How to double your profits WITHOUT increasing your sales

How to double your profits WITHOUT increasing your sales
Makers Business Tribe Podcast
How to double your profits WITHOUT increasing your sales

Apr 22 2024 | 00:24:47

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Episode 3 April 22, 2024 00:24:47

Hosted By

Nina Huchthausen

Show Notes

In this episode, we discusses the highly underestimated power of product branding and packaging to increase your profits.

I am getting super tactical & share with you an example of two coffee brands with similar taste but different packaging, and how the one with better branding can charge a higher price and therefore - even if they sell the same amount - end up with a much higher profit.

To demonstrate this I am walking you through the calculations - step by step to equip you with all the knowledge you need to assess how much you could increase your profits by getting your branding  dialled in.

To access the video recording & download the worksheet I am using, click here: 

https://zfrmz.com.au/5HIGJTlE4EqkpVdF8hFw 

And if you'd like to sit down and do a rapid fire brainstorm on how we can solve a challenge in your product based business, book a Free 15-min call here: 
 
View Full Transcript

Episode Transcript

Nina (00:02.918) Hello, welcome, goodness me. Podcast number two, I am stoked, I am pumped. Now, what are we talking about today? In today's episode, I would like to share with you how you can double your profits without increasing your sales. It is possible. And most of the time, it is the easiest way. to position your product, your brand, your baby in a space of higher value perception and in a space of where you can add more magic to your product and ties in a space where you get to add more magic, more love, more ... finesse, more do to your product than maybe the space or the arena that you're playing in today. And that space, my friends, is called product branding. Proper product branding to, in a way, so that your product doesn't just look like you have it. it's kind of homemade and it got a sticker on it and it's it's worth a few bucks and you would like to sell it at a market but to a degree where it pops out of the shelf where a retailer ultimately calls you and say Nia I need your product because when I look at your product I can see how it pulls people into my store. I can see how people are being drawn to and attracted to wear position your product and ultimately the world, the magic, the beauty and of course the health and the wellness and everything that comes with our wonderful earth conscious products. I can see by just looking at your product, at your packaging, Nina (02:27.398) that this is what I need. This is what my customers need. That's the type of branding I am talking about. Now, why should you care about it? Because a lot of product -based businesses that are starting off a little bit again, so very hesitant in investing into their branding. and is specifically in their packaging and kind of have this perception. I can just go onto Canva and I can put it together and it looks nice. And then I get it printed and off I go. Yes, we can do that if we're just selling at a market store. And if we're at a stage where we are testing our product and we're trying to figure out, do people want it? What else do they need in order to love it? We're here to get some. some feedback on what next, and we are also ultimately just getting the word out there and getting comfortable becoming a business owner, getting comfortable in selling our product, getting comfortable in standing in front of our customer. But once we've done that, we're past that stage and we are confident in our product and we now want to get it into the hands of many. and we want to build out our partnership network of either distributors who help us sell or retailers who help us sell or online stores, you name it, wherever you would like to get your product into, whoever you would like to build a partnership with that wants to help you get your product out, then it will help. immensely for your product packaging, which means your branding courses will to be downed up and stand out in your category. And for people when they look at it in split second for them to say that looks like it has immense value to me and I'm willing and ready and able to pay that. Nina (04:52.742) And if I can't, I make it happen because I feel like I need it in your life, in my life. I've always dreamed about it. I've always wanted it. We know these types of reactions. Yeah. And even myself. And I like something beautiful and shiny at some point, sometimes in my life. And I know you too, everybody does. And oftentimes, I think the statistics are about 85%. My good friend and designer, Derek from DMS Designs, we were talking about this the other day and he was like, it's 85 to 87 % based on his research is that we judge and choose a product by its packaging. Yeah. And then of course comes the marketing. But if I'm being presented in a retail shop with two... products that do the same thing and one packaging speaks to me, calls me, is connected to my heart and I can see how it enhances my life, my kitchen, my handbag, my hair, how it just makes me feel be more confident and on it versus okay. I will probably pull up my card for this one. Now, so I have, of course, for those who are listening, check out the show notes. But here's what I did. I was in a store recently and there were two coffees. And I had a look at them, I was like, man, I gotta need to show you this. So let me show you. And for those who can't see it, I will describe this to you. Okay? Because it's just... It's mind boggling, mind blowing, all right? How powerful this really is, okay? Nina (07:00.774) So let me present this. All right. So, um, Nina (07:09.478) Let's have a look at this. Okay. So what we are seeing here on screen, one packaging is from the Katz pajamas. Okay. By the way, I'm not, um, affiliated with either of these brands. I just saw them as a customer in store and, and here's what I noticed. One packaging, the Katz pajamas has kind of this first of all, it starts with the material. It feels really nice in my hand. I touched it and I was like, Ooh. Okay, okay, now we're talking. This feels nice. Yeah, then it's kind of like a cream, cream colored bag. It looks really nice in just in the shelving and like a light wooden shelving. And then it continues. It has these like kind of two cute cats on them, one with glasses and a, and in a, in a, in a striped suit and a striped suit and the other cat, no glasses and a black and white. suit, very cute. Yeah. And then it kind of continues with it. Like the name is even called like the mice will play. Yeah. So it's tongue and cheek really cute. This stands out. All right. And then the packaging feels really good and the branding seven miles and the cat's pajamas, the font families that were chosen, all of this kind of, yeah, in layman's terms speaks to me. This product was, I think, priced at 60 bucks, 60 or 65 bucks for a kilo of coffee beans. Then next to it, we got Cadilly coffee. Cadilly coffee is presented in a black plastic bag. Doesn't feel as nice, feels a lot cheaper when I touched it. And it only has like a, like it's small white label that looks more like someone has peeled it off of like a big stack of labels and stuck it on. It's professionally printed, but the logo is a lot simpler. It has like three leaves, one green, one, one brown and yeah, it looks okay. It looks okay. Priced at 42 bucks or so. And it black back and in these shelves, when you have a look at the photos, Nina (09:38.918) It gets lost. It gets lost. And, um, that's a first, first of all, the retailer having positioned these two products, of course, with the cat's pajamas, you attract one crowd, Cadillac coffee, you attract a different crowd. Now I tried both coffees because I had to geek out on this and they tasted very similar. And when I was talking to the store owner, the practices to his knowledge, very, very similar. So they couldn't really recommend one over the other. At the end, because I liked touching the cat's pajamas back so much because I'm a very tactile person. I bought the cat's pajamas for 60 bucks. All right. Crazy. I could have spent 20 bucks less for the Cadillacoffee. But with the cat's pajamas, I was like, it's going to look really nice in my kitchen. I like feeling it. I kind of feel like this is more premium because of the name, because of everything. And, um, yeah, I paid, I was willing to pay 20 bucks more. So now the question is, why should we care about this? Because even though I am not a designer to explain this in its full detail, you do your research yourself just to see and test out how easily you are drawn to a more expensive product based on their packaging. and how much willing all of a sudden you are to pay way more than maybe a comparable product, but it's packaged a lot more simply. Nina (11:40.326) and then you can calculate for yourself. Well, what does that mean when it comes to numbers and what does that mean when it comes to my business? Here's what I've done. Okay. And I think this is super cool. I've done some numbers for you guys. So those who cannot see, just listen to me because I think this is super impactful and you gotta hear it. So that my hope is, You jump on my calendar, link download link will be in this, to calculate for yourself how much more money you could be making if you were to dial up your packaging and then because of that pushed your product into a whole new arena when it comes to its value perception. So here's how it goes. I'm just assuming for simplicity here, that both Cadilly coffee and Seven Miles coffee because it tastes so similar have very similar cost like cost of goods. Yeah. So the ultimate cost of the product is the same. If you haven't heard of cost of goods before, do not worry. I'll be releasing a podcast just on cost of goods shortly. Watch out for it or DM me and say, Hey Nina, where's this fricking podcast? Okay. Cost of goods is the same because that's the base, that's the ultimate cost of what it costs each of these products to get them ready for us consumers. So now if we are looking to sell this product wholesale, so meaning in bulk, Um, then we need to determine a price there. And if we are looking to give a retailer a certain margin so they can sell this product to the end consumer, then we need to play a few scenarios through here because if you are determining based on the packaging and for Cadillac coffee, we know this Cadillac coffee should be sold for 40 bucks to the end consumer. Nina (13:54.694) and the cost of goods is 20, then here's what we need to figure out. Because most of the time, a retailer expects to at least get 40 % margin to stock your product. If that is the case, if they want 40 % margin, and you're like, okay, this is probably a $40 product, and your cost of goods per item is $20. I'm just choosing those numbers for simplicity. So please don't tell me these are ridiculous numbers, but the percentage, the retail percentage is true. Then that means working backwards and recommend you guys watching this on screen as well, that the maximum wholesale price that you can charge is $25. Because look here, but $25. only gives you five dollars profit. So because here's what happens if we turn it to 30 percent. If we turn it to 30 percent which would give you ten ten bucks profit per product you're reducing the retail margin for way too long most retailers will not get that to you. So probably the maximum that you can charge is 25 but it could even just be 23. because if your retailer says 40 or even 50%, you almost got a problem here to make any money whatsoever. And I would honestly say $3 profit per pack unless you're selling millions of coffee. I would be very uncomfortable here. Now let's imagine Cadilly Coffee decided they are upgrading their branding and spending. five to 10 grand on their branding and new package design. I don't want to quote any of our designers out there, but we're not talking for one product, crazy money when we are starting off. Yeah. I would honestly say, um, the makers business tribe partners, they would charge you less than 10 K for a fricking awesome. Nina (16:19.686) branding and packaging design just to put that out there because our makers business type humans get access to them all the time. Now let's imagine Cadillacoffee dials it up to 7 miles coffee still cost of goods sits at 20 bucks. But now see what happens because of the packaging dial up 7 miles coffee can easily charge $60 meaning Look what happens. So right now in, we can give a retailer a 40 % margin, but you can charge it wholesale 35 that gives you a 42 % margin. That means $15 profit per product sold by just dialing up the packaging. It's a huge difference. $15 profit versus $3 profit. Yeah. We're talking 12. dollars difference per pack. Here's what happens. Yeah. So. Let's say you want to make three grand profit a month because you've decided, okay, cool. I need to at least get 36 grand of profit into my business bank account in order to make, to meet that next expansion. So at the $40 rate, we need to sell 1000 coffee bags. for that month to make three grand in profit. Yeah. If we want to make $3 ,000 in profit selling the seven miles coffee with the cats on it, we only need to sell 200 coffee bags, which is a huge difference. Nina (18:25.894) So ultimately, my friends, and I hope this was helpful, short and sweet, through branding, proper branding, and we will have a separate podcast in which we will talk to you, in which one of our makers business tribe, branding amazingness humans will come on and share with us the ins and outs of really awesome, branding. But regardless of those details, if you're just playing with the numbers and I love a good numbers game because a lot of people are so hesitant and investing into good branding, but if that enables you to move up 20 bucks, Nina (19:17.818) in set in in in recommended retail price for your product. you don't need to if you want to make a certain profit as you can see here if you want to sit let's say you might be already be selling a thousand you could go down to as little as 200 to meet the same profit or if you wanted to If you are at a thousand products and now you're implementing your pricing, your profit is going to go up to 15 grand if you're staying at a thousand products a month in comparison to 3 ,000 a month. That means on a yearly basis, you'd be making $180 ,000 in profit. if you sell your coffee in this case at 60 bucks or you're staying at 36 grand if you're selling it at 40 bucks. So I just want to show you the difference. Nina (20:38.31) It's a difference of $144 ,000 profit for a 5 to 10K, maybe a bit more investment in really good branding and really good packaging. Now the decision is yours, my friend, but to me, just looking at those two products and these mind boggling differences. I hope even if you're just starting off to put this into your pipeline and to put money aside for branding and packaging as early as you can because if that helps you to develop your profit and because of that you have money for expansion and growth and hiring an assistant and outsourcing what needs outsourcing and technologies that you want and getting money for warehouse. all these things that we need in order to go on scale business. Start with branding and watch the magic happen for you. All right. I hope that was helpful. Make sure you like and share this podcast. Spread the word. Help me spread the word. Let me know how you are liking it. And of course, click on the link below to. subscribe to my emails. And of course, if you want my awesome calculator. Nina (22:13.094) And of course, if you want my awesome calculator, click the link below. I think it's something like calculator. Um, and you get to download it and play with it and hopefully get heaps out of it. Okay. Bye.

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