Small Business Marketing Insight Tip #8 - How much is enough ecommerce leverage?

(photocredit: annia316)

How much do you really need? Depends...

Marketing is a numbers scene. Really. Look, I've told you about the Bell Curve and Leverage. They work together.

You're going to need several hundred products offered at a price which will give you, on average, your targetted weekly income. Figure about 300-500 products, selling for $10-$30 or more.

Reason? Bell Curve. About 3-5% of your customers will buy. About 20% of those products will be producing the bulk of your sales.

500 products - 25 (5%) might sell in a given week (although 2% is more common). That will net you $200-$500 per week, @ $20/product.

Seriously. Do the math.

Does this shoot you in the get-rich-quick foot? You bet it does. How long does it take to set up several hundred products? Weeks, if not months. Do most people do this? No.

What are the exceptions to this?

• Selling very high-end products to an exclusive clientele. (Radiological measuring devices to researchers.) Only have to sell one every year. But you have to really, really know your customers. Also means your operating budget runs by swings - as do your taxes if you happen to sell more than one in any fiscal year.
• Having a loyal clientele which you service very, very closely. Like MAC buyers.

What do those two exceptions have in common? Having all your eggs in one basket and watching that basket very carefully.

But if you are just starting out - the trick is to build up a large inventory and track these to make sure you don't have duds in them.

What you must do at every chance is to get subscribers and take very good care of them as clients - not customers.

The numbers game tells you what the average herd/tribe "customer" reacts. But what you want to do is to get these turned into clients and have them buy on a repeating basis.

Let's look at these numbers again, saying that you have 2% turned into subscribers every week:

1. First week - 3% buy, 2% are now subscribing regulars.
2. Second week - 3% buy, plus the 2% from the week before = 5%. Another 2% added as clients.
3. Third week - 3% buy, plus the 4% = 7%. You now add another 2% as clients.
4. And so on.

So, your income in week one is, say, $300. Week two - $500. Week three - $700.

Does this work out exactly like that? No. But having recurring customers does make your income go up - and is the only reason that people really get more than 2-5% on any offering, any sales page.

There is the odd "fluke" where a person gets 50% conversion from a single product - but what did that person do? He found a niche of clients who buy anything having to do with a certain product or brand. He tapped into an already converted body of clients - which someone else did all the work to create. Fads are made of this. What kills a fad? Lots of salespeople climbing in and poorly servicing the existing clients.

Too simple? Maybe.

My own research into people who don't make it in Internet Marketing and small business tends to show this simple pattern. Would you shop in a store if it only stocked one type of bread, one brand of cereal and one fruit? Big store - three products. Nope - stores know this, especially the Big-Box boys, like Wal-Mart.

Does the reverse work? Sure - a great bicycle store has what? Lots and lots of different brands of bicycles AND a great bicycle repairman - plus a policy that if you bought it here, repair parts are at cost and labor is free. (And would you like a ringing bell and larger tires to go with that?)

So, starting out, what do you need to do? Get tons of products, great sales pages for each one, everyone tied to their appropriate niche keywords. Make sure that people can subscribe to your site in a dozen ways, especially through email. And then really, really service that client you have and bend over backwards to make sure they are completely satisfied with what they have gotten from you in the past.

But the guys who expect to get rich quick are doing what? Putting up some expensive PPC ads for just a few products and quitting after they don't sell well. You can lose your shirt on eBay just in their fees - if you don't know what you are doing. But the guys who have made it to Power Seller status (which is a measly $1K per month - not enough to live on) are selling hundreds of items - not just a few. They can't sell a hundred of one item every week at any decent price. (But telemarketer scammers know this and sell eBay training to people who can't make that training work - and oh, yes, these scammers tell people to buy a lot of PPC ads...)

To be successful on eBay, you have to offer hundreds of items and expect that, by averages, you will get maybe 30-50% successful auctions every week. After fees and other expenses, you should eventually start to make a living off eBay. But track your other costs - how long does it take to track, return email, package, ship, give feedback on a couple hundred diverse items? That's right - if you're lucky, you'll get them all done in time to start the next week. You'll have to have time to research existing items and always hunt for new ones. Expensive in terms of time and money overheads.

In short, making a living on eBay is just as much hard work as it is anywhere else.

The people who don't want to work hard don't make it. They need the government subsidies and factory jobs - lots of structure. Entrepreneurs are driven to succeed by fulfilling their own burning desires - they are doing what they really want to be doing in life. And so they become their own boss and sell their products to the people who work in factories and get paid for spending their lives there.

Only 3% make it. That's the way its set up. And the way it's always been, no matter what type of government, what party is in charge, dictatorship, democracy, anarchy. The only thing different is that people can make a lot more money in a free-market economy. More people don't become outrageously successful, but the overall standard and quality of living is much higher.

Bell Curve. Leverage.

Use them and win.

And - oh, yes - Follow your Bliss.

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Disagree? Post your comment, please. I'd love to hear from you.

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Update - a few minutes later:

Oh - found a hole in this math. If you have one customer - they have to look at all 500 items. Won't happen.

This is figuring that you have 100 customers looking at each of your 500 products.

Obviously, if you only have a handful of viewers, you'll have 3% of a handful of conversions - maybe one a month. 12 sales a year won't pay your bandwidth.

That's why PPC works, somewhat. It can get people to your site - and has a much wider audience than you could find on your own.

But, say you put a video up for each product on YouTube, or a presentation up on slideshare (even better). Means you can get hundreds of people looking at your stuff.

That's why eBay is used by scammers to get people hooked. Millions of potential customers searching for stuff - they are mostly pre-sold already. Easy to get started. However, the people fail when they build their own site and they find that they can't 1) get people to their site in any volume, and 2) get any decent percentage of those few to convert.

The scam training says to a) get your buyers to come to your site to buy there (which ebay really discourages), or b) set up an (expensive) eBay storefront.

The one success I've seen is to sell a CD on eBay which sends the person online and gets their email with a free subscription to a "members only" site - and that follows the above scenario I laid out. Get your customers converted over to subscribers. And use eBay as a lead generation site. The more of these CD's you sell (this was burned on a local machine with a paste-on label and mailed regular first class - all for $14, an overhead of maybe a buck-fifty. And if they had offerered me more than just what-goes-for-average service I might have kept up subscribing to their emails.)

[And note, the scammers don't tell you how to get subscribers to your email autoresponder. Or anything about RSS subscriptions or social media subscribers...]

And that is the crux of Internet Marketing. It's a numbers game - and those who are in the top positions of the search engines get the bulk of the traffic. The other option is to pay high eBay and PPC fees so people will come and buy your stuff. Your choice - spend more time getting top SERPs or pay more money to get their faster.

What consumers really want - not what media and politicians think...

(photo credit: nzgabriel)

(A work in progress...)

Where are we going and how?
Consumers Herd, Politicians and Media Only Follow...

Some interesting data converge:

• Bell Curve says that 80% of any group are simply consumers, not market leaders or leaders at all. They buy what everyone else is buying. And this Bell Curve describes everything we do - everything. Call it the Pareto Principle, or the Long Tail - it's the same deal.
  
• Media feeds this bulk group with uniform tabloid-style "journalism". Most of their reporting is death, dying, destruction, and the latest celebrity gossip. Academic ideals on a "journalist's code" are really just ways to sell their classes and courses, not produce real change. (There is no such thing as a "public's right to know" - it's only a justification for feeding their sensationalism addictions.)
  
• Political parties have both become more split and diverse. There is a growing "center" which is neither Donkey or Elephant, but will vote split-ticket with abandon. Consider all those in California who voted in Obama and out (for the 2nd time) gay marriage.

So the people who thought they actually "controlled" these herds of consumers are finding that they really are just following the herd themselves.

And as the Internet becomes more used and widespread, that herd is becoming more "niche-fied" - meaning that people are able to find and stay within the niches they want and feel comfortable with. So the world has become more and more "long-tail". And there are fewer 1950's style "big head" type masses. So customers have more and more choice - because it's now possible. Meaning that there is no Model T in every color - black. Ford had to succumb to demand for different colored cars - but his Model A became one of his biggest hits when he did so. Beginning of the Long Tail.

The simplicities of the Bell Curve/Long Tail:

• Business is always working to find what people need and make these into what they want.
• People need basics, necessities. People what what makes them feel good.
• Fads are wants which don't line up with needs. Trends are wants which align to needs. Blips are trends which aren't efficiently linked/associated with needs. Movements are wants and needs closely aligned. Evolution is a series of movements.
• Generally, all cultures trend toward improved survival. (An overall observation is that as cultures improve their peoples' quality of living, birth rates decline and environmental care increases - as does investment in other "humanities".)
• To date, the most effective way of improving quality of living globally is to let free-market commerce continue - as this brings higher-paying jobs to low-wage areas, as well as humanitarian concepts such as "human rights". The least effective methods of social reform has been by any government agency or dictator or King.
  
• And what is all this but letting people chose their own way-of-life niches?
  
• As communication improves, choice improves - and responsibility increases as a person will now hear about their bad choice from their neighbors. That is how environmentalism works with commercial interests to improve things.
  

Example: If the enviros' ideas cause the cost of doing business to raise, business will increase the cost of their product - when that product cost gets too high, people will quit buying it. Too many products with too high cost - and the business moves out of that area = net loss of living quality, unless that product was really more a want than a need. A business that can tell people that their higher costs are due to meeting environmental issues, will cause either acceptance of their higher prices, a lessening of the pressure by the enviros (and so reducing prices) - or the business still can't make a profit and shuts down.

Example: Taxes. California found out that when it raises taxes on the rich - they move out of state and take their businesses with them. Net result: fewer million/billion-aires living in state and lower tax revenue. Factually, this is happening on both coasts - the heavy population areas try to soak the rich to pay for public services. However, the smart rich are much quicker than governments and reorganize their businesses so that they no longer fall under than new rule, either before the rule goes into effect or quickly after.

Example: Tax breaks. California also used to have a credit for installing solar panels. I knew some friends who started and kept a business going of just building and installing solar panels in California. Made a mint. When the tax credit dropped, they dissolved their business. Went somewhere else and did other things.

Example: Subsidies/Welfare. For decades, there were payments to low income families which had fatherless children - single moms. Result was an increase in numbers of single mothers with lots of kids. The system could be gained so that they didn't have to get jobs, just keep having kids. A change in this system got the majority of these people into at least part-time job under threat of no welfare payments at all. And the numbers of teen pregnancies dropped for awhile, as well as causing an increase in marriages staying together. Freakonomics? - Yes, and no.

Example: Want to get rid of gang activity? Clean up the neighborhood and paint out all graffiti. New York drastically dropped it's crime rate by cleaning up the graffiti off its subway cars, and also cracking down on people avoiding tolls to those subways. (See Gladwell's "Tipping Point.")Enforced the rule of law - which exists to protect quality of life interests, really nothing else. Laws are changed when they are percieved to decrease some population segments' quality of living.

Example: Rise of home schooling due to failures of government-sponsored schools. Spelling Bee and Geography Bee winners are now routinely home-schooled students. Private colleges and universities are turning out a higher percentage of successes (jobs on graduating, lack of corporate criminals) because they have input from the people they service - and who pay their salaries directly. This is called accountability.

Example: Ex-urban dwellers tend to vote center-right. (Ex-urban: people who have been able to move from urban central areas. Frequently move to suburbs, but also are moving to smaller towns and rural areas.) It was thought they voted more Republican, but this isn't necessarily true - they vote with their pocketbook. Democrats picked up more House seats by getting fiscally-responsible (conservative) candidates to run - because Republicans were spending as bad or worse than the Democrats before them. Obama really only pulled ahead of McCain when the stock market tanked and housing bubble burst. But now that he is saying he wants to increase the national debt - even before he is in office - that support is evaporating. Remember the pocketbook.

Key datum: Politicians and News Media only follow the herd.

So what do media and politicians do - and what do they think they do? Practically, they follow the wants and needs (in that order) of the bulk of their publics. What they think they do is lead.

When politicians and news gets too far off center, they lose support. How are elections won? By appealing to the center. In primaries, the centers of the respective parties run to the extremes - but candidates have to be centrist to get enough support to get the final tally in their favor.

When news media consistently moves away from common sense, they lose viewers and readership. And low ratings cause their advertising support to move as well. Because commerce follows the pocketbook.

What of the Internet? This is a growing trend (along with ecommerce) because it's ability to quickly match want with need. Faster than ever before.

And because people search for their wants/needs, businesses that are online quickly find out how to get products that people are looking for and then produce them and deliver them in a manner which is quick, economical (remember the pocketbook), and sensible (remember "common" sense).

So our current online economy continues to expand while the slower brick-and-mortar businesses continue to decline. (And politics find they need to publish more stuff on line, while news agencies simply are going out of business - like record companies, they can't hold onto their apparent monopolies any more.) However, the hybrids, such as Wal-Mart, where you can order individual products online and have them delivered to a local store are tending to survive much better. And anything you can deliver online (like movies) will increase your bottom line - and not just because it costs less to produce and deliver - it fits wants and needs together for instant gratification. Ebooks are also booming - as Amazon can tell you.

Who actually does lead the herd?

Farmers and ranchers can tell you - it's the boss cow. But that boss cow can change, depending on what that herd wants and needs. If you have sweet-feed in your bucket, certain cows will get their first. If there are thirsty cows, others will take the lead. Best grass - there are a few individuals who have a particular "nose" for better grazing, and will be on the edge of that herd constantly looking for it.

For our consumer herds, they have their influencers and their evangelists. These are people who are actively seeking solutions to life-problems. And when the find them, they tell the people around them about it - and because they are trusted, their immediate circle will try it. If that product works out to be useful and sensible, they will tell others around them. As long as that feedback continues to be more positive than negative, the adoption continues.

(The funniest stuff I see currently is these sites which say they are keeping track of "trends" on the Internet - what they post as trends are simply fads. The products are non-sensical, only apply to really narrow niches, and never turn out to really amount to any economic sense on the long run.)

Madison Avenue is really behind on this, since they've been mostly mis-trained into thinking they are "market leaders", when all they've ever been able to do it to find where people are already going and then tell them what they already expect to hear. They've only ever just worked effectively to augment existing word-of-mouth. Nothing more.

One recent story I heard was where Pepsi was starting it's new look and so delivered a series of cans of their products, all about 40 minutes apart. Probably a fine marketing gimmick for someone working in a metroplex high-rise. It backfired only when this one carrier had to sit outside one "influencer's" house and bring him in one package after another, precisely on schedule. He lived on what seemingly was the edge of rural/suburban nowhere - and there weren't any other deliveries that guy could do and still make it back to deliver the next package. Needless to say, the product wasn't well-reviewed by the recipient. More like, the company gave itself a black eye.

But if you wanted to predict really sensible solutions, you'd have best-sellers all over the place.

Let's take Detroit. Needs a solution, not a bail-out. Situation is that unions and bureaucratic Washington have driven their costs up beyond what is competitive in a declining market. And they weren't able to shift from safe, comfortable SUV's and trucks over to economical small cars almost instantly. The market changed rapidly with the price of oil skyrocketing. They quickly found themselves selling neither what people needed or wanted.

What have people traditionally loved to do with their cars? Customize them. Which car was probably the all-time most customized vehicle? The Volkswagen Beetle. They even used to be imported from Mexico until only a few years ago.

Do any of these current automakers have a similar product they could revive like that? Ford had the Model A. There's your idea: bring back a version of the Model A with it's simple structure and build it in such a way that you could disassemble and rebuild any part of it. Put it on a straight frame - or make the body and bottom able to be separated (like older cars with a separate frame, or the Volkswagen with it's bolt-on body - not this locked-in uni-body nonsense). Set it up so it fits a wide variety of engine mounts. Sell a very simple, stripped down (but safe) version of it - no electronic anything. Buyers of that car can have anything they want (customize it), while you give them what they need - affordable transportation. And it fits a wide variety of niches, because it reflects the attitudes (and pocketbook) of its owner.

Detroit could sell tricked-out versions of this car, right next to a single-color stripped-down version. And even sell add-on's - factory installed, or shipped to your garage so you can do it yourself. Imagine - custom-equipped cars, built with your name on it. There's a European car which is being built with colored panels - so you can have any color you want, and can even change the color yourself for different occasions. That point was why convertibles have always been popular.

This is exactly why iPhones are the rage - and will continue to be, as an extension of the cel-phone. Wants (entertainment, social connection) and needs (ready, portable communication) combined. And they are customizable - mostly on the inside, but that's what is wanted - carry everything around with you that you could possibly want as far as digital goods. And access to stuff you could have (if you can afford to pay for it.)

When you connect this up with my other approach to Economics - that it's not just Supply and Demand, but also Service and Information - you then see a broader application, and a way to build a profitable business around any product.

Luck to us all.

Winning Elections, Social Media Style

How Obama Won - A lesson in personal branding

Obama sold trust. Where McCain got any inroads during the campaign, it was in sowing doubt about Obama. And where Obama jumped ahead, it was when people got scary economic news and needed to trust someone - and they couldn't trust the sitting president.

Could Hillary be trusted? Well, not as much as Obama. Could McCain be trusted? Not as much.

Obama used social media to get his brand out. And it worked.

Will it ever work like this again? Probably not. He had too many factors going in his favor:

• Relatively unknown - no real political baggage
• Young, dark, handsome
• First Person of Color
• Perfect Storm of economic meltdown

When he wants to run again, he'll have had four years of scrutiny - also called baggage. That economic meltdown will either still be there, or we'll simply be recovering from it. Those other two points won't change much.

Was it a landslide due to social media effect? No - wasn't a landslide. Only in the Electoral College. Popular vote still close (53/47%) - and mostly heavy population areas. Analysts mostly talk about that independent center which moved left, as the politicians moved center. The country is still evenly divided between left, right, and center. Just the way we like it.

But how we campaign now is changed forever. Just like marketing is. If you can't be trusted (like that Chicago governor) you can't get elected.

People still vote the way they always have - someone most representing their values. And now we can share our values many new ways.

While this may be flying a kite in a lightning storm, there's my two bits.