How can I reduce my cost per bottle without risking a big financial hit?

    In my last message I wrote about SCALE and explained that the profit is greatest when production and sales closely match. Unsold inventory is a drain on profit. But it's also a fact that large orders can give each of your components a lower per-item cost. Moreover, with a larger order you have access to a greater range of bottles, pumps, boxes, and even fragrances. The question is, are there purchasing strategies that will give you the best of both worlds?

    The answer depends (this may sound corny!) on your business plan, your long range goals. Is your first venture into perfume being planned as a one-shot venture -- if you make money perhaps you'll go deeper; if you don't make money, that's the end of it -- or does your plan reach out beyond your first promotion?

    If your planning calls for a moon shot -- one "make it or break it" promotion -- then the smart plan is to follow the strategy outlined in my last message which is to match, as far as possible, your production with your likely sales so that, when you've finished, there will be "no paid for but unsold" inventory dragging down your profit.

On the other hand...

 

    If you are planning "perfume" long range, your first venture is simply a test, and you do want to keep it small, working for orders from just the very best prospects. But now there are some ways you can reduce your cost per bottle.

    Say for your test you are hoping for 1,000 orders. Does that seem too small? OK, we'll bump it up to 3,000 orders, increasing our risk just a bit. So, while we will need to produce 3,000 bottles of perfume, we aren’t limited to ordering 3,000 units of each component.

    But before ordering any components in larger quantities we have to estimate how far our program might go. Ultimately will we sell 20,000 bottles, 40,000, or more? What do we have available in funds?

    Look at an example. For our first promotion our expectation is that we will sell 3,000 bottles. But within a short time, when our first results come in, we expect we'll be able to sell at least another 7,000 bottles, and we have the money available to produce 10,000 bottles without straining our budget. So what do we do?

    We buy 10,000 pieces of each component we need but we assemble only 3,000 bottles. Our only exception could be the perfume itself of which we may be able to  buy in a minimal amount, just in case our market really hates the scent.

    By assembling only 3,000 bottles and keeping the rest of our inventory in reserve we gain flexibility. Should our first promotion bomb because of the name, we can change the name because we haven't yet printed those 7,000 other labels. Should we need more perfume immediately, we will be ready with the necessary bottles, pumps and boxes.

    By ordering components in quantities of 10,00 each instead of 3,000 each there is a chance that we will significantly reduce our cost per bottle. And, because the bottles we do not fill are not "leftovers" but, rather, inventory for the next stage of our project, they do not become a drag on profits.

Settle your strategy before you get started

 

    Are you going for a one-shot promotion or do you have business building plans? If you are planning a one-shot, limit your buying to what you expect to need now. The cost per bottle will be more than if you bought in a larger quantity but unsold bottles won't be sucking the profit out of your sales.

    On the other hand, if this is to be the beginning of , and you can consider your first promotion to be a test, it makes sense to buy your components in larger quantities. Only don't get too carried away and buy so much inventory that you won't be able to use in this lifetime!

Misunderstandings about SCALE could be crushing your urge to launch your own perfume

   
     "Scale" simply refers to the SIZE or your promotion. Planning for unlimited perfume sales puts you at a disadvantage and dramatically increases your risk. Why? Because, to be fully profitable, you must sell out your full production -- no leftover inventory. Why? Because the production cost of every unsold bottle reduces the profit you would have made.

    Now it can be hard, almost impossible, to guess the number of bottles a promotion will sell. But you can guess with some accuracy at the number of bottles you will not sell. This is a guidepost for establishing the scale of your promotion.

    For example, you have good reason to believe -- perhaps due to your limited financing and distribution -- that you almost certainly will not sell 20,000 bottles. So the scale on which you plan your promotion will not anticipate the sale of 20,000 bottles. But what will the right number be?
     
   You need to consider the size of your hot market. How many people are really likely to buy your perfume?

    Then you need to consider the cost to reach these people. Suppose (this may seem a bit depressing!) that you have 12,000 really hot prospects for your perfume -- but, when you look at the best possible distribution you will be able to arrange, your fragrance will only be in stores that serve 3,000 out of that 12,000 -- and you need all the money you have to promote your fragrance to those 3,000 hot prospects.

    It is certainly human to imagine that somehow you'll be able to reach those other 9,000 hot prospects. It is certainly human feel you might go on to sell 20,000 bottles of your perfume. But your immediate project is to MAKE MONEY.

    You can make money by planning to produce and sell 3,000 bottles of your fragrance. If you are correct and you really have a hot market that will produce 3,000 sales, and you produce only 3,000 bottles, you end up with no waste, just profit.

    Now you can look farther ahead. Now you have some experience with the sale of your fragrance and you have some money -- the profit you made on those bottles you sold. Now you can start planning to target some or all of the 9,000 hot prospects that you couldn't target the first time around. Perhaps you'll split those 9,000 prospects into groups of 4,500. If all continues to go well for you, you'll sell to the first group of 4,500 successfully and then go on to the last group to complete your success.

    Then you can look for additional markets.

    But what about my cost per bottle? (To be continued...)

Promotion -- What you need to get down cold before you invest in a perfume

 
  Don't spend money developing a fragrance unless you've got a solid plan to promote it -- and coming up with a solid plan to promote a fragrance is not easy.

    Go back to market, scale, and distribution to see how many orders you will need to make your promotion profitable and where you expect those orders to come from. Your challenge now is to turn this market -- large or small -- into a market of buyers.

    There is no magic to making sales. One promoter has said that enthusiasm is more powerful than truth or fiction. Buying a fragrance is an emotional decision and, to make sales, the emotions have to be stirred. Logic won't do it.

    But your efforts to ignite emotion must be guided. They must follow a well thought out plan. You cannot sell to people unless you can relate to them and they to you. This is why certain "super salespeople" can move from one product to another and continue to sell successfully. They understand the buyers.

    Do not expect the scent of your fragrance to sell itself. In the first place, if you are relying on sales to people who have sampled your fragrance you are in trouble. Few people will have the opportunity to sample your fragrance, even if you are fortunate enough to have it in a number of stores. Even those who are able to smell it, and like it, will need guidance to carry them to the point of making a purchase. It is essential that you begin to develop buzz for your fragrance BEFORE people confront the perfume itself.

    The buzz is what brings people into the store or, for those who may happen to be shopping in a store that carries your fragrance, to seek out your display. Don't expect people to just stumble across it. You have to drive them, impassion them, win them to your point of view BEFORE they confront the fragrance itself.

    How do you do this? What are the hooks? Ask yourself, "What is it that generates an emotional response?"

    There are a number of lines you can work along. The "author" of the fragrance can generate an emotional response if he or she has a personal story that is compelling and emotional. Here is where the emotion for celebrity fragrances is generated but, looking into your own personal history, you may find that you have a story about yourself and your perfume that can generate an emotional pull that will then translates into sales.

    You might find an emotional pull in the story you develop for your fragrance. What were you thinking when you created it or had it created for you? Was there a theme a bit unusual, a bit attention grabbing, that others can relate to? Will that theme move their hearts?

    Sometimes people fall in love with a brand and take an interest in any new product that brand releases. Being new in the field does not rule out the possibility of people being attracted to your brand. Look at all the upstart brands found in the wine racks of liquor stores. The brand NAMES are witty and clever and they have appeal for their iconoclastic take on wine vending. Wine, like perfume, is sold for the most part to people who are not experts, so that clever brand name is important. Then, under the brand name come the individual wines -- or fragrances.

    Relationships can create strong emotional bonds and pulls toward the cash register. If your prospects feel that "you are one of them" and feel they can relate to you, they may want to "support" you in your endeavor. Making your own personality part of your presentation can go a long way... if your personality actually matches that of the people you have targeted.

The lesson

    The lesson is simple. You're not ready to develop and launch a new fragrance until you've devised a way to reach your target market and bond with these people in some way that will create an emotional connection, one that drives them to try your fragrance. It's as simple as that.
   

When it makes sense to invest in a perfume

    The thought of marketing your own perfume and making a pot of money from your efforts is tantalizing. But when should you do it? Or should I say, "attempt it"? There are times when it makes no sense at all and times when "you'd be a fool not to do it." Here are some guidelines that can help you spot opportunities and avoid costly fiascos.   

 

Four Essentials

 

    Before you invest money in a perfume you need to have four areas nailed down. They must be secure rather than "probably okay." They are (1) The market, (2) Distribution, (3) Promotion, and (4) The knowledge of how to have your perfume produced for you at the lowest reasonable cost. Let's look at each of these considerations.

    The Market

    It makes no sense to develop a perfume unless you have people to sell it to. Here you have to think about numbers. How many people are there in your market that are candidates for your new perfume? Really what you are looking for is a specific opportunity, a gathering of people that, for certain specific reasons, are likely candidates to become customers for your perfume.
    The reasons cannot be general. You cannot proceed thinking "women always love a new perfume", or "men are attracted to a new cologne." You can't proceed thinking "everybody will love my perfume if I put a clever spin on the marketing." When I had my great success with "P" cologne it was because I had a captive market of older men, most of whom had never bought a fragrance in their lives, but who would try almost anything my company offered them once we had made an appealing pitch to them. You have to find a very specific opportunity for your perfume where the odds that the right number of people will buy from you is in your favor, before you launch your project.
    Looking at "numbers" and your specific market you must estimate the size of your market and then scale your project to that size. If your real market is only a few thousand people (often the case!) you have to scale your project -- your production and marketing expenses -- to insure that you'll be able to make a profit (an outstanding profit!) developing your perfume for that market.
    The first step in determining whether it makes sense to invest in a perfume is to identify this opportunity, a market that, for specific reasons, will be receptive to your perfume.

    Distribution

    How are people going to go about buying your perfume? How will you set up your distribution? "Internet" is the easy answer (which is really a highly complex approach) but I've had entrepreneurial hopefuls also cite "Macy’s" and "Walmart." Why not QVC and Duty Free Shops? None of these are the answer unless you have carefully prepared the way. Bint El Sudan (from Bush Boak Allen) -- a huge marketing success in Africa of the 1930's, '40's, and '50's -- bypassed the established trading houses and was distributed through mammy traders, women who sold goods in village market places. The fame of Bint El Sudan spread through the social media of the day -- word of mouth.
    "Internet" itself is not a distribution system. There are many online possibilities, your own website, affiliate marketing, etsy, eBay and more. But the challenge is in getting people to come to these various sites to make their purchase. The advantage of "internet" is that there are no barriers to setting it up. From your home office you can go out and do it.
    Retail stores have the similar drawback of being useless unless you can drive motivated traffic to them. The larger chains, the Macy's and Walmarts of this world, will have no interest in working with you (unless you are heavily funded and have brought on board some key industry veterans who can open doors for you.)
    Smaller retail stores, particularly local retail stores, can be more receptive to displaying your fragrance but establishing a relationship with these stores and servicing each "account" requires that you really think in terms of developing a distribution network that can be used for more than a single perfume. No one store will sell enough of your fragrance to make it profitable.

    Promotion

    Regardless of what your distribution may be, you can not expect to make sales unless you have developed a promotion that will motivate people to want to try your perfume to the extent that they will interact with your distribution system to buy your perfume.
    For example, if you are selling from a website (the easiest distribution to set up), what are you going to do to round up motivated prospects and drive them to that website? A website can only take sales (like a retail store). For the most part if will not executed the step of making people want to try your perfume. This is something you have to do and, until you can work up a plan for a promotional program that will make enough converts to make your perfume profitable, investing in your own perfume will be folly.
    How do you make these converts? How do you inspire people to seek out your perfume and give it a try? This is one of the great mysteries of marketing for which there is no stock solution. But it can be said that following a "business school" formula will probably not do the job for you. For you, a really powerful hook will be essential, otherwise hang on to your money for now.

    The knowledge of how to have your perfume produced at the lowest reasonable cost

    "Buy low, sell high" -- the rule of marketing success. If you buy at the wrong price, that is, if you pay too much to have your perfume made for you, profitable sales become impossible. The people who make money will perfume are the people who have studied all the costs that go into producing a bottle of perfume and how each can be minimized or controlled without degrading the quality of the finished product. This is true whether you are producing your fragrance yourself, in your garage or barn, or whether you are working with a consultant or through a fulfillment house ("assembly house" or "contract packager").
    You really have to look at all your costs before you get started. My own concern is usually with the cost to produce the fragrance. Have I fought for realistically low prices from each vendor? Have I cut every corner that can be cut without cheapening the product or compromising quality? You want to avoid middlemen as much as possible, particularly those who offer you a "package deal" if you'll follow some formula they've worked out to make their profit from entrepreneurial hopefuls who are ignorant of a manufacturer's cost for services and materials.
    Likewise with both promotion and distribution. Is someone ready to sell you an advertising program? Media is always looking for advertisers but is it media that can do something for you? Media salespeople have their statistics but none will really apply to your perfume. You have to think this through quite clearly. Where are your best prospects? How can you reach them? What will it cost?
    It is easy but not so effective to simply buy an ad and hope for the best. (I recall with embarrassment spending $10,000 for a page in a major fashion magazine -- without first testing -- and not making one sale -- thus this warning.
    If you have to convert people to your cause and see social media as a way to do it, you've got to consider the time and attention you will have to devote to the project before you might be in a position to launch your perfume. "Time is money" as they say and this truism tends to be forgotten when "free" social media are available.

Summary

 

    Here then are the basic elements that must come together before it makes sense to invest in a perfume. But look, they can and do come together for those with open eyes and, when they do, the results can be quite profitable.

Where are you planning to sell your perfume? Online?

    The most obvious points of sale for your perfume are retail stores and online. In my last message I wrote about the basic requirements for making sales in stores. Now I want to address the online option. There are alternatives to both of these that fall under the heading "guerrilla marketing" but it's hard to explain these opportunities as a good deal of imagination and energy are required to recognize and exploit them.

    Anybody can offer their perfume online. There are no restrictions, no gate keepers. You control your online presence. What is essential is that you have a device to take orders. This eliminates Facebook, Twitter, and Instagram although they can be highly effective for promoting sales. Typically selling online involves having a website, although there are alternatives such as eBay, Etsy, Shopify and "Etsy alternatives" (do a Google search for "etsy alternatives" to find them.)

    The cost of having your own website can be (realistically!) less than $60 a year -- if you are able to prepare your own pages. The $60 includes both web hosting and domain registration. For shopping cart you can use Paypal which is free. But, as Shopify warns, "Marketing your store is ultimately up to you, and is your responsibility as shop owner."

    So to sell online you need a store, you need to market that store, and you must be prepared to ship orders promptly (and be familiar with regulations for shipping perfume.) In short, you need to become a merchant but, as mentioned, there are no bars to prevent you from setting up your online store.

"Marketing your store is, ultimately, up to you."

    A platform like Shopify takes pains to educate its clients. Other platforms often make vague promises of marketing support. They want your business and the truth about how unlikely you are to sell any perfume with them unless you, personally, work at marketing it, does not encourage sales of their hosting services and it is the hosting services that they are selling, not your merchandise. You may need a hosting service but, just like having your perfume in a store, getting it into a store doesn't mean you're going to make sales.

    Sometimes the solution is a marketing partner, a person who can take what you have and make sales. It is not easy to find an individual who can take this role and, of course, it means that profits will be shared. "Sharing" is the key here. You don’t want to pay someone a fee to market your perfume based on promises alone but you certainly might make a commission arrangement with someone who can make sales for you that you otherwise would not have made.

    What it all comes down to is your overall plan. Having a product (your perfume), having a market (people who will be receptive to your perfume) and then deciding how to best connect with that market. If your market is local, a retail store makes sense. If your market is scattered across cities and states, an online store makes sense. But the key will always be how well you sell your perfume.

Could this be an opportunity for you? Using a window display to sell a lot of perfume!

  
  Thinking "big markets, unlimited sales" might close off any hope you have of becoming a successful perfume entrepreneur. You don't have the resources to complete and, by focusing on big markets, you're likely to overlook markets where you can make money.

Keep it small

    If you've never sold a perfume before and have never sold anything in big numbers, how many bottles of your own perfume do you think, realistically, you might be able to sell perfume? 50,000? Not likely. 10,000? Still a tough proposition. But what about 1,000 or perhaps a few less? Can you manage to produce just the number of bottles you need? Producing more bottles than you can sell can turn a good promotion into a disaster. Let's look at opportunities to sell 1,000 bottles, or even fewer.

No media, no sales
   
    You need media to reach your buyers. Sometimes the availability of a particular media opportunity can be your opportunity to sell your perfume. To expand your vision of media, look at this list. It could expand your thinking.

    From this list, look at one example: "window displays" which I take to mean retail store windows. Yes, windows can be media and, depending on the store's location and foot traffic outside the window, a window display could be used to sell an unknown perfume successfully.

Getting your perfume into a store

    It's not that hard to get a store to take your perfume on consignment, which means you only get paid for what is sold. It's no big deal for a local store to take your perfume on consignment. Perfume doesn't take up much shelf space. The problem is that, since a bottle of perfume is small, your perfume can easily go unnoticed and, when it is seen, it can easily be passed over ... unless people have some reason to take an interest in your perfume. Here's where a window display can change everything.

    Let's talk about that store window. I'm not suggesting you'll be allowed to take over the entire window (unless you have a really strong display) but you are likely to get enough space to put up a poster (big) advertising the actual bottle (small). This is media you don't have to pay for as you would with newspaper, magazine, radio, or TV advertising. The expense is nothing more than the cost of making that poster. The effectiveness will depend on your powers of persuasion. An alternative to a poster could be a video that loops. This would require some hardware and video production but many effective marketing videos are, today, shot with a mobile phone. You will, of course, have a duplicate display in the store with your perfume.

    Can you make an opportunity out of a willing retailer? Can you sell 1,000 bottles of perfume? You do have to monitor the store's traffic before you undertake a project like this. Are there are enough unique visitors to give to store the potential you need? If you find a good store that may not have all the traffic you want but good traffic for your perfume, consider cutting your goal down to 500 bottles or even 200 and keep your production in line with what you expect you can sell.

    Working with a retail store is a good experience because you will get a dose of the reality of what a store owner needs and what the public wants, and, in this "window display" strategy, you can get this with a very small cash outlay. If you can make it work, it can be your first step into perfume entrepreneurship.

Selling 1,000 bottles of perfume when nobody loves you

    (This message is a continuation of my blog and email from 8/8/19 which is now posted as a blog article here.)

    I have said that by selling 1,000 bottles of perfume you can make $10,000 in profit -- if you produce ONLY 1,000 bottles of your perfume so that your profits aren't dragged down by the money you spent on the bottles you didn't sell. But to sell those 1,000 bottles you need a market where people love you and are happy to buy your perfume. The question is how can you start your own perfume business and become a perfume entrepreneur if you don't have your own market of people who love you?

    The solution that has worked well for major fragrance houses is joint venture. They provide the perfume (which they don't make themselves), the joint venture partner provides the buyers. These arrangements are called "licensing agreements" because the legal implications of a true joint venture would take them somewhere they would not want to go. It will be the same for you but instead of a forty page licensing agreement you'll generally do quite well with a simple "letter of agreement." A good writer can reduce the essential nuts and bolts to a single page.

    To launch your perfume venture with this strategy you must be able to identify a joint venture partner who has a following that could, without too much difficulty, be led to buy your perfume (although it's likely they won't know it's your perfume they are buying.)

    The other piece of the puzzle is to sell this "entity with a following" on the concept of doing this deal with you -- you supplying the perfume, they providing the buyers. The ease with which you'll be able to sell your project will depend a lot on how confident your proposed "partner" is with their ability to sell your perfume to their customers or followers.

    You won't be breaking any new ground with this plan. Look behind the scenes at your local perfume counter and you are likely find that none of the companies selling their perfume created and produced that perfume. The companies that created those perfumes and control their formulas (but are restricted from marketing them) are not named on the packaging. Where you can break ground will be in applying this strategy to small, carefully targeted markets.

    You have to ask yourself, "is this an idea that could work for me?" But before you walk away from it -- or jump on it -- let me get in a few more words. Marketing requires imagination. The great marketers are those who can take the germ of an idea they picked up (not thought up!) and mold that idea into something that works gangbusters for them. Great promotions never come ready made.

    Likewise, in producing your perfume you need imagination to guide you to reliable vendors of the components and service you need who will give you rock bottom prices. You have to work at it. Nobody is going to hand you their best prices on a silver platter.

    It helps to study what others have done but to make it happen for you, you have to take what is given you and give it a spin that will make it uniquely suitable for your market. Remember, you are the one who has the most interest in getting the perfume produced and sold!

    Now here are my plugs for my books that can help you --

    Creating Your Own Perfume With A 1700 Percent Markup!

    How To Make Your First Perfume For Under $500 (free download, no email required)