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VAPE MENTORS BLOG

The 5 Minute Vape Industry MBA

Read this if you want to skip MBA school and go right into the vape industry.

Look, I have an MBA. I wish it wasn’t true, but it was a complete waste of money. I’ve actually spent the last 4 years re-programming my brain to be an entrepreneur, not a corporate robot (which is what an MBA trains you to be).

That said, there are SOME things you can learn and apply to vaping.

I ran across this Twitter feed and was absolutely blown away by the value and clarity with which this person explains complex topics.

As I was reading it I immediately connected it to the vaping industry, so I wrote up this post with a “how this applies to vaping”.

Enjoy.

Strategy

Porter’s Five Forces

These ideas describe the vape industry to the T!

Because E-liquids are (or used to be) VERY easy to produce and begin to sell, there were a lot of new entrants, hight threat of substitutes and a product that is easily replaceable.

The same is basically true with vape shops – a new one used to pop up once a week in some areas.

All these forces drive profitability down and hurt competitiveness in the long run, which is what we are seeing with shops and e-liquids.

With how easy it used to be to make and sell e-liquids, it’s no wonder why e-liquid margin has gone down since the heydays, right?

This is what the cigarette industry is experiencing. Vaping is a “substitute”, despite what the anti-vaping crowd would argue. We’ll see if e-liquid substitutes come in to threaten current profit margins for e-liquids though.

Customer bargaining power is at it’s absolute peak right now. It’s never been easier to switch. Another reason why loyalty programs are important. Also, a reason why the regulations are all that bad. If you can survive, customer bargaining power will be diminished so profits should rise.

There are a lot of e-liquid suppliers right now for vape shops, meaning they don’t have a lot of supplier bargaining power. That’s good for vape shops. Once the regulations hit, that will change. As for e-liquid brands, there’s no shortage of PG/VG or nicotine, so no real threat in production. Not really an issue for vaping right now, but maybe in the future.

There is a lot of competition from online, but not from big guys like Amazon so that’s a good thing. Also, since we can’t advertise, there isn’t a lot of affect there. The one thing that does apply though is firm concentration ration. Lots of firms, so I’d say industry rivalry is fairly strong, but the regulations are actually helping keep it less competitive as it could be.

Low Cost vs. Premium Pricing

These next Tweets apply mostly to manufacturers and juice brands. To sum up: pick either low cost, high volume or low volume, high cost. DO NOT try to please everybody by being in the “middle”.

If you are in the middle, I’d suggest starting with a premium product first. Higher profit margins and fewer customers means it’s more scaleable.

Vape shops COULD use these ideas but an ecommerce shop would more easily be able to execute. A vape shop that wanted to be premium but is in a low income area can’t suddenly change their model. They’d have to start out that way.

An ecommerce store, on the other hand, isn’t stuck to any location so they could pivot more easily.

The Ansoff Matrix

Use this matrix to assess the current status of your business, then decide how you want to grow.

Are you going to develop a brand new product in a brand new market (diversification?). Or are you going to buckle down and get more sales with your current products (market penetration).

This is a very clarifying exercise for any business.

This is the “easiest” because it’s the lowest hanging fruit. The most impactful thing you can do is increase your average order value.

If you are an ecommerce shop using Shopify, Zipify is the best option for you >>>

If you are any vape business at all and you need a place to start, begin with your customer avatar. I have a free worksheet here >>>

Many e-liquid companies are already doing this.

Not exactly sure how this would apply to vaping…

No. Just no.

 

Marketing

The Product Marketing Mix (or 7 P’s)

There’s no better visual guide than this one out there, and no better way to understand marketing than the 7 P’s.

In my opinion, marketing is the cornerstone of any business. The rest is just fulfillment. If you aren’t marketing something, then you aren’t in business.

 

This applies mainly to manufacturers and e-liquid brands.

Key term: perceived. Branding is perception. Improve branding to improve perception and charge more.

Online is becoming more and more irreplaceable. Vape shops should have more than one place to buy.

Promos are difficult since we can’t advertise, so you have to get creative here.

Pay attention vape shops!

Hire for attitude, not skill. Skills can be taught. Attitudes cannot.

Need good people to have a good process. Your job as the owner is to master the processes, i.e. working ON your business rather than in it.

I went to a fancy pre-fix dinner with my wife recently. They included a custom printed menu with our names on it and everything we ate that day. VERY cool. Think of ways to get something of value into the hands of your customers that will make them remember you. This concept also applies to the branding of your store: what does the experience feel like to them?

Brands to study
– Louis Vuitton (premium)
– Ryanair (low cost)
– Amazon Web Services (barg power supplier)
– Dropbox (fail cuz replicatable)

— Pieter Levels @ 🇺🇸 (@levelsio) July 20, 2017

Finance

Net present value

Use these concepts to determine whether you should open a new vape shop, invest in a PMTA, or make renovations to your shop.

 

Reading Profit & Loss statements

Financial Modeling

Management

Conclusion

Obviously there are many things that this mini MBA didn’t cover, but it’s a great place to start. (If you have comments on all this, please submit a comment below). Fill in the rest of your knowledge gaps with this blog, our VapeMasters group and by Googling these concepts and visiting Youtube.

Here’s the main takeaway: MBA’s (and MBA grads) are lauded as “business geniuses”, but I’m here to tell you that’s bullshit. MBA’s are nothing but theories and no practice. I’ve spent the last 5 years un-learning what I learned in MBA so I could become a real entrepreneur. Entrepreneurs are NOT good MBA candidates. Networks are important, so you should network with other entrepreneurs, not with MBA grads.

That’s what our VapeMasters program is all about. You can learn about it here. It’s a network of vape entrepreneurs (we call them “vapreneurs”). See what VapeMasters is all about >>>