Product Launches V2

Good Morning Operators!

It’s been a little while since my last note - I’ve purposefully taken some time away the last 1.5 months or so due to some projects at work being really intense. Happy start of SubSummit to any of you who may be going - I won’t be there but I hope those of you who are have a fantastic time! In other event-related news, I am hosting another DTC Breakfast meet-up with my friend Morgan in July. For those who missed it, this was our last one back in February. I hope everyone who is able and interested can make it! Sign up and stay tuned for more details coming soon 🙂 

Today’s newsletter was partly inspired by this tweet (h/t @ Sean) - Product launches are one of the highest-leverage moves a brand can make. Launch well, and you can create tens of millions in net new revenue (or more). Launch poorly, and you might even run yourself out of business.

Those of you who’ve been around since the start of this newsletter series might remember the first piece I wrote on product launches which focused on problem statements - This piece goes a little deeper into the longtail considerations and impact of launching a new products, rather than examining whether or not you should launch a new product.

Why launch a new product?

Outside of considering the scalability of the problem statement you’re solving for, there are some very practical reasons for launching a new product, particularly for brands that have achieved a certain maturity with their current product lines. There are a few scenarios I’ve seen pop up that have prompted brands I’ve worked with to consider launching a new product (also h/t to the Marketing Operators podcast for providing extensive commentary on this).

• Declining repeat purchase rates: Sometimes it doesn’t matter how good your product is. No matter how many colors you have your water bottle in, or how many sizes you have of your award-winning pans, eventually repeat purchase rates are going to slow down because when you build a great product that lasts a long time, your customers are only going to buy so many of them for themselves + their friends & family. This isn’t to say you can’t achieve a lot of scale with a strong hero SKU, there are lots of brands I’ve worked with that have gotten to 8 figure run rates with only a few products.

• Competitive Category Pressure: Stanley Mugs going viral last year caused nearly every water bottle brand to think twice about their branding, GTM, and current product offering. When brands in your category are making noise with new products, it gives your customers an opportunity to look around and try something new - which makes it easy for you to lose them and have to spend $$ re-acquiring them later on.

• New category use cases: Sometimes significant macro-events create new use cases for products within your category that either didn’t exist or didn’t have broad organic demand before the event. For example, think about the impact Covid-19 had on the market for Air-purifiers and the significant market opportunity that created for brands such as Canopy.

So, What?

Here are a few ways launching a new product can help brands:

• Retention: Launching a new product can keep your current customers excited about re-engaging with you and purchasing more products. What’s more, the impact often extends beyond current customers. In some categories (e.g. Beauty), I’ve seen new product launches nearly double new customer AOVs because not only do they buy the primary hero SKU, they buy the new product because “TikTok made them buy it”.

• LTV Expansion: This goes hand in hand with improving retention rates among existing customers by increasing their purchase frequency with you. Additionally, as mentioned above, LTVs go up substantially from customer cohorts with higher AOVs on their first purchase; Therefore, the more excited you make them about buying from you the first time, the more likely it is that their first purchase will be higher and their total LTV will be higher.

• Complimentary Category Expansion: Think about what kind of products that sell well in tandem with your hero SKU. I like to think of this as a 1+1 purchase, such as these accessories as a +1 to a water bottle with a handle from Stanley, Frost Buddy, or Simple Modern.

Ok, so you want to launch a new product, what’s next?

Key Considerations for your Product Launch:

• Distribution: What distribution channels are we launching in? What are the buying behaviors we see across these channels?

  • A few considerations here:

    • What is my AoV across different channels? What is my AoV on Amazon vs DTC vs Big Box Retail? These are data points you should have on hand and up on a big board while you consider which channel to launch in.

    • Is this new product’s category native to any of those channels? I.e. Is this something a potential customer may be more likely to buy on Amazon vs DTC vs Retail?

      • Mini Case study: Let’s say you’re a laundry detergent brand (e.g. laundry sauce) and you want to launch a new scent. It may actually make more sense to launch on Amazon vs DTC.

        • Questions to ask here: 

          • What kind of purchase is this product? Is it a “vanity” purchase or is it something consumers buy on a regular basis? (e.g. think about a baseball cap vs a bottle of facial cleanser) In this case, it’s likely safe to assume that most consumers who buy laundry detergent do so regularly as part of their monthly grocery / household essentials shopping.

          • What types of products do consumers usually purchase with this item? This helps uncover the 1+1 opportunities - perhaps in this case it may be helpful to sell this in tandem with a scented candle since Laundry Sauce positions themselves as more of a fragrance brand.

  • Pricing nuances:

    • What are the pricing rules that I have to play by across channels ? (assuming you’re selling on Amazon + Retail)

    • How much can I realistically charge for this?

      • Is this an accessory a Hero SKU or is it its own product? Generally, if a product is an accessory, it shouldn’t cost more than the Hero SKU it accompanies.

        • These MagSafe accessories from Ridge are accessories to their hero Wallet SKUs, whereas these Damascus Steel Knives from Hexclad could be their own product, or could also be a 1+1 purchase with one of their pans.

    • Production Scalability: “Cut once, Sell Twice”

      • Cut once, sell twice: How many times can I sell the “same” cut of physical product without needing to come up with a new production process for more variants? The more streamlined and simple (read: faster and cheaper) it is for you to produce different variants of this new product, the stronger margins you’ll have on this product when you sell it.

      • How many variants can I make? The more variants you can make of this product (such as different colors + sizes), the more customers you will appeal to and the easier it will be for you to sell more products.

      • Winning examples out in the wild:

        • Frost Buddy: I’ve consistently been impressed with how Brock and his team crank out dozens of variants of literally the exact same product to sell the same product to different customer cohorts across different segments such as College Sports Fans, and other segments seeking custom branded drinkware.

        • Simple Modern: There was a point earlier this year where I think I saw 20 different colors of the Classic Tumbler around the office. The S|M team crushes “Cut once, sell twice”. I don’t think I’ve seen any of their products come in less than a dozen variants.

In summary, launching a new product is hard to pull off, but if it makes sense for you both financially and logistically to do so, these guidelines should serve as strong starting points. I hope you all have an amazing week, looking forward to spending some time in your inbox again soon 🙂 

Cheers,

Zach