So you want to sell your own products, eh? Got $xxx,xxx in hand?

[mont7071]

Alright, so I keep hearing how nearly every IMer who's been in the game more than 2 months thinks they are going to "start selling mah own CPA product offer, gonna keep all those profits for myself". Newsflash guys, its not as easy as you think, Let's walk through the math.

Let's say you are gonna sell some sort of bottle of pills or something, standard free trial offer. Small lots, factory labels, nothing custom etc, its still going to cost you , say, $4 a bottle, so we'll use that for this example.

Next, you think you are going to just release it on a network (cuz hey, you are in good with XYZ big network because you are a hotshot publisher there, right?). First wake-up call, the Network doesn't care. Being a decent Pub has nothing to do with becoming a decent Merchant, there is a reason the Network employees who deal with publishers (AMs) are different than the employees who deal with the Merchants behind the actual offers (bizDev).

You want any chance of succeeding, unfortunately you can't "scale up" slowly. Tell a Network that you have a hot new (unproven) offer, and then tell them you have to "cap" it at <100 leads a day for cash-flow reasons, and you are either going to either a) get laughed at, or b) set up, and then never promoted by any of the AMs because you are too small-time. Likewise, the big pubs who can actually drive some traffic and get your offer some momentum are not going to waste their time on an offer that can't handle at least 100 leads a day. You're in the big leagues now, gotta be ready to spend some coin.

So say they agree to try you out, (because Networks are kind generous organizations), and to run your offer with a max cap of 100 a day. You didn't really think you could wait till you actually had sales to pay out those CPA commissions, right? Nope, count on a pre-pay, no network is going to give credit to a new unproven merchant in this day, better be ready to pre-pay @ least 10 days worth of expected sales before you get your first lead in the door. At an ave CPA on stuff of $30-$50 per, you better have some cash laying around.

So, onto the math......

 

[mont7071]

Inventory: 100 bottles a day X 30 days worth to get started @ $4 a bottle = $12k in inventory costs

Min Network Pre-pay: $40 ave CPA X 100 leads daily cap X 10 day's worth = $40k just to start, with a first-month total of $120k in cash outflow

Shipping: free trial offers have to ship fast, no customer is going to accept waiting 12 days for product to arrive when the free trial period is 14-30 days, plus you need deliv tracking # to show they got their stuff. Count on an ave cost of $4 X 100 shipments per day X 30 days = $12k per month.

Notice we haven't even gotten to any recurring income for you yet (you'll probably charge a small "S&H" fee of a couple dollars to each customer to get their billing info, but its not going to even cover your product cost), and yet somehow you've already spent $144k in the first month. Add in some merchant card fees (from 3%-14%), some customer service costs (ok, you'll do that yourself or ignore it, cuz you're broke now) and all those tiny random variable costs that pop-up (custom banners, hiring a lawyer to review your LP, getting insurance in case you get sued for poisoning someone, etc) and you are pretty much at $150k in out-of-pocket costs in the first month, even after you got a tiny bit of S&H revenue in from your customers. If you're lucky, some % of your sign-ups will start re-billing after day 20, assuming you've made it that far without going bankrupt or giving up. Then the real fun starts, you get to buy even more product, and start the process all over while praying your rebill rate can keep you afloat before your luck runs out.

In case you think these #'s are exaggerated, you're right, they are. They are actually very low/conservative. Talk to anyone that has launched multiple, medium success offers on Networks, and you'll find that spending a quarter-mill on an offer before they can even analyze whether it was successful yet or not is fairly common.

Good Luck bros

 

[aaronklaw]

+rep
although I thought your inventory "fell off the back of a truck".

 

[HiGhPeR]

What if you wanted to push your own product, but do it yourself? ie, cut out the network and push 100 leads/day on your own?

 

[jeffrey]

Awesome post Mont. Solid knowledge drop on here and via paper cup telephone line.

 

[MCRunning]

$4 bucks to ship a lousy bottle of pills? Should be like $2-2.50 tops with shipping supplies. First Class is pennies and delivery confirmation is free when you buy online. So only like 6k a month for shipping #justsayin

Overall good post

 

[mont7071]

$4 bucks to ship a lousy bottle of pills? Should be like $2-2.50 tops with shipping supplies. First Class is pennies and delivery confirmation is free when you buy online. So only like 6k a month for shipping #justsayin

Overall good post

Ya, I debated making that number slightly lower assuming peeps only shipped first-class and not priority mail/UPS, but by the time they add deliv confirmation, buy labels, bubble mailers, boxes, tape etc it gets pretty close to 4 bucks even with the cheapy 1st-class rate

 

[blogspotter]

What if you wanted to push your own product, but do it yourself? ie, cut out the network and push 100 leads/day on your own?

I think this should be the way to go. And let the networks come to you once you have some success
You may not have to prepay if they come to you.

@Mont:
How about a dating site? Would like to know the math for a successful CPA driven paid dating site.

 

[clyde]

and WF is revived.

+rep when I can again.

 

[megatabbers]

What if you wanted to push your own product, but do it yourself? ie, cut out the network and push 100 leads/day on your own?

That works and you can get going for under 10K.

 

[mpbiz]

What's with all these added costs. All you need to do is grab a private label from a supplement company.

And since when does S&H not cover the cost of a supplement, or at least a bottle of pills. You don't have inventory costs or storage either.

You can fit 1,000 bottles in your garage, or keep them at the manufacturers facility.

Fuck going to an affiliate network. Just sell it yourself.

And you don't have to do a free trial. You could easily do a straight sale of $60, and then enter them into a rebill program where they get a discounted price of $35 or something.

For customer service you can answer your small amount of calls yourself or hire a service to do it for Xcents/minute.

Mont I can see where you're coming from, because a lot of people's game plan is to just launch their product on an affiliate network but that's a stupid way to start. Has everyone forgotten that back in the direct response days huge supplement and beauty companies were started with $2k?

And that's not because costs have risen. It's because it didn't follow the "internet marketing" model it followed the simple model of hustlin out of your mom's basement.

 

[dsiomtw]

What are these costs you speak of? Inventory? Shipping? Screw that shiznit this is the digital age boys and girls. Keep it digital. You can make just as much selling leads without all that bullshit and drama. Plus you can scale it slowly, you don't have cashflow issues, in fact I've never had any of the problems you speak of. Just networks pounding on my door to run my offers lol. Good luck bros!

 

[MCRunning]

Ya, I debated making that number slightly lower assuming peeps only shipped first-class and not priority mail/UPS, but by the time they add deliv confirmation, buy labels, bubble mailers, boxes, tape etc it gets pretty close to 4 bucks even with the cheapy 1st-class rate

$1.64 for 3 oz first class. A 30 tablet bottle weighs around 2.x oz
I ship all my supplements in either a bubble mailer (.23 cents can probably find cheaper, but these are good quality) or 6x6x6 box (26 cents)

Delivery Confirmation is free. I don't know anyone who is going to be going to the post office, waiting in line, having them ring up 100 packages, then paying .80 cents a package for DC. Sign up for endicia, stamps.com, shipstation. All automated and free delivery confirmation. And you get commercial base pricing.

Tape is super cheap. Labels are even cheaper. I print all my shipping labels on a 4x6 label with a thermal printer. Don't have to worry about ink. I pay < .02 cents per label when I buy 10 rolls (250/roll). Can probably get cheaper if you buy more. Hell you can get labels free from UPS/Fedex.

With my product weight + my shipping supplies + .07oz for a 6x6x6 box or .03oz for a bubble mailer sent First Class, I pay $2.05-$2.75.

Charge them 4.99 for shipping. You will make money on shipping and this will help offset the costs.

Here is 3 oz:

http://i.imgur.com/DvvcC.png

7 oz:

http://i.imgur.com/Mw1Ra.png

First class usually arrives in 3 days. Priority Mail 2-3 days.

 

[mpbiz]

$1.64 for 3 oz first class. A 30 tablet bottle weighs around 2.x oz
I ship all my supplements in either a bubble mailer (.23 cents can probably find cheaper, but these are good quality) or 6x6x6 box (26 cents)

Delivery Confirmation is free. I don't know anyone who is going to be going to the post office, waiting in line, having them ring up 100 packages, then paying .80 cents a package for DC. Sign up for endicia, stamps.com, shipstation. All automated and free delivery confirmation. And you get commercial base pricing.

Tape is super cheap. Labels are even cheaper. I print all my shipping labels on a 4x6 label with a thermal printer. Don't have to worry about ink. I pay < .02 cents per label when I buy 10 rolls (250/roll). Can probably get cheaper if you buy more. Hell you can get labels free from UPS/Fedex.

With my product weight + my shipping supplies + .07oz for a 6x6x6 box or .03oz for a bubble mailer sent First Class, I pay $2.05-$2.75.

Charge them 4.99 for shipping. You will make money on shipping and this will help offset the costs.

Here is 3 oz:

http://i.imgur.com/DvvcC.png

7 oz:

http://i.imgur.com/Mw1Ra.png

First class usually arrives in 3 days. Priority Mail 2-3 days.

Are you secretly Vincent James?

 

[mont7071]

Regardless of whether you think you can save 50 cents on postage rate, or even a buck, that isn't the bulk of the costs. Even if you assumed only $2.50 on every single package going out the door with 100% success rate (never happens) you'd be reducing your total costs less than 5% from those stated above. You're also going to have more product damaged that has to be re-sent (USPS likes to run over/step on First Class), you're going to have costs for things you never even thought of, your printer will die, shipping software will glitch, Endicia will decide to misprint an entire batch of postage, etc.

My company sends things by a variety of first class, Priority Mail, and Int'l. Our blended rate is still over $4, and we have every bulk discount you could think of, and that's before you get into hiring a fulfillment center, replacing inventory damaged/lost in the mail, cost of weekly USPS pickups or gas if you are driving it to the post office, etc.

 

[secretagentdad]

Heh
You would think a solid digital product would be less hairy.

Pity thats not how it turns out.

 

[mont7071]

Ya, digital products always sounds good on the surface, less inventory and shipping costs, unlimited reproduction, etc but you are talking about something that is even harder to build "perceived value" in to. I can find you 50,000 eBooks and clickbooth offers that never made 100 bucks, the very things that make them easier than physical products to start are also their drawbacks. I'd guess that less than 2% of the digital products ever released actually made a profit of more than a few hundred bucks (I'm excluding services/memberships). Its pretty hard for a person to copy a bottle of pills and share it with 10 of their friends, you dont see too many torrent sites sharing weight loss pills, etc. Add in the fact that the average consumer is more wary of paying for something that isn't a physical "thing" that they can touch, and tends to expect digital content to be "free" in the Internet age, and I would propose that digital products are actually harder to make a success out of, even if they are cheaper to start. I don't sell anything digital personally though, so YMMV.

 

[MCRunning]

You are telling me if I send something First Class instead of Priority Mail it is a higher chance of getting more damaged? I use the same boxes for First Class and Priority never had a problem. A supplement product only weighs a couple ounces. Put that into a 6x6x6 box there is no way the thing is going to get damaged.

We use a Zebra LP 2844, thing has a long lifetime. Even if it does die, you can get another one for 100 bucks. Never had Endicia misprint an entire batch. But let's say it did misprint the entire batch. Simply select refund postage, throw away the labels, you are refunded in 14 days. Reprint the labels again and you are set. Say you printed 100 labels that it messed up, that is $2. Out of the thousands of labels I have printed I have never had a serious hiccup.

What costs of USPS pickups? They pickup Monday-Sat for FREE.

https://tools.usps.com/go/ScheduleAPickupAction!input.action

I don't know where you are pulling half the stuff you say from. Sure stuff goes missing in the mail, but if your product cost is only $4 that is nothing to replace. Say you charge $5 for shipping and it costs $2.50 to ship. Say 1 out of every 100 packages go missing. You net $250 in shipping and have to replace one $4 bottle. Now you are talking about fulfillment centers which is a whole another game. Your OP was about fulfilling yourself.

 

[blogspotter]

@Mont:
How about a dating site? Would like to know the math for a successful CPA driven paid dating site.

Mont?

 

[jpet1010]

Inventory: 100 bottles a day X 30 days worth to get started @ $4 a bottle = $12k in inventory costs

Min Network Pre-pay: $40 ave CPA X 100 leads daily cap X 10 day's worth = $40k just to start, with a first-month total of $120k in cash outflow

Shipping: free trial offers have to ship fast, no customer is going to accept waiting 12 days for product to arrive when the free trial period is 14-30 days, plus you need deliv tracking # to show they got their stuff. Count on an ave cost of $4 X 100 shipments per day X 30 days = $12k per month.

Notice we haven't even gotten to any recurring income for you yet (you'll probably charge a small "S&H" fee of a couple dollars to each customer to get their billing info, but its not going to even cover your product cost), and yet somehow you've already spent $144k in the first month. Add in some merchant card fees (from 3%-14%), some customer service costs (ok, you'll do that yourself or ignore it, cuz you're broke now) and all those tiny random variable costs that pop-up (custom banners, hiring a lawyer to review your LP, getting insurance in case you get sued for poisoning someone, etc) and you are pretty much at $150k in out-of-pocket costs in the first month, even after you got a tiny bit of S&H revenue in from your customers. If you're lucky, some % of your sign-ups will start re-billing after day 20, assuming you've made it that far without going bankrupt or giving up. Then the real fun starts, you get to buy even more product, and start the process all over while praying your rebill rate can keep you afloat before your luck runs out.

In case you think these #'s are exaggerated, you're right, they are. They are actually very low/conservative. Talk to anyone that has launched multiple, medium success offers on Networks, and you'll find that spending a quarter-mill on an offer before they can even analyze whether it was successful yet or not is fairly common.

Good Luck bros

All of this is pretty damn accurate. Say you're lucky and you have an in with a network that will work with you on payments, that helps a ton. You still have to consider the fact that you'll have to order more product on day 15 to ensure you have more when on day 30 (based on these #'s). If your product is coming from overseas, have fun with customs and random holds. As for shipping and guys saying just do it yourself, most guys that I know do not become an advertiser to sit at home and pack orders all day nor do they want some random buddy logging into their CRM, seeing their sales, and printing orders. So more than likely you're going to be using a fulfillment company which will cost you.

Then if you are doing continuity on a diet product you can count on your first re-bill coming in at 60%-70% after refunds / cancels. But that's not where you make your money, you make it when the payments compound. But let's say there's a hiccup with your product order, well shit. Now you can't run new sales and you can't compound payments...Let's not forget about $35 cb fees, those stack up quick. If your MID is offshore, some of those cb fees can be as high as $70 with refund fees of up to $5.

Like OP said, the random fee's will amaze you. There is definitely a lot of value and a lot less stress in a nice straight sale offer. Yes the ROI might not be the same (but still can be great ROI) but it goes hand in hand with the amount of stress.