By Lee Ann Fox and Carol deStefano
Many people have a “great idea” for a product, and eagerly look for ways to make their idea come true. Here is Part II in a two-part article (read Part I) on the eight essential steps to take you product invention from concept to market.
Part II: Preparing for Business
Step 5: Market research
Gather as much market insight as you can. You will need this information whether you decide to market your product on your own, or present to investors and manufacturers.
- Identify your best target audience. Most times, you think you know who your primary target is, so test this group first. But also test secondary market segments. Sometimes the results can surprise you.
- Get consumer feedback from your target segments, including reactions to: your product concept, product name, copy/messaging, packaging (if applicable), where they would expect to buy the product, how much they would expect to pay, and their intent to purchase.
- Put together a “competitive analysis” on any similar products already on the market. Identify the differences and similarities to your product and to each other. Create a chart showing their manufacturer, features, pricing, where they are sold, who they seem to be targeting, and where they are advertising or promoting their products.
- Most of the information you need can be found online. Look for industry related articles and research reports. (Some research documents may charge a fee, so be certain it’s what you are looking for before you spend the money). Check industry association websites for relevant statistics and trends.
- Then conduct your own consumer testing of your product concept using an online tool like Survey Monkey, or circulate a survey to your own personal contacts list that matches your target audiences.
Step 6: Draft a business plan
Put together a basic business plan outlining your timeline for development and distribution; estimate operating, manufacturing, distribution, marketing and customer care costs; and estimate profits per unit sold.
- Sample business plans can easily be found online or through the Small Business Development Center (www.alliancesbdc.com).
Step 7: Form partnerships
Select the best manufacturing, distribution and marketing partners you can to help take your product to market. You will want not just suppliers, but partners that can make the difference between moving your product forward quickly vs. struggling to do it on your own. Always look for ways to leverage other people’s experience and financial resources.
- Your patent attorney may be able to refer you to some manufacturers. Look for someone with offices in the US, even if they are manufacturing overseas.
- Beware of signing up with an “invention development company” that asks for money up front. Most of these companies make their money on inventor fees for products that never make it to market.
Step 8: Evaluate your options
By now, you should have enough information to determine which path to market you want to take for your product. And, you have the necessary information and documentation to present to investors and/or potential partners.
Form your own company to develop, manufacture, distribution and market your product – leveraging partnerships and investors as needed.
License your product to an existing company that already has established manufacturing facilities, distribution channels and marketing organizations. They will usually finance the tooling (averaging $18-$50,000) and manufacturing expenses in exchange for a share of the profit. Inventors usually receive about a 5% royalty based on units sold – but this varies depending on the industry.
- Whether you are presenting to a group of investors or to potential manufacturers, they will want to see proven results before committing.
- They will need to understand why this is a better use of their money than anything else they can invest in or spend their manufacturing dollars on. So, make sure your presentation includes all of the essential ingredients in the previous steps: good prototypes, patents, competitive analysis, market conditions/demand for product, and consumer feedback.