of that, to your point, you just shared a human experience that says look, do you really look for an extra catch up? Right. No, I don't. Okay. You know, the human truth behind your product. That's how you got to creating your product. So also understand, you know more than you, than you may think you do when it comes to that aspect of it. The other thing to always understand too. And I know we kind of beat this a lot with our listeners, but as it relates back to your unique ip and let's say you go there and you say, you know what with the Preparation H example, right? Like, oh, we do this and this and this way better, right? You also need to make sure you take the next step of can I actually say that?

Oh, of course.

That's the other piece of it that's going to separate it. Can you make that statement? Now?

Let me give you another example. Let's say that you're, you want to jump into the category of I'm going to say nail polish remover. You go to the store, you look at nail polish remover, there's probably three or four choices and it's what, five dollar product, right? What can you do better than the ones that are there?

You know, you price to do it.

And are you priced to do it? And can you convince people to spend ten dollars in a five dollar category? Because you can't build a business on a five dollars item. You can build a business on a five dollar item if people buy millions of it, right? If you're selling energy drinks, five dollar items, fine. If you're selling an item that people consume once every six to 12 months, no, you can't do that.

Nope, not going to work.

So these are the things that you need to look at. If your product is an item, then you need to figure out how do I round out this product category or do I need to go sell my ip, right? I've had people bring stuff into me that were like container items and I would look at and say, well, this would be great if Rubbermaid made it. Because Rubbermaid's got a whole section and.

There'S nothing wrong with being an inventor that you can make a good living off of that. If you just want to keep creating things and selling licenses off, that's great too. There's no, there's no reason.

Absolutely, that's fine. And that's really where we're going today. So I mean that kind of wraps us up for what we wanted to hit today, but do you have an item or do you have a business? And again, you may have an item on Amazon that's doing perfectly fine because of the long tail.

Yes, yes.

But that means Amazon is where it.

Lives forever and that's what that does. That's simply what it does. Again, if you know the difference, you have to be able to evaluate the market size and market opportunity, understanding how your unique IP or unique offering so steps up in the category. You need to have healthy margins in the product and pricing in order to be able to support the pathway through. And there needs to be an ability for expansion. You need to be to create a entire line of offerings. You can't just have one item. If it's just this one item and I can make it into three ounce and an eight ounce, it's still one item. That's not going to be enough to really create a business. So you need to work through these things because this will be able to help you understand what, what the expansion opportunities, what the retail opportunity could be. And I think you've given them some good action items. Go to the store, look it up, look at Google Trends. See anybody looking up your problem that you solve differently. There are things out there you can do.

I'm going to go to another category and a category I'm going to go back to baking and decorating. And we worked, we worked with a client who was in that category. Yep, great Amazon business. Amazing, amazing Amazon business. But they had an amazing Amazon business because they had what, 50 SKUs.

Oh yeah, yeah.

So one SKU, one of their SKUs on Amazon wasn't that relevant. But putting them all together, they had a nice Amazon business.

Yep.

However, you couldn't take them to Walmart because they would take up a shelf by themselves and Walmart's not going to.

Give you an entire shelf.

And in a Walmart environment you can't get that much space because no one item sold enough. So this is what you want to look at. I might have stuff that's doing on Amazon that's doing well. I might even have 10, 20 things on Amazon doing well. And together they make an Amazon business. But they don't necessarily transfer over to retail because in the world of retail, one item needs to be able to be a business.

Yeah.

Not the line. One item is my one item big enough to be a business.

Well, and I think you also bring up another thought that comes to my mind with that example was also too not only with that concept of replenishment and how Is the consumer journey there and how much frequency are you going to get to purchase of an item? But also seasonality. Right. You're not going to be able to go to retail if you're pitching an item that sells for three months and is dead for the other nine months at best. You'll be in and out at best. So you need to ensure that you have a product or product story that at the very least can sell good volumes at least six months out of the year. That can carry you an entire year. It's not going to cut it.

Sun Care is a really good example of this. We've done tanning, tanning products for years and typically you ship all the tanning products in, in February.

Yep.

And you don't start getting paid by the retailers until August because it all sits on the shelf on as pay on scan. Then they start paying you in August and then they ship you back what didn't sell by Labor Day. It's all back and now you're sitting on it until next February.

Yep.

And it's all date coded.

Yeah.

So, I mean, it's a tough business.

It is.

Now, I've got one last thing I want to talk about before we go. I want to offer people something new here, Justin. And what I'd like to do, I'd like to, to offer our listeners if you have a product or a marketing and advertising challenge that your company or your product is having, I want to give people the opportunity to actually bring their problem right here to the podcast. And we will talk to them live right on the show, talk about their business, talk about their specific needs and answer them and give them the advice and the help they need right here. While everyone else can listen to the same advice.

I love it.

So go to cpg insiders.com and email us.

Yep.

Or you can also go to Jekyll High labs.com and reach out to Justin and I. Tell us about your business, tell us about your product. What kind of problem are you trying to resolve? And we will have a absolute free creative and business strategy session for you right here on air.

I love it. Please reach out. I think that'll be fun.

I do think it'd be fun.

A lot of fun.

Other than that, I think that's it for us for today. As always, if you have any challenges, questions for us, you can always reach out to Justin or myself and we're happy to try to help. Make sure you go to wherever you get your podcast. Leave us five star review. We'll see you next week. If you're looking to greatly increase sales on your CPG product, don't hesitate to contact us at Jekyll and Hyde Advertising and Marketing, by the way, the only advertising agency with a guaranteed result. Just go to jekyllheideagency.com or feel free to give us a call at 800-542 10.