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Case Study: How to Introduce a New (Somewhat Complicated) Product to Consumers

Horde your capital and harness the power of analogies.

Based on its name alone, you might not think Perfect Fuel Chocolate, a three-person startup based in Boston, was aiming to pioneer a new product category.

After all, what could possibly be new about chocolate? As it turns out, plenty. And Perfect Fuel's story provides a textbook marketing example of how to introduce a novel idea--especially when the idea could sound, to skeptics, like a familiar one.

A 'Chocolate But Not Chocolate' Idea

First, some background. Perfect Fuel is sold in 235 total stores, including 72 Whole Foods Markets. Founder and CEO Nicolas Warren, 31, expects the three-year-old company to break even on $450,000-$600,000 in revenues. His board includes Larry Slotnick, cofounder of Taza Chocolate; Dave Dickinson, former CEO of healthcare startup Zeo; and Randy Engler, who spent six years in senior management at eBay.

Warren met Slotnick in July, 2010. At the time, Warren worked in nearby Cambridge at SCVNGR (the creators of the LevelUp mobile payment system). He had already come up with his basic idea: chocolate with ginseng as a healthy energy product.

The challenge was perfecting the recipe. Any old recipe wasn't good enough. Crucial to Warren was that the product would also be certified organic and sustainably produced.

And so, one day after work at SCVNGR, looking for advice, he biked to Taza's headquarters in neighboring Somerville. "I literally just rode my bike over to Taza, walked in and introduced myself and said, 'Hey guys, I have a cocoa idea, but it's not candy,'" Warren recalls. "I met Larry and told him, 'I have a chocolate, but not chocolate, idea.'" 

Using the Old to Explain the New

With Slotnick's help, Warren eventually hit on the five-ingredient recipe for Perfect Fuel. He officially founded the company in February, 2011. 

With the recipe perfected, the marketing challenge was born. Distributors and retailers had categories for conventional chocolate products like candy; they also had categories for energy qua energy products, like 5-hour Energy. Perfect Fuel was a hybrid of these broad notions, yet it was altogether different. It was organic, it was sustainably sourced, it was gluten free, it was sodium free, it was vegan, and it was kosher.

Specifically, the challenge was emphasizing the uniqueness of a distinct product that contained aspects of the familiar. But as it turns out, familiar aspects can be a good thing when trying to explain a new product. "When faced with something new," note professors Christopher B. Bingham and Steven J. Kahl in the MIT Sloan Management Review, "we usually look for similarities to the familiar. And the more commonalities we find, the more readily we accept the new."

This, of course, is why Apple used familiar terms like "desktop," "trashcan," and "files" to help early customers get comfortable. "Apple was helping people transition from what was familiar to them in the physical world to what was new in the digital world," they write. Likewise, Amazon initially used familiar terms like "shopping cart" and "check out" to help people grasp "how shopping in an online environment was similar to what they would do in a physical one." The best way to concoct an analogy, note the authors, is to focus on similarity of function, rather than appearance. 

All of which explains why "Perfect Fuel" is very close to a perfect name. The word "fuel" emphasizes the product's primary function and separates it from the traditional reasons consumers buy chocolate. Likewise, fuel is familiar term to all consumers from the world of automobiles. And while it's commonplace to think of foods as "fuel" for the body, not many food products actually use the word in their marketing, let alone their titles. 

Apropos as the name is, it hardly came about overnight.

"I would have brainstorming sessions with friends and advisors in coffee shops before and after work, and eventually threw a couple chocolate tasting parties with paper and pens all over the house which I collected and transcribed the next day," recalls Warren. "Of course, we wanted it to be cacao-focused, 'the food of the gods,' but we wanted it to be scalable and accommodating to future products. I did my best to look out 10+ years."

The Road Ahead

The main challenge for the company going forward is cash flow. Because Perfect Fuel's products are sold through retailers and distributors, it can take a while for the company to actually get paid. "Small stores pay in 15 days, chain stores pay in 45 days and require a discount if you want you cash any faster," says Warren. "There's actually 90-120 days of cash cycles between buying raw ingredients and then actually receiving a break-even amount of money back from that product."

Crucial to the business model (and to its inherent cash-flow challenges) is that Pure Chocolate gets 30-90 days payment terms from its sourcing partners. According to Warren, this is because the suppliers are believers in the product who grasp the duration of the production-distribution-getting paid cycle. 

Given how cash-intensive the company is, Warren says his biggest regret--the one thing he'd do differently, if he were starting all over again--is wait longer to begin. "I would've worked another year, and horded my capital," he admits.

The good news is, he's made it this far with relatively little outside investment. An angel round of roughly $100,000 helped float the company for its first year and a half; another dose of "just under" $100,000, at the year-and-a-half mark, has kept the company going to this day. 

Perfect Fuel officially turned three years old in Febuary. Warren was aware of the birthday, but didn't hold a celebration. "I'm actually a little bit regretful of that," he says. "But we're so busy, and really focused on our milestones. We acknowledged it, and said, 'That's great--let's get back to work.'"

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