What is a common mistake made by CPG (consumer packaged good) startups, and how can this mistake be avoided?
To help you avoid common mistakes that CPG startups make, we asked successful startup founders and business owners this question for their best insights. From not considering competition to over-reliance on a single acquisition channel, there are several common mistakes that are pointed out to help CPG startups run their businesses successfully.
Here are 10 common CPG startup mistakes to avoid:
- Not Considering Competition
- Failing To Conduct Market Research
- Confusing Customers With Brand Inconsistency
- Not Keeping Up With Supply Chain Factors
- Overpaying for Slotting Fees
- Imitation Without Innovation
- Wrong Package Branding and Design for Focus Groups
- Not Testing The Product in Multiple Markets
- Over-Reliance on a Single Acquisition Channel
Not Considering Competition
CPG startups need to consider their competition, especially since even brick-and-mortar CPG businesses have an online presence. There are bound to be many CPG businesses similar to yours that people can find on the internet, so you have to find a way to make yours stand out. You can do this through strategic SEO methods, catchy copywriting, or by thinking of how you can make at least one aspect of your product more innovative compared to your competition.
Nick Shackelford, Structured Agency
Failing To Conduct Market Research
A common mistake made by CPG startups is failing to properly research and understand their target market. This can lead to them developing products that do not appeal to their target consumers, and as a result, the products fail to sell. This mistake can be avoided by conducting market research to gain a better understanding of who the target market is and what they are looking for in a product.
Matthew Ramirez, Paraphrasing Tool
Confusing Customers With Brand Inconsistency
Your product is the most important extension of your brand and is literally what your entire brand is about. When it comes to your CPG, you want it to be reflective of and in alignment with the rest of your brand and its tone, voice and style. Make sure to keep consistency between your brand and your consumer packaged good as not to confuse or turn off your customers.
Eric Elggren, Andar
Not Keeping Up With Supply Chain Factors
Sometimes CPG startups do not put enough thought into the supply chain element of their business. They could have a great product, but without taking the time to look into good shipping options there could be delays in shipping, which could displease customers and lower sales rates.
Furthermore, the startup may need to rely on shipping from other suppliers in order to put their products together, and if they do not stay on top of their inventory, they may not be able to get their products to customers in a timely fashion. Eventually, CPG startups need to find ways to keep up with both receiving and delivering products in the most timely and efficient manner possible.
Drew Sherman, RPM
Overpaying for Slotting Fees
One common mistake often made by CPG startups is overpaying for slotting fees. Slotting fees have skyrocketed as of late and are simply not as effective at acquiring new customers as they used to be. Focus instead on brand equity and a stronger social media presence. Building one’s brand will eventually attract better partnership offers that will not cost nearly as much.
Sasha Ramani, MPOWER Financing
Every little bit adds up, and it’s easy for startups to overlook the compound effect of a few cents here and there with packaging costs. Over-ordering initial product runs to take advantage of the next tier of bulk pricing results in amassing excess inventory that may end up costing you more to store. Extra shelves of products you may not be able to sell through quickly could expire in some cases, and park much-needed funds that could otherwise be put towards brand awareness, customer acquisition, and payroll.
Evaluating your business model’s essential needs can help you explore alternative production and packaging options, such as print on demand, so your startup maintains healthy cash flow instead of being pennywise and pound foolish.
Marilyn Zubak, Snif
Imitation Without Innovation
Copycat brands don’t earn consumer trust. And startups that gain entry into the CPG space by launching products that are simply imitations of another brand’s top sellers provide no additional value to consumers who are willing to pay more to buy from the familiar brands they trust. This makes it vital for new brands to listen to their target audience on social media and spot seemingly obscure trends. Doing so will help them to identify up-and-coming niches within the CPG space, enabling them to innovate products so that they meet the evolving needs of consumers while still resonating authentically as a brand.
Maria Shriver, MOSH
Wrong Package Branding and Design for Focus Groups
Package branding and design can be an issue for CPG startups. Startups in the packaged goods industry want their products to not only function, but look good to consumers. They want their products to look appealing whether they are on the shelves of a supermarket or in the display photo of an eCommerce webpage. This means finding the right packaging aesthetic for their target audience. Focus groups are useful for resolving this issue. If a startup wants to attract parents or single young professionals to their product, then they have a lot to gain by asking these demographics questions about what is attractive. When the pack is the first thing a customer will see from a CPG startup’s product, the design and branding is a major factor in encouraging a purchase. Focus groups are a key to honing package design.
Katy Carrigan, Goody
Not Testing The Product in Multiple Markets
Having worked with some large and small CPG companies, I have seen products fail for many different reasons. One of the main ones is the lack of market research on the product you plan to bring to market. As a CPG start-up, you need to understand that a successful focus group in one city does not guarantee market penetration in another. You should always test a new product in multiple markets to understand the wants and needs of consumers.
David Watkins, EthOS
Over-Reliance on a Single Acquisition Channel
I’ve spoken with 1,000+ CPG founders over the past year and the biggest mistake is an overreliance on a single acquisition channel. Most commonly, Facebook ads. CPG brands that were built 5 (or even 2) years ago could do that, but the landscape has shifted overnight. Today, you have to focus on a foundation of organic acquisition and word of mouth and layer on new channels – advertising, affiliate, and search, over time.
Kenny Hanson, MentorPass