Step 1: Define Your Target Customer
When I talk to new entrepreneurs, one of the most common oversights they make is being unable to link their product idea to actual consumers interested in buying it. When it comes to determining your market segment, some of the biggest mistakes new entrepreneurs tend to make are having no target customer or a target that is too vague (e.g., “health conscious woman” is not a viable consumer group). Another big mistake is not establishing their target customer until after the product has been made.
If you’ve properly defined your target market, you should be able to answer the following questions:
• Who are they? “They” should be a group of people that are united by (at least one) common activity, profession, or health issue.
• Where are needs waiting to be filled? Working backwards from the constraints customers face when making a decision is a great way to answer this question. A great example: Are vegans lacking adequate choices of joint health products (most glucosamine is derived from crustaceans)?
• Where do they buy their products? Typical answers include specific retail outlets, healthcare practitioners, distributors, websites, catalogues, and events.
• Where do they obtain their information? This will allow you to identify where you should advertise; either specific websites, blogs, magazines, trade publications for professionals, or classes of professionals.
• Will it be possible for me to solve my target customer’s problem? Unfortunately, some problems exist because there is no reasonable or affordable way to solve them. Don’t put yourself or your product into that category.
Gathering the information necessary for answering these questions might seem like a tall order, but there are plenty of tools to help you do it. Start by asking people you know in your market segment. You can also use tools like Survata to conduct a consumer survey to fill in the blanks. Spending a few months and a few hundred bucks to get these answers right will save you a lot of heartache later on.
Step 2: Decide On Your Customer Acquisition Model
There’s no right or wrong way of finding customers, but a golden rule for choosing the method best for you and your product is: Pick the one you can do/work with best. Pay-per-click, blogging, media buying, direct sales, direct selling and working events are some of the most popular options. I advise a zen-like approach (and some more research) for making this choice. It sounds a bit corny, but chances are there’s one particular path that’ll speak to you if you look inside yourself. Let your intuition guide you.
Step 3: Do a Competitor Analysis
Competitor analysis is very important. Even the best product won’t sell if it doesn’t stand out from the pack. It’s time to open an Excel spreadsheet and start recording information about your competitors and their products. This should include price, how they are reaching customers, key label claims, price per ounce/pill/capsule and their target customers.
After collecting this information, you can separate your product from the rest in the following ways:
• Price. Tricky to do right, but tried and true. Large volumes often go to the lowest bidder, even if the difference is marginal. Just be prepared for paper thin margins (possibly less than $1/bottle when all is said and done).
• Find a new customer segment. Classes of customers, such as athletes, seniors or people with restrictive diets might overlook a particular type of product because it’s never been marketed to them in ways they relate to.
• Find a new certification. Is the world waiting for an organic version of something that’s not currently out there? A type of product that vegans can eat for the first time? Finding a new certification is a great way to instantly distance yourself from the pack. NOTE: This is much harder than you think! Usually, the reason these certifications don’t exist is because it’s either very hard or very expensive to create ingredients in this way.
• Delete an ingredient. Oftentimes an undesirable (or less popular) ingredient has to be used in order to make a particular product (usually because it has to come from a certain source). NOTE: The previous note also applies to this category.
The key here is to find a detail within the product development process that other companies decide to avoid or cut out (which they may have good reasons for doing — you’ll have to do research to find out). This is your opportunity, wily entrepreneur, to go all-in — demonstrating your commitment to your product and your target customer.
Step 4: Formulate
It’s not uncommon for people to think that formulation ought to be the first step. The reality is, formulation should happen right before you’re ready to bring your product to a manufacturer. Only after you have an understanding of what people are looking for, what they’re willing to spend, and what exists already can you comfortably start the formulation process. Here are some additional points to keep in mind:
• Start with the key features you want to advertise and then work backwards.
• It’s okay to borrow great ideas from your competitors but don’t go too far. Start with your vision first.
• If you have rough ideas in mind most manufacturers will have a product development staff that can help fill in the blanks.
Step 5: Find a Manufacturer
With a well-rounded product idea and your basic business model developed, you can now start approaching manufacturers. For industry newcomers, the process of actually getting a product manufactured can seem daunting and, at times, unaccommodating. You should learn everything you can before you start this step, as well as making sure that you’ve developed some kind of business plan to accompany your product.
With all of this in mind, here are a few more important tips for evaluating a manufacturer:
• Price is important, but not everything. You’ll often see prices cluster around a certain point for a product, which is normal. Golden Rule of Pricing: If it seems too good to be true, then it probably is.
• Check for NSF Compliance. Working with manufacturers/facilities that are (at the very least) NSF compliant is a must.
• First impressions matter. Simple things like timely responses and openness from the start are usually positive indicators of what working with a manufacturer will be like.
Step 6: Build Out the Rest of Your Business Plan
Here are some of the components that every supplement business needs to get off the ground:
• Fulfillment. Your manufacturer will often be able to provide it, if not there are plenty of other options to choose from.
• Legal Formation. Establishing the groundwork for legal protection and structure is a must. Be sure to set aside a portion of your budget for this task.
• Label Design. Working with a professional label designer is a must. Whether you choose your manufacturer’s in-house designer or a third party, a label is not something you want to pay for more than once.
• Setup Your Website. Some of the most popular e-commerce platforms
include Shopify and Woo Commerce. Whether you want a selling-focused or selling-and content-focused online store, the right platform is out there.
• Begin initial advertising. You’ve already decided on your method of customer acquisition. Now’s the time to begin planting your seeds, either by blogging, buying up ad space, collecting e-mails, or negotiating deals with your advertising partners.
It isn’t a bad idea to start working on these components before you choose your manufacturer. Either way, you should have addressed all of these components by the time your product has made it through manufacturing.
Go Forth into the Supplement Industry!
Now it’s time for you to get to work! Go forth and start your journey toward your very own (successful) dietary supplement line. Remember: Do your homework, weigh all the options, and above all else — be prepared!
This Tip of the Month was written by Andrew M. Goldman, Vice President Marketing,
NutraScience Labs, Farmingdale, NY with help from the NutraScience Labs team.
Published in WholeFoods Magazine December 2016