Finding your ‘hero’ to survive challenging economic times
We all need a hero especially when we’re feeling a bit stuck. Although it would be pretty nice if Thor came in with his hammer to smash competitors and all the problems that are weighing us down, reality says that you’ve got to find your own way out.
Finding the superhero products inside your business is something that seems obvious when you talk it through but is often overlooked when it comes to the busyness of getting through the monthly sales routine.
How can a hero product help your business?
Gives a clear identity for your brand to position itself from …. ‘best dishcloths ever’, ‘the tastiest sausage rolls in town’, ‘Coke is the real thing’.
From a function level, it can help to cover costs, cover waste, provide a key entry to attract customers to your brand. If you know what your heroes are, then you can create sales and marketing plans to promote them further. This could be new bundles, sizes, formats or even reducing the range to focus on a new or under-served customer group.
WHEN LESS IS MORE… a CLIENT CASE STUDY
A classic example is a client that were an online business that had a HUGE product range (we’re talking 200+ different items) that was trying to sell to literally everyone through every channel they could think of. They had a whole lot of items on Trade Me, as well as direct sales on their website plus B2B larger orders. The owners spent all their days eyeball deep trying to juggle everything and wondering why nothing seemed to work. They’d started their business on Trade Me and had a belief that ‘everyone is on Trade Me so we should be too’. While this used to be true, what they found on looking deeper is that they were beaten by the curse of ‘sort by lowest price’ with drop-sellers who had imitation products and spending a lot of time managing orders for under $20… not enough to justify the effort. With fees continuing to increase they felt stuck and weren’t sure how to get out of it.
By stepping back and asking themselves ‘where do we make the most profit’, and ‘where are our biggest profitable customer opportunities’, they made the decision to pretty much eliminate their Trade Me business and focus on the much smaller (but WAY more potential and profit) large B2B customers that valued the amazing service and customisation that they offered in finding solutions to their often more complex problems. They weren’t looking to save a few cents or combing through market sites to find the right product combination to meet their challenge. They were willing to pay for TRUST, RELIABILITY and SERVICE.
Their HERO was their B2B range of selected products that a NICHE of customers were willing to pay for. By doing a bit of work, mapping out their different customer groups, margins and profit, they could make the best decision for their business. This work and realization meant they could reduce their range significantly, put more focus on their DIRECT sales channel and nurturing existing customers rather than constantly hoping that Trade Me or general website sales would save the day. Although it took the owners TIME to build up the customer base - the order values were often well over $5,000 and sometimes $10,000+ and they have a clear differentiated position as the ‘go to’ people for their niche in a highly valuable product range.
Finding the hero in YOUR business - a how to guide.
It’s calculator time.
If you’re too scared to look at the numbers, or don’t know where to start then this is for you. Data is the bedrock for making decisions in your business and there are lots of places to go digging to find the right info to make decisions.
Firstly, your accountant should be able to help with some of the analysis and its worth talking to them about what you’re trying to do so they can work on pulling together the reports & info that you need. If you’re selling through Shopify then look through the different report options they have and print them out if it’s easier for making notes or being able to see the whole picture.
Data alone won’t tell you what to do.
Its a starting point to ask yourself ‘so what does this really mean’, and more importantly ‘what am I going to do about it’.
How to dig into your data to find the nuggets of insight
Set up a table and pull out monthly data for the last 12 - 18 months to identify any overall patterns. Are there peaks and dips that you are vaguely aware of but never quite sure ‘when’ they happen. This can help you with working out when to promote, when to take a break (during slow time), and when you might need extra support for managing high demand.
Use the ‘filter/ sort’ option to rank your products based on $ sales, unit sales, $ margin, % margin, growth rates
This will help you identify which are your VOLUME drivers that can help with operational efficiencies, which are the PROFIT drivers and which are pulling down the overall performance. The ‘conditional format’ function will help with quick colour coding and is a super handy tool.
Look at both product margin % and also total profit margin $. You don’t want to delete something that is covering overheads just because its absolute % is low. Same is true that a high % margin with no sales isn’t worth saving either - you can’t bank a 100% of $0 sales.
You can make 1% on $1000 sales or 100% on $10. Either one will get you $10 profit - the difference is the effort needed to get it and impact on the rest of your business
Work out the different margins for different sales channels.
Think about where do you make the most money - in terms of both absolute $$ as well as your GM%. Online stores like Trade Me may seem like they have lower success fees than traditional wholesale, but with all the extra advertising, store and assorted payment fees it can add up quickly and eat up a LOT of margin without realising it. That isn’t to say Trade Me and other online retailers aren’t worth considering. Its more that you need to make sure its the RIGHT place for you - and where your target customers expect to find you.
Map out your time and consider what takes up more of your time (and focus), and are you getting a return that’s worth it?
This can be literal profit as well as a sense of satisfaction. eg Trade Me is getting increasingly expensive, low value, low margin, low volume. Lots of viewers but often rank on price. Selling through auction style channels is great if you’re confident in your niche and know that you’ve got a compelling product. If its a drop-shipping race to be the lowest price then this may not be a long-term business model unless you’ve got deep pockets. Brand websites and online sales can also be a LOT more expensive when it comes to customer acquisition costs (CAC) as it takes a LOT of traffic to drive enough volume to hit your targets. This is fine if you’re confident navigating your world online, or have different goals, but its worth really mapping out the full cost to understand if its going to fulfil your ambition.
Remember, your time is valuable and you need to make sure you’re spending it on the RIGHT things.
Look at the FULL cost model for different products
Are there some that have expensive ingredients that aren’t used in any other products? Or are they fiddly to make so the labour cost is high?
There can be a whole lot of different things that can impact your cost model, and its possible to have a few superheroes that do different jobs like covering overheads, using up ‘waste’ ingredients or simply having high margins that cover others.
You should have a full costing model for each of your products and review it regularly so you can make decisions with confidence and identify where any problems are potentially coming up.
It’s not just about calculators… it’s also about your customers
There is a HUGE amount of value that comes from understanding the softer side of your business alongside the numbers.
What do your raving fans shout about most?? Which products do you KNOW are the guaranteed sellouts at markets or whenever you do any kind of promotion?
What are you ‘world famous’ for with your customers?
Look at your reviews across Google and Facebook, read through the comments that customers make on social media posts and most importantly ASK THEM. People like to share their ‘must have's’ and will gladly tell you ALL the things that they like about their favourite product that you sell.
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Once you’ve pulled through the data, identified a few ‘a-ha’ moments of insight and talked to your customers, you should be able to confidently identify the hero products in your range. If you can’t then that’s a big insight as well. The success of your business relies on having something that you are known for and that people can associate with your brand. If you’re a bit of everything, then you’re a whole lot of nothing. And nothing is NOT what you need for long term.
If you need a hand working through the analysis, setting up spreadsheets, understanding ‘so what’ and where to go hunting - then give me a call. There’s nothing I love more than a good Excel spreadsheet and digging into data to figure out ‘so what, now what’.
