How CROSSNET is Having Our Most Profitable Year Ever
I hope you had an incredible weekend and are spending the last few hours of your Sunday doing whatever it is you love. For me, I’m spending some quality time with my in-laws before I head off to LA in the morning for a quick 48 hour trip.
If you haven’t seen, I’ll be hosting two dinners on Monday & Tuesday for the Founder’s Club where there will be over $2B of revenue in the rooms. We actually have six seats left on Tuesday, so if you’re a founder or marketer for a DTC brand and interested in joining let me know!
I want to start this newsletter off with a huge shout-out to Particl. They’ve graciously sponsored this week’s newsletter and I’m so excited to begin working with them for product development. My friends over at Rhone, Cuts, and Beard Club all have used them to discover new product opportunities by using AI-driven product development which leads to incredible product launches. Essentially if you’ve ever felt stuck about what products to put out next, Particl’s the backbone for creating new ideas and the data behind your next product iteration.
Speaking of product launches, CROSSNET just left its monthly management meeting and….
Sales are up 35% this year, while marketing spend is down 43%
In a world where there seems to be nothing but doom and gloom everywhere, how is this happening? Here’s how!
Investing in product development.
Regardless of your industry, 99% of the time you can’t keep selling the same shit over and over again, you need to drop something fresh. I know Cuts works with Particl and they drop new styles of men’s t-shirts every other week.
For us we released five products this year: CROSSNET Pickleball, Four Square Straps, SmashNet, Backyard Pong, and Bubble Bash
In this newsletter, I’m going to give you a behind-the-scenes look at what product development looks like internally.
One of our biggest mistakes was waiting to release new products and being content on selling CROSSNET over and over again. Releasing our pool version was the wake up call we needed when we realized that online sales were almost 1:1 between the original version and the pool version when we released it.
You can go about things 1 of 2 ways.
1) Have an internal team member or group strategizing on new product ideas. I wish I could show you, but we have a pipeline of 30+ games that we are interested in taking to market. We know we can’t do them all and we also know some of them are shit. The goal is to launch the best ones as soon as possible, deciding which ones are the “best ones” is the hard part.
2) Using a research design firm (very costly) or an AI product development tool like Particl that will actually make product suggestions for you, help you price them, and allow you to see if these ideas actually make sense for your business before you go down a long and expensive rabbit hole.
The Goal is to Make Products Our Customers Actually Want
In my world product development is not a quick process. The majority of the concepts we are working on can take 9-12 months to launch, if not longer. Here’s what it looks like:
Set a Product Development Budget for the Year
Product development can super costly. Having a veteran or a product on your side to help you to understand all of the costs before starting a project is crucial. We’re about to spend $60,000 on patents, tooling, and design work on a game that I’ll bet my company is going to be a best-seller. There is nothing worse than starting a project, wasting time, and then getting a quarter of the way through just to find out its going to cost way more money and way more time that you don’t have.
Build a Product Drop Calendar
Just like a marketing calendar you need to have a set schedule for when you’re dropping products. Why? It matters from a cash flow & also advertising schedule. A real life situation right now, a game we’re about to start tomorrow can be done for November this year but requires $40,000 to start production. We aren’t going to launch this product until April, so why not wait two more months and get the product done for February instead? This helps our cash conversion cycle a bit and doesn’t force me out of $40k a few months earlier.
PLEASE MAKE SURE TO FACTOR IN CHINESE NEW YEAR & SHIPPING TIMES
The Sampling & Tooling Process
After we pick a game to create, we then begin working with our product developer to design and concept everything before we begin production. After receiving the first sample he’ll look for ways to improve costs, lead time, and packaging size. Other things to consider:
Product quality & cost per material
Estimated carton size & weight
The first round of pricing for a new game. We’ll look to get costs down to the $35 range over the next few months.
Pricing, Pricing, Pricing
After five years on the market we finally adjusted the cost for CROSSNET for $149.99 to $99.99. The results have been amazing and have fueled our sales growth, while yielding a more affordable acquisition cost.
Why did we make this change?
As crazy shopping habits from COVID wind down, shoppers are starting to tighten up their wallets as a nonstop recession looms. We were by far the most expensive game in our category, with the average game going for $50.
When launching a product our goal is to start with 70% gross margins (Revenue - COGS/ Revenue). Regardless if you’re in business for 3 weeks or 30 years, improving your gross margins is one of the best things you can do for your business. The larger the margins, the more room you have for advertising and acquiring new customers.
Slow things down. Price smarter. Launching a product with terrible margins will lead to a terrible business.
One of our biggest struggles is trying to know when we should price products a bit higher. A current situation we are dealing with is that we are toying with the idea of listing CROSSNET on Amazon for $104.99, instead of $99.99 to squeak out $5 in extra margin. The $99 price is much friendlier, but at 100 sales a day, the extra $500 is all profit.
We are starting to use Particl to help price our products and to understand how to maximize our ROI. They will track and analyze sales volume of thousands of competitor SKUS, so we can set prices that lead to the greatest return and conversion.
Get Honest Feedback!
Whenever we are about to launch a new product we make sure to get 10-20 samples to send out to our best customers. We work so hard to build this loyal customer base and there’s no better way to make your customers feel special by hooking them up with free and early access to products.
You will want to task them with giving you honest feedback, asking them to test durability, and also taking photo and video content. Our secret weapon is being able to launch a new product and already have 10-20 pieces of Facebook ad-ready content.
Get our Next Good Sport Product for Free
I hope this week’s newsletter helped or inspired you to create something new. We’re dropping something brand new for Good Sport this August and I am going to be giving away five free sets that are worth over $100.
All you have to do is take a quick demo with Particl here and learn more about how they can help you with product development and pricing. Want the friends and family hookup? Send me an email back and I’ll intro you to my guy Austin who runs the marketing team.
These freebies will go quickly, so sign up and let me know when you’ve done it! I’ll begin shipping products later this week and am expecting some honest feedback.
Hope you have the best week ever,