Market Your Product Online, Offline, Both: The Sky is the Limit

1) How long does it take you to get to your nearest consumer electronic store? 

2) How hard is it to find the exact product you want in a specific section of Best Buy or Comp USA (and how painful is it finding and talking to the help there sometimes)? 

3) And do you ever wonder if there could be a higher-quality product at another store for a better price just down the road?

My answers: 10 minutes.  Hard (and similar to sewing my eyes open and feeding me sleeping pills).  All the time.

As consumers, we don't like spending time, enduring pain, or wondering if the grass is greener with another product out there.

Welcome the emergence of the hybrid online/offline consumer experience.  A recent study completed by Yahoo on 2,000 U.S. adults, focusing on 5 consumer electronic categories, revealed that while 2/3 of shoppers still make purchases in physical retail locations, 2/3 of the consumers will use online and offline methods to research products before they go to the store to buy. 

"The Internet is far more than just another point of purchase; its biggest impact lies within the awareness and consideration process," said Wenda Harris Millard, Yahoo!'s chief sales officer. "The widespread adoption of social technologies gives marketers an even greater opportunity to continuously engage consumers and make connections across traditional and new media advertising, helping to build brand mindshare and increase offline sales."

Not surprisingly, according to the LA Times, internet ad sales soared 35% in 2006 to $16.9 billion in the U.S.  We're seeing businesses like NearbyNow, which allows consumers to locate items, availability information, and put holds on products for in-store purchase, spring up and streamline the online/offline experience.

Savvy product marketers, and marketers in general, are using the online/offline experience to drive impressive consumer awareness and sales campaigns, for FREE.

Integrating product marketing mixes can allow any company profound online/offline marketing tactic opportunities to get their message across effectively.  This story by Marketing Sherpa highlights how one non-profit organization was able to get its video message viewed by 59% of its target audience by sending out an announcement through the postal mail to the audience 2 1/2 weeks before sending that audience an email which opened up to a video message.  That creative little stunt earned the non-profit $1.9 billion in free advertising last year.

With the internet changing the nature of the game and leveling the playing field, smaller companies have more opportunities than ever, to capitalize on creativity, technological savvy, and integration to market and sell their products.

 

Business and Product Strategy - Part 3: A Portfolio of Product Iterations?

Seth Godin wrote a quick, poignant post on Starbucks recently:                        

Here's today's entrepreneurial trivia question:

Even after Starbucks had five stores and more than 20 employees, which item was unavailable for purchase at their stores:
Espresso
Hot Coffee
Biscotti
Frappucino® blended beverage

Actually, it's a trick question. The answer is 'all of the above.' It wasn't until several years after the company was up and running that they realized it would be a good idea to sell any beverages at all. All they sold was beans (but you could get a free taste of coffee if you asked nicely).

It might not be too late to fix your marketing/story/product mix.

It could be argued that one should always be fixing their marketing/story/product mix.  The fact is for many start-ups, small businesses, and inventors, it may not be possible to capitalize on a HitForge kind of strategy in which a portfolio of businesses (or products) are cooked up all at once and thrown against the wall to see which one sticks.  The issue is bandwith.  Early on, there is only so much bandwith to go around at a given point in time in terms of giving one product and business the time and resources necessary to see it through, let alone a portfolio.   

But a major problem that often plagues companies that don't take the portfolio approach is that they throw everything into the exact opposite approach: they produce one static product based on company-centric development.  Companies often see the product development process as something that is centered upon themselves and happens only in the beginning stages of a product.  They focus on first customer ship, rather than getting the product right in the eyes of the customer and making sure a market exists that will pay for the product.  If the product is launched and does not reach certain milestones quickly, it is dropped as a failure and company resources are directed to the next company-centric product.

But, one could think of one-off ideas as a linear portfolio of product and concept iterations that are continually being honed for success.  And they aren't being honed by you or people in your company.  You are led through the honing process by empathic interaction with the intended users.   And you hone in on the winning product amidst the portfolio of iterations by continuing to test it and all sorts of variations of it, even when your product is experiencing marginal success.  You start with a solution to a need in the beginning, in the form of the first product iteration, and let your customers lead you through the many steps of realizing the solution in the best, most lucrative form possible. 

In Steven Gary Blank's, The Four Steps to the Epiphany, the author lays out his theory that successful startups tend to implement a customer development process along with the product development process.  The idea being that the two must work in concert and prevent the all-too-common "fire, aim, ready" strategy, in which companies develop a product first and then put it on the market convinced that it will hit.  Blank notes that while the originators of the idea or product concept come up with the first iteration, the company must get beyond feature lists and focus groups, and go outside the building to validate whether there are customers and a market for it.  The cash-burn rate is kept low while going through this process and nothing is scaled up until a viable product finds a paying customer through a viable channel.  Most ultra-successful inventors and businesses that I have come across never stop this process.  There is not one chance in a product, but perhaps an evolution through 3, 5, or 10 possible iterations to fill a need successfully.  You have a portfolio of test results.

Is your product Starbucks just before they decided to try something different and sell beverages? 

Here's today's entrepreneurial trivia question:

Even after Starbucks had five stores and more than 20 employees, which item was unavailable for purchase at their stores:
Espresso
Hot Coffee
Biscotti
Frappucino® blended beverage

Actually, it's a trick question. The answer is 'all of the above.' It wasn't until several years after the company was up and running that they realized it would be a good idea to sell any beverages at all. All they sold was beans (but you could get a free taste of coffee if you asked nicely).

It might not be too late to fix your marketing/story/product mix.

It could be argued that one should always be fixing their marketing/story/product mix.  The fact is for many start-ups, small businesses, and inventors, it may not be possible to capitalize on a HitForge kind of strategy in which a portfolio of businesses (or products) are cooked up all at once and thrown against the wall to see which one sticks.  The issue is bandwith.  Early on, there is only so much bandwith to go around at a given point in time in terms of giving one product and business the time and resources necessary to see it through, let alone a portfolio.   

But a major problem that often plagues companies that don't take the portfolio approach is that they throw everything into the exact opposite approach: they produce one static product based on company-centric development.  Companies often see the product development process as something that is centered upon themselves and happens only in the beginning stages of a product.  They focus on first customer ship, rather than getting the product right in the eyes of the customer and making sure a market exists that will pay for the product.  If the product is launched and does not reach certain milestones quickly, it is dropped as a failure and company resources are directed to the next company-centric product.

But, one could think of one-off ideas as a linear portfolio of product and concept iterations that are continually being honed for success.  And they aren't being honed by you or people in your company.  You are led through the honing process by empathic interaction with the intended users.   And you hone in on the winning product amidst the portfolio of iterations by continuing to test it and all sorts of variations of it, even when your product is experiencing marginal success.  You start with a solution to a need in the beginning, in the form of the first product iteration, and let your customers lead you through the many steps of realizing the solution in the best, most lucrative form possible. 

In Steven Gary Blank's, The Four Steps to the Epiphany, the author lays out his theory that successful startups tend to implement a customer development process along with the product development process.  The idea being that the two must work in concert and prevent the all-too-common "fire, aim, ready" strategy, in which companies develop a product first and then put it on the market convinced that it will hit.  Blank notes that while the originators of the idea or product concept come up with the first iteration, the company must get beyond feature lists and focus groups, and go outside the building to validate whether there are customers and a market for it.  The cash-burn rate is kept low while going through this process and nothing is scaled up until a viable product finds a paying customer through a viable channel.  Most ultra-successful inventors and businesses that I have come across never stop this process.  There is not one chance in a product, but perhaps an evolution through 3, 5, or 10 possible iterations to fill a need successfully.  You have a portfolio of test results.

Is your product Starbucks just before they decided to try something different and sell beverages? 

Business and Product Strategy - Part 2, The Long Tail

I apologize for putting a graph at the top of this post.  I bet half of you will wince in pain upon seeing that. But those aren't just pretty colors; they help me to build on yesterday's post on strategy and risk. 

Can your business strategy or product development strategy be based on flexibility and variety?  Take a look at HitForge, a new web 2.0 start-up company in Silicon Valley.  I first ran across this company in Business 2.0 magazine, and then on a blog post by David Bayless, of EvergreenIP, a product capitalist company, entitled The Cost of Failure Falling...Success Remains Elusive.  Bayless notes the 80/20 Rule of Long-Tail Economics, which describes the phenomenon that 80% of the revenues made out there by start=up businesses seem to come from 20% of the offerings.  You hear this rule in many industries: 20% of the real estate brokers make 80% of the money, 20% of waiters make 80% of the tips, etc.  The point the rule is trying to make is that it's not a bell curve out there in terms of returns.  It's a long tail.  In addition to this phenomenon, Bayless notes observations by Guy Kawasaki, a notable Silicon Valley investor and entrepreneur, that the cost of starting up businesses has fallen dramatically.  Naval Ravikant, a Silicon Valley investor and entrepreneur, will be testing this model with his new company HitForge.  Bayless comments:

...the hit-and-miss nature of Web 2.0 companies is not unique.  The market outcomes of a host of other businesses, including movies, music, and books are subject to long-tail economics, where a small number of offerings account for the bulk of revenues...

In fact, research shows that a remarkably broad range of consumer products, from food to sporting goods, can be similarly described [3].

Secondly, the cost of failure is falling.  As Kawasaki puts it,  

During the dot-com bubble, you needed $5 million to do stupid ideas.  Now you can do stupid ideas for 12 grand.

The implication for these entrepreneurs is to predict less and experiment more.  To do that, Ravikant has launched Hit Forge:  

This is like a movie studio.  It's about milestone-based development, piloting concepts, access to distribution...The engineers have the freedom to experiment, but they have 90 days to ship a product.  The product has to grow organically without any marketing.

  Those that survive get more funding and access to distribution.  

We are going to build as many as 20 companies a year.  We need to find one hit to succeed.  We can do that.

Is this Michael Raynor's ideas on prozac?  Or crack?  HitForge might be an extreme test of this model, but Venture Capitalists have been doing this for years.  They always seem like geniuses after Google goes public or YouTube gets bought out, but the fact is that they invested in at least 100 other companies in each of those cases, just to hit upon the big payoff in Google and Youtube.

Perhaps the strategy might be to develop a variety of 10 low-cost products, test them in various specialty stores to see how they're received, take the winners to the tight shelf space in a large retailer, where they win you more shelf space?

In terms of products and supply, the driver of the long-tail phenomenon is the cost of inventory and distribution.  If these are higher, it only makes sense to stock your hottest selling items.  If these costs are lower, then it is cheaper to offer a greater variety.  Think about limited shelf space.  If a retailer has only 2 spaces for your 8 products, only the 2 hottest selling products will be shelved.   In addition, manufacturing 10 different products is expensive and creates a much more complex and expensive supply chain. 

So how does one capitalize on this strategy?

How Much Are the Strategies Behind Your Business and Products Really Worth?

Too interesting to do all in one post.  In the last few months, I've been routinely running across this topic in everything from business blogs, conversations with entrepreneurs, to business books.  It's the topic of business strategy and whether a significant amount of strategic planning for our business, product marketing, product development, etc., as we know it, is really worth a...  I couldn't do the topic justice in one post without making your eyeballs bleed from gray font.  So this is just the beginning.

A good starting point is this video.  If you can get past the cheesy intro on this short interview with Michael Raynor, author of the The Strategy Paradox: Why Committing to Success Leads to Failure, and questioning why the interviewer's side of the room looks like it's midnight and Michael's side 9am, what Michael explains about business strategy is worth listening to and pondering.

His analysis points to the basic question of risk. How much do we really know?  How certain are we about that which we're guessing about?  The idea is to embrace the fact that, generally speaking, we don't know a whole lot about the business environments we face and we can't be certain of much beyond what we do know, so what good does having a masterful business strategy and executing it perfectly do if the outcome is based on many factors out of our control anyways?

His comments on Microsoft developing multiple strategic options and possible product offerings in the 80's gives us a great example  of how Microsoft enabled itself to dominate the personal computing software space no matter which direction the market went.  Some companies have hit home runs by coming up with a great strategy and executing it flawlessly.  But the percentage of these is likely to be miniscule in comparison to those companies who have done the same, but failed miserably because the market went an unforeseen direction.  In an age where market shifts are occurring more frequently and quickly than ever, variety of options and flexibility may win supremacy over commitment to a strategy in the early stages of starting your business and getting your product out there.

Does your business strategy allow for flexibility to go the right direction when the market gives you feedback?  When developing your product line, are you creating a variety of products that will test various niches, offer different solutions or combinations to the problem your product resolves, or allows you to push it out through various channels to see where it does well?   

Another good interview with Michael Raynor on this topic can be found at Guy Kawasaki's popular business blog here.    

China and Your Intellectual Property: Why do They Copy?

This very morning in Shenzhen, China, a young design engineer will rise from his bed, have a quick breakfast and get dressed in clothes that might be the very ones he wore yesterday.  He'll jump on his bike or scooter, zip through the streets for 20 minutes, jump off and head into his company's manufacturing plant office to begin the day.  He'll put his things away, join another engineer in their "Reverse Engineering Department", and sit down around an existing product selling successfully on the market in Europe, Canada, and the United States.  He'll begin to pull piece after piece of it away and log notes on it's assembly, materials, dimensions, etc., with the intent of giving this information to his bosses, who will create 10,000 exact replicas at the factory to sell into the Chinese market with a new label on it.  Why?

This morning I read a post asking the question "Why Does China Copy Designs" at DesignSojourn blog, written by D.T., Design Translator, a product designer who works out of Sydney and Singapore.  His analysis largely focused on cultural and socioeconomic factors regarding the motivation of chinese companies to replicate, build-off-of, tweak, and steal existing product designs.  I usually get the question of "how does one prevent a product, invention, idea, or design from being stolen?"  Rarely do I get the question of "why do they steal?".  As D.T. points out, giving an explanation does not equal defense of the practice.  It's just a bloody interesting question.  It's a very complex issue.  But, to discuss it in a blog requires simplification.  I've consolidated D.T.'s points into two themes that struck me.

• Culture and Education:  "Fast forward to today, this is also similar to (i dare say) most design schools in China where students come from a rote learning high school background and are tought to follow instead of think. At school they look to famous designers and architects as examples, and their work naturally becomes very thematic or contain the safest forms of expression. Furthermore it is expected that Schools focus on technical skills instead of thinking skills, as learning about creativity is about following a set way of doing things."   

A few years ago, I was part of a program which brought professionals, educators, and politicians from 14 different countries around the PacRim for 6 months to discuss and interact on issues of culture, leadership, and more.  We discussed this phenomenon with our Chinese teammates and their responses were the same.  Today in Chinese culture, you are frowned upon heavily if you take a risk and are wrong.  New/different ideas and practices that deviate from the norm are shunned.  Conformity is praised.  Some might say the foundation for this cultural theme was laid by the teachings of Confucius.  Thus, the typical chinese person learns throughout their educational experience and upbringing that it's better to replicate something already proven than try and develop something new.

• Socioeconomic situation:  "When you grow up in a country where life is cheap, things do get brutal and money talks. There is no area for the softer aspects of the business, like branding, experience and emotive products etc." 
  

Competition amongst companies and factories over there can be very intense and many individuals will do whatever they can to beat out the next guy and build financial security for their family.  When I wrote my little story at the beginning of this post, I purposefully included the fact that my fairytale engineer might wear the same clothes day after day.  This is because he really might only have a few decent shirts, pants, and two pairs of shoes.  Many of these people have seen dramatic changes in their lifetimes, scarcity, and total government control.  Life can be very tough in China, and only recently since the early 90's, has there been a window opened for a new and better way of living.  When opportunity to flourish arises, many will take it.

A few points of note... 

• The situation is improving. 
• It is likely that they will begin protecting IP more when they have their own IP to protect (which they will someday). 
• This is why it's absolutely necessary to know who you're doing business with and visit their factory.

Finding Manufacturers in China: Building a Network the Wrong Way

On a trip to China last year, I was sitting in the airport and got into a conversation with a businessman who was heading to China for the first time.  He was the CEO of a small company here in the US that had a very unique product line and niche, and he proudly told me of his plans to show up in Shenzhen and find suppliers to make his product.  He had no trip schedule.  He had no real idea of how he was going to link up with the right supplier, let alone tour multiple suppliers to begin getting an idea of what the right supplier is.  He was just headed there.  It was as if I could hear his spurs quietly "clink" on the soft airport carpet as he swaggered by, John Wayne style.

I also often have conversations with inventors taking products to market, who refuse the idea of working through anyone--be it a middleman, trade company, service provider, consultant, to find and partner with manufacturers in China.  Why?  They have found contacts via Alibaba or some other internet trading portal.  They are already connected.  Why would they want to pay someone to be in the middle to get connected when the internet circumvented all of that. 

My esteemed colleague Dan Harris at ChinaLawBlog has raised another relevant scenario through which people get connected with Chinese suppliers in How Not to do Business in China, Part I:  Traveling With the Government.  The inspiration for the post came from Andrew Hupert on the DiligenceChina blog in Matchmaker, Matchmaker, Make Me a Profit.  Hupert explains his exasperation that government led (US government) trade missions to China with the purpose of connecting small-to-medium sized businesses with partners in China through Chinese government contacts are still occurring. 

I have lived in China for 5 years, speak reasonable Chinese and have achieved a certain familiarity with the Chinese operating environment. There’s NO WAY I would advice a client to start his China business by entering into a JV with a local Zibo company that was arranged by the local government. This is a very advanced move, and I doubt that I could pull it off. From what I understand from extremely knowledgeable associates, management teams from those smaller NE towns make Shanghai Sharks look like harmless guppies.

Harris of ChinaLawBlog adds to this with a story of his own, in which a seasoned offshore manufacturing veteran spent months narrowing down possible locations to one city.

My client met with government officials in both cities to explain its plans.  Both cities strongly urged my client to partner with a particular company in their respective city that they touted as by far the best in the field.  My client met with both touted companies.  In conducting its due diligence on the various potential partners in both cities, it concluded these were by far the worst candidates.  Both of these companies were at least five years behind the other companies in terms of technology and the buyers know it.

Hupert, a seasoned China businessman, and Harris, a lawyer with considerable China experience, give it to us pretty straight: going through chinese government officials to find partners in China is going to be trouble.  There are going to be some times which working with the government is a good move, particularly if you are entering the market there.  But I found out that even this is dubious at a recent seminar on entrepreneurship and China  at Stanford University.  A panel of chinese entrepreneurs were asked to give one piece of advice to the audience in terms of conducting affairs in China.  Out of the five, two men were Chinese nationals and had been doing business there for at least a decade.  One said "go through the government".  The other said, "stay away from the government".  How's that for consistency?

My own two cents..?  One of the biggest factors in my own success in doing business in China has been getting connected through the right network of people.  As Hupert and Harris point out, local US government is not really equipped to provide this and going through the Chinese government, well... 

Trading portals on the internet are even more sketchy.  The bottomline is, you have no idea who you're talking to and they probably have no idea what you're really trying to say.  One of the first sourcing companies I worked with was another example of this--not the greatest network of suppliers and people.  If birds of a feather flock together, so do suppliers and people with similar business styles.  My own advice?  Find a China connection here, who does the kind of business you want to be dealing with in general.  Work on getting connected to the correct individual on this side--whoever they are and however you can find them.  If they are upstanding individuals and have been doing business successfully in China for years, chances are they are going to have found the right kind of network there.  You'll be starting out over there at a point where, if you used one of the aforementioned methods instead, it might take you 2 years of time, mistakes, bad partners, and searching to get to.  Even John Wayne could tip his hat to that.

 

 

Product Design Party

Do you and your product development team find yourself staring at walls or ceilings, tapping pens on the table, jotting down notes and crossing them out repeatedly when brainstorming and prioritizing what features your product might include?  My conversations with clients regarding the features they want to include in their product design are usually more problem-themed than celebration-themed.  Creating the right mix of the most important, relevant, cost effective, user friendly features is a very difficult balance to strike.  Sometimes, just developing a number of possible features in the first place can be daunting.  Check out Creating Passionate Users blog posting on throwing a product/feature design party.  Here are the party-planning steps:

The basic idea looks like this, although there are a million ways to modify it:

1) Pick 9 people, ideally from different parts of your company and including some customers. (If you don't have a company yet, pick 9 friends--preferably those who don't know each other well)

2) Buy/borrow/find at least 20 "input materials" including books, magazines, a short film, graphic novels, etc. (a list of possibilities is a little lower in this post)

3) Assign (randomly) at least 2 "inputs" to each person. Do NOT let them choose (it's important they not be allowed to gravitate toward things they're already comfortable with)

4) Give the group 30 minutes to generate 4 ideas (if it's a feature/upgrade party, then 4 different features or feature sets... if it's a feature implementation party, then 4 different ways to implement the already-decided feature, etc.) These 4 ideas don't have to come directly from their input materials, although participants should be highly encouraged to describe at least one new thing they learned that inspired their idea.

5) Round One begins: split into 3 groups of 3 people (see chart below). Each person gets no more than 10 minutes to "pitch" four ideas to the other two in their group. There are 12 total ideas for this group, so allow about 30 minutes. Record (anonymously) the selections of each person, which represent a "vote" for the ideas.

6) At the end of Round One, each person must select their two favorite ideas from each of the other two members of their group. So if Group One had Fred, Mary, and Sue... then Fred must select his two favorite ideas from the four that Mary pitched, and his two favorites that Sue pitched.

7) Round Two begins: reconfigure the groups so that each person is now with different people (see chart below). Instead of pitching their own four ideas, each person pitches the four ideas they chose from their previous group members. Again, they have about 10 minutes to pitch the four ideas. Remember, the point is that each person is no longer pitching their own ideas!

8) At the end of Round Two, each person must again select their two favorite ideas from each of the other two members of this new group. Record (anonymously) the selections of each person, which represent a "vote" for the ideas.

9) Round Three begins: reconfigure the groups again. Each person in the group now pitches the four ideas (two from each of the two members of their most recent group) they chose in the previous (Round Two) round.

10) At this point, each person has pitched a total of 12 ideas:
* Round One: pitch your own four ideas
* Round Two: pitch four ideas from your Round One group to your new Round Two group -- two ideas from each of your previous group's other members.
* Round Three: pitch four ideas from your Round Two group to your new Round Three group, as before.

11) At the end of Round Three, again each person selects their top two favorite ideas from the ones pitched by the other two members. Record these as a vote.

12) You should now have a total of 108 votes. Choose the top 9 vote-getters (you'll have to be creative about tie-breaking... you could choose more than 9, for example).

13) Give each person a copy of the 9 ideas, and send them back for another round of "inputs." Again, assign each person different materials from the ones they used at the beginning.

14) Give the participants 30 minutes to use their inputs and flesh out a single idea from the nine. Their one idea can be a modified version of one of the nine, based on their "research." Their one idea could be a mashup of two or more of the nine ideas. It cannot, however, be something completely new. Participants should be prepared to explain how something they got from their inputs helped in some way (not an absolute requirement).

15) Now it's up to you what to do with the ideas. You might choose just one, or take all 9 "winners" with their pitches back to another person or group, etc.

What about intellectual property?  That might be a concern if not all 9 people are within your company.  But it shouldn't stop you dead in your tracks.  Would all 9 people be willing to sign NDAs?  Are they trusted friends that have no interest in the ideas that come out of it?  Could you limit the idea session to only one aspect, feature, or problem regarding your product?  Chances are, you have far more to gain than lose in this process.

 

Product Marketing: No Product That Has to do With Life is Boring

• Use people to sell to people
• Perception is reality, so use scripted professionals
• Tell a memorable story
• Create an emotional experience
• Create a believable, relevant personality
• Deliver a critical, hot-button moment

I don't care if you have invented the new dust collector, wall plug, or lug nut.  There is a connection between that product and humans.  There is a story you can tell about your product.  You can probably tell it through a multimedia channel.   If kleenex can do it, so can you.

Product Sales/Demand Forecast Risks and the Supply Chain

Risk.  I'm not referring to the world domination-themed board game.  Today, I'm referring to risk in the demand forecasting process and your supply chain.  I know..."yawwwnnnn".  Words like that at the beginning of any written material can make your eyelids heavy and elicit drool.  Now read these words "Money, Money, Dollars, Bling, Rich, Poor, Win, Lose, Money".  Now, I hope you are bright-eyed and chomping at the bit to know why the yawn words, demand forecasting and supply chain = the exciting words, money, dollars, and so forth. 

Risk in product sales forecasting, or demand forecasting, result from a mismatch of projections and demand.  If forecasts are too low, you leave money on the table by not having enough product to sell to hungry customers.  If forecasts are too high, you are left with excess inventory and price markdowns.  Scary concepts like "long lead times", "seasonal demand", "high product variety", and "short product life cycles" can make the savviest of forecasters lay wide-eyed and trembling in their beds at night.  Too dramatic?  Replace "trembling" with "definitely not sleeping and drinking excessive amounts of coffee the next day".

It can be difficult to accurately assess customer demand, let alone affect it.  So smart company execs often turn to the next best place to control their risk:  their supply chain.  There is a whole science and consulting industry behind this area.  But I'll give you some of the main points and keep it short and sweet.  Think about these issues in terms of your product, company, risk, and money saved or lost:

• Information Distortion:  In late 2003, product shortages in Western Europe led Nokia customers (distributors and retailers) to order more than was needed so they could meet demand if Nokia began rationing or allocations of product.  The exaggerated figures confused Nokia's own reading of the market, and caused the company to make inaccuracies in sales forecasts.  In general, the farther you get from the end consumer in the supply chain, the greater the chance for misinformation.  It's just like the childhood telephone game, except it is referred to as the "bullwhip effect" in the industry.  If you have a distributor and a retailer in between you and your end-customer, how accurate of demand information are you really getting?  If your inventory is building up, you could be losing substantial amounts of money.  How to control?  Approach your partners in your supply chain and work to collaborate with them for greater information sharing.  Increased communication between supply chain partners about inventory levels, demand, lead-times, problems, etc., help reduce the risk that your company will under or overestimate demand for your product.  It will help your partners as well.  Everyone wins.

Dollars, Money, Piles of Cash...

• Short Product Life Cycles: If your product is expensive to manufacture and/or the amount of time it will be valuable on the market is not that long, building up inventory can be a very expensive proposition.  To address this, companies will weigh the tradeoff of carrying higher inventories of expensive products with the possibility of responsive delivery.  Responsive delivery might mean air shipping certain quantities of your product to customers once they have placed an order.  Air shipping can be expensive, but you might be surprised to find out that it could be cheaper to warehouse your inventory overseas and airship it to meet demand at the last second, rather than warehouse it here.

Bling, Greenbacks...

• Too Many of the Wrong Product:  If you are developing a new product line, this can help.  An unsavory situation can occur when your company has too many of a product that doesn't sell what was forecast, and too little of a product that sells more than you have to meet demand.  This can often happen with SKUs that have just minor differences from each other.  A solution to this can start with basic product design and architecture and involves designing a product line to use standard parts across the line and for product assembly to be uniform with all of the products as close to the finished stage as possible.  The finishing touches, whereby the products are differentiated from each other, are postponed to the latest possible stage.  Thus, your risk of having the wrong product is minimized as much as possible.  HP did wonders with this strategy with their Laserjet printers in the 1990's.  Imagine a line of 15 different printers designed to all be the same until late in the assembly process.  They are then shipped to domestic warehouses and assembly is completed, and the product is differentiated into 15 different versions, when HP knows how many of each product they need.  They have saved hundreds of millions of dollars using this method and it has become a model strategy for companies across the world.

Sales and demand forecasting, and supply chain risk are not the sexiest of subjects when a company is selling products on the market.  Small companies often don't even have the time or resources to explore these parts of their business.  But, alas, they are crucial issues and could cost or save you big $$$.

Global Sourcing Specialists on Inventors Alliance Radio Show

We just did a radio show ("Radio Show #2") with Andrew Krauss, President of the Inventors Alliance.  The Inventors Alliance is a fantastic non-profit organization which offers tremendous value in education and resources to inventors.  I've seen a lot of inventor organizations out there, and this one is the most helpful and professionally run that I've come across thus far. If you are an aspiring inventor, they offer educational articles, links, videos, and other resources to help move forward.  You can also check out Andrew's other platform to help inventors, InventRight.  If you are a veteran inventor, you might want to consider contacting them to share your story, experience, or connect with others in the business. 

Andrew asked some great questions pertaining to some of the issues inventors and businesses are curious about in manufacturing in China and offshore manufacturing in general.  I talked a little bit about our recent trip to China, factories, good sourcing strategy, quality control, and the like.   Check out the radio show here, by clicking on the play button next to "Radio Show #2". 

Marketing Your Product on an Increasingly Cramped Retail Shelf: Your Biggest Challenge and Your Best Friend

Imagine you are walking down this aisle looking for one particular answer to your need, in the form of one product.  What words come to mind?  The words that come to my mind are: "cluttered", "overwhelming", "confusing", and "lost".  Coincidentally, these are the same words that come to mind when I look at my taxes, the freeway system in Los Angeles, and my hair in the morning.

Your product, which you have invested thousands, tens of thousands, or perhaps hundreds of thousands of dollars into, not to mention your blood, sweat, tears, 2nd mortgage, and kid's college education, might end up on the shelf in a situation like this. 

Here's some developments in the retail world in the last decade to chew on.  The number of SKU's ("Stock Keeping Units", or simply put--"products") out there has increased tremendously.  This is partly because the increase in private label offerings by major retailers.  But, it is also because companies are trying to refine their product offerings to appeal more to specific market segments.  Shoppers, consumers in general, are demanding more specific offerings that meet their specific needs.  One national retailer shelves more than twenty different models of kitchen mixers.  A national home improvement retailer offers 318 different refrigerator models.  A national electronics retailers sells 164 digital camera models.  You get the picture. 

What does this mean for someone browsing the shelves where your product is placed?  It means that it has become more difficult to evaluate and compare product features and purchasing paralysis is more common.  To make matters more challenging, your product has got to sell well in the first few weeks it's on the shelves of a national retailer, or they are going to be compelled to replace it with something else that might.  Is the word "overwhelming" creeping back into your mind again?

Don't let it.  Here are some things to consider that can help you beat out your competitors who are throwing in the towel or are too risk-averse to try something beyond the same old formula.  As you may remember from a few blog posts ago, in which I posted an interview with Barbara Carey, packaging is essential to get your product's perceived value as high as possible.  Also, if you read this post about Joshua Bell and the importance of context in communicating value, you have got to smack people in the face (not literally) and provide the message that your product is great through context.

• Product Packaging:  Your packaging must provide a positive emotional experience.  This is a very large component of the purchasing experience.  A nationally acclaimed study presented at the 2001 Radiological Society of North America national meeting, by Dr. Dean Shibata, demonstrated that when images were taken of subjects brains as they made purchasing decisions, the frontal lobes of the brain always demonstrated high activity, which was indicative of a substantial degree of emotional processing.  How can you make your packaging provide an emotionally positive experience?  Make it easy to understand what your product does and the pain it relieves your customer of--at the most basic level.  Don't clutter your packaging with a description of every feature and description you can conceive of.  Your product might make someone's teeth whiter AND provide greater fuel efficiency for their car, but which one is the reason why your specific target market is going to buy your product?  Remember, they are already overwhelmed.  They are seeking an easy choice and buying experience.  You might not get every single customer that walks through that section, but you will surely get the one with the pain point that is looking for the specific relief that your packaging is screaming out.

• Marketing Strategy:  I simply have to refer to the post on Seth Godin's presentation in my previous post.  In fact, that provided a good deal of the inspiration for this post.  Customers feel good when they feel engaged.  They feel they have been reached in a personal manner by someone offering them something that meets their specific need.  You can help accomplish this before your customer even walks into the store.  Your website, your message, your mission, your brochures, your blog, your press releases, your trade show presence, and more, can all be geared towards getting close to the customer and letting them know that you aren't a huge, faceless corporation throwing a product at them.  You are a company made up of people that understand their specific needs and have come to their rescue with an amazing product that will help them feel that they need to make a special trip to their nearest retail outlet where it is sold, pick it off the shelf, and walk straight to the counter without even considering anything else.  Or, better yet, make a purchase directly from you off of your website.

The increasing complexity of the retailing experience is challenging companies big and tiny.  Your advantage, lies in the fact that you can push the above strategies to the next level much more quickly, easily, and authentically, than the big guys.  That retail aisle up above could be your ticket to your customer's favor.  Have at it...