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Guest: Bill McAlister, president of Top Dog Direct and a direct-response product marketer.
Host: Kevin Mako, founder of Product Startup and the leading expert in hardware startup consulting. A hardware entrepreneur since 1999, Kevin has advised more than 1,500 founders and built and scaled MAKO Invent through its acquisition by TriMech in 2024.
What Direct-Response Marketers Want in an Invention
Bill McAlister explains what direct-response television marketers look for in consumer products and how inventors can approach licensing without carrying the full cost of a launch. The episode considers demonstrability, broad appeal, economics, and the attributes that help a product sell quickly on screen.
Episode transcript
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Filip Valica: Hey, everyone. Welcome to the Product Startup Podcast, a podcast that helps bring your product idea to life by chatting with successful inventors, product designers, and other industry professionals. This podcast is run by Mako
Filip Valica: Design + Invent and hosted by Filip Valica. Our goal here is to get to the bottom of what makes a product successful, from initial idea to putting your product on the shelf. We're taking you step by step to build a functional product and scale your product business. Now onto the show.
Filip Valica: The product startup, episode 48. Bill McAlister with Top Dog Direct, about As Seen on TV products and product licensing.
Filip Valica: Hi, everyone, and welcome to the product startup podcast, where we talk about turning ideas into successful products step by step. I'm Filip Valica, and thanks for listening today.
Filip Valica: In the last episode, we talked to Chris Ray and Chariss Tatman with C-squared consulting about some of the financial, legal, and HR traps of buying and selling small businesses. So make sure you check out episode 47 if you want to hear more about getting your company
Filip Valica: ready for outside investment and how to find investors. So many of you have written in and told me that you are stuck at the very beginning of the product development process. Does this sound like you? You procrastinate working on your product or business.
Filip Valica: You're waiting for the best idea to come along. You've spent months or even years reading and listening, but you haven't taken action. You have too many ideas so you don't work on any. Your budget is too small to go to manufacture so you don't start.
Filip Valica: Or maybe you have a busy schedule with a day job and family and you can't. find the time. Perhaps you think that you're not really good at anything. If any of these describe
Filip Valica: you, then you really want to take part in my upcoming free 14-day Just Start challenge. Find it at the product startup.com slash just start or click on the button on the homepage. For the span of the
Filip Valica: challenge, you'll get an email from me every few days with concrete actions to take to help you take the next step. Again, it's completely free to participate. I'll also be running this challenge
Filip Valica: live, meaning everyone will be getting the same email at the same time. This way you can pop into the Facebook group and share how the process is going for you and then see how other people are
Filip Valica: taking action. But here's the catch. I will close sign-ups for this on Wednesday, April 19th. I also don't know when I will be to launching this live again because I want to make sure that I
Filip Valica: work on roadblocks for some of the more experienced listeners as well. So if you or someone you know is ready to stop listening about launching products and start creating them,
Filip Valica: and you want simple advice to help you get unstuck and take that action, then you need to sign up. Go to the product startup.com slash just start and enter your name and email address to get started.
Filip Valica: So now on to today's episode.
Filip Valica: Hi, Bill. Thanks for joining me on the show today. Thanks for having me. My pleasure.
Bill McAlister: Really excited to have you on the show because you've got some deep experience with QVC and HSN, and I wanted to make sure that we talk about that. Can you bring up some of your history, with both companies?
Bill McAlister: Well, I was one of the first importers of product to QVC when they first started. As a matter of fact, when I was importing the products, they were buying 10 and 15 pieces of everything at a time.
Bill McAlister: We consolidated it and come back, and then I went on the air with it. And I did that for the first five years of QVC. And then me and my partner, Brad Spector, started this company.
Bill McAlister: and we moved all of our business to home shopping and we became one of the top 10 vendors for, well, the better part of 15, 17 years.
Bill McAlister: So I've deep experience with both companies and have sold 15 or 16,000 different items
Filip Valica: to the two different companies and done almost a billion dollars in revenue at retail with the two. So I'm very familiar with them. I was offered a high-level job at home shopping,
Bill McAlister: which I turned down because I'm making more money by selling them than I would have been by working for them. Yeah, that's interesting. You say that.
Bill McAlister: When you mean by selling them, you mean by being a source of products that you offer as a distributor or as a supplier, or you have your own products that, like your own product line that you're… We have a lot of products under the Sobacala name.
Bill McAlister: and the Sokow pillow is a buckwheat hull pillow, which we sold close to almost a million units just on home shopping network alone. We sold magnetic insoles there. I mean, I went on the air with all the products.
Bill McAlister: So that's kind of how I got to learn this business by not only making the products overseas,
Filip Valica: but I had to actually come up with a pitch and figure out how to sell it on the air. So that was really an easy transition into the direct response business. commercial business.
Bill McAlister: Those commercials you see on TV. But wait, there's more. If you buy now, you get the second one absolutely free. So that's the business that we're in now. So it was very easy transition for me. Yeah, so talk about that a little bit. You mentioned
Bill McAlister: the importance of having a pitch, especially for as seen on TV audience. Can you describe the essential elements of a good pitch? Well, the pitch really has, it's really not the pitch as much as it is the product.
Bill McAlister: Pretty much anybody can sell a good product.
Bill McAlister: You know, the pitch helps a little bit, but really the pitch you're just selling the features and benefits of the product.
Filip Valica: If the pitch is good, the product stinks, the products still not going to sell. So the product, the product is king.
Filip Valica: And then really, quite frankly,
Bill McAlister: the pitch is just as easy as saying, this is what it does.
Filip Valica: These are the two or three things. It needs to be demonstrable in our business. It needs to hit a certain price point, and it has to solve a problem.
Filip Valica: So if you hit those three criteria, you're going to have a very good product. When you say demonstrable, it's something that someone needs to demonstrate on TV or you have to
Bill McAlister: be able to see the effect, the before and after effect that you're trying to sell, right? 100% accurate. That's exactly right. I remember listening to one of the other guests that we had on the show here that was selling
Bill McAlister: a glass cleaner, and that was really difficult for her to show on TV because it was difficult to show, you know, clean versus dirty unless you go way overboard like they do on the those vacuum cleaner commercials where you're just dumping a ton of stuff on the carpet.
Bill McAlister: Yeah, we actually sold a glass cleaner. It's a lot easier than you think because all you need
Filip Valica: to do is take glass and dirty it up, which is an easy thing to do and then clean it off.
Filip Valica: And most cleaners actually don't clean glass. Glass is one of the hardest things to clean.
Bill McAlister: And Windex just, you know, they own that market. So it's, though it is an easy thing to demonstrate, it's a hard thing to sell because, you know, quite frankly, there's a lot of the best glass glass cleaner out there is Windex.
Bill McAlister: Yeah, so you're competing against the brand name. Yeah. Speaking of products, that might be a little bit more difficult than to show on TV, what have been some of the products that you've seen or heard of that you thought maybe this isn't something that's fit for TV? All right.
Bill McAlister: I can give you 10,000 different products. We see a lot of products here every single week.
Bill McAlister: And 99.9% of them don't fit that criteria. Most products don't.
Bill McAlister: Just think of anything. Furniture doesn't. You know,
Bill McAlister: anything that really doesn't move and doesn't do anything, even though it might be a great product,
Bill McAlister: a refrigerator doesn't put the criteria. I mean, the things that you use every single day don't fit the criteria. The cell phone doesn't put that criteria.
Filip Valica: So what really, and it's interesting, and you look at the sales of QVC and home shopping, and they're down. They're down for really for one reason. And they got away from the basic formula where you need to sell things that you can demonstrate on TV.
Filip Valica: And neither one of them are doing it. Both of them are having horrible last two years.
Bill McAlister: So if I were going to recommend anything to either one of them and say, go back to the way you started, which was new, innovative, demonstrable products that solve a problem and hit a price point.
Bill McAlister: Yeah, that's really fascinating because I would think that a lot of the products that you described are something that would be relatively easy to solve. on TV because people have some sort of an association with them. They have a history with the refrigerator, right? They understand the benefits of that.
Bill McAlister: So just getting on TV, to me, would just sell to a different type of audience. But what you're saying is that there's some inherent benefit to, you have to be able to show the product in use.
Filip Valica: And they already have a refrigerator. Ah, right. So, and they can buy a refrigerator at Best Buy. They can buy a refrigerator in a million other places. So it has to, in the case of home shopping, you can see it all. It also has to be somewhat, you know,
Filip Valica: something that you can't get anywhere else but there.
Filip Valica: So then there's a sense of urgency for that consumer, which is what they were both built on, you know? And having people come on and demonstrate products, you can't buy them anywhere else.
Bill McAlister: You can only buy them there and only buy them until they're sold out. Yeah, so you touched on one thing. You mentioned that the exclusive nature of selling on TV is something that is really important.
Bill McAlister: So would you advise people that are first starting out? They've got a product that they've maybe even researched. They're at the manufacturing stage and they might be looking to launch it.
Bill McAlister: I think the typical path is usually to build your own e-commerce type website or get on someone else's like Etsy or Amazon or wherever and then branch out into stores.
Filip Valica: But what you're saying is that some products might be better suited for TV.
Bill McAlister: Yeah, I mean, the products that are better suited for TV are exactly what I said. They hit a price point. They're demonstrable. And they solve a problem.
Bill McAlister: And, you know, that's what, you know, if you look at these too many commercials, which is the business I'm in now,
Filip Valica: the products that are on TV are not at retail yet.
Filip Valica: Though we, you know,
Filip Valica: within six months, we're at retail. But the reason why it's selling on TVs is because you can't buy, like we have a brand new product called. Futsuki,
Filip Valica: and you can't buy it anywhere other than on television or, you know, on our website. Is that critical to getting a deal with H.S. and a QVC that it's exclusive?
Bill McAlister: No, no, I mean, that's their problem, frankly. They're not doing that. They used to do that. They used to have products that you, you know, can only buy at home shopping in QVC.
Bill McAlister: Now, they're selling Sony television. You can go on Sony.com and get the same thing for the same price, or Amazon even better, and you don't pay shipping and handling. Right.
Bill McAlister: As people are going through the product development stage and they've got their idea, they've developed the design for it, what do you recommend as a way to test that this
Bill McAlister: is something that's going to help them be successful by launching their product? Like, is there a way of finding out early on if your product is going to be a good product?
Filip Valica: Well, we, you know, and my team is me, Jackie, and Steve. here. And what we recommend to everyone is use the internet. It's a great tool.
Filip Valica: Just think about 10 years ago, you really didn't have the internet to speak of. Now, everything you can imagine it's on there. So do your research before you spend a penny on developing a product. Go on the
Filip Valica: internet and see if it's already out there. You know, searches this government websites,
Bill McAlister: just trademark and patent websites that will tell you for products out there. And all you have to just put in something, describe what the product is, and plug it in. And it'll take it. And it'll tell you whether or not the product's already out there.
Bill McAlister: I can't tell you how many people have come to us with a product that's already on either on television or at retail and they've spent a fortune getting a prototype made. It's already out there. Yeah, I absolutely agree with that.
Bill McAlister: I have potential clients that I turned down for that same reason because they went out and patented something that has just so much competition out there and they just patented some, you know, a little isotanic feature on there that, in my opinion, maybe just didn't have that much market.
Filip Valica: Now it's possible for them to chase it all the way down, but as you said, you're just spending so much money on the front end for this low likelihood of differentiating with what else is out there. Yeah, I mean, I'll have a really interesting example.
Filip Valica: About 10 or 15 years ago, somebody came to us and we put a product on home shopping.
Bill McAlister: It was a very cool hair product.
Bill McAlister: Halfway through the third airing, it was selling like crazy. I mean, like crazy. We sold 5,000 pieces to show. The product, the middle of the airing got pulled.
Bill McAlister: off because Conair saw it and they had already had patented the product 20 years ago and then repatented and repatented it again.
Bill McAlister: And this guy had spent $300,000 to $400,000 in tooling and didn't even search it. So the poor guy went out of business. That's terrible. A lot of the people that I talk to think that patenting is probably the first or second
Bill McAlister: step in the process of creating their product. In my opinion, it's validating the audience first, you know, having conversations with people, seeing if people actually buy something like that. How important it is for someone to have
Bill McAlister: a patent before they go out into the market? Unfortunately, it's not important at all. Right.
Bill McAlister: Because, unfortunately, the United States doesn't enforce patents like they do in other places. In China, believe it or not, which is probably the best place in the world to have a patent,
Bill McAlister: they won't allow the product to leave the port if it's patented, if somebody knocked it off, for example.
Filip Valica: Here, they could care less. The United States could care less about patents. We have the worst legal system when it comes to patents.
Filip Valica: A gentleman, we just saw a gentleman who just got knocked off, and it became the biggest product in the history of direct response. I'm not going to tell you what it is, but I can tell you this poor guy lost $400 million.
Filip Valica: Wow.
Bill McAlister: And he had six patents, and the patent office didn't enforce it. So unfortunately, patents aren't worth the paper they're written on until somebody, And hopefully it's Donald Trump until somebody changes the laws in the United States.
Bill McAlister: The patent office doesn't do a thing. They don't enforce it. When you bring it into the ports, they don't enforce it. I mean, there's knockoff, Gucci. Amazon's carrying thousands and thousands of knockoffs.
Bill McAlister: There's probably 10 or 15 lawsuits now because Amazon doesn't care either. I think the USPTO and other places like retailers that saw products put the onerous on the patent holder to protect their patent, right?
Bill McAlister: So I guess some of the places that I've worked at, they've had legal teams where all they did was scout competitor products for infringement and send them cease and desist letters. Yeah, but unfortunately, that's great.
Bill McAlister: But unless you have this person I'm telling you who lost $400 million, he spent $18 million
Filip Valica: in legal fees and wound up settling for $4 million. Wow. So the person who knocked him off got $400 million in net price. profits.
Filip Valica: Gross was $800 million.
Filip Valica: So unfortunately, it's a sudden that you can tell my voice, in the tone of my voice,
Filip Valica: I can't tell you how disappointed I am in the U.S. government and the legal system. It's absolutely horrendous. Over in Europe, especially Italy, Germany,
Filip Valica: Great Britain,
Filip Valica: if you have somebody knocks you off,
Filip Valica: they have to put up a bond. They have to post a bond. And if they lose, they lose three times whatever monies that they had taken.
Filip Valica: So here,
Filip Valica: nothing happens. It takes two to three years to get to market. Most of the time, these adventures don't have the money. And they get steamrolled by either large corporations or people
Filip Valica: that have deeper pockets. Yeah, no, I absolutely agree with that. The USPTO is full of patents also
Bill McAlister: that are just not applied to anything, right? Most of the products that we see on the shelves aren't even patented products, they don't have any patents associated with them.
Filip Valica: In the beginning, when I first started, in school, we were taught to do patent research before you execute the design. And in practice, I was basically told by a number of companies to not even bother with that, that they deal with patents on the back end.
Bill McAlister: If they want to patent something on the front end, obviously they'll pursue that. But regarding infringement, because there's so much noise out,
Filip Valica: there because there's just so many patents out there and a lot of these conglomerates are holding patent portfolios that they're using it as weapons really where they're
Bill McAlister: preventing innovation from other type of companies so they basically just asked us to just go ahead and start designing and they'll deal with the legal side if they get approached from the legal team on someone that holds the patent you know not that we did anything
Bill McAlister: intentionally of course but the the discovery process to see if you're actually infringing
Filip Valica: on something was just so burdensome that the
Bill McAlister: we didn't bother with it. Yeah, burdensome in a lot of ways, but financially burdensome, because patent attorney is the most expensive attorney out there. Yep.
Filip Valica: So it costs anywhere from $10,000 to get a patent, and quite frankly, it's toilet paper. Yeah, absolutely. I mean, I think, you know, I think there's some rare technologies that if you come out with something that's really brand new, if you had, you know, coal fusion or the secret
Filip Valica: to clean energy or things like that, that I would definitely pursue some patent protection.
Bill McAlister: But for most of the… I would agree with that. But if you're talking about a gadget or a gizmo, don't waste the money. Just launch the market. So people ask me all the time, how do you compete against all the other players that do
Filip Valica: have those portfolios and you don't want to get knocked off and you don't want to spend all this time and money in the beginning? We run like a bat out of hell. So as soon as we know it works, a lot of times I pulled off the air, I go overseas.
Filip Valica: I make 250 to 350,000 units, get it on the water. or then come back and put it back on the air
Bill McAlister: and sell it to all the retailers before anyone even knows what's what's happening. That's the way to beat them. Yep, be first to market. Be first to market and be fast to market and be at the lowest price at market.
Bill McAlister: Because this other person I'm telling you about who lost 400 million,
Bill McAlister: he was first to market. He just didn't have the right price. Yeah, I've heard of that a few times where you get a little bit greedy at the trough, so to speak, and because there's nobody else out there, so you're marketing it on value instead of maybe some of the other factors,
Filip Valica: and it leaves just ample opportunity
Bill McAlister: for a competitor to come in
Filip Valica: and undercut you by a considerable amount, I guess. Yeah, yeah, in this case, it was $10. One was selling at $29, and the other guy came in at 19, blew him out of the water,
Bill McAlister: got the retail shelf space, and that was the end of that game. That's one of the things that surprised me the most about going into retail products is how price sensitive a lot of products are. Like, even on a couple of the products that I have on Amazon,
Bill McAlister: a $3 price difference on a $20 product. So going from a $1699 to 1999 has a huge effect on my sales volume. It's 30%. Yeah.
Bill McAlister: Yeah. It's, you know, it's completely, you know, it's completely, it depends on an item. It's all obviously item driven.
Filip Valica: But certain items like cosmetics, for example,
Bill McAlister: We have the very first spray-on nail polish.
Bill McAlister: And, you know, we sold it at 1995, which sold great on the Internet. But at retail, we come to find out the right price is $5.99. Who knew, you know? Yeah.
Bill McAlister: You know, and now we're down to five. You've got to figure out a way to make it to make money a $5.99 or you've got to get out of category. Yeah, bundling multiple colors together or something like that. Yeah, correct. That's what we're doing. No, that's interesting.
Bill McAlister: So as people go through this process, is there anything that they can do to help themselves
Filip Valica: to ensure that their products is going to be successful before they reach out to somebody? Like I said, as you know, use the Internet. It's the best tool we have.
Filip Valica: And that'll tell you what's out there with the price points, the other people are at.
Filip Valica: And I think that's for me, I mean, it's been, it's an invaluable tool for us.
Filip Valica: And we were constantly searching.
Filip Valica: We, you know, we search Kickstarter and other people that are people that are out there.
Bill McAlister: we're always looking for the next item. And by the way, if anyone's out there who needs any help, they can just go to our website and, you know, topdog direct.com. And if they've got questions, just write the question right there
Bill McAlister: and we get back to it in 24 hours. And what stage of the process do you get involved in? All stages. I mean, it's very rare. We have this product called Be Active.
Bill McAlister: Or this person brought us the product, was already patented, already trademarked, already bought. box,
Filip Valica: already had studies done on it,
Bill McAlister: and he already had inventory and testimonials. It's the only time in the history, some 30 years of us being in business, that we've had somebody bring some product already done.
Bill McAlister: So most of the time people have ideas.
Bill McAlister: Some of them have just applied for patents, and some of them have prototypes. But we involved in all stages of the game. One of the frequent questions I get is, how do I know who to trust? Because there's so many companies that do product development.
Bill McAlister: You know, I'm in the space as well as you are. There's some big names out there that, you know, there's famous companies that maybe we don't mention my name that you suit them an email with your idea and for a flat rate,
Bill McAlister: they'll evaluate it and come back to you with what they, you know, what they think about it.
Filip Valica: And if they choose you, they'll help you take it to market.
Filip Valica: Here's my take on anybody. If anybody's telling you, they want you to pay them money, run.
Filip Valica: Sprint, don't run, sprint away from them. The companies that are worth talking to,
Filip Valica: like ours, you know, we don't ask for money up front.
Bill McAlister: And we'll sign in certain cases, you know, as long as I know what the product is, we'll sign non-disclosure non-competees. And those are the companies you want to deal with. Anyone who ask you for any money up front, it's not a legitimate company.
Bill McAlister: And when you say you work with them, would you take a cut of the retail or the profits? Or is that just to let you know? We take over the whole project and pay the inventor of royalty. Okay.
Bill McAlister: 99.9% as you know of these people that come to you and they don't have the financial wear with all. I mean, just to take a product to market, a regular product through with TV and retail, you need about $7 million a month.
Bill McAlister: So figure it's going to be a six-month process. So you need a little over three and a half to $4 million. So there's not a lot of people that have that because the opening orders are, you know,
Bill McAlister: anywhere from 450 to 500,000 units, not including television, which could be a million dollars in some weeks.
Filip Valica: So it's an expensive process if the product is successful products. Yeah, I'm definitely going to defer to your experience on that from the TV side. I tend to work with lower volume products where you're coming out with 1,000 units or something like that,
Filip Valica: or 5,000 units maybe. My experience is more on the low-end stuff where it's probably easier and cheaper to do a small volume shop, but like you said, you don't have as much upside because you're not dealing as much volume.
Filip Valica: And the problem with that is, in our industry, we have some not very good people.
Bill McAlister: And if you're just out there and you're on Amazon, for example, they have people in their offices, in some cases, two or three, that all they do is less. look through Amazon, looking for the next hot product. So let's say you bring in 5,000 pieces and you're on Amazon.
Bill McAlister: Well, they're going to find it. They're going to knock it off whether you have a patent or don't have a patent. And then they're going to do a commercial and go to the market.
Bill McAlister: So that's why, in our world,
Bill McAlister: you've got to go fast and you go hard. I don't know if you remember a bunch of balloons, but this guy was a Kickstarter guy. And, you know, he didn't go first to market. Now, he did win,
Bill McAlister: you know, a TRO just recently, which was great.
Bill McAlister: But, you know, you just have to watch because there's a lot of bad people out there. Right.
Filip Valica: And looking for, just looking for somebody who's got a great idea because most of these guys that are out there don't. So they have to rely on other people that are much smarter than they are. And to your point, I've seen lots of patent infringement stuff on Amazon.
Bill McAlister: And Amazon is starting to realize that it is a big issue. So hopefully this year they're going to take. more action on it. But like you said, even with a patent, at the end of the day, if you've got a huge budget behind it, it's hard to compete in some of these bigger markets.
Bill McAlister: Yeah. It seems like a lot of the products that you have experience in are marketed to a broad range of people. Can you maybe talk a little bit about selecting the audience for
Bill McAlister: your product? Like how big of an audience is best suited for TV? Like how focused or narrow does it need to be or how broad should it be? Well, it's a great question, actually. We market to the female customer,
Bill McAlister: well,
Bill McAlister: let's put it this one. We have a new business coming out called Ashton on the Internet. But for TV, we market to the over 40 market female. The Internet market, totally different. It's the millennials,
Bill McAlister: a lot of them don't even have TVs. Most of them don't have cable,
Bill McAlister: and most of them are watching Netflix and on-demand.
Bill McAlister: So it's opened up a new world for us for the Internet. But as far as TV is concerned, it's definitely over 40 and female. And it has to be a mass market item for us to get into it.
Bill McAlister: In other words, it's got to solve that problem for that consumer. And we've got to be able to hit the masses for it to work in our business model. And by masses, I mean millions and millions and millions.
Bill McAlister: So how can you assure that maybe that speaks to that many people? Like, do you feel like you have to sell something that's super, broad that eight out of the ten people that you know are going to respond to it positively? We do.
Filip Valica: So I'll give you a perfect example of that. Tagaway is one of our products, which it sounds disgusting and it kind of is, but skin tags is a big problem. So we use the internet, once again, a great tool and find out how many people in the United
Filip Valica: States have skin tags. Well, two out of three people over the age of 40 have skin tags.
Filip Valica: So that, we went ahead and, I mean, I can't tell you how many millions and millions of
Bill McAlister: millions and millions of bottles of tag away that we continue to sell. So that's, we do our research and we look for a market that is a big, broad market, and that's a big broad market. The new product, Faduke,
Filip Valica: which is people that have problems with their feet, well, with an
Bill McAlister: overweight society that we live in, unfortunately,
Bill McAlister: there's a lot of diabetes and a lot of people with diabetes have problems with their feet.
Bill McAlister: and so we went ahead and marketed that product has been very successful. But it's 66% of the people over the age of 40 have huge problems with their feet. Wow. That's the kind of market.
Filip Valica: We have a new product now that's coming out next week, actually, Monday,
Bill McAlister: called the Spring Thing. And that's a product for people that have neck and back, upper back, neck and headaches.
Filip Valica: And that's two out of three people over the age of 40. So, you know, that's the market that we'd go for for TV. Now, the Internet, which we're relaunching us on the Internet this year,
Filip Valica: will be for people from the ages of, you know, 15 to the age of 30, 32.
Filip Valica: So that'll be a completely different, you know,
Filip Valica: set of rules and so on and so forth.
Bill McAlister: And so that'll be more the millennials who we're going after.
Filip Valica: Yeah, that's really interesting to see how the landscape. changes as different generations get older, right? And for a long time, the baby boomers were the ones that were driving a lot of the marketing and products that you saw being
Bill McAlister: sold on TV. And now that the millennials have that purchasing power, I mean, it's fascinating how quickly, like, people switch around their marketing and their product selection to appeal
Filip Valica: to that audience. Well, I mean, I can tell you from my daughter, Jackie, who's sitting right here you know they're 25 years old they don't even have tv they don't even have cable so they've got
Filip Valica: their you know Wi-Fi and they've got their laptop and that and they watch netflix and on-demand and that's it right yeah streaming services works at so you go up to them in a different way but
Filip Valica: they oh as jackie's sitting here using her phone as we're talking that's all these millennials do even when they're watching their shows Netflix they're constantly on their phones so
Filip Valica: So, yeah, it's a completely different way to market products and we're, and it's evolving. It's, you know, and those people don't shop in stores, by the way, for the most part. Right.
Bill McAlister: Yeah, Amazon's going to just have massive growth in the next 10 years. My son ordered something from Amazon the other morning, and he got it that same day. There's a new big, huge warehouse in Cranberry, New Jersey that just opened up.
Bill McAlister: It was a pair of sneakers, and it came at 7 o'clock that night. Yeah, that's crazy. It's insane.
Bill McAlister: they're really pushing the boundaries on what expectations consumers should have you know so if you're rolling your own e-commerce solution it's really tough to compete with some of that service now on the
Bill McAlister: flip side as being an amazon seller they take a monster cut yes they do and especially for products that are under $20 for example where the fees can be you know seven dollars depending on the weight
Bill McAlister: of your product and dimensions and things like that yeah it's insane so you definitely pay for those eyeballs you know but then the conversions are there, right? You get 30% of the people that hit your page on Amazon will convert
Filip Valica: versus if you're trying to pull people to your e-commerce store where you might be getting two or three percent conversion. Right. Correct. I mean, listen, even right now, because people
Filip Valica: trust Amazon, it's like 35 percent of the people that see my commercial will go to Amazon before they'll go to my website. Yeah, it's crazy. And it stinks for the product creator because it roads your margin there because if they bought from you, even if it was the same price,
Filip Valica: You'd at least have a shot at making a little bit more margin off of it. You're 100% right. You know, while we're talking about the costs here, you mentioned the cost of goods needing to be correct for TV.
Filip Valica: Now, usually my rule of thumb whenever I'm speaking to clients is around, you know, 3 to 4X.
Bill McAlister: So if you've got a product that costs $5 to manufacture and that's your landed cost in country, you're aiming for a retail price to, you know, $15 to $20 depending on, you know, if you've got any suppliers involved or distributors involved, that type of thing.
Bill McAlister: Obviously, more margin is better. But what are your thoughts on what that rough number should be as people are looking to hone in on their retail price and then find some manufacturers who can make it? Well, we need five-time markup just to break even.
Bill McAlister: You know, that's because of the cost of TV and just go back 20 years. 20 years ago, there was 12 channels.
Bill McAlister: Now there's 1,000 channels.
Bill McAlister: 20 years ago, if you want to buy two minutes of time on Fox, it was $2,500.
Filip Valica: And, you know, Fox back then probably had 11 million people that watched them every single day. Now they have 4 million people, and it's $25,000 for the same spot. So economics don't make sense.
Filip Valica: So it's getting harder and harder to make money on television or even break even. So we need a five-time markup just to break even. So a $20 item, we need a $4, land it with all the costs to boxing, everything in it. Yeah. No, absolutely.
Filip Valica: Yeah, and my margins on my – so my product actually costs about $5.50, and I'm selling it on Amazon for $20. I'm making about $3 on that.
Bill McAlister: That's net profit after all the expenses of the – That's pretty good, actually. You know, going through all the costs and everything like that, it's amazing at how many people can get involved, especially if you start selling wholesale.
Bill McAlister: In my experience, wholesalers typically want maybe 25% or so or distributors might want 10%. And the retailer might even want a 50% cut. And so you have to work a lot of that stuff in there. Yeah,
Bill McAlister: absolutely do. Have you noticed any other type of hidden costs that typically people forget about
Filip Valica: that just might really inflate the final purchase price of a product? Well, shipping is a big cost depending on who you're selling.
Filip Valica: So, I mean, in how much the product weighs, packaging is a big hidden cost.
Filip Valica: You know, if you want to do a clamshell, sometimes in our case, the packaging is, in case of tagaway, our packaging is almost as expensive as the product itself.
Bill McAlister: So, yeah, packaging, you've got to worry about that because it could be, especially if getting to clamshell packaging, it's much more expensive. But shipping has become, you know, especially back when gas,
Bill McAlister: was much higher. It was, you know, freight from the Orient to here was ridiculously expensive.
Bill McAlister: So those are the kind of things that we look at. But other than that, no, I mean, you know, we have our costs down. And that's one thing you do have to know. If you don't know your costs up front, going into it, you're going to be a lot of trouble.
Bill McAlister: Yeah, absolutely. You had designed with a spreadsheet in mind. We've got an IKEA nearby the house. And they put a little board up on their wall a couple years ago that said, we design with a price tag first? And I thought that was really interesting because at the end of the day, if people won't
Bill McAlister: buy your product, it doesn't matter how great it is, right? And so you need to get a price that's pretty accurate. Yes,
Bill McAlister: 100%.
Filip Valica: While back, you talked about how you mainly deal with licensing type scenarios and you pay inventors a royalty.
Bill McAlister: My understanding is that most royalties are between 2% and 10%, depending on some of the arrangements. Can you go into some details about what people can expect? Yeah,
Bill McAlister: it's hard to hit 10% because we make 7% at the end of the day.
Bill McAlister: So we do everything based on us netting 7% just because of the nature of the market
Bill McAlister: and the people that are going to jump in. So if I'm only at 7%, no one's going to knock me off. Right.
Bill McAlister: So we work on very thin margins, but very high volumes.
Bill McAlister: and we pay between, you know, three and five percent as five being the highest.
Filip Valica: Yeah, and obviously it depends on costs involved and upprint fees and all sorts of other factors. Right. What have you seen to influence that value the most for people that, you know, feel that maybe, you know, they don't want to come in on the low end because they might want
Filip Valica: to strike it out on their own? How could they maybe convince themselves that, you know what, instead of doing this on my own, I'm going to come in and license it? what will help kind of push them over to that edge? Well, I mean, I think unless you're going to, not too many people have, as you know,
Filip Valica: have the money to market a product. So, and they think they do until they really get into it.
Bill McAlister: Understanding, first off, most of the big retailers won't take a one item vendor because they don't want to put them out of business.
Bill McAlister: Right. So if you come in with a single item into a Walmart, you're not going to get in.
Bill McAlister: they're just not going to put you in just because they you know if it doesn't sell first off you're not going to be able to give that marked out money and or take it back because it'll put you out of business so it's very hard in these days to be a single item
Bill McAlister: vendor at any retailer so that's number one number two to finance it is it's a big it's a big to do and in our case we don't get paid for six months from the time we place in
Bill McAlister: order in the Orient on Fuziki to the time we get paid from Walmart, it's six months. So you've got to be able to carry that money for six months. Not too many people can do that. Yeah, especially a lot of these larger companies have terms like Net 180 where you're,
Bill McAlister: like you said, you're waiting like six months from even the point when they receive product in order to get paid.
Bill McAlister: Yeah, exactly right. Well, I mean, think about it. Place an order, it's in the Orient. So it takes some 30 to 45 days to make it. Then it's another 30 or 45 days on the water. then it's in my warehouse and then I ship it to them
Bill McAlister: then 30 to 45 days later I get paid. So
Filip Valica: you know, it's almost a full six months. So something a lot of people don't think about.
Filip Valica: And even if you're making it here, it's three months from the time you buy it from, you know, manufacturing
Bill McAlister: the United States is the time you're paid. That's if you are selling it. You know, if you have a, you know, if you're in a Walmart or a Target or Bedbeth and Beyond or CVS,
Bill McAlister: yeah which hopefully is your end goal is to get into retail or brick and mortar stores we can make some of the most impact but i still had one more question about royalties
Filip Valica: that typically inventors could receive that's probably one of the top questions that i get on my show is i'm interested in licensing a product and how do i get involved with that oh
Filip Valica: do i need to and we already talked about this a little bit do i need a patent my invention first and um why would a company license my invention from me if it's not
Bill McAlister: why can't they just take my idea and run with it or why won't some other idea look at another
Filip Valica: licensed product and do the same yeah i'm not sure of the question i mean i think license it's very hard listen a license deals pretty simple with us because we do a commercial and either it works
Filip Valica: or it doesn't work if it doesn't work you get it back and you get it back with and i'll even give you my you know the the 35 or 40 000 we spent on the commercial you can have it either it works
Filip Valica: or it doesn't work. And if it works, you know, a licensing deal, you're going to start getting paid literally right away. So, because television, we, we hit the credit cards the day we ship it.
Filip Valica: So,
Filip Valica: you know, we'll be, basically, we'll be paying you within 30 days of being on the air.
Filip Valica: So,
Filip Valica: licensing deals to me, you know, I've done it myself. There's some deals here that don't make sense for us, and we actually give it to a competitor and take a royalty. just because it doesn't work for us.
Filip Valica: We're very close friends with a competitor of ours, and we've given them items because they're in the snuggy business, and they invented the snuggy, and we had a couple of items that kind of matched what they did,
Filip Valica: so we gave it to them.
Filip Valica: So, you know, it depends.
Bill McAlister: And I think if I were out there and I had a product, and I was new to the business, I would definitely do a licensing deal, because it's easy. It doesn't cost you any money. You have no money. out of your pocket. Just got to make sure you pick the right company. And, you know,
Bill McAlister: we've made a lot of inventors rich. Yep, absolutely. And I guess if it doesn't work with you guys,
Filip Valica: they could always try to do it on their own
Bill McAlister: or do something a bit different,
Filip Valica: maybe make some changes to the product and come back. Right. Yeah. Excellent. So do you have any parting tips before we close up the show? We have a big, speed pitch coming up in the Washington area.
Filip Valica: So if anyone has any items in there, like to show it to us,
Filip Valica: they can go to inventors at topdog direct.com
Filip Valica: or if anyone's out there who wants to submit their items,
Filip Valica: they can submit directly to Jackie at topdog direct.com. Perfect. Well, Bill, thanks again for coming on the show. It was a pleasure having you on. I appreciate you sharing all your experience with selling direct to TV and your experience with
Bill McAlister: royalties and licensing and that's definitely been some of the top questions that we've had on the show recently and so again thanks for sharing your knowledge with us my pleasure have me back on again please i hope that you took away some good points about as seen on tv products
Filip Valica: and product licensing from bill with top doc direct here my three takeaways number one number one the broader the market the faster the launch many products that we feature on the show have unique
Filip Valica: features that are difficult to replicate some also target niche markets that aren't best served by TV audiences, but if you have a relatively simple product that appeals to a broad market, nothing beats being first. Remember what happened to the Fidget Cube on
Filip Valica: Kickstarter. Number two, don't be greedy. Don't inflate your margin to the point that it encourages copycats to enter the market with the exact same product at a lower cost. Commodity products
Filip Valica: are difficult to differentiate. Competitors will always try to undercut you, but they should do it at the cost of features, quality, or service. Number three, patents aren't everything. It's difficult to enforce patent protection when you're just starting out.
Filip Valica: Remember that most products on the market are not patented. Even the USPTO says a majority of the patents filed sit unused. File a provisional patent application if you're unsure and let the product sales pay for the full application if you decide to go down that route.
Filip Valica: And if you'd like to get these takeaways in your inbox every week, just go to the product startup.com, scroll to the footer of any page, and sign up to the weekly wrap up.
Filip Valica: And now here's the 30-second ad spot from a longtime product startup listener, David, who's launched his own product.
Filip Valica: Hi, Philip. Thanks for giving me the opportunity to share my product found at canisterclips.com. Is your bagless vacuum giving you allergies or making you sick? Do you breathe in the cloud of
Filip Valica: dirt and dust that is released every time you empty the canister? Canister clips stick easily to the side of your bagless canister and hold a bag tightly around the opening as you let the dirt out.
Filip Valica: Now, a simple plastic grocery bag can be used like a canistered diaper to catch that dust cloud. Canister clips, cleanly empty your bagless vacuum. Canisterclips.com.
Filip Valica: Thanks, David, for submitting that clip, and good luck to you. I hope that you get some great feedback from the product startup audience. If you'd like to connect with David, along with other product creators, visit the product
Filip Valica: Startup Workshop, our private online Facebook group. And if you want to pitch your product in the show or just leave me some feedback or questions, shoot me a voicemail at 681, 321, 1115. Join me next time as I speak
Filip Valica: with Juliana Garaziar with a Houston Angel Network about Angel investing. So make sure to tune in next week to hear that episode. Don't forget to sign up to the 14-day Just Start challenge at
Filip Valica: the product startup.com slash just start to help get unstuck. take action to launch your product or business. Thanks again for joining me today. I hope that you're working on developing your products and I'll see you next week.
Filip Valica: Thanks for tuning into this episode of the Product Startup Podcast, the show that teaches you what it really takes to bring your product to market and turn it into a big success. This podcast series is brought to you by Mako Design + Invent, the first firm in North America
Filip Valica: to provide global caliber end-to-end physical consumer product development to startups, inventors, and small product businesses.
Filip Valica: If you're looking for product development help on your invention, head over to macawdesign.com. That's m-a-k-o-design.com for a free consultation from one of Mako-design for design studios from coast to coast. Thanks for listening and see you next time.
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