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The Short Guide on How to Develop and Select a Product or Service That Will Work With Performance Marketing Strategies.

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This Blog Post's Table of Contents

Everyday we see people drive through dangerous intersections without bothering to look to see if the intersections are clear of oncoming traffic. These persons assume that there is no danger to themselves. Study this blog post carefully. The following signs may keep you from getting hurt:

  • Don’t make assumptions about your product.
  • Price your product competitively.
  • Select your product correctly.
  • Try for repeat sales.

Don’t Make Assumptions About Your Product

Evaluation of the product or service is important because without a highly desirable product, failure is assured.

An old story best illustrates this point:

A large food manufacturer decided it wanted to go into the dog food business. Company officials developed what they perceived to be a good and potentially profitable product.

They hired one of the most prestigious industrial design firms in the country to design the food packages. The company retained a nationally known ad agency to put together a mass media blitz.

First-time sales were spectacular (because of large promotional allowances given to distributors for buying opening inventory) but then they fizzled to near nothing.

Things were getting desperate until one morning in a meeting of regional sales staff, threatened with the loss of their jobs, the sales manager demanded to know why sales were so poor.

A large, soft-spoken salesman stood and made the following statement: “Sir, the problem is simple. The dogs won’t eat the crap!”

The problem was solved. The company had failed to investigate what the consumer liked and didn’t like. Don’t make assumptions.

The preceding example is typical of a major manufacturer’s launching a retail merchandise item into the national market. In performance marketing fewer mistakes of this magnitude are ever made.

The reason is most performance marketers start out with a single product line and gradually expand into other lines and other markets. By carefully building a specialized database, the performance marketer measures sales and profits against marketing costs.

Gradually the line is expanded into new markets. Those showing real potential are spun off into separate ventures (e.g. e-commerce businesses) going to special interest markets.

Example: This company was started in the back room of a small retail store. The owner started making and buying various fishing lures to sell to his customers.

A large lake nearby was very popular with his fishermen patrons. From this humble beginning, the owner expanded into an e-commerce business of fishing lures. Sales took off.

Next he added rods and reels and assorted fishing gear, then hunting equipment and apparel. That too was very successful.

His next venture was into heavy equipment like boats and motors. Now he has spun off the light tackle equipment into separate e-commerce shops: fly fishing, saltwater fishing and bass fishing. The clothing line was expanded from specialized hunting and fishing apparel into general outdoor apparel with its own e-commerce venture.

Price Your Product Competitively

Pricing the product or service can make the difference between success and failure. It is necessary to build into the selling price the costs of marketing and fulfillment.

You also need to evaluate the optimum price of an item that can be sold profitably by performance marketing. In order to make a profit on items costing little, a company must generate a very high volume of business and have additional, more profitable items to sell to the customer database they create by selling low-cost items.

  1. Many coaching / home-study courses businesses promoted via Facebook ads now run items costing over $400.00. They avoid the problem of asking for that much cash in one payment by asking for four or five equal payments of say $99.00 per month. On the other end of the spectrum are expensive travel tours being sold for $5,000 or more. Those items usually start with a substantial deposit and full payment at least 30 days before departure. The tour company usually charges a substantial penalty for cancellation.
  2. Some people call the following – $14.95, $19.95, $24.95, $29.95 – department store prices because each occurs at a psychological barrier in the buyer’s mind. For example, someone will spend $19.95 for an item but would not spend $20.00! Department store prices seem to work in nearly every category of products promoted via performance marketing methods.

Remember to consider all costs when setting a price. If the price is too low, the program may generate a very high volume of sales yet lose money. If the price is too high, sales may be insufficient to cover those same expenses.

It is easy to fall into this price trap of high volume and low or no profit by the time all sales and fulfillment costs are covered.

The best way to avoid the problem is to first carefully evaluate how much volume is needed at different price points to break even and make a profit.

Using the projected profit-producing prices as a guide, test two or three different prices to see which one works. You will learn which price will produce the largest volume of sales and whether your volume projections are realistic.

But there’s more to pricing. People interested in starting a performance marketing program see companies running Facebook ads or Google Ads selling low-cost items and assume that those companies are making money selling items in that price range.

So these neophytes frequently attempt to do the same sort of thing. These beginners usually fail to perceive the motive behind low-cost-item advertising.

Usually, companies that have on-going programs selling low-cost items direct by using cold traffic do so to build a customer database and identify buyers with precise buying behaviors and interests.

This brings us to the next important consideration.

Knowing How Much to Spend to Make a Sale

This is vital to the success of any performance marketing program, yet numerous companies fail to adequately consider that fact.

To make this determination, carefully price the various media being considered, such as online display ads, web push, SMS, direct mail, space advertising, telemarketing and TV etc.

To avoid some expensive surprises later, take care that all estimates include the following costs: cost of goods, lead generation, cost of placing ads, and fulfillment expenses. For example, if television is part of the program, costs should be included for film production, talent, distribution to television stations and time charges.

Hire a Consultant to Help Prepare Cost Estimates

If at this stage all budget figures are based on estimated response rates, not actual rates, it might be prudent to retain a consultant familiar with the type of business being considered to help you prepare cost estimates and recommend what media to use.

The consultant should have current knowledge of response rates in the media selected. If a consultant is retained, take care that you understand the information provided.

General advertising agencies unfamiliar with direct-response or performance marketing may mix response rates of coupon promotions for retailers with direct-response sales rates.

While the two are related, direct sales offers usually receive fewer responses.

On the other hand, response rates to your own customer database (if you have one) will probably be much higher than a coupon offer from a retailer. Also remember, response rates from your customer database are much higher than from any rented list or cold traffic.

It is important to determine exactly what was promoted, by which medium and to whom, when evaluating claims about how much response can be generated by any particular type of campaign.

These facts need to be known before making projections of potential response rates from any advertising media.

When you hire a consultant, be prepared to answer lots of questions. It is absolutely necessary to be forthright with whomever is retained. The quality of the services performed will to a large extent be no better than the information you provide.

Here’s an old story about consultants that you may enjoy:

A large firm hired a consultant to help the company bring to market a new product. The president of the company was sitting in on the initial meeting and got very irritated. He demanded of the consultant, “Why do you always answer a question with a question?” The consultant responded with: “Why do you ask?”

If you are wondering what questions you need to be prepared to answer, see Performance Marketing Checklist #2: Launching a Successful Performance Marketing Program.

Select Your Product Carefully

When making your product selections ask the following questions:

Are There Any Special Preconditions for Product Selection?

Ideally you will have found some common desire, need or subconscious fear that can be related to the product you wish to sell. Once found, this can become the stimulus or motivation used to sell the product.

Remember, in The Guide to Crafting the Performance Marketing Offer Step By Step you were reminded that the principal motivators in advertising are grounded in need, greed, fear and sex.

Is the Product Readily Available?

Other questions to consider before selecting the product are:

  • Is the product or service readily available at numerous retail or business-to-business outlets?
  • Is its full potential being adequately exploited by those marketing it?

If the answers are yes, continue looking until you find a product that offers something different from the competitors’ products.

Is Product Easy to Deliver?

  • Is the product easy and inexpensive to ship?
  • Can it be shipped by regular postal carrier or by a courier service? Or is it so heavy that truck shipment will be required?
  • Is it so fragile that it will require special handling and packaging material?
  • Is it a home study course in an electronic form but your target group’s preferred method of payment is cash on delivery?

Can More Products Be Sold to the Same Market?

When a company is just starting out in performance marketing and has several different products to sell, one of the first questions to examine is whether each of these products will appeal to the same market segment.

If they do, selling additional products to the same market will be much easier, and the company is more likely to make a profit.

If the company’s other products don’t appeal to the same market, the company has two major problems.

  • The first is that no additional sales are likely to be made to the customer purchasing the first product offered. Remember, the first sale is seldom profitable. Multiple sales bring greater profits.
  • The next problem will be that each product will require the identification of totally new target audiences, traffic sources, and publications in which to place space advertising.

The other products will also require creation of separate promotional pieces (i.e. landing pages, mailings, banners etc.) and fulfillment services.

Such problems increase sales expense and weaken overall effectiveness and performance. It is much better for a company to start with a base product, then expand that line before branching out into other markets.

Try for Repeat Sales

Most performance marketers don’t make money on the first sale to a new customer. That’s why they will frequently use low-cost items to build a customer database and to identify lifestyle and any special interests of the buyer.

Once such facts are known, they can sell those customers profitable items that satisfy their special interests and lifestyles.

If the company has but one product to sell, it loses this very important opportunity to make money.

On most performance marketing offers, a two-time buyer is twice as likely to buy again as a one-time buyer. A one-time buyer is even more likely to buy a second time than a well-qualified, new prospect is likely to buy the first time.

Summary

  1. Avoid making assumptions about product selections and price. Start with a highly specialized market.
  2. Set prices based on the market selected and the amount of competition your company is likely to have.
  3. Remember, repeat sales are the key to success.

If you like this blog post and want more expert advice on performance marketing, direct marketing, direct response advertising, please share it. Thank you!

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The expert's thoughts on direct response - growth hacking - performance-based marketing activities - DIRECT MARKETING

About Me, Rafal Lipnicki.

the direct / performance marketing consultant with a strange sounding name

Who.

Not your usual "guru" but a real-world performance marketing & innovation consultant based in Europe and an experienced senior executive at leading multinational companies.

What and Where.

I am a consultant for hire, working remotely and on-site all over the world (but Europe is always preferred). See my consulting services page for details.

How.

Contrarian advice most of the time. Document-based audits, workshops, one-off projects, mentoring programs, and more.

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