Stop Forcing Product Into Retail!

The single biggest factor to the growth of Pinnacle Brand Management in the last 3 years has been the fact that brands are waking up.  Owners, Presidents and Sales Managers have grown over exhausted with attempting to use the same tactics of selling with decreasing sales results.  Where Pinnacle has grown the most is on the naturals side of the business. This is because there are more brands but also for the simple fact that selling into grocery, specialty and nutrition stores has completely changed over the last five years and naturals, from our research, is slightly behind in the direct to consumer approach.

I was talking with a Sports brand owner yesterday and he was telling me that he got so frustrated trying to sell into retail that he started fresh with a new brand planning to be direct to consumer only.  With only six months of dedicated direct to consumer marketing, and really just a few direct to consumer sales, his phone was ringing off the hook with retail buyers. I said sarcastically, “you mean, you didn’t call them incessantly, begging them to bring your product in and sell them product below cost to get it on the shelf?!?!”   He laughed because he knew Pinnacle took a similar approach with one of our brands and got the exact same results.

Product innovation aside, retail buyers could care less about your product or the pricing you give them.  What they care about the most is if it will sell. Price, especially for retail, isn’t the most important factor since consumers can most likely buy online for less.  What is the most important is if there is a demand for the brand/product. Stores no longer create demand…..and to be honest, I don’t think they ever did! Brands are solely responsible for creating demand and stores are just a place where people can purchase. 

If you want to increase retail sales, dedicate your time to increase demand.  Leverage social media, digital marketing and content creation to make your product and brand very desirable and retailers will come to you, you won’t have to go out and get them.

Sales Funnel 101

Sales funnels are all the rage.  We have brand owners and CEOs asking us about eCommerce sales funnels not knowing what they are or how they work, but they know it’s something that is crucial to their direct to consumer success…..and they’re right.  

Identify the Audience

Everyone seems to understand the funnel concept.  The top having a large number of potential customers, many of which won’t buy our product and the bottom of the funnel being the closest to our exact customer ready to purchase.

The key with funnels is producing the most appropriate message or offer for each group to lead them down the path to purchase.

Top of the Funnel

For us the Top of the Funnel is an ongoing discovery process.  We produce low barrier content like an educational video, an entertaining video or a blog post.  From there we can determine how many people engage with the content. We are to assume that people engaging with the content are more likely to be a customer than those that don’t engage.  We capture the data from each content piece as to which worked best and we keep testing.

Middle of the Funnel

Middle of the Funnel people have either already engaged in our content or we have a high level of confidence in their demographics that we serve content that requires some kind of committing step.  For instance, offering a free download in exchange for an email address is good for a middle of the funnel group. Again, we are to assume that if they are willing to give us an email address that they are more closely related to a person that would actually buy our product.

Bottom of the Funnel

Someone at the bottom of the funnel is someone that is ready to buy.  Anyone that has engaged in the top or middle of the funnel can be put into this group, but we also lump abandon cart people into this group.  With this audience we serve a strong call to action like a promotion or free shipping offer that motivates them to act.

Lastly, it is crucial to work backwards with your audiences.  People that make it through the funnel need to be leveraged in look-alike audiences to refine each part of your sales funnel.  If this refinement is done properly and enough times, your funnels will run smoothly. By no means does this have a “set it and forget it” type scalability, however, by constant refinement and testing you can have a very powerful sales engine. 

International Products and The USA

A large portion of our business is dealing with and representing international brands in the USA.  The largest untapped market for most international brands is the USA with plenty of opportunity still available.  Breaking into the US market comes with its own share of challenges including “Americanizing” your marketing and refining your sales strategy to compete with the top global brands that originated from America.  

The first thing in being able to compete is to control your costs. Being smart about establishing your business and marketing is crucial and could end up costly if you don’t have a strong grip on the market. That was essentially the seed of our business to create a very cost-effective way to grow in the US without breaking the bank.

One cost saving strategy that we’ll focus on today is freight and manufacturing.  European brands, in particular, are in love with their local manufacturers. The relationship bonds are very tight, probably because of excellent terms, communications and satisfaction.  This, however, can significantly impact your ability to do business in the USA. Here are the hurdles you must contest with.

  1. Expensive shipping of product to the USA.
  2. Tariffs and other regulatory taxes for importation. 
  3. Timing – product being delayed on the water/air and quarantined by FDA for weeks or months.
  4. Thousands of dollars spent in initial regulatory and customs broker fees.

At Pinnacle we have relationships with the best manufacturers in the USA.  With these relationships you avoid all the extra costs above and it allows you to price competitively with the USA brands.  Contrary to belief, ingredients used in manufacturing in the US are held to a very high level of quality checks to insure purity.  In addition, now that brands have moved away from proprietary formulas, there is no need to keep your formula a secret. 

Regardless, we always encourage brands to do whatever they feel most comfortable with however, if regulating your costs is important (and it should always be important), consider a US manufacturer to make your product as you get established in the market.  Pinnacle can source ingredients and work with the best manufacturers to insure the same quality of product, best pricing and comfortable runs to put your brand in the best possible position for success. 

Find Your Target Customer

I believe we always need to be targeting the end consumer.  Whether you are a retail specific brand or direct to consumer, your marketing needs to be focused on the person that will be using your product.  

That being said, how do you find out exactly who your customer is so you can run your targeted campaigns?  For established brands with years’ worth of online sales data, it’s easy. Simply export the list of email address from your sales segment and upload it into Facebook.  Facebook can then identify your customer.

For new brands or brands without online sales history you need to start the process of collecting data through content marketing.  Now you should already have a general sense of who your customer is by the product you offer. For example, if you have a women’s line, you already know you’ll be targeting women but with something more general you’ll want to establish some basic parameters. 

  • Age
  • Sex
  • Interests
  • Location

If you can identify these four items, you will be ahead of the curve.  

Next, create some brand specific content, blog articles that associate what your brand offers with an educational piece that will interest someone as a reader and as a potential customer.  An example like “4 Ways to Gain Weight for Your Sport” would be a great idea for a blog post for a brand that offers sports performance products.

What we do next is post this article on our site and create campaigns on Facebook specific to our target market group.  To better understand our target market, we create duplicate campaigns with slight variations (A/B testing) to see which gets more activity.  

The most important piece of data we collect is not the type of person that clicks to read the article (although that is good information) but it’s the person that clicks the article that also ends up buying your product.  Through retargeting and tracking we can specifically follow up with the person that reads the article with some sort of promotional ad and if they end up buying, we have another clue as to who our target is.

The end goal is to be able to export a list of email addresses from people that purchased so we can create look alike audiences to serve our ads to.  For best results having a list of at least 500 people can optimize Facebooks function to identify who your customer truly is. As you can tell, for startups, this could take some time.  Trust the process and don’t start this unless you are committed to it. 

Eliminate Chargebacks with a Net Pricing Model

Want to know exactly how profitable your sports nutrition company is at any time?  Switch to a new pricing model with your retailers.

Avoid chargebacks which are nearly impossible to audit.

Control supply.  If you build up enough demand for your product, you can control the supply.  When you do this, you force resellers to abide by your MAP policy. If everyone can play by the rules, the net pricing model will work.

If they cannot play by the rule then you simply cut off the retailer and allow the system to drain their inventory.

Is it Possible to Sell a Clinically Dosed Product?

In the Sports Nutrition industry, creating a clinically dosed product is the right thing to do.  You can go to sleep at night knowing your customers are getting a quality product without fillers or small quantities of effective ingredients.  However, to create products like this you either have to be prepared to operate on small margins or you have to price your product outside of normal category prices to maintain a healthy business model.

I’ve found that today’s online consumer does their search based on price…..period.  Large specialty websites are well aware of this, which is why you always see merchandising of low priced product and/or aggressive promos for products that definitely don’t live up to an effective product standard, in most opinions.

So how can you create a high-quality product and sell it effectively to maintain a healthy business?

  1. Increase your direct to consumer business.

If you have a very good product, boost your direct sales.  This is done through strong lead generation, effective social media marketing, an active website and creating quality content.  You can safely price your products in category standards (ex Pre- Workout $29.99) if you are selling directly from your website.  This price may be impossible if you are trying to sell through distribution, Amazon (with their fees) or any other ecommerce site with their discounts off of wholesale.

  1. Double down on the marketing.

If you want to clinically dose your product and work with resellers, you must come in with a plan of how to market it.  In fact, you should do several months’ worth of marketing prior to the release to see what kind of interest you can generate in the product.  If you have to sell a pre-workout, for example, at $39.99 to make solid margins through resellers, you need to make sure people want this product prior to its release otherwise you won’t have any resellers.  Creating quality content is key.  When selling through the internet you need to rely on video as your sales rep.  Educational and entertaining videos may just be enough to get someone to spend an extra $10 on a high quality pre workout with 10 less servings.  Getting a manager at a brick and mortar store to push your product may be a challenge, so don’t bank on it.  Consumers don’t go into the store to browse any longer, they go in with an agenda because they’ve done their homework already. Create a scenario where they go into shops asking for your product.

In summation, don’t create a clinically dosed product unless you have a strategy to take it to market.  Sure, creating these types of products is the best thing to do, but be sure to have a B2B and B2C strategy and if at all possible generate enough content prior to the release to get people lined up to buy.  This will not only help direct sales, but will generate enough interest on the reseller level where you don’t have to chase down customers.

 

Reverse Engineer Your Cost Of Goods

Bringing a sports nutrition product to market requires more than just a good formulation.  Some of the best formulated products don’t even make it through their MOQ’s before they hit expiration dates.  Why is this?  If I make the best product the market has ever seen, what’s the hold up?

Too many new companies try to start categories or create product before they completely understand what the consumer will pay.  The internet has given us the best resource to price out similar products to get an idea where we need to price our products competitively to give it a fighting chance.

If you’re a new company or a part of a lesser known brand your best way to storm into the market place is with low cost goods and an aggressive price point.  As you build brand loyalty, then you’ll have an opportunity to introduce products priced above category standards.

Few things to keep in mind when starting your discovery process.

  1. What does the market dictate for a product formulated similar to yours with the same amount of servings?  
  2. Does your product have a larger market presence than that brand?
  3. If yes, go ahead and add a premium tag to it.
  4. If no, you have to come in lower.

When selling directly B2C, there aren’t many other factors to consider other than, if you want to run promotions, will you still maintain healthy margins?

When selling B2B, this is where your COG is going to play an important factor.  There was a time when wholesale cost was wholesale cost, but through the manipulation of the industry, discounts have since been applied to wholesale where brands extend deeper discounts to those accounts that can move higher volumes.

In addition, in the .com space, promotions influence sales. If you want to play ball with the likes of a Bodybuilding.com, you need to be prepared to give discounts of 35% or more off of wholesale and create situations where the product can be promo’d at 20-50% below that to gain any type of merchandising space.

This all has to be done within your MAP pricing, which needs to be set in line with the competitors in each category.  

This may be enough info for you to bail out and look at another line of work because being able to get product at the price you need to remain competitive is extremely difficult when starting out.  With this in mind, if you are a smaller brand with less access to funds or resources, start with a direct to consumer model.  If you can grow your following, you’ll have retailers connecting with you and you can control the market.