Three ways to mess up a good marketing opportunity for perfume

Sometimes we come across marketing opportunities for perfume that should be wildly profitable. The people are there, they want your perfume, they are eager to pay your price. What can go wrong? There are three simple ways you can mess up this opportunity and earn only dimes when you could have earned dollars.

Mess up # 1 — Addressing a mirage and missing the real market

What's the real size of your market? Not everybody who matches a particular demographic is your market. Your real market is concentrated — people who will respond to you and your perfume, people who are enthusiasts for you and for your perfume, people who have enough mad money on hand to buy it.

If your true market — potential buyers — is about 5,000 people but you allow yourself to think your market is really tens of thousands, you will make harmful mistakes in your planning. You will, within the limit of your resources, produce more perfume than you will ever be able to sell, and you will spread your promotional dollars too wide and too thin, meaning a lot of effort and promotional money will be wasted trying to sell people who could never have an interest in your perfume.

Because of this misunderstanding of your real opportunity, you fail to make sales you could have made — to people who could have been excited by your perfume — and you produce more inventory than you can possibly sell. This drags down any profit from the few sales you might make.

Say in this case you have $25,000 for promotion. Instead of using that money to make a big impression in a hot, well focused market segment, you try to influence too many people — far too many — so you buy one or two big ads (all you can afford!) to a very general audience (say ALL Facebook accounts of women in a certain age group!) rather than hammering away, again and again, at a highly focused, highly select market segment.

The result? No results!

Mess up # 2 — Too much production

Marketing opportunities come in different sizes. You have an opportunity to sell 5,000 bottles but you produce 10,000. Look what happens:

Say your cost to produce a bottle of your perfume is $4.50. You wholesale it at $17.50 and it sells — successfully — at retail for $35. But "successful" relates only to the 5,000 people who want your perfume. That's all who want it. That's the size of your market. But you produced 10,000 bottles. You're left with 5,000 bottles you paid $4.50 each to produce but can't sell. Let's look at the math:

Your cost per bottle was $4.50.

You sold 5,000 bottles at $17.50 each.

You paid $22,500 to produce those 5,000 bottles and then sold them for $87,500 giving you a gross profit which would have been $65,000 were it not for the $22,500 you paid to produce bottles you didn't sell. Your profit now drops from $65,000 to $42,500 — only 65 percent of what you would have earned if your production was matched to true market size.

Mess up # 3 — You paid too much for your perfume, even when you knew what its highest possible retail price could be

This is the classic cause of marketing failure in almost any field — the opportunity is hot but you pay too much to obtain your product (in this case a perfume) even though you know what its highest possible retail price can be.

Say your perfume will retail for $35 and you will wholesale it for $17.50 and correctly expect to sell 5,000 bottles. Your gross receipts will be $87,500 but now you have to deduct the cost of those 5,000 bottles.

Say your cost per bottle was $4.50. That's a total cost of $22,500 giving you a gross profit of $65,000.

But say you lost track of your numbers. You wanted to make your fragrance a bit more elegant and you failed to negotiate to drive down your costs. Now instead of $4.50 per bottle you end up paying $11.50 per bottle (yes, it can happen!) so now the cost of your 5,000 bottles is $57,500 and your gross profit will only be $30,000 — half of what you might have made! Investing $57,500 in product to make $30,000 (gross!) is not so exciting.

Discussion

The most profitable marketing opportunities come in fixed sizes. You maximize profit by understanding (judging correctly) the size of your opportunity. You produce just enough perfume to meet the anticipated demand. You don't fret over the handful of people who say they want to buy your perfume but waited until your supply was sold out. You don't produce another 5,000 bottles of perfume because a dozen people failed to buy it while it was available.

When you start to think about perfume marketing in narrow terms, small markets, you are headed in the right direction for making good money. It's easy to become distracted and want a big score with a single promotion but the odds are against you. To make a highly profitable business out of selling your own perfume, think in terms of "small" markets, markets that practically lust for your perfume. There are lots of them but they must be addressed one at a time.

Footnote

Don't be misled by the hypothetical gross profits shown in the examples above. The cost per bottle of your perfume is very important but it is not the only important expense you must harness. Advertising and promotion can be a large or small expense, depending on a number of factors. And, oh yes, there are those "administrative expenses" to deal with — the cost of running your office and operation. If, on day one, you sign a lease on a fancy car because you think you need it for your "image," most likely your business will be doomed from the start.

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Philip Goutell
Lightyears, Inc.