28. How would I market my product (EFL.TO)?

First I would find some unique characteristics of my product that made it stand out from my competitor’s products.

Most of companies are buying external equipment or external products to support their operations or product development, which would generate profits for their own firms.

Do buyers really care about buying a premium or fashionable product for company’s use? They would consider the following criteria:

-         Is the product performed as expected or as marketed?

-         Could they use the product to shorten development cycle?

-         Does it help to generate more profits and lower internal expense?

-         Is this product affordable based on allocated budget?

-         Is this a long term investment or must be replaced after a short period of time?

One of example is Electrovaya marketing their premium Lithium-ion battery as a premium battery, thus customer should pay a premium price for its battery. I would do another way to market its product. Actually Electrovaya’s battery has a longer cycle life as compared to its competitor’s battery, which could be around 60% of Electrovaya’s battery cycle life. Its proprietary Litarion cell separator provides better safety against any potential fire hazard due to suddenly broken, mal-operation, or puncture/heavy impact of battery case.

-         Its battery is used in large applications, thus this requires time and resources to install or to replace, which could be converted to installation cost.

-         Some application are critical, thus replacing battery would prompt potential shut down of backup battery in a utility power plant. Their own customers would be inconvenient or upset.

-         Some electric bus, forklift, or vehicle must be out of use to replace battery

-         The cost of fire of battery storage/container could create shut down operations of a company, which is costly.

It’s hard to estimate the costs of a fire due to malfunction battery, which would persuade a client to buy its battery. However it would be worth to mention that customers could be worry free of potential loss due to shut down of their operations.

Estimating other costs due to installation to customers, thus they would have concrete numbers due to labor cost as well as short term shutdown of equipment using battery.

Estimate and convert the cost or sale price of competitor’s batteries into cycle life cost, i.e. price per cycle life. Electrovaya could buy some battery of its competitors to get the price and tested for its cycle life. Electrovaya would then do either the following

-         Quote its battery in cycle life price at about the same as the lowest competitor, but its product offers savings estimated above for labor costs, fire hazard, shut down of operations.

-         Quote its battery in cycle life price a little bit higher than the lowest competitor, because it offers saving in other areas as mentioned earlier.

-         Give customers some free cycle life for large volume orders, e.g. free 2%-5% of cycle life.

Marketing in this way wouldn’t make customers think that they’re paying more for a product that they may not need. Customers are concerned with their expense.

If I was Electrovaya, I would take the entire battery market except Tesla, which has a partnership with Panasonics. Mass production of battery would bring down product cost, too.

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2017-05-12 Electrovaya's CEO and CFO don't know how to talk to customer and operate EFL.TO's effectively?

* Q2 2017 revenue is $2 million (Cdn $2.7m) for the quarter ended March 31, 2017, compared to Q2 2016 revenue of $4.3 million (Cdn $5.9m).

* The net loss for Q2 2017 is $6.3 million (Cdn $8.6m) compared to a net loss for Q2 2016 of $3.1 million (Cdn $4.2m).

* Cash and restricted cash totaled $9.2 million (Cdn $12.6m) as at March 31, 2017 compared to $4.3 million (Cdn $5.9m) at March 31, 2016.

* Inventory is $15.6 million (Cdn $21.4m) as at March 31, 2017 as compared to $11.7 million (Cdn $16.0m) for March 31, 2016.

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I have held many shares of EFL.TO, and was disappointed with the performance of EFL's CEO and CFO. I wanted it performs well, thus I could get back my investment.

1. Forklift:

In the conference call of this morning, they have mentioned time required per OEM would be around several months to test batteries and extrapolate the would-be results for several years of EFL'S battery life. Thus the order would be slow for many OEM, which have been testing its battery for 6 months.

* There was one OEM with special tests such as shock, etc., and sent an approval of their products to a manufacturer. This resulted in a quick order of battery.

>>> Anyway, so the second OEM comes in and he tests the battery slightly differently. He does shock, vibration, all kinds of things, which the OEM would want to do. He does test our battery management interfacing with his trucks' controls and et cetera. And again intensive testing which went over for a few months and then he gave the green light and blessed the product, and that's how the first purchase order came through. And now -- so we don't expect the second and third purchase order should take that long. So this purchase order came a few weeks ago in April. And as Richard mentioned, we've got nearly 10 units now running in lot of other large companies. And all test results, they are all looking good.<<< from http://EFL.TO

* Why didn't EFL give those specific tests to other reluctant OEM to try out?

2. Premium price:

CEO mentioned that their battery is the lowest per cycle cost, but this meant lowest price to manufacturers? Anyways CFO mentioned that they wanted a "premium price", but it has to be reasonable. CEO mentioned that "we gave you highest cycle life battery, thus you should give us higher margins."

- CEO is definitely not a person to talk to any customers. Why? He doesn't know what customers care about. They care about their expense and business. They don't care about EFL's business. Mentioning as above would bring negative results to EFL.

- Lowest cycle cost converted to lowest battery quote couple with some (temporary) discount due to lower raw lithium price would make customers happy to send a PO.

- Of course I had written an earlier notes about advantages/savings for customers using EFL's battery.

- Improving logistic and efficiency as well as ROI for customers using EFL's battery would be worth to mentioned as a sale pitch,  but you can't get some money off from that.

* Basically talking to customers would require some skills to show customers benefits that they would get by using your products.

3. Profit margins:

* Li-ion battery is not a special products. Actually I care more about cash inflow and retained earnings.

* You could sell $100,000 worth of your products at higher margin such as 60% to retain $60K. This is worse than selling $10M worth of products at 15% profit margin to retain $1.5M cash.

* If I recalled correctly, EFL's capacity is $200M, thus having idle capacity is a nightmare.

* Inventory is increasing to $15.6M.

* EFL should have lower of volume required for special pricing (temporarily) in order to lower inventory quickly OR sending out special prices to some (preferred - loyal) customers until inventory at around $5M.

- Probably notice preferred customers, who would be long-term and frequent buyers to make a PO with special prices. They would be the first round of notice and must be decided within a couple days. If they delayed their purchase at this special price, then approached lower priority customers. This would avoid over sold of products to reasonable inventory level. Goal is to lower inventory to make room for higher density battery, too.

- Pricing scheme would be restore to normal attractive level after.

* If http://EFL.TO didn't lower inventory level, they would need another round of financing, which would be bad to existing investors. I didn't sell my shares at $3.80/share, because I thought http://EFL.TO would be more valuable. It turned out that http://EFL.TO is traded at $1.90/share as of today, i.e. I lost 50% of my investment. A round of financing with stock convertible was executed a couple of weeks ago, i.e. shares diluted or peak/expected share price would be lower than months ago.

* Probably they used profit margin to evaluate efficiency of a company, but Li-ion is like a commodity, thus you have to sell as much as you can. Increasing battery density would lower cost of products, too. But insisting on high profit margin is a deadly tool.

- If you increased "price" (which should be based on a reasonable price to sell) in order to increase profit margin, this would be a disaster.

* If http://EFL.TO believes that their pricing scheme was right, they should have made lots of sales, and didn't need the recent $15M financing.

Source: https://finance.yahoo.com/news/edited-transcript-efl-earnings-conference-232605116.html

Notes:  September 21, 2017: Recently EFL has recruited senior sale staff. Hopefully they're making aggressive sales to keep EFL growing as expected.

EFL does have highest recharged cycle battery at lowest cost per cycle as compared to its competitors. This is a huge advantage, thus they could price their battery per cycle as compared to competitors. If they are willing to get lower profit margin, they could effectively kick all competitors off the market.

EFL battery has ceramic separator adding safety value, which we couldn't easily estimate a sale price.

* Basically my strategy was simple. I wanted to sell a good product at prices that kill all of my competitors. However I would also want to choke my customers for superior parts as much as customers willing to pay.

In EFL case, battery cells and electrodes must be priced at low profit margin based on recharged cycles as batteries were like commodity. Customers would save maintenance costs by replacing of their batteries less often, but this was part of a sale pitch.

EFL could also try to buy back used batteries as their batteries are recycle-able. This would effectively lower sell prices of their battery to customers.

The only part that EFL could try higher pricing scheme was its safe ceramic separators. However it couldn't price too high to scare customers away.

* As said above, I think, EFL would win the market for 500MWh full capacity of its manufacturing plant, if it didn't chase high or fancy profit margin.

OEMs have been testing EFL batteries for around 6 months, thus orders should be in for the incoming months, not years. Reasonable low pricing would push them to make decision quickly.

Currently raw material was at depressed price, thus temporary discount was possible.

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* December 29, 2017: There is a simple strategy to sell your products. Of course your product must be good performance or comparable to your competitors:

1. Lower price than your competitor if both products are about the same performance and quality.

2. Same price as your competitors if your product outperformed your competitors.

The above 2 strategies would help your customers to pick your product quickly. You don't need to spend time talking and convincing your customers, i.e. time is also money.

If you have to travel and book a hotel for a series of conversation with your customers in order to sell your outperformed products at higher prices, it'd be expensive or factored in/lower the profits.

You may try to sell your "outperformed" products at a little higher price in such a way that it's negligible to customers, then they'd pay. For example, $105 for your product while your competitors quoted $100. If you quoted $200, customers may think twice.

* December 30, 2017: Usually you shouldn't expect high profit margin by selling products to governments. However, it's good to sell products to governments for other indirect benefits.

For example, Tesla sold 100MW batteries to Southern Australia, they got worldwide free media coverage, i.e. like huge free marketing and recognition.

Governments are usually careful in purchase a product for its performance and price. If they made a bad purchase, they would be scrutinized by media and tax payers. Thus it's good to sell a product to government, i.e. your product is good and reliable.

Of course if you sold a good product to governments, you would be able to ask for some help in some legitimate administrative issues, if needed. I'm not talking about bribery or corruption.

* How to price your product in order to make sales is a hardest part.

To come up with an idea and R&D was a concrete step. You could develop a product based on staff expertise and research.

We don't have anything to base on for a quote.

If there are similar products in the market, we could try to see the price range, where our products could be priced for quick sales. Otherwise we have to guess the reasonable profit margin in the industry or sector that out products in.

January 9, 2018: "Electrovaya, which together with its subsidiaries, designs, develops, manufactures and sells Lithium Ion Super Polymer batteries, battery systems, and battery-related products in Canada, the US, Germany, Norway, and internationally."

Most of EFL batteries would be from 500MW manufactory plant in Germany. However Electrovaya should ask customers if they wanted batteries made, tested, and shipped from Germany, Canada, USA, or Norway? These 4 western countries would be the best sale pitches for EFL, i.e. western quality. Their batteries are not Made in China.

Most of customers would like products Made in Germany anyways.

Most of end users are willing to pay more for products made in Germany or Japan. It's not products designed by Germans or Japanese, but made somewhere else.

Electrovaya should mention "Made in Germany" in their sales effort.