This article is just kind of loud thinking about marketing information products on the internet.
The old model was to produce an ebook, video series etc. and to market it then via the own website, using PayPal or Clickbank as systems for payment and delivery.
Promotion worked mostly via affiliate networks and creating buzz using product launch techniques. Most products, even excellent ones, were dead a short time after the launch because all attention of affiliates and target audience was going with the noise to the next launch.
The need to launch even for the most successful internet marketers several high profile products per year just to stay in business and pay for their overhead did no good..
- not for profitability
- not for the quality of the products
- not for value delivered to customers
Product Life Cycles without the Maturity Phase?
Even if we pretend for a moment that there was no quality problem with these many products released on a very tight schedule, the fact remains that the product life cycle was cut.
A normal product life cycle looks like this:
Here is a short explanation about the meaning and the function of the four product life cycle phases in terms of profitability:
- Development and testing naturally are investment phases, where you spend money. The cash flow is typically negative.
- After testing comes the launch. The goal is here fast and deep market penetration. This helps to establish the necessary scale to become highly profitable and to cement a competitive advantage over me-to products.
- A mature product should provide a stable positive cash flow over a reasonable time. This should make the whole project profitable, covering the cost incurred in the development phase and in the launch phase, pay for the cost of capital etc.
- The harvest phase is concerned with recovering as much as possible from the investment when the product becomes obsolete. This may be done by using assets as long as possible and not replacing them, by transferring resources to new projects and by transferring customer trust and brand recognition to a new project, if possible.
Now compare this to a graph I have drawn for a typical internet marketing product launch:
If you watch this graph you will see that the cash flow over the whole project is much smaller. In fact the cash flow is only positive in the final stage of the product launch and in the first part of the harvest phase. This means less profit, but it also means that you must strictly limit the expenses for product development and testing. The result is in diminished product quality.
Why Do Marketers Throw so Much Profit Away?
The shortcomings of this launch-and-run strategy are so obvious, that it begs an answer to the question: Why do people still use these aborted product life cycles?
I think there are several reasons for this. Some of them might be:
- The digital nature of information products sold through the internet means that these products can be copied without effort by anybody. And they will be copied, because there are more than enough people around who do not care about copy rights and intellectual property provided both belong to others.
- Affiliates will run after a launch. A successful launch means high market penetration. High market penetration means conversion rates will fall: Everybody will still buy only once, provided he likes the offer, whether 3 or 15 people tell him about the deal. And lower conversion rates mean less rewards for the same effort by an affiliate.
- Limited product support, caused by the anticipated early end of the product life cycle erodes the value for the customer further and damages the value of the producer’s brand. Sales are hurt even more and the product leaves the marketplace even faster.
- Limited resources for product development make for poor products. And poor products need pressure sales tactics, as they are accommodated in a product launch environment. Mature products do not accommodate pressure sales tactics, as products in the mature stage are readily available. Thus sales will break down after the launch.
- The aborted product life cycle strategy allows still for some profits.
I am not the first one to note this problem, or to think about solutions. In fact there have been many product launches promising by themself to provide such solutions. The main strategy in the internet marketing place has been up to now to extend the product life cycle via continuity programs. This means, as far as information products are concerned, to drop-feed the information through a membership website or via coaching programs to the customer. It is easier to detect and act against illicit sharing of passwords and usernames than against outright copying of ebooks, videos etc.
Others left – at least as far as own products are concerned – the information product market and moved to ongoing services like web hosting, audio streaming.
But I think there arises a new opportunity to solve that problem: Platforms such as app stores by Apple and Google, Amazon offers for Kindle devices; probably Microsoft will establish a similar system, and regional book dealers will also try to develop such platforms.
Why do these platforms help us to solve the problem? First of all, they control the content distribution, i.e. on which machine an app or ebook might be copied or not.
But there is more: You can update an app on a mobile device to keep the quality high and the information up to date. This adds an element of the drop-feeding to your product, as mentioned earlier. And it allows you to offer a high quality product to new customers, while keeping the existing ones happy.
A third aspect: The cost for the user of an information product has two components: The money spent on the product and the value of the time used to consume the product. A mobile product reduces the value of the time the customer needs to invest to use the product. He can read and listen while sitting in a train, plane, waiting at the doctor etc. He can spare his quality time for his family and his customers.
Please Share Your Thoughts
I invite you all to share your suggestions how to overcome this problems in information marketing. If you have an idea how to solve the matter, or if you want to add another aspect to the problem description, please leave a comment.