A great product is no guarantee of success
There are so many great products. Stores are full of them. Unfortunately, there are many that were great products, but they are not available anymore. They did not sell enough to stay on the shelf.
It is incredible to see the amount of effort and resources that go into developing products. Many are the result of people’s passion for an idea, some are developed to address a need the entrepreneur might have and others are created to fill a void in the category. It is sad to see the amount of work and investment that goes into products that do not achieve success or even worse disappear from the market.
Great products need so much more to maximize the potential they have.
Getting listed with a retailer or distributor is no guarantee of success
Enticing a retailer or distributor to carry your product is a major accomplishment. One to be celebrated in your business. Unfortunately, even if your product is great, it is no guarantee of success. Thousands of consumers will have access to it but it does not mean they will pick it up and put it in their shopping cart.
Many people believe a great product in a store, on the shelf will earn them enough to buy an island in the South Pacific. This (might) happen only when people want to buy your product and you can meet or exceed the sales your customers are looking for.
6 tips to increase your chance of success
Develop a product with an economic model that works in our industry
It is a reality in food and beverage that it costs a lot of money to move your product around, you have to create demand and retailers need to make money selling your product. When you look at the regular retail price of your product, these three things can absorb a significant percentage.
In this example your product is going to sell for $6.99 in the store.
The retailer wants to make a 32% gross margin, so your product needs to be delivered to the retailer for $4.75. You have a distributor who gets your products into the store and they need to make a 28% gross margin. That means you have to sell your product to the distributor for $3.42. We would also tell you that you have to create demand (see tip #2). That can absorb 25% of your selling price which leaves you with $2.56 to actually produce the product and cover all of your other costs. Approximately 2/3 of the retail price goes to the retailer, distributor and your investment in sales and marketing. We are using averages so you need to do the work for your product to see what your reality will be.
Create demand
It is your job to create demand for your products. A great product does not sell itself.
There are two areas where you can invest to create demand; trade spend and marketing spend.
Trade spend is the money you invest with retailers and distributors to drive sales. This can include ads, in store specials, loyalty programs and any other opportunities you have with your customers to drive sales. When you make these investments you should always try to negotiate and get the best opportunity for your products.
Marketing spend is the money you invest talking directly to consumers. This can include social media, mass media, public relations and any other opportunities you have to reach the people who will buy your products.
Execute a great in-stock position
People can only buy your product when it is where they want it, when they want it. It is a significant challenge to deliver this component of your strategy, especially as your business grows.
Although retailers tell you their #1 priority is to drive sales they will not do a good job ordering your product. They are focused on running their stores. You need to make sure it is on the shelf and if there are problems work with them to get the issues resolved.
If you are through the warehouse you need retail coverage to ensure execution is there and product is flowing through the system to the shelf. If you are using a distributor you need to manage them and make sure they are doing their job. If you are direct store delivery, you need to manage your space, be in the stores often enough and keep the shelf full.
Analyse what works and what doesn’t work
You might have noticed in tip #2 I used the word investment a few times. If you think of what you expect when you make an investment it is a return. Every time you spend money with a customer or on social media you should expect a return on the investment.
Forecast the results and measure the actual sales. If one tactic exceeds your expectations for sales, you should consider doing it again. If a different tactic does not come close to your forecast, you should find something else to spend your money on.
If you do not measure, you will not be able to learn and bring continuous improvement to your sales and marketing.
Build relationships
You need good relationships with customers and consumers. No news is not good news from retailers. Find opportunities to communicate with them, even if it is bad news. Plan your communications with customers, similar to the plan you would build for consumers.
There are opportunities throughout the year to interact. These can be face to face meetings, virtual meetings, trade shows, industry events, retailer hosted events, charity events, email, phone, text and the list goes on. Depending on the size of your business with each customer we recommend you have at least one touch point per month. As your business grow the frequency of the interaction should increase. Keep it reasonable and do not always expect a response.
You should also have a communications plan for consumers. You need to continue to develop relationships with people in your target market. Evolve with them. If they are more concerned about prices find a value message to focus on. You will be tired of the story long before they are.
Visit stores
If you want to be successful selling in retail, you need to visit the stores. This is where your customer is playing their game and where consumers make the decision to buy, or not buy your products.
You need to see how your great product compares and what is happening to it. You need to see if it has even made it to the shelf. Retailers are busy and they are not perfect. Honestly, they should be better. They do work with the same labour challenges producers and processors do. The average conventional store has 35,000 SKUS. That is a lot to keep track of, not to mention health regulations, demanding consumers etc. Not excuses just reality. You need to visit the stores or have someone visit the stores on your behalf to ensure your products are getting the best chance for success.
It is a cost to have retail coverage. We would put it ahead of many other investments. It is also part of your job to get out there.
There are so many great products and it is unfortunate when they do not deliver the results they should. It is not because of the product. It is often because the work, plan and resources are not in place to ensure they sell. It is hard work. It is tedious work. It is frustrating work. If you are not prepared to do this work your great product might not deliver enough sales to get you that island in the South Pacific or just allow you to operate a successful business.
Peter
SKUFood Recipes for Success Podcast
The response to our SKUFood Recipe for Success podcast has been great. We want to thank everyone who has been with us as a guest. So many interesting conversations about our industry.
The story of Cedar Valley Selections is a great one. You might have seen them on Dragon’s Den. I was fortunate to meet Ameen and Surria a number of years ago when I did a workshop for the Windsor Essex Small Business Centre. They were just starting and Ameen asked a lot of questions!
If you would like to be a guest send us a note. We are always working on the upcoming episodes.
Retail Council of Canada Grand Prix Awards
Speaking of great products…
Recently the Retail Council of Canada announced the Grand Prix award winners across a broad range of categories.
Congratulations to the winners and hopefully they celebrated this with their team.
Similar to our content this week, it is no guarantee of success. The work we outlined above still needs to happen to ensure these great products have the best chance to meet or exceed sales expectations.
