Anatomy of a Launch: Step One -- Smart Market Research
Keith Waldon, CEO of Earth Preserv, in Irving, Tex., has found that it pays to plan. His studious market research led to his landing a seven-figure initial order from a major retailer. He had Earth Preserv's environmentally correct bath and body products on the shelves in 640 JCPenney stores across the country -- in time for Earth Day 1994.
The launch was so well-timed, in retrospect it looks effortless. But Waldon sweated each phase of his start-up research. "I used to have hair," he quipped on Earth Preserv's one-year anniversary.
Here's how Waldon approached three questions every entrepreneur must answer:
· Can we make this product? Waldon had been a marketing manager for a luxury-hotel chain when Earth Preserv recruited him. He knew little about launching a distinctive line of consumer products. The investors expected profitable performance from the start. The challenges: to produce bath, hair, and skin products with no synthetic ingredients; to meet FDA requirements; and to use 100% recyclable aluminum packaging.
His study showed that it was all feasible with "large production runs to bring down the price." He searched Thomas Register of American Manufacturers for possible bottle manufacturers. "We hit some roadblocks. Big companies laughed at us and told us we couldn't do the all-aluminum bottles." Finally, Waldon located a Japanese beer company that knew how. "It was too expensive," Waldon recalls, but the beer company helped him understand the technology he'd need. The feasibility study ate up nine weeks. It was the most time -consuming element of Waldon's research.
· Who will buy, and what will they buy? Waldon already knew his customers were women aged 20 to 50. Cosmetics-industry reports and articles he'd studied at the Dallas Public Library confirmed the women's purchasing power. Waldon hired a midpriced consulting firm -- Alliance Research, in Crestview Hills, Ky. -- to conduct an ambitious consumer-research study in 12 markets. The cost? Nearly $100,000, but it was worth it, Waldon says. In mall interviews and home tests, 300 women identified the most appealing scents. Their preferences guided Earth Preserv's final formulations, as well as product positioning and package design.
· How should we market and distribute our products? The feasibility study indicated the need for a partner. "We did an analysis of who could write us a big enough check," says Waldon. "The ideal was a national retailer with central distribution." That ruled out the health-food chains. Too small.
Waldon compiled a list of 20 mass merchants and went to town. He talked to retail, manufacturing, and sales-rep associations, and culled annual reports and trade directories. He shopped the stores. He met with clothing manufacturers and makers of other consumer goods, plied them with bath gel, and barraged them with questions about the channel. How difficult is it to sell the chains? Will they do co-op advertising? Which manufacturers have launched their products successfully in the chains? Which stores need us as badly as we need them? "JCPenney quickly rose to the top of the list," Waldon says. "It seemed healthy -- paying its bills, and it had double-digit growth in the bath and body department."
But, never having approached a store buyer, Waldon says, "I had a lot to learn."* * *
This is the first in a series on start-up Earth Preserv and its national product launch. Next month: the big sales presentation. To comment, please call Susan Greco at 617-248-8473 or send electronic mail to firstname.lastname@example.org over the Internet.