Does Your Brand Have Product-Market Fit?

It’s been a few weeks since my last newsletter. I had to spend some time prioritizing our raise and adding to the team at WeStock, but I also thought a bit about how I wanted to best structure the newsletter moving forward. I don’t know if the 1,500+ word daily newsletter on one topic is sustainable or the most actionable way to talk about the retail landscape.

I am excited to play around with the format and stay consistent with posting.

We just wrapped the LAST Expo East ever and I have nothing but positive things to say about Expo East as a whole over the past few years. I actually have enjoyed the show much more than Expo West.

I think the writing was probably on the wall when the show moved to Philadelphia a few years back from Baltimore. Baltimore might not be a huge draw for buyers, brands, and decision-makers, but the convention center was substantially better than the Pennsylvania Convention Center where Expo East has been hosted for the last three years.

Both Baltimore and Philadelphia provide a much better experience than Anaheim given the proximity to more hotels, restaurants, and a major airport that isn’t an hour and a half away (LAX).

That being said, I think the move to consolidate the shows and focus on Expo West is probably the best move since there were a lot of missing booths and the show kept declining in attendance each year.

I do think trade shows overall caught some strays from some loud LinkedIn voices last week, almost dancing on the grave of Expo East. I get it, many founders feel the cost associated with a booth is not worth it and I think the way New Hope handled 2020 Expo West was the final nail in the coffin for a lot of emerging brands.

Still, trade shows are a valuable part of the CPG/Retail ecosphere. Take out the fact that netting one new mid-market account most likely justifies the expense of the show, it’s just great to see everyone in person and remember how connective and collaborative this industry truly is.

You have to measure the ROI of trade shows and understand that the trade show payback period is most likely going to span 12+ months as you work to close those accounts, but if you’re a brand positioning yourself for venture funding and future acquisition, have a presence at shows, even if it’s just walking, truly helps.

Now, let’s dive into the main topic for this week!

Does Your Brand Have Product-Market Fit?

In the early days of CPG brand building, you are looking for any positive sign to latch onto as a proof point.

You're taking every positive signal from a family member or potential customer as validation that you made the right decision and that the market needs your product and is ready to embrace your vision.

As you start to sell online and spend on new customer acquisition, it feels amazing that anyone is buying your product, even though you are still paying for that customer.

Simultaneously, you’re opening new retail doors, getting placement in some high-visibility accounts and things feel like they are moving in the right direction.

On top of this, you’re getting press from some amazing outlets. Your brand is making top 10 lists, and you feel like the brand is taking off, but it is hard to measure that feeling.

This culmination of events makes you feel confident when someone asks you; do you have a product-market fit?

Product-market fit is when your target customers are repeatedly buying your product and telling others about your company's product in numbers large enough to eventually hit profitability and sustain the growth of the company.

I think the issue of marketing masking product-market fit has cooled off a bit from the high two years ago when brands were launching primarily DTC.

This is when swarms of founders were starting brands with the sole value proposition of being the DTC version of X. They raised millions, had amazing branding, and spent most of their funds on customer acquisition costs.

This led to brands making millions overnight, but it wasn’t sustainable. Repeat purchases never came, the product was poor, and the founder didn’t prioritize retail growth in tandem with online.

Fast forward to today where you can still acquire customers quickly, just for much more and far less efficiently. Brands can’t fake product-market fit like they could just twenty-four short months ago.

So, how do you know if you have true PMF and you’re not just blinded by the press, new doors, and any initial sales traction?

🛒 You have moved past the third reorder for a new retailer or distributor

You can never rest on your laurels when it comes to your retail partnerships. You always have to nurture your buyer relationships and support your key accounts, but after you have received the third P.O. from an account, you have at least moved past the initial traction phase. This is more important for smaller and mid-tier retailers since they most likely don’t have an annual review period where they make decisions (brands will still get reorders from Target or Walmart over the course of a year even if your product isn’t moving well), but a retailer who is on a rolling review schedule and still bringing in your product is a great indicator.

📈 Your hitting velocity metrics off promotion

One of the first conversations with a new buyer partner should be about expected units sold per week/per store/per SKU for the category. You might not have access to Spins or Nielsen data, but you can at least get the average sell-through number from the buyer and monitor your sales from there. Hitting your numbers because you're constantly on promotion or constantly demoing discounts PMF a bit, but if you’re hitting the target sell-through numbers outlined by the buyer even when you’re off promotion, you are cooking with gas.

🏋️ Trailing lift is consistently increasing

My above point does not mean you shouldn’t run promotions, on the contrary, you should have a robust promotional strategy for any new retail partner. You need to both show support for the account and get into new customer baskets. The biggest PMF indicator from those promotions will be an increased trailing lift, meaning, the new baseline for sell-through after a promotion. Are customers who bought your product on promotion coming back to buy it at regular price? If so, that is a great sign for PMF and shows that once customers try your product they are coming back for it.

📦 The core product set is fueling growth

This might be my biggest indicator of product-market fit for a new brand. If your brand is under two years old and already looking at new categories or innovations because you have hit a growth wall, the original product does not have PMF. Rebrands, reformulations, and packaging changes are not included in this. You want to constantly be improving your core product, but the kiss of death for most brands early on is not setting a revenue or ACV% goal that they want to hit with their core product set before moving into another product extension. New flavors are on the fence here for me. I think LTOs and seasonal flavors are a great way to expand your product set in current accounts and claim more shelf space, but it has to be balanced with the understanding that core SKU growth takes precedence over everything else.

One more trap door to watch out for when it comes to PMF and a mantra I would repeat as a brand owner. Press is not an indicator of product-market fit. There are way too many investor and sales decks that I see where the press slide is taking the place of a retail or consumer data slide. Press is great, but it is very difficult to measure the ROI from it and the way it makes us feel is usually much greater than the actual impact it has. Press in this space is made to find new and innovative products, but very few of those product cross the chasm into household items. You want to cross that chasm, it’s cool to cross the chasm!

Retail Execution of the Week

I shopped at King’s here in Cresskill, New Jersey last week and really enjoyed the experience. It's a great retailer and has a ton of emerging brands. We are going into the holiday season and holiday planograms are taking shape.

I walked into King’s and the first thing I saw was this display of Töst which I loved.

Töst is one of those brands that understands the importance of placement and I feel like they are always on an endcap no matter the retailer.

I am a strong believer in placement outperforms promotion. If you can secure multiple placements inside a store, especially in impulse areas like the front entrance, you are going to see a huge lift in your key accounts.

That’s all for this week! Next week we are diving into what I saw from Instacart at Expo East that blew my mind and how it should be on every brand’s radar. Enjoy your week!