Tag Archives: market research

For Inventors, News

Building a Product Invention Business Case

A typical product invention business case, which is what we like to call what we are doing with developing products and helping inventors develop products, is really centered around two major things.

First, what is the pain the invention will solve, and second, how do we identify how much the pain is costing the consumer who will use the product? The key with the best product business cases out there is finding the best product to solve the pain point or, when you’re inventing a product, creating the best solution. 

First Issue: Identifying Pain Points

In developing the best business case, obviously we want to identify what the pain is and how much that pain is costing the consumer because, then, we can make sure that our product has the benefits and the return on investment, or ROI, for the consumer. This way, we can make sure that that we are solving that problem in the best way possible. Otherwise, you’re just developing a product to compete with a product that’s already in the market. You’ll be competing with a product that’s well established. If we don’t help the inventor figure out what the pain points are and what we need solved, it’s probably not going to be a good invention business case.

The first thing we want to talk with an inventor about and make sure that they understand about their invention is that if they haven’t truly identified the pain of the current consumer, they’re going to leave something on the table. Meaning, they’re not going to charge enough for it, or they’re going to design the product around a false sense of actually meeting the customer’s needs.

Second Issue: Identifying Costs

In order to identify costs, we have to look at how current problems are meeting the pain points. People do not change the way they’re doing what they’re doing until the way they’re doing it is so painful that they are forced to make the decision to go a different direction. When they come to that decision, you want your product to be clear and visibly the best solution.

We may be able to design something that costs ten dollars but, if we can truly understand the cost and what people would be willing to pay,  that really set sets the value of what we’re designing. The better goal is to be able to build it for ten and sell it for a hundred, rather than make it for ten and try to sell for twenty.

We have to think about things like putting a value on customer pain points, and then determine if we can solve them, what would they be willing to pay for the product. If we don’t, we’re going to leave profit margins on the table and we’re going to leave benefits and features on the table. Benefits and features increase the ROI of your invention, so we definitely don’t want to keep them out of the final product.  

Pain points and costs are the main key pieces we want to understand in developing the invention business case. You’ve got to understand what’s currently available and, with your design, you want to make sure that you can meet those needs at a cost the consumer is willing to pay while making as much profit as possible.

At Alotech, we partner with you to find creative ways to help you navigate the manufacturing world. Because we work with inventors with a range of products and needs, we have the resources and knowledge to help you be successful. Contact us today by calling 919-842-3599, or visit our contact page and fill out the form.

For Inventors, News

4 Risks of Too Much Money Too Soon

Raising funds is a great accomplishment for any inventor, but it can be taken too far. Like all elements of life, too much of a good thing is a bad thing.

1. It Will Keep You From Running Lean

When you start out inventing, you have to be very creative to get your company off the ground. Over time, as you start raising more money, it can be much harder to keep that lean mindset from the start. Sure, you need capital to speed up the growth of your business, but raising too much too soon can increase the funds you waste. Instead, raise capital and force yourself to be stingy throughout the inventing process.

2. There is a Time Frame for ROI

Typically, venture funds are structured as 10 year commitments, which means investors expect a return on their investment in that time frame. The earlier you raise money, the earlier the clock starts ticking.

3. Money Creates a False Sense of Security

Many inventors use a formula that divides their money by their monthly expenses to see the number of months they can survive (also called the runway). However, it’s not always a valid way to look at things. First, expenses will always rise, which means the number of months decreases. Second, products can be late which means already-counted on revenue doesn’t materialize. This means the runway isn’t extended like counted on, and it can cause an uncomfortably tight squeeze.

4. You Depend on “Experts”

When an investor has money coming in, they begin to look for “world-class” experts and vendors who might not be all they’re cracked up to be. If an investor doesn’t have the cash, they need to look for more creative ways to get results rather than relying on consultants and agencies charging big bucks for their advice.

At Alotech, we partner with you to find creative ways to work within your budget. If you’re interested in spending your capital wisely, give Alotech a call! Because we work with inventors with a range of products and needs, we have the resources and knowledge to help you budget successfully. Contact us today by calling 919-842-3599, or visit our contact page and fill out the form.

 

For Inventors, News

Independent, Unbiased Third-Party Market Research Is Essential for Product Inventors

“There are around 1.5 million patents in effect and in force in this country, and of those, maybe 3,000 are commercially viable.” – Richard Maulsby, director of the Office of Public Affairs for the U.S. Patent & Trademark Office

Inventors tend to exhibit excessive optimism when it comes to the market viability of their inventions. This is because most people are biased; we usually believe that our own ideas are the best ones. Human beings are also prone to “confirmation bias,” which refers to our tendency to ignore or dismiss evidence that contradicts our conclusions. Making the problem worse, many inventors may ask friends and family members for feedback on their ideas—and a friend may say, “I’d buy one in a heartbeat.” Unfortunately, this type of advice is usually not truthful. Some friends may fear hurting the inventor’s feelings, and unless the friend happens to be a product marketing expert, their advice is probably not backed by any kind of critical analysis like third-party market research.

Benefits of Independent Third-Party Market Research

An independent market research company should be one of the members of your Master Manufacturing Team! Engaging a third-party marketing group to conduct independent research and perform due diligence on each new product helps inventors to validate their own findings. Entrepreneurs should conduct their own research prior to working with an outside firm. An inventor should strive to become an expert in the markets where the product will be sold. A third-party firm can provide an independent analysis and closely examine the cost of manufacturing, the competition and the key features and benefits that make a product sellable.

Pricing and Manufacturing Costs

The real question of marketability boils down to four factors:

  • The number of people who need for the product,
  • The price they will pay for it,
  • The cost of manufacturing the product, and
  • The pricing and availability of competing products.

A product idea might be a great one, but not if only ten people will buy it. A friend might say, “I’d buy your product in a heartbeat,” but how much would that friend pay for it? No matter how attractive or useful a product may be, it is necessary to keep costs below a critical threshold; otherwise, the product will be “priced out of the market.” Retailers will not put a product on store shelves unless they are confident that it will sell at a price that will net them an acceptable margin. The economics of an invention essentially hinge on the cost of manufacturing the product. Independent analysis by a third-party market research firm is important for this reason; an expert can project the retail price and work the numbers backward to figure out the maximum production cost.

Key Features and Benefits

It was once said that “if you can build a better mousetrap, the world will beat a path to your door.” The real world is not that simple. Whether you are introducing a brand-new product category to the world or making an improvement to an existing type of product, it must alleviate a pain that people are feeling. Otherwise, few will pay any attention to the bells and whistles, no matter how nifty its inventor may think they are. An analysis by a third-party market research firm can help to determine what unmet needs exist in the marketplace and whether these needs are strong enough to justify a purchase.

Competing Products and Substitutes

Entrepreneurs often miss the mark when it comes to competitive analysis and market research. When we feel that we have invented something great, we may be prone to believing that no one else has ever done anything like it. Even if this is true (which it often is not), more questions remain. Did someone else attempt to build a similar product before and fail? If so, why? Do other products already on the market adequately relieve the end user’s pain? If so, in what specific way does the new product add more value? A third-party marketing research firm can take a thorough inventory of the products and solutions currently available and compare the new product’s benefits against the competition.

Remaining objective about the value of one’s own product or invention is difficult, because it goes against human nature. Most inventors are not marketing experts—which is why it is easy to overlook critical factors that can influence whether a given product idea is a “go” or a “no go.” It is unfortunate but common for inventors to sink considerable sums of money into new products, only to find that no one wants to buy the fruits of their hard work.

Marketing experts are trained to look at businesses with an objective eye and assess how a potential customer is likely to view them. We recommend utilizing the service of an independent third-party market research firm, and doing so sooner rather than later. Understanding your product’s potential market share and marketability are keys to partnering with Alotech!