Asset Building Product Design

Protect your brand, product or invention from the hazards of consumer product launching. And go from idea to product to big brand. With guidance from retail product design and development experts, Tracy and Tom Hazzard. Get the insider secrets to put the right things in the right order with the right resources so you can out design, outsource, and out profit your way to retail success. Hi, everyone. Oh, we're really low energy this morning. Ah, coffee. Hey, I did not have my coffee yet, so there's no excuse for all of you. So let's build up some energy, okay? Cause I am going to talk fast and I am going to give you tons of information. James told me that I had too many slides for you. I promise you that they're very visual. And I promise you that I will give them to you so you do not have to scramble to take notes. But we're gonna talk about asset building, product design. This is my favorite subject in the world because I went to school for design. So I have been practicing this for, oh, I'm gonna date myself 25 years, 26 years, actually. And when we talk about asset building value, right? This is exactly what Michael Gerber was talking about yesterday, right? We want to build a company, we want to build a business, we don't want to build a product. We want to build something that's going to get bought and it's going to get us a valuation that's high, right? Maybe something like that. So that's what we're talking about. But asset building value is not about money. It's not about having a bunch of patents. It's not about all those things. It's about being original, being long lasting. Because when somebody buys you, they want to make sure they're going to get their value from having bought you. That it's price for profit, right? So it has to be profitable when you sell your company. And it only has 2% profit margin. Wow. It's no wonder you get a low valuation that's lower than your revenue. And we need to make it priced and we need to make it value. That's competitive proof. And I know that sounds like a really lofty goal. So competitive proof is really about fending off the competitors and making them feel like they don't have a chance to compete with you. So we're going to talk a little bit about that. But first a little question. Does the best product win? No. Have you guys found that out as you've been working? Right. The best product doesn't win. The best idea doesn't win, but the best Brand does. And so we're going to talk about that. We got to build a whole brand here. So there are way too many product failures in the world. Any guesses on the product failures? How many of you have had five product failures or more? Three or more? One or more? Okay. How many of you are just too afraid to launch a product because you think it's going to fail? There's probably a few of you out there. Yeah. Well, you know what? You're not alone, because there are lots of product failures at retail as well. There are seven out of ten consumer products fail in the market. Seven out of ten, that's pretty dismal. That's not really good odds. You know what's worse? HSN Home Shopping Network. 14 out of 15 product failures. How is that a business? Kind of why they're not doing so well right now, huh? But just take a look at some of these logos. Right? You've got Toys R Us just went out of business yesterday. They couldn't find a buyer. There was no value for them. Xrocker and Waylon, they got bought out. Wayland got bought out by Lian Fung. So that did pretty well. Hey, needle's gone. So, you know, we start looking at these things and we say, wow, big brands have some problems, too. They fail, but they have a little bit more Runway than you do. Right? They got a little deeper pocket. So they can afford to have this shotgun approach of having 10 products and only three succeed. But they also have a little secret formula. They also know that there are certain things that they have covered that they don't have to worry about. They have a lot of systems and processes and things that work. Right? So let's talk a little bit about why so many fail, both for the big brands and for you guys. Okay, so why do you think they fail? Quality. Okay? Customer doesn't understand it. That's pretty good. What else? Poor marketing. They become irrelevant. Well, you know, typically when I do an audience, they're not as savvy as you or as technical as you. And they usually say it's usually money that comes up as well. Money or team lack of capital. But what we're hearing here, you guys cut it. You know already. It's the wrong market and the wrong product. Those two things are gigantic. They're 54% of the failure rate. So if we can get the market connected to the product and we can make that fit, right, we have a lot less chance of failure. So we can reduce the risks and defy the odds. So let's talk a little bit about a case study of where we didn't do that so well. This is one of the people I wrote about in my in column, Laura Beck. She has a company. She literally called it Striped Shirt. Her idea was that she would create these striped shirts so that you could wear them to a baseball game. She was a Red Sox fan. Baseball game. And you wouldn't have to wear their logo on it. You could just wear the colors. Let's see how that turned out. Hi, I'm Laura. Welcome to the world's first real Kickstarter campaign. The liquidation of striped shirt. Five years ago, I started a business, Striped Shirt. Really? Striped shirts for women, kids and babies. To show their colors and support a team, a school, a cause, an organization. Five years ago, I threw caution and career to the wind. And I built a business on a dream I had for 20 years as a girls sports fan. Why can't I just wear a cute red and blue striped shirt to a Red Sox game? I don't want to wear a logo on my chest or a guy's name on my back. So I did it. It was glorious. I created a pattern. I made a sample, I found a manufacturer, and within six months, I had thousands of shirts in my garage. And here, most of them still are today. Turns out even the best businesses don't always fly. And if you build it, they won't necessarily come. Even a great site with good SEO doesn't bring in the sales. So after a five year go, I'm saying no. This is my indie. No go. This is my Kickstopper. Help my husband park his car in our garage again someday. Help company sleep in our guest room without feeling they'll be smothered in the night by stripes. And do it for the children. Can I not wear another stripe? Yeah. A girl should have their own sense of style. Aren't our birthday gifts supposed to be surprises? Help make my midlife crisis a little less expensive. Just go today to Stripeshirt.com and place your order. And at checkout, enter the code Kickstopper. You'll get 50% off your order. And I'll get one more stripe out of my garage.

I'm Laura, a proud and public failed entrepreneur. I'm wearing it like a badge of honor. Now you start wearing a striped shirt. Support my indie. No go pass it on. Tell your friends I need everyone's help. Kick stopping my business. Thanks for your support. Yay.

You guys know what that feels like, right? You try to avoid that at all costs. You don't want to have that Kickstopper. This is actually a serious campaign. This was not a joke. She spent five years, I think it was $150,000. Five years, $150,000. And then realized that she had this entire probably 10,000 pieces. Originally she bought. She had only sold 2,000 over five years. Very, very sad. She did not have them on Amazon. And so anyway, she learned a lot of lessons there. But the number one thing was she didn't test that product market fit. Right. She didn't know that people really didn't want to buy a striped shirt. And there's lots of reasons for that. And we're going to talk about that in a little bit and ways at which we can make sure that we don't have a design problem on our path to getting to brand gold. Right. We want to get to that high level valuation. So would it be okay with you, though? Because sometimes we have to learn our lessons the old fashioned way. If I told you a little bit of story about how Tom and I got started, would that be okay? There's my husband right there. He's in the cool 3D printed tie, which you can see there. We do 3D print. That's another story. We have three podcasts, actually. Product Launch Hazards, WTFF and Feature Brand. And when we started out, we actually started out. Does anyone remember the Palm Pilot? Yes. Yeah. I'm older than I look, right? And so, yeah, we started out selling stylus pens. We invented stylus pens for handheld computers. These cool ones if you were way back then. They were called the Throttle originally. And we were so excited about it. We had this great business and we built it up and there was no Amazon, there was no Shopify, there was none of that. We had to do everything the hard way. I personally coded the database system and the customer service system myself. And I don't have that skill set. I went to art school. So it was an interesting venture for us, but we were super excited. And one of the main things is we had these great patents and we were so proud of them and we were so excited about them. And we kept going into Palm and saying, hey, look, we have these patents and we have these really cool pens and we've got a whole bunch of people who are buying them from us direct mail order. Why don't you put us in your catalog? Because that's what you had to do back then. You couldn't just get on the buy box, right? You had to beg them to put you in the catalog. And so we kept Doing that. And we did that for about a year and it hadn't happened. But our business started exploding because we started to do more things. We did a pens for FedEx ground because they were using stylus tablets. And we started doing some for lots of doctors and lots of pharmaceutical companies. And so our business was growing and we got an office and it was all freshly painted. And I walk in there and I'm so excited and I open up the catalog and on the back cover is a picture of a stylus pen that looks exactly like ours that we did not design. And I was devastated. I went home and cried. I had all these employees, I had this new office. We built this business up over a couple of years. At this point, we had these patents. It was supposed to help. And we were so frustrated and I was so scared about what was going to happen to my family and to everything that we were going to do. But I bucked it up. And Tom and I got together the next morning, our entire team. And we had 13 investors, all of us together, and they were all friends and family. And we said, well, what are we going to do? We got $5,000 of cash flow in the bank. Are we really going to be able to make this work? And they said, well, you can't fight it. You don't have enough money. And we said, well, what can we do about it? And so we decided to fight with a grassroots campaign and this became how we became featured in Harvard Business Review. We created a viral campaign with no social media. We created this one exactly here. Do we detect a bit of pen envy? They look a lot alike, don't they? And that became the subject of IP and entrepreneurship course that's taught in 26 countries around the world. And it helped us win. Well, we didn't really win a lawsuit. We settled a lawsuit, right, with ideo, the largest design firm in the world, and Palm. And we did get lucky. I will totally admit that we got lucky because Palm wanted to go public and they did not want to be fighting with their developers third party, right? So that's how we got out of that. But it taught us some extreme lessons about how to design, how to test our products, how to make sure that our intellectual property is safe, and how we use intellectual property today. And that's some of what I'm going to talk about as we move forward here. So as was mentioned, we've done 250 products that's due 2 billion. And they are a combination Amazon and mass market. And if you divide that up, that's $8 million a year because this is our statistics over the last eight years. So when you get a sku, you want it to work really, really well. And of course, that's my, that's my godchild, Fiona. This is my favorite part about it though is when people take you pictures of your product, isn't that cool when they show you that they're using it? That's my favorite part about designing and selling products. So let's talk about that profit formula. Are we ready? You guys ready? You with me? Okay, here we go. Here it is. It's simple. It is out design, outsource, and out profit. And I know you all are going to. Yeah, that's oversimplified. But I am going to dive that in for you. So I'm going to give you the steps all along the way. So it doesn't matter whether you are going for funding or you are self funding. This is the reality of today's economy is that that seed in self funding covers the product market proof. You have to prove your product before you can get to scalable growth, before you can get to the things that Michael Gerber was talking about yesterday. Right? So we have to get through this phase because you aren't going to find money. The bank's not going to believe in you. There's a whole many things that are not going to allow you to scale that business. If we don't get this part right. And we aren't really good at it because we don't want to have a 2% profit margin and we don't want to have 7 out of 10 failures. We want to have odds that defy that so that we force the banks and the investors to go back and look at that and say, yeah, you're right, we need to change our metrics here. So that's what we're looking for. Because when you show them the proof, the money flows. It does. And you may not need them. This is what we found over time. We don't always need them because the money is flowing from the sales of the product because the sales of the product is exceeding your expectations. So let's talk about the out design. The number one thing that we try to do with everything that we do is to get ourselves into me only territory. Right? You understand what that is? Me too. That's arbitrage, Right? Me only. That's like you're the only guy in town. You're the only girl in town, right? So the other thing that we really do is research our fit offline okay with real people, not data. And we figure out what women want, we'll talk about why that is. If you don't know, I'm surprised you're still here. Design out cost, that's the number one thing we got to do in the design process. And the guy who had the hack, I loved it. The hack about changing the size on the products. Oh my gosh. Yep, that was you awesome hack. And that is something that serious designers, real designers, designers who don't just draw pretty pictures, they do design for manufacturing, design for cost effectiveness throughout the whole process to make it smoother, make it more cost effective and make it more competitive. So let's talk about good design though. Because good design is right fit. It's really intentional, it's purposeful, it has some reason you're doing it. It is not because you want it to be pretty. It's cost effective. If it's not cost effective, then why are you designing it? That's just feature ad. Like anyone can make something more complex than add features to it. But making something simple. Think Apple. Making something simple is really hard. And design at the end of the day needs to be very valuable. If it's not, it just doesn't fit. So design is not what we normally think about. It's not creative. I say that and I went to art school. It's not optional. It's not optional if you are building a brand with value. It's totally optional if you don't have that style of business. If you have no plans to sell your brand or create a bigger brand value. And it is not nice to have. I hear that all the time. It is not nice to have. If you want to have a big brand, this is what you need. Design is essential to sales success. That's why you need it. It makes your sales bigger. So why is that? Well, today we are in a gigantic consumer market. You know how busy this is, right? You guys have seen this. You are compet with that every single day. But it is the consumers who matter, right? They have so many choices, it's amazing how many choices they have. So if you don't stand out, right, if you're me too or even just me special, which is like, you know, you change the color and maybe you added a little feature. If you're just that and you're not in me only territory, you don't have the longevity you're going to need. You don't have the brand value you're going to need. You don't have proof that you are Valuable. So let's talk about that offline research so we can really get a better product market fit and decide what those design features should be, what's so critically important in the design process? So, of course, you want. You guys know this better than anyone. When I give this talk, I usually give it to inventors and product people, and they don't have. They don't have the background you have. You've already got one step ahead. You know you have a reachable market. Right, because you can reach them through Amazon. You can reach them through direct response. You guys are marketers. You know that. That's the hardest part, though. And you know that you need quantifiable data. You guys have a lot of data to use with. But is your data relevant to telling you that people want to buy what you have beyond already selling it or before already selling it? And that's one of the key areas we want to look at here. We also want to show competition. I say this all the time, and it shocks people, but you guys should know that I always get this kind of grown in the audience. But if there's no competition, you shouldn't do it. You should really test it and make sure, because it is rare, that you really are that big an original or really ahead of the curve that far. And if you are, you're paving the way for everybody else, and you're highly likely to not make enough money. So make sure there's some competition out there. Obviously, you don't want it flooded with competition, and then you want to have the me too. Minimum. We always study this. We do have, like, these gigantic matrixes for a couple of designers. We have a lot of data that we use, but we make these matrixes of showing what it must have to be comparable to the existing products on the marketplace. Right. These are must haves. Me toos. But we want to have that. Me only maximum. The difference is, is that maximum has to be of value to the consumer you want to attract, not because you think it's of value, but because they think it's a value. So that's where we're going. So who do we ask? Well, typically we ask our friends and family. Right, Right. Yeah. Not a good idea. Why? Because our mom loves us and everything we do is so great. Oh, yes, Tracy, you can do it. It's fabulous. Of course, my dad's the opposite. My dad's, like, so afraid I'm gonna just, like, flop that. It's just gonna be so hard. It's the hard way to do things. To be an entrepreneur. And so really, you know, begging me to go get a real job. So they say no, right? So we do have yes women and no men, right? That's how it works. But let's instead practice good market research, right? So here are some ways that we do this right? We do survey style feedback. You guys know that I loved the Pickfu app. That was another great hack. I wrote that one down. These ones I use all the time. Field agent or mobile market research. They also let you access Amazon prime, member, Walmart, shoppers, whatever demographic you want, all of those things and you can do, we've statistically studied this, is that if you have less than, even if you have 200 in your survey that you do, it is still statistically accurate enough to give you enough feedback. What you have to do is don't just say, oh, 51% of the people liked it. That's not good enough. You need like 80% or more okay to go or no go. And so it's pretty easy. You can pop up pictures, you can just pop up renderings. We do that all the time. We A B test colors. We do this pretty frequently. And you ask them questions because you want to make sure that they're not buying it under duress, right? They haven't seen anything else. They've been trying to get one. They really need this feature, like that kind of thing. So you want to make sure that they want to buy it. So ask them some good questions and make sure you use someone who's qualified to write those questions. It's not, not very costly. You can find them on Fiverr. I know a few if you need them. But somebody else write the questions because when you write them, they're leading and they usually give you a false answer. So we want to make sure we're not doing that. If you want to do a focus group, I'm not a huge fan of them. I mean, I've worked in a lot of companies where we do them. I'm not a big fan of them unless you do them really early in the design and development process and use it to provide information for how to develop. But if you do it, do not do it yourself. Okay? So focus groups, you know, go to nonprofits, go to meetups, go to mops groups, you know, mothers of preschoolers. If you've got juvenile products uk, if you got baby products, go to a Lamaze class, right? Bring them snacks, healthy snacks, please, no coffee, and do things like that. And they are very happy to let you know what they Think absolutely happy to do that. But do not do the moderation. Do not ask the questions yourself. Bring a professional in. It doesn't cost very much, it's worth the money and it will get you better answers. So we also match that qualitative research, right? What do people think with a competitive product research because we have to know what the market trends are happening. Now here's the problem. When we look at the numbers on Amazon and we're just looking at the sales numbers and we're just looking at all of those things, or we're looking at keywords, merchant words, any of those types of things, it it doesn't give us an accurate directionality except in a short term. And because of seasonality of shopping, it's not always really accurate. So we have to be really careful that we are watching our product category. And this is why I probably will cover this again later. But I want you to have one category that you really stick with. If you're in juvenile, great. Juvenile products, right. If you're in jewelry and accessories. Jewelry and accessories, right. Great. Keep in a category because it's easier for you to study the trends over time as you sell more. And what we really want to do is see are things going up and down. So this is pretty old, but if you look at that, you see that structural mesh. Remember that chair I showed in that picture about our sales? That chair sells at Costco, $20 million a year. It's been there for six years, which doesn't happen at Costco very much. That's our platinum record. This was the statistics, right? This was the trend data. It says zero percent, it's not going up. Why would we develop a structural mesh chair? Well, we screen that against a lot of other information. Like manager chairs were going down. So there was a price point we were trying to hit and task chairs were going up. So we added a lot of features that has flip up arms and a bunch of other cool things that it does. And so we turned it into a structural mess task chair. And so that it has all those great features. But if we hadn't been studying the overall trends in the market and we what people want, then we wouldn't really know it. But the number one thing that we did that made that chair so successful is we figured out what women want.

Women control 86% of retail purchases bought influenced by women. And I say this all the time and someone will challenge me and go, not men's underwear. No, you're wrong because your mom bought your underwear. And after that, if you bought it yourself. You wanted a woman to see you in that underwear, so she was influencing your decision. So, yeah, happening. So it's statistically across every product category. And when we look at that, we really have to know what they think. And are they going to tell us men, Are they going to tell you? I don't think so. I don't tell my husband. We've been married 26 years. So you have to find ways to get at that. You have to find ways to get them to answer you. You have to find ways to figure that out. So some of the ways we do that, we go head to head. This is a mistake, by the way. I want to point that out. This is a company that I actually advised and they were making this amazing aquaponic lettuce. An aquaponic lettuce, like, uses less water and is sustainably farmed. And it's a cool company out of Utah. I love it. And they wanted to do a test in the locals farmer's market and in the Trader Joe's. And they got permission to do it and they were going to run it right next to the locally organic lettuce. And they came to me and they were like, oh, yeah, we're going to do this with a sign that says, growing with 50% less water. We're going to sell it for a dollar less so that we're sure that people will buy it. And I looked at them, I go, will people buy that? I go, I don't know. If I saw that it was a dollar less, I'm going to start thinking to myself, it's not as good. Maybe it tastes bad because it doesn't have enough water in it, right? So we really must go head to head, actually head to head against our competition, same price, same things, and test our maximum value feature only, right? The thing that we want to get across. And we test that at first at the same price point, right? We don't test it at a premium price point. Later we'll test, can we command a premium, right? But first we want to make sure we can compete. So we do this a lot of ways because we do not want to spend a lot of money on inventory. We do not want to have 10,000 striped shirts. So we do a lot of low cost rapid sampling. This is a camo design we did for a company and this camo we produced, I don't know, I think we only made five yards. So you can do a lot with that and a lot with testing. This is a rapid company that does that. And will print on any material, pretty much. We also do 3D printing. This is a really good example of what we do with 3D printing is we will make a run of a thousand pieces if we need to. Usually we make hybrid. Like there's electronics in this. Those electronics exist. We didn't reinvent those. We were testing out the design. But if we had to go and tool for this part product, Tom, what would the tooling be? 4 or 5,000? 6, 8. Okay, 6, 8. And they had four design ideas. Which one's gonna sell? I don't have a crystal ball. I'm a good designer. I've been doing this a long time. I can make a good guess. But I don't know every single market and I don't know what's going on today and I don't know what millennials think. I have one and I just don't know. I don't know what's going through our head every day. So I gotta make sure that I'm right if I'm gonna spend $8,000 and then have to buy a large run of inventory. Because you have your own tool. Right. So we got to make sure we're right here. And so this is some of the ways that we do that because we want to actually sell. So here I've got a couple of these mixed in. So you want a big insider tip for big brand value. Yes. Okay. How about that? Okay, you know what this is coolest cooler, One of the biggest kickstarters. 13 million, something like that. Don't kick start. It's a big failure point. Don't kick start to start your brand. Okay, somebody likes that. So here's a question. Which one of these two do you think defunded? On the left side on my right. That's a eyelash curler. It is 3D printed and 3D scanned to perfectly fit your eyelashes. Perfectly fit the shape of your eye. Because every person's eye shape is different. And so it will fit perfect and it won't pinch the corner of your eyelid. I mean, it's pretty cool, right? And has tech. The one on the right is a razor. It has a. Some kind of. I don't know what a linen micarta handle is. Some kind of wood thing. It has a magnet on the end and it has a cool blade. It is a high end luxury razor, but it's still a razor. Which one do you think funded the razor? Yeah, the razor funded. In fact, it overfunded and they never delivered. They never delivered something that I Mean that's not original. That's me special at best. And they couldn't deliver that and they got more money than they should have. And the other one they didn't fund at all. You want to know why Kickstarter is 70% men, young men with no money. Look at the stats. It's true. Young men with no money. And if you've got young men with no money advising you, whether or not it is no wonder that not a single Kickstarter has had mass market success for any of the ones that actually made it through to the mass market. And so many of the ones that succeed fail miserably like the coolest cooler to not to deliver. And they will never make it on a shelf because no retailer will touch someone who can't deliver and can't manage their money and their process. So it is the kiss of death. Now there is an exception to it and I will get this comment after. So I will just say there is an exception to that. And that is if you already know it will work and you already have a pre market and you know you're going to fund, then go ahead and do it. But you have to be willing to fund everything in the process and you have to not switch and not get crazy when you over fund because that's what happens. Feature creep and craziness. So let's move on to outsource. Okay. A lot of you know what sourcing is, so I'm not going to go into that. Normally I do here we do a little sourcing a little bit different here. So this is what I've highlighted for you today. We go direct and we make it in person, right? We make it personal. We reduce our risk all along the way for everything that we do when we source and we design out cost in the entire process, we're always on top of every stage and what we can do in the manufacturing process. And the other thing that we design out which is so important is complexity. Because it is your complexity of having 12,000 SKUs or however many you have that is killing your ability to run your business and your ability to be profitable. So it was mentioned before that I worked for Herman Miller. I worked on the Aeron chair, you know, that really old chair that is the famous icon for tech companies, right. And the tech dying off. But one of the things that I learned so early on in my career was that there was always room for you to be able to cut. And my job, I was 24 years old, was to walk in there and tell that entire Company that I had to take. What was their material line? Their material line that had 600 SKUs that was designed by a very famous designer and architect in the 60s. And I had to take that and I had to cut it down to 300. So I had to cut it in half. And do you think I was scared? I was pretty scared. I was pretty scared it was going to, like, tank miserably. Everybody was going to be mad at me. But what I learned really is that nobody cared. They were so happy with the cut. Everything got more profitable, Everything got less complex. Everybody made more money. And when you smartly design. So I cut actually 400 and then redesigned 100. When we brought in 100 new, we made the whole market happy too. So there are ways to have lower complexity and less SKUs and make it better. So we really want to think about that overall. And that starts with sourcing smart and taking out the complexity from the beginning. So we build this in person relationships. We're not an email with any of our factories. We've never been. We have a team on the ground, so that does help us. It's not a giant team. We just have a few people. But we are always there and we're always meeting with factory owners. We are not just in communication and think we're building relationships with the sales team. That's good. You want to do that. But they're not there to tell you how great you are and to say that to their management and say, hey, they're not willing to risk that. They just want that next purchase order from you. So they're not there to advocate for you. You have to be able to advocate for you and say, hey, look, I'm building this great business. It would be really great if we could scale up starting with this minimum order quantity. Because I think if I preserve the cash, it's more likely that I will reorder from you faster and we'll be both be able to be in this together and partner and collaborate on this. So that works. We have found that that works. Have dinner with them, enjoy the time, become personally related to them. Right. Someone offered my daughter an engagement at one dinner. The factory owner thought that would be so great. I did not take her up on that. She's married to someone else. But yeah, so that's how it can happen. You build these good relationships and they do not. They do not take your ip. They respect you and they are much more willing to negotiate and work with you and collaborate with you to take out those costs and complexities. I have a dialogue. They're going to come back to me and say, hey, if we did it in this order and you took this particular part out, we could save a ton of time. And if we save all this time, then we're going to be able to produce more, faster and you're going to be able to get a lower price. So we do a lot of these things because when you have no relationship, you have lots of risk. Due diligence is a big one, right? Did you check them out? Did you go see them? We found factories that don't have the finish line that you expect. And you want to know why your products are always delayed? It's because they don't have copper finishing and you thought that they did and you requested it, and instead they're sending it to another outside source. This is where understanding and being on the ground and seeing what they actually have, as to what they say they can do is really important. We have bill of materials. You guys know what bill of materials bombs are, right? Please, I hope you're getting them. So you should be able to get this. You should be able to understand the difference between the material cost and the labor costs and the processing costs and the shipping costs and all of those things. You should be able to understand that at great detail. And if you don't have a good relationship with your factory or your sourcing, you are not going to get that volume mismatch. You know, have you ever had it happen to you where you go, yeah, here's my great price on 5,000 pieces. And you go, hey, you know, can I have 2,500 to begin with? And then I'll buy another 250045 days later. Would that be okay with you? And they go, oh, sure, but it's going to cost you. And they raise the price. And then when you say, well, you know what, that's okay, I'll buy the 5,000. The cost went up on that. That ever happened to you? Happens all the time when you have a volume mismatch. When you're not meeting something that they are like need to do, they need to meet a certain volume. And when you request otherwise, they freak out about QC and QA testing. I'm sure you guys are familiar with qc, but anybody know what QA is? Quality assurance. Right. Quality assurance is different than quality control. Quality control is making sure that they meet your metrics that you've said. It's, you know, the wood stain can be this dark and maybe within this variables, the fit is this. You must Quality control and test one out of every five pieces or 500 pieces or whatever that is. But quality assurance is making sure that we can maintain that quality over time, that we can cost reduce. There's a lot that goes into that that is important to make sure that you have or are getting. Especially the longer you run a product. And the more important it is, the more me only it is, the more important it is that you put that in place. So how about one more insider tip? You ready for it? This is a beanbag company. Have any of you ever heard of the sort of beanbag recall? Because children died from being zipped up inside of the beanbag and sucking in those plastic pellets. It's horrible. This happened. Beanbag company, they were selling beanbags to Walmart and Target and all of those great places. And this recall happens from the cpsc, the Consumer Product Safety Commission. And when this happened, they were going to lose instantly $20 million on their bottom line. And they were in the midst of trying to go for a buyout. So they were in big, big trouble. And we came in and we said, okay, well, what can we do about this? Let's see if we can save your business for you. We invented a zipper that can't be opened, able to go back into the buyer, and they were able to save the business. And they only lost, I think, six months of business. Because once a buying decision has changed and they don't buy, you can't get back in at mass market for about six months. So they only lost about six months. So they only Lost 10 million, but they were able to save their sale from that. So that took us, what, I don't know, two weeks. Yeah, not very long. Maybe we charge them $5,000 to 10, I don't know. But it wasn't very long. That saved them $20 million. They saved them. Their business. Compliance is not optional. You have to think ahead for that. You absolutely have to think ahead for these kinds of things. These are all the things you probably don't know that you don't know. Scary, huh? These are a lot of the things you don't know. And this is just my slide for manufacturing. I have a whole different one. If you want to do retail sales, there's another one just like that. We have a lot of rising costs per sku. The inventory is the biggest drain on our bottom lines and the valuations of our business. Right. And so when we look at that, I mean, look at all these costs that are in here. I mean, I don't think I can totally read all of that. But turnover ratio and obsolescence and depreciation and we've got labor delivery and import duties and we've got shrinkage and stock out costs. I mean these are a ton of things that we have in this that are really draining this. So this is one of the reasons we heavily invested in 3D printing, by the way. Because wouldn't it be awesome if we were on demand printing? We didn't have to have any inventory, we just had to have a design. That sounds pretty cool, huh? We're working on that. So if we're really going to out profit, we're really going to change that inventory model. We have to be really smart about everything that we designed along the process and that means that complexity, right? And that's the way we can get to this out profit. We can get to this competitive proof space in which we are so efficient that our competition can't catch up. That's that. So wonderful hack that about changing the size, right? It makes it so that your competition camp scratches their head and go, what the heck? How are they able to sell it for less? I guarantee you they're not measuring the box. So it's a really smart way to go through this. Also we start thinking about this in terms of patents and other things. So we're going to talk about that in a second. Designed to last built for profit and sold for higher valuation. Because that's what we're going for, right? You guys are under constant pressure and watching the numbers on Amazon stresses me out. Like we don't have to watch that in mass market retail as often, right? We get a report once a month and we go, oh, that's pretty good. We did all right. There's pretty much a guarantee of stocking orders when we get a new product in and things turn at a relative pace. Yes, our fourth quarter is fantastic, just like you guys. But watching it on a daily basis makes you feel that constant pressure that you have all the time, that competitive pressure every single day. So we want to do everything we can to reduce that and want to get out of that competitive proof. So here's the big insider tip for patents. Let's use patents for offense, not defense. Because you remember my story, defense wasn't going to work. There was no way we were going to sue Ideo and Palm and make that work. We have to use patents and trademarks and copyrights for offense. And we use them all that way. We use them to fend off. We use them to say, hey look, we've got some great value. And we do something we call bulletproofing our ip. So we bulletproof our patent and our IP and things like that by intentionally inventing in the holes. Okay? We're plugging the holes. When we invent, we're finding out where our competitors are weak and we're inventing right into them. As long as they're relevant, Remember, we gotta go back to that relevance, right? They still need to be valuable and relevant. We also provisional patent first. This is my biggest advice to you people over patent. They spend too much money on that. And you want to save it. You need it for your marketing, you need it to create traffic and leads. That is the number one. I say that as a designer who should care more about the product and I don't. Because if you don't drive traffic, it doesn't do any good. Save your money for that. We want to hit those competitive gaps that I was talking about and we want to create a patent fortress. So we've done this. We like take somebody's patent, which is right in the middle of that, and it's great, and you have a great me only territory. And this is wonderful. But here's what's going to happen with that. Someone's immediately going to find a way to circumvent it. Right? You guys are hackers. They're patent hacks out there. We've done it. We do it for good though. Promise. We don't do any black hat patent hacking. We will only do it for the patent holder. And when we do it, what we do is we circle that patent with a fortress of other patents every which way that it might get hacked, it might get circumvented. And sometimes when we do it, we actually find a better way. This happened with one of our clients, found a better way, a cheaper way to make their core products. But they were about to go into court and enforce their core patent. And so having all of those holes plugged around it made everyone come to the table. But what it also does is it gave them tremendous valuation because now you don't just have one patent, you have a group of patents. You have a market territory. So we do that a lot. Design to outlast. That's that Erin chair I was referring to. If you don't remember what it was, those are the designers, Bill Stubbs and Don Chadwick. And this wasn't just designed how it lasts. I mean, I have one of these chairs that I bought in 1994 and it still works. It's amazing. So when you think about that, they're still making it practically the same way. I talked to them a year ago for an article interview and they had only made some minor changes in the scope of everything. It was that efficient. And when you think about how long they ran that tool, how long they ran that product, how well they know it, how little they have to think, think about that every single day. And it is still the best selling chair in the market, in every market. So remember, product, market fit. We want to get those better odds and we want to show us the money, right? We want to get to that place. But here's what I hear. It's going to cost too much. It's going to take too long. Oh, I've worked with some of you Amazon sellers. You are not patient. You will not wait for good design. You will not wait for a better product. Go ahead, go ahead and bring in that me too product that me special product. But still be patient because what happens when everyone jumps on your on your listing? You're going to be ready with that next thing they won't even have thought of yet. So do both. I can do it myself. Oh my gosh. The do it yourself I would love. And I was asked to teach you design here, but I don't know how. I wish I could. There's just so much to it. I can teach you what makes it good so you can hire well, so you can find someone. But this idea that you can do it yourself. If you do not have the skill set to be able to design for manufacturing, to be able to take out costs, complexities, get yourself some help. Because what happens is the rookie errors, the cost, the time. It's the time loss that I see those rookie errors really, really cost you. So I want to let you ask some questions. But I have this opportunity to do the 10 biggest product launch hazards. You guys want them? I'll do them really fast, I promise. Okay. Mind the gap. Too many niches. When you spread yourself too thin and too far out into too many categories, you have to get product competency in too many places. Don't do it until you're really competent in one. Don't spread yourself too thin. Too much inventory. Please don't buy 10,000 pieces of anything unless you are absolutely sure it's working. Over patenting. Do not spend too much money on your patent up front. Do not file international pcts until you know know you're going to sell in another country and you know which country should go to sell. Do not waste your dollars until you Are sure it works? Patent, please. Patent. And I am not knocking any IP attorney here. Go get their advice, get their help, but do not overspend on doing that too early. You guys know who this is? Yeah. Too many secrets. That's how old I am. That I remember. This is one of my favorite movies. Too many secrets. If you keep it so secretive, you're not getting enough help, you're not getting enough vice, you're not getting other people who are category experts to give you information. So I know that. But when you're in me only territory, do you really care if everybody knows it? No. You want to shout it. You want to build brand values. So you want to be out there because you are not. Me too, right? You are not a cookie cutter design. You are not a cookie cutter product. Here's what I want. Stop shopping poor source. Go straight to the source. Because we never shop on Alibaba. We never shop. We've never shopped at one of those marketplaces. We go there, we do get ideas and we meet people, but we do not buy there. We go directly to the source. Overstock. Oh yeah. You had too much inventory, right? You had too much inventory. You can't move it. You can't get a price down enough. The other thing is, please pay attention to your expiration dates. Get stuff out of there and get new product in cost basis pricing. Oh, I hate this one. You guys should all be better at market basis pricing. You all should know that. But I get a lot of people who come from this is my invention and it costs this to make. So I need to double that. Oh, no, don't do that. Time wasters. Oh my gosh. There's so much things that suck us in and waste our time. I have a whole bunch of things I call the product launch hazards. Like time wasters and like people you shouldn't hire and things like that. And one of them is you should hire into your procrastination point. The thing that sucks you in the most. For me, it's financial data. Like I could spend all day doing something spreadsheets. As a designer, I know that sounds crazy, but I could. That's not okay. That is not the best use of my time. So think about that. Those things that are wasting your time. And then I really want to make you aware of what you're unaware about. And this is the thing. Sourcing in Asia is one set of risks. Sourcing around the world and as one set of risks. But there is just as big a risk right here in the US There is slave labor going on in every state. California is the worst. There are genes being made by those that are being made to do it against their will. This is not a joke. It is on the rise. It is getting worse and worse. And it is going to happen even more as we have material tariffs and tariffs coming into the. It's going to happen even more. So this is something you must walk into those factories. You must know, you must go to your sources. Please pay attention to this because this is a very, very big risk area. And some of you think you're making these wonderful, healthy, beautiful products. Products. And isn't that great that you're making these amazing products that are going to help the world and be more sustainable. And I applaud you for that. But if you were to find out that that was happening, wouldn't it devastate you? So please make sure you're aware. Check the transparency. Don't just trust, verify. So recap quickly, out design, outsource, out profit. This is our asset building formula so that we can be designed to sell for more. And Now I have 10 minutes for questions. Hey.

Who's got some questions? Yes. I'm sorry, I can't see, it's so dark. No problem. I just have a couple questions real short. So you talk about the me only being the preferred method, but you also talk about make sure you have competition. How do you remedy those two beliefs? Yes. So me only just means that you have a gap, right? There's an opportunity gap in that competition. So you want to have competitors, but you want to find that sweet spot of opportunity that is relevant to the consumer, that the consumer isn't getting, that she really cares about, that she completely wants. That's what you're looking for. That's me only territory. It's not blue ocean. I want to be really clear about that. Blue ocean is scary. You're out there all by yourself. There's sharks. There's like all kinds of things. I live in California. You won't believe what's in the water. So it's pretty scary out there. So you want to just be in that gap, that little pond. Okay. Okay. Does that make sense? Yeah. Okay. You have another question? Yeah. You talk about going straight to the source. So you don't use Alibaba. You may do investigation there, but how can you be sure you're going straight to the source if you're limited on budget and can't? Yeah, you know, I mean, it's hard when you're starting out. This is like step Two, obviously, yeah, you will buy on Alibaba or you will buy from a sourcing company and you will do all, all of that. But as your products taking off and as you're developing and designing your own, you want to be in that factory when they're working on it. So you will know and you will just contact and say, hey, I'm coming in. Can you get me an escort? And usually the factories and everything will take care of you on the ground. So you just got to get there. They'll feed you every night. You don't have to worry about that. They'll transport you. Sometimes they even pay your hotel. So you may not have to worry about any of those things. But just getting to China and making sure that, or getting wherever you're sources and then getting there to work on the development on the ground with them, because there are lots of decisions that are made right there. Okay. Okay, thank you. Let's go to this side. Hi. Hello. I just have a question about the market research. I want to know how do you handle it? When you want to make sure that a product is going to sell, but you have your own design with a patent and everything, how do you put it out there? Okay. If you've got a patent filed, you're covered. And I think this is where that too many secrets comes in. You've got to let go enough of that privacy and secrecy to be able to get feedback. Remember, most people are never gonna make it. They're not gonna take action. You are not revealing it to other Amazon sellers when you're testing it. You're revealing it to a consumer who desperately just wants to buy it quickly on Amazon. She does not care about hacking this and figuring out how to make it herself. Okay. So if you're with the right audience, it shouldn't matter. You should just be excited to share it with them because the feedback is going to be so much more valuable than the secrets. But once you're patented, you're fine. Provisional is enough. Okay, thank you. Hi, my name is Morris and I have two questions. Yep. My first question is that you mentioned not to get into too many niche markets. Don't spread yourself thin. The challenge I'm having is that I cannot find a niche that I can find enough unique products or unique selling points to sell it. So I am spread through many markets. And, you know, I'm. I'm doing okay. I'm happy with it. But so you know what, this is something that you need to talk to an expert in. Right? This is one of the things we would need to strategize for you. Because I haven't found a niche that doesn't have an exciting market explosion yet. I still haven't come up with one that I can't figure out. Where needs are being unserved. I mean there's always people who are not getting what they want. So you may be seeing that niche and saying while there's not a lot of opportunity, that's because there's huge gigantic gap and miss that people don't understand and don't know in that marketplace. So that's what you want to look for first. But secondly, I think just it's okay to be in relevant product areas. So like furniture, furniture, home accessories, they're the same buyer, that's okay. But I would get competent in one, make sure you're comfortable there and then move to the other. And knowing that you would have this grouping, we had a client who was and coffee and coffee and tea drinkers are totally different. So you don't have the same market that you think you do. You're not going to market tea to the same people. So keep that in mind as it's really more about the consumer and not the product category as it appears on Amazon. Does that make sense? Yeah. Second question. I import from China and I do all that and I strictly sell on Amazon, ebay and my own website. How can I transition into whole selling to maybe bigger chain stores or giants or what have you? Prove it. If you're selling well on Amazon, you have an opportunity now. It has to be a unique product. It can't just be the same thing that they can already get from a distributor. You also need a collection. Okay, so this is a big brand key collection. You want to have a grouping of products in that category. So let's say you want to sell to a sporting goods store. In the sporting goods store you want to make sure that you're to going going to have a grouping, a collection of products. Because if they're going to take the time to make you a new vendor, then they need to make sure that you've got enough that's of value to them. So make sure you have a good collection that is based in a very core and a couple of strong me only things that they cannot get from their current suppliers. But prove it on Amazon first because the first thing that they do is Google you and check Amazon. So they're checking you out that way too. Okay, thank you. Hi. I am a toy maker and toy inventor and the first toy that I invented over 20 years ago is our most popular toy. But I never got a patent or a trademark on the name. So it's kind of like Kleenex. Our toy is now the name of our toy is used by everyone. Luckily, we're still the biggest and most popular. Our brand is known. Is there anything to do about that? Now, I'm not a lawyer and I'm not an expert in any of those things, but I would say now is the time for you to take that knowledge because you have been the longest selling toy maker, but with a great design and a great process, take that information and make something new. That's incredible. We have been. Thank you. But I was just wondering if you do about. That's where I would go with it. Because you're always going to be ahead of everyone else because you have better information. Thank you. Yep. Hi. In addition to selling online, we sell in a lot of retail stores as well. Curious if you could give any insights as to pricing and how you price your products. Typically, we try to do some basic market research, figure out a price point that will sell and then we know, you know, retailers want 50 to 60% margins and we just kind of work back from there. Yeah, you know, this is a. It's tough to encapsulate that because it's different in every product category. And there's lots of variables based on the size of the product and all of these things and based on the stores. And when you're selling into club, all I can tell you is clubs are magic. So Costco is magic because they only put 15% margin on top of it. So you have a lot more room to work. But they also have higher quality standards. So you have a balance of those things. But here's what we do. We look at a product and we say if we were to do this product in very large volume, right. Container loads every single month, and we were to get efficient. So maybe we had to make our. You know, right now we're using tooling and we're doing a little bit more handwork than we would be doing. But at its most efficient, can it be 20% of what the market retail will bear? And if we're there or close enough to there, then we say this is worth doing. So you're costing of goods and all of that landing and everything needs to be around 20 to 25% at its most efficient point. At its most efficient point, not at what it is today because it takes time to get there. And that's okay. But you'll be Accepting less margin for a while. But on your growth path, if I had more money investor, I would be able to make these efficiency improvements and you'd be able to see this better profit margin return. So those are things you want to think about. But it's about 20 to 25%. So if we can't make it there, it's really not a mass market product. There's so many layers of costs, it's crazy. That's why that posted slide is about twice as long for that industry. Awesome. Thank you. Okay, we got one minute left. I hope we can get through. I will be fast. So I'm actually a patent attorney, so I thank you for all the marketing. This is great. You're welcome. I applaud you guys. IP attorneys, we use them all the time, so it's really important. So my question for you is when you have a client coming. Come in. How do you advise them on when to file a provisional application? Also, it seems impractical to do it on everything. How do you decide what to file on and what not to? Okay, so this may not be very legal and I'm going to be really cautious about it. So you would be the advisor to that. We are a little more liberally generous about filing provisionals. So we file after the initial design process is done, but before we make final samples. And sometimes we, we break up our sample making into facilities or we make it ourselves because we do want to keep that privacy for a little while at the moment that we're going to go into the factory and have them make one, that's the moment we file the provisional. So that's our process there. We are very liberal in filing the provisionals. In other words, we may file more than we intend to, but as soon as we see this one's not going to fly. It's not getting past the market, it's not what we thought it was. We just abandon it and we move on to the next thing. And so it is sort of cost factor you have to think about. But for us it's worth having it. So it's important to start there. Hi, one last. How would you go about protecting the IP for a product that is formulation based? Ah, talk to him. Yeah, but that's how you did it. So it's totally not. I've never done it with a formulation before. I mean we've done a process patent, like a method patent. But formulations we don't work in. I didn't say this. We don't work in food or anything that requires FDA approved because I'm so impatient. I can't take that long. So I don't have an answer for you there. It was worth a shot. Thanks. So I think we're out of time. One more. So people who are interested in design and all that stuff, do you have any resources, books or classes or anything? Even if it's just enough for us to know how to hire for that? Yeah, that is a really good question. Tell you what, ping me, okay? And I will post up on it's tracyleehazard.com L E I G H and Hazard has two Zs. Tracyleehazard.com I will post up the slides there and I will give you a list of books. Is that a deal? Okay. Well, thank you all so much. I really appreciate it. Thank you for joining us on this episode of Product Launch Hazards. To get the most out of your membership, visit productlaunchhazards.com to join the expert Office hours live and ask us your burning questions. Check out the resource library for document templates and guides and get exclusive articles and shares each day. Day. Don't forget, you can always book a private consult with any expert so you can out design, outsource and out profit your way to product launch success.