Test -- Question everything -- guard your money!

    Even a simple, imperfect test can save you a lot of money and embarrassment -- or clear the way for a major success!

    Marketers test in order to evaluate opportunities without, spending much money. When daily newspapers were the test vehicle for mail order companies, many  offered advertisers a split run. A split run -- or a "perfect A/B split" as it was known -- involved printing two versions of an ad on a rotary press where plates for both pages could be mounted. When the press was run, every other paper off the press would carry the "B" version of the ad. When the newspapers were stacked and bundled for distribution, one paper would carry the "A" version of the ad and the next in the stack, the "B" version. Regardless of how distribution of the newspapers was carried out, regardless of the demographics of any particular neighborhood, half the readers would see the "A" version and the other half would see the "B" version.

    I recall one particular split run in which I was involved. The marketer had an ad that had been a success but was willing to run it against a new ad in a split run test. The new ad produced dramatically improved results and became the first stepping stone in developing a multi-million dollar business.

    General advertisers have also used newspapers for tests. An ad for a new product would be run with a store coupon in a small city newspaper. If enough coupons were redeemed, testing would be expanded until national distribution was achieved.

    Because daily newspapers are read and tossed, their special value was the quick answers they produced. In a few days the marketer could judge whether the product would be a success. When people read an ad in a newspaper, either they respond or they don't. Very few people redeem a coupon that has been saved for more than a week. Response, or lack of it, shows up within three or four days.

    Moving closer to testing opportunities that might be useful to you, upstart marketers such as the young Estee Lauder have gotten their start by making arrangements with an established retailer to allow them to set up a display table within the retailer's store to pitch a product of their own. For Estee, it was her first product, a skin cream. Success within the retailer's store gave the retailer good reason to stock her product. This was done without any large advertising expenditure.

The need to have a product to test

     To make a test it is assumed that you have a product to test. For a new perfume, this can be a problem if you're looking at the need for a run of 10,000 bottles or more to get the few dozen bottles you want for your test. Ten thousand bottles is a major commitment. If you can find a way to test the waters before making this commitment, it makes sense to do it.

"Reserve your bottle now"

    You can test the appeal of your fragrance and your promotion by giving potential customers a chance to "reserve" a bottle so they will be the first ones to receive a bottle when the product becomes available.

    This is a variation on the classic "dry testing" technique -- advertising a product you don't have, producing it if you get enough cash orders, and simply refunding buyers and dropping the product if it doesn't bring in enough orders. The genius and the problem with dry testing are that you're taking money for something that doesn't exist. The genius part is that you get a statistic on how many people are willing to part with their money and not just make a worthless commitment to buy it, if and when. The "problem" is in taking of money for something that doesn't exist. There are laws about this, even if you make instant refunds.

The dummy product

    Testing with a dummy product can teach you whether or not you can sell perfume (or whatever it is you're selling) but it won't tell you whether or not you can sell your perfume. Perhaps the best way I can explain this is to give an example from my own experience.

    We wanted to sell a fragrance to a particular audience, a particular demographic, but we weren’t sure if these people would buy it. A competitor was selling a product similar to what we wanted to sell so we tracked down the competitor's source and bought a small supply. Our purpose was not to make an immediate profit but to see how well this product would sell. If it sold well (which it did) our plan was to knock it off (which we did). By having this other product -- a dummy product (fragrance but not our own fragrance) -- we were able to make our test, spending no more than a few hundred dollars for the inventory and next to nothing for the advertising. This simple, inexpensive test gave us "numbers" that showed we could make good money by developing and selling a fragrance of our own.

Buy for a larger quantity but fill only a handful of bottles

    Sometimes you must plan to produce 10,000 or more bottles of your fragrance in order to get the juice made and to purchase the particular bottle you want. But you don't have to fill all 10,000 bottles. You might fill only 500 or so and do some test marketing with them. By doing this you give yourself two advantages. First, if your promotion flops and you can be pretty sure that the flop isn't due to the scent, you can rename the fragrance, fill another 500 bottles and take another shot at it with the new name and a new promotion.

    Then, if things really go badly for you, you can simply sell the empty bottles, the bottles you didn't fill or label, along with the caps or sprays that went with them. Your boxes will be a total loss unless you can find someone who wants to try and sell your fragrance (or their own) using the name on the box.

How do you use these ideas?

    For a retail store, testing is always difficult. What is important is to track your inventory and sales. When certain items sell better than others, you want to spot this quickly and take advantage of it. You'll need precise numbers, not hunches.

    Beyond this, keep your eyes open. Question. Be alert for new ways to test that relate to your situation. Decisions based on hard data -- facts which may or may not please you -- are what will make your business grow.

"Advanced" merchandise acquisition strategies

    Last week I wrote about what I call the "standard" methods of acquiring merchandise for a perfume store. But I also suggested that while you could get a business started using these methods, you would be unlikely to earn more than a minimal profit. Yes, even a minimal profit means you'll be able to pay your rent but if your thinking is like mine, you'll be looking for ways to make more. Today I want to explore with you some "advanced" merchandise acquisition strategies. Whether or not you find any particular one helpful, they should get you thinking of possibilities and looking around for opportunities.

    In acquiring merchandise, the maxim is "buy cheap, sell dear." The importance of this cannot be overemphasized. The spread between what you pay for your merchandise and what you can sell it for is what gives your your profit. If that spread is small, unless you can achieve dramatic volume, your profit will be small. To achieve dramatic profits, you are going to need a very healthy spread on one or more popular products.

Closeouts

    There are dealers in a number of fields that buy closeouts and overstocks. Many of my own bottles come from a closeout source (McKernan). Depending on the item and its marketability you might get it for pennies on the dollar. But closeout sources will have minimum order requirements that you might find scary. With bottles, I've bought closeouts because I know that what doesn't get used for one project in time will be used for another. And I've always had room to store those cases of bottles I'm setting aside for future use.

    The problem with closeout sources is that they lack continuity. Once an item is gone, it's gone. No restocking. If you need more of something you got through a closeout you might have to go to the original source and pay full price, or you may not be able to find it at all. It could be discontinued.

    You can explore a number of closeout sources for perfume and scented products. Keep in mind you are not looking for discount sellers who sell by the (discounted) individual piece, but closeout lots, cases of merchandise. Keep in mind that because closeout dealers take advantage of specific purchasing opportunities, their inventory is constantly changing. What they have today might be gone tomorrow -- and they are hoping it will be gone! Again, be prepared to buy in bulk, getting perhaps a good deal more than you want at the moment. But, if the price is right... And you may be able to split an order with another shopkeeper.

Become your own closeout broker, sort of...

    First time perfume marketers often fail. When they fail they fail with unsold perfume. Often their perfumes are quite good, developed and packaged by professionals, but the marketing didn't click. The marketer may not have the money or the will to go at it again. These ventures are too small to attract the attention of established closeout brokers but they can a ripe target for you. You will need some tact and negotiating skills but, if you can locate one or more of these failed ventures, there is a good chance you will be able to purchase some or all of their perfume that didn't sell. To find these situations, follow trade magazines and press releases. Look for perfume launches by new companies. Then, after a number of months, look to see if they are still in business. Many will not be and they might be happy to talk to you.

    On a smaller scale there are creators of perfume who have produced what they cannot sell. They may be eager to sell their unsold inventory and, if a fragrance is good but selling skill is lacking, they might be willing to provide you with a continuous supply of their fragrance at close to cost -- or, if motivated by ego, they might be willing to take a loss on every bottle you take from them, just so they can boast that their fragrance is a success.

Find one hot item and purchase it in bulk

    If you start off with a good variety of merchandise, you may soon find one or two items selling better than the rest -- bringing in a significant share of your profit -- but because you don't yet have a significant markup on these items they aren't yet doing anything dynamic for you. Here's where you have an opportunity.

    Track down the best source for these items and find out what kind of a price you could get if you were buying them in bulk. Be prepared to put a big wad of cash into the selected item, knowing it might take a while to sell all of what you are buying but, as you sell it, you'll be getting your money back with juicier profits.

    A friend with a small store competing against far larger stores adopted this strategy. He could sell the hot item for close to what big stores were charging because he had bought it in bulk. This brought customers to his store. When they came, they bought other items. His business flourished.

Have the hot item made for you

    Sometimes you have the frustration of discovering you have a hot item but you can't find any source that, even in bulk, will give you a price that can make this item really profitable. Here's where -- if you can deal with the complexities and risk the money -- you can go to a manufacturer and have a similar product made exclusively for you. This can give you a very, very low price per unit which means a very, very good markup.

    This strategy has two advantages. First, you already know from your sales reports that this item is going to sell really well. And you know you are getting it for less than what your competitors, who are buying through wholesalers, are paying for their version.

    But there's another huge benefit. This product is now yours exclusively. A competitor could offer a similar product but, once you establish an image for your version, "similar" doesn't command the same price. Think of having a hot item you can sell for ten times what it cost you! Markups like this are what will make your business grow. In time you may be able to develop a number of products with markups like this. Then the profits from all your other products will be icing on the cake.

    In my next article I will write about testing -- a very important issue but difficult for a small retail business. (These articles go out in emails and, if you wish, you can sign up for them here.)