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.
- What does the market dictate for a product formulated similar to yours with the same amount of servings?
- Does your product have a larger market presence than that brand?
- If yes, go ahead and add a premium tag to it.
- 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.
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