Friday, May 14, 2010

Know your Market

Over the past year EasyPlug has gone over some fundamental changes. Our original idea spawned from Apple’s magnetic technology found on their laptops. We decided to develop a product that would change the wall socket innovating in an area with great potential. We felt as our inspiration was found in the laptop market we would provide a solution for all non apple PCs. For approximately a year we fielded questions about wireless power and extended battery life, potentially limiting our growth. We worked on our business plan perfecting our pitch and winning several business awards; but there was one main problem. We weren’t talking to our customers, near the end of the year we did visit several stores asking about laptop damage only to find the problem wasn’t as large as we anticipated. How many people were tripping over their cords? Since we couldn’t build our product near the laptop end of the cord it was located near the wall socket which limited the effectiveness when someone struck the cord. After several months we decided that our real market lay in child safety. People would surely pay a premium over the small plastic pieces currently in use.

Our first focus group in child safety was a success, one participant said that he initially had plastic plugs in all sockets but they weren’t replaced when appliances were used and changed. EasyPlug provided a better technology and allowed for easy connection and disconnection, surely we had a winner. With this concept we developed a plan to enter the safety market selling our product in packages of 3 and imagined expanding in the socket market which sells millions of units annually. Our engineers designed the electronic circuit board and then the entire 1st prototype. Unfortunately as we began to receive positive market feedback we completed a BOM (Build of Materials) which came back higher than our market would bear. This also proved difficult as our team lacked experience in mass manufacturing and our BOM reflected North American pricing although it was still several times more than our price parameters. Our product effectiveness relied on a net of products covering all wall sockets rather than just one or two wall sockets. This meant that competing with a simple plastic insert; furthermore the Canadian and American electrical codes had changed earlier that year to prevent accidental damage. Using small gates sockets would prevent electrocution if children inserted metal objects. This meant that although we had a superior technology it no longer met the market need due to price constraints and our market would be limited to retrofits in the coming years. For these reasons we decided to once again shift to one of our subsidiary markets, we were a horizontal technology looking for a home!

Mid way through our IRAP grant and over a year into the team’s existence we were changing markets once again. This time to a quick release block heater adaptor, gone were the electrical circuits and flat contacts. Replaced with a stripped down mechanical device that would be easy to manufacture and would allow for reasonable margins. As I was working another job we didn’t have time to conduct the proper market analysis while the prototype was being built so we forged ahead blindly. Then I returned to the company to find some opposition when talking to outsiders about our product. One individual stated it had been done before but most importantly many individuals felt that it wasn’t really a big need. Our device worked in the occasional case where a driver pulls out without disconnecting their block heater cord. This would prevent damage to the wall socket, block heater, car body and the extension cord. The problem was that damage doesn’t happen often; we had a “push” product and required insurance style marketing where prevention stops future damage. This spawned an idea to focus on B2B rather than B2C, throughout an entire fleet of vehicles it would be more likely to incur damage and fleet managers would be willing to pay the small fee in order to keep their vehicles on the road. Unfortunately rather than disconnecting and staying with the vehicle our device remains attached to the wall electrical cord. If it remained with the vehicle and prevented a certain amount of damage our device would pay for itself. Our potential customers are car rental companies in cold provinces although the downside is that the device is easily lost if the car drives away attached. This led to another realization; our mentor at ACETECH had experience in warehouse management and explained how some forklifts might be plugged in overnight.

So in a final push we are looking into the market need of both electric forklifts and car fleets. My advice for anyone planning on starting a company is that they should try to determine their market in advance. In reality you may change markets to attack the best possible segment but at least you’ll be a leg up if you start with a significant market need.

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