4 Steps To Bring Your Product To The Market
The B-I Triangle is made up of eight integrities, and one of the integrities is the product. While not the most important integrity, it is a necessary component of the entire business system.
One reason Kim and I created the CASHFLOW® board game was to familiarize non-investors with the vocabulary of investing. In all our games, players quickly learn the relationships behind the words of accounting, business, and investing. By repeatedly playing the games, the players learn the true definition of such misused words as asset and liability.
Our Mission at The Rich Dad Company is to “elevate the financial well-being of humanity” so the board game was an integral artifact to accomplish our Mission. Below are the steps we took to bring the board game to as many people as we could.
Do Something Unique
Design the business around a unique tactical advantage. In my plan, my tactic was to play the game so I virtually eliminated all competition. I eliminated all the competition because if the legal work was strong, no one else could do what our business did. No one else has our CASHFLOW® games. As rich dad said, “Design a business that can do something that no other business can do.”
Simply put, focus all your efforts on your core strength, your unique product.
After Kim and I had enough money to survive without working, I knew it was time to give back. In selling our education business, I took the time to design a business that could teach my rich dad’s lessons to more people at lower prices. That was the conception of The Rich Dad Company. Instead of teaching via seminars that at times cost over $5,000 to attend, I decided to create the CASHFLOW® game.
The production piece of bringing our CASHFLOW board game to market involved, as you can imagine, countless rounds of testing. We had to make sure that the game actually played as we intended. We hired someone to make sure all of the mathematical equations were accurate who ran over 150,000 different simulations. And then we hired an intellectual-property attorney to begin the process of filing for patents, trademarks, and other legal fences to protect my intellectual property.
In the summer of 1996, Kim and I went forward and hired a graphic artist to bring the game to life. He then shipped his work to a game-manufacturing company in Canada. In November 1996, the commercial version of the game was played at a friend’s investment seminar in Las Vegas, Nevada. The game worked. Participants loved the game. The paradigm shifts we wanted were happening. Immediately, we flew to Singapore to another friend’s investment workshop. Once again, the game did its magic.
In 1996 after the CASHFLOW® game was in its final production and ready for commercial use, the next question was: How much is this game worth? How much can we sell the game for? The packaging looked great, but we thought it might have looked too much like a game for entertainment rather than education. We made it look bright and fun because we wanted learning to be fun. But as we looked at our finished product, we began to wonder: How much would someone pay for fun?
We wanted people to know the game was about education, but again, how much would someone pay for education? Looking at our finished product for the first time, Kim and I knew we had serious marketing challenges.
To find out what the market might think about our product, once again, we formed a group of people who did not know us, as we did with the beta test, and asked them what they thought of the packaging. The feedback was mixed, from “It looks great,” to “It looks stupid.” The people in the group did not know we were the creators of the game, so their opinions were pretty frank, often painful.
Next, we asked them what they thought the price of the game should be. Again, not knowing us or what went into creating a game and not having played the game, the prices they suggested ranged from $19.95 to a high of $39.95. This was even more depressing. At that point in time, due to the small production runs, our cost just for producing the game, without freight, was forty-six dollars per game. This did not include development costs. We were starting off with a product with a negative margin before we added in the costs of the rest of the B-I Triangle.
One evening, I went home and talked with Kim. The first thing I said was, “We should sell the board game for $200. We will position it as the most expensive game in the world. It’s not just a game. It’s a seminar in a box.”
Kim agreed. She did not flinch at the idea of selling a board game for that much money, even if our focus group said it should sell for $39.95.
In business, a very important word is the word margin. It is as important a term as cash flow. In fact, both terms are intricately related. In overly simple terms, margin is the difference between what it costs to produce your product and the price you sell your product for. For example, let’s say it costs you two dollars to manufacture your widget, and you sell your widget for ten dollars. In this case, your gross margin is eight dollars. There are three reasons why a product’s gross margin is so important.
- The gross margin finances the rest of the B-I Triangle. Looking at the B-I Triangle, you can see that a product’s margin must provide enough cash flow to feed the rest of the Triangle.
Margin pays for the team’s salaries, legal fees, the company’s system operations, marketing, and accounting. These are also known as operating expenses.
- Margin determines the price of your product. Obviously, the more margin, the higher the price of your product.
- Product and price determine your customer.
To help clarify this, let’s look at the automobile industry. A Rolls-Royce is known as a very expensive car. It attracts a certain type of customer. If Rolls-Royce suddenly announced it was going to produce a low-priced budget model, many of their rich customers would probably start looking for another brand of car.
The most important place you want to be first in is in your customers’ minds. For example, when you think of a soft drink, do you first think of Coca-Cola® or Pepsi®? When your very special customers think of your product category, do they think of you first or your competitor first? Ultimately, the most important job of an entrepreneur is to be first in the mind of your customers.
Remember that your very special product is important to a very special person.
The price of your product must satisfy the person’s needs, wants, and ego. When it comes to ego, we all like finding a bargain. Also, many of us like letting people know we spent a lot of money for a product that only a few people can or will afford. So ego can work at the high end as well as the low end.
Where you place your product so your customer can find it is important. Always remember that a new Ferrari will look out of place in a used-car lot filled with cheap cars. If you place your product in the wrong place, your sales will suffer. When Rich Dad Poor Dad was first printed, we placed the book in our friend’s car wash/gas station in Texas. Why that car wash? Because that was the place where the affluent people brought their cars for a wash and for gas. If we had put our book in a place where people came to buy cheap gas, I believe the books would still be there.
The only position you want to be in is in the first position. Always remember that most of us know that Lindbergh was the first human to fly solo nonstop across the Atlantic. Very few people know who was second. If you are not first in your category, then invent a new category you can be the first in. When the game was not known, we became the first game to claim the highest-priced-game category.
Editor, Rich Dad Poor Dad Daily