Invent It, Sell It, Bank It!: Make Your Million-Dollar Idea Into a Reality (14 page)

About being the highest priced item: As you know by now, my ultimate goal has always been to bring people a great product at the best value, and I aim for the biggest, broadest market. Sometimes, though, you may find that your product is overengineered or really high quality, which can make the price much higher than the competition that is selling the hell out of it. The question is not whether people will pay the extra cost for a better item versus the alternatives out there. Rather, it is how many people will pay the extra cost for the better product? You don’t see a lot of Ferraris out on the streets, but that doesn’t mean that the carmaker isn’t rolling in profits.

DON’T BE GREEDY

Some people use the same “keystone” strategy as retailers, meaning they calculate their profit by doubling their costs, and they don’t want to sell for anything less. But you will
need to balance your needs and the needs of your family against what the general public will be willing to pay for your product. You may not be able to earn a 50 percent markup and still price your product competitively. Sometimes you can make only a 30 percent margin, sometimes only 40 percent. Evaluate each item individually.

Not long ago, I met the father of a young entrepreneur, eleven-year-old Lukas Pakter. He was so proud of his son, who wanted to be an entrepreneur and started his first enterprise, selling glow sticks. As you can see, this kid already has better sense than many of his older, greedier competitors. Lukas wrote his story to me in his own words:

So it all started 2 years ago at a 4th of July festival. There was a man selling little rings that would fit on your fingers and glow all different colors. I remember him selling them for about 4 dollars, which seemed really overpriced. The next morning I looked up how much the little rings cost and they cost only about 50 cents each, so everyone was getting ripped off. Two years later, I was looking for a way to make some money and I came up with the idea to get 200 glow wristbands, which cost 40 dollars, and then I also bought 100 glow necklaces for 20 dollars. At the 4th of July, I sold the wristbands for 1 dollar each and the necklaces for 2 dollars each, which to me and the people who bought them seemed like a more reasonable price than the price the guy was charging 2 years ago.… I couldn’t carry all 300 glow bracelets and necklaces, so my stepbrother Diesel handed out the glow sticks and I took care of the money.… By the end of the day I had made a profit of about 300 dollars. I split the 300 dollars with Diesel.

Lukas is already way ahead of many entrepreneurs because he’s smart enough not to be greedy. That’s a lesson I’m constantly trying to impress on people. Set your price correctly, and you will make plenty of money. Don’t be a one-and-done because you were so set on making a 50 percent margin that you set the price too high on your product and made it fail.

My strategy has always been to make a good-quality product at an affordable price so that everyone can enjoy my products. That means I sell at the lowest price I can afford to, taking slimmer margins but hoping for bigger volume. My theory is that the more volume you sell, the more consumers have your product (which lends itself to more word-of-mouth sales), the happier retailers are, and the longer you stay on the shelf—or additionally in my case, on QVC. It’s a simple theory and it works. Sometimes when I can, I can make a better margin on a low-cost item, but I’ll have to take a lower margin on a different higher-priced item. It makes more sense to sell a product at the right price than to get stuck with inventory because consumers think it’s too expensive. Pricing according to what feels right for the market, and what people tell you they would pay for it, is the smartest way to go.

The truth is that these days I don’t do much market research. One of my strengths has always been that I have good gut instincts about what people want and what people will buy. But it also helps that I have relationships with some of the most astute buyers in the business. As I’m developing and testing products, I can often count on the buyers at QVC or in retail to share their thoughts with me. They have tons of experience with what works and what fails.

Sometimes you need to convince them that your product is
different from or better than something they might have seen in the past that didn’t work. That’s what happened with my closet organizer. The buyers said they’d tried closet organizers before and they didn’t sell. I needed to convince them to give mine a chance. I said mine was different—it spins and has shoe pockets on all three sides and has purse slots. I had to be really persuasive, and was excited when they finally said they’d give it a try. Fortunately the product became a great seller, and over the years we sold hundreds of thousands of units in varying styles and configurations. They’re still on QVC today.

Still, I’m always grateful for these buyers’ opinions and I value their input. Many times they have brought great thoughts and ideas for product enhancements to the table. It’s a good thing I have them as my sounding board. My team also has great input and ideas. It’s always a team effort. One funny running joke among all of us is that Dan, who is unbelievably brilliant in so many ways, and a whiz with numbers, is not naturally a “product guy.” No matter what new product I’m coming up with, his initial reaction is, “Nope, not gonna work. No one’s gonna buy it. Not gonna work.” “Yes, it will work. Don’t worry, they will buy it,” I’ll tell him. “Trust me. I have a little bit of a track record. Just watch.” Everyone at the table will crack up. Dan’s a good sport. He sees us laughing and he knows why. The product will go on to sell millions. And yet no matter how many times we’ve repeated this scenario, he still feels compelled to be the skeptic. We all have our areas of expertise. Dan is a numbers guy; I’m the inventor. That’s why we’re a perfect team.

Surround yourself with people who have different skills than you. Everyone benefits from complementary skills.

I certainly don’t have a perfect
record. Market research might have saved me from one item that didn’t work at all—a smartphone wallet. It looked kind of like a knapsack for your cell phone. It was a black leather case that adhered to the back of your phone with a hook and loop fastener (like Velcro) and had a secure, slim, and sealable pocket at the top where you could put your credit cards, a little cash, and ID. My friend Jeff brought the idea to me. I didn’t create it, but I loved it! I thought it was brilliant, and was perfect for someone like me who doesn’t like to carry the extra weight of a wallet.

“Your best teacher is your last mistake.”

–A
UTHOR UNKNOWN

I thought it would be perfect for other women, too. A woman may leave her purse at home, but she will not go out without her phone. But where to put your ID and a little cash or a credit card if you don’t want to schlep around a handbag? The smartphone wallet solved that problem. I loved it (I still use mine). But it didn’t sell. It was only later that I asked around and discovered that a lot of people didn’t want to put Velcro on their smartphones. Jeff was definitely on to something, because today many cases have integrated slots for credit cards. I just wanted something that could hold more—but I guess the market didn’t. I always learn from every experience.

Some people feel better knowing they’ve done the research for every product, even when they have a proven track record. Others have a knack for hitting the sweet spots and don’t feel the need to dig so deep every time. Continue to do market research before introducing new products until you have a track record of success and feel you have honed your instincts. Eventually, you will find that you need a lot less market research once your business is up and running, especially if you take the advice I offer later in this book, and create extensions off the product lines you’ve already created.

MARKET RESEARCH TO-DO LIST:

Write a questionnaire complete with 8–10 open-ended questions that will elicit honest feedback.

Identify a minimum of three locations for face-to-face consumer research.

Identify online sites for research.

Establish that people like your product.

Establish that there is a demand for your product.