Developing a profit-focused business model - sports and outdoors

Last week we spoke about the product, and its role in building a sustainable business model for sports and outdoors. You can read it here if you missed it. 

Quick recap of the 4 pillars of our model:

• Product

• Market and customer

• Revenue, profit and loss

• Cashflow / financing

This week it’s all about the customer and the REAL obtainable market. Not the bullshit you can pull off the internet and fool yourself into believing.

This is where we got a big surprise. We had developed a nicely developed customer avatar. But when we surveyed real actual customers that were buying, it didn’t match. So, first, please, establish who your perfect customer really is.

There are two parts to this ideally.

1. Who are those who did purchase

2. Who are those that didn’t purchase, and why?

The best way to establish this, by far, is to actually talk to existing customers. And this is easier for young and new businesses where customer numbers will be more manageable.

1. It’s easy for D2C. You have their details, so reach out for 10-15 mins of their time. Incentivize them in some way (gift, small Amazon voucher etc.) and you will get 8x more agreement, from our experience. Then find out:

   • How they found you

   • What did they think of the product? Bad and good

   • Would/did they recommend?

   • What exactly they use the product for, and who with?

   • Demographics - age, family, household income, social channel most active on.

     All of this could also be done via email. But a video / call is definitely better. You can pick things up between the lines.

2. This is even more critical. Again an important part of having a good email list. There are tools (in Klaviyo for instance) that can detect subscribers who have been on your site over a period, e.g. 60 days, and not purchased. Put them in a segment, email a questionnaire and you can find out why they didn’t purchase. Or better still, arrange to get them on calls. Remember to incentivize. This can be hugely insightful. Price? Color? Not what they expected? Problem with website journey? Reviews? No product / market fit? Vitamin, not pain killer?

   We found that a buried negative review had caused us a lot of missed conversions, for example. (We’ll share results in the our journey section next week.)

If you’re pre production then you can still use your email list to arrange calls with potential customers, and ask them the pertinent questions.. This is why a landing page and an email gathering strategy is a crucial first step. The tools that can be used are Unbounce.com, Leadpages.com and others. As I have mentioned before, these lead page tools will deliver much cleaner results than a LP on your own website. So I do recommend them, even though they do come with a cost. Don’t be penny wise and pound foolish.

It’s absolutely critical that you find out who your potential customer is as early as possible, and focus everything on them. Riches in the niches. We made the mistake at times of trying to please everyone - imagine trying to develop a product that will suit weight sensitive hiker-campers and also vehicle campers? Nearly impossible. You need to really hone in on the customer - who they are in detail, what they want/need, and what they’re willing to spend on the solution. Knowing this exactly will give you a much better chance of getting product / market fit. Think the Solo Stove lite from Tuesday’s newsletter.

With regard to estimating your Serviceable Obtainable Market, we gave you the actionables in last week’s newsletter.

As our example:

You can research the Amazon sales of tents (via Smart Scout subscription) over a trailing 30 days.

The ‘tents and shelters subcategory in Amazon is estimated at $31m / month for the above trailing 30 days (in Smart Scout).

Amazon = 40% of online sales (*approx.) Total online sales opportunity = c. $77.5m / that month

Online = 22% of retail sales (*approx.) Total sales opportunity = c. $352m / that month.

*Adjust for seasonality if needed - depending on the 30 days used. 

So the total tent sales over 1 month can be estimated, for target market (USA)

Our own journey.

In this Thursday newsletter, I’ll also be adding a section on our own journey. This will include what works, and more importantly, what doesn’t work, so you can plan. We will show the results.

We’ve re-built our business model, reducing direct costs significantly and redesigning some of our products to help increase product/market fit. These new revised products ship next week, so exciting times ahead. In this newsletter in future weeks, I’m going to share how that goes - conversion rate, feedback, etc. Hopefully that will prove useful to you as well. Next week we’ll start with the results we got when we completed the above non-converting traffic questionnaire, and how we used it.

AI Tool of the week for D2C sports and outdoors:

Exploding Topics

Firstly, this is something I’ll be adding to Thursday’s newsletter. I’ve made it my business to test at least one new AI tool that can be used in our industry (including paid subscription if needed) and report back. Anyone who’s sticking their head in the sand re the effects of AI on eCommerce is, well, delusional. Take the opportunity to become an early adaptor.. I know we’re promoting everything sports and outdoors, but that doesn’t preclude us from using machines to help our businesses.

Exploding Topics is like Google Trends on steroids. The tool I’m most interested in there is their ‘Trend Forecasting’ with the tagline ‘We surface rapidly growing topics before they take off….’

Continued….I like that they also incorporate good old fashioned ‘human expertise’ alongside the AI. A couple of examples below:

So, if you want to see what’s emerging in our space it’s a brilliant addition. Or what may drop off. It has been around a while by the way, so not a fly-by-night. And definitely worth taking a look. You need to be much more specific with Google Trends. This allows the tool to do some of the work. There is a free 14 day trial (well, technically $1). And by the way - I’m absolutely NOT on any affiliate with any of the tools I suggest. I just use them and report back if they are good for us or not.