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Do you know what's crazy?? What the ROI is on a small improvement of your product vs. the ROI on the original product. I've been researching products this past week and I've also ordered $300 worth of items on Amazon to see what my competition is like.
Here is what I noticed:
Let's call this a picnic blanket that sells for $30.
I ordered 4 picnic blankets from the top 10 results ranging from $15-$35. It's pretty safe to say that the $15 one was too thin. The $20 and $27 were identical. The $35 was noticeably thicker and waterproof.
Ok, after contacting a bunch of suppliers. The product sells for $5-$12 wholesale. Based on my research:
The $15 one, cost $5. Bare minimum product
The $20 and $27 one, cost $10. Better material. Thicker.
The $35 one cost $11. Thicker and coated to be waterproof.
ROI
$15 blanket - $5, sell for $15 = 200%
$27 blanket - $10, sell for $27 = 170%
$35 blanket - $12, sell for $35 = 191%
Looks like selling the $15 blanket is a better deal right?
Now, look at the numbers. If you are a cheap a$$ and want a cheapo brand. You go with the $5 one and race yourself down to the lowest price with the other cheap asses. Great ROI, large headache.
Most of you would go with the $10 one. But then you give it a cool brand name and 99designs logo , awesome photos and a bunch of reviews. This way you can sell it for $27 instead of $20. Decent ROI, easier to sell and get favorable reviews.
But look at the top. For an extra $2, you can get it waterproof coated. This results in an extra $8 in selling price. For $2, you gain $6 profit. That's 300% return on the $2. You would be crazy to not add this feature, but many don't. But that's not all. You also have a better product!
Ok worse case scenario, what if you can't sell it at $35 for the waterproofing. Maybe the current $35 blanket is a name brand and you don't have that recognition. AND you don't have any reviews.
So you need to lower your price to compete. You come down to $27. Now you are up against the $20-$27 competition with a lower quality product. You should be able to sell yours up against theirs no problem. Yes, you paid $2 more for this product, but you will save that in reduced PPC costs and having no need to do review giveaways.
BTW, these numbers are a little bit generalized. And I know that they don't illustrate my point that great. But I can tell you that in the real world. The added value is much much greater in ROI than my example above. We are talking about 1000% and more.
Many times the margins of the improvements are so huge. But we tend to look at how much we pay the manufacturer and try to get the lowest price. I have many products where a $2 increase in material quality results in an extra $20 of selling price. Or sometimes $1 more can get me double the amount of product (because the bulk of the cost is in the packaging and labor), which results in adding $5 to the selling price.
Here is what I noticed:
Let's call this a picnic blanket that sells for $30.
I ordered 4 picnic blankets from the top 10 results ranging from $15-$35. It's pretty safe to say that the $15 one was too thin. The $20 and $27 were identical. The $35 was noticeably thicker and waterproof.
Ok, after contacting a bunch of suppliers. The product sells for $5-$12 wholesale. Based on my research:
The $15 one, cost $5. Bare minimum product
The $20 and $27 one, cost $10. Better material. Thicker.
The $35 one cost $11. Thicker and coated to be waterproof.
ROI
$15 blanket - $5, sell for $15 = 200%
$27 blanket - $10, sell for $27 = 170%
$35 blanket - $12, sell for $35 = 191%
Looks like selling the $15 blanket is a better deal right?
Now, look at the numbers. If you are a cheap a$$ and want a cheapo brand. You go with the $5 one and race yourself down to the lowest price with the other cheap asses. Great ROI, large headache.
Most of you would go with the $10 one. But then you give it a cool brand name and 99designs logo , awesome photos and a bunch of reviews. This way you can sell it for $27 instead of $20. Decent ROI, easier to sell and get favorable reviews.
But look at the top. For an extra $2, you can get it waterproof coated. This results in an extra $8 in selling price. For $2, you gain $6 profit. That's 300% return on the $2. You would be crazy to not add this feature, but many don't. But that's not all. You also have a better product!
Ok worse case scenario, what if you can't sell it at $35 for the waterproofing. Maybe the current $35 blanket is a name brand and you don't have that recognition. AND you don't have any reviews.
So you need to lower your price to compete. You come down to $27. Now you are up against the $20-$27 competition with a lower quality product. You should be able to sell yours up against theirs no problem. Yes, you paid $2 more for this product, but you will save that in reduced PPC costs and having no need to do review giveaways.
BTW, these numbers are a little bit generalized. And I know that they don't illustrate my point that great. But I can tell you that in the real world. The added value is much much greater in ROI than my example above. We are talking about 1000% and more.
Many times the margins of the improvements are so huge. But we tend to look at how much we pay the manufacturer and try to get the lowest price. I have many products where a $2 increase in material quality results in an extra $20 of selling price. Or sometimes $1 more can get me double the amount of product (because the bulk of the cost is in the packaging and labor), which results in adding $5 to the selling price.
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