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How can a new product with a very small profit margin survive the cost of marketing?

I manufactured dish sponges for families with pets. Distinguishable shapes so the whole family knows which one is the dog's dish sponges and which is the family sponge. Profit margin is tiny. The cost of bringing eyeballs to my website is way more than the profit made from selling to some of the visitors. Retailers and distributors don't want to touch my product because this business is too new and too small. How does marketing for low profit products work?

http://www.yogisponge.com

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Hi: I am in the process of trying to bring a product to market and have numerous people drill into me the need for a true financial plan that begins with your COGs (i.e cost of goods sold). `If you don't have margin for marketing then you really need to question your products viability. Happy to help with the exercise - just contact me.

Jeff Gindin

Cycling Designs LLC

Jeff, I sent you a message. Thank you very much!

Fran Maghsoud

Yogi Sponge

Lower your costs.

Also, your website is going to have super low conversions due to the nature of it. For something like your product, I would think that having an add to cart or buy now button on your landing page would be critical. It's confusing how to actually purchase your product.

Zachary Graft

Graft Outdoors LLC

Hi Zachary, yes, I realize it's a little bit confusing. Huge photos and tiny obscure call to action buttons. Need to fix that. Thank you. I just started (few months old product) and had to push the factory's MOQ even lower for this first order so the cost went up. Hopefully the next shipments will cost a lot less, and some mistakes will be fixed... that's if I manage to stick my foot in the market first. Thanks for the feedback!

Fran Maghsoud

Yogi Sponge

Fran,

As someone who has placed thousands of products in retail chains I can tell you that your cost can be no more than 20% of MSRP/retail therefore if your item retails for $6.99 then your cost can be no more than $1.40. You will need this much margin in order to pay all the expenses associated with retail placement and still make a decent profit for yourself.

From a product sourcing standpoint, I think your item should be able to be produced for about $1.25 in China when purchased in quantity. I don't see anything about it that's difficult to manufacture - 2 sponges and a package.

I would suggest you find a manufacturer's rep who has placed items in Pet Smart and Petco. Pay them for their time and advice. Ask them if your item has a chance of getting placed and what the right retail price would be for the item.

All the best,

John T Clark

John, thank you very much for your very valuable advice. I should definitely speak with a manufacturer's rep. If I can order a bigger quantity (next time) actually the price will go under $1.25. Not this time though but I am prepared to lose some money in order to stick my foot in the retail market now until I adjust and start to see some profit. Part of a startup investment I suppose. Thanks again for your time and feedback. I appreciate it!

Fran Maghsoud

Yogi Sponge

Not to be a downer --but you can't survive on a low-margin product - as you will need both the cash-flow and the marketing capital to spend on growing the business -- which costs, not 'makes' money.

Thank you Steven, I know. Impossible unless one has an unlimited financial backup and even that might be a bad idea.

Thank you!

Fran Maghsoud

Yogi Sponge

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