Product Development and Launch Series: Launching, Pricing and Getting Paid – Part 2
A MESSAGE TO PRODUCT CREATORS
If you’re a product developer and you’re looking for the best way to bring your unique creation to market, the direct selling industry could provide you with the ideal channel, with a fast track to market and huge potential upside.
The Sheffield Group has decades of experience advising product developers and helping them launch new and great products into the MLM channel. Here we summarize some of the key insights that help generate maximum success.
Once product development is complete, it’s time to market the product or service. This begins with creating the literature and supporting marketing materials that assist in the promotion and branding of the product. With the ultimate goal being… SELLING.
Pieces of literature and website assets will do a lot of work in promoting the product or service. The following literature is suggested to have ready in promotional packs.
Online Product Website or Overview Flyer – This includes an outline of the product benefits and sell features, as well as a short overview of the product and its intended customer base. A more detailed description should include the need and market for the product, the product’s uniqueness, and current competition. Also include the suggested retail and wholesale markup prices (in the range of 5-7 times the cost of retail goods).
When thinking about the ideal price range for an MLM or direct-selling product, it’s important to know that there is a limit to what the average person will pay on a monthly basis.
In the direct-selling industry, $50 to $100 per month for a nutritional product or even a skincare line is considered average. Skincare products can be priced slightly higher. Ideally, a product that is affordable to the masses will not impose a limit on the number of people who can afford the product, limiting sales potential for both the independent distributor and the company.
A product that is comparable to a similar product available in retail stores as opposed to one that is new to the world will be priced differently.
A good pricing strategy for products that are new to the world is to consider what the average person would be willing to pay for it, plus 25 percent. Customers may be willing to pay more for a premium product, especially if it’s sold through direct selling.
Note that it is always possible to drop the price but it is very difficult to raise the price of an underpriced product. Raising the price on a product could cause problems for the company. There are plenty of ways to bring down the perceived cost of a premium product through product specials, 2-for-1 programs, or even lowering the price as the business grows.
Keep in mind that having the most expensive product on the market, or the lowest, can place the business in a difficult position. Direct selling companies want to create a value proposition where customers feel they are getting their money’s worth.
Now that we’ve established some product pricing guidelines, let’s return to the discussion of product marketing.
MLM companies considering your product will want information about the product samples offered. Be specific when discussing how many samples customers will receive and at what cost. Supply customers with extra at the lowest quoted wholesale price to show good faith.
Be sure to build the costs of packaging and postage into sample pricing. Distributors should be taught that, before sending samples, they should qualify the prospect.
If samples are not available, prototype photos or artist renderings can be used as a replacement. Make sure, however, that all trademarks (™) or service marks are already assigned to the product. If trademark applications are still pending, be ready to discuss how the company plans to handle trademarks during distribution.
Trademarks are an important aspect of launch for any business. For more on trademarks, read this article by MLM legal expert Attorney Jeff Babener.
Closing the Deal
When you are getting ready to close a deal with a client MLM company, be ready with some standard legal documentation.
- Confidentiality and Non-Disclosure Agreement (be sure to enclose a sample of the documentation that the client will be signing).
- Distribution and Supply Agreement (again, enclose a sample for the client to be prepared to sign) and have the sales quotas determined beforehand.
These documents should be reviewed and signed at an in-person meeting. The reason for in-person meetings is to give your client an opportunity to see for themselves the manufacturing process or facilities. A lot can be told and determined by physically viewing the client’s operations first-hand. And, to maximize the value of seller and buyer time, be sure that all meetings are prearranged and scheduled with the appropriate decision maker.
Payment arrangements can be set up in a variety of ways; however, The Sheffield Group recommends requiring 50% down upon order placement and the other 50% prior to product shipment. If a client can’t afford this arrangement another can be agreed upon, but under no circumstances should credit be accepted.
Tying Up Loose Ends
Upon signing the first client agreement, be sure to address the costs of dyes, labels, artwork, and other costs of product manufacturing. Make a determination and come to an agreement about who pays for these expenses.
Agree upon delivery times and make those expectations clear. Consider the additional supplies needed, such as raw materials and packaging. Be sure to plan the timing of the first order and subsequent reorders.
Be ready to discuss product liability, specifically which party will be responsible for product liability and who covers the cost. Generally, it’s the manufacturer’s responsibility to take on product liability.
Lastly, consider the costs associated with research and development. Are these costs the MLM company’s expense or a shared expense? Many product creators negotiate a shared expense in exchange for product exclusivity. Perhaps a more favorable option is to have the client company pay in exchange for exclusivity.