Why Most People Fail at Making Online Products (And How You Can Win)
May 08th, 2012 - 63 Comments
A confession: I’ve left millions of dollars on the table by not developing a course about how to build your own online product and sell it on the Internet. My courses have sold well over $100,000 in one hour, and I get asked about how I did it over and over.
It would be relatively easy to teach. I could build a product teaching you how to build a product (now we’re getting meta), including sharing actual sales data, the tactics I use for product launches, my sales copy, the biggest mistakes I’ve made, and conversion rates for various techniques. The product would handily make me 7 figures.
Unfortunately, the blunt truth is, I don’t believe most people will ever be successful building online products. This isn’t just a condescending “I can do it but you can’t” view. No, the data backs this up. The vast majority of people who try to create online products fail — like 99%+. This is the elephant graveyard where the dream of passive income goes to die.
See, to succeed with an online product, not only do you have to be extremely good at your area of expertise and know the basics of marketing — including identifying your niche, pricing, finding customers, etc — you then have to learn all about productization: packaging, upsells, cross-sells, advertising, email funnels, JVs/affiliates, refunds, customer service, sales-page construction, A/B testing, continuity programs, etc.
Unlikely. If we’re being honest, most people have enough trouble mastering the first part of the equation (creating something other people will pay for), much less learning the rare skills of productization. Think about it: Would a personal trainer have you do 400-lb squats on Day 1? No, he would start you off with light lifting to perfect your form.
Why would I sell something — even if it could make me millions of dollars — when I know the vast majority of people won’t be successful? The money does not motivate me if you’re not seeing measurable success. Remember, IWT was never about making me money. It was and is about behavioral change. There are tons of ways I could make easy money, but I have no interest in creating a product about creating a product when the vast majority of people will fail. (I encourage you to read The $75,000 Email, a story about turning down easy money because I simply wasn’t interested in it.)
And yet people continue to email me about launching an online product. Recently, there have been more and more successful “micro-products,” which don’t require years of investment and waiting to judge success. Instead, many of these products are high-quality and take only a few months to produce. And with new marketing techniques, they can quickly produce ROI. If the product fails, it’s only a few months and a few hundred bucks out of your life. But if it succeeds, it could be a game-changer.
I haven’t written much about these products, but today, I’ve invited my friend Chris Guillebeau to write about how to build an online product. Chris writes a fascinating blog called The Art of Non Conformity, where he catalogues his goal of traveling to every country by the age of 35 (a goal he’ll hit next year). He’s created several products and has had multiple $100,000+ launch days, so you should listen to him. In fact, he reveals specific numbers below.
Beneath his friendly exterior (and he really is a friendly guy, a lot nicer than I am) is an extremely sophisticated marketing mind that’s built a massive business with customers around the world. And in this post, he’ll show you how to begin creating a product for only $100.
Chris — take it away.
Why Most People Fail at Making Online Products (And How You Can Win)
The infoproduct was launched with much fanfare. A pre-launch campaign, a series of guest posts to bring the message to a new audience, the recruitment of affiliates who would all sound the alarm on the big day.
But then the big day came, and nothing happened. Or at least, nothing exciting happened. A few people purchased, perhaps even a decent number… but far from the expected flood of customers. After a day or two, sales slowed to a trickle.
What went wrong?
One way to look at it is to say that the person wasn’t ready. They should have spent more time paying dues, serving as an apprentice, and learning from others.
But consider the case of two individuals, both of whom created massive success by ignoring these prerequisites… and then consider what other people usually get wrong when trying to replicate these successes.
Case #1: Brett Kelly
Two years ago, Brett had a great family, a steady commitment to Happy Hour microbrews, and a full set of tattoos. What he didn’t have was a huge Twitter network (just 1,000 followers at the time) or a popular blog. He wasn’t a WordPress celebrity, and he hadn’t spent years learning online marketing.
What he did have, however, was a passion for Evernote, the free software that saves “everything” in the cloud. Brett noticed that while there were several Japanese language manuals for helping users get the most of Evernote, there were none in English. Thus he set out to create Evernote Essentials, a comprehensive guide offering tips, tutorials, and shortcuts.
Brett offered the guide online for $25 and made $10,000 in the first couple of days after launch, allowing his wife Joann to quit her job and stay home from the kids. Over the next few months, sales were consistent, surpassing $300 on most days and never slowing down.
I wrote about Brett’s whole story in my new book, but I had to keep revising the details as his income grew. At first I said it was an $80,000 project, making almost that much each year in profit. Then Brett wrote in with a correction, which I forwarded to my editor. “It’s now on track to clear six-figures.”
Another month went by and Brett wrote in with another correction, which I dutifully sent along. “Uh, it’s a $120,000 ebook now.” Then it was $160,000. By that point, my editor had stopped responding to me, so I just sent one final addendum: “Just say that it makes a lot of money.”
Why has this product been so successful, without the usual formula of affiliate recruitment and a “big audience push”? It’s simple: Brett made something useful. It was simple to make, easy to understand, and the marketplace responded well.
Case #2: Brandon Pearce
In 2009, Brandon Pearce was living in Utah and had a day job as an engineer while teaching music on the side. But Brandon was also intensely curious, and wanted to combine an interest in technology with his passion for music education. As he thought about colleagues he knew, he found the convergence point between his skill and what they needed.
“Music teachers don’t want to deal with business administration; they want to teach music,” he told me. “But in the typical music teacher’s workday, they have to spend much of their time dealing with administrative tasks.” Scheduling, rescheduling, sending reminders—in addition to time, all these things take up a lot of attention and distract from teaching. Furthermore, many music teachers aren’t making all the money they should, since payments are sometimes overlooked and students fail to show up.
Brandon didn’t intend to create a business at first; he just wanted to solve what he called the “disorganized music teacher problem” for himself. The answer was Music Teacher’s Helper, an interface that Brandon created for personal use before turning it into a one-stop platform for music teachers of all kinds. The teachers could create their own websites (without having any technical skills) and handle all aspects of scheduling and billing, thus enabling them to focus on the actual teaching they enjoyed.
The service is available in several different versions, including a free version for limited use and going up to a $588 a year version depending on the number of students.
Three years later, Brandon’s life is quite different. Instead of living in Utah, he now wakes up in sunny Escazú, Costa Rica, where he lives with his wife and three young daughters. He has ten employees living in different places around the world. He carefully tracks his time and estimates that he spends eight to fifteen hours a week directly related to the business. The rest of his time is spent with his family and on various side projects that he pursues for fun.
Oh, and one more thing: Music Teacher’s Helper is currently on track to earn at least $360,000 a year. Because his customers commit for the long-term and pay monthly, it’s unlikely that this number will ever go down. Instead, it will continue to increase as more and more music teachers join the ranks.
Are stories like Brett’s and Brandon’s unusual? Yes and no.
When most people launch an online product for the first time, they don’t have results like these. Instead, results are more typical of the example from the beginning of the post: lots of work, but little reward.
But here’s my assertion: You don’t need to build a huge audience or wait forever to make an online product. You do, however, need to be sure that what you offer is actually valuable and desirable.
The first time I made an online product, I had just started blogging a few months earlier. A manifesto I published had done well and I was actively recruiting new readers, but my subscriber count was still less than 2,000 people.
As I traveled the world, writing about my trips, I noticed that a few recurring questions kept popping up in my Inbox. Everyone wanted to know the same things: how I book airfare, where the best deals were, how to set up a round-the-world plane ticket, and so on. (Bonus lesson: if you find yourself being asked the same kinds of questions over and over, pay attention.)
In response, I decided to create a small ebook called “Discount Airfare Guide.” I know—what a boring title. I launched the product with little fanfare and no hype, just a sense of curiosity as to how my small readership would respond.
The first day I sold a grand total of 35 copies for $25 each, a profit of just over $800. Even though the product was fairly simple, I had still put a ton of work into it. I’d estimate the time cost to be somewhere around 50 hours, so my initial earnings-per-hour rate was less than $20. Seventeen bucks an hour wasn’t bad, of course, but I’d hardly end up crashing Sethi Mansion at that rate.
Even though the product had a tiny launch and a poor initial conversion rate, I was comforted by two facts:
1. I had created an asset. Now that this product was done, I didn’t have to do anything else for it. It could sell poorly, but as long as it continued to sell at all, I’d essentially be making free money.
2. I knew the model would work. At first, I avoided creating a complex product, offering more than one pricing option, adding audio and video, thinking about how I’d get paid after the sale, and so on—but once I realized I could succeed even with a basic online product, I got to work building the next one out further.
The next product was the Working for Yourself guide. It still wasn’t fancy, but it was a bit more deliberate. I put a lot more than 50 hours into it—probably closer to 100 hours or more. I offered two price tiers for the guide, and I recorded a couple of audio sessions to accompany the written text.
On the day of launch, I pressed the button to make it live… and by that afternoon it had sold $5,000 in copies. This may be a small number in the eyes of some internet marketers, but I felt incredibly happy and grateful.
Later I would go on to sell $100,000 in a day, multiple times. I’d figure out how to build a continuity program with thousands of members paying every month. But all of those things were secondary—the real success started with understanding that online products could actually work if I took the time to create them properly.
What makes the difference between success and failure—and how can you avoid falling on your face? To be more like Brett or Brandon and less like the all-too-common failure story, it’s not that hard. You just need to beware of a few common (but deadly) mistakes that most people make when offering an online product for the first time.
Mistake #1: Failing to understand what customers really want.
The two case studies hit on something significant—the perception of value combined with a focus on a core need. Whatever you choose to create, remember that most of us want more of some things and less of others. We want more time, money, love, sex, affirmation, and validation. Meanwhile, we want less stress, uncertainty, fear, and hassle.
These characteristics are connected to a singular, simple concept: happiness. The more you can connect your project to happiness, the better. Focus your efforts on adding more of what customers want or removing something that causes them pain, and that’s where you’ll find the central promise of a strong online product.
By the way, most people will not buy generic, self-help info. (Yes, some might—but the point is, most people won’t.) Someone wrote in and suggested that I create the Unconventional Guide to Mentoring. I said that it sounds like a great free project. Regardless of its merit, the odds that a lot of people would buy that guide are quite low.
Instead, you need specificity. You need actionable info. “Earn 1k” is a good example from Ramit, and “Earn 100,000 Frequent Flyer Miles a Year (enough for four plane tickets)” is one from me.
Mistake #2: Misunderstanding the whole concept of “target market.”
To understand the people who will buy what you sell, stop asking your friends what they think of your ideas. First of all, your friends don’t want to tell you that your idea sucks. Instead, they’ll usually say, “Dude, that’s great!”
Consider this recent conversation between Ramit and me:
Chris: Ramit, I love you. What do you think about my new project, “Growing seeds for fun and profit?” I’m trying to decide on the right pricing model.
Ramit: Check out all my Starwood points! I’m going to Vegas and upgrading to a suite!
Among other concerns, your friends probably don’t actually know if the idea sucks or not. Unless you’re selling Mary Kay or Amway, your friends are not your ideal customers—or at least, they shouldn’t be. It’s not really about a selectively-defined “target market” anyway—it’s about the people who will actually buy what you sell.
When you do ask questions of advisors or potential customers, be sure to ask questions that will actually be useful. Asking “Do you think this is a good idea?” is the WRONG question. Asking “Would you buy this?” and “If so, how much would you pay for it?” is much better.
Mistake #3: Focusing too much on the product, and not enough on the marketing.
The best graphic design in the world will not matter if no one buys your product. In fact, it’s not about the “quality” of your product at all—it’s about the perceived usefulness. This factor matters more than anything else.
Do not slave away for months in a cave, making something that isn’t proven to work. That’s why Ramit conducts so much research in advance of creating a new product—he wants to make sure his time is spent well, so he can spend more of it checking out the set of jacuzzis in his Vegas living room.
Instead of building the product first, construct the offer first. Then, write the sales letter or whatever copy you will use when pitching it. Think about the ultimate value you will deliver to people and focus on that throughout. Then build the actual product with this end-goal in mind. Remember, even if you have a 3% conversion rate, 97% of people will never see your actual product—so don’t neglect the parts they will see.
Mistake #4: Failing to change your customers’ lives.
When you make something for the world, it doesn’t matter how many pages the PDF is, how much you slaved over the audio recordings, or how awesome YOU are. What matters is the ultimate marketing question: “What’s in it for me?”
Fundamentally, the product should change people’s lives. You may be familiar with the idea of focusing on benefits instead of features. This is good advice, but what ultimately matters is what will be different after your customer experiences your product.
One final note: no matter how you focus your money-making efforts, a lot of people will encourage you to “become comfortable with failure” and “learn to fail quickly.” WTF? Here’s a better idea: become comfortable with success. Learn to succeed quickly. You can start with your very first project and hit the jackpot, just like Brett and Brandon did.
In different ways, Brandon and Brett show the power of creating powerful online products that earn significant money—without being experienced or having a huge audience.
Useful. Desirable. Money in the bank. Forget about failure—follow this model and you’ll succeed.
Chris Guillebeau’s new book, The $100 Startup, chronicles the lessons of 70 ordinary people who created businesses with no special skills and a small amount of money. He also writes for a small army of remarkable people at ChrisGuillebeau.com.
I believe you can learn from ANYONE -- even if you don’t agree with 100% of their views. Years ...Read More