Selling a Product That Doesn't Exist (Day 22)


One Startup. 30 Days. No Secrets. Start at the beginning. 

 

It's true, we are taking orders for a product that doesn’t actually exist. Yet.

Despite the narrowing 30 day timeline, or maybe because of it, we are incredible proud of what we have built in just three weeks. Pride in hand, we are now sharing MixedMade with our community and are accepting pre-orders.Bees Knees Spicy Honey Pre-Order

To begin accepting pre-orders, we believe we need two key items to convey our offering:

  1. Photos of the product
  2. A price, based on actual costs

But instead we’ve settled on:

  1. Digital renderings of what we think the product will look like
  2. A price, based on estimated costs

MixedMade Homepage

That is to say, we have no finished product. We have no finished packaging. We haven’t even sourced our honey yet. Thus, we can’t show photos of our actual product or know the actual cost. We are skipping ahead a few steps to figure out the detail that truly matters – will people buy our product? 

If we were strictly following The Lean Startup method, we should have began pre-sales more than a week ago in case no one wants to buy spicy honey. Accepting pre-sales last week would have been possible, but we feel less risk given just a week more of progress. We now have a recipe, packaging options identified, beekeepers in contact and confidence that we can pull this off, so we are gladly accepting pre-orders.

With help from crowd-funding sites like Kickstarter and indiegogo, customers are familiar with the idea of buying a product before it is completely developed. In fact, I think some consumers prefer being early adopters and sharing some risk in a new product or new technology.

Pricing

Bees Knees Spicy Honey Text

We will reveal full financial details in the future, but in short, it will cost roughly $8 in raw materials and labor to make an 8 FL OZ bottle of Bees Knees.  Given that Bees Knees is unlikely to sell in high volumes, we need to sell each bottle for at least $10-12 to justify our time and effort. 

Based on prices of premium hot sauce and similar products, we believe the high end most people will pay for a bottle of Bees Knees is around $15.  As consumers, we have a hunch that a $14 price is substantially easier to swallow than $15 and have decided to test our luck at $14 per bottle.  “Maybe $14 feels like a $10 bill and some change, instead of nearly a $20 bill?”

 

Source: Curtis William Readel

Based on our cost of $8, this will result in a gross profit of $6, or a profit margin of 43%, which I feel pretty good about.  If we can scale and produce / sell more bottles, our costs should decline and our margin will increase.  However, if we sell to retailers, we will have to sell at a lower price and take a reduced margin. 

Eventually we should become more sophisticated about our pricing and test if we would, for example, sell 300% more bottles sold at $12.  Until then, we will sell at $14 unless overwhelming feedback suggests a price adjustment.

And already, the first order is in for a total of $40 (2 Bottles + Shipping) - celebratory backflips off the deck are in order!

Action: We’d love to hear if you have any objections to accepting pre-orders for a product that isn’t 100% complete yet.  Comment to share.

Source: iCharts.net


3 comments


  • Rafael

    Morgen, Casey, How is it that you had your first pre-order just like that?! I struggled so hard to get pre-orders for anything I’ve tried. Is it just because you put it on kickstarter and Indiegogo that people wanted to try new things that sounded good to them?

    See, I understand from your story that you just enjoyed making a product, you’ve put it out there and found people interested in trying it. I started pretty much on the same date as you guys, but never got attention to a product I’ve made. It looks easy from your perspective. Because I would be happy to just understand why people trusted you with your product. Is it just because they were on kickstarter? That’s it? Or is there something I’m missing?


  • Morgen Newman

    Thanks for sharing your thoughts A. Perry, we appreciate them! You pose a good question: does a product warrant its value because of the quality or rather the time spent on development?
    You are right that we and our initial customers are taking some risk in selling or purchasing an early version of a product. As we have now shipped about 40 bottles, we are excited to begin soliciting feedback from our first customers, which will help guide any immediate changes to the product if needed.
    QUESTION: would you be more inclined to purchase the current product if we offered a no-question money-back guarantee?


  • A. Perry

    The price is way high for a product you haven’t even fully developed. The reason JoJos can charge that price is she has truly refined her art and so you’re paying for an excellent artisanal product that has been fully refined. You’re still taste testing a product without any market testing. I love the idea of starting a company in 30 days which you have done but in order to sell an artisan product you have to have a product. You have an idea but no product. I def won’t be buying one of the first bottles that you haphazardly threw together just to get something out the door. Best of luck but I think you’re going about this all wrong.


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