Something important got left out but maybe we can put it back in ... (the money machine!)

Yesterday I was reading about a political fund raising project. An unknown candidate with very little money raised more than $8 million in a very short time. How did she do it? She worked with outside experts and was overwhelmed by the sudden name recognition they achieved for her and the bundles of money that came in.

The story made me think I had left something out when I wrote How To Launch Your Own Perfume Company: A Simple Business Plan but now I'll give you my correction. The book outlines a practical, solid plan for launching your own perfume company with minimal capital. But I left out the part of the equation that put our political friend into the clover. Besides an experienced company that molded and shaped a political image for her, she had another firm that took what the first firm had done and ran the promotion everywhere they knew it could bring in money. Working with experts is what made the difference. Now here is what's missing from my story.

In How To Launch Your Own Perfume Company: A Simple Business Plan I describe a program whereby you can start your own perfume business by producing fragrances for marketers who will pay you up front. This relieves you of the need for substantial capital. If the fragrance sells well you continue to make money by providing the fragrance. For you this business is profitable right from the beginning, at least minimally so.

But for a big payday sales must really take off. How to achieve this was not part of the book but I think it should be a companion volume. What was missing was the introduction of a promotional team. This is what made the difference for our aspiring politician. One team created her advertising -- just as our book will help you do the "create perfume" portion of the business -- while another team took that advertising and placed it where it would do the most good, including in the hands of some very powerful influencers.

So my amended program would be this: set up your business as I describe in How To Launch Your Own Perfume Company: A Simple Business Plan. But find that special business partner who, in a relationship with you, will promote the sales of the fragrances you have developed for your clients. This business partner will be paid some costs but also a motivating commission on sales. And, as those sales come in, you will be making more and more money through your sales of the fragrances to the marketers.

Once you find good promotional people to work with hang onto them. As a team you will be able to take on one marketer after another as a client and both you and your promotional team will flourish.

Rules to follow when setting a price for your perfume

In brief --

#1 The price of a perfume depends on the environment in which it is sold.

#2 The price must cover all costs and leave you with a profit.

#3 Working backward, you discover what you can afford to pay to produce your perfume -- and if you can't produce it for this cost or less, profit becomes impossible.

    There is a formula for setting a retail price for your perfume. This formula won't give you an exact retail price but it will give you a tight range within which to set your price. To work this formula you first must gather up some data.

Lesson # 1 -- The retail price you can set for your perfume is limited by the environment in which is will be sold

    This means you have to look at where your perfume will be sold and what fragrances are being sold in that same retailing environment. If your perfume is being developed for high end boutiques, you have to look at how others are pricing their fragrances in this market. Your price should fall somewhere in the range of what others are charging. Why? Because this is what buyers expect.
    If you're selling in a middle market or a bargain shopper market, again you must look at what others are charging. This tells you the price range buyers find acceptable. Pricing your fragrance higher or lower puzzles buyers. They start feeling you're doing something wrong, that you don't understand what you're doing, and they become suspicious. This hurts sales.

Lesson # 2 -- Selling environment is just the starting point

    From your planned retailing environment you can make an estimate of how your perfume should be priced. But this is only an estimate. Now you have to work backwards from that estimate to establish the most you can afford to pay to produce a bottle of your perfume.
    To get this number you start with your anticipated retail price. Then you subtract the portion of that price that you will not receive, the discount that will be given to retailers, which should range from 40 to 60 percent, depending on the relationship you are able to develop with stores. Don't count on everyone paying you the same price. You may want certain stores to take your fragrance for the prestige. In other cases you'll just offer a "standard" discount and hope that you can get it. Now for distributors.
    If you plan to distribute your fragrance widely, you will use various distributors and jobbers. Now you must allow for the discounts they will want. Then -- take a deep breath -- you'll want to allow yourself some money for advertising, administrative costs, and returns. After these considerations you must still allow for the cost of producing your perfume -- and your profit.
    As you take each of these costs into consideration, you begin to understand just how important your production cost has become. Now looking at these obligations, you begin to ask yourself, "Can I do it? Is it even possible for me to make a profit?"

Lesson #3 -- Eliminate all non-essential production costs

    Some of the lessons: alcohol costs less than perfume oil. Don’t go overboard using oil when you could be using alcohol (In most cases this will please your buyers. They don't really want a heavy fragrance!) Water is less costly than alcohol. Don't use pure alcohol when you can use a pleasant alcohol/water blend. Don't aspire to a custom bottle when so many good stock designs are available. Women will prefer a spray pump over a splash bottle. For men, splash is a good choice and a cap is a good deal cheaper than a spray pump (although a sprinkler neck bottle may cost you a few pennies extra.)
    And the fragrance itself. "All natural" is good but presents some challenges. Some natural ingredients are cheap but the really lovely ones are quite expensive. That is why the industry has struggled to develop excellent synthetic substitutes. That may sound like heresy to you but, unless you're marketing your fragrance to a very aware, picky audience of people who will pay more, avoid those beautiful expensive naturals or blend just a tiny bit with your synthetics to give them more character.
    When you've finally got it together and whittled your cost down to something reasonable, look at where you stand on potential profit. After you've covered the cost to produce your fragrance and all the costs mentioned above, how much profit are you going to squeeze out of every bottle you sell? That's the number you have to look at when you decide whether or not to go ahead with your project.
    If you want to read more about trimming costs and producing your fragrance at a cost that will give you a good markup, read Creating Your Own Perfume With A 1700 Percent Markup! It's available as an instant pdf download and, as a photo-illustrated softcover at Amazon.

What is a new customer worth to you?

     When you spend money to advertise, a critical issue is the value of a new customer. The "game" is to make more money from your ads than you paid for your ads. If you spend $50 in advertising to sell a bottle of perfume that yields a $45 profit, have you won or lost? You can't tell unless you know the customer's LIFETIME VALUE.

    In brief, if you spend $50 in advertising to make a "$45 in profit" sale to a new customer who will never buy from you again, you've lost $5. You would have done better not to have advertised.

    But, if your new "$45" customer makes a second purchase from you which yields  another $45 in profit, you've made $40 in profit off this customer. If he or she buys from you again, your profit from that customer will be even greater and the $50 you spent to acquire this customer has more than paid out. This "customer value" metric is what guides your advertising program.

    This issue of "customer lifetime value" is shouted by bloggers and ebook writers all over the internet. But their wisdom may be of little value to you. One issue stands in the way of your using customer value to accurately guide your advertising program: your lack of data. New in business, you don't yet have the customer histories you need to establish the lifetime value of a customer.

    So what can you do?

    The first essential step is to develop a purposeful customer database. This, in time -- maybe in just a few months -- will allow you to begin to establish the lifetime value of your customers. Here's how I've done it and how you can do it.

    Every order you get goes into a database. You'll want it to be on a computer so you can sort and manipulate it. Every order that you post is posted with the product purchased and the revenue received. From the product you can extract what amount of the selling price is profit. Every entry will also include a customer name, address (when possible and practical) and some sort of unique customer identifier.

    This customer identifier is essential as gradually you will develop two databases -- one of individual invoices (sales) and the second of the customer's cumulative history. This second database will show the total amount of money the customer has spent with you, the sum of individual purchases. This second database may also be able to show how often each customer has ordered from you.

    The "trick" to setting up this system is to find a unique identifier to allow you to aggregate each customer's individual purchases into their cumulative history.

    In the past I have assigned a unique customer number of each new customer based on name, address and zip or postal code. If you're selling digital goods, you might not get a name and address but you will get an email and that can become your unique identifier.

    If you are a retailer, you'll ask for a phone number. Most people today have their personal mobile phone and thus a unique phone number.

    I realize that for the average new marketer, setting up this sort of system can seem overwhelming. I came to it from the advantage of having IT people to do the programming so all I had to do was specify what data I wanted captured and what manipulations I wanted to be able to make on that data. If you're just starting out you'll probably be reluctant to spend time setting up systems when, at present, you're just desperate to make sales.

    But keep this in mind. As you begin to collect orders, by organizing them into at least an invoice (sales) database you'll be making a start. And, for this database, collect at least one identifier be it cell phone number or personal email.

    Don't wait too long before you do it. Your data will start to show you what each new customer is worth to you and that number will begin to show how much you can spend on advertising, to acquire a new customers.

FOOTNOTE: If the concept of a database is new to you, here are some ads for databases you can look over. Looking costs you nothing. And, if you are going to become a marketer, you'll find databases are an essential tool. I've developed my own marketing database but before I could do it, I learned a lot from our IT professionals. Regardless of timing, a database for your business is an important "something" to keep in mind.

When is the time right to spend money on advertising? When should you launch an ad campaign?

    Everywhere you look you see advertising. Every media bombards you. Could this tool -- advertising -- help make businesses more profitable? Could advertising be helping you? If you are reluctant to spend money on advertising, it may be because you haven't asked yourself, and answered, these three questions:

    (1) When should I advertise?
    (2) What should I advertise?
    (3) How should I advertise?

When should you advertise?

    The answer is easy: “when you have something to advertise." But “having something” requires your taking a hard look at your business and asking yourself, "Do I have at lest one product or service that is selling profitably now and might get even more orders if I were to advertise it?"

    In spite of stories you might have heard about advertising selling the unsellable, advertising rarely can make an unwanted product profitable. Don't advertise until you have proof that a product or service you offer can -- and has -- made sales.     If you don't yet have at least one product or service that sells profitably, you're not ready to spend money to run advertising.

    You may ask, "how can I make sales without advertising?" but there are many ways to expose your products to the public without paid advertising and, if no amount of exposure results in sales, you're not ready to spend money on advertising. First you have to get your act together and make your product desirable. This may mean writing a more compelling description for it, or showing it off with a better photograph, or getting enthusiastic testimonials for it, even if you have to give away a few bottles of your fragrance to get those testimonials.

    Before you begin to spend money on advertising, be confident you have a product that will sell.

What should you advertise?

    For some, under some circumstances, just advertising your business could make sense. For most of us advertising a single product from our business makes more sense.

    If, from experience, you can predict that a new customer will buy from you again and again, consider advertising a "loss leader," a popular product you can offer at a conspicuously low price. This strategy attracts as many new customers as possible and you do it with the knowledge that the additional business you receive from them will more than offset the minimal profit or small loss you get from their initial orders.

    Before you experiment with a loss leader, make some estimate of the profit that will be produced by future orders from these customers. This is a long range strategy and one that calls for record keeping that will allow you to estimate what a customer is worth to you in profit over the weeks, months, or years they continue to shop with you.

    But suppose you have a small number of products to offer and experience shows that most new customers don't give you a second order or, if they do, it's a long time in coming. In this situation you'll want to maximize your profit on the first and possibly only order. Look for a product that sells well and yields a generous profit from each sale. This will probably be your "best" product and it's the one you want to advertise.

How should you advertise?

    Ideally you will begin by running test ads in several media with several messages to see what works best for you. If your budget is extremely limited you may do better to put all your eggs in one basket rather than spreading the money so thin that any results you get will be too small to analyze. For starters, go with the media that can give you the most bang for your buck. You don't yet know what it is so you must take a shot in the dark with an advertising program you can comfortably afford and where you can quickly cut your spending if necessary. Give consideration to Google Ads, Amazon Advertising, YouTube, Facebook, Twitter, Instagram, and Reddit. Think about media where you see ads that are most closely related to what you are selling.

    Set up a budget that will allow your ads to run over a period of weeks but won't break you should the program prove a  failure.

    Study at the media you have selected. Look at the product you have selected. Write about it just using the ideas you would use if you were selling it in person. Keep it simple. Keep your focus on how the product could help someone.

    If advertising is new to you, the two most important points are selecting appropriate media -- placing your ads in media that makes sense for your offer -- and the offer itself. A good offer made in the right media can sell a product far better than all the work of "creative" advertising people when they promote a poor offer in the wrong media. Writing and photography skills are secondary to common sense selling.

    Keep these two points in mind. My own current advertising program is focused on selling a single product: this book.

Developing an idea for a new perfume... and how I'm going to sell it

     I've mentioned the Etsy store I've been setting up as a research project. Regardless of what you may think of Etsy, for me it has providing some inspiration and giving me new energy. We can all get in a rut at times and, by forcing yourself to interact with a platform entirely new to you (to me, in this case!), fresh insights and ideas get pounded into your head and, if you stick with the program, you find old skills refreshed and new skills acquired.

     Marketing online can seem overwhelming, even if you've had marketing experience, but Etsy guides you – and requires you! – to provide the minimal essential information needed for your goods to be purchased; so that a sale can be made from your store. Beyond the minimum requirements, Etsy prompts you to add additional content and links to your store to make it search friendly for both Etsy and Google. Merchandising tips help you make your store attractive to visitors.

     The inspiration and energy I mentioned above came as I began to develop my Etsy store. I was reminded that I should be taking those same promotional and merchandising steps on my own website and through my social media. I felt like I was being mentored by Etsy because, when you're a small – or very small – business, you find yourself pulled in multiple directions and too often you're pulled away from the most important tasks by small tasks that, aside from making your feel you've "done something," don't do much for your sales or profit.

     While I'm not eager to get back into the business of shipping merchandise – daily trips to the post office with tubs of orders – doing the setup work on Etsy energized me. All of what can be found on my Etsy store can be found elsewhere. The books are available at both Amazon and PerfumeProjects.com. My fragrances are all available at PGLightyears.com. But it struck me that my Etsy handle, "Unnatural Aromas" – a name I came up with on the spur of the moment, wasn't synchronized with the PGLightyears.com site. This prompted me to take two steps. (Are you following this?) First, I added a big "Unnatural Aromas" headline to the PGLightyears site. Then – very important – I registered "UnnaturalAromas.com" as a domain name so it would be available to me should I want to set up an independent site to mirror what I'm doing on Etsy.

     But there was another important inspiration – two meanings of "unnatural aromas." The first is a bit of a slam at those who insist that their fragrances be "natural." Before the advent of synthetics, the range of materials available to the perfumer was limited. You would find yourself creating the same, or nearly the same, scent over and over again because the number of available naturals was small, and now many of the most historically important naturals have been banned due to ethical or health considerations. Meanwhile I plunge ahead with the "unnatural."

     My inspiration from the name "unnatural aromas" may be even more to the point. A handful of my fragrances are... a bit "oddball." My fragrances for men don't follow the unwritten rules for how a man's fragrance should smell. My women's fragrances definitely do not follow the rules for "ladies" perfume. Many of my male, female, and unisex fragrances are quite... "unnatural."

     So now, thanks to my fussing around with Etsy, I'm working on gathering up the more "unnatural" of my fragrances and promoting them as a collection. Currently that collection has three fragrances with unquestioned credentials (Blackberry, Xotic, and Mimosa) but I'm already planning a new fragrance to become part of this club.

     You might ask why I continue to develop new fragrances rather than just hammer away at those that are already finished and bottled. The answer is, I love to explore, to find new fragrance ideas, and to develop new smells that, while they might be "unnatural," are nuggets of beauty for those who can set their prejudices aside and embrace that which is different.

Early statistics from my Etsy adventure

     Although I have a website that offers my own fragrances, and I sell my own books both at Amazon and my own bookstore, I have been experimenting -- "researching" -- other platforms, looking for additional possibilities. Thus far eBay hasn't rung any bells for me but Etsy shows promise and doesn't conflict with my other platforms.

    To learn about Etsy you really have to open and Etsy store. To open an Etsy store you must have at least one product to put up for sale in that store although Etsy recommends you list at least ten items when you open your store. (The cost is minimal.)

    The first point you want to take note of here is that you can't use Etsy unless you already have a product to sell. This may seem obvious but we don't want to put the cart before the horse. Developing your product -- a fragrance I'm presuming -- is your first step, although you can and should have, while developing your fragrance, begun to map out your marketing plan.

    Not knowing anything about Etsy and, therefore, not having planned a finished, fully decorated store in advance, I opened my Etsy store with just one item. This met Etsy's minimum requirement. Since then I have been adding items to my Unnatural Aromas Etsy store. This is easy to do as Etsy's template guides you through the process, gathering the essential information and giving you opportunities to add extra information if you see fit. For me, adding items was easy enough as I already had products, photography, and descriptions from my web pages and photo archives.

     I've added both fragrances and books to my store. The books are in the form of digital downloads and I've run into a problem here due to Etsy's 20 meg limit on file size. In one case a cover, which can be seen on Amazon, quickly overshot Etsy's file size limit and the cover photo had to be eliminated. The file size limit makes it challenging to use color illustrations in ebooks for the Etsy platform.

    A few statistics have been coming in for my Etsy store, Unnatural Aromas. What they show to date is about a 40/60 split between visitors who have come through Etsy searches and promotions and those who have come through sources outside the Etsy universe. This would include my own web pages, Facebook, and blogs. When I did a Google search today for "Unnatural Aromas," the first mention of my store came up on Google's page three.

    What is important to notice is that, should you offer your perfume on Etsy, it will be useful to promote it both through Etsy support and through your own social media activities. And, of course, you'll want to make your store itself as shopper friendly as possible.

    The "rules" for making sales on Etsy are no different than the rules for making sales through retail stores, local or national. Like Etsy, the stores may "take" your fragrance but don't expect them to sell it for you. If you want to make sales, be prepared to become a promoter. That's the only way.

Can Etsy sell your perfume? It costs very little to find out and you learn a lot along the way!

    In my last message I wrote about a marketing test I was conducting on eBay, although I considered eBay an unlikely marketing platform for an unknown fragrance from a nearly unknown company. This week I've turned my attention to Etsy stores which, I believe, offer greater opportunities for the sale of handmade, homemade, and indie perfumes.

    You can find a lot about using Etsy effectively through a simple Google search which will turn up a great many articles on Etsy. Like eBay, much depends on your keywords but Etsy's handbook gives an excellent explanation on how Etsy ranks stores in their search utility. This handbook is worth studying and the ranking system it reveals is not unlike that of Google and other platforms. Etsy search rankings start with keywords but are narrowed down by another group of factors including how active you have been on Etsy, historically how many sales you have made, how recently sales were made, and what Etsy calls "customer experience."

    I opened my own Etsy store because you can't really understand how Etsy works until you take the plunge and do it. It's a bit like Facebook. You can't see what's going on until you join. With Etsy you can shop without any enrollment but to understand the complexities of the selling side you have to participate.

    What is clear from the many helpful comments you find repeated both in the Etsy forums and elsewhere is that success on Etsy involves effort. To sell successfully on Etsy you must put in a good deal of time; you must read and re-read Etsy's advice to sellers; you must constantly be "improving" your Etsy store, interacting with customers and prospects and adding fresh products to your store. Etsy wants you to have at least ten items on your store and Etsy won't let you open a store without at least one item ready for sale. Thus, at present, you'll see my Etsy store with that one required item.

    If you need marketing guidance, Etsy gives sellers good advice such as "offer items at different price points" because people might come to your store for your perfume but, finding it a bit expensive, they might try you out with a smaller order -- a candle, soap, or perhaps a small solid perfume.

    In general you have to keep in mind that Etsy is out to make money for Etsy. But to do that -- since they take a cut of sales -- they will boost the rankings of the "most likely to succeed" stores because this will make more money for Etsy.

    Think of an Etsy store as a store because that's what each Etsy vendor has -- a store, storefront and all. Think of what makes any store succeed -- attractive merchandise, attractive prices, attractive customer service. A lot has to go into it. On eBay it's perfectly normal to sell a single item. Many eBay sellers post a single item and the are done. But, like Etsy, there are eBay stores and these are stocked and, in large part, depend on repeat sales from customers and word of mouth recommendations. It's difficult to be in any retail business selling a single item.

    This doesn't mean you shouldn't give Etsy a try even if you have only one item -- one perfume -- to sell. A lot of "no-name-brand" perfume does get sold on Etsy. (You can see how many sales each store has made because it is posted by Etsy on their storefront.) But, with only one item you are less likely to attract traffic to your store.

    As to me, now that I've opened a minimal Etsy store I'll develop it as time permits... to see what Etsy can do for me.

    And I strongly suggest you read the Etsy search and Etsy ranking pages. Whether you decide to sell on Etsy or not, you'll get some important internet marketing guidance from these pages that can help you, regardless of where you decide to sell your perfume.