Getting a Physical Product to Market, Part 2: Launch
Armed with your pre-launch list and reservations, you’re ready to launch! If you haven’t read Part 1 on pre-launch, check it out before reading on. When you’re launching a consumer product, you can either launch:
- On a crowdfunding site
- On your own e-commerce site
- With a sales and distribution partner
Each approach has its pros and cons, as well as unique circumstances that make it appropriate for a given launch strategy. Let’s take a look at these three approaches in detail.
Crowdfunding — where you raise money for projects from everyday people through an online platform like Kickstarter, Indiegogo, or GoFundMe — might be the most recognizable way to launch a new physical product, thanks to famous Kickstarter campaigns from companies like Pebble, Formlabs, and Peak Design. Crowdfunding your launch is a great way to acquire early customers and build a follower base that will stick with and promote your product as your company grows and matures.
Think of crowdfunding as a pre-order campaign because in most cases, crowdfunding campaigns are for products that are still in development or, at the very least, just going into production. To successfully crowdfund, you need to create a video, get high-quality photographs of your product, and be ready to spend a pretty penny on advertising and public relations.
The money raised through crowdfunding is usually earmarked for things like tooling, assembly, and freight forwarding. But unlike a pre-launch campaign geared toward collecting email addresses or reservations, crowdfunding campaigns are all about conversion, namely getting people to buy your product before it’s ready to ship. Crowdfunding is ultimately a numbers game, and you need to get your campaign noticed by 10 times the number of people you want to back it. Expect to spend 10% of what you hope to raise with the campaign on marketing and advertising alone.
After a campaign ends, don’t keep your backers waiting long. Aim to fulfill your campaign pledges within six months to a year at most. If you can deliver sooner than that, do. But be careful not to over-promise and under-deliver. You’ll be required to provide consistent monthly (at least) updates to your backers about your progress toward manufacturing and fulfillment. Plan for this early by ensuring you have photo and video capture resources near your manufacturing partners to document production, assembly, testing, etc.
One thing to consider about crowdfunding is that different platforms have different tools and built-in audiences. Think about that before you choose where you want to launch. Indiegogo is increasingly the best place for new hardware products to launch, and their built-in marketing tools are great. But Kickstarter has a higher profile, especially for creative projects. That recognizability helps with trust among backers who may not have previously backed a crowdfunding campaign.
The drawback about crowdfunding is that you’ll drive the bulk of the traffic to your campaign page. You’ll grow the crowdfunding platform’s user base just as you’re growing your own. At the same time, you’ll need to give up around 5% of whatever you raise to the platform. On the upside, the platform bakes all the payment collection, communications tools, reporting and logistics integrations, and discoverability into a single platform, so you don’t have to cobble them together on your own, which can be very helpful.
Another option is to launch your own web store using an e-commerce content management system (CMS), such as Shopify. You can still run a pre-order campaign here too by collecting payment for the product at a discount well in advance of the product actually shipping, but you’ll need to use a third-party app, like one from Shopify’s app marketplace.
Alternatively, you can use your pre-launch from earlier to build anticipation for a full product launch, with the plan to ship products to customers within 7–10 days of their purchase. It all comes down to your financial position and whether you need money before commencing production, or if you can start production and start fulfilling with the hopes of making up the costs later.
To launch on your own, you need all the same assets you need to launch on crowdfunding: a brand, a website and email marketing system, and advertising. But unlike crowdfunding, you don’t absolutely need to create a video, though if you can, you should. Videos convert to sales really well when used in marketing. Also, unlike crowdfunding, you’ll keep a lot more of what you sell because you won’t be paying 5% back to a platform (though there are usually credit card transaction fees at around 3%).
The other benefit over crowdfunding is that everyone understands what an e-commerce website is and what it means to buy something online. Crowdfunding requires a bit of educating to help would-be customers understand what it is. Additionally, you aren’t required to publish monthly updates when you run your own web store, though you do want to use email and social media to keep your customer abreast of your progress. Updates are a great marketing opportunity!
Shopify is above and beyond the most recognizable and trusted platform for launching a new e-commerce business. Squarespace, Webflow, WordPress, and others also have e-commerce features but are more geared toward portfolios and static marketing sites. It’s hard to beat Shopify’s backend infrastructure for managing inventory, fulfillment, and returns.
Sales and distribution partners
If you’re lucky enough to have a partnership or pathway to a partnership, this is your fastest, safest, and most scalable way to get to market. Partnerships can take a number of forms, but fundamentally, they’re any arrangement in which another party helps sell your product. Think retailers like Target, e-commerce sites like Uncommon Goods, and drop shippers like Touch of Modern, for instance.
So why wouldn’t everyone prioritize this channel over all others? If you don’t have a partner already lined up or a solid pathway to a partner that can help you get to market, you’re going to spend a lot of time prospecting and pitching. An impressive pre-launch campaign can help a lot — especially if you can demonstrate a clear willingness from tens of thousands of people to pay for your product before it’s available — but you’ll still need an in with a potential partner for them to pay attention.
It can also be difficult to negotiate good terms, such as a reasonable purchase price or a prime listing, if you’re just starting out. Partners who purchase inventory from you to resell are usually looking for at least a 50% margin, meaning you’ll need to be able to sell your product to them for 50% of your retail price. This puts significant pressure on you to make sure you have plenty of breathing room between your cost of goods sold (COGS) and your sales price. The silver lining is that if you can work with a partner to get to market, your marketing costs will be close to $0.
The last thing to consider with a partnership is the terms of the engagement. Many big box retailers require inventory to be warehoused with an approved third-party logistics provider (called a 3PL) that has an existing vendor relationship with the retailer. 3PLs provide warehousing, fulfillment, and returns-processing services to ecommerce companies and big box retailers. Keep this potential requirement in mind when negotiating; kicking off a partnership with an approved 3PL takes time and may introduce unanticipated additional costs that will cut into your margins.
Additionally, pay attention to how your partner will handle returns and support. You and your team still need to provide customer support, but this can often be in collaboration with your partner’s own support staff. You will need to provide troubleshooting and support documentation to help them.
If you can, avoid any requirements to buy back the inventory that your partner isn’t able to sell themselves. We all hope our products will sell like hot cakes, but launching with a partner often removes your ability to control the marketing message and reduces your visibility into what is and isn’t working from a sales and marketing perspective. You don’t want to be on the hook to buy back all of the inventory you sold to your partner just because they can’t sell the product.
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