Today I want to talk to you about mistakes that I see product-based business owners make over and over again.
I've compiled a list of some of the top mistakes that I see. I wanted to share them with you so hopefully, you won't make any of these mistakes, and if you are making them, you can fix them. You can read below or watch the video.
First mistake - Not pricing products so that you have enough gross margin in your product
So what do I mean by gross margin?
It’s all about pricing your products correctly. I like to start with my product and figure out what is the perceived retail value of this product. I take retail price and divide that by two, and that would be your wholesale cost/price. Then you divide wholesale by three, and the cost of goods for your product shouldn’t be more than that.
Sample- Retail Cost is $10, divide by 2 = $5 which is your wholesale cost, now divide the wholesale cost by 3 = 1.66 your cost of good shouldn't be any higher than 1.66 or you don't have high enough margins.
Now, that formula can work a little bit different if you're not wholesaling. If you are just retailing your product you manufacture or make you can take your cost and times it by 2.5 to 3X over cost and that's an okay margin to price at retail. Of course if you have a perceived value that is higher go ahead and price your products at the higher rate, it makes for a better margin.
However, if you are wholesaling your product, you have got to make sure that your cost of goods for your product is at least a 3x for the wholesale price and then 2x wholesale price for the retail price. Make sure that the perceived value is that price or greater to sustain those margins.
Why a 3X over cost?
⅓ COGS ⅓ Overhead ⅓ Profit
If you lower to a 2.5 over cost it will work, but you are starting to erode your margins and it can become a problem if you have higher overhead expenses.
Second mistake - Missing the proper selling cycles and seasons
Buyers typically go to the trade shows in January/February and July/August. It makes sense to release new products around the time that those trade shows are. I always had new product launches in January and July, and that way when the buyers came to the trade shows, they could see the products.
If you're not going to trade shows, you still should be putting new products out around those times. Holiday products should come out in July or sooner. The bigger the retailer is, the earlier that they start buying.
For example, when I was working with big chain stores such as Kohl's department stores, I was showing them Christmas in January. They were making commitments for holiday orders by the end of February or early March.
If you're calling up buyers in October or November with Christmas items, you're way too late. You need to be thinking about your Christmas and your holiday products early. The small independent stores will probably be thinking about Christmas in June, July and August. However, the bigger the stores are, the earlier they're going to be thinking about it. Don't miss your product launch seasons and don't call buyers too late.
Third mistake - - Not niching down enough
You cannot sell your product to everyone in the world. You've got to be able to niche it down enough that you can target your marketing and your advertising.
For example, my husband has a product that is an odor eliminator. Now, if he just marketed it as an odor eliminator, who in this world doesn't have an odor they need to get rid of at some point?
There are a lot of products out there in this space. It's a really competitive niche, but what he's done is narrow it down into niches where he can solve a specific problem for a specific person.
For example, one of the areas that he's had great success in is selling his odor eliminating product to police officers. They wear bulletproof vests, and they get so stinky because they can't wash their bullet proof vests. Police Offices have a definite need/pain point because they don't want to be smelling all the time and need to get rid of that awful odor.
My husband is target advertising to those police officers that wear bulletproof vests to get rid of that odor. He isn’t advertising to just anybody that needs to solve an odor problem. It is scary sometimes to narrow your niche but it really does work.
Another example my husband markets to is hockey players. Their gloves stink really bad. They can't get rid of the gloves because they are so expensive. They sweat every time they wear the gloves and when they put them back on they stink. Hockey players are always looking for solutions for stinky gloves and equipment. He is marketing to hockey players, specifically for their knee pads, their equipment, bags and their gloves.
Think about your product. How can you niche it down even more?
It is a big mistake if you're going too broad and too wide in your marketing, so niche down.
Fourth mistake - Not being clear on your message
When I say your message, I'm talking about your marketing message. You can have the greatest product in the world, but if you are not marketing it correctly, nobody will know your business exists.
There are three things I want you to really be clear on in your marketing messaging for products
1. What it is.
2. What it does.
3. Why I need it.
If you're clear on those three points, the customers will quickly and easily be able to figure out why they need to purchase your products.
Are you being very clear in your messaging? Are you telling customers what your product does and why they need it? Are you solving their problem with your marketing copy?
Let’s use my husband’s business as an example again. All he has to do in his marketing to target police officers with bulletproof vest is say, "Are you tired of stinking every time you put your vest on to go to work?" They have a specific problem he can market to. How can you market your products to solve a problem in a specific niche?
Fifth mistake - Not doing promotions
I know there's two schools of thought on this, but let me tell you, success leaves clues. Look at someone in your niche that has a bigger business that's successful. Go sign up for their mailing list and see what they're doing.
They're going to be sending out promotional emails on the regular! You have to come up with some promotions you can do. You don't have to give your product away. You don't have to do crazy things, and if you have questions on it, I have done a webinar on promotions that drive up sales here along with tips on how to schedule them and what kind of promotions to do.
It's really important that you do promotions for your business because it gives you a reason to get in front of your customers over and over again. You want to have a reason with a sense of urgency and a call to action that will make them buy your product now.
If your product is available all the time at the same price, they're not going to be as excited to get it and/or they will wait and never purchase it.
Hopefully these tips helped you.