Do the Math & Avoid Online Suicide

By Armand Melanson 
© lessworkmoremoney.com .  

In a recent article, I gave you some ideas on how to pick winning products using dry testing & the Overture search suggestion tool 
(go here to try it: http://www.overture.com/d/USm/adcenter/tools/index.jhtml). 

Unfortunately, I  get email every day from people who have setup their websites to sell but they can't get any traffic to their site - they are going out of business fast.

So let me emphasize another element of online success:  Find markets that you can quickly penetrate via pay-per-click advertising at Overture & Google. 

This means that even if you find a product which is in great demand, you should 1st determine if you can get a top 5 position at Overture for the most relevant keywords before building your website. This is very important because if you can't get a top 5 at Overture, then you will not get sufficient traffic to your site to make money from the start.

Of course, you can go the long route of using search engine submission tools, link trading, banner ads, ezine ads & what not. But this will take months before it pays off in sufficient traffic to make you some real money. If you want immediate results, you  have to be able to get a top 5 spot at Overture- top 5 is key because Yahoo, one of Overture's partners, picks up the top 5 Overture results.

If you can get top 1 or 2, then even better because Overture's other partners (MSN, ALTA VISTA, LYCOS, etc.) will display your results.  But top 5 alone will produce good results because Yahoo is huge & gets a massive number of searches.  

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MATH IS FOR PINHEADS?? - NOT!!!!!
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The way to calculate how high you can bid at Overture is pretty simple:

Let's assume a very conservative 1% conversion rate at your site
- that means 1 out of 100 visitors buys.

Determine your profit on 1 sale of your main product - if you are selling  widgets at $30 a piece (expensive widgets I know) & your cost is $10, then your gross profit is $20/sale (haven't factored in other expenses yet).

If rough profit per sale is $20 & you  make one sale/100 visitors, then you can't afford to spend more than $20 to attract 100 visitors (in fact, you should spend less if you want to make any money).

So that means that you can't bid more than $0.20 per keyword at Overture & still make money. At $0.20, you will not break even.

With this information, you can now assess whether or not it is feasible for you to test market your widgets via Overture. If you could get a top 5 bid at Overture for $0.10, let's see how things would work out:

- at 0.10$ per click, it will cost you $10/100 visitors. This means that   each 100 visitors will produce:
  $30(customer price)
- $10(your cost)
- $10(Overture click costs)
-----------------------
= $10 profit

$10 per 100 visitors is not a lot of money unless your able to produce thousands of visitors/day - not likely.

Based on this assessment, you should pick another product or another market & start all over again.

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This is a general approach which can be modified according to the circumstances. Certain product have higher conversion rates than others. Your site marketing copy will have an effect on conversion as well. I use 1% conversion to be on the safe side. As well, some products might sell better in hard copy ads or trade magazines, so online testing might not be the best assessment.

But if you are going to sell online, doing this basic kind of number crunching is what will help you to establish what types of products/services you should consider selling. Otherwise, you are really not looking out for your best interests - the success of your business venture.

1) Is there a demand for this?
2) Can I quickly & affordably advertise to the target market?
 
That's what the number crunching tries to answer for you.

So let's review the process again:

- identify some in demand markets
- pick several products which target those markets
- do some informal surveys to identify the top products
- use the Overture search suggestion tool to verify how many searches are being made on the most relevant keywords for your  prospective products
- determine whether you can bid high enough to get a top 5 spot at Overture for the most relevant keywords
- build a simple prototype site & submit your listings to Overture
- monitor your traffic to determine whether you have sufficient  visitors to make a go of it
- build a full fledged site which is fully optimized to sell

Armand Melanson
Less Work More Money
Publisher
Ultimate E-Marketing & Dropshippers Guide
web: www.lessworkmoremoney.com
email: armand@lessworkmoremoney.com