How To Create Digital Products At Profit? You Often Hear Experts Say It’s Easy To Be Thrifty, But What Then Makes You Fritter Away Your Profitability?
Creating and selling digital products is a smart thing to do for a business. Intrinsically, digital products cost less to make and less to market, right? This is what you always read about online profitability.
But it’s equally true that the online business world is a minefield for entrepreneurs with an itch to do things the “easy and faster way”. This craving for the effortless and speedier route to success is what makes us get ourselves the most outrageously expensive tools, experiment with a host of worthless outsource freelancers, and pay to get our ads into the limelight.
When you get frustrated with the typical “online business slow start” you begin to itch for the needle to move … and get yourself into “frustration-spending”. If only you can wait for that inflection point when you will succeed spectacularly, for sure, you can make huge profits.
At Solohacks Academy, we believe the need for ease and speed are the slippery slopes of the online world – and those are the two main eroders of profitability. Make all the digital products you can, by following our “penny-pinching” ideas below. Then give them time to burst forth. Time given compounds your profits.
1. The type of digital product you choose to create first will impact your profitability
There is a strong temptation among solopreneurs, who are starting out in Knowledge Commerce businesses, to make that first digital product a bestseller. They put all their energies and money into a product – often it’s a huge course – which can be “launched” with mega fanfare.
This word “launch” means nothing but money. It means discount-priced starting promotions, needless expenses on PR agents, paying influencers to piggy-back off their mailing lists and fans …
On the contrary, the best kind of way to launch your digital products is to not create big-ticket products at all in the beginning. Instead, focus on building an audience. Write great blog posts, in spate, on your chosen knowledge or expertise area. Get more traffic to your site. Convert these visitors into email list subscribers with an attractive free downloadable – like an ebook or an email course. Get your subscribers to read more and more of your blog posts. Make them raving fans and followers. Make them trust your word as credible.
Then slowly introduce a low-priced product (like an ebook) within your own mailing list. Prompt people to want to buy and read more of these ebooks. If you make low or no profits, that’s OK. Sell a few ebooks, and make small profits from volumes sold, rather than from high profit-margins per product.
When you and your audiences seem ready for bigger buys, set up short courses to sell. Price these a bit higher than the ebooks, with better profit margins. If they sell well, aim for a longer bigger course. If this kind of slow-build starts gathering serious traction and momentum, then go for the kill. Put out that BIG PRODUCT IDEA at a highly profitable price. Give it all the bells and whistles, and fanfare, for a big public launch.
Nobody will give a hoot for your launch of a big digital product, loudly-promoted, unless you’ve built trust over time – via a range of smaller but valuable offerings that gather steam slowly.
2. Validate your idea and assess your potential demand for the product in mind
You should never underestimate the importance of validating your digital product ideas. There’s can be no point in creating products over weeks, or months, that nobody actually wants.
Look at the shelves of Amazon KIndle titles to see how many dud products people have written, laboriously, that hardly sell a single copy. This is a clear indication that little or no research went into the financial planning before such books were written. If there was no demand-research, there was also probably no “profit goal” in the mind of the author-marketer.
How do you validate the demand and probable price of a digital product you have in mind? Here is a process you can follow:
- Identifying the area of demand is the first step: Think of a customer-problem and create a probable title for your digital ebook that answers the customer problem. For example, if you are an expert podiatrist, the customer-problem you may have identified could be “Adult people with smaller than average feet who find small-sized adult-styles in shoes difficult to find. They only get childish footwear designs.” So your proposition for your product may be an ebook on “Finding Stylish Shoes for Adults With Small Feet”.
- Search online for demand cues: Google some keywords related to “small-size stylish shoes for adults” or variations of that idea. Google should give you an idea of the searches made per month by people with such a problem. Then search Amazon to see if there are books or products sold under the same idea, and how the popularity numbers of such books or products are.
- Next, take a look at online forums: Online forums can also include social media. Search for concepts like #smallsizeadultshoes or similar hashtags. If you catch people under that hashtag discussing their woes, you can join in the conversation to get an idea of exactly what their problems are, and whether the supply of such shoes does match the demand level they seem to reflect.
- Ask people about prices openly: When you talk to people online or offline who have this problem, ask them what prices they may like to pay for more information on where and how to find stylish shoes for their small adult feet. If the problem is dire, people may be willing to pay a higher price. If the problem is not so top-of-mind, the prices they are willing to pay will be lower.
- Lastly check out the competitive stores, online and offline: See if they have such footwear on sale, how they are pricing it, whether some of them are making custom-designed footwear for adults with this problem, or whether they are ignoring this market completely. If they are, then you can be sure the demand is weak – because marketers know how to smell the money and they will stock up on what’s in demand. See if they are volume-sales pricing (signals of high demand) versus margin-sales pricing (signal of low demand}.
A lot of marketers sneer at this informal style of demand and price validation, but here are two questions. Isn’t informal demand estimation better than starting with no idea at all? And isn’t first-hand research by you better than second-hand research from other people? Don’t sweat this step.
3. Take note of the competitive environment and try to be “the first in something”
There is a simple axiom in advertising circles that if you aren’t the “first with something”, you will always be a “nothing”. In other words, people will never recall your brand name if you are not the “first with something”, and if they don’t recall your name spontaneously, they will never believe you are a credible brand worth buying.
Let’s see if you can name the best ever mobile phone? Most people would say “the Apple iPhone” because it is invariably the first with something new. Then they may Samsung, because Samsung always follows what Apple does, with or without some of their own innovations. Beyond that there is a sea of lesser and lesser brands whom you probably don’t follow as much on their goings-on.
When you are planning a digital product – an ebook, a course, a membership site – remember to be an iPhone instead of a Samsung or any of the less recalled brands. How do you become the iPhone of your niche? You look for an angle on your topic uncovered by competitors.
Remember, profits go by the 80-20 rule. The No #1 in anything – a new idea starter usually gets 80% of the profits in that niche, while the rest get the 20% profitability, no matter even if they are running a fairly close second.
To corner not just the market share but also the profitability in your niche, you absolutely have to be “first with something”. Think hard about this. It’s your ticket to a lot of financial gain.
4. See if your audiences will trust you and find your price justification credible
To be able to make higher profits you need higher price tags on your products, right? But higher price tags demand lots of justifications of price to the buyers.
Again, to be able to sell those justifications to your buyers, you need their listening ears – which they will give you only if they trust you, and find you to be a credible and authoritative source of information.
Credibility and trust are slow-build concepts. People need to be exposed to you over time – and find that you are authentic, likable, and empathetic to their issues. They like you to “know your onions” before you start preaching to them. They like to see consistency in what you say and do. They give their trust with a lot of caution, because they likely have come across many charlatans in the online world.
It’s also a truism that even when people fall in love with some digital products at an emotional level, they will only allow themselves to pull out their wallets and buy if the level and amount of logical, and non-emotional, justification, given by the seller, matches the price to be paid. The higher the product price, the more price-justification the seller has to give, and be believed.
For example, if you buying a children’s ebook at $2.99 you’d be happy to know from the seller that it is “written by a child-psychiatrist who understands children well and aims to make them feel positive”. That seems like enough justification for that price of $2.99.
But if you were to try and sell an ebook of $47.99 on “yoga workouts for people with back pain”, you need a whole lot more of credible price-justification. For example, here are all the things you may have to say:
- “This ebook is written by an orthopedic surgeon who experimented successfully for 10 years in fusing yoga with other techniques to cure back problems.”
- “There have been 15,000 copies of this ebook sold so far, with no customer complaints.”
- “We have over 27 hefty testimonials from super-athletes who found benefit in curing sports injuries to their backs.”
- “We are ready to give you a full refund if in 30 days you don’t start seeing some benefits from this book’s program.”
If the trust factor is built so that your justifications are bought, the product and its price tag will be bought. And your profitability will be a given.
5. The more you use DIY the more your profitability – cost of effort affects profit
It’s no rocket-science that the more sweat and toil you put into the creation of your digital products, the higher your profitability. Do-It-Yourself (DIY) effort is where the money is either saved or drained. Self-effort saves money, outsourced effort spends money.
But the workloads involved in digital products are very heavy. That is why many solopreneurs balk at the effort they need to put in themselves, without the help of tools and personnel.
There is an enormous amount of writing to do. You write to create ebooks; you write to create scripts for courses; you write blogs in an endless flurry to get Google to give you traffic; you write social updates by the thousands, again to get traffic; you write emails to subscribers; you write press releases; you write marketing spiel; you write outreach letters to bloggers to get your work promoted; you write, you write, you write …
It’s no wonder that many solopreneurs in online knowledge businesses get tired of the endless writing (especially, initially, when all that writing seems to get no traffic). The urge to splurge on tools and freelance help begins to look tempting. That is the weak moment, when many online businesses start going into the dustbin as failures.
It is said that about 95% of all online businesses fail within the first three to six months of existence, which may be exactly when the workload begins to tire out the mind of the solopreneur. The 5% who succeed and then see huge profits, after a certain point of inflection, are usually those who have disciplined themselves somehow, to get past that stage of burnout. They have fallen and risen, and fallen and risen many times. But in the process, they have learned the art of putting in the work without expecting results, and still retaining motivation.
You too can find your ways – smart, innovative ways – to keep motivation and energy high, when there are no visible results on the horizon. Doing so will help your later time of extremely high profitability. Maybe, you have to keep your eyes on that shiny faraway goal, and plod along today when the goal looks like it’s miles away.
Although many experts will tell you how they managed through the tough times, their success formula may not be the right one for you. Every solopreneur cuts his own path through the hours of grunge work to get to the promised land beyond.
People can tell you how it feels after you get to the 6-and-7-figure incomes, but they can never tell you how YOU can overcome your lack of mojo in the tough early days to get there. You have to find your own answers to succeed over your own inner blocks and days of dispiritedness.
At tough times, when there is no money to be seen, giving up is the easiest thing. The next easiest thing is to jump to another business idea and start all over again. Neither of these methods really helps. Profitabiliity, in digital product-creation, is easy – but only after you have proven that you have that survival instinct. Profitability is actually less about the digital products you create, and about the new you that gets created in the process.
6. For everything there is a free tool you can use – instead of buying expensively
Once you are in any online business, you will find that there are tools for almost everything you need to keep your business running. Tools for automation, for email marketing, keyword research, blogger outreach, social media posting, managing your memberships …
But the surprising thing online is that for every expensive tool, there is probably also a free tool also out there that does the same or similar job with fair aplomb. It would be completely wrong to decry free tools just because they are free to use. In fact, there are a lot of tool developers who believe in “open source morality”. They think tools should be free of charge for public usage.
Some tools (for example, the famous Woocommerce tool for ecommerce) are free in their basic form. But if you need more add-ons they charge you for those. These could be add-ons that increase the basic tool functionality. If you want to add an extra line of information to buyers on their email receipts, you may need a Woocommerce add-on that costs some money, because the vanilla Woocommerce tool has a rather simple email receipt without provision for any added messages to buyers.
This is usually the business model of the free tool makers. They offer their basic tool free of cost, but charge for some add-ons.
If you use the WordPress platform, there are thousands of free plugins that can help you set up all manner of features and functionalities on your site. Although these plugins may also have a “Pro” version that costs money, most penny-pinchers (like me) find we can get by without the added frills.
Looking at my site, would you say I am paying for any tools? I am a proud scrooge who gets a kick out of making free things work for me by tweaking them as best as I can.
Profitability is a mindset. To be profitable once – or a few times with a few sales – is easy. But to make profits on a regular basis there is just one rule, that we can learn. It comes from all the frugal wives of soldiers who went to fight during World War II. They had this mantra: “Use it up, Wear it out, Make it do, or Do without!”
7. Never spend on marketing without ROI-calculations – and aim for organic reach
There are two principles that have given me, at Solohacks Academy, the maximum profitability I could have dreamed of. Here are these two gems:
Always aim to get organic reach and traffic – and never, ever spend on ads:
Every bit of traffic I get to my site comes from organic Google SEO and social media posts – without paying for ads. I take no risks, because I have seen people around me get burnt by pay-per-click advertising.
When you buy ads there is a problem. You get traffic for a bit – but the minute you stop the ads, the traffic also stops. So it has become all about spending more and more to get the traffic. If there is no conversion of that traffic into customers quickly enough, you can blow away all the money you have chasing traffic that only responds to money on ads.
On the other hand, there is a long wait for traffic and conversions when you decide to “go organic” on reach and traffic. You have to blog every day, consistently, and build up a bank of 400-500 posts, before you start seeing traffic in dependable quantities. It is a long wait, for sure. But just when I too was about to give up in frustration, I saw a story that made me think again. The story was that of the Chinese bamboo tree.
A Chinese bamboo tree takes five years to grow. It has to be watered and fertilized in the ground where it has been planted every day. It doesn’t break through the ground for five years. After five years, once it breaks through the ground, it will grow 90 feet tall in five weeks.
That is the kind of growth model you have to be ready for if you want to spend the least, get organic traffic, make sky-high profitability down the lie – and laugh all the way to the bank. (It doesn’t take 5 years though … it’s much less)
Never spend on anything without doing your ROI arithmetic:
What is ROI? It is Return On Investment. When you have to spend any money on anything in your business, ask yourself this question: Is this going to be an expenditure that will never be recoverable, or is it going to be a recoverable expense? If it is recoverable, go for it. If not, don’t spend.
For example, let’s say you need to use a freelancer for completing your ebook writing which you are unable to do yourself. And you’re wondering if the expense will be worth it. Let’s say, you will be paying the freelancer a sum of $100 to get the work done.
Your ebook is going to be priced at $15 per book, and you are sure you have at least 7 people among your own friends, ex-colleagues or your subscribers you are sure will buy the book from you. That means you will somehow cover the freelancer’s cost with the sure sales of 7 books at $15 apiece, right?
If you’re as sure as that, or can take that bet on selling 7 books, go for the expense. If you’re not sure of making back that freelancer cost, think twice about hiring the freelancer. In other words, even if you can’t make a profit, the money you earn can pay for the expense you make.
If you can be sure of selling 10 books at first launch, you will even make a small profit and that’s good. The expense has justified its ability to help you either break even, or make a small profit. It has a positive ROI.
The expenses to beware of – the profit eroders – are the expenses that can never be recovered because the money spent cannot earn more money for you. It’s as simple as that. The line between those who make a profit every time and those who don’t is that the latter always spend on things that cannot earn back the money.
8. Your traffic numbers matter a little less than your conversion numbers for profitability
Before you worry about getting a lot of site traffic to be able to sell your digital products, the more important goal to set is “better conversion rate”. That conversion rate is what directly affects your profitability.
Let’s take two examples to demonstrate this point.
- Example 1: Let’s imagine you are able to get traffic per month of 5000 visitors to your site. You are able to convert 2% of that traffic into subscribers who join your email list. That would give you 100 subscribers on your mailing list. Then you able to convert 5% of the subscribers on your mailing list into buyers of your digital product ie.5 buyers. The price of your digital product (ebooks) is set at $10 per ebook. Now let’s calculate your earnings. If each buyer bought one ebook at $10, you’d earn $50. Now let’s say your costs of creating that ebook were $15. Deduct that from earnings and you would get a profit of $35.
- Example 2: Now let’s assume everything is the same as in Example 1. You are spending $15 to create ebooks, and selling each ebook at $10. You are also getting the same 5000 visitors to your site. But you are converting subscribers and buyers at much healthier rates. You are on the higher side of the average conversion rate online. You convert at least 5% of visitors to subscribers (i.e. 250 subscribers). You also convert 7% of subscribers into buyers (i.e. 12 buyers). So let’s see the math again. At $10 per book sold to 12 subscribers, you’d earn $120 from which your expenses of $15 have to be deducted. That leaves you with a profit of $105.
The moral of the story is that it is not more traffic that matters more to profit – it is the greater conversion rate of that traffic into subscribers and buyers. That’s why the content marketing experts always say “The money is in the mailing list.”
Focus on growing your mailing list, and use email marketing more effectively to get people on the mailing list to buy. That is the easier formula for higher profitability, instead of chasing after more and more traffic that doesn’t convert.
9. The only automation you need to use is email automation – and it costs almost nothing
When entrepreneurs look at iconic online businesses like Amazon, they cannot help but marvel at Amazon’s automation. Their systems follow and track every customer or site visitor, watching the patterns of his interest and his behavior. They then follow up with extremely customized emails that move people towards greater and greater familiarity with Amazon, and ways to explore its vast offerings.
I saw some research recently that many solopreneurs are very enamored of the idea of automation – probably because they are lone-rangers. Rather than hire people, they are tempted to look at automation as a way to scale their businesses, while they always remain one-person businesses.
But it’s also equally true that many entrepreneurs have burnt their fingers buying expensive automation tools, many of which have features they may never need. What people don’t tell you is that marketing automation is an attractive idea – but it is not only expensive to get, it is expensive to set up and then get trained on so you can use it wisely. All this expense is needed for the systems to then work on auto-pilot.
As we said earlier, though, the only real marketing that works spectacularly to convert people from being visitors and subscribers to buyers is email marketing. Used with strategic intent and a great plan, email marketing can work wonders in nudging people closer to sales and eventually clinching sales. And best of all, email marketing is among the cheapest forms of marketing today, and it can be used to send the right email to the right customer at the right time in his buying journey. It is extremely easy to automate, and costs next to nothing. You only pay more as your subscribers scale up, by when your business probably operates on a different profitability dynamic.
Precise targeting is one advantage of email marketing. The other advantage is that emails are among the most difficult messages to ignore. They can be personalized, and look like standard email correspondence, and they reach people’s inboxes that people itch to visit many times a day.
See that you brush up on your skills in this area. Amazon wouldn’t be what it is if it wasn’t such a virtuoso with its email marketing. Have you seen any other form of content marketing from Amazon, other than its legendary email marketing?
10. Use word-of-mouth publicity – and find ways to tag influencers to get their admirers
Every good digital product needs a lot of publicity to be promoted. But of all the methods of publicity and promotion, the one that has stood the test of ages, consistency, and maximum impact is word-of-mouth. But how does an online digital entrepreneur get word-of-mouth working for his digital product? There are two great ways:
- Engage in social groups – or start your own: Have you seen how busy some Facebook Groups or LinkedIn Groups are, with members genuinely conversing with each other on topics of interest? You can join existing groups. Or, at no cost, you can create a group of your own. The only caveat is that you should not be seen overtly promoting your products. Instead, get the discussion going on your niche or topic area. If you have a course on “How to Do Push Marketing”, you don’t talk about your course. You get the discussion going on “push marketing”. Subtly, people will notice that your signature on all posts hints at you being the author of a great Push Marketing course. Group engagement will give you quicker trust and a customer base, from which some people will explore you and your products further with confidence in your credibility.
- Try to tag big social influencers in your social posts – their followers will spread your word: On social media, it’s always smarter to aim at the influencers who have built up followings of several millions of fans. But how do you get them to give you free publicity? First, do some blog posts where you have curated some of their work, or quoted them. Then when you socially post about these blogs, tag them and thank them for being an inspiration, and say you have quoted them in your blog post. Many of them, seeing they are flatteringly tagged, will just retweet your tweet. That will get their entire army of followers doing the same thing. Before you know it, you will have used the influencer as a reach force-multiplier. I do this for every blog post. I make sure to include quotes from some influencers, so I can get them to retweet my “thanks tweet” out into their world of admirers. It costs nothing – but done consistently, it really adds to credibility. And credibility always brings in profitability, because those who trust you and like you, buy from you.
So What Are Your Thoughts? Do Share!
This post is incomplete without your input. The community of Knowledge Commerce solopreneurs would feel galvanized to hear from you … so do share your thoughts on this topic with us, in the comments field below this post.
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- Knowledge Commerce Myths That Solopreneurs Must Disbelieve
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