New product pricing, profit margins, MAP etc

[Reflo Ltd]

I am an inventor that has had a product produced and am just begining to make sales through our own website for now (soft-start until new year).

I am really grappling with the pricing structure of my product. Wholesale pricing vs retail pricing, instituting a minimum retail price.

My product is a child's drinking cup. It has a patent pending and is unlike any other in the world. I am marketing it as a smart alternative to sippy cups.

So, it is unique and therefore pricing is even more difficult. I have been selling them for 7.99 each on my site but notice via my traffic reports that I am getting a lot more visits than buyers. So, I reduced the price to 6.99 to see if and how it might affect my sales. At the original price I was selling about 3 per day. I just changed the pricing a few hours ago so I haven't been able to quantify the effects yet.

At this price (6.99), what would you expect wholesale pricing to be for a product like this. If you want to see it, you can at reflo.net

Thanks in advance and I am new here. It looks like an intersting place and I hope to sepnd a bit more time here.

Pete Draganic

[Steve B]

I would think a retailer is going to want to make around 30% when they sell it.

Also, If it's that unique, I'd be careful about lowering your price just because a lot of people visit your site and don't buy it. If you were giving it away for free you would still have lots of people visiting your site without getting one. You may want to do more sophisticated research before lowering your price.

[Spider]

I can't imagine many retailers being happy with 30% markup. If you are a grocery store, perhaps, with fast-selling products, yes, but most retailers would need 50%-100% or more, depending on how quickly they move their merchandise.

[dynocat]

First of all, congratulations on the new product and site. I didn't see "patent pending" shown anywhere on the site and honestly am not sure how important it is, but may be worth researching.

I wouldn't take number of visitors being higher than buyers as an indication of much. It seems normal since not every visitor will buy on their first visit, especially with a new product. Have you been selling elsewhere previously? How old is your site? Testimonials from (real) customers might be a good addition to prompt sales.

Have you researched pricing strategies online? There is quite a bit of info out there, especially regarding housewares. You've probably already come up with a realistic cost per item which includes materials, labor, overhead and profit margin. From there it really varies with the product. "Keystone" pricing at one time meant the retailer would double your wholesale price. I've recently read that it can be 2.5 to 3 times cost depending on the product line.

We manufacture niche houseware products. I'm sure I have spend more time on determining pricing for wholesale and, in our case, drop ship resellers, than I have on producing and packaging the products. We now have a product we private label as well. Talk about nightmare calculations. Mostly I've flown by the seat of my pants and we've been fortunate in how it's worked out.

One thing to determine too--like you don't have enough on your plate already :)--is that a minimum order quantity and case lots, your pricing can reflect that. It's easier to give a better price when you're selling hundreds of something than a dozen or so.

Another thought on your product catalog: have you consider selling these in sets. Many people with toddlers who would use your product would probably buy a set of 2-4 cups in a set, e.g., one is dirty from milk, grab another one for juice; Joey is using one, get a second one for Amy. It looks like a cup that could be used by more than just toddlers. In addition to marketing targeted toward children how about the elderly, disabled or physically handicapped?

My apologies if I've rambled on a bit here. I like to see useful new products and tend to get carried away.

[Patrysha]

I wouldn't start messing with the pricing until after you'd worked on improving the copy of the website. It's quite a remarkable product, but there's nothing that would make a mom (the prime buyers of the product) trust your site or it's claims. In fact, your pricing may be a little low if you're going head to head with sippy cups...the Playtex ones are $14.99 when not on sale...sometimes a higher price is better for sales...

[huggytree]

are you better off selling 1000 cups at $1 profit each or 200 cups at $10 profit each?

there's a sweat spot.....find it...

dont worry that 100 percent dont buy your product...no matter how low you go it doesnt mean all will buy......if 50 percent are buying id say the price is way to low already...

first thing is to know your actual cost...then see how the competition is selling...if yours is better shouldnt it be priced higher? sounds like your 1/2 price of the competition. can you buy a Lexus for less than a Chevy? do people who are Lexus shopping think a lower priced item is good? or do they think 'you get what you pay for and thats why i buy a Lexus'...they may pass over your product as being a cheap item because its priced like a cheap item.....sounds like you could be battling against yourself whether your going after Price or Quality.....pick one...if its new and better price it like its new and better....better things cost more

ive always felt its better to sell less of something at a higher price than to sell alot of something for low profit......

sell your product to Walmart for $10 each and let them sell them for $19.95

[Reflo Ltd]

Thank you all for the great advice and insight.

I have justified the lower price because we don't have retail packaging just yet but I am not sure that we sold much less at the hogher price.

With virtually no advertising we have sold 70 cups online in 10 days and have gotten a lot of great feedback on the idea but none from users (no complaints either).

We will probably readjust the price as of the first of the year when we do our true product launch. We will have better photos by then and are working on putting together a video (many requests for something that shows how this works).

As for our wholesale pricing, with the MSRP set at $7.99 we offer wholesale to retailers at $4.50 for a case of 48, packaged for resale. $4.30 at 5 cases and $3.80 at 10+ cases.

For institutional use (daycares, nursing homes, hospitals, etc) our pricing is $3.80 1 case, $3.60 5 cases, $3.25 10+ cases. These are all bulk packaged.

Yes, I too am doing this by the seat of my pants as another poster put it.

I need to put together a rate for drop shippers too I suppose. I would probably add a dollar per unit for that.

Our packaging will be here next week! Can't wait... should also have all the new photos in about that time too, hired a photograpoher that does great prodcut photo work (from the area here)... I am sure it will be worth it because I know the first thing I pay attention to is how the site looks and how product photos look when I am trying to judge the trustworthiness of a site. If they don't look professional I have a hard time trusting and dealing with them.

I attached a pdf of wholesale pricing if anyone wants to see it.... nevermind, the site says the size limit for a PDF is 19kb, mine is 46kb.... ??

[Reflo Ltd]

I didn't see "patent pending" shown anywhere on the site and honestly am not sure how important it is, but may be worth researching.

In addition to marketing targeted toward children how about the elderly, disabled or physically handicapped?



I should probably add "patent-pending" to the site, thanks.

Yes, we realize that there is a huge market in the elderly and disabled markets. We actually have some being trialed at a local nursing home with good initial feedback.

[Reflo Ltd]

I wouldn't start messing with the pricing until after you'd worked on improving the copy of the website. It's quite a remarkable product, but there's nothing that would make a mom (the prime buyers of the product) trust your site or it's claims. In fact, your pricing may be a little low if you're going head to head with sippy cups...the Playtex ones are $14.99 when not on sale...sometimes a higher price is better for sales...

Please tell me what particular areas of the site are in need of improvement, I too look for well-designed sites when buying online. We do have professional photos being done as we speak but other input is much appreciated.

[skoster]

I'm just on this website to learn, but as a Speech Language Pathologist who works in early intervention I can say that you've got a huge untapped sales force out there. One of the first things I do is try to get the parents of the kids I work with to throw out the sippy cups and pacifiers, both are really bad for oral motor development.

I can't tell you anything about pricing, however I can tell you that if you make up a nice little brochure and send it out to various school district infant/toddler programs you'll have speech paths from here to Timbuktu telling parents about the product. Probably only need a few brochures per county, they'll get passed around.

I'd love to see some video and pictures of people using them so I can get a handle on how much liquid gets through the insert during drinking, and what happens if the cup gets knocked over or a child wanders around with it while tipping it. If it works, you might want to speak to some SLPs and OTs to try it out in various settings (early intervention, SNF, acute care, etc.) with various clients and get some testimonials.

[Reflo Ltd]

One of the most interesting things I came across in my research while developing this product was an article on the subject of dental and speech problems attributed to sippy cups. Thank you for your input, it is a big help. Speech pathologists would be an excellent group to introduce this product to.

We will be working on a video soon to give buyers a better idea of how our product works. A video has been the most common request we've received.

[Steve B]

What is your website?

[Reflo Ltd]

My website? It is Reflo Ltd - a smart alternative to sippy cups (http://www.reflo.net)

[Steve B]

I love the look of it. A video would be a great addition.

If you had a version that held 16 oz. of fluid and fit in most cupholders, I would consider trying one out.

[Reflo Ltd]

Actually, the next product we will produce is an insulated mug / coffee mug. It would be splash proof and there would be no buttons to mess with or no need to look for the drink hole while driving as it would work the same at all 360 degrees of rotation.

[Steve B]

I would think that would be a huge seller if it were cheap enough. I can see a bunch of them at every truck stop.

[Reflo Ltd]

Probably in the 12-15 dollar range, stainless steel walls, black rim and insert. Won't really know until we nail down design and product specifics. You couldn't imagine what the cost is just to have a plastic injection mold machined to make a couple pieces at a time. The first quote we had to make the inserts for our current cups was $57k for a single-cavity mold (makes one piece per cycle). It is a pretty complicated mold though and some comapnies wouldn't even quote it because it was too complicated.

[huggytree]

i think your idea is definitely worth some money....id consider hiring someone who knows how to market nationally

[Steve B]

I agree. Ultimately, I would think your product should end up in the baby section of Wal-Mart and Toys-R-Us etc. However, you may not enjoy your business as much if you have to compete in those arenas. I know I wouldn't. But, I'd be worried that someone will steal your idea and do the mass-market thing.

[Patrysha]

I agree. Ultimately, I would think your product should end up in the baby section of Wal-Mart and Toys-R-Us etc. However, you may not enjoy your business as much if you have to compete in those arenas. I know I wouldn't. But, I'd be worried that someone will steal your idea and do the mass-market thing.

To compete in WalMart will likely need venture capital to get to the levels those sorts of markets demand. I got a glimpse of that during my speaking tour in Kenora earlier this fall. I spoke in the morning and in the afternoon Chris & Larry who developed a candy out of one of their grandma's recipes and called it Clodhoppers. It was certainly an interesting journey. All of it well documented through publicity efforts throughout the process. They eventually ended up selling when the venture people decided it was time to sell...right after the recommendations for growth started to include big advertising buys.

As for the stealing...would they be able to steal an idea that has a patent pending?

I think the 'net makes for possibilities of major sales without major retailer involvement. I mean it's not going to be completely free by any means to get the word out...but with the proper use of some publicity efforts and social media involvement...along with some direct mail efforts to people in the medical and seniors markets that can help influence sales. Really...it wouldn't take much to push sales if it delivers on the promises in the current site. Word spreads quickly these days...and it's not too difficult to nudge it in the direction you want if you have a great product.

[Spider]

Sounds to me like a great product for The Shark Tank - Have you considered applying?

Shark Tank season two | TV Series Finale (http://tvseriesfinale.com/tv-show/shark-tank-season-two-17217/)
ABC.com - Casting (http://abc.go.com/site/casting)

[Steve B]

Sure - it can be stolen. A patent gives the right and ability to defend your idea, but it can still be stolen and can take a lot of money to go after the person who stole it. It's like saying nobody can steal my car, because I have my name on the owner's title. Someone can still steal it, you just have to have them hunted down and prosecuted.

You could also have someone make a similar but different variation to the first patent. Tivo is a good example. I think they "invented" things about digitally recording live TV, but others came out with different variations and were successful in the market.

[Patrysha]

So the goal would be to be first past the post in becoming the household name for the product category...

[Steve B]

Exactly, and well stated. At one time or another I heard a pretty extensive list of very successful products and companies that were the second or third to arrive on the scene.

[Reflo Ltd]

I agree. Ultimately, I would think your product should end up in the baby section of Wal-Mart and Toys-R-Us etc. However, you may not enjoy your business as much if you have to compete in those arenas. I know I wouldn't. But, I'd be worried that someone will steal your idea and do the mass-market thing.

Thanks! I am a little nervous about getting that big too soon. Not that we don't all want a new product of ours to be successful but I don;t have the resources to put it out on that kind of scale.

On the other end of the same concern, I hear horror storuies of dealing with big retailers, demanding that your wholesale is right against your cost and also worry that the cup then becomes a low-dollar gimmick on the walmart shelves whoch I do not want. I think it is an important consideration to maintain the "value" of this product being that it is unique.

[Reflo Ltd]

i think your idea is definitely worth some money....id consider hiring someone who knows how to market nationally

THanks, I like to hear that kind of feedback... and I would love to hire a marketer but finances dictate otherwise for now.

[Reflo Ltd]

As for the stealing...would they be able to steal an idea that has a patent pending?

I think the 'net makes for possibilities of major sales without major retailer involvement. I mean it's not going to be completely free by any means to get the word out...but with the proper use of some publicity efforts and social media involvement...along with some direct mail efforts to people in the medical and seniors markets that can help influence sales. Really...it wouldn't take much to push sales if it delivers on the promises in the current site. Word spreads quickly these days...and it's not too difficult to nudge it in the direction you want if you have a great product.

I think our patent application is pretty well-written and being that the "invention" is relatively simple, there is a lot less to tweek for a potential competitor to get their hands on the idea.

I would pursue any patent infringements in a very strong way.

Also, the internet is a great place to spread the word, especially about a unique product. Not as good for selling products that everyone has. I am hoping, after the beginning of the year when we officially launch the product, to put out press releases and gain some media attention. That would be great, especially in the right publications.

A local newspaper has contacted me about doing a story. I am a small suburb councilman so the reporter knows of the product from general chatter about it here at home. I asked him to wait until after the new year so we will have the website updated and our packaging will be here.

BTW, I upodated all of the photos on my site and cleaned up the look some if anyone wants to check it out and give me feedback on it. Reflo Ltd - a smart alternative to sippy cups (http://www.reflo.net)

[Reflo Ltd]

Sounds to me like a great product for The Shark Tank - Have you considered applying?

Shark Tank season two | TV Series Finale (http://tvseriesfinale.com/tv-show/shark-tank-season-two-17217/)
ABC.com - Casting (http://abc.go.com/site/casting)

I LOVE that show... and have thought about applying. I wouldn't know where to start for a proposal or offer to the panel there.

[Reflo Ltd]

Sure - it can be stolen. A patent gives the right and ability to defend your idea, but it can still be stolen and can take a lot of money to go after the person who stole it. It's like saying nobody can steal my car, because I have my name on the owner's title. Someone can still steal it, you just have to have them hunted down and prosecuted.

You could also have someone make a similar but different variation to the first patent. Tivo is a good example. I think they "invented" things about digitally recording live TV, but others came out with different variations and were successful in the market.

I think it helps me a lot that it is such a simple invention. It does not mingle existing and unprotected technologies with mine. Instead of thinking along the complicated lines of a tivo, think of something simple like a straw. If the straw were patented, it would be nearly impossible to copy it without infringement. Also consider that a lot of new products that seem to get ripped off may actually be selling rights for production.

Also, about patents, even if you invent an improvement for an existing patented device, you can only benefit from the improvement. You cannot now produce the device and add your improvement to it without permission form the patent-holder of the original device.

[Reflo Ltd]

Did you know that sippy cups were invented in the 1950's but didn't become popular or widely manufactured until the 90s? THe patent has long since expired before they were a big item. Now they seem a neccessity.

[Spider]

I LOVE that show... and have thought about applying. I wouldn't know where to start for a proposal or offer to the panel there.I'll bet you didn't know where to start when you first had the idea about your cups - but you found out. So, go and find out how to make a proposal and apply to the program.

[Reflo Ltd]

I'll bet you didn't know where to start when you first had the idea about your cups - but you found out. So, go and find out how to make a proposal and apply to the program.


Good call.. I went ahead and applied online. Thanks!

[Patrysha]

THanks, I like to hear that kind of feedback... and I would love to hire a marketer but finances dictate otherwise for now.

Unless you are dead broke, you might find it surprising how little it can cost to work with a marketer to develop your own marketing and promotions plan. It's much easier and less expensive than most small business owners tend to think. The amount of time and energy you spend on marketing is exactly what you need to make the rest of the work you've put in so far to have been truly worth what it should be. Marketing shouldn't be an afterthought or something you try to afford someday, but part and parcel of product development and failing that should be part of the early stages. I know I'm biased, but there are good reasons for it.

If you have zero $$, you can still achieve a heck of a lot through publicity and social media :-)

[skoster]

Can I be perfectly frank? I dropped by the website again today to see if there is a video up yet. I'm ready to buy a few to show the parents of the kids I work with, but I need to see it in action before I do. Here's what I need before I buy, and I bet a lot of people are the same way:

1. A video of someone drinking out of it so I can see that it's a natural act and can be done by the people I would use it with (young children).
2. A video of a child running/playing with it and tipping it so I can see that it doesn't spill.
3. A video of it being knocked over and not spilling.

I'm not trying to be harsh, I'm sure that you're overloaded with everything, but those videos are the make or break point for my sale and, I would bet, a lot of others. At this point I drop into the front page of your site, don't see a video or a big banner-type link to videos, and navigate away again. I don't need anything special, just three ~20 second clips. Get a 20 dollar one use video camera if you don't have a regular one and free editing software from the web, we're talking about a few hours of work.

[Reflo Ltd]

Skoster, you are absolutely correct and we are working on this. I have had a LOT of requests for a video.

[dynocat]

You've gotten some great ideas and suggestions here, Reflo. I wouldn't even consider the big markets like WalMart, Costco, etc. I think you have the perfect product for marketing yourself or with the help of a professional. Get the home and institutional market and you won't need to cut your profit to the bone for the "big boys!"

[Spider]

Except that you will obviously sell a whole lot more through Wal-mart, etc. Personally, I'd rather cut my profit to the bone and have 10 cents profit from every cup that Wal-mart sells than $2 profit from every cup that St.Jude's Hospital for Children sells. (Allowing for Wal-mart to sell 1 million cups against St.Judes selling 10,000 cups in the same amount of time.)

But there's another, possibly more important, question — once you have sold through Wal-Mart, you have "first-to-market" status. Until you are so established in the marketplace that "reflo-cup" becomes a household name (like kleenex - or sippy-cups, for that matter), you are subject to being pushed aside by the big guys who are very happy to make a killing at 5 cents a cup profit. Maybe even Sippy-Cups, themselves. (Oh-oh! It seems sippy cups are already generic and are made by Dr. Brown’s, Evenflo, Gerber, and Playtex amongst others.)

OTOH - being first-to-market isn't always the best plan - see Think Twice About Being First to Market - BusinessWeek (http://www.businessweek.com/smallbiz/content/may2009/sb20090519_306313.htm)

To make the most of this idea, I think you need some serious, heavy-weight entrepreneurial help.

[Reflo Ltd]

For the time being I think we will work on getting sales through smaller outlets so that we can determine the proper pricing, etc... and get a little history established.

I suppose selling to Major retailer has its pros and cons. The first concern that comes to my mind is devaluing the product. I don't want this to become a $1.99 cheapy product either. It is unique and I think it would be difficult to work around our patent, but you never know what clever idea someone will come up with.

My hope would be that a major retailer would want this cup eventually because of its popularity and uniqueness.... and that would allow me to not have to cut to the bone or devalue the product but I have never dealt in the world of major retailers... or minor retailers for that matter.. So I don't know what the potential is in that area.

I am wondering if it is an acceptable practive to work with a local chain of grocers, perhaps, and sell the product for one price at one location and another price at another location, as a test. However, the demographics of the two areas may differ enough to skew the results too.

We originally offered the product on our site for $7.99 each. Then, because we didn't have retail packaging yet... and as a way to guage reaction... we changed the price to $6.99 each and will keep it there until we get our packaging around Jan 5. I don't think we noticed a change in sales or in shopping habits, to be honest.

Our pricing structure now is fair, I feel. I suppose we will see how sales continue as time goes on. I know that our wholesale pricing is very appropriate for the wholesale market for institutions. I am not sure how retailers will react to the pricing though. They can certainly double their money on our product which I think is acceptable.

My only concern with retailers now is where to set the MAP and MSRP.. and how that should coincide with our own sales. If we are having no trouble selling online for $7.99 + shipping, should we keep that price as the MAP for retailers?.. and as the MSRP?

I know this reply has gone in a dozen different directions, just a lot going through my head at the moment.

and by the way.....Merry Christmas everyone!

[Spider]

...My hope would be that a major retailer would want this cup eventually because of its popularity and uniqueness.... and that would allow me to not have to cut to the bone or devalue the product but I have never dealt in the world of major retailers... or minor retailers for that matter.. So I don't know what the potential is in that area... That is why you ought to put aside your ego and consult with someone who has.


...I am wondering if it is an acceptable practice to work with a local chain of grocers, perhaps, and sell the product for one price at one location and another price at another location, as a test. However, the demographics of the two areas may differ enough to skew the results too...Unless you are actually selling the product to the public yourself, you have no say in the price the grocer sells it at. You determine what you sell it for, the reseller sells it for what he decides to sells it for.

[Steve B]

What I've noticed on other products is that buying direct from the manuf. never saves you any money. It seems that the MAP and MSRP need to be the same - otherwise, why would anyone want to spend their shelf space on a product that people can buy cheaper.

I'm really not an expert, but I don't think I'd be that confident about your patent being bullet proof. First of all, earlier in this thread you said you didn't have money for help with marekting, but you also said you would aggressively fight a patent challenge. Fighting a patent challenge would simply take a lot of money. I guess it's possible you have plenty of money for one and not for the other, but ... Secondly, (and this is only based on seeing a TV show called Pitch Men - or something like that) a young kid had an idea for a set of wrenches that looked like a Swiss Army knife. They found out a similar idea was already patented so they busted his dream. Fortunately, they were able to go back to the drawing board and changed something that I thought was relatively minor and they were back in business.

From what little I know of your product and the market you are trying to sell to, my guess would be for you to make a big splash as quickly as you can. Perhaps, you'll even sell your idea to Even-Flo or someone else with the ability to take it big time.

Please take all of the above with a grain of salt. I really have no particular experience in any of those things. I'm just a small local business owner trying to carve out a niche in two established services - nothing even remotely close to taking a patented product to the market. I really think your idea is great and has a lot of potential, but my guess is it would need to be developed by someone who understands the mass market.

[Spider]

One of the thoughts I always have when watching "The Shark Tank" is - How uninformed even the smartest of inventors and entrepreneurs seem to be regarding money. They have an idea, a prototype, maybe, a few friends who think the idea is great, and they want $200,000 for a 10% stake. Then they look aghast when the panel ask them how they value their business at $2 million! Then they cringe and wriggle when the Sharks offer them the money for a 55% stake.

My attitude would be "Take whatever stake you want. Put up whatever money you think is needed. What I want is your involvement. I will earn a lot more owning 10% of this company with Barbara Corcoran, Kevin Harrington, Robert Herjavec, Daymond John and/or Kevin O'Leary on board than I ever will on my own!"

If you really think your drinking cups have big-time potential - are a blockbuster product - a goldmine in-the-making -- then, for goodness sake, get some people on board who have the money, have the skill and the experience to make it what you want it to be. Piddling around at the edges, in a cut-throat industry that you admittedly know nothing about, is setting yourselves up for - well, I won't say, disaster - but for a wasted opportunity.

[Reflo Ltd]

Trust me, no ego involved. As we progress we will probably go the route of hiring a consultant.

Good point on price control. You are right and the retailer can sell for anything they want I suppose. I can control what price they advertise the product at and think that might be prudent for now as an effort to protect retailers from each other in a sense... but maybe I shouldn't concern myself with that right now either and let the market work itself out. If one retailer wants to make $1 per sale vs $4 per sale, that is their business to some degree.

Hiring experts at this point is tough because finances are a little tight... not non-existant though.

[Spider]

...Hiring experts at this point is tough because finances are a little tight... not non-existant though.You don't have to hire experts - in fact, I would advise against hiring an expert. You want an experienced investor. They come free - in that you don't pay them anything, they pay you (a much nicer proposition!) Give them a big enough share of ownership and let them make money for you.

[Reflo Ltd]

You are correct and I would be very open to an investment from someone in the know about these matters, however, I think I would do better for myself to create some sales history and success before asking someone else to come onboard. I think a lot of those in the "Sharktank" come in with concepts or products with no history to prove their worth and yet the entrepenuers want big dollars. My approach is to create some value in this product.

[Reflo Ltd]

That is an intersting thought. I never looked at it that way. I guess I always assumed it was a pay service not an investment opportunity for them.

[gabearnold]

Good thoughts from skoster. How it works would be a good thing to show in video.

I am wondering who your partners are? What I mean is, have you talked to real bricks and mortar businesses, or mommy groups who can give you feedback and help you get things moving ahead?

How are sales going?

[Reflo Ltd]

So far our sales history is this... We began selling on Dec 8, 2010, online only. With no paid advertisment we sold 145 by the end of the month.

I have been getting feedback from a few sources but i have no "business partners". Just my wife and I doing what we can with this.

I have appraoched a few retailers this month and have gotten some response. I don't know that it equates to interest but I did have a well-known national retailer send me vendor forms to complete today.