This is my conversation with a friend of mine who is thinking of starting a non-tech venture. She is very energetic, very smart and is convinced of her ideas. She is also very protective of the ideas, so even I do not know what the product is.
Here is part of our conversation, if your answers would be similar to her answers or if you find nothing wrong with any of these answers, I can help, let us talk.
Who will buy this product?
I think anyone can benefit from this product. If they want one, I will sell it to them.
Can you be more specific?
Well I should say, this is more useful to baby boomers and people in that age group.
How will you find them and how will they find you?
It is all online sales. I do not need to get my product into stores. They will find me through their Google searches. It is made to order and hence I do not need to make more than I can sell.
Customer and Competitor research:
Have you found out what these customers value, what they look for in this product, why they buy the competitor product at its current price and how the competitor will react?
I don’t know. How will I find that information?
What do you think customers will pay for it?
I think I can charge $300 for my product.
But what do you think your customers will pay?
They will pay $300 because the current option in the market is priced at $800. Compared to that mine is a steal.
Do you think the segment you mentioned will pay $300 for your product?
I will be targeting only those who have money and want to pay. Again, compared to $800 mine is cheap.
Well I want to charge 40% to 50% margin.
Cost and Expenses:
How did you compute the expenses?
There is the cost to make each unit and then I need to account for marketing cost. I calculated that I need to sell just 1000 units for me to quit my day job and do this full time. Using that 1000, I divided my total cost to compute the product cost.
How do you know you can sell 1000, what if you cannot sell 1000?
(without my prompting, I got this response)
You know, I am going to call this product by this (redacted) name. You know why, because it is a name I have fallen in love with and think this is such a great name.
What about your customers, what will the brand mean to them and what does it say about them?
It is my product. They may see it as new but will get used to it.
Do you identify yourself with this person or have other thoughts? Send me a note.