The Key to Product Launch Success is to Plan It

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.

Hey there. This is Tracy Hazzard with product launch hazards and we are on planet. Not plan it like circulating the universe here, but plan it. Tom and I like to say that hope is not a plan. So this is a really critical point to do early. And in planning we're going to talk about quite a few things, planning as to the sort of life cycle of the product, like where are we going to start selling it, where is it going to sell next, where is it going to sell after that? And kind of watching what happens when it's successful, where do we go with it? Also keeping in mind that we have a long term plan of, of where we want to go from A to Z if that's the case. So we might want to go from not selling anything to all the way to mass market retail and a huge brand that gets acquired. So kind of keeping those things in mind, those are part of our planning cycle. And the reason why we do this as our step three and really early on is because again, this is one of those things that informs how we make something. So sometimes we have to make things in phases. Maybe we make it a beta version, you might have heard that term before. So we make a beta version and we plan to add features to it. And so that also plans our cost structure, like how much budget do we need for each things, maybe how much capital we need to raise. So we really want to go on all of those things. So it's going to have a budget impact, a cost impact, a impact on our overall success. So we build up success in one channel and then we move on to another. And in this case, remember we were talking channels. Channels might be mass market retail, might be club stores, might be HSN and QVC, or a channel might be E Commerce, Shopify, Amazon, Jet.com, any one of those places. And so there's advantages and disadvantages to both ways. And one other of the asides I'm going to talk about in a minute is how licensing just straight going that that's your plan is to get it licensed as soon as possible so that you never really have to make much. So that's another goal in the process. And there might be A different plan to make that happen. So that's what we're going to really talk about today. And I think that we really essentially have to start with where do you plan to sell or pitch your product first? So what is the first place you plan to go to and what is the last place you plan to go to? So where is it that you want to no longer be selling the product anymore? You want somebody to buy you out and take it over? And so for some of you, that that's really. You want to go all the way to, through E commerce, get bought out before you go to mass market retail. That's a totally fine plan. You just need to really have that factored in. And some of you really want to build up enough sales volume and enough track so that you can get yourself licensed and sold to a bigger brand. Maybe you want P and G Procter and Gamble to buy you out or something like that. So really thinking about that budget, we have to think about where it is because it has different inventory implications, it has different time cycle implications. And I know that sounds just like really too much to be thinking about before you've even made the product. But it's actually essentially important to make sure that we plan our budget accordingly so that we don't use too much of our capital too soon. Especially if we have a bigger plan here, if we need a larger inventory or we need to last longer on that capital. And that happens very frequently when we go to mass market retail. So getting that right from the very get go is the most important thing. So you want to sit down, really think about the trajectory of your product and your brand and where you want to go with that and also be thinking about the cost of marketing and lead generation. So if you're going into mass market retail, if you're going into Target, it's really Target's job to draw in customers. It's not as much your job. You do have to support that, you have to brand build. You do have to do that in general as, you know, build yourself a better brand. But it's not as critical as if you're trying to do it in your own Shopify shop where you have to draw in customers yourself. Or if you're going in a direct response marketing model of selling your product over an info page on the Internet. And it's definitely, you know, an HSN model is for the most part they're drawing the audience in for you. Your job is to have a great product to pitch and demo, so your cost factor is different. Your budget factor is different in each one of those cases and I'm not gonna make judgment on which one's a better one. I can just tell you from experience, the Amazon first model is the least capital intensive because Amazon draws a model for you. So they already have their customer base, they're very strong in that. And while they want you to draw people in and you do need to have some marketing costs to be able to do that, for the most part, Amazon is doing 90% of the work for you. And so it makes it very easy to gain traction and success. Get your listed, get yourself ranking, making sure you have a good product market fit and building some what is relatively quick revenue because you're typically paid within 30 days. Whereas if you go into mass market retail and you are on the shelf at Target, you might have to last 120 to 180 days before you would get paid back. So from the time you shelled out money and then had it shipped from Asia all the way to the 180 days later, it might be before you actually get a check for the product. So you have an extreme lag time, a very long amount of time that you have to last and be able to fund inventory replenishment. So we really think about that when we plan because it means that we have to have a bigger budget for an inventory buy than just the initial amount, just the minimum order. So we really have to think about our overall budget and what we have working for us in order to make sure that we have the right plan in place and we're starting in a place that is actually feasible with the capital we have on hand. So there are lots of very important costs in the overall scope of things. But for me it's the inventory carrying costs. Like how much inventory am I going to have to buy over the course of time before I'm going to get paid by whatever retail process it is. So how much time before it's in my account and paid to me? So we have a formula for that. It's tooling, cost of goods plus quality control, packaging, all of those things that we talked about yesterday, quality controls added onto that because you will have returns and other things. So there's a little bit other factor here that we consider that has to do with the retail process of it, of how you're selling it. And we do that plus, and this is in parentheses, right? So landing of the first run, right? How much does it cost till I get it to my door and in my warehouse and ready to sell? Or an Amazon's warehouse and ready to sell times 9 months lead time if you're going to mass market retail. And three months lead time, except for the holiday time, that's the only time you might want to have a little bit more, one extra month. But typically three months lead time is what we allow. And that's assuming that you have a 30 to 60 day manufacturing lead time. So sometimes it takes you longer to make a product in your first run, but subsequent runs are only 30 days or something like that. So you could shorten that cycle up. If it's 30 days and you're air shipping, you can always shorten that time up a little bit. But essentially what you'd want to look at is basically three turns of your product. So three orders in a mass market retail, you wanna look at nine orders of that before you ever get money in your pocket. And if you have enough cash flow for all of that, then you've got a fairly good plan and good budget. That's the way we do it. It gives us the most buffer, gives us the most ability to be flexible for things that go wrong. And there are lots of things that go wrong. Runs take longer, shipments get rerouted, ports have strikes. All of these things can happen to you and can affect your cash flow in such a negative way that because you don't have a lot of, because you don't have as much deep pockets as bigger brands, you can get really hurt quickly and you can find yourself out of business fast. And so this way, this is the best way for us to preserve the capital. I'm gonna talk about our different steps that we've been talking about. We've already talked prove it, price it, plan it in the modules. That's what we're here. And I'm talking about the percentages that I assign to it. So If I have $100,000 budget, what do I assign it to? I'm gonna talk about that in a minute, but I want to take an aside right now and talk about licensing your product. So I've already pretty much stated in our first module that licensing product is extremely difficult. It's not an easy thing to do without some amount of market proof or sales proof. And so when we look at that, we really need to make sure that we are probably selling something that gives us some indication of market proof. And so we used an example before of someone who might make an. A product, a product that they're just private labeling. They're just taking a product that exists on the market and they're putting their logo on it and or adding a couple of bundled items with that in and of itself is some success model. And then you make an ad, your prototype, and you might have renderings and this might be something that you go and you say, hey, look, manufacturer or big brand? I've got this product idea. This is already really selling well over here. I know that you make products in this category. Here's what I've got to offer. It's still a hard row because they're like, well, we invented this product category. Who are you coming into this? So we call it not invented here syndrome. So you have a lot of that. So we really have to evaluate the potential for licensing as to how long it's going to take and would we be better making that and selling it as proof and making revenue from it in an Amazon model or a Shopify model and using that along the way as the time it takes for us to convince someone to license our product. Because the more sales we have, the more members we have, the more fans we have. All of those things make it easier, very, very easy to convert into a licensing model and let someone bigger take it over, because it already is successful starting from scratch. You just need to be able to say in a budgetary standpoint and a planning standpoint, expect a year to take a year to license a product that you have already good indicators, good proof on. And if you can't last that long, then maybe licensing is not the right path for you. So really be thinking about that and budget and it's just really a hard road to hoe right now. The licensing model is just not as easy as it used to be because it's way too simple for a brand to go and do what you're doing already and source things and just modify them. And they have much deeper pockets to be able to do that. So it's just. It has to be so exceptional and already have traction for them to want to license it from you. So just be thinking about that and make sure that you have a plan to last a year and. Or it's a side job. There's another option of paying someone to go out there and license it for you. However, we see that not as successful. So even counting that kind of percentage or cost, we see it not as successful nowadays because they don't have the same passion that you do for your product idea and for the new invention that you've created. So moving on to this, we've talked really a lot about the sort of budgetary plan, but we also want to talk about forecasting. And forecasting is really looking at what's going to happen and how much am I going to have to buy. Scaling up. And you're also looking at the seasonal effect or promotional effect. So if you know you're going to do a direct response marketing campaign on month three of your product launch, then you really have an idea that I got to have a little boost in inventory here. Or if you're going to do an Amazon lightning deal, you're going to run out of inventory and you need replenishment right away. So looking at that forecasting and sort of plan for those spikes and then inevitable dips. So you do have inevitable dips that will happen at various times of year. Retail as a whole, consumer retail is very seasonal. Always heavy in the last fourth quarter and in the fourth quarter of the year. Right. Gearing up towards the holidays, it's always like that. There's a big drop off in January, except for certain categories. So we see a big boost in sports related items in January, we see a big boost in gift card usage. So anything that might be sort of that discounted and on sale or something that's very personal that you wish you bought, those things tend to go in January. And then TV stands and televisions go big in January because as you gear up for super bowl, so there's always a seasonal cycle that happens for every product category. And this is one thing that I want you to be really careful of. Those of you who are out there studying the Amazon sales, doing Jungle Scout or any of those other Unicorn Smasher or any one of those other tools out there, when you're looking at those tools, be sure that you're not looking at them at the wrong time. Be sure that you weren't looking at them just post a promotion or just post holiday or just during the holiday. Like if you were looking at them at Black Friday and use those numbers as your benchmark and your forecast and your plan, your numbers are going to be way overstated and you will never achieve those goals. So you really want to look at them at organic times of year. So that's what I like to do is like say if it were selling in the middle of March and it were selling at this rate and that's still viable business for me, then that's perfect. Or the middle of summer for a winter product, right. Something that might be outdoor related for winter sports or something, you want to look at it in the off season and say at its minimum turn level. Is this still viable for me? Is this worth it and or am I happy with just gearing up to fourth quarter sales and doing it with big spikes at those times and just not worrying about my inventory levels and keeping it really low for the rest of the year? It depends on how you want to run your business. It depends on how fast you want to grow and are you building a bigger brand. So really be thinking about those. And then those of you who are doing multiple products, here's another thing to really look at is the overlay of those forecasts in making ones that don't spike all at the same time, but ones that have different seasons involved in them. So these are many, many factors that we look at when we are looking at our plan. The most important one is for us to preserve capitals. So let's talk about that. Our percentage plan with reasonable timing expectations. So I think a reasonable prove it time frame. And this assumes that you might go through multiple iterations of proving. So you might try something. It doesn't work. You try it again. I say you need to have 5 to 10% of your overall budget. 5% if you're funding it yourself, and 10% if you have capital investment already. And the reason for that is because if you have capital investment, you have a bigger plan. So you need a little bit more market proof. So we're looking at it in sort of context as to that. I also think if you spend less than three months in that cycle of proving it, you're likely to not get great information. So you really want to be trying something out, making sure it's working, making sure the market wants it. Spend some time in that area. Spend 90 days to make sure that you're right about your idea that the dogs really will eat the dog food. Then you don't really need to spend any money on pricing it. This isn't something you should hire a consultant for. It shouldn't cost you anything. But if you do want to hire someone to do some financial analysis for you, I would just lump it into your budget for prove it. But we don't allocate any budgetary amount for priceit. It's just sort of like one of those things. We do a study in a week and we make a decision about it and we, we analyze the numbers and we set benchmarks. That's kind of an internal thing. This planning cycle though, I again would allocate another 5%. And the reason we do that is because we want to really think about, we might want to get an outside opinion, we might want to pay for some more Better forecasting services. We might want to pay to make sure that we have premium plans on some of the tools instead of free plans. Prototyping it, obviously you want to reserve quite a lot of it for the prototyping it, which we haven't talked about, but that that's coming up next. And we want to reserve 30% if we're funding it ourselves and 60% if we've got outside funding. Because if we've got outside capital, it's likely that it has much more higher innovative features and things like that that we will need a higher prototyping budget on. And you know, this still isn't a tremendous amount of money in prototyping. I mean, if you think about this, this is research and development. So Overall between the two stages, you're spending 40% on all your research and development. That's like very, very small. If you consider big brands that do really well and have the highest profitability margins, like Apple and other places like that, the next area is protected and protect it is patenting and trademarks and all of those things. And initially if you spend more than 10% on your patent costs and all of your legal fees and all of those, then you are way overspending in these early days. You really need to keep that cost low as possible in the early days until you know you have a product that's worth it. And then after like one year be spending additional money. But you know you have a market, you know you have a product that's selling. If though you have investors or capital, you might want to go up to 20% because they may insist, because they want international distribution, that you file your international patents, which can be costly and then we go to produce it. 50% of your budget or a very large new capital funding. So this is the time to get more capital in. But 50% of your budget needs to be in the production phase. And the reason why you need to do that is because you need to make sure that you've got those inventory carrying costs we talked about, be able to last three months or nine months. And then in addition to all of that, like consider that your launch budget, if that's 100,000, you've broken it all out 5%, 5%, 30%, 10%, 50%. So that adds up to 100%. Now you need one more. You need 10% additional minimum on advertising and promotion every single month. So whatever your sales are, you need to allocate at least 10% of it. That is the smallest I would go, I'd say probably 20% is more likely in today's world that you need to spend more money, but you need to in the early days make sure it's converting, but have an additional expect 10% of your sales to be going constantly back into marketing and brand building and advertising and all of those things to really get your brand known. It's the best way to get your brand acquired at the end of the day. So I hope that really helps you really think about the plan and the structure of everything so that you really can make it into a plan that is viable and gets you to your end goal of an acquirable brand.

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