Product Genius, the Podcast for Inventors, Entrepreneurs, and Startups

Steven Julian

We start the show with Noah's story time. First time ever at the top of the show. We end the show with possibly the launch of the first Product Genius product line. And in between, you're going to learn a lot about pricing your product or service. Next on Product Genius.

Noah McNeely

Do you want to be a successful inventor entrepreneur?

Steven Julian

Struggling to get your product from idea to market? Well, you've come to the right place. Welcome to Product Genius. The down-to-earth podcast that explores important topics about inventing and launching new products. Noah McNeely is your trusted guide. With more than 20 years of product launch experience, he's here to help you on your journey to become a product genius. Let's get started. Here's your slightly annoying co-host, Steven Julian.

Noah McNeely

Hey, that's my line.

Steven Julian

Yes, it's time for Product Genius. I am your slightly annoying... Co-host. Greetings and salutations, everybody. Steven Julian, deep in the lair of Product Quick Start to do the show that only our host can do. Yes. Sitting across the table from me is the host of Product Genius, Noah McNeely.

Noah McNeely

Hi. Hey. Hey, it's good to see you.

Steven Julian

And sitting to your left and. my right, the intrepid producer, Jody Smith.

Noah McNeely

Wow, you're really good with directions. That was like that. I was. On your left and my right. Impressive.

Steven Julian

You know, when I was seven years old, somebody helped me with that. Anyway, go ahead. I'm sorry.

Noah McNeely

That's fine.

Steven Julian

Did my fingers the left and right.

Noah McNeely

Yeah. I was listening to the intro and, you know, we're going to have to update that at some point because I will turn 50 later this year. So we're going to have to make that 25 years. Really? Wow.

Steven Julian

Well done.

Noah McNeely

More than 25 years.

Steven Julian

Silver anniversary of helping people bring products to market.

Noah McNeely

I suppose. Yeah. Been doing it a long time.

Steven Julian

A plethora of years. For all you Three Amigos fans, we are going to talk about pricing your product or service today.

Noah McNeely

That's right. Yeah.

Steven Julian

Very exciting. And the coolest part is we're going to do something that I don't think we've done on this show yet. We've done it, but not at the front end. It's going to be Noah's story time. Noah has a story. Noah has an anecdote about pricing your product or service. that has something to do. With. t-shirts. Now, the question is, is it a parable? Is it an analogy? Is it a, oh, shoot.

Noah McNeely

It's a historical reenactment. Oh, great.

Steven Julian

I love those. All right. So everybody grab your favorite beverage minus coffee. I have it right here. Jody, you got your coffee. So let's all sit back, relax, and Noah, kick us off with your anecdote and historical reenactment.

Noah McNeely

I'm going to preface this by saying that this is really a story about how to start a day kind of immoralized and demotivated.

Steven Julian

Oh, fantastic. I can't wait.

Noah McNeely

Yeah, which is perfect for a motivational podcast, right? So you guys are here in the lair. You know, I'm a pretty casual guy. I wear t-shirts to work. I wear blue jeans because I make a lot of messes. I get dirty. Not wearing a three-piece suit, not wearing a tie. Probably haven't worn a tie in years. So t-shirts are kind of my thing. I wear a lot of them. And like you said, this is a story about t-shirts.

Steven Julian

Yeah.

Noah McNeely

Uh, my wife and I go to various events and, um, retreats and things. We're at this one retreat. It was, it was a. pediatric, pediatric cancer retreat. And at the end of the retreat, everybody gets a t-shirt and, you know, took this t-shirt home and it was actually one of my favorite t-shirts. It was one of those that made me, you know, it's just that perfect fit where it made me look a little bit stronger than I actually am. And it kind of hid the parts I like to hide. It was great.

So one day, not too long ago, I was, went through my closet. Through my little t-shirt drawer, I was like, oh, I'll wear that t-shirt today. So I get it out, start putting it on. It's like, it feels a little weird right now. And then I keep trying to put it on and I, you know, wow, this is tight. Have I gained weight, et cetera. And then I realized that I can't roll the t-shirt down all the way over my body. And then it dawns on me, this is my wife's t-shirt.

So we had swapped those in the laundry at some point. And I, you know, obviously, and I've always known my wife's a lot smaller than I am, but. This very. physical, very visual representation of just how much smaller she is than me was a little bit demotivating since I'm trying to lose weight, trying to be healthy, and to my wife's credit, and though I'm very grateful for it but don't understand it, she wants me to be around for a long time, so I'm exercising and doing all the things at her behest.

So anyway, t-shirt didn't fit, didn't feel great about it. Found the right t-shirt, of course. To make myself feel better on the way into work, I stopped and had a bacon, egg, and cheese biscuit. Now, honey, if you're listening, I didn't really have a bacon, egg, and cheese biscuit or a chicken biscuit or any biscuit that you're aware of. Right.

Steven Julian

But that is a great cure for demotivation.

Noah McNeely

Yes, always. Whatever habit's getting you into trouble, just double down on it. So what's that got to do? With pricing your product.

Steven Julian

Yeah, I'm interested.

Noah McNeely

So the way the t-shirt, sometimes you have that t-shirt that's just that perfect fit. Sometimes you have one that's too loose, too tight, and it's just not a fit. The same can be true with the price. of your product or your service. You can have a price that's way too tight for what it needs to be for your business plan. You can have a price that's a lot lower than what your business plan could support. And that's really the analogy. So today I want to talk about really kind of three areas.

Number one, to continue the forced t-shirt analogy, how do you know what size t-shirt you need before you go up to the counter and buy that t-shirt? Now, as people, we all have a lot of t-shirts. You kind of have a good feel for it. Yeah, I'm extra large. That's what I always do. Large, whatever. I'm used to that. That's my thing. But when you're doing a new product or a new service, you don't have that history. So you kind of start from scratch. You've never worn a shirt before and someone asks you, what size shirt do I need to wear?

So we're going to talk about a couple of approaches to finding that price. Also, if we can't get the size we need or want, how do we get ourselves or our product in this case? to the size that we want it to be? In other words, how do we fit it into the right t-shirt size or the right pricing point?

Steven Julian

And we promise that gluten will have nothing to do with the size of your... Product or service or business that were.

Noah McNeely

Unless you have.

Steven Julian

Unless you have gluten in the product.

Noah McNeely

Exactly. And then third, what do you do if you bought the wrong t-shirt size? How do you return it? Or the analogy, how do you correct a problem with your pricing after you've already launched the product?

Steven Julian

I like it.

Noah McNeely

So I forced that analogy. far enough, I think, although it may come back up later.

Steven Julian

Well, speaking of what may come back up later, there may or may not be. I'm going to give a tease. So shirts might be something that also has to do with this show and its loyal listeners. So there's a reason why you told that anecdote. So I don't know. We'll see. That's my tease. That's not from Noah. In fact, Noah is now staring daggers at me like, what are you talking about? But anyway.

Noah McNeely

Oh, you're talking about the shirt I'm. wearing? Yes. Oh, okay. Yeah.

Steven Julian

Let's save it for the end. It's a tease. All right. Sorry. I'm bringing in my. Bringing in my podcast industry experience.

Noah McNeely

But if you would like a shirt with Steven's picture on it, let us know.

Steven Julian

Doesn't happen. Well, we'll take bids because that is incalculable, the value of it anyway. So we're going to start with how to know your size before you get to the counter, knowing the price to start. So really, you're kind of talking about when you're doing your product or service. How do you figure out what price to put on that product or service before you bring it to market?

Noah McNeely

Yeah. So there's basically two and I guess three different methods.

Steven Julian

There's two. Well, three. Okay.

Noah McNeely

Well, because the first method is guess. And as silly as that sounds, I've met a lot of people that have done that. And I don't mean just inventors. I mean, even like big corporate types. And you ask them, well, how much you plan to charge this product? And they're like, I don't know, $12. How'd you get to that? It just seemed right. I guessed it. They didn't say. the word guess, but that's essentially what they did. So I don't really recommend.

Steven Julian

I had a chemistry teacher in high school who called it a swag, a scientific, wild, educated guess.

Noah McNeely

I wouldn't even go that far. It's just a guess. It's just a guess.

Steven Julian

It wasn't even a swag. It was just a guess.

Noah McNeely

The wild guess. It's a way.

Steven Julian

It's a good. It's good. Yeah. Right.

Noah McNeely

So the real methods, there's, there's really two methods that I'm going to talk about. Now, of course. If there are any economists listening, there's of course books with hundreds of pages that talk about all this sort of stuff and all sorts of different things related to this. I'm just trying to make it something that's usable and practical for the average entrepreneur. So I've broken it into two key areas. The first method, and this is a method that really engineers kind of latch on to, you know, I'm very familiar with this method myself.

It's what I would call the bottom up analysis. You as the inventor, you decide, okay, the product's got to have these features and it's got to be made out of this material. Or. in a big company, the CEO or the marketing people decide, oh, it's going to be stainless steel and it's going to have Bluetooth and it's going to have this, that, and the other. So then the engineers or the people developing the product, they look at all these things, they maybe quote some of these parts out, and they come back with an analysis of, with all this stuff, this is what it's going to cost to produce that product.

It's going to cost $8 to produce it. And that's just raw cost. That's what we're going to pay factories and et cetera to get it boxed and get it here. And yeah, that's our bottom line cost. And then kind of the traditional models, you would say what they call the Forex model. You take that number, you multiply it by four, and that's what it's going to retail for. It's kind of a shortcut. It's a little bit of a cop-out. It's not always accurate. It depends on the industry. And frankly, it's old information because if you're selling direct to the public or even direct through Amazon, It doesn't have to be 4X.

If you're in. a different industry, it might be 10X. In the infomercial industry, for example, it's often an 8X or a 10X, meaning that that product you buy $19.99 off late night TV, it really costs them like $2 to make it. Not saying it's a bad product. That's just the nature of that industry.

Steven Julian

So you said kind of the engineers want to latch onto this, largely because the engineers are the one at the... Bottom, putting all of it together, telling the people this is what it's going to cost to produce this at certain levels. And you said the Forex is kind of an older model in The Economist. You talked about all the different books. Is this something that has been starting to change massively recently because of Amazon and e-commerce and all of that? Is it something that, hey, there's always been, and again, going to your 25 years.

Has it always been like that? There's always something coming along that's potentially changing the 4X model to another X model.

Noah McNeely

So picture it. The United States, 2000. Amazon really doesn't exist in any significant way. I think they may have sold books back then. You really didn't. have access to, as an inventor, to sell your product in a lot of ways on your own. Unless you're door-to-door, you could do it that way. But that was about it. So the model there was built around getting your product into Walmart, into Walgreens or Ace Hardware, whatever the retail is. That's kind of where the Forex model comes from as a baseline. So you look at, I'm going to make this product for $8.

I'm going to sell it to Walmart for $16. Walmart's going to sell it to the public for $32. So everybody's going to get that piece of the margin there. There are always exceptions to that. So if you are making a very commoditized product like copy paper or drawing paper or something like that that's very competitive and there's really not a lot of innovation there, even Walmart's not going to double the cost of that when they sell it. So that might be like a 1.5X. So maybe it costs a dollar to make that.

You sell it to Walmart for $1.25. Walmart sells it for $1.75. So it's sort of industry dependent. Talking about just mainstream consumer products that were. the types of things I tend to develop, Forex was a good model then. Now, that is not the only avenue to get your product into the marketplace. You can, and I know people, they actually have very successful businesses. They sell direct just through Amazon or eBay or both or Shopify on their own website. You don't have that additional layer of markup there. So in those cases, I think Amazon's markup is... 17%, 18%.

So now that $8 product, let's say you still want to make $8 off of it. So you sell it through Amazon at $16 plus 17%.

Steven Julian

So you're looking at $19, $20.

Noah McNeely

So that's $20 that you can sell through Amazon. You still make the same money as years ago. you would have sold that product for $32 at Walmart.

Steven Julian

I'd encourage listeners of this show who haven't gone back and listened to the archives back when Noah was... Part of a team of when Tiffany was hosting the show, we interviewed multiple people who had been on Shark Tank or were part of, you know, talking to Shark Tank and a lot of that direct, you know, there are many different channels now. rather than just I got to get my stuff into Walmart or CVS or whatever. So that's a good explanation of bottom up. The second slash third. I'm guessing is top-down.

Noah McNeely

It is exactly top-down.

Steven Julian

What do I win, Jody?

Noah McNeely

It is not top-up and it is not bottom-down. It's top-down.

Steven Julian

Explain what you mean by that.

Noah McNeely

So when you look at it from that perspective, and this is how really marketing people, salespeople, oftentimes CEOs or people running the business will tend to look at things. And that's a process where they do their research in the market. And they say, okay, this market segment, they will pay X amount. They're willing to pay $20 for a product that does this, that provides this solution. And that's how they come up with the pricing. So with TopDown, you really have to know your market space. And this is a case where you may have one segment of the market that can pay $20, one that can pay $40, and et cetera.

You don't necessarily have to pick just one, but you really need to decide who are you targeting. You can't target everybody. And you need to then work. on your pricing structure based on that target.

Steven Julian

So it's not necessarily based on what the cost of it is. That's the bottom up. So the top down is more, who am I targeting? Who is the end line of this? And I'm really going after that person and then doing enough research to know what they're willing to pay. And therefore the value, which, okay, so that's intriguing.

Noah McNeely

And how much is that solution worth to that market? And in a future episode, we're planning to interview the CEO of a company called PickFu, which does market research or helps small clients do market research. And that's a great way to look at this and finding some of these answers. And literally for just a very small amount of money, you can use a company like PickFu and there are other ways to do it too. To get some of that knowledge that you do not necessarily have. Because I've seen people kind of do this analysis incorrectly in two different ways.

One, sometimes inventor entrepreneurs, they're like, they're so close to it. They're like, you know, people pay $40 for this. I'm sure they would. When in reality, yeah, maybe you would because it's your product. But most of the market you're trying to target, that's way outside of what they're willing to pay for this solution. And you go out and you design a product that has to be sold at $40 and you don't have a business because nobody's buying it. I see inventors do the opposite too, which can be just as bad as they're like, they undervalue that.

It's like, well, I got to sell this to everybody. It's got to be $8. Okay. So then you end up designing, developing a product that's so de-featured or devalued or whatever that nobody buys it. You sell it at $8 when you could have been selling it at $12 or $20 and you leave a lot of money on the table.

Steven Julian

I have a great homework assignment for any listeners that want to engage in this. It'll also help our listenership. And I can also say with confidence that Noah was not a part of any of these. Go back to our archive of shows. Find the people we interviewed talking about their products that are literally on the market because I will confess there. were times listening to these people. And they talked about their product. I could see what they were doing. And then they said what it costs. And I'm like, there's no way on God's green earth I'm paying that for that.

Conversely, other people talking about their products, talking about their solutions on our show as I'm interviewing them. And I'm going, it's brilliant. I'd pay almost anything for that. That's brilliant. I'm not saying which is which. I'm saying it might be fun to go back and listen to some of those interviews. And I'm happy to say that. None of those are people that know you were on those shows. It was mostly through one of our other partners in the past. So drive up our listenership. Go back and listen to some of those past ones.

I can think of one, and Jody and I are going to get off the air. I'm going to say, you know which one I'm talking about, and he'll know exactly which one I'm talking about. But I was like, there's no way I'd pay that for that. Anyway, all right. So moving on. So we've talked about a great explanation. of kind of how to figure out. How to put a price on it? Don't guess. Figure it out, bottom up or top down. Now let's talk about getting to the size or the price. that kind of works for your business plan, the idea of getting to the size you want to be.

So if I'm a 3X or 4X and I want to trim down to 2X or 1X, I know what I need to do. To make that happen. But in terms of your business, it involves biscuits. Yes, it does. Bacon, egg, and cheese, preferably the cheese that have been separated by Frank's Cheese Hammers. Go on to, you know, talk about fit, right size fit for businesses as you're launching your product or service.

Noah McNeely

All right. So here's the crux of the top down, bottom up. is you actually have to do or you should do both if you're going to have a successful business. You can succeed at one or the other, and you might be successful as a business, but you may not be optimized in terms of maximizing the value or even reaching the right market. So if you do both of. those analyses and you've got a mismatch, that's what I'm saying. Your shirt doesn't fit. It's too small. It's too big. If your top-down analysis comes back with a pretty big number, let's say $40.

And your bottom-up analysis comes up with like $30. Well, that's a really good place to be because you have a lot of room there. And what you might do in your business plan, you can find other ways to be comfortable in that. So maybe you say, okay, well, I can still charge $38 or $40 and still have a big piece of the market. Well, guess what? Your margin just went up a lot, which helps fund your next product and so forth and so on. So that's actually the good problem to have.

Top-down analysis is bigger than your bottom-up analysis, which leads us to the bad problem. The bad problem, as you can probably imagine, since it's the opposite.

Steven Julian

My mathematical brain can't handle this, I think.

Noah McNeely

Yes. It's when your bottom-up analysis number is bigger than your top-down analysis number. So now the engineers, maybe it's me, maybe someone else, maybe it's whoever. Looks at all the stuff that you. want to put in this thing and, oh, that's $30. But then you do your top-down analysis and you realize, okay, this market, they're only going to pay $20 for this solution. So now you've got a problem. So what do you do? There are two main ways.

Steven Julian

Are you sure it's not three? One is guess? Oh, I've stumped it.

Noah McNeely

Well, you are because my notes spread across two pages here. So maybe there will be more as we work through this.

Steven Julian

He said there's two main things, but there's four bullet points to my notes that I sent you before the show, Steven.

Noah McNeely

We're using modern mathematics and chaos theory in this particular set of notes.

Steven Julian

So there's two things you can change.

Noah McNeely

There are two big knobs you have to turn that you can change. One is if your product just is too expensive, maybe you can find ways to change the product and make it less expensive. That's one.

Steven Julian

We've talked about that in the past on the show. Hey, you could use plastic here rather than stainless steel and that might.

Noah McNeely

Yeah, I'm going through that with a client right now. It's like, you know, right now the manufacturer costs this particular product is coming in like $15, $16 and they need it to be $9 and they've got stainless steel and other things in it. So now we're going back through and I'm explaining to them why you can't. Right. Why you can't do that. It's just not going to work. Yep. This is not my fault. It's the fact that stainless steel costs what stainless steel costs. The other thing you can change, of course, is your business plan.

And what do I mean by that? That means that if you can't fix the bottom-up analysis, in other words, you can't take anything out of this product. It's got to be stainless. It's got to have these features or else it's not going to make an impact in the marketplace. Then you have to change your marketplace. So then maybe you go back and you redo that. Analysis targeting a different market. So maybe you were targeting people that could afford to pay $25 for a solution here. And that might be a pretty big group.

But now you can go back and you can target people that will be willing to pay. $40 for a solution. That might be a smaller group, but it's still a group you can be successful with. That also opens up the opportunity that now. You may have a little bit more room to add other features into this product or even upscale it a bit more, and that may be what's necessary for that market group. So if you're selling to a premium market group, you may have to make the product even more premium to find that right balance of bottom-up and top-down analysis.

Steven Julian

Noah, in what you do with product quick start, and we always say at the end of the show, hey, you know, you contact through the website, and they hopefully don't say, I've got a great idea, call me. And they're giving you this. Is this one of the main areas where you bring clarity, you bring help, you help people? Do people get bogged down in this step? This seems like this is one of the major obstacles. I know what I want. I've got it designed. I've got a, what's the word? An initial.

I can't even think of the word. Golly, I have not enough coffee today. Prototype. Thank you, Jody, our intrepid producer. That's why he's intrepid. I've got a prototype, all this kind of stuff. And my bottom up, top down, it's costing too much. Is this the main area you help people with or one of them, one of the key ones?

Noah McNeely

I would say this is one of the facets of the main area that I try to help people with. And I'm not even talking about helping from an engineering standpoint. Exactly. Really more helping from a counseling and advice. This is the genius side, right?

Steven Julian

This is the genius part of Product Genius, of you getting people to understand what it takes.

Noah McNeely

Yeah. And let's be clear. Through this program, I'm not saying I'm a genius. The goal here is to help make everyone else a product genius. Like I said, I used to work with very big companies, even sometimes directors of departments and CEOs, is they will fixate on something. And that subconsciously, consciously, or whatever becomes an immovable object. They might fixate on, well, this is the market and it's not changing. And they may also fixate on, well, it's going to be stainless steel and that's not changing. So sometimes a lot of what I have to do in those cases is try to pull out of them, why is that so important?

You know, we're not going to get there with all these conflicting requirements. You know, we're not going to get you to a $4 product made out of solid stainless steel. You're going to have to give somewhere. And then we have to dig deeper and deeper as to what's driving each of those things. Well, what's driving the $4 thing? Well, I want everybody to be able to buy it at, you know, at the dollar store or whatever. Okay, let's reevaluate that. Why? And then we go from there. Maybe we end up designing a product that now maybe it even becomes a more expensive product, but we have a successful business potential because we're selling to a bigger group.

And then if you really want to serve that lower end market, that's great. Maybe we'll come out with a version two that is that really de-featured. Maybe it's not stainless steel, maybe it's plastic and you can still provide that service to that lower market, but you can't sell everyone a Mercedes. Not everybody can afford it. Right.

Steven Julian

So apart from those two big knobs of the product and the business plan, there was one other thing, kind of a little rabbit trail you wanted to go down of one other little thing somebody might want to consider. Talk about alternate manufacturing quotes.

Noah McNeely

Right. So if you have a number back, this is on the bottom-up analysis, and it's higher than you can really justify with your business model. Before you go change everything, it's generally going to be worthwhile to at least get a second opinion. So get a quote from another manufacturer. Excuse me, that's a very difficult word to say quickly.

Steven Julian

It is.

Noah McNeely

Another manufacturer. Get a quote from them. Make sure they're legitimate. Make sure there are a lot of manufacturers out there like Alibaba and et cetera. They're just going to give you a really low price to get you in the door. Then they're going to take all your money later. Get a second legitimate quote. If it's in line with the first one, it's not going to be exact. One's going to be a little higher than the other. If they're within 10%, then it's. probably a pretty legit quote on both ends. But if not, if they are way off, well, then go get a third quote perhaps and just try to find what that real price is.

And we've covered this in a different episode, I think. Not every factory is the right match for every product. And if you're trying to... Push that square peg through that round hole. You may be getting a high price for the wrong reason.

Steven Julian

I think it's safe to say that if the bottom-up is larger in price than the top-down analysis gives you, this is going to be one of the areas where you've got to spend some time, really think some things through, go back to the drawing board of whether to de-feature your product or whether to change the business plan to upcharge to get the price higher. You know, by making it even better or really targeting a specific market that can afford it if you do it a certain way. And then thinking of alternate manufacturing quotes.

So now, kind of last, we're talking about returning the T-shirt. So what if we just can't get there?

Noah McNeely

Well, if we just can't. get there. And this is kind of before returning the T-shirt. And this is, I've unfortunately had to have this conversation with a few people.

Steven Julian

See, I thought that was a perfect segue. I guess that's slightly annoying. Okay. I apologize.

Noah McNeely

You did.

Steven Julian

Hey, what if you just can't get there?

Noah McNeely

Okay. If you just can't get it. And like I was trying to say, I've had this very sad conversation with a few people and hopefully we have this conversation very early on. And sometimes that is, you have a very expensive solution for a very inexpensive problem. So you may have that $50. It's going to be a $50 product by the time we do everything. Nobody's going to pay any more than $50 for it, even if we add a whole bunch of other stuff to it, and yet I can't bring the price down.

Steven Julian

Because it's a gold-covered plunger. It's the greatest plunger ever invented.

Noah McNeely

And it's a problem or an opportunity that's just not that valuable to people. They'll pay $10 for something that helps them out here, but nobody's going to pay $50. This is probably one of the ones that you were referencing. earlier. You know, earlier episodes, but sometimes the decision is, hey, there's just no match here and it's just not going to work. Well, what's the worst thing to do there is just ignore that and keep going. You know, the better thing to do is just take a step back, ask the hard questions.

Is there another business that can work here? What can I make that look like? All right.

Steven Julian

So the third part of your analogy out of your story was returning a T-shirt that's the wrong size. And really what you mean by that is. You're printing the shirts or you're doing your launch and all of a sudden, as it's coming out, you're thinking after the launch, ooh, I think I may need to fix the price.

Noah McNeely

Yeah, so there's a couple aspects of this. One, strategically, how do you prepare for the unbelievable possibility that you misjudged the market or misjudged the price? Well, one thing I generally recommend to people is Don't buy a lot. Start with a small order.

Steven Julian

And shout out to Tiffany, first host of the show. She talks about that all the time, right? Yeah, absolutely. That's one of. the main things she learned from her Shark Tank story.

Noah McNeely

Yeah, Tiffany is spot on the money there. So don't buy a lot. And this kind of flies in the face of stuff we talked about earlier because if you do a small order, those are going to cost more per item typically. So if you're ordering $1,000 or something, Maybe they're going to cost $7 a piece, but if you went and ordered $5,000, well, maybe they're $5 a piece. However, if you still misjudge that, you've got $25,000 invested versus $7,000 invested in that initial order. And once you get in the market, you realize, okay, well, I was going to sell this for $20.

Nobody's buying it. Well, now you've only got $1,000 that you have to deal with at that point. Your purchase is $5,000 or $20,000 or whatever it is. So order small. That may mean on your first order, you're really not making a lot of money. You're really just validating the market forces that will dictate the price you can sell and how many you can sell and who's going to buy your product. That's especially useful for inventing entrepreneurs because you're probably. not spending that six-figure research budget to go out and learn all these things before you launch a product the way, you know, the way a Procter & Campbell would when they launch a brand new product.

Steven Julian

So another thing that might happen is what if sales are going great? What if you started and you've done that small order? Or maybe you've been doing it for a little while and your sales are just continuing to grow. I believe a word you used on your notes was gangbusters.

Noah McNeely

So I don't even know what that means.

Steven Julian

I don't know either. But that's another story for another show. But I'll look that up. I'll get back to you.

Noah McNeely

Probably means something horrible that we're not aware of. It's just become part of the vernacular. Absolutely.

Steven Julian

So it might be the more you grow. Then it becomes the question, or the longer you've done it with some success, inflation, costs are rising. Oh, if I raise my price, I might lose some of my clients or some of my customers, repeat customers, all that kind of stuff. Figuring out how to gradually increase your price.

Noah McNeely

Yeah. So there's two reasons why. this T-shirt could be uncomfortable. It's too tight or too loose, right? So if you find that you're selling really, really well, faster than you thought, and you can't keep up with inventory, that helps you identify, well, Maybe there's more willingness in this market to pay even more for this product. Now, I've seen people just go out and instantly raise their price. And I'm not a big fan of that because I think it kind of rubs people the wrong way. But I think it's something to look at as you get ready to place your second order.

Maybe you pull back some inventory or however you're distributing or selling this, and then you up that price. But maybe at the same time, so people won't think they're getting ripped off the second time because they've already seen your low price. You know, that's out there. People know what that is. You almost have to give them something extra. So now maybe you're adding a little element to it that doesn't cost you a whole lot, but justifies that extra 20% or 30%. So maybe it's, you know, if you're doing a kitchen thing, maybe, you know, in.

Gen 2. now for, you were selling for $12.99, now it's $19.99, but it comes with a recipe book or whatever that is. And that's a strategy I've seen people use is that. You can err on both sides of this. You can price too low or too high. And pricing too high is generally worse because you're not going to sell anything. Pricing too low is a better problem to have, but it's still a problem. You're leaving money on the table that you could be investing in growing your business.

Steven Julian

The fact is, as somebody is trying to bring a product or a service to market, we kind of spend some time talking about the size that, you know, getting the size right for your business plan. And that's before you launch. You still got to talk. You still got to review this. Right. Almost every year as you're going, you got to always analyze the numbers. Your T-shirt size of your product or service is going to change constantly.

Noah McNeely

Well, sure. And the market changes constantly. You may have more competition. You may be solving a problem that becomes a bigger problem. Like if you were selling. sanitation or stuff before the pandemic, once the pandemic hit, you probably. There's probably a lot more demand for your product.

Steven Julian

To try to circle it back to your anecdote, years and years ago, cotton t-shirts were the best. Then wicking materials came out. And polyester for a little while. And so the market constantly changes. How was that? Was that good?

Noah McNeely

That was fantastic.

Steven Julian

Oh, wonderful. I seek Noah's approval. That's why I'm here.

Noah McNeely

So the one really painful thing, if you're overpriced, and if you paid so much for your product, they have to be this price, and you just can't sell them. And unfortunately, I've seen this happen a couple of times with clients is you may have to sell that first round of inventory at a loss and learn from it.

Steven Julian

Right.

Noah McNeely

That's better than not selling it at all, even though, okay, well, I had a thousand of these and now I'm selling them, I'm losing $3 a piece. Okay, well, that's a $3,000 lesson you learned, but now you can work on Gen 2, take that cost out, make it appropriate for the market, or go the other way, add features, et cetera, to. attack a larger or a higher value market. So if you're just back in that corner, don't put a line in the sand there. Sometimes the best business move is to sacrifice your queen as they would in chess.

Steven Julian

Well done. My son appreciates that illustration. So this is great. I mean, this is fantastic stuff. Obviously, there's a lot to digest here. I don't know why I went from a t-shirt analogy to a food analogy, probably because of our lunch.

Noah McNeely

We always tend to know.

Steven Julian

Well, I know I do. That's my go-to, right? So I think what you've talked about here is that you've put it in a very digestible way. No, I think it's good for people to kind of talk about this. And this, again, just to kind of circle back, this is one of the key areas you can help people with. Is if they've got to a stumbling block, if they've got to, I don't know how to overcome this problem.

Noah McNeely

And let me clarify that just slightly. Sometimes people will come in and they're like, they have something on a napkin and they're like, how much is this going to cost? I. can't tell you that on day one. I can't even do the bottom up analysis at that point. I can give you a swag maybe, but nothing that you could. Swag, it's a swig. Swag, swag, swig, whatever. Swigs for after work.

Steven Julian

Right, exactly.

Noah McNeely

I can give you a best guess, but it's not going to be that good at that point because we do have to do a little bit of work just to know how many parts are going to be in it. What are they really going to be made out of? How much is that component? You want to be Bluetooth. Well, can we use the Bluetooth chip? that costs a dollar or is it going to be the $4 one? Whatever those things are. But yes, that's something I can help with. Just don't expect.

I'm not a magician. I'm not a wizard. I can't see the future, but I'll do my best.

Steven Julian

Well, and what they can do is they can go to productquickstart.com. There is a contact us form and in that contact us form, it doesn't just give their, for their contact information. It's for them to give you a good idea. of where they're at, what their main questions are, what they're looking for help with. That is one of the best things people can do. is the more information you put on that, the more, no, you can help them.

Noah McNeely

Absolutely.

Steven Julian

So go to productquickstart.com, check out, by the way, read some of their success stories, read some of the, look at some of the products. Noah has helped others bring to market and start a conversation with him through that Contact Us form. And you can set up a first consultation and very clearly talk about what your time is worth in that first consultation so that nobody's wasting their time.

Noah McNeely

Yeah. And, you know, everything's going to be transparent. We're not going to surprise you with downstream costs. You know, we do everything fixed price that we can. And, you know, because typically in venture entrepreneurs, you need to be able to budget as far out as you can.

Steven Julian

Now the more important, not more important. Now equally as important, Noah, speaking of, I know why you have the anecdote for the t-shirts. You got t-shirts for the staff.

Noah McNeely

Well, these are actually jerseys. Jerseys. Sorry. I think. they would call these rugby jerseys.

Steven Julian

I would think so. Yeah. Rugby. Yeah. That's a good one.

Noah McNeely

Yeah. They are emblazoned with the Product Genius logo and very bright colors of orange and yellow. I don't know. Aquamarine.

Steven Julian

So the tile of our podcast is emblazoned. I like that. On the front of these rugby jerseys.

Noah McNeely

It's a marketing word.

Steven Julian

Slash hockey jerseys. No, no, no. Hockey. Slash walking billboards. Yeah. And I will be proudly wearing this shirt and can't wait for people to come up and ask me when the circus is in town.

Noah McNeely

Excellent.

Steven Julian

Well done. These may or may not. Be potentially offered to loyal listeners of this show.

Noah McNeely

Well, I mean, for a price. So far, I've ordered three, and that's for the three of us. But, you know, if people want one, let me know.

Steven Julian

Maybe we can do a bottom-up or top-down analysis, find a price point, and we can start creating it. You know, people talk about multiple revenue streams. I think there's a multiple revenue stream of this show. So, Noah McNeely, thank you so much for all your insight and advice. Today on Product Genius.

Noah McNeely

Thank you.

Steven Julian

So for Noah. and for Jody, this is your slightly annoying co-host Steven Julian saying, I'm going to go get a cup of coffee and put on my new shirt from Product Genius.