Product Development Office Hours with Yoana Dvorzsak: Let's talk about your target price point
We are sitting down today with Yoana Dvorzsak, Director of Product and Component Development at Solésence, to discuss target price point. The target price point, also referred to as COGS or "Cost of Goods Sold", is a critical piece of the product development puzzle — here, Yoana will walk us through what it is and why it's crucial for laying the foundation of your next product.
What do you expect to learn from brands in terms of their target price point, and when do you expect to learn this?
The target price point — or COGS — is absolutely a key item defined on the product brief, which is something we have brand partners etch out as soon as they decide they want to work with us. We need to know the fill size (how big is the product?), the component type, and where a product is sold. We will also need to know if the product will have a carton. And it's worth noting that we need this to guide product development decisions, and with all turnkey partnerships, but also so that we can see the overall vision for the project.
Let's break it down a bit: why can't we give an estimated quote for a market-ready product cost until we have the component size and type?
Let's say a brand partner is looking to launch a white label product. The amount of product someone wishes to sell directly impacts the cost, so we need the amount up front. In addition to that, all of our market-ready, white labels were developed to fit a vision and a category, and to suit a certain component or selection of components. That means sometimes a product can have limitations in terms of component compatibility, so really both the component and the size impact price.
And when you say "where a product is sold," do you mean where it is retailed, or where it is sold globally?
We need to know both. First, we need to know where a product is launching around the world. Regulatory requirements are different across different countries. Regulatory requirements on the carton versus the component are different globally; they are different in Europe versus in the USA. We need to know if a brand plans to have different cartons in the USA or globally, or if a brand will do over labels, and who will manage it. We can manage these things for brands if they want, it's just something we need to know since it adds a cost.
Why do you need to know about a unit carton?
Each time you add another component, it will add to the overall cost of making the product. So knowing if there will be a unit carton helps us break down the COGS and it also helps us understand what your customer’s experience will be. A product with a unit carton is perceived to be more high end. Generally, I would say that unit cartons are common because it is very difficult to fit marketing and regulatory information on primary packaging. So despite sustainability concerns I would say that 99% of our brand partners have unit cartons.
What if a brand is not sure about the fill size?
We can help guide brands through fill size. As a general guideline, skin care products for the face tend to be 50ml, complexion products are around 30ml, and body care products are 3-5oz. If a brand wants to be sure a product is under the carry on limit in the USA we advise to stay under 100ml, or 3.4oz.
Why do you need to know about component and art right away?
Components can be very expensive, and even the number of colors on primary and secondary packaging will impact the price. Beyond the component itself, fill & assembly comes into play. For example, tubes are generally more cost effective than bottles, and tube filling can be less expensive than bottle filling in terms of the assembly itself. So, it's important to have the brand story solidified so that each of these micro-decisions can come into play, since they will all be the physical manifestation of your brand once it's out in the world.
Can Solésence help with component selection if a brand isn't sure where to start?
Absolutely. We can guide brands through component selection as long as we have a clear vision of what a brand wants. From there, we can recommend a component that both suits the brand and is compatible with the product.
How does this price point inform product development?
For customized white label products and custom development, knowing COGS is essential because it keeps us within a certain realm. Outside of key ingredients that brands want to include, I will always ask if brands have a certain claim they want to make. Then I can go back to their COGS and recommend a few ingredients that are within the proper price range. For white label products, knowing the price point will help us direct a brand to certain products that fit within the range.
How else can we help brands get to a lower price point?
I would say that guiding components is key. We can look at what is more cost effective from a components standpoint or a production standpoint. Having less complicated artwork can also help. We try to be as transparent as possible with brands and to help with education at every turn.
Thanks, Yoana, for another great conversation!