Product development should be adapted to local conditions: At the current stage, how can we improve the success rate of product selection?

A netizen sent me a WeChat message, saying that he had benefited from my reply in the forum and was thinking about improving his product capabilities. I was of course happy for this netizen's recognition and his progress, but I also felt ashamed because I hadn't replied to questions about product development in the forum for a long time, so I updated this article overnight.
 
As the title says, and as I have always believed, any method should be based on different basic conditions, which means to adapt to local conditions. No matter how good a method is, it is impossible to apply it to all situations. Therefore, even if everyone recognizes concepts such as "market capacity", "heat trend", "life cycle", "differentiation", "profit margin", "competition ratio" and "ROI" and methods to achieve these concepts, when it comes to actually implementing them, there are still many differences and difficulties in each case. This article mainly talks about this issue.
 
According to the maturity of business development, we simply divide the business into four stages, namely 0-1, 1-10, 10-100, and 100-N, and then discuss the product selection methods suitable for them respectively.

Note that we are discussing the business here, not the individual seller, because multiple product lines or departments of the same seller will be at different stages of maturity, and it is more accurate to discuss them separately.

Stage 0-1:

Refers to a company that is still looking for products and does not have a stable and profitable business. It is common in newly formed startup teams.
 
At this stage, unless the company has a planned strategic loss, the most important goal is usually to survive, that is, to find a product that can make money. At this time, the most basic requirement for the product should be fast, low-cost trial and error, and a certain profit. This is the most important product selection goal, and then around this indicator, the matters that should be paid attention to in product selection are disassembled, and the remaining indicators can be used as secondary indicators for reference.
 
Specifically, the first thing to do is to determine the budget for each project based on the capital budget and promotion capabilities. For example, the total budget for each project before cash flow turns positive is RMB 200,000, and the cash flow turnaround time is 4 months, which means that at least RMB 200,000/USD 30,000 must be collected in the first 4 months. Based on 1,000 orders in the fourth month, the total sales volume is about 2,500 orders, with sales of USD 60,000, an average customer price of about USD 25, and a purchase price of USD 6-8. It is best not to exceed USD 6,000/800 pieces of inventory for a single order.
 
Then, you need to combine the budget and actual situation to eliminate categories that you don’t want to sell, such as those that are too expensive, too large, have too far supply chains, have too fierce competition for sales, have too short sales windows, have highly consistent appearances, or are too unpopular. Then, search the list one by one and list all the products you find.

There are two points to note here. 1. The competition for sales volume also depends on the range. In some categories, the competition from the 1st to the 100th place is very fierce, but in some categories, only the first 20 or 50 are fierce. There are still good volumes and prices after the 20th or 50th place. The latter situation can be considered. 2. The sales window period refers to how long the time opportunity is to launch a new product, which is different from the life cycle and seasonality. For example, the life cycle of mobile phone films is 11 months, which has a certain seasonality, but the time opportunity for new product promotion is only 1-2 weeks;
 
After making a list, it is time for detailed comparison and screening. The decision to launch the product will be based on profit margin, sales volume, cash flow, success rate, product complexity, ease of promotion, and the number of orders. Generally speaking, such products are more common in newly opened categories and lists (if you often browse various categories on Amazon, you will often find some new categories emerging), new product forms in old categories (products have been iterated or the scene has been migrated), marginal or cross-product lines (such as very large or very small SKUs, general products for segmented groups, etc.).
 
The wrong approach at this stage is generally to try to cover everything but to have high expectations but low skills. A bunch of seemingly important but unprioritized indicators are listed to limit the products. Then, the big money cannot be made and the small money is not valued. In the end, either no product is launched and time is wasted, or a bunch of self-satisfied products are launched and then piled up in the warehouse.
 

Stages 1-10:

Refers to a product line that is profitable overall, but has a confused mindset, lacks a unified process, and lacks replicable growth points. This is common in small teams that expand or spun off from a startup team.
 
The main difficulty for businesses at this stage comes from stable growth. The most reasonable approach is to find several teams of similar size and situation and copy them down.
 
I know that many people look down on the word "copy", so let's change the way we say it and make micro-innovations based on imitation.
 
Specifically, you need to combine the strength of your current team, refine the average order value, order volume, competition ratio and advertising budget of the product line that your team can promote, look for product lines of similar size, and look for sellers on the target product line who are doing better than you but have not yet formed a monopoly. Systematically study their product line layout and operating methods, and then make micro-innovations to surpass them.
             
The main process of product selection at this time is to find the target categories and competitors, disassemble the opponent's product line layout and operation strategy, find the opponent's suppliers and shipping prices, shipping volumes and shipping times, compare similar products from suppliers of the same level, and infer their product selection standards and ideas, as well as profit margins.

Combined with display angles, embedded keywords, bids, negative review points, targeted optimization, gradually eroding their market, and finally using new products to seize the competitors' positions. It doesn't matter if you can't compete with them for a while, you can always find a better way to reduce costs by visiting suppliers more often. As long as you succeed once, you can use this method to replicate in batches for subsequent product lines.
 
The wrong approach at this stage is to be lazy and directly copy or poach other people's products, or to be timid and indiscriminately say that you cannot beat the big sellers as soon as you see them, without the ability and patience to disassemble the target data.
 
The essential difference between the 1-10 stage and the 0-1 stage is that the former has a stable basic profit, while the latter does not.
 

10-100 stage:

Refers to teams that have a stable and controllable new product success rate and business scale, but have a single growth model, and cannot improve profits and labor efficiency. This is common in teams that are in the expansion stage or have just completed expansion.
 
The difficulties of this stage of business mainly come from breakthroughs in labor efficiency and profits. The most reasonable way is to find a strong thigh and hold on tightly.
 
"Holding thighs" means that at this time, we should focus on screening business drivers according to business strategies and performance targets, separate key high-value resources for independent operation, and either shut down second- and third-tier resources or give them to newcomers for training.
 
High-value resources include key supplier resources and corresponding business personnel. Only key supplier resources can provide you with the most core products and business resources. Only the most core business personnel can make good use of these resources, thus forming the Matthew effect of the strong getting stronger. Only then can you improve output efficiency from the core and reduce opportunity costs and waste of resources.

At this point, the product selection criteria are only used to measure the priority of these resources and how much budget should be injected into them, and are not suitable for deciding whether to keep or remove specific products.
 
The main process is:

Product lines, suppliers and corresponding business personnel should be arranged according to business output. High-net-worth resources should be listed separately, and then classified and managed according to the standards of cash cows, dogs, stars, and problems. Those that need to be strengthened should be strengthened, and those that need to be merged and eliminated should be dealt with in a timely manner.
 
The wrong approach at this stage is to let outsiders command insiders, and to use non-professionals to classify and make decisions according to their own preferences. They cannot tell the difference between a cash cow and a dog. In the end, those who should be strengthened are relaxed, and those who should be eliminated are strengthened, and the opportunity for transformation is missed.
 
The essential difference between the 10-100 stage and the 1-10 stage is that the former has core resources and will not fail as long as they do not make mistakes, but the latter cannot.


100-N stage:

Refers to businesses that have moved away from relying on scale to achieve growth and have taken root in several categories. Generally speaking, these are the names we often see in the news.
 
How sellers at this stage develop products is basically based on how to be a good boss and how to lead the development of the industry. It is not appropriate to talk about it in detail. We can only say that the main starting point for product development will become how he views the trend of technological development, how he views the priority of user interests and commercial interests, how he views the relationship with competitors, and similar factors.