Products, Services and Scarcity (Real and Imagined)

A couple weeks ago, we did a podcast about getting the locomotive going—getting momentum. Then, I had a busy week and failed to live up to my pledge of momentum building. There’s saying it and there’s doing it. I said it, but everyone needs to do it. Getting the locomotive going is key. Blank Products are the bestIn the quest for earning that first $10,000 of online revenue, there are some realities. Spinning out spammy sites full of keywords is a dud. It’s not impossible to make money, but it’s unlikely. Likewise, you can definitely win a lottery ticket if you buy 16-million tickets. The days of Adsense rewards are over. The math can’t work: you need to run so many pages and get them ranked well and you can’t let them prey on each other and sap off each other’s popularity. The way to win at Adsense is raw traffic: lots of it, aimed at good quality unique content. Plenty-of-Fish does it right. If you can become a leader in some niche, you can get a lot of the attention and you can get a lot of traffic. That traffic like mining a mountain for gold. You can get rich, but you have to move a mountain to do it. Products are a classic way to earn money online. The people I know who are making money are selling physical products. To a lesser extent, people are making money with digital products. We have digital products: 7 weeks ago, we published Pin It To Profit, to share our Pinterest knowledge with people who are still trying to figure it out. We sold it at a low price point. We had handful of paid purchases. When we put it out for free, we had thousands of downloads. There is finesse for how to promote products: this site has a great checklist of what you should do and when. Likewise, the $100 Start-Up$100 Startup is all about how push your products. Marketing is key, especially when you’re selling digital products because once the product is out there, your work is done and you have talk people into hitting that download link as often as possible. Example Digital Products:
  • Ebooks
  • Digital assets (wallpapers, icons, fonts)
  • Apps and games (iPhone apps, Android apps, desktop apps)
Services are another legitimate method of getting to that first $10,000. Technically, digital products share a lot in common with many services: they’re electronic, they’re on demand and they’re intangible. You can see the impact of a good service or a good product, but you can’t pick up that difference and put it in a box. With services, the onus on you usually to make sure that the service is up-and-running. In the digital world, that leads to 24x7 vigilance and that can be grueling. Examples of Digital Services:
  • Tracking stuff online
  • Completing work for you
  • Storing and organizing stuff
Products encumber you, but services can free you. A book has to be read. A physical book takes up shelf space and a virtual book takes up disk space; but a service can perform labour on your behalf or act as a digital valet. Something like Hotmail acts as a fusion: it serves to pipe and organize your mail, that mail being the product of others. So there are ways to fuse the two models. The big difference: services require an ongoing arrangement and products are usually a one-time affair. You can continue to bill your customers month-after-month until their service agreement lapse or until they cancel. I have this agreement with a few service providers and I don’t pay a small amount for the services, but I get an appropriate value. Here’s some math on services:
  • $99 / month X 10 clients = $990 / mo. gross revenue.
  • $99 / month X 100 clients = $9,900 / mo. gross revenue.
  • $99 / month X 1000 clients = $99,000 / mo. gross revenue.
If your service is processor and labour hungry, it could cost a large amount to deliver, but maybe you can run at a thus consistent profit while allowing for scaling and an amplification of income? When SEOMoz received a large amount of funding, they uncloaked their earnings. It showed that they were bringing in a lot of money—14,000+ subscriptions or approximately $1,400,000 per month of cash flow. That’s some nice coin. If you look at building a service to create an income for yourself, you don’t need a tremendous subscriber base or a high per month subscription fee to hit that goal. Services need some things:
  • Provide a service that is worth money (saved time or a revenue generator of its own). You can likely sell a kitten-of-the-day service, but your audience may not see its value proposition.
  • You need to offer something unique—it can be truly unique, but you’re more likely to find a niche where your service offers a list of features that you cannot find in one place. Likewise, be careful to offer a service that some big player is unlikely to roll out for free. Last week, Bing revamped its webmaster tools and delivered some tremendous value for free. I have to bet that some SEO services were rendered valueless as a consequence.
  • You’re offering a 24x7 service or not. Spell out what the clients can expect for service and delivery times. One service I know of creates a manual report on a recurring basis—that’s not a 24x7 ad hoc service.
  • The subscription rate has to be something that you can bear were you to manually satisfy some of the clients at a rate of $10 / hour. In other words, could do what your service delivers, but do it manually at $10 per hour and not lose your shirt? You don’t want to become the mechanical turk for your clients, but you need to be able to survive if something rattles in your system and you want to carry out good customer service through manual processing to satisfy the needs of valued or noisy customers.

Act Now!—Scarcity Is Going Fast!

I was considering signing up for the Third Tribe Marketing program. I signed up for admission, but I was not allowed in immediately. I was lucky enough to be offered a chance to pay (lucky me!). Today, I got a notice that I time was running out! I had until 5PM today to sign-up! Hang on! There’s a limited time I can join and a deadline for enrolling? It’s a scarcity play. Scarcity happens when three people reach for the last dinner roll. In digital products, there is very little reason for scarcity to be an issue. Third Tribe is promising access to a forum, webinars and tutorials. By limiting enrollment and expiring the window of enrollment, it generates excitement. I love and hate the concept of scarcity. Scarcity almost comes from a law of thermodynamics, but some sources are so ubiquitous and they negate the role of scarcity. Nobody worries about using up too much sun or wind, so solar power and wind generators are post scarcity tools. Computing power is so cheap that it’s almost limitless: you’re unlikely to develop faster than Moore’s Law can build out new processing. Our culture buys into scarcity. We think that something is worth more if it’s scarce. If someone is in a limitless supply, you can attach scarcity to its access to generate excitement, but its ubiquity can make it cheap for you to procure and sell. I hate being played with scarcity. But if people buy in because of the impression of scarcity, then that will generate sales for your product or service. The takeaway:
  • Make a product or a service
  • Do your market research
  • A little scarcity goes a long way
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