Marketing Your Invention
You have developed the “BETTER MOUSE TRAP” and now it’s time to make some big decisions. If you do not sell the idea and decide to market it yourself, the following article will help you down the road to success. While it is impossible to cover all aspects of the new product launch in this article, we will focus on two areas that are critical: pricing and the marketing budget. Both of these can make the difference between success and failure.
The Pricing Decision
You do not need a course in economics to understand the basics of pricing. When you look at either individuals or the whole market, the rule of thumb is that the lower the price, the more you will sell. The often quoted exception is high ticket luxury products or services. There, the high price exists to provide a symbol of exclusivity and superior quality, such as in perfume and designer fashions.
For the rest of us living in the real world, maximizing our profits with the correct price is a trick that few have mastered. This is mostly due to the dynamics of a competitive environment. We do not have the luxury of existing in a competitive vacuum. Our competitors are out there making things difficult. For the best example of how a competitive environment can make pricing a nightmare, think about the airlines. They are so busy competing that they are driving themselves and each other bankrupt.
When setting your price, keep in mind the following:
-How are competitive or substitute products priced?
-Do you have an advantage over competitive products that can be converted into $?
-Do you have an advantage in production cost that can be translated into $?
The more unique your product the more you can charge over and above the competitor. The exact surcharge relates to the dollar value of your superiority. If you have a significant production cost advantage over a competitor, you can price slightly below them and capture market share. However, you can expect them to react competitively and lower their prices as much as they have to. Both you and your competitor might be better off in the long run if you price close to each other (without collusion, of course).
Those of you who have significant up-front manufacturing costs must consider your average cost curve and your economies of scale and scope (how much cheaper production costs become as you increase production quantity). You may need to achieve a set sales goal to be competitive at all.
Don’t underestimate the power of market research to determine the willingness of your target audience to pay a particular price. Market research can also help you to determine the value that your target audience places on the particular features and attributes of your product. A little market research now can make a big difference in profit levels later. If you decide to do your own market research, there are several good books and other resources available.
If you live near a university with a business school, you often can get help from the MBA students on designing and administering a questionnaire. The students will get course credit and you will get market research for a fraction of the cost of a typical provider. This type of research may be very useful if done in the early stage of the product design.
A proper analysis will determine the value that your customers place on various attributes and features, and will help you design the optimal product. It can also identify different market segments with varying needs.
The Marketing Budget
Unlike the industrial powerhouses, you probably have a very small marketing budget with which to launch your product. It is crucial that every dollar is spent in the most efficient manner. Luckily, two of the most powerful marketing tools are free. Both word of mouth and press coverage can have a great impact on your product launch. Each industry is different, but there are often ways in which the industry communicates with itself (i.e. blogs, newsgroups, newsletters, trade publications, associations, trade shows, etc). For these methods of communication, the primary investment on your part is time. Set aside time each week to take advantage of these forms of marketing communications. Write articles for trade publications, log onto bulletin boards, and post articles on internet news groups.
For the marketing tools that cost money, like on-line and traditional advertising and direct mail, your best course of action is to rate their relative effectiveness. Of course, this effectiveness measure should indicate the potential for a final sale, not just the ability to reach your target. This is the classic mistake made in traditional analysis. The traditional reach number is meaningless if it is not likely to generate a sale.
For the initial media selection process, you may want to find out what marketing tools the competition is using. They may not be using the most effective marketing tools but it is a good place to start. Involve a professional in the production and selection process, at least in the early stage. Otherwise you may end up wasting your money on the wrong marketing tools.
Create a method of tracking the responses for each marketing tool. This can be done either with coupon codes, telephone extensions, or simply by asking. The most effective marketing tool is, of course, the one that results in the largest dollar sales per dollar cost.
When negotiating for advertising, do not neglect the possibility of P.I. (Per Inquiry) or P.O. (Per Order) rates. When there is unsold space in the media, the ad sales department may be willing to accept a P.I. or P.O. contract. If your product has a broad use, you might be able to barter.
