Product Startup Podcast Episode 226: Increase Product Perceived Value

00:00:00 Kevin Mako: Hello, product innovators. Today we learn marketing tactics on how to increase the price you can charge for your invention from a CEO who has worked with over 3,000 e-commerce brands.

00:00:09 Kevin Mako: This is the Product Startup Podcast, a show to learn from top leaders in hardware product development, prototyping, manufacturing, product selling, and everything in between.

00:00:19 Kevin Mako: Hosted by Kevin Mako, the leading expert on product development for hardware startups. Welcome back, everyone. I'm very excited to introduce Valentin Radu to the show.

00:00:29 Kevin Mako: Valentin is the CEO of Omniconvert, a company that has worked with thousands of direct-to-consumer e-commerce brands to maximize marketing potential. He is also the author of The CLV Revolution, a book on transforming customer value optimization for e-commerce brands.

00:00:42 Kevin Mako: Today, Valentin will show us some valuable knowledge for inventors, startups, and small manufacturers on defining profit versus perceived value, how to focus on the solution your product provides, and tactics on increasing the price customers are willing to pay for your new invention.

00:00:56 Kevin Mako: Now, onto the episode. This show is produced by Mako Design, the original firm providing end-to-end consumer product development services tailored specifically to hardware startups, small manufacturers, and inventors. Take your product from idea to store shelves at MakoDesign.com. Now, onto the episode.

00:01:18 Kevin Mako: Hey, Valentin, welcome to the show.

00:01:20 Valentin Radu: Hi, Kevin, and hello, everyone.

00:01:22 Kevin Mako: We're excited today to talk to you about maximizing the perceived value of your consumer product when selling direct to consumer. And there's lots of methods to sell direct to consumers, a new hardware product. It can be as early as crowdfunding. It can be later stage in terms of direct-to-consumer through Shopify or Amazon or Walmart marketplace or a number of other verticals that sell your product from yourself as the inventor and

00:01:44 Kevin Mako: Manufacturer directly to your customers. The big question is how do you make the most money from these sales? Because as we all know on the show, margins are important. Profitability is important.

00:01:55 Kevin Mako: That's what will scale your enterprise to be great. So we're going to talk today to one of the leading experts on this very topic, the author of the book on the topic and has been in this industry for almost 20 years and a whole bunch of other things, worked with over 3,000 direct-to-consumer product brands, which is incredible. But before we get into all that, just give us a quick backstory going back 20 years to how you got to the success story that you are today.

00:02:17 Valentin Radu: Yeah. So I've started by providing undeniable value to my neighbors because I brought broadband connection, broadband internet to my neighborhood.

00:02:27 Valentin Radu: After that, I got a taste of entrepreneurship and I thought, I've got this luck out of the sudden. I was making 10 times more money than my parents. And I said, why not continue this?

00:02:38 Valentin Radu: I mean, why is not everyone doing entrepreneurship? And then I got into this roller coaster, but eventually I got here. So I built four companies and now I'm running Omniconvert, which is one of the leading growth machines for e-commerce direct-to-consumer brands.

00:02:54 Kevin Mako: And talk a bit about the book that you released as well.

00:02:57 Valentin Radu: Yes, it's called The CLV Revolution. You can find it on Amazon. Two years of writing it, the hardest project of my life. I've tried to compress everything that I've learned about it after working with all these great companies into it.

00:03:10 Valentin Radu: So I've built it like a bible for everyone wanting to be profitable. So basically, after 17 years in e-commerce and working with all these brands, I've compressed pressed everything into it. And that's basically the bible around customer lifetime value and profit.

00:03:25 Kevin Mako: Well, congrats on getting out there. Super useful book and very helpful. So let's now dig into some of the messages and key ideas behind both the book and your experience in spending all this time working with thousands of e-commerce brands. I want to talk about the perceived value in messaging. And this is something that's really important to a hardware startup. First of all, because anybody who listens to the show, who's developing their own product, you're making something unique and innovative that is special. It's creating

00:03:52 Kevin Mako: Value that just doesn't exist in the world today. So that is super important that you're able to take that value and all the design and engineering and innovation that you put into the product and be able to relay that to your prospective customers so that they become actual customers.

00:04:08 Kevin Mako: So let's dive into it. Just start big picture with what it means in terms of some of the unit economics around the actual product itself? Yeah. So one important thing is everyone wants profit, right?

00:04:18 Valentin Radu: That's why we are doing what we're doing in entrepreneurship. So in order to get the profit, you need revenue and costs. But in order for you to generate revenue, you have revenue coming from existing customers and new customers. So if you drill down into this unit economics, you'll understand that in order of course, more customers that buy more often and pay more on your products and without you paying a ton to acquire them. So at the end of the day,

00:04:43 Valentin Radu: It's this simple equation. Number of customers multiplied with the ratio between how much you are getting down the line from each customer, which is the customer lifetime value. So predicted profitability per customer divided by the customer acquisition cost, like how much you are paying to acquire that customer so this leads to long-term profitability now in order to

00:05:08 Valentin Radu: Improve that so to to nail this unit economics need to understand who are your best customers right because not all the customers are created equal and what are your best channels to acquire cheaper better clients right so these things can be affected and must be affected, but they can't be affected without you being aware of them.

00:05:30 Valentin Radu: So improving the product without improving the go-to-market engineering, without understanding what is the perceived value and how to position your product and how to nail the messaging around your product, it's a trap.

00:05:43 Valentin Radu: So stop over-engineering the product because that's 10% of the success. It's 90%, it's around distributing the product, making customers happy, making them brag about the new product that they've bought, coming back to buy again and so on.

00:06:00 Kevin Mako: This is great. So you create a new product and it has some additional value. What you're saying is now the first part of your job is done. You've developed something special, something that's helpful. But most entrepreneurs overlook the second part is how do you actually describe that properly? How do you enhance that perceived value so that especially new customers, because as a hardware startup, you don't have any existing customers. You only have new customers.

00:06:23 Kevin Mako: And therefore, you need to figure out how to properly message to those new customers to increase that perceived value to the point where they make a purchase at a high enough price that you more than capture your customer acquisition cost and cost of the product. And that difference is obviously profit. That's what we're talking about here today. So I want to hear some of your best practices for how we enhance and grow that profit so that you can have a very healthy margin

00:06:46 Kevin Mako: Product right from the get-go, which absolutely should be the case if you've created some amazing he's a new product, some new technology that people like. What part do you actually start with in figuring out how to craft this messaging? Yeah. So I've applied this method. It's called jobs to be done, right?

00:07:02 Valentin Radu: So when you're buying a product, you're not buying that particular product. You are buying the progress that you're making thanks to that product. And you're buying it because of each of a struggling moment. You're buying it because you have a pain and you want to get rid of them. So basically products are taking customers from a to b, from a struggling moment to a desired outcome.

00:07:25 Valentin Radu: So the better version of me, it's me plus this freaking oura ring, right? So that's, at least that's in my head, right? So the perceived value is that the better valentine is going to be thanks to this product.

00:07:39 Valentin Radu: So once you understand how your customers are describing the value that they are getting thanks to your product, and once you understand what's the itch, then you know how to nail the messaging because nobody is buying a product for the sake of having that product.

00:07:56 Valentin Radu: We are buying it because of our egos, because of our suffering, because we feel like we are not enough without this new whatever cosmetic whatsoever. That means you have to do this type of customer research.

00:08:08 Valentin Radu: And once you understand the jobs to be done, then you can understand how to nail the messaging by using your best customer's words, not your own words.

00:08:19 Valentin Radu: That's the thing, because we are like fish in the water. We don't know where we are because we've got so acquainted with our products, with our features, with whatever, that we can't describe what the heck we are selling.

00:08:31 Valentin Radu: And that's why we need our best customers to describe it so that we attract new customers with that.

00:08:37 Kevin Mako: That's powerful. And it seems intuitive, but I can tell you in dealing with thousands of hardware entrepreneurs, after months and months and months of you spending so much time on the details, the specifications, the product engineering, the manufacturing, and all the great things that you've accomplished there, which is always a massive feat to go from that idea in your head to something that's actually in production is a big deal.

00:09:01 Valentin Radu: And it's a big feat.

00:09:02 Kevin Mako: And it's amazing, you know, that a hardware startup has got to that point. But the thing that that does from a marketing perspective is that pushes the founder into this like feature based view of their product.

00:09:13 Kevin Mako: So when they go to self market, if they're just essentially, as you're saying, kind of shooting from the hip and not listening to your customers and said advertising in the way they think it makes most sense.

00:09:23 Kevin Mako: They typically, not always, but typically are focused on these features.

00:09:27 Kevin Mako: So one of the best things you can do that Valentin is talking about here is get some of those either early customers or early interested parties or early test users or whatever it might be. Listen to what they are saying about the rationale of what excites them about your product, not just about the product itself, but how is their life changing based on your product?

00:09:45 Kevin Mako: And if you can focus your messaging more on how their life changes and the focus of their actual goal, like you said, how is their life improving from a to b? That should be your messaging, not anything to do with the actual features or specs of

00:09:57 Valentin Radu: Your product.

00:09:58 Kevin Mako: Or if that's part of it, well, figure that out through your customers. Figure out what parts of your product are most important to them. Tie it together with that actual messaging.

00:10:06 Valentin Radu: That's right. And this is such an overlooked aspect, Kevin, because we end up overlooking the fact that people buy based on emotions, and that we need to understand what is the pain.

00:10:19 Valentin Radu: Because if you're not selling a painkiller, then you're selling a vitamin. And a vitamin is a nice-to-have product, but you have to sell something which is mission critical for their lives.

00:10:29 Valentin Radu: And that's why the words can change the destiny of any given product. So without changing any feature on your product, you can change the profit, you can change the distribution by positioning your product differently.

00:10:43 Kevin Mako: That's interesting you mentioned. Should focus more on the pain than on the opportunity? Because we talk about it a lot on the show. Most products, you can look at them two ways. I'm either creating this opportunity for somebody or I'm solving this pain point. You're saying, focus more in the pain because people are much more acutely willing to pay money to solve the pain, then take vitamins for potential opportunity in the future. Look how we are buying. I mean, all of our

00:11:05 Valentin Radu: Decision buying decisions, according to harvard business review, 96% of the buying decisions are purely irrational. So that means they are based on emotions, which are not on the conscious mind. So, that's why throwing some features, what is the voltage of your product, whatever, is not going to make the cut. But if you're selling, I don't know, let's say you're selling this battery for your iphone, right? So, aren't you tired of not being reachable

00:11:31 Valentin Radu: After 6 p.m? And that's how you sell a battery, an extra battery, because that's the pain. You know, when I'm having this iphone, which is one of the most expensive new iphones in the market, but it's letting me down.

00:11:46 Valentin Radu: So that's why I need the battery or I need to switch to an android, but I don't love android because it's not working. So at the end of the day, it's the struggle that makes me, okay, let's buy this new phone

00:11:57 Kevin Mako: Or a battery. Yeah, that's a great, great observation. And so I think it's very important when you're looking at that sales messaging, one of the things that I look at in terms of features, especially to hardware entrepreneurs, they say, yeah, but it has these things which help support the logic around the messaging and the pain point.

00:12:13 Kevin Mako: And I think that's okay, but that's support evidence.

00:12:16 Valentin Radu: That's secondary.

00:12:17 Kevin Mako: What we're talking about here is hooking the person in and getting them to like a bi-state

00:12:21 Valentin Radu: Mindset.

00:12:22 Kevin Mako: So once they're in the mindset of bi-set or very close to, well, you've attracted them. Now they're willing to dig deeper and look at it more. Well, at that point, if you now have the, let's call it the real estate to be able to discuss it longer or longer on the page or more video or whatever it's taking to help you convert.

00:12:38 Kevin Mako: Sure. Now you're going to support your claims. So I'm going to change these things for your life. And if they're looking for proof, well, that's more the proof. So hook them with the logic around the kind of the marketing, the excitement, how it's going to changed their life, get them emotionally to want to be a buyer. And then if they aren't yet a buyer, now you can start using some of your features to validate your clients. Yeah, that's right. And that has a lot to do with

00:13:04 Kevin Mako: Understanding the perceived value of your customers.

00:13:07 Valentin Radu: Because if you keep on throwing the same message that you've decided it's the right one, then you are shooting in the dark.

00:13:14 Valentin Radu: So that means you do the customer research, you understand how they describe your products, you understand the jobs to be done because the same product can have two or three or even four different jobs to be done. So basically, let's look at the sofa, for instance. A sofa has four jobs to do. It's filling up the empty space in the living room. It makes you brag to your friends about how cool your living room is. It brings the family together and it makes you

00:13:41 Valentin Radu: Lazy while you are on Netflix. So that's four jobs for the same sofa. But if you are about the ego game and bragging in front of your friends, then the messaging for this sofa should be completely different than how comfortable it is. It can be something like, pay attention, this new sofa will create envy. So that's what I'm after. So, that's the message

00:14:05 Valentin Radu: That you are leading with when you are doing ads, positioning, landing pages whatsoever.

00:14:10 Kevin Mako: Powerful stuff. Talk a bit about your book and the core structure of the book and then where people can actually buy a copy and then I'll let you go.

00:14:18 Valentin Radu: Oh yeah, of course. So imagine that I've got these companies and customers coming to use our software, right? So we are selling software to do customer experience, to do a customer lifetime value, to improve their conversion rates.

00:14:31 Valentin Radu: But we thought, okay, people are not adopting it. So we realized, you know what? They don't know how to use these things. So I've crafted a methodology called the customer value optimization, right? So it's a 10 steps process.

00:14:43 Valentin Radu: It always works and it has to do with starting with the KPIs, doing the right customer research, then crafting the right message and then improving the three pillars of customer lifetime value. What you sell, the products, what you say, the marketing and what you do, the customer experience. So basically I've put this process over here and it's like a step-by-step guide to improve any direct-to-consumer or

00:15:10 Valentin Radu: E-commerce company. So, basically after these two years of hard work, I've put it out there on Amazon. You can find it. I don't know, I think it costs like one or two coffees depending on where you're buying that coffee. And it's all this knowledge with practical examples from actual companies, how they did it and how they've made progress. It's basically for

00:15:31 Valentin Radu: Companies and the job to be done of this book, by the way, is for companies that want to fix their business model and to create sustainable growth down the line. That's the job up to be done by this book.

00:15:45 Kevin Mako: Powerful. Valentin, thanks again. And I'll put the link below to the book where folks can buy it and for anyone who wants to just click through. But thanks again for your words of wisdom on understanding how we can increase the perceived value and thus the price of our products to really make sure that we are getting the most value and a fair price for the amazing innovations that hardware startups have created.

00:16:07 Valentin Radu: It. Thank you, Kevin. Thanks everyone for listening. Thanks, valente, man. Take care.

00:16:13 Kevin Mako: We'll talk soon. Thanks for tuning in to this episode of the Product Startup Podcast. If you found some value in the show, please do us a huge favor and hit the like button and subscribe. If you have any questions, guest suggestions, or anything else, feel free to reach out to us anytime at our email podcast@MakoDesign.com. This show is hosted by Kevin Mako, North America's

00:16:35 Kevin Mako: Leading expert on product development for hardware startups. And the podcast is produced by Mako Design, the original firm providing end-to-end consumer product development services tailored specifically to hardware startups, small manufacturers, and inventors. Take your product from idea to store shelves at MakoDesign.com. That's M-A-K-O Design dot com. Thanks for joining and see you again soon.