Many of us develop things for one of two purposes: to hack something cool, or to sell something cool. When hacking something cool, your target market is yourself, and you already know you’ve made the sale. If your goal is to sell the thing you are making, then a lot more thought and effort is required. You could develop the coolest product in the world, but if your target market is too small, your price is too high, your lead time is too long, or any of a dozen other factors is not quite right, you’ll be spending a lot of time and effort on what will amount to a huge disappointment. The Hackaday Prize Best Product has many great examples which let us study some of these success factors, so let’s take a look.
Who is the Target Market?
Figuring out who will purchase your product is an important part of developing it. It will tell you what sales channels to use, inform price range, graphics, and marketing, and give you an idea of sales volume. Take, for example, the Graphically Programmable Arduino Shortcut Keypad pictured at the top of this article.
One could say the target market is gamers, or possibly professionals who use specific software packages. It isn’t language specific, so there is no limitation on country. In a sense, it is a blank slate with broad application for a few huge markets. But would someone who wants to use it for CAD shortcuts or playing WOW really purchase, or even search, the “Graphically Programmable Arduino Shortcut Keypad?” It might have a different branding and graphics and name for gamers than it would for hackers or accountants. Each of the target markets will require a different approach, and may assign different values and expected prices to the product.
Now consider the Electro-Magnetic Enabled Bagpipes. While a cool idea, the Total Addressable Market would be only people who play bagpipes, which (thankfully to some) is not a big number. It wouldn’t take many units to saturate the market, but it may be easy to reach out to all of them through a limited number of publications or forums.
How Much Will It Cost?
There are a few ways to determine the right price for a product. One is to find a competing product and match their price or beat it slightly. For example, you could look at an existing Raman Spectrometer, see that it’s really expensive, and price yours slightly lower.
Another is to take your Cost of Goods Sold (COGS), multiply it by 2-4x, and use that number. Your COGS is how much the thing you’re selling costs you, so you have to sell it for more than that to keep your business going and pay yourself. If you are going to retail, then you might sell to the wholesaler at 2x the COGS. They will turn around and sell it to the retailer with some markup, and the retailer will mark it up again, quickly getting the retail price to 4x the COGS. If you are selling online only, you can sell for less because you don’t have the overhead of wholesale or retail, but it means that you may never be able to sell retail in the future because they don’t like it when you sell online for cheaper than they sell in stores.
Unless you are selling your product with a consumable subscription model (Juicero, Keurig, Dollar Shave Club), you cannot get away with selling at a loss, and if you plan to grow the business, you have to price it high enough that you can afford to buy ever increasing volumes using profit from the previous batch.
Will My Target Market Buy It?
Makers are a tough market. They are frugal to the point of absurdity, they want to build things themselves, and they are knowledgeable enough to seek out other options. When it comes time to get that cool Nixie tube clock, is your target market going to buy an assembled Nixie tube clock, or are they more likely to design and build it themselves just so they can figure out how a Nixie tube works? (Hint)
Besides the challenge of setting the price high enough that you can reasonably make and sell the product and stay in business, you have to set the price low enough that your target market will buy it. The general saying is that you can never raise your prices, but you can always lower them. You could come out with a new product that has different features at a higher price, but raising the price on a product rarely goes over well with customers. That’s why it’s important to set the price higher to begin with, then if the market doesn’t react you can try dropping prices lower and lower until you’ve found the sweet spot. Too low and you’re not making enough profit on each unit.
This is one reason why luxury goods are so appealing; high margins means they don’t have to have as many sales or as much inventory to make the same amount of profit. It’s also a reason why healthcare is appealing; if the insurance is paying for it, people don’t know or care how much the product really costs. The more positive reason is that people pay more for things that obviously improve their quality of life, and things like the Hand Tremor Gyroscopic Stabilizer project are exactly the type of product that have the potential to hit the sweet spot of providing significant value to a lot of people in a domain that can command a higher price.
How Will I Sell To My Target Market?
If your target market is government contracts, maybe Kickstarter is the wrong platform to capture sales. It’s important to be able to reach your target market and offer the appropriate payment methods for them to buy. The benefit of a small target market is that it may be easier to reach them, but it also means your product has to be compelling enough to all of that market that a significant portion of them will make the purchase. Electric longboard owners are a pretty small market, so the Bluetooth controller for one needs to offer a lot of value in order to capture enough of the market to make the product profitable. As I’m not an electric longboard owner, I can’t speak to its value to that community, but for [elmameto]’s sake, I hope it’s high.
Addressing the target market with the right angle in your pitch and the right language and the right venues is important. Seek out the publications and forums that your target market uses and write in their style. Hackaday has extensive worldwide reach into millions of homes, but if your product is a piece of sports equipment, even daily features won’t make it into many of the homes of the people who will buy your product. If it’s a robotics kit for schools, teachers may not be able to purchase from Kickstarter.
A great product isn’t just a great product because it has a lot of features. It has to have a market, the market has to hear about the product, the market has to want the product, and the market has to be able to pay for the product at the right price. THAT’s what makes it a great product. If you think your idea is useful and has value to an identifiable target market, you should consider entering it in the Hackaday Prize Best Product competition before the July 24th deadline.