CPG Product or Business

Episode Transcript

SPEAKERS

Mark Young, Justin Girouard

 

 

Mark Young 

Welcome, everybody to another edition of the CPG insiders. I'm your host Mark Young with co host, Justiin Girouard. I'm a little under the weather today. Justin, my voice is a little off. You can tell that.

 

Justin Girouard 

I mean, I just think you've got your late night radio DJ voice on now.

 

Mark Young 

It is because I can get very close to the microphone and I can talk like this.

 

Justin Girouard 

See, we're playing to smooth jams.

 

Mark Young 

That's right, baby.

 

Justin Girouard 

Exactly.

 

Mark Young 

So we're gonna we are going to talk about a subject today that you and I get exposed to from time to time and the topic is do you have an item, Or do you have a business?

 

Justin Girouard 

Yes, yes. Well, especially now, Mark, I think I feel anyway, that this is something that we have run into a lot more in the last three years with the emergence of Amazon, because Amazon created the ability for people to start making money off of items.

 

Mark Young 

Items. Yes.

 

Justin Girouard 

Right. But not necessarily have something that you can build a long lasting business or brand against and, and there's a lot of confusion.

 

Mark Young 

Right you can you can come up with a chicken Shredder, and put it on Amazon and sell 25 pieces a day and make a nice little side hustle. Exactly,

 

Justin Girouard 

exactly. But and we get calls all the time. Hey, um, you know, I'd sold you know, a few 1000 of these things on Amazon, I want to go to Walmart. And it's like, well, hold on. Hold on. Is that really the right opportunity here?

 

Mark Young 

 Right. So first off, let me explain something that people unexplained the difference between short tail and long tail retail. When we think about long tail and short tail. So I want you to imagine in your mind right now an XY graph. And on the left side of the graph, we're starting way up high on the page. And then our graph slowly, you know, kind of rapidly at first, rapidly slopes down toward the bottom of the page. Then it takes kind of a hard right turn and it runs very parallel to the bottom of the graph for a long time. So let me tell you what I'm explaining here. Let's say that we're talking about book sales.

 

Justin Girouard 

Yep.  Yep.

 

Mark Young 

So if we go to Costco, Costco sells a lot of books. But if we go to Costco, Costco probably only has 150 book titles. That's probably the max that they have a book titles.

 

Justin Girouard 

Yeah.

 

Mark Young 

That's called the short tail. So when we look at this graph, we see that to the left of the graph is where the majority of the volume is. That's The big volume. So Amazon or Costco will have their 150 books. And their 150 books probably represent 80% of all book sales this month, nationally. Now we start to run down the long tail, that that's called Amazon. Where 150 books is in Costco, Amazon has millions of books, infinite selection, infinite selection, because Amazon has the luxury of being able to sell one. Now, the problem here with retail is retail has a limitation on it. And that limitation is called atoms. Because A-T-O-M-S.

 

Justin Girouard 

Right? Physical, yes.

 

Mark Young 

Brick and mortar is made out of physical things. And even in the case of Amazon, Amazon doesn't need to carry all those books because Amazon can even do print on demand. Oh, absolutely, absolutely not. In the case of Costco. Costco needs to carry a large quantity of those books because they sell so many of them. And they only carry the top 50, top 100, top 150 titles, and that's the extent of it. So because of this long tail environment, everybody can sell something, a thing that I find fascinating of all the millions of songs that are on iTunes, I read a stat that says every song on iTunes sells at least once one copy a month. Now think about that 10s of millions of songs on iTunes. But everybody sells at least one. But if we were to look at the biggest sellers, where are they at? Will they listen to the Billboard Top Top 100, right? Billboard Top 100 is going to be 90 plus percent of all the volume. So 100 songs will make up 90% Of all the business, and 10 million other songs will make up the other 10% of the business. So this is the difference between Long Tail and short tail marketing. And it's why long tail marketing creates these wonderful opportunities.

 

Justin Girouard 

Oh, absolutely.

 

Mark Young 

Because I came up with a cake decorating glitter kit, or buy chicken Shredder, or, you know, whatever the item is, and I can go to Amazon and I can show my cake decorating kit. And there will be some people who are really into baking who will see my cake decorating kit and they'll call and order it.

 

Justin Girouard 

Right? Right.

 

Mark Young 

 When we're limited to brick and mortar. Because of this whole problem with atoms, we're limited to items that have to be in the short tail column. So now we're looking with items that have to be on that far left of our XY graph. So the equivalent of your item needs to be the equivalent of a Billboard Top 50. Right, right, or, or the, you know, New York Times bestseller list. It needs to be the equivalent of that in its category.

 

Justin Girouard 

And so I guess the transition, then, I mean, I'll ask the initial obvious question, which is, how do I tell if I have a business or an item? I mean, I'm making money on it. But how do I know the difference?

 

Mark Young 

Well, this almost becomes like the Supreme Court's old ruling on pornography, that we'll know it when we see it. I will say for many times you and I will look at a product and we will say that's an item not a business.

 

Justin Girouard 

Well, and I think even take it larger, right? If you're if you're going to create a business, you need to have a product or even service, right? That provides a unique value that either surpasses what's currently in the marketplace or something that doesn't even exist in the marketplace. And that value can be in different things but that's the key, right? And that can be either through unique technology, you know, unique IP. It could even it has been done in the past, right? With with simply a unique messaging or unique value statement that connects with consumers in a way that other things are. But it has to be able to create more value than what is currently in the marketplace for consumers.

 

Mark Young 

So I'm gonna give you an example of items that tend to be items and not businesses. They are products who, who I think tend to fall into the area of accessories. So I had a delightful woman brought me her invention that she made. And she made a device that stopped, that you could put on the easel of a picture frame that will stop the picture picture frame from sliding down and the photo falling over.

 

Justin Girouard 

I remember this, I remember. Yep.

 

Mark Young 

It worked. It solved the problem. And it was a $5 item, if that.

 

Justin Girouard 

Right.

 

Mark Young 

So the problem is you have one $5 product that goes to a category we'll call picture frames, that only solves a problem for a small percentage of the people who buy picture frames. So when we look at picture frames, we already have to say, not a not a huge category at Walmart, okay? They carry some picture frames, not a big data, big category. Now, of all the people buying picture frames, what percentage of those people will identify the picture frame falling over as an issue. So now this market is getting very narrow. Now, we have the issue of it's a $5 item, which means you have no money to advertise. And Walmart is looking at bringing in an item that if it's sold would make them $2. So in this particular case, the hard reality of it for this particular caller that came to us was you need to find a picture frame company who's willing to buy your IP.

 

Justin Girouard 

 Mm hmm.

 

Mark Young 

 Because as an accessory to a line of picture frames.

 

Justin Girouard 

 It's great. It's a great extension.

 

Mark Young 

Right. Because I have 10 picture frames in Walmart. And now I can sell this accessory that will fit all 10 of them. And Walmart might give me some extra shelf space because I already have 10 spaces on their shelf. So to get one more accessory in isn't such a big deal. But for me to go to Walmart and get Walmart to open up a new vendor agreement for a vendor who might sell one product a week per store for $5. Walmart's not going to do that.

 

Justin Girouard 

Nope. So right there. So one of the again, what I'm hearing and that example, comes down to market size and market opportunity, right? So whether that's currently what the category looks like, from a size standpoint, what are people buying in this type of category or even potential, right? Like, hey, this is untapped category doesn't exist, we're creating it. But is there actually a demand for this large enough to explore? You also talked about margin, right? If there's not enough margin to be able to market it and grow it and that everybody essentially can make a profit off of it, and then there is no opportunity for it. And then the other one you just mentioned is opportunity for expansion. Again, it's there's nowhere to go. It's a one trick pony. Right.

 

Mark Young 

Now I had another couple came to me and they made a great item. This is the other end of the spectrum. They made a very expensive pry bar.

 

Justin Girouard 

 I was just gonna I was gonna bring this one up, too. This is the first one that came to my mind.

 

Mark Young 

So we're talking about an item's $150 - $200 a pry bar folks is something that you use when you're doing demolition in a house. You're tearing walls down, you're tearing floors down, you're taking shingles off a roof. This guy was in construction. He made a better pry bar.

 

Justin Girouard 

Oh yeah, it was a great tech. It really was.

 

Mark Young 

And is years ago when I was a young man when I was a kid. I grew up in a construction business. And when I was in the construction business as a kid, I would have wanted one of these. Now, here's the problem with it. It's a $200 item. Not that many do it yourselfers are going to buy a $200 pry bar. Because as a do it yourselfer, I'm probably only going to demolish something one time in my life.

 

Justin Girouard 

Right.

 

Mark Young 

 I'm going to take up the kitchen floor.

 

Justin Girouard 

Exactly.

 

Mark Young 

So for 200 bucks, I'll just fight along with the chisel and what I've got. So you're going to really need to sell this to people who used pry bars for a living which means demo contractors, ceramic tile contractors, roofing contractors. Where do you find these people where you go find these people? In supply houses, Home Depot, Lowe's, Menards. Okay, how many of those people are out there? That's a limited number. How many of them out of all the contractors need a pry bar, the number is getting smaller. How many of them need a pry bar that does this and are willing to spend an extra $200, the market just got smaller. And now comes the issue of how do I find that group of people and market to them in an affordable fashion, so they know this pry bar even exists. Now in this particular case, our advice to this couple was, you need to get rigid or Stanley tool to add this to their list of pry bars. So now I go to Home Depot and I'm in the pry bar market. And craftsman or Milwaukee, or whoever Rigid has five pry bars, getting home depot to bring in the sixth better, more expensive one is doable. But getting home depot to start shelf space for my single pry bar that has no brand recognition is impossible. Now I can also tell you as a contractor, as a former contractor, we all tended to be brand loyal. So I grew up in the Plumbing, Heating Air Conditioning business. So what rigid tools were everything. Rigid tools is the brand for plumbers. And Milwaukee power tools is the brand for plumbers. So I had all Rigid hand tools. I had all Milwaukee power tools. So if I was going to buy this and Rigid made it okay, this is pretty good. Because I know my Rigid tail my rigid tools hold up. And this is true statement. I've literally broken Rigid wrenches before. And I walked back in and Rigid gives me knew it.

 

Justin Girouard 

Right.

 

Mark Young 

Literally walked back in with a wrench in two pieces and they had me another one. So I'm going to stay loyal to that. I'm not going to be loyal to John Smith's prybar. Even if it looks clever, and looks like it'll do things, it's like yeah, but wonder what this guy made it out of? I wonder if it's really going to hold up with what I do, because I'm going to beat the crap out of this thing. So this is where we we try to focus on Do you have a business or an item? And other way to know do you have a business? Is Where is it you want this product to live? So let's say you want this product to live at Walmart. Well, if your product is going to live a Walmart, it needs to sell roughly $40 a day per store. Or $40 a week per store. So we have 4600 stores times $40. Okay, is your brand is your product capable? Is there enough consumers looking for that item to equal $40 times 4600 at all a Walmart stores? Let's say you want to be a Costco want to be a Costco I need to sell $900 per SKU per week at Costco is your product, does it have a big enough market for that? Now what I'm saying big enough market, I'm not even saying have you built a brand yet. We can advertise the brand and pump the brand up. What I'm saying is is the demand for this category big enough to support you. There's only so many items you can put into a category.

 

Justin Girouard 

Absolutely well and event he talked about earlier, even if you're going to be you've got a product that doesn't quite neatly fit into a new new category that you'd be creating your own. That's fine that's possible as long as you can prove there's enough consumer demand for this type of item and this type of problem whatever the case may be, but then you also have to understand that if you're creating a new category, a lot more energy has to be put behind it to create a new category because there is no frame of reference for the consumer doesn't exist. No one's naturally looking for it yet.

 

Mark Young 

So let me give you the I'm gonna give you the poor man's way to do some market research. Go to Walgreens, Walmart CVS, wherever did you think a product should go. Go look at the category and see how many items are in the category. If you're looking at topical analgesics pain creams, there's going to be 60 70 80 items in the category. If you go to the category, you look at toenail fungus, there's six items in the category. There are other categories, you can look at where there's only one or two items in the category. So now you have to ask yourself a question is the category that reduced due to market dominance of a key player. So by example would be Preparation H, or Sensodyne Toothpaste. Sensodyne just dominates the sensitive toothpaste business. There's very few other competitors because Sensodyne has spent so much money. Preparation H, they just have a stranglehold on the category. So now I have to ask yourself, first question is, is it a big category dominated by one major player? And if that is a yes, then what is the unique IP I have that will make people take notice? You know, do I have this unique IP? So the my example would be Preparation H dominated the category, we came in with RectiCare, which was the first product with 4% lidocaine. And we became number two because Preparation H made tissue shrink, but we had something that killed the pain immediately. So we had something they didn't have. Okay, so we had IP. So that's the first question. The second question is, are you going to the category and you only see one or two products there? Because it's just a tiny category. And the retailer just carries one or two items for the for sake of convenience to their customers. So another one that is a great example is ketchup. You notice how you can go to the mustard category. And there's 100 Different mustards. Go to ketchup, there's one.

 

Justin Girouard 

Yeah.

 

Mark Young 

Heinz ketchup.

 

Justin Girouard 

Yeah. Private Label. That's about all that's in the category.   Right.

 

Mark Young 

Yeah. Now why is that the case? You might get a sugar free, you know, ketchup now. But it's Heinz ketchup. Why is that because Heinz has the perfect formula. It says the perfect combination of salt, sugar, fat, sour, sweet. They've got the perfect formula that tickles everybody's taste buds. You can't improve on it. So they just dominate the category. And they dominate it with advertising on top of that. So if you're coming up with a new ketchup, good luck to you. Meanwhile, you can come up with a new mustard. And that's a different game because you look and you see what people like experimenting with mustards. Just like they like experimenting with hot sauces. Or with pasta sauce. Well, I had Ragu. I'm going to try Raos and I'm going to try Botticelli and maybe I'll go try Michaels. Because I'm looking for a new experience. But there are certain things people are not looking for new experience in. Very rarely is anybody looking for new experience with the ketchup.

 

Justin Girouard 

Exactly. Well, I think you bring up a good point, too, is you can also it's understanding who your consumer is. And and yes, the more money you have, the more access to what we'll call, you know, qualitative data you can get, but outside of that, to your point, you just shared a human experience that says look, do you really look for an extra ketchup? Right, right? No, I don't, okay, you know, the human truths behind your product. That's how you got to creating your product. So also understand, you know, more than you than you may think you do, when it comes to that aspect of it. The other thing to always understand too, and I know we kind of beat this a lot with our listeners, but as it relates back to your unique IP, and let's say you go there and you say you know what, it was the Preparation H example, right, like, oh, we do this and this and this way better. Right? You also need to make sure you take the next step of can I actually say that?

 

Mark Young 

Oh, of course.

 

Justin Girouard 

That's the other piece. That's going to separate it. Can you make that statement?

 

Mark Young 

Now, let me give you another example. Let's say that you're you want to jump into the category of I'm gonna say, nail polish remover. You go to the store, you look at nail polish remover, there's probably three or four choices. And it's what $5 product.

 

Justin Girouard 

Right.

 

Mark Young 

What can you do better than the ones that are there?

 

Justin Girouard 

And are you priced to do it?

 

Mark Young 

And are you priced to do it? And can you convince people to spend $10 in a $5 category, because you can't build a business on a $5 item. You can build a business out of $5 item if people buy millions of it.

 

Justin Girouard 

Right.

 

Mark Young 

If you're selling energy drinks, $5 items fine. If you're selling an item that people consume once every six to 12 months, no, you can't do that.

 

Justin Girouard 

 Nope, not gonna work.

 

Mark Young 

 So these are the things that you need to look at. If your product is an item, then you need to figure out how do I round out this product category? Or do I need to go sell my IP?

 

Justin Girouard 

Right.

 

Mark Young 

I've had people bring stuff in to me that were like container items. And I would look at and say, well, this would be great if Rubbermaid made it. Because Rubbermaid has got a whole section.

 

Justin Girouard 

And there's nothing wrong with being an inventor. You can make a good living off of that, if you just want to keep creating things and selling licenses off. That's great, too. There's no, there's no reason you can't do that.

 

Mark Young 

Absolutely.

 

Justin Girouard 

That's fine.

 

Mark Young 

And that's really where we're going today. So I mean, that kind of wraps us up for what we wanted to hit today. But do you have an item? Or do you have a business? And again, you may have an item on Amazon, that's doing perfectly fine because of the long tail?

 

Justin Girouard 

Yes, yes.

 

Mark Young 

But that means Amazon is where it lives forever.

 

Justin Girouard 

And that's what that does. That's simply what it does. Again, if you didn't know the difference, you have to be able to evaluate the market size and market opportunity. Understanding how your unique IP or unique offering steps up in the category, you need to have healthy margins in the product and pricing in order to be able to support the pathway through and there needs to be an ability for expansion, you need to be to create a entire line of offerings, you can't just have one item if it's just this one item. And I can make it in a three ounce and and an eight ounce, it's still one item that's not going to be enough to really create a business. So you need to work through these things. Because this will be able to help you understand what the expansion opportunities what the retail opportunity could be. And I think you've given him some good action items, go to the store, look it up, look at Google Trends, see, or anybody looking up your problem that you solve differently, there are things out there you can do.

 

Mark Young 

 I'm gonna go to another category. And a category I'm gonna go back to baking and decorating. And we worked we worked with a client who was in that category.

 

Justin Girouard 

Yep.

 

Mark Young 

 Great Amazon business.

 

Justin Girouard 

 Amazing.

 

Mark Young 

Amazing Amazon business. But they had an amazing Amazon business because they had what 50 SKUs?

 

Justin Girouard 

Oh, yeah, yeah.

 

Mark Young 

So one SKU one of their SKUs on Amazon wasn't that relevant. But putting them all together, they had a nice Amazon business. However, you couldn't take them to Walmart because they would take up a shelf by themselves.

 

Justin Girouard 

And Walmart's not going to give you an entire shelf.

 

Mark Young 

And in a Walmart environment, you can't get that much space. Because no one items sold enough. So this is what you want to look at. I might have stuff that's doing on Amazon that's doing well, I might even have 10-20 things on Amazon doing well. And together they make an Amazon business. But they don't necessarily transfer over to retail. Because in a world of retail, one item needs to be able to be a business.

 

Justin Girouard 

Yeah.

 

Mark Young 

Not that the line. One item. Is my one item big enough to be a business>

 

Justin Girouard 

Well I think you also bring up another. Another thought that comes to my mind with that example was also two not only with that concept of replenishment and how does the consumer journey there and how much frequency are you going to get to purchase of an item, but also seasonality, right? You're not going to be able to go to retail if you're pitching an item that sells for three months and is dead for the other nine months, right? At best you're being in and out at best. So you need to ensure that you have a product or product story that at the very least, can sell good volumes. At least six months out of the year that can carry you an entire year. It's not going to cut it.

 

Mark Young 

Suncare is a really good example of this done tanning tanning products for years. And typically you ship all the tanning products in in February.

 

Justin Girouard 

Yep.

 

Mark Young 

And you don't start getting paid by the retailers until August. Because it all sits on the shelf on his pay on scan. Then they start paying you in August, and then they ship you backward didn't sell. By Labor Day, it's all back. And now you're sitting on it until next February. And it's all date coded. So I mean, it's a tough business.

 

Justin Girouard 

It is.

 

Mark Young 

Now I've got one last thing I want to talk about before we go. I want to offer people something new here, Justin. And what I'd like to do is like to to offer our listeners, if you have a product or a marketing and advertising challenge that your company or your product is having. I want to give people the opportunity to actually bring their problem right here to the podcast. And we will talk to them live, right on the show, talk about their business, talk about their specific needs, and answer them and give them the advice and the help they need right here while everyone else can listen to the same advice.

 

Justin Girouard 

Love it.

 

Mark Young 

So go to CPGinsiders.com and email us or you can also go to JekyllHydelabs.com. And reach out to Justin and I tell us about your business. Tell us about your product. What kind of problem are you trying to resolve? And we will have a absolute free creative and business strategy session for you. Right here on air.

 

Justin Girouard 

I love it. Please reach out. I think that'd be fun.

 

Mark Young 

I do think it'd be fun.

 

Justin Girouard 

A lot of fun.

 

Mark Young 

Other than that, I think that's it for us for today. As always, if you have any challenges questions for us, you can always reach out to Justin or myself and we're happy to try to help. Any last comments, Justin?

 

Justin Girouard 

No, I think we're clear.

 

Mark Young 

All right. Make sure you go to wherever you get your podcasts leave us five star review. We'll see you next week.