It is common knowledge that running an online business isn't easy. However, without adequate planning, it is almost impossible to successfully continue any business venture. One of the key things to get right is the product, and so this article focuses on the factors to consider in the product selection process.
Entrepreneurs have to select between numerous types of products to meet the gaps in the market. Online business owners need to be careful with their selection because these products can require a high investment.
Product selection is the key first step of your journey as an online business. It is essential because a product provides the direct contact with the customer. It can work like a charm if your product meets the demand and satisfies the consumer.
In this guide, we'll go over the factors to consider in product selection process to help your online business get away to a great start.
Table of Contents
Value to the Customer
Hands down, the most important factor in whether a product will sink or swim is the value to the customer. Your product must provide value to the customer, not necessary in price but in how it solves a problem for them and cures a pain-point.
When working through the product selection process, always keep this front of mind as its a key factor which needs to be put ahead of the rest of the items in this article.
An Identifiable Supply Gap
When you think of working on a product category, you should always consider the markets that are left untapped by competitors. A gap in the market mainly refers to a product that consumers want, but no other firms offer the goods or services. You can cash in on this opportunity.
Learn about the size of the market with this gap. It is the main factor in determining the sales of your goods. The greater the demand, the higher your sales will be. A great benefit is that there are very few or no competitors for you to worry about at this point. As a result, you can establish yourself as a strong brand for your one-of-a-kind service.
You can set prices for a market gap because most customers are likely to opt for your business alone. There won't be any fear of losing your customer base to another firm. You will have a good amount of time to establish your product before others follow in your steps.
Pro Tip:
Use Amazon to your advantage. If you have a product in mind, then search it on Amazon and you'll see competitors products come up in the search results. Next, review the similar products and look at the product reviews. Focus on the poor 1-star reviews and see what customers have been complaining about the product. What are its flaws? What do the customers want to be improved?
Take these customers concerns and problems and look to develop your product to fix and improve them. Straight away, your product will be better than the competition because you've fixed the pain-points of the products already on the market. Be sure to promote the fact that your product doesn't have these flaws and is superior, within your marketing.
Availability of Investment
Any startup requires an investment, the reason being the fact that you need to develop a product. You need money for research, development, the production process, marketing, sales, shipping costs, and so on. There are so many intricacies that you will need an ample amount of cash at every stage.
If you choose a product that falls way out of your budget, you will incur a loss. The situation can worsen if you cannot effectively market it and can't even recover the money you invested in the first place.
To be on the safe side, prepare a budget for yourself and list the amount of money required to produce one unit of the product you have in mind. Then, look to order a small run of say 100 units. Once these sell, then you can order more and more as you scale up.
Raw Materials are the Crux of a Physical Product
If you're looking at a physical product then without raw materials, you don't stand anywhere with production. So, when you think of choosing a product, you must know the quality and quantity of raw materials that go into it as well as the ability for ongoing supply.
If you fall short on raw materials, you will have to stop production midway. But, on the other hand, if the quality of the raw material is bad, customers will return the product and this can tarnish your overall brand image.
There are several things you should consider when you think about raw materials:
- Is it readily available?
- Can your budget cover the cost of the raw materials?
- Will you have to import any items?
- Can you store the raw materials, or is it perishable?
- Do you have enough space to manage your inventory easily?
- How well does your pricing allow for an increase in materials cost?
Consider these things seriously when you're considering a physical product and purchasing raw materials for a new product idea.
Technology
Never ignore the technological factor. The world is evolving because of technology. It makes production easier and more efficient compared to years ago.
When you select a product, make sure you think through the technological aspects. The required technology should be available in the market for you to purchase. The amount of labor force you will need to use the machinery and technology is also essential.
Also, understand that computer technology requires constant updating. Therefore, you will have to train your workforce accordingly and on a timely basis. Every year, a new IT system makes the process easier and faster, but training the workforce can be complicated and costly.
Consider the depreciating factors of technology as well because it is a significant factor in producing an item. Technology also makes production processes cost less. It can also increase per unit production, smartly reducing your variable costs.
The product should be technically well-received by your customers in terms of it being or having the latest features etc.
Profitability
Online businesses are all about profit. Therefore, you must make sure you'll have good profit margins when you select a product. Focus on the raw material cost, then allow for marketing and getting it to the customer and then what profit you have left. Try to develop or choose a product with a good amount of profit as this not only helps the business but allows for cost increases should they happen suddenly.
High profits will allow you to invest in the business to grow. These considerations make a huge difference and make profit margins a vital factor. It also attracts investors.
A product that offers high profits is often chosen because it allows businesses to pay back debts, spend more to advertise the product and provides timely discounts to customers for higher sales.
Marketing
Marketing is essential for an increase in sales. Your product must be unique and have some value added to it. A marketable product is often chosen because it makes planning a marketing strategy easier for online business owners.
A sound marketing strategy will always offer you an edge over competitors and bring in more customers. An interesting product generates demand. It allows the marketing strategy to market it on different platforms and brings more traffic to your website. Invest in CRM and email marketing software to combine your sales and marketing efforts.
A marketable product helps the business reach its full potential when reaching out to the ideal customers.
The Right Employees
You need qualified and trained personnel when dealing with the product of your business. They could be handling all the production activities as well as marketing activities. If you don't have efficient and trained workers in the field for your product, it'll be very hard to survive, because your competition does have these things. Use well known freelancer sites like UpWork to find and vet good potential employees.
If the staff are incompetent, be prepared to see your business affected. Having knowledgeable staff is crucial because their experience in how to produce the product will save you time and money. Competent hands coming together can bring the production costs down by a significant degree, as well as a reduction of mistakes.
Government Policies
This is an essential factor because it is out of your control, but you must comply with it. You can't influence government policies, but they can impact your product and revenue. For example, if the government offers incentives for producing a particular product type, people are more inclined toward producing them and buying them.
It is mainly because these products are in demand locally and are supported by the government. If the government imposes quotas on a product or a particular government policy to stop imports, it can result in the demand falling. You might lose out on essential raw materials for your production. So, think before you choose a product.
FAQs
I can't find a product. What other options are there?
If you really get stuck finding a product then maybe consider buying an existing website instead. The huge benefit of this is that the business will already have established products and be making money already. Go to Flippa.com to find a huge range of websites for sale today and quick start your journey.
What is the Importance of the Product Selection Process?
It is essential to get a good product with this process because it impacts customers and builds the brand's overall image in the long run. It will also influence all long-term business strategies and profitability.
What are the Main Risks of Product Selection?
Sudden political interferences might reduce demands for products and the ability to produce products. The process might take too long, and another competitor might introduce the product before you. There are chances you might miss out on another great product as an opportunity cost.
What are the Benefits of the Right Product Selection?
It can turn your business into a leading brand with high revenues and a solid customer base. Turning into a dominant brand means that the business can easily influence prices as long as it abides by the government policies and doesn't exploit consumers.
What is Product Selection? Can You Reverse a Poor Product Selection?
The product selection process is choosing the right product for sale, considering several factors. Of course, if an owner wants, they can reverse it. However, it can be costly and new investment will be required to come up with another product to sell. It can also be detrimental to the business's brand image if they fluctuate from one product line to another.
Conclusion
We understand that implementing all the factors to consider in the product selection process at the same time is difficult for new online businesses. However, even if you focus on a couple at a time, you can choose the right product for your business. Start with a clear frame of mind and conduct proper research on each point from the guide, based on your product ideas to fine tune your list into one product to go with.
The knowledge you have about these products will help you make the right decision and choose a product that will make money for you. So, start planning your product selection process.
