Direct-Marketing Dilemma: Is It Better to Create or Buy Your Product?

There are plenty of good reasons to create and manufacture your own unique product if you are in the direct-marketing businesses. Most obviously, you can lower production costs. Lower manufacturing costs give you a greater product margin and that can allow you to sell your initial product (and thereby establish a profitable customer relationship) more aggressively and build a bigger business. Creating your own product gives you a second important advantage. It allows you to tailor it to the particular demands of the market you serve.

If your customers are older, for example, you can design it to be easier for an older person to handle and you can include instructions in larger, easy-to-read type. A third advantage (and this relates to the second one) is that it allows you to develop your USP (unique selling proposition) by identifying and incorporating an element into your product that is different from and perhaps better than that of the competition.
All that is true — and that’s why I recommend that all my clients consider creating their own products … once they have reached a certain size. But I don’t recommend doing so when you are starting out. That’s because it costs a lot of money to make a prototype. A lot of people who are in the start-up phase of a small business, committed to the goal of having their own product, go nearly broke paying for the prototype.
Then, when it comes time to sell the product, they don’t have enough money left to do the necessary marketing. They skimp on the marketing, fail, and spend the rest of their lives wondering what happened. Remember ETR’s first rule of business: Spend most of your early money, time, and brainpower on marketing. Do that right and you’ll have the cash flow to figure out everything else. If you are smart, your idea will be similar to something that’s already in the market — something that’s selling strong.
To get yourself into business with the greatest chance of success, buy a limited number of the thing you are adapting (i.e., knocking off, imitating, reinventing, improving, etc.) and try to sell them. Until you discover how to sell them profitably, you haven’t figured out the business. And until you’ve figured out the business, you shouldn’t be spending your time and money on creating your own unique product. This may seem obvious, but too many entrepreneurs don’t seem to get it.
They blow their life savings and waste their dream by making the foolish mistake of putting product before selling. If your initial promotion doesn’t work at all, you will have saved yourself a lot of time and hassle. If it succeeds, you’ll have the confidence and cash flow to get involved in the manufacturing process.
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