Launching a product successfully is an art that relatively few businesses master. In fact, an estimated 80 percent of product launches fail — and the costs of failure can quickly add up, especially when the average product launch costs between $100,000 to $1,500,000 over a five-year period.
Keeping costs down is a key to making sure your product launch is profitable. Here are four ways you can improve your odds of a profitable product launch.
Streamline Your Development Phase with Rapid Prototyping
Traditionally, prototyping is one of the more major expenses of a product launch due to the high cost of making molds. Traditional mold tooling can cost anywhere from thousands to hundreds of thousands of dollars and up, and can take months to complete.
In recent years, manufacturers have developed new ways to carry out rapid prototyping at considerably faster speeds and lower costs by using digital modeling, 3-D printing and other tech advances. For example, medical manufacturer Instrumentation Laboratory found that for designing a hemostasis testing system, digital modeling alone reduced costs by 30 percent, while combining digital modeling with 3-D printing yielded 40 percent in savings. This amounted to $600,000 in annual savings, or $7.2 million saved over the lifetime of a product with a 12-year cycle.
Comparison Shop for Cost-efficient Materials
Another way to lower the costs of your product launch is to comparison shop for less expensive materials. Companies often use materials that cost more than necessary for a number of reasons. For instance, some products are designed to endure test conditions that are more rugged than the conditions the product will face during actual performance. In this case, it may be feasible to use less rigorous materials to lower costs.
Another way to find lower-cost materials is by shopping for a different supplier. For instance, a supplier that uses 3-D printing, like Apple Rubber does to manufacture o-ring seals, can mass produce on a scale that enables them to dramatically lower costs to the end user.
Test the Market Before Scaling Up
Marketing is another major component of product launch costs. That’s because an estimated 42 percent of startups flounder because executives fail to establish a market for their product. Test marketing can help your company avoid this mistake, while cutting your marketing costs in the process. This gives your company an opportunity to identify the most appealing applications and benefits of your product as well as its optimal pricing point.
Start with a small production run and test it through an online sales vehicle, like eBay. Some other ways to test market include using a focus group, giving away free samples to industry insiders in exchange for their feedback and demonstrating your product at a trade show.
Keep Logistical Costs Low
Logistics costs, such as warehousing and shipping, can also eat up a big part of your product launch budget. In fact, these expenses now make up 8 percent of the gross domestic product, according to a 2015 CSCMP study. Automation is the key to reducing costs, and logistics software can help you with functions like:
- Automating your inventory tracking
- Organizing the most efficient warehouse picking routes
- Optimizing shipping schedules.
Robots increasingly are being used to automate shipping. The more you can rely on automation, the less payroll budget you will need to allocate for logistics.