In one of our previous articles, we discussed how to evaluate your product ideas on market-based criteria. If you have not read the previous article click on the link below and check it out here: The Five Essentials Of Product Research To Find Profitable Product Ideas.
Today we’re here to discuss how to evaluate your chosen niche and product against product-based criteria to find in-demand and profitable product ideas.
Without any further ado, let’s dive in.
Brief overview : Product research
The marketing study that gives information about a product or service desirable qualities is called product research. Finding out what customers actually want helps firms adjust their products to their demands. This study can assist develop new product concepts.
Product research is critical in new product development, being done throughout the process. Product research should begin by screening for and identifying new concepts. Reduced product development expenses are achieved by conducting this testing.
When you will conduct product research, you’ll be able to find answers of the following queries:
- How successful will the product be when launched in the market?
- Which competitors of yours are selling the same product?
- Which is the most suitable way to develop and sell your product to customers?
Thorough product research enables you to design and execute a strategic initiative with effectiveness. In order to avoid mistakes and increase profit, we highly recommend using a strategic approach.
How to conduct product research
Now we’ll take a look at the list of criteria we’ll be covering before we dive into the individual criterion one by one:
- What is your profit margin?
- How much are you willing to sell your product for?
- What’s the weight and size of your product?
- How long will your product last?
- Is your product a means of relieving suffering, or a means of resolving a problem?
- How frequently will you need to replenish inventory?
- Is your product disposable or a consumable?
- Is the product you’re selling perishable?
- Is your product subject to any restrictions or regulations?
- How scalable is your product?
Now it’s time to discuss each of them in detail, so let’s dive in.
Determine your profit margin
Before venturing too deep into a new concept, it is critically necessary to evaluate markup for a certain product. When you begin selling online, you’ll immediately discover that there are several expenses that reduce your profit margins, which means you’ll need a substantial initial markup to cover them.
So in order to better grasp the margin, let’s examine a genuine product. We will use a pet pedometer for this example.
Our examination of comparable pet pedometers on the market led us to estimate that the pricing for a device like this would be around $24.99. The Alibaba search revealed that we can get these pet pedometers for about $2 each.
A markup of over 1200 percent! This is going well, right? Let’s examine the additional costs we will need to take into consideration.
The costs seen in the example above will erode your profits over time. When everything is said and done, a product that originally had a markup of over 1,200% ultimately ends up having a markup of less than 100%.
While it is likely that you may decrease expenses considerably by managing fulfilment yourself and not paying as much on advertising, the numbers above are only approximations. No matter what, it will be vital to know this information upfront.
Figure out your selling quote
In order to maximise profits, you must move a large number of units. Also, the further one moves from the origin, the more questions for service and other metrics are generated. Conversely, selling luxury items requires a lengthier sales cycle and discriminating clientele.
A pricing range of $75 to $150 often lowers the requirement to acquire a big number of clients while providing some marketing and operation budget protection.
Our previous example, the pet pedometer, sold for around $25. Variable expenses ate away much of the earnings, leaving just $12.95 profit per unit.
Let’s examine what occurs, but instead of using the pet pedometer, we’ll use a new product with a hypothetical retail price of $100. (4x more than the pet pedometer). The penalty for consistency has also been doubled by a factor of four.
Due to the increased pricing, we have greater margins: 73% vs. 42%. As a result, our profit per unit shoots up from $12.95 to $76.75.
Determine size and weight of your product
Size and weight might affect your revenue and bottom line. These days, many customers anticipate free delivery, and a price rollback does not necessarily help. These expenses cut into your profits. Passing the shipping expenses on to your consumer may decrease your conversion rate.
You will also need to consider the costs of delivering the items to yourself (or your warehouse) from your manufacturer, as well as storage expenses. Inventory procurement overseas could be less expensive than you’d expect.
An over-sized fitness mat is popular among yoga mat companies. The product itself costs $99. However, shipping is $40 to Canada and $100 to other countries. It is challenging for consumers to rationalise spending 40% or more in delivery.
How long will your product last?
How long will your product last? Faulty items may present an opportunity for someone to come by and do you harm. Breakable products cost more due to the need for extra packing and there will be more returns and exchanges.
Is your product a means of relieving suffering, or a means of resolving a problem?
We addressed this topic before in this article, but selling items that fulfil a passion or answer a need is always advantageous.
Additionally, when you offer items that meet one of these criteria, your marketing expenses are typically reduced, since consumers are actively seeking a solution, rather than you having to extensively advertise your product to attract them.
Determine the turnover of your product
It is dangerous to have items that must be altered or relaunched all the time. If you put out this sort of goods, there is a chance it will not sell before the time of changeover. First, understand what your turnover schedule would look like before getting in and selling a product with constant turnover.
In this way, the mobile phone and tablet cases industry is seeing a great deal of activity. It often takes an upfront investment in design, prototyping, and minimum order numbers to produce new designs. It might be challenging to get enough traction and exposure before the next generation smartphone/tablet is released. If you are not selling through your inventory quickly enough, you will accumulate cases of products that are no longer up to date.
Is your product disposable or a consumable?
When selling to the same client again, having disposable or consumable items brings a sense of naturalness since the things get worn out after a set amount of time, which motivates customers to return to their supplier for more merchandise.
Goods like razors, shaving cream, and deodorant are highly consumable, and therefore Harry’s often sells those products. This approach makes customers want to return to their website and purchase again.
Is the product you’re selling perishable?
Products that have a short shelf life (that quickly decompose or turn into waste) pose a high risk for any firm, much less an online one. Timely delivery of perishable items results in a high cost of transportation. Even items with a longer shelf life may be problematic, since it increases storage and inventory, and if you run out of anything before the expiration date, you may end up with ruined products.
Here are some example situations in which products with an immediate expiration date or critical importance are different from regular products: Food products, supplements, medication, and anything else that must be kept cold or has a short shelf life require special handling when ordering inventory and shipping to customers.
Is your product subject to any restrictions or constraints?
Restriction and constraints on your product and niche choice are frustrating, if not impossible, to live with. If your product selection is subject to laws or constraints, you will not want to proceed with your product concept. You need at least know how big they are so you can control them.
While some chemicals, foodstuffs, and cosmetics have limitations placed on them in both the nation you’re importing the goods to and the country you’re exporting the goods to, there are other things that have restrictions on them that go beyond those two countries.
In addition to importing your product and your warehouse, you will want to make a few phone calls to customs and border services of the nation you are importing your product into, as well as the Food and Drug Administration (FDA) if your product is a food/supplement supplement.
How scalable is your product?
If you are still in the “launch” period, thinking about the future and scaling your business is challenging, nevertheless, including scalability into the business model from the outset is an important consideration.
Think about how to grow your goods if your business takes off if your product is handcrafted or involves unique or hard-to-find components. Can you contract out the manufacturing? Will you have to expand the number of staff if there are increased orders?
Start your product-based product ideas research today!
The success of your business depends on correctly identifying the market that you are in and the product that you are offering. These product-based criteria should be used as a guide to help you decide whether your chosen product and niche will be successful in the market or not.