You had a great idea and thinking of a launch your product scenario. Your prototype got great reviews from focus groups or even from a crowdfunding campaign. Now you’re planning for mass production, ready to launch your own website, prepping for massive online sales, and practicing poses in the mirror for your picture on the cover of Forbes.
Having something to sell is the easy part. Getting it into the hands of consumers is sometimes the more complicated step. E-sales may make marketing easy, but that can be deceptive. Ben Wong is the Head of Startup Launchpad at Global Sources. He helps startups understand the distribution channels they need to leverage, and the different challenges they need to address to get their products into the hands of paying consumers in an offline setting. Global Sources runs the largest electronics sourcing trade show in the world. This October, more than 63,000 distributors and retailers from around the globe will wander the aisles at the Asia-World Expo in Hong Kong, stopping — or not — at 6,000 manufacturers’ booths. Among those will be about 300 booths where ambitious, hopeful, sometimes naïve, startup companies will beam with pride, burst with anticipation, and sweat with anxiety as they demonstrate their products and hope for a chance to launch a product, start a business, and scale to meet demand.
Ben’s job is to make sure each startup has the best chance to succeed. The New Jersey native and graduate of Dickinson College in Pennsylvania has spent the last ten years in Asia. He and I met in his bustling Hong Kong office recently to discuss how he helps the next generation of business leaders understand the marketplace.
Jay Sullivan: Hong Kong has long been the gateway between China and the rest of the world. You must feel like you are at the epicenter of the tech boom, getting products in between two major markets, while getting to see the latest ideas becoming reality.
Ben Wong: There is definitely a palpable energy coming from the people I meet. They’re all excited. It’s the ones who are also a bit nervous that I know will have a better chance of success.
Sullivan: What’s the biggest misperception people have about marketing a new product?
Wong: A lot of startups think they can advertise their new product on their website and the sales will start pouring in. But only 10% of consumer spending happens on the web, and much of that is with time-tested products, not new technology products. With new products, particularly tech products, consumers like to touch the product before they buy it. They want to feel it, play with it, try out how it works, and see if it works for them. Therefore, startups have to understand the customer journey required when it comes to new products and brands.
Sullivan: How do you impart that knowledge?
Wong: We run a series of mini-events at no charge for startups looking to understand the marketplace. Many of the people we deal with are engineers. We help them become well-rounded business people.
Sullivan: What do you cover in these sessions?
Wong: We cover topics like understanding how to protect your intellectual property, how to price your product, what distribution channel is best for you, how you might need to educate the different elements of that channel on how to market your product, how you might have to package your product differently for different segments of the market.
Sullivan: It sounds like you’re running a mini-MBA program for creative types.
Wong: Sometimes it feels that way.
Sullivan: What tend to be the biggest takeaways for your audience?
Wong: There are five elements of getting a product to market that I think are most important.
First, how are they pricing their products?
Many hardware startups price their product without understanding the complexities of sales and distribution channels. To launch your product, they start with their “bill of materials,” what it costs to make their product. Then they factor in what they want as a profit margin, and they think they have determined their price. But it doesn’t work that way. The distributor who picks up the product from the manufacturer’s warehouse needs to add 40% to the cost of the product. The end retailer will add another 50-70% because they will be the ones giving up shelf space and paying for the sales people to learn about the product and spend time explaining it to consumers. Now your product that cost $8.00 to make, and that you thought you could sell for $12 and make a bundle, will now be hitting the market at closer to $20.00. You have to ask yourself if your product is worth $20.00 to the target consumer. If the answer is not a solid “yes” then it’s time to look at your production costs and look at ways to lower your costs because as a new brand, many distributors and retailers will not budge on their minimum markups required