Enterprise : LEARNING CURVE: CUSTOM FOLDERS : Reality Check : Entrepreneur Owes Success to Research
Before launching Custom Folders in July, owner Rick Dural invested $5,000 on a market research report and learned that his prediction of the demand for personalized paper folders did not match the needs of his expected customer base. After changing his pricing structure and targeting new customers, the company has exceeded its sales goals. Dural was interviewed by Karen Kaplan.
*
There’s a perception that only a big company can afford a marketing study, but the truth is you can’t afford not to do one. It cost us close to $5,000, and I am convinced that had we not done this, there would be no Custom Folders today.
Our product is these fantastic folders that you can personalize for your clients at very little cost. You can put their company’s name on them, add some color and clip art and put a message on the back cover. It takes about 0.6 seconds to get their attention and make them feel good.
We commissioned a marketing study in February to find out what people’s reaction to our product would be, to test the viability of our pricing plan and to determine the proper channel for marketing this thing.
What it taught me about myself is that I don’t live in the real world. I have a tendency to think some things are great that the rest of the world thinks are really ridiculous.
Had I not done the marketing study, the business would certainly have failed. It showed that our initial plan to sell the laminator and folders in bulk was not what the market wanted. We had to get the initial price point down from $500 or $600 to under $100. The study also told us there was demand for a legal-sized folder, which we didn’t have initially.
So we spent two months with our suppliers looking for ways to get the pricing down. We retooled the manufacturing process to automate a little more. We increased our volume commitment. Altogether we ended up bringing our costs down by 35%.
The new prices opened up the mass market. Now we can sell folders to individual real estate agents instead of in bulk to the real estate company. Likewise we can sell to many insurance agents instead of just a few insurance companies.
The other thing the marketing study told us was to accept Visa and MasterCard. I thought taking credit cards would be expensive and a lot of trouble for a small company. But people are a lot more willing to spend money if they can use their credit cards. That way they don’t have to pay for the whole thing at once if they don’t want to. Plus it’s good for us because then we get our money right away.
On who should do a marketing study . . .
“There’s a perception that only a big company can afford a marketing study, but the truth is you can’t afford not to do one.”
On what the study told him . . .
“It showed that our initial plan to sell the laminator and folders in bulk was not what the market wanted.”
On keeping an open mind . . .
“You have to go in with a plan but be willing to look at it with an open mind. You may think the market is one way, but the world’s going to be the judge of whether that’s true or not.”
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
AT A GLANCE
Company: Custom Folders
Owner: Rick Dural
Nature of Business: Sells and distributes paper folders that customers can customize for clients.
Location: San Clemente
Number of employees: 3, plus independent sales representatives
Annual sales: Expecting $400,000 for first year in business
