How much profit per product should i aim for? (10)
Hey guys, i'm researching products to sell via
Is there a minimum i should shoot for?
Are cheaper items with $5 - $10 markup enough to cover costs, or should i aim for more expensive items with a better profit margin?
Is there a rule of thumb here?
Thanks!
Keep in mind I'm not someone running e-commerce now but...
The profit in ecom is in AOV and LTV, not in profit per product. It's not impossible but it's not really the most common now to make money on one single product with media buying.
You should expect to even lose money on the first product but then make up for it with upsells, downsells and future orders that you generate through email campaigns or remarketing on FB/Google/others.
This quote from the book "Ecom Evolved" may help you:
I call this the 3X rule, and here is what it comes down to: if you can't get 150 percent markup on your product, consider choosing a more lucrative product. I always follow the 3X rule - I won't sell a product unless I can mark it up at least three times the cost. If the product costs $5, I need to be able to sell it for at least $15. I have gotten so strict about it that I bypass a product completely if I cannot start at that markup, and often I will mark up a product even higher than that, but 3x is the bare minimum starting point.
The markup has to be that high because of your fixed and variable costs. Remember, you won't make $10 in profit on a $5 item. In my businesses, I typically wind up with around a 60 percent gross profit margin from a 150 percent markup. When I factor in another 20 percent for advertising and overhead, I wind up with a 40 percent operating profit margin.
Amy
Really depends on the product and market. And which sort of business you want
High volume, lower price or high value, lower volume (but less work)
Arbitraging Aliexpress (dropshipment from there), or selling a branded product (less promotion needed) , or selling you own brand (more promotion needed, but higher margins)
Selling a more expensive product is not necessarily more difficult. If you target well and your copy and offer are on point, you'll sell a $25 just as easily as a $99 product.
So:
- 1 - what sort of business do you want
- 2 - which products and customers support this business
- 3 - create the offers and target these customers
Hope this helps...
Commenting also someone who doesnt really do
But I would think that its super easy to test that since alot of this comes down to your own skill. You could be paying twice as much as they are for user acquisition(or other way around) .
You don't really need to have products to test.
Basically, put the product up on your site then run test ads. And then make sure that after they added the product in the cart they cant actually check out. That way you will get a rough idea on your ATC price and you can make your calculations based on that.
Originally Posted by vortex
Thanks Amy, i actually started reading that book last night!
Will try and knock it over today
Originally Posted by AdzMed
For a quick test there's no need to even build out a complete funnel - just populate a
Just make sure you set up a separate dummy store to do this though - if you're wanting to build a loyal customer base you probably won't want to piss off people to ruin your store's reputation.
And once you do have a decent sized customer base, it may no longer be necessary to do this type of testing - if you do adequate research to make sure a product is popular in the specific niche, it may be easier to just buy a small batch of the product before running ads, so people can actually checkout with it. Even if it doesn't sell well enough to turn a profit on the initial sale, you can push that to all or part of your customers through email to probably at least break even overall.
Alternatively, you could use a part of your existing customer base to split test your upsell/downsell funnel to find the best arrangement for free, before rolling that out to the rest of the customers plus run paid traffic to it.
In the end though, whether or not you can use your customer base to test new products will depend on the particular situation. What the niche is, how relevant the new product is to the niche, whether your existing customer base is a good representation of the audience you're planning on targetting for the new product, are just some of the factors that will determine the accuracy of this type of testing.
And this is why it may be a good idea to segment your customers (for example by tagging each customer/visitor) based on the audience you are targeting when you acquire each of them (age, gender, interest, behavior, whatever else). This will help you to better choose products for, and better tailor your messages towards, each segment. Result will be higher conversion rates. It may not be worth the trouble to do this in the beginning when the customer base is small, but you can still start the tagging, so that one day when you have a large enough list to be worth marketing to each segment individually, you'll have that option available.
Amy
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When you do ecommerce there are different ways to go. As some people have mentioned try to keep your pricing 3x all the fixed costs. Fixed costs you want to include inside this calculations are:
- Product cost
- Shipping cost
- Labeling cost (if you are doing it)
- Merchant fees
- Currency exchange rate
All of these summed up shouldn't be over 30/33% of your final pricing. We also recommend our clients and partners to add a 10% miscellaneous costs that may show up.
Depending on your main traffic source and strategy (you can build a funnel using CF, or you can send traffic directly to your store) you can aim to higher value products. As per today what is working great in TIER 1 and 2 are products priced between $39 and $99. Of course you can find winners that are more or less expensive of that but according to our records, that final prices allows the most profit and the faster scalability.
Moreover we recommend to start testing in the most agile way possible and then build branded store for your winning products. Branding is great since it lowers your product costs and, since you order in bulk and ship the products to a warehouse (we offer that service) in the end-customer region, you lower the shipping time.
Other advantages of building a brand is that you keep monetize the same costumers growing both your CLTV and your AOV.
Hey udroppy,
I like your comment on branding and building a legitimate long-term business rather than just burning and churning. I am currently putting together a store/lander to test demand for a new angle on a product that I know for a fact is selling very well. Lander: https://noorhair.com/a/offers/p/3005...1-month-supply
I have 3 quick questions if you'd be willing to answer:
1.) What is the fastest way to test demand for a new product? I've been building a store and a long-copy landing page for a potential product, but it takes A LOT of time to get high quality product mockup images, write all the copy, get fake reviews/testimonials, etc. And this is all before you even run traffic to the page to test front-end conversions to see if there is enough demand to put in a minimum order at a manufacturer for the product (i.e. 1,000 bottles or whatever). While yes, I know AdPlexity eComm can help find winning products, to my knowledge these products are short-term trending items that are difficult to brand and build a long-term store around (i.e. cat flashlights, etc.) And while yes, I can outsource some of this to a VA, the landing page takes the longest time and is something I need to do (at least for now).
2.) What is a good eComm affiliate network to check out some landing pages of the highest-converting, branded ecommerce stores? Right now I'm testing in the women's natural hair growth niche but all my competitors just use a basic
3.) You mention products priced $39 and $99. Are these products recurring revenue or just single-purchase high-ticket products? And if so, what niche are they in? I'm pricing my hair growth product optimistically at $44 when I can produce it for I believe $4-6 per bottle, which is around the ballpark 8-10x markup that Tim Ferris recommended in 4HWW, but even $44 is high for my niche, so I have no idea if the luxury angle will resonate and I'll be able to get any traction.
Appreciate all your advice on these questions, and no worries if you're too busy to answer. But it would be great to pick your brain since I've heard that it can take anywhere from 1 test to 50 tests before you find a product with sufficient demand that can actually be profitably sold online. It goes without saying that being able to streamline this initial process and save time would be life-changing.
Also, to everyone else on the forum, if you have some words of wisdom regarding these points it would be super helpful!
Many thanks,
Owen
Will wait for udroppy to chime in (btw big thanks to udroppy for all the valuable insights!) But in the meantime here are my thoughts:
1)For a quick test there's no need to be a perfectionist. Just populate a
Will it give you the same conversion rates as a well-designed funnel would? Maybe not. But this will be enough to help you identify products that are promising enough for you to justify investing effort into designing something more efficient.
So for example, if you're close to breaking even or better with this quick testing, then you know you can probably make it profitable with further improvements.
No need to think too much. Just start testing and go from there.
2)Lots of networks have ecom offers! Just do a search on this forum or on offervault.
Here's an example:
https://stmforum.com/forum/showthread.php?t=41683
I don't really want to list specific networks openly - I'm sure they won't appreciate affiliates signing up to use them as a spy tool as a result of my "recommendation". 
3)Will wait for udroppy to answer this one. But in general regarding product pricing, 3x sourcing price or more would be a good start, and you can always test different price points to see which one works best. (CR may not be the only consideration though - if people pay high prices they may expect more - something to keep in mind.)
Amy
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