How is my business plan wrong?

September 21, 2009 9:13 AM

What is the likelihood of my product selling such that I make $1000 a month? What money I've put into it isn't an issue as it was sort of extra money that I wanted to put to something like this anyway. Everything I do to figure out how much I'll make seems to imply that I'll be rich (for a student) and I don't believe that's true, but I can't figure out what I'm missing.

This is my first post on AskMefi, and for that I'm sorry. I was hoping my introduction would be through a post about healing all the pain in the world, but realistically I don't suppose any post would be good enough. Also, I'm real sorry this is long. I've been reading askmefi for a long time, but I wouldn't be surprised if I messed this up. Just correct me if I do.

This is the very basic version of what's going on. I am in the process of making a product. The product is a how to guide regarding studying in the context of other things, ie, memory techniques, note taking techniques, keeping a healthy mind, etc. I'm not linking to it or advertising it because it's really not necessary and there's nothing to link to yet. And this product is pretty good I think. It's not amazing, but I call it good in relation to other things I've seen and things I've done in the past.

I am also having a page made by a professional. Not just a white page with text that RANDOMLY GETS BIGGER AND BOLD.

I plan on having about 50 adwords keywords, ten for each topic of the course (speed reading, note taking, memory, mind health, and stress management). There will be five individual ads, one for each topic.

The other courses on memory and stuff I see online are 200-300 dollars usually. Mine has about that much information I think (It's 5 audio files, a booklet, worksheets, and a quickstart guide) and I'm not too ambitious (I'm a student, so even a little money helps a lot) so I'm selling mine for just short of 100. In the 90s somewhere. If it fails, I'll go a little bit further down.

The catch is that some people will recognize this formula as the Four Hour WorkWeek formula. And it is except I'm not using a physical product. I followed most of his advice, and while I totally understand and to a degree agree with the people who criticize how jerkish he seems, I'm trying to follow the book so that if it fails, I can criticize it instead of myself.

My reason for not mentioning it as part of the question itself is that I read the last Four Hour WorkWeek thread which seemed to address Tim Ferriss as a person, and the title of the book as unrealistic. No one seemed to actually consider his plan.

There's $50 a day on advertising. Assuming I sell this product at $99.99 (For rounding's sake) how likely am I to make $1000 a month?

The reason I ask is that I keep running the numbers and they are way way too optimistic. Tim Ferriss suggests assuming 1% of people searching for your term will click it, and 1% of them will buy the product. That comes out to 1/10000 people searching for the term buying it, and if that goes right then I'll be selling somewhere around 20 a month. I can't believe it's going to work like that. What am I missing?

posted by DerangedGoblin to work & money (23 comments total)

Think about putting it on clickbank, or equivalent (depending on the quality of the thing). $99 is probably too much, think of what you could walk into a book store and buy, when it comes to study aids.

With Clickbank (or equivalent), you'll only get 25% or 30% of the sale price, but other people will bear some of the burden of advertising. You can still sell it yourself, and a well done landing page is very important either way.

Also, stop being quite so introspective about this. Just go for it, set a budget and see how it works.

Terms to look up: A/B Testing, Affiliate Marketing, Article Marketing, Long Tail Keyword

Sites to browse (but don't get sucked in by): forums.digitalpoint.com (clickbank section for ideas, there are sellers there), blackhatworld.com (sellers there too, just more evil).

When I recommend clickbank, I really mean one of 4 or 5 services which serve the same affiliate marketing niche. You post your product up, and others can sell and get a cut. It won't happen automatically, but any little bit can help. The other thing you can do is figure out how affiliates market stuff, and just do that yourself, for your own product, so you get to keep 100% of it.

Your idea isn't absurd, and can have legs, depending on how you market. The sad fact with ebooks is that the content doesn't matter much, but the marketing does matter a ton.
posted by cschneid at 9:22 AM on September 21

I've thought about things like clickbank, and I'm keeping them in my back pocket, but I'm thinking it's easier to say, "This isn't working let me change methods or lower prices," but I would hate myself if I started on clickbank and it took off.
posted by DerangedGoblin at 9:28 AM on September 21

Why would you hate yourself? You offload the work onto others, and there's nothing stopping you from selling it directly yourself (either direct through CB avoiding affiliate fees, or direct through your own site, avoiding affiliate and CB fees).

Basically, what you have is exactly what affiliate marketing tries to sell (fairly well too). At least steal all their ideas.
posted by cschneid at 9:30 AM on September 21

Where I suspect that you're going wrong is in your estimate of the market size.

I doubt, although I don't have the numbers to back this, that 200,000 people are searching for "guides regarding studying in the context of other things", or that 20 people/month are buying such guides across the entire market, let alone from a single vendor.

If I were in your shoes, I'd do some research to see who your top competitors would be, and then find out as much as I could about their businesses -- what are their yearly revenue numbers like? How large is their client base? How long have they been in business, and what was their growth pattern?

Finally, as far as I can tell, you've pretty much admitted to stealing a fairly well-known IP and rebranding it for your own commercial purposes. Anyone with a Google keyword search for the Four Hour Work Week would likely find this post, and if you were making any real money you could be sued if they decided to go after you. You might want to think about creating your own IP based on studying strategies, if you want to sell them.
posted by ellF at 9:35 AM on September 21

The product is entirely original, I am simply following Tim Ferriss's advice for how to market and sell it. The product is something I've been interested in and done legitimate research on myself and unless I misunderstand copyright laws, I don't think I can be sued for anything in it.

The market issue however is very possible, though I point out again that I will have 50 keywords. It's not an impressive number, but it broadens the possibilities from people searching for "guides regarding studying in the context of other things" to people searching for how to improve their memory, how to study better, how to read faster, etc. I do agree that it's hard to imagine that that many people will buy my product or even similar products.

And while I don't mean to be quite so difficult, though logically I can't see this working, whenever I try to find a way to use real numbers to calculate the average success of similar programs, I come out with varied figures, all of which are above where it seems like it should be.

Despite my argumentative nature, I do appreciate the reply.
posted by DerangedGoblin at 9:43 AM on September 21

If your advertising costs are $50/day, that will average out to $1520/month. If that is your only cost (e.g. distribution is free), then you will need $2520/month to get $1000/month in income. If you sell the product for $100 (rounded), then you will need to sell between 25-26 units/month ($2520/$100 = 25.2). You are anticipating selling 20 units/month which is not enough to break even.

I would expect sales to be "lumpy" -- not too many sales in summer, a lot in September and October, etc... Think of your customers and when they would want such a product. If sales are lumpy, you will need to sell more than 26 in your high volume months to make up for the lower or zero volume months. You may want to consider suspending advertising or finding a lower-cost method during the low volume months to reduce your overhead.

Hope this helps.
posted by elmay at 9:45 AM on September 21

Whoops. Bad edit. $2000 revenue - $1520 costs = $480 profit/month. Sorry bout that :).
posted by elmay at 9:47 AM on September 21

Perhaps I misunderstood -- I read "The catch is that some people will recognize this formula as the Four Hour WorkWeek formula. And it is except I'm not using a physical product." as meaning that your study materials were a reimplementation of Ferriss' ideas, rather than the idea that your -marketing strategy- was. Apologies if so! :)

As far as the marketing analysis goes: my advice would be to not conflate your tactical approach ("I'll buy a bunch of keywords!") with your product strategy ("I'll create and sell materials that teach people how to study!"). The latter determines whether people want to buy what you're hawking, and the former dictates how those people find out about you. Creating need is much, much harder than advertising a solution.

For example, If I was searching for "memory mnemonics" and came across your site, I'd not even look at it -- because the match was a synthetic keyword match, not an actual lining up of a product (study guides) and my need. I doubt 200,000 people/month are trying to solve a "how should I study more effectively?" problem, and if that's true then your proposed conversion numbers are inapplicable.
posted by ellF at 9:53 AM on September 21

$50 a day is cost per click. It's not going to be $50 so much as UP to $50. Assuming I'm paying .20 per click, that's 250 views a day. That means, basically, that is 1/500 people who were interested enough to click the ad by the product, then I break even. I don't know how likely that is, and figures I see for estimating how many people will buy the product after seeing a fairly professional page suggest .5% or 1%, which still means that if I actually DID spend $50 a day, then I would have 1 or 2 sales a day.

I want to point out that I don't really expect that kind of volume, not that that's gonna stop me from trying.

The lumpy sales point is very much appreciated, and is something I had not entirely thought of.
posted by DerangedGoblin at 9:53 AM on September 21

Why not also try actively pursing good, Glengarry-like, leads.

$0.20 please.
posted by ActingTheGoat at 10:12 AM on September 21

Tim Ferriss suggests assuming 1% of people searching for your term will click it, and 1% of them will buy the product.

This strikes me as the dumbest rule of thumb ever. The fraction of clickers who buy your product will depend on how many of them are convinced that the product is worth buying. No fixed percentage based on the averaged experiences of other people selling other products on other websites is going to be meaningfully accurate. You may as well read tea leaves.
posted by jon1270 at 10:32 AM on September 21 [1 favorite]

I have a membership site for which I charge a little under $100. I launched 6 months ago and so far net an average of $1,000 a month with no keyword purchases. My site shows business people how to apply a process I've developed. So I'd saying selling a course or course-like info is certainly doable.

Some thoughts (sorry for the length; too busy to edit):

Don't put all your eggs in the keywords basket. I'd recommend setting up a blog in addition to using keywords and a sell page. When you're asking people to spend a chunk of money, you need to seem like an expert. The one-page selling sites that so many gurus set up can cheapen your product, though clearly they work for some sellers. So in addition to your plan for keywords and a sales page, I'd recommend setting up a blog through which you share some of your techniques and show that you're a trustworthy and helpful person. So far, I market entirely through occasional mentions on my blog and an ad in the sidebar of my blog.

I avoided the traditional sell page because my target market is people in big corporations, who would reject that outright. Instead, the marketing site is a normal web site with multiple pages, screenshots of the product with notes about the benefits, a link to the free section of the product, and lots of testimonials. On my blog, I offer tips that are also covered in the paid product. When people buy access to the product, they're basically buying access to a far more structured and detailed presentation of the ideas that are in my blog.

Since your market is consumers, they're more likely to be okay with the traditional one-page sales site, but I still think a blog would humanize you and give you a way (through comments on other blogs) to establish yourself and get free traffic.

Also look at free, viral methods. A funny slideshow on Slideshare has worked for me; for the consumer market, you might do better with a YouTube video that presents your ideas but does it in a creative and funny way. It can be tricky to hit the right note (you want it to go viral because it's good, not because it's stunningly bad!).

Also, pay a lot of attention to your positioning. Make sure your product meets a clear and specific need that other, more widely known products aren't meeting, you're going to address a clear and specific audience that isn't being addressed, or your approach is clearly unique and effective. Don't make price your main differentiator, because then (1) you'll get only the price-sensitive customers, who tend to also be the high-maintenance ones and (2) you make yourself vulnerable to competitors who are willing to lower their price.

I started with PayPal but abandoned them within two months due to their horrendous "service." I went with Dharma Merchant Services for my merchant account, Authorize.net for the gateway, and e-Junkie for the shopping cart. My operating costs are minimal: merchant account fees, domain hosting, and $5/month for e-Junkie.

On preview:
"you've pretty much admitted to stealing a fairly well-known IP and rebranding it for your own commercial purposes. Anyone with a Google keyword search for the Four Hour Work Week would likely find this post, and if you were making any real money you could be sued if they decided to go after you." This is incorrect. The poster isn't selling Tim Ferriss's IP, they're applying it. The poster is developing a course on how to study, not a course on how to start an online business. They read the book and are following the advice, as are many, many other people (just look at Ferriss's forums). There's nothing illegal in that.

What Ferris did was clearly describe and popularize what marketers have been doing for years. I used to be in marketing. Most of his advice is solid, in my opinion, especially if you're going after the consumer market. I wouldn't, however, rely at all on his 1% formula. Way too much depends on your copy and whether you've clearly identified your market and their needs.

For comparison: I have 3k blog subscribers. I've sold the product to 64 people, most of whom (apparently) learned about it through my blog. So a very brutal and inexact figure for me is: "Send the product announcement to people who are already interested in the process and 2% will buy." These people are already qualified. The figure would be far lower if I were selling to complete strangers. In fact, it probably is lower than 2% because I doubt that everyone who bought the product is a blog subscriber. Some were passersby.

I took an organic approach to keywords, writing my marketing site copy to optimize for the words my best customers use, using keywords in page titles, etc. When I get more serious about marketing my product, I'll look at conversion rates for those keywords, but at this point I can say that search traffic is a very minimal source of income for me.
posted by PatoPata at 10:35 AM on September 21 [2 favorites]

P.S. More on response rate: To clarify, I didn't just send the product announcement to blog readers. I also mention the product occasionally in blog posts, as do commenters. So this isn't directly comparable to an email blast. It was one announcement, a second post about a month later announcing new pricing (effectively raising it), and an occasional mention in other posts. Interestingly, when I publish a new post, whether it directly mentions the product or not, I tend to get a few more sales.
posted by PatoPata at 10:47 AM on September 21

I wasn't entirely sure I'd get anyone who had actually done something so similar. The blog idea is a good one I might have to try. How did you get away with raising the price?
posted by DerangedGoblin at 10:51 AM on September 21

You might also think more about your pricing. If, as a consumer, I do comparison shopping and see most products selling for $200-300, then I might be skeptical of the one priced at $99.
posted by paulg at 11:57 AM on September 21

> I am also having a page made by a professional. Not just a white page with text that RANDOMLY GETS BIGGER AND BOLD.

FWIW, salescopy is rather counter-intuitive, in that the things you don't expect to sell well, often do-- and vice-versa. Oftentimes, vast sums of money and time have gone into the process of creating salespages that look sparse... or even ugly.

I'd echo the clickbank suggestion-- it's cheap to setup; you've a built-in marketing system; and you can abandon it at any time. The marketing system is important-- no doubt you're aware of the relative virtues of sizzle and steak, when it comes to the allure of a product... but far more important than either is the question of how close your restaurant is to the highway.

Actually, Ferris' 1% of 1% rule-of-thumb is fine... so long as you chop it in half, into 1% of .5%. You'll be able to optimize it up later to 1/1, and better, but start off with a lower projected conversion rate.

Since you're a young guy coming in out of the blue and asking for green, chop your projected price. Unless and until you get some money-making testimonials from ecstatic customers, $99 is way too much. Shoot for $17 to $47, and then price-test with split-testing software. At this point, credibility is much more important than price-- I'd even say sell at $7, but with the stipulation that they give you feedback after 1 week.

You might want to buy some cheap PLR-- rights to other people's products-- and offer these freebies in exchange for testimonials... and especially video testimonials.

Especially because you're offering info that's uncontroversial, I'd suggest, yes, doing the YouTube thing... but you'll want to define two things first:

a) Who your intended buyer is. Precisely visualize the age, sex, appearance, needs, and fears of your ideal customer. Expect at least 30% of your sales to come from one general type of customer-- and then aim your marketing at that one type. Don't just go by intuition-- after a sale, offer a bonus if they take a survey that reveals something about them.

b) Who *you* are. Or "are". That is, establish a character for yourself. Who is the goofball buddy/demonic alter-ego/son they never had/wise older brother/crazy ex-boyfriend/spiritual guru that your Target Customers would like to have in their lives?

Though you are selling a product, you are actually selling your credible promise of help. With that in mind, you might even consider *giving away* your product in exchange for your visitor's email address... or *several* of their friends' email addresses...

so as to build a large email list quickly...

and harvest testimonials...

and build a relationship of trust with your subscribers...

and then proceed to send them email about the limitless river of other people's products...

which you can take a 50-75% commission on, via Clickbank.
posted by darth_tedious at 12:03 PM on September 21

I raised the price by shortening the access time, shifting from annual to quarterly pricing. I did it to lower the entry price (but raise the annual) and to appease my merchant account provider, which didn't want me to charge for a full year at a time.

Say, for example, you offer 1 year of access to your materials for $X. Some people buy at that price, but the emails and questions you get suggest that the price is too high for many in your market. You also realize that most people could learn your stuff in 3 months and don't need the full year. So you change your pricing to offer 3 months of access for $X/3 (not $X/4). This effectively raises the price for a full year but lowers the entry point.

Of course, people could just use the site for 3 months and cancel before they get charged again, but you'd get more customers overall, which also means more referrals and a bigger list to sell related products to.

Another way to do it is to have a special introductory price for the first few months. Show the higher, standard price and the "special introductory rate." After awhile, remove the special introductory rate (after the usual "Last chance to buy at this rate!" warnings). You see that approach everywhere, of course, and it makes me cynical, but it apparently works.

I don't think anyone here can tell you which price is right, since we don't know your product or market. However, if others are getting $200 for the same type of info, I think it's safe to say that you risk cheapening your product by sticking a wildly lower price tag on it like $7. You also don't want to attract the cheapo consumer, because they can really turn into a big pain. In my market, at least, the people who resist paying a fair market price are also the people who need lots of technical support and ask far more than the usual number of questions, trying to get free consulting.

I do agree that you should be very generous in giving free access so you can get testimonials. You could also experiment with offering a subset of materials for a smaller price to get people hooked.
posted by PatoPata at 12:19 PM on September 21 [1 favorite]

> I think it's safe to say that you risk cheapening your product by sticking a wildly lower price tag on it like $7. You also don't want to attract the cheapo consumer, because they can really turn into a big pain. In my market, at least, the people who resist paying a fair market price are also the people who need lots of technical support and ask far more than the usual number of questions, trying to get free consulting.

Both these points are true-- sustained cheap prices do, in the long run, reduce credibility, and do attract the worst, most irritating and demanding customers.

But cheap prices are useful in the very beginning... so you can get the volume that attracts testimonials... which can be vital, when you are selling information.

Another approach is to

a) pitch a high price
b) offer a desirable freebie, in exchange for an email subscription
c) pitch a lower price, esp. in exchange for a survey, via email

The disadvantage to this approach is that you lose impulse buyers.

The upside is that your high price asserts value, while your ultimate low price converts sales... and you get the all-important feedback that

a) enables you to create a Target Customer profile
b) gives you the stuff of testimonials.
posted by darth_tedious at 12:40 PM on September 21

Would it be feasible to just say "For a limited time only $X" and call it a grand opening sale. Or to say, "For a limited time only, $X if you submit a testimonial!" to encourage testimonials but not necessarily actually enforce it so that I'm technically just selling it for that price?

The speed reading course was going to be my freebie and differentiator. The idea being that after seeing the prices of programs that only taught speed reading, I not only beat their price, but also included a speed reading course. Does that seem like enough for a freebie?
posted by DerangedGoblin at 12:49 PM on September 21

I should note that the speed reading course is shorter than the other courses. Which seems like a bad thing, but I'm thinking it makes it sound more like a free extra and not just some random part of the product that I've decided to call an extra. I could offer that for free if they sign up for a free newsletter. It gives a good feel for the rest of the course and such.
posted by DerangedGoblin at 12:52 PM on September 21

>Would it be feasible to just say "For a limited time only $X" and call it a grand opening sale.

Yes. But put a time limit-- either use code to make the dates dynamic (ending on today+N days), or even hard-code the date: October 15th, for example.

>Or to say, "For a limited time only, $X if you submit a testimonial!" to encourage testimonials but not necessarily actually enforce it so that I'm technically just selling it for that price?

Yes, but don't ask for a testimonial, per se. Offer participation in your Quality Assurance Feedback Program.... which consists of them having to fill out a survey, a week after they buy.

Remember that the overwhelming majority of buyers and even customers will flake out on anything that requires effort or attention... so you'll get many fewer than you ask for. And that's fine... because you want the enthusiastic ones.

You can even run BOTH prices on the same page-- I've found that having a high price *and* a low price, right next to each other, produces higher sales than a low price does, on its own.

>The speed reading course was going to be my freebie and differentiator.

Sure. You can even put an affiliate link to other people's sales pages, where they are selling speed reading courses... so

a) customers know that what you're offering free might otherwise cost money
b) if they do buy elsewhere, you get a cut of the sale.

Also, as someone suggested above, the size of the market might be an issue, if only because there's a ton of free info on mnemonics available. You might want to combine your offering with something like a subliminal or hypnotic audio. Remember, you are selling "easy" and "no effort"-- and anything that adds "easy" to your product will make selling your product yet more easy.

Also, you mention you're hiring a designer-- later, when you can afford it, you might want to look into a hiring a (cheap, novice) copywriter. It really is the words and the emotional arguments that sell, not the pictures... and sometimes visually attractive sites actually reduce sales.

For more info on these topics, hang out on warriorforum.com .
posted by darth_tedious at 1:05 PM on September 21

I really am interested in the affiliate stuff, but I want to see how I do "raw," for lack of a better term. How well I do in the initial stages is going to determine how far and how quick I dive into things like clickbank or regular affiliate type deals.

I appreciate the advice on having both prices. I think that's definitely what I'll do, assuming I understand right. You mean the type of things that have "$299" but it's crossed out and "99.99" is beside it?

I'm slowly coming up with more and more things to bundle with the product as the product itself comes together. If anyone else has any more ideas for making this work, please don't hold back.
posted by DerangedGoblin at 4:14 PM on September 22

> You mean the type of things that have "$299" but it's crossed out and "99.99" is beside it?

Actually, in that test, I did something stranger:

I put two different active and working buy links-- the high price, then "if you swear to send in feedback, you can use this lower price" or something like that, and then put a lower price immediately below it.

Some people actually paid the higher price.
posted by darth_tedious at 4:39 PM on September 22