So you have experienced what makes you suffer, acknowledged it, found joy on working on the solution, you have taken your solution and tried to buy it (yes, of course, BUY) from those you'd expect to be your customers for your idea. Those target customers told you it is a good idea, but does not exist.
So now you have to make a sample of your idea, to discover the costs and make a sample to test the idea and price.
Price is never the issue at the specialty level. The new iPhone 6 averages say $400. They'd sell more at $10, and less at $10,000. But $400 is the optimum price point. You are only designing enough into your product to get enough orders to cover the supplier's minimum order requirement, profitably, in a workable amount of time. Say something like this.
Add a monitor later. Stick with a computer. See from customer feedback what they think of the computer, and find out what people hook up as a monitor. That will tell you much about what to do next.
A fundamental is to design what you are designing, a test of your hypothesis. Age quod agis. Organic, gluten free bread mix is a test of organic gluten free bread mix. You'll get reaction to the product based on what you are testing. If you also make it "kosher" you've lost control of the variables, and no longer (in the measure you added "kosher") are testing the market for organic, gluten free bread mix. Your results don't tell you much, one way or another. Of course, if it is your intention to test orgainic, gluten free and kosher, then very good. But people often add on goodies hoping for new market and in the process ruin their test.
Each iteration makes money or gives clear information of how to do better next time. The result is a upward spiral, excelsior. When you add on too much to test, too many variables, you've left money on the table, the version that would have sold. You dissuade customers who may have bought more simple, and thus added to your knowledge base by their feedback, not to mention added to your customer base.
You foreclose too much customer feedback by overdesigning. Don't overdo the design and leave money on the table and miss out on feedback. Just enough design to create a product that will generate enough orders to cover the suppliers minimum in a workable amount of time, profitably. Along these lines, the one constant in criticism of me by people who have gone on and started businesses is that I should emphasize how little it actually takes to compete on design.
Sigh... I say this in my book, I say it in my classes, I don't know how much more I can emphasize it. I think the problem is our books are full of stories of HUGE SUCCESSES so people are conditioned to believe their product must be huge design effort to be a huge success. Nope. Boeing started tiny. Apple started tiny. Most happy people got to a place and stayed where they want to be in business. No one writes about happy people.
Having said that about design strategy, we get to a tactic - design to price points.
Part A ...
Your specialty product is more roundabout in production and distribution than a commodity item, therefore it costs more to produce. Keep this in mind as we consider the fact that every industry has price points, collective wisdom as to what people are willing to fork over for what.
Say gift and housewares...
4.95 9.95 19.95 24.95 29.95 49.95 295.00 595.00, etc...
Clothes 20 50 100 250 500 1000
Beef Chow Yuk 2.95 4.95 7.95 12.95 29.95
These are simply price points people find acceptable, and thus do not slow down the thinking process about price. A gift item at $17.50, people have to think about that. Better $19.95.
Clothes are much more emotional, so rounder numbers can work, but the point it the price point.
Food can be the wildest. Sure you've ordered that $2.95 beef chow yuk, and spent a week regretting it. The $4.95 is not much better, but if it's take out window, you know where they are saving the money. You'll find it on a good restaurant at $7.95. And at a fashionable restaurant at $29.95, all free range grass fed beef, house-made noodles, duck fat for cooking, and so on.
That $12.95 price point is the pop-up restaurant, the kids who are trying a new recipe, working out of a hole in the wall like the $2.95, card tables and folding chairs, but using the same ingredients as the $29.95. And cleaning up. I hope this makes sense..
So you build your item to price out at a standard price point... Your item may normally be a $7.95, but your mess of beef chow yuk has free range beef, grass fed, hand foraged chanterelles, in-house made noodles, so it is price blind. No one knows what the price should be. But it meets the criteria: testing what you are testing, not leaving money or design on the table, designing to price points.
(As a side note, one reason the restaurant business is so alive and creative is there are no intellectual property rights in that field. Monsanto is trying to sneak in with patents on ingredients, and being strictly NonGMO is a way to fight back.)
You are not gouging the customers, the price is fair. The customers are getting a very good deal, for they get excellent food and are not paying for ambience (and you are not risking the cost on ambience to sell with your unproven dishes.) Don't end up with expensive ambience and no customers to pay for it.
Part B ...
What is the mark-up in your industry, cost to wholesale? What is it wholesale to retail?
Say cost to wholesale is keystone (roughly, depending on the definition, doubling.) and say wholesale to retail is the same..
So if the price point at retail is $100, then your wholesale price is $50, and your costs are $25 landed. Depending on freight duty, etc, you probably have abut $22 to play with in the cost of the item.
So them within the contraints of
1. testing what you are testing
2. not leaving money or design on the table
3. designing to price points
You decide what you can put into the product.
Now, that mess of beef chow yuk may be normally $8 a plate, but since you are using free range, hand foraged chanterelles, in-house made noodles, yours may be at the $24 price point. But it meets the criteria: testing what you are teesting, not leaving money or design on the table, dsigning to price points.
Feel free to forward this by email to three of your friends.
So now you have to make a sample of your idea, to discover the costs and make a sample to test the idea and price.
Price is never the issue at the specialty level. The new iPhone 6 averages say $400. They'd sell more at $10, and less at $10,000. But $400 is the optimum price point. You are only designing enough into your product to get enough orders to cover the supplier's minimum order requirement, profitably, in a workable amount of time. Say something like this.
| http://en.wikipedia.org/wiki/Apple_I |
A fundamental is to design what you are designing, a test of your hypothesis. Age quod agis. Organic, gluten free bread mix is a test of organic gluten free bread mix. You'll get reaction to the product based on what you are testing. If you also make it "kosher" you've lost control of the variables, and no longer (in the measure you added "kosher") are testing the market for organic, gluten free bread mix. Your results don't tell you much, one way or another. Of course, if it is your intention to test orgainic, gluten free and kosher, then very good. But people often add on goodies hoping for new market and in the process ruin their test.
Each iteration makes money or gives clear information of how to do better next time. The result is a upward spiral, excelsior. When you add on too much to test, too many variables, you've left money on the table, the version that would have sold. You dissuade customers who may have bought more simple, and thus added to your knowledge base by their feedback, not to mention added to your customer base.
You foreclose too much customer feedback by overdesigning. Don't overdo the design and leave money on the table and miss out on feedback. Just enough design to create a product that will generate enough orders to cover the suppliers minimum in a workable amount of time, profitably. Along these lines, the one constant in criticism of me by people who have gone on and started businesses is that I should emphasize how little it actually takes to compete on design.
Sigh... I say this in my book, I say it in my classes, I don't know how much more I can emphasize it. I think the problem is our books are full of stories of HUGE SUCCESSES so people are conditioned to believe their product must be huge design effort to be a huge success. Nope. Boeing started tiny. Apple started tiny. Most happy people got to a place and stayed where they want to be in business. No one writes about happy people.
Having said that about design strategy, we get to a tactic - design to price points.
Part A ...
Your specialty product is more roundabout in production and distribution than a commodity item, therefore it costs more to produce. Keep this in mind as we consider the fact that every industry has price points, collective wisdom as to what people are willing to fork over for what.
Say gift and housewares...
4.95 9.95 19.95 24.95 29.95 49.95 295.00 595.00, etc...
Clothes 20 50 100 250 500 1000
Beef Chow Yuk 2.95 4.95 7.95 12.95 29.95
These are simply price points people find acceptable, and thus do not slow down the thinking process about price. A gift item at $17.50, people have to think about that. Better $19.95.
Clothes are much more emotional, so rounder numbers can work, but the point it the price point.
Food can be the wildest. Sure you've ordered that $2.95 beef chow yuk, and spent a week regretting it. The $4.95 is not much better, but if it's take out window, you know where they are saving the money. You'll find it on a good restaurant at $7.95. And at a fashionable restaurant at $29.95, all free range grass fed beef, house-made noodles, duck fat for cooking, and so on.
That $12.95 price point is the pop-up restaurant, the kids who are trying a new recipe, working out of a hole in the wall like the $2.95, card tables and folding chairs, but using the same ingredients as the $29.95. And cleaning up. I hope this makes sense..
So you build your item to price out at a standard price point... Your item may normally be a $7.95, but your mess of beef chow yuk has free range beef, grass fed, hand foraged chanterelles, in-house made noodles, so it is price blind. No one knows what the price should be. But it meets the criteria: testing what you are testing, not leaving money or design on the table, designing to price points.
(As a side note, one reason the restaurant business is so alive and creative is there are no intellectual property rights in that field. Monsanto is trying to sneak in with patents on ingredients, and being strictly NonGMO is a way to fight back.)
You are not gouging the customers, the price is fair. The customers are getting a very good deal, for they get excellent food and are not paying for ambience (and you are not risking the cost on ambience to sell with your unproven dishes.) Don't end up with expensive ambience and no customers to pay for it.
Part B ...
Say cost to wholesale is keystone (roughly, depending on the definition, doubling.) and say wholesale to retail is the same..
So if the price point at retail is $100, then your wholesale price is $50, and your costs are $25 landed. Depending on freight duty, etc, you probably have abut $22 to play with in the cost of the item.
So them within the contraints of
1. testing what you are testing
2. not leaving money or design on the table
3. designing to price points
You decide what you can put into the product.
Now, that mess of beef chow yuk may be normally $8 a plate, but since you are using free range, hand foraged chanterelles, in-house made noodles, yours may be at the $24 price point. But it meets the criteria: testing what you are teesting, not leaving money or design on the table, dsigning to price points.
Feel free to forward this by email to three of your friends.
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