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This is a video of a groundbreaking presentation by Seth Godin that will push how you think about your product's development through marketing, design, production, and delivery further than it has gone in years.  Once you begin to let Godin's ideas about these issues start to permeate your skull, there's no turning back.  You are on your way towards something other than mediocrity.  When trying to develop a new product and get it on the market, mediocrity could be your worst enemy.  You might have a product for the masses--but your approach to alerting them to it and delivering it to them will likely need to be anything but average, run-of-the-mill, mediocre.  You need Seth Godin's ideas on your side.  Enjoy.

It's amazing what context does for our judgments of the value of something.  As humans, we like to process information by placing it into categories.  This helps us to make order of the world and is often one of the fundamental factors behind our occasionally amazing ability to make great snap decisions, as well as our habit of falling victim to stereotypes and judging books by their covers, so to speak.   

This phenomenon plays out everyday and is nothing new, except when drastic situations illuminate the power of it in our daily lives.  The Washington Post did a fascinating experiment, in which a world-class violinist named Joshua Bell performed as a street musician in a Washington DC metro station.  Bell played  his $3.5 million violin, built in 1713, for 43 minutes in the morning during rush hour, as 1,097 people passed by.  As you can see in the video, no one really took notice, and he only made approximately $30.  Perhaps all of these people had more important things to do, and were running off to spend our tax dollars instead of listening to beautiful music.  Or, maybe without the concert hall, tuxedo, and fanfare, we rarely know something is great unless all the packaging is there to affirm it.

This reminds me of my recent conversation with Barbara Carey in which she discussed pricing a product based upon it's perceived value, and the importance of packaging in raising the awareness of that perceived value of your product.  We've all seen it out there--products which seem to be the exact same as their cheaper, generic counterparts, but are packaged in much more attractive packaging and sell for a 30%-50%, or more, mark-up.  Perhaps I could dress in a tuxedo and play Stairway to Heaven on my guitar in a concert hall that charges $200 a head?  Who's with me?

I believe brands are built on solid product (hence me abandoning my aforementioned "Stairway" plan).  But at the point of purchase, people probably won't think your product is great, unless your packaging provides the tuxedo, concert hall, and fanfare that your target market is looking for.  Think about the stores you shop in, that skin cream you bought, or any number of sports cars on the market which possess the same engines as your family sedan.  All are geared to indicate to you the value that the company selling the item wants you to believe you are getting--to give you an experience by creating the context.  Whether a given company or product delivers on that, that is another story.

Major companies test their packaging routinely, and often find that sales increase substantially when they hit upon the right combination for their target market.  You can't just put lipstick on the pig, and put poor, low end products in high end packaging.  This will only erode your customers' confidence.  But, if you're product is geared to provide something great in value to a particular market, you need to provide all the context that will turn their heads and get them to focus in on what is truly amazing about your product. 

Without further ado, here is the third and final part of my interview with Barbara Carey.  Again, you can learn more about her by visiting her blog or checking out the launch of her new program: The Carey Formula.

Part III
Working with Buyers, Team Members, and Other Third Parties

A:  So when you needed to find out whether stretch velveteen was good enough, did you find that out by putting it in front of people?

B: Yup.  When I have a question, I ask.  I survey.  You’ll want to ask your end user, customer, retailer, lots of people in different categories.  I mass market, so I need to appeal to the masses.  For these reasons, I always try and develop a relationship with the buyer I’m working with.  I typically close my deal with my buyer before I even go see them for the first time.  When I go see them, I usually feel I’m there as a courtesy call to pick up paper.  I do it that way because I believe in being a person that does what they say they’re going to do.  I pick up the phone.  I tell the buyer what I’m going to do and get off the phone very quickly.  A month later, I follow up with them and say “remember what I said I was going to do?  I just did it.”  And then I do it again and again.  And pretty soon, over a period of the product development process, which might be 6 or 8 months, I’ve become a person who does what I say I’m going to do.  And, the buyer has seen this whole series of accomplishments with you and they want to do business with you. 

A:  What about bringing in people to help you during this process?  Can you talk about how you surround yourself with people that can do certain things better than you?

B:  I surround myself with people that can do things I can’t.  I’ve got an excellent CFO.  I’ve got an excellent Operations Manager.  Basically, we are a sales and marketing office, a great designer, and a wonderful marketing coordinator.  We farm out everything else as a virtual company.  I don’t need to be in the warehousing industry or the manufacturing industry, so we have contract warehousing and manufacturing companies.  So throughout my life, I’ve been on this hunt to find great resources, and that’s what my CD library is all about.  It’s a collection of all these people and pieces that you need to make this whole thing work and keep very low overhead.

A:  That’s one of the messages that came strongly out of your book: keep costs low.  A lot of people go out and spend a lot of money on things that aren’t necessary when they’re starting a business…

B:  Business cards.  What a waste of money!  And, what a wonderful opportunity to get someone to email you instead.  Now you have this relationship of communication going back and forth.  Information can be the same way.  That’s the whole thing behind the book and web presence that I’m launching:  Access to information at an affordable price.  And it’s not just the book—it’s a whole business binder including how to price your product, cash flow and inventory management, and more—like the NOLO Press on how to start your business. 

A:  Turning to the subject of manufacturing overseas, what are some of the lessons you’ve learned along the way in this area.

B:  One, I, personally, don’t need to go overseas.  Two, use a third party quality control inspector.  Three, analyze how your communication process is going with your overseas supplier.  If they’re not responsive or don’t seem to put in much effort, that can be a big problem.  But they can do amazing things overseas.  I can get a book printed over there and sent here, even with the added shipping time, faster than I can get it printed and sent to me with a company here in the US.  A US manufacturer will make a book for me in 6 weeks.  A Chinese manufacturer can do it in 4 days. 

Also, you need to check references and do your due diligence.  If there are red flags, chances are they’ll become problems later.  Usually, where there is smoke, there’s fire. 

A:  What about dealing with problems that come up?

B:  Problems always come up in every area of the business.  I’m a problem solver.  That’s my job and I’m good at it.  You need to be a problem solver in business.  You need to maintain your professional composure.  I work with my vendors.  I’m not going to tear them apart when they make a mistake, because in the end they’ll love to work with my company.  I can be challenging, but I treat them fairly.  But you have to know that there isn’t anything you can’t solve or overcome.  Problems seem much smaller when you live that way. 

When I was building my Hairagami business, I had a vendor that didn’t do the things they said they were going to do.  And I had an order I needed to fulfill.  I was dumb in the first place to leave myself at their mercy.  You need to have a second source.  The order was supposed to ship and I hadn’t even seen a production sample for approval yet.  But, I didn’t freak out.  I went back to my buyer and told him that I had a challenge and I wanted to see if he could work with me.  I’m willing to compromise to figure these things out.  And that buyer was wonderful and so polite in helping me figure the situation out.  Part of his motivation for being that way was that he respected me because he already knew me as a person that does what I say I’m going to do. 

Here is Part 2 of 3 from my interview with Barbara Carey.  There is some very insightful info about pricing and testing your product on the market.  Enjoy.

Part II
Pricing Your Product

A:  Touching on the point of selling your product before you manufacture it, I have worked with several people that have taken orders from customers but were not aware of the time it was going to take to develop and manufacture the product, and they realized they promised on something they couldn’t deliver. 

B:  Hey, the article you wrote for our newsletter on obtaining manufacturing quotes and schedules is an excellent remedy for that.  Reference it here (Thanks Barbara, I will: Obtaining Cost Estimates From Manufacturers).

And in thinking about manufacturing, getting quotes, and setting your price points, it all starts with the perceived value of your product.  You want to get that up as high as possible and you use your packaging to help with that.  You have a product.  It delivers a promise.  What is that promise’s value?  In terms of Hairagami, it was great because it wasn’t a hair clip that you look at and think “this is a piece of plastic made for a dollar and then some”.  Hairagami makes a new hair style which saved you a trip to the hair salon.  That’s worth fifty dollars.  So then, when I can sell it at $14.95, it doesn’t just save you fifty dollars once, but each time you might go to the salon.  And, it saves you time because you don’t have to go to the salon.  It saves you time and money!  So, start with your perceived value of your product and your packaging should convey all those key messages that bring your perceived value up.  Talk to a few manufacturers or experts to get some cost feedback for your analysis.  Then, do a marketing survey to see if your target customers would buy at this price or that price.  And, ask the likelihood that they would buy it?  I ask these questions many different ways until I hit what I think might fit with the key price points.  Retail has price points $14.99, $7.99, $9.99, etc.  You don’t price your product at $16.75.  You have to think about where your product fits into one of these categories where a potential customer will see that at that price, the perceived value is much higher and the ‘cup runneth over’.  Rich Jr.’s item was very inexpensive to make, approximately $2.  I don’t remember exactly.  He sold it for approximately $6.50, and there was a nice sized margin in between.  Size matters!  And we thought, “gee, we sell it at $6.25, they could price it at $12.50.  But the retail price point that’s going to move a lot is at the under-$10 threshold, or $9.95.  So we tried a couple of different price points at retail and the $9.95 point sold three times as much, just because of that little change below $10.

A:  When you test different price points, how do you make sure you aren’t cannibalizing sales of your product in another channel? 

B:  You guard against that by doing a small test with somebody who might be in a different channel.  You might keep your main channel at the optimal price point, but you might experiment a little at a specialty retail store or a resort.  You can try different price points that way and still protect your channels.

A:  So you’re always testing, surveying, etc.?

B: Even when your product is more mature in it’s life cycle, you still are going to want to test your price points.

A:  How do you deal with deciding whether to go with your perfect vision of the best product you can possibly design or to go with something that is just good enough to sell at your chosen price point?  Many inventors fall in love with their products and develop the most amazing, high-quality item they can conceive of.  Then, they go get manufacturing quotes and realize that they are way out of the ballpark when it comes to making their margins.   

B:  That’s not good…

A:  Right, so how do you make sure you don’t run into that problem?

B:  That’s why you need to start with the perceived value and then you need to make a product that you can make a big margin with and give the retailer a margin they can make money on.  You have to ask what price the end user will buy it for.  Ask the retailer what price they need to buy it for to make money.  And, find a price you can have it made for so that you can make money.  That’s why I look for products that have a high-perceived value and are relatively low in cost. 

A:  So when you thought of Hairagami and had to decide what kind of fabric to use, how did you decide what would be cost effective and still deliver?

B:  I didn’t have the money to afford velvet to hit the margin that I needed.  So I used stretch velveteen and that was good enough and didn’t change my margin either.  Also, this was a product that I needed a large packaging insert to explain what the product could do.  But I didn’t have the retail shelf space to accomplish that.  So I created a package in which there was a pop-out map concept.  The paper unfolded, opened up, and gave a great display of “let me tell you about my product”.  So you have to think of creative ways to accomplish what you need cost-effectively.