Two weeks ago we first wrote about the launch of our new training platform for online business builders in 5 lessons from a $213,000 launch.
Today we have 5 more lessons from our launch to share with you. If you’re building an online business or launching a new product, this post is for you.
6. Low Priced Products Can Deliver Big Financial Results
Online courses are priced at almost any amount you can imagine, from free all the way up to $3,000 and beyond.
This always raises interesting questions. How do you price your own information products? Do you have to price high to earn high? Can lower priced products still earn good revenue?
In the case of Fizzle, we decided to make our monthly membership affordable for a couple of reasons:
- We believe we can produce high-quality education for online entrepreneurs at a reasonable price, and we believe this training should be affordable to most people who want it.
- We wanted to differentiate ourselves from the crowd of “gurus” selling training in the $2k and up range.
We weren’t sure this pricing strategy would pay off, but we knew of many online training platforms covering other topics that were priced similarly and have been spectacularly successful. Lynda.com, Udemy, Treehouse were three models we used to help make our pricing decision. We thought of this as an opportunity to bring a proven model to a market that hadn’t really seen it before.
Are we leaving money on the table by not charging $2k for Fizzle? Perhaps, but the launch results were very encouraging, and we think this pricing level will create more member success stories and long-term relationships. In the end we want to make good money, but we believe helping our members succeed (and not gouging them) is the best way for us to succeed.
So, how does the launch of a $29 product lead to $213,000 in revenue? The revenue doesn’t all come in at once. The $213,000 figure is based on two calculations: average monthly revenue per customer and average monthly churn rate.
In our case, we earn more than $29 on average from each customer because our deluxe package is priced at $49. We also offer annual packages at a slight discount, so those need to be taken into account.
We’ve since moved to a single $35/month level.
Once you have your average monthly revenue number, you also need to calculate your average monthly churn rate. This isn’t an easy number to calculate, especially when you first launch, but it’s probably the most important number for any subscription type business.
Your churn rate is essentially the percentage of people who leave your site each month. Average churn rate is hard to calculate because different groups churn at different rates. People who sign up with a coupon might not “stick” as long as people who signed up at regular rates. Different traffic sources will churn at different rates. People who have been members for six months will churn less than brand new members, etc. etc.
The best you can do is to watch your churn rate over time, and to measure by cohorts. Cohorts are just ways to group your members to see what’s really going on with your data.
Once you have an average churn rate, you can now calculate your average customer lifetime value. Customer LTV is simply the average revenue per member X the average length of memberships.
Divide your monthly churn number by 1 and you’ll get the average length of a membership. For example, if your churn rate is 10% per month, your average membership length is (1 / .1) = 10 months.
If your average membership length is 10 months, and your average monthly revenue per member is $50, than your average customer lifetime value is $500.
This is why churn is so important. A reduction in churn from 10% to 8% means customers stick around 2.5 months longer. 2.5 months at $50 is $125 in revenue per customer. That extra revenue could open up tons of opportunities for content production, advertising, making customers happier, etc.
Next, you just need to multiply your average customer LTV by the number of customers who signed up to figure out the expected revenue from a given launch, month, promotion, etc. Again: keep in mind that the average churn rate can change dramatically from one group to the next, but this is a good starting point for calculating your revenue.
This might sound a little complicated at first, but it’s actually fun to calculate and watch these metrics so you can try to improve them over time.
These numbers show you exactly how a fairly low-priced monthly subscription can add up to big revenue over time, assuming you keep your customers happy.
7. Promotions Work
Your product probably won’t sell itself. You have to give people compelling reasons to buy. The more specific and time-sensitive your reasons, the more likely people will jump in.
Time and time again, we’ve found that running special promotions is one of the best way to sell a product online.
When we launch, we run multiple special promotions for different groups (email subscribers, blog readers, launch interest list subscribers). Leading up to the official public launch of Fizzle, we held multiple smaller alpha/beta launches and offered special intro pricing for those as well.
Within the first 72 hours of Fizzle being open to the public, we had already signed up over 600 paying members. Without a carefully executed launch plan that included special launch promotions, we would only have signed up a fraction of those customers.
We also occasionally run other promotions around special holidays, anniversaries, etc. We’ve found that a well planned promotion can lead to more sales in 72 hours than we might typically sell in a month or more.
If you haven’t tried running a special promotion for your products before, give it a shot. Every situation is different, but most people appreciate a deal, especially if they were on the fence about purchasing in the first place.
8. Content Marketing Pays Off
There’s no question, content marketing is a lot of work. Operating a blog like Think Traffic for nearly three years takes an incredible amount of time, creativity and dedication.
But the payoff can be huge.
When we launch a new product like Fizzle, we don’t have to go around paying for advertising or begging for customers. We’ve worked hard to build a following at Think Traffic and people who read this blog become our first customers and biggest supporters.
In marketing, there is nothing as powerful as a dedicated audience. Forget every marketing tactic you know of. If a dedicated group of people regularly look to you for advice, inspiration or entertainment, the selling part is easy.
But driving sales isn’t the biggest benefit of content marketing. Having a crew to sell to is gold, but what you learn while building that audience is even more important.
When you publish regularly to build an audience, you learn exactly what people want and need. Product ideas are easy to spot and test.
We talked last time about the minimum viable product. Content marketing is about building a minimum viable audience. There is no better insurance against a product failure than building a dedicated audience and learning what they want and need.
9. You Can Learn a Lot from Reverse-Engineering Other Businesses
I mentioned earlier that we looked at existing training platforms like Lynda.com and Treehouse to develop our pricing strategy. That wasn’t all we learned from examining existing businesses.
To develop Fizzle we looked at dozens of video-based online training programs. We dug into each to see what we liked and didn’t like. We made comparisons of several and took notes.
Reverse-engineering other businesses can give you a huge head start. You can learn how other products are built and delivered and borrow and adapt what you need for your own situation.
But this isn’t about copying tactics. Simply doing exactly what another business is doing without understanding why they’re doing it is like wearing a dive helmet to the bottom of the ocean because you thought it looked cool, not realizing it served a purpose and that you needed an oxygen supply to make it functional.
To really reverse engineer another business you need to become a detective. Don’t just look on the surface. Pick things apart, go through sign-up processes, examine emails, contact customer support, read testimonials and ask what customers think.
Then dig deeper: follow company founders on social media. Read team members’ blogs. Scour the web for articles and interviews with the people who built the product.
Try meeting with people in the company directly. Be up front and let them know what you’re developing. If your business is in a slightly different niche, it shouldn’t be a problem. Even if you are in the same niche, most smart businesses don’t see competition, they see opportunities for collaboration.
In the course of building Fizzle, we learned a lot from examining other businesses. The folks over at Udemy have been helpful and willing to share details of their success. Ryan Carson from Treehouse has been great as well, meeting with us and by being so transparent and helpful in interviews and on his blog.
10. Nothing Substitutes for Going All-In
If you’ve been following Chase, watching his videos or conversing with him recently, you’ve probably heard him use the phrase “all-in” once or twice. I think I’ve heard it 100 times in the past few months.
We’ve been big on the concept of going all-in around here recently, for good reason. I made a similar declaration myself last year and haven’t looked back.
We’re 110% committed to helping the small online entrepreneur who wants to make a difference in the world and build something she’s proud of. We care about what we do so much it’s hard to call it “work.” It’s more like a mission.
When you’re all-in on what you do, people notice. When you care about what you’re making so much, you bring fresh insight and dedication, and that shines through for your customers to see. There’s something attractive about unrestrained dedication, and people notice, join in and help promote what you’re doing.
Fizzle wouldn’t have happened without that level of dedication. Going all-in isn’t about some short-term result, it’s about dedicating yourself to a cause or group of people for the long term or maybe the rest of your life.
When you’re driven by a cause you believe in, a story that’s bigger than the failure/success of your product, when you tap into something matterful, people respond. If people aren’t responding to your work, examine your dedication first.
You’re not just launching a product, you’re at the head of a movement. Serving an audience with everything you have and helping them defeat their dragons ends up being the best sales tactic of all.
There’s no substitute for being all in. :)
If you missed them, check out the first five lessons in this series. If there’s anything you’d like us to expand on, leave a comment below and we’ll gladly reply.
The Top 10 Mistakes in Online Business
Every week we talk with entrepreneurs. We talk about what’s working and what isn’t. We talk about successes and failures. We spend time with complete newbies, seasoned veterans, and everything in between.
One topic that comes up over and over again with both groups is mistakes made in starting businesses. Newbies love to learn about mistakes so they can avoid them. Veterans love to talk about what they wish they had known when starting out.
These conversations have been fascinating, so we compiled a list of the 10 mistakes we hear most often into a nifty lil' guide. Get the 10 Most Common Mistakes in Starting an Online Business here »