Big companies invest resources and time into testing new product ideas but still get it wrong most of the time. So what about the individual who has a new idea or concept for a product, service or new venture? You have limited resources and time and lack the specialist skills.
Yet many people start something of their own and despite the odds make a go of it. I’m not talking about heavily engineered products but home-made, hand-crafted products such as niche foods, hand and body lotions and custom-made clothing. What’s the secret?
Yet even in the so-called craft industries, you can experience failure unless you follow some sort of process. At the very least you need idea generation, idea screening, idea development and testing, business analysis, market testing, commercialisation and new product pricing. I’ve skipped the technical implementation step but if you have a manufactured product, you will need technical communication such as data sheets, logistics planning and operations planning.
So we do you begin?
It all starts with an idea. This can come from basic research using a SWOT analysis, observation, listening, questions and personal brainstorming. Next, you need to identify customers, size and growth of the target market niche, technical feasibility to make the product and decide whether the product will be profitable when manufactured (even in your kitchen or garage) and delivered to the customer.
Everything hangs on market demand. Will customers buy? You’ve got to be clear about your target market, the benefits they want and how you can reach them. Before you even get into beta testing and market testing by producing a physical prototype or mockup, you need to estimate sales volume based on market size and what you estimate you can capture.
Even for the small-scale business person selling prototypes at Saturday morning markets and small trade shows, you need to estimate sales volume and selling price based on competition and customer feedback.
Let’s stop for a moment. How do you estimate the quantities of trial products you should put on a Saturday morning market? What do you have to work out?
An example. A small home-crafter is selling bacon jam at a morning market among several other products. How many does he need to make and what price does he seller that. OK, his ingredient costs are about R10 and packaging about R5. That’s a cost price of R15. Now, how much should we sell it for? His cost is R15 and he is aiming for a gross profit margin of 37.50%. Therefore it is selling price is R40.
How many should he trial?
The Saturday morning market attracts about 500 customers each morning and if you times that by a conservative trial rate of 0.05 (5%), it means he should make 25 units of bacon jam for the Saturday morning. For the months his batch of stock would work out as follows:
500 x 4 x 0.05 = 100.
That saves him wasting his money on products that won’t sell. At least he has a good estimate. That’s the secret: small batches to test demand.
There’s a lot more to it than this but that’s how to start. I strongly advise you to be very careful whom you take your advice from, especially when it concerns your life, business and livelihood. If you want to know how to develop products and services, “Breakthrough Ideas” shows you how. Here’s the link.