Part 4: Analyzing Our Offer
Product Launch Results (first 1,000 units)
  • CPA: $9.21 / purchase
  •  Avg Ticket: $33.85 / unit
  •  Product COGS: $6.60 / unit (Materials@$2.22 & Packaging@$4.38)
  •  Operations COGS: $9.18 / unit (Shipping@$8.00 & MerchantFees@$1.18)
  •  Gross Margin: $18.07 / unit
Join the List
Your Privacy is Protected
Based upon our product launch numbers above, we had the beginnings of a recipe for success. However, before we could scale up our advertising and double-down on the brand, we needed to determine if our offer was actually any good.
Offer Analysis
Following the recent turmoil that thrust me into the driver’s seat of the business (see previous post), I needed to determine whether (a) the Prescribd offering I had inherited was a diamond in the rough or (b) the Prescribd offering was a pig. Given the reality of product development and our inexperience in this niche, it was incredibly likely that these next couple of months would be expensive market research, and while it's easy, looking back, to armchair quarterback the situation, the reality of bringing a new product to market is that the overnight success is usually the culmination of years of hard work, iteration and pivots.  Over the years, I have developed a 4-step product-market fit assessment methodology as a litmus test to determine the above. This is a multi-month process that is summarized in the following manner (the Table below is best viewed in Desktop):
Step 1
Offering *FREE* trial/sample to the target customer in exchange for user feedback through an application process – A.K.A. the “Ask Campaign
Assess messaging and get market research data on understanding the particular customer need
Everyone loves free stuff and being on the *cusp* of something that could potentially be ground-breaking, so getting sign-ups is a function of validating offer interest within the market.
Step 2
Delivering *FREE* samples to the target customer in exchange for usage feedback/positive reviews/testimonials
Understand tonality, usage and language of the particular market niche
The purpose of this step is to understand how the customer values the product by assessing the content that they generate
Step 3
Additional rounds of increasingly ascending customer testimonials, feedback & reviews (E.g., increase the required ask) for additional ongoing *FREE* supply
Assess offer stickyness, repurchase rate and/or effectiveness of the product & messaging
This is what separates break-through soon-to-be-viral products from me-too improvement offers. The fundamental thesis behind this process is to push the limits of value given from customer vs. value received by the offering.  
Step 2
Delivering *FREE* samples to the target customer in exchange for usage feedback/positive reviews/testimonials
Understand tonality, usage and language of the particular market niche
The purpose of this step is to understand how the customer values the product by assessing the content that they generate
Executing the Offer Analysis - Late Dec/Jan 2017
We put our offer on social media (Instagram) and got over 50 responses.  Although this added an extra step, we got the added benefit of some increased social media reach from this.
We sent people who responded on social media to the following lander
We had 20 people successfully complete the survey
Our litmus test goals and results were as follows
  • Month 1: 75% Hoped For - 94.1% Converted
  •  Month 2: 50% Hoped For - 29.4% Converted
  • Month 3: 25% Hoped For - 0% Converted
Based on the above results, it became clear that people were interested and enthusiastic about the offering (our messaging was on point) but that the offering as it stood had deficiencies that needed additional work.  This was later reinforced by analyzing our customer retention / churn data over the next couple of months.
Getting More Data - Late Feb/March 2017
By late February, it was readily apparent that the offer had to be reworked & expanded, but prior to starting that process, we decided to put that process off until April and perform market research in hopes of gathering a more comprehensive data set to give us the knowledge to increase the possibility of success of our upcoming product pivot. To accomplish this, we launched a second more open-ended Ask campaign in late February.
Ask 2 Takeaways - Late March 2017
  •  Major Takeaway 1:  
Customers "like" natural but really want efficacy
  •  Major Takeaway 2: 
A complete beauty regimen replacement (which was our offer) was something that would only occur amongst the truly desperate (ones who were willing to admit failure). Someone who just wanted to *try something out for curiosity's sake* was not willing to buy and use 1 or 2 components of a complete system. The demographic that purchased was ultimately more likely in need of the specialized attention of general medical advice and prescription strength efficacy that a naturally formulated offer was simply not capable of delivering.
  • Major Takeaway 3: 
Our Formulation amounts were off based upon a general lack of understanding of beauty product usage (many had too much of Step X but not enough of Step Y).
Anatomy of the "Oh $H!T" Moment (Behind the Scenes of our Epic Fail)
Although we knew that a product pivot was required, it wasn't until early April that we realized how truly in over our head we actually were.

Looking back, the offer formulation strategy made absolutely no sense.  Take a #1 best selling Amazon product offer that has poor branding and marketing, analyze what deficiencies / issues / complaints existing customers have with the product, package it in a way to solve those concerns, add marketing and a story line and take it to a different channel to jump-start a brand and then expand.  So what were we thinking?  How were we so smart to think that we could walk into a completely unknown industry and take it by storm?  WTF?!?!?  It truly does take a special level of ignorance and/or hubris to spend almost 6 digits on a plan to ruin a #1 best-seller.

In doing our post mortem, it appears that others had figured out that there was a better way.  Simply put a different label on the exact same thing and advertise it in the channel for about the same price and people will just buy your product because the packaging looks nice. <facepalm>
To better understand what we did wrong, let's take a more detailed look at our offer
A Fundamental Mistake
It starts with the fundamentals of consumer psychology and purchase decisions (the concept of being sold hard vs buying)
What I’ve found is that if you just sell something, it’s not as strong and doesn’t create the emotion you need to really cause action. If you want people to adopt a new concept and want to get their buy-in, you have to lead them to the answer, but you can’t GIVE it to them. They have to come up with the idea themselves. You plant the idea in their minds with a story and if THEY come up with the answer, they will have sold themselves. The buying decision becomes theirs, not yours. When that happens, you don’t have to sell them anything.
In retrospect (which is always 20/20), what happened was that the product development team started found what was already out there (in this case the Aztec Indian Healing Clay) and then they attempted to “build a better mousetrap” by creating a simple and easy to use 4 step system. This is what’s called an Improvement Offer.
Improvement Offer Issues
It starts with the fundamentals of consumer psychology and purchase decisions (the concept of being sold hard vs buying)
  •  Improvements Are Hard: 
Most people have tried to improve in the past and for some reason it didn’t work. If they’re coming to you, then whatever they tried in the past didn’t work for some reason. They know the difficulties they’ve had to go through in the past and there is pain associated with that.  
  •  Desire vs. Ambition
All people have desire, but very few have ambition. Improvement offers are selling to over-achieving ambitious people, who probably represent less than 2% of the population.  
  •  Admission of Failure
For someone to buy an improvement offer they must first admit failure, which means that they have to admit that the choices they made in the past were wrong.  
  •  Price Erosion
When selling improvements, you are selling against dozens or hundreds of other improvements which turns you into a commodity and pushes the pricing down. There is no strategic advantage in being the #2 lowest price leader 
*NOTE: Improvement offers have a place in the market, as they are particularly effective when upselling, cross-selling or expanding an existing trusted brand.  However, for a start-up trying to gain traction and disrupt a market, instead of building an Improvement Offer, what needs to be done is the formulation of a New Opportunity.
Why Consumers Crave Opportunities
  •  New Discovery
When people discover your new opportunity for the first time, they’re going to want to share it because sharing something new and cool gives them an immediate increase in status within their social circle.
  •  No Pain of Disconnect
Because they don’t have to admit they made bad decisions in the past, there is no longer a huge pain of disconnect from what they are currently doing. Improvement offers sell THROUGH the pain, where new opportunities sell AWAY from the pain.
  •  Dream Replacement
Most people struggle to make the changes they want and need in their lives because they fear failure. If they try to change and it doesn’t work, then their dreams are dead. When presented with a new opportunity, you give someone a new dream to move forward.
  •  Greener Pastures
Instead of trying to convince people that their grass is green or offering to fix their grass, allow them to follow you to the other side of the fence because that’s where they want to be
So if the above supposition is accurate, the good news here is that my instinct of being on the brink of a break-through are there.  All I need to do is to find/formulate the proper offer that fits this niche...
FB Comments Will Be Here (placeholder)
Copyright 2017 - Nexem Inc - Terms of Service - Privacy Policy