Your aim here is to determine if the cost of making the product allows you to make a profit. In other words, can you create, produce, and market a product and make a profile with consideration to what the customer is willing to pay?

The good news is that if you’re developing it at home, for example, in the evenings after work, there may be few overheads. You can also save money by promoting the product on social media sites, guest posting, and writing articles for industry publications.

However, as you begin to scale, which hopefully happens if the business kicks in, you’ll need to allocate some funds to the following areas:

  1. Advertising cost – the cost of ad campaigns for your product, for example, Google Adwords, Facebook Ad, as well as in newspapers, sponsored posts, or offline advertising.
  2. Distribution cost – if you’re selling digital downloads, such as online courses or ebooks, you’ll need someone to take the payments as well as help setup affiliate programs. The most popular include Clickbank $49.95 to setup plus percentages of each sale, EJunkie.com $5/month, Shopify, 1ShoppingCart, Digital River and a range of others.
  3. Production cost – how much does it cost to hire a software developer, graphic designer, voice-over artist for tasks that you may not be able to handle?

Of course, you may be able to do this yourself but the time, cost, effort and quality may delay your product development. In retrospect, trying to do everything myself just to save a few hundred dollars was a mistake.

For example, I got ALL the graphic design work for this site for less than eighty dollars on Odesk.com. If I tried to do this by myself (as I did in the past) it would have taken weeks and the results would have looked amateurish anyway. Now, it finally looks professional. I’m certain this helps sales.

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Before you create your product, especially if this is the first time in digital product development, you need to know exactly who will buy it. Sounds obvious, doesn’t it?

However, what often happens is that what looks like a great opportunity to you – I bet many people would like to buy that – may not have many potential customers. And those potential customers may be hard to find.

A second problem is ego. It’s hard to let go of an idea if you’ve invested time in it. It feels part of you.

Surely, someone will but this.

Maybe, but maybe not enough to make a profit.

So, how do you verify that there is a real market with potential customers looking for this type of product?

Identify the price they pay for similar products.

Is there a demand for my product?

One way to approach this is to develop a business case for your proposed product.

In other words, imagine that you worked for a ‘real company’ and you had to convince your manager, who has to convince the Finance Dept, and so on, that there is a real, immediate demand for this product.

How would you do it?

  • Creating a business case is a simple exercise in determining both to yourself and others if it should get development and marketing funding.
  • Use the business case as the foundation for your marketing plan. It helps you identify the justification for the product. It also ‘proves’ to you and potential investors that a gap exists in the market and that your product will address this.
  • Is there a gap in the market for my product?

Well, how do we find out?

Gap Analysis is another task which helps determine if there really is an appetite for your product as opposed to a ‘gut feeling.’  Gap Analysis looks are what currently exists in the market, what should be there, and how you can fill that gap.

Take languages for example. These are very popular. I’m learning Greek at the moment with GreekPod101.com.

The most popular languages are well served. Italian, French, Greek, Chinese, Arabic and so on.

But how about smaller, less well-known languages, for example, Gaelic Irish, or different Chinese dialects?

If everyone is competing to build the Italian, French, Greek, Chinese, Arabic products, the market is probably already saturated. Instead, look at other languages which are underserved. I’m sure you can think of two or three right now.

How to perform low-cost market research on my products?

If possible run polls on your site, ask questions in forums, perform searches on Twitter, and look at your competitors. In other words, take your own feelings out of the equation. Prove to yourself that Yes, there is a potential market for this.

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Ivan Walsh, Internet Business ExpertAbout Ivan Walsh Got a question about running an online business? Contact me on Google Plus, @IvanWalsh, and Facebook

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How To Negotiate Daily Rates When Starting as a Freelance Web Writer

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Patterns: Breaking In To

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Do Sub-Domains Increase or Decrease Google PageRank?

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Matt Cutts’ SEO blog discusses different ways Google interprets Sub-Domains and Folders. What’s important is how your Google PageRank may be affected by setting up a new blog on a sub-domain versus a folder.

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9 (Unusual) Ways to Make Money on Your Blog

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Sir Alex Ferguson’s Unique Interpretation of Success

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Most of us congratulate our team when they win, right? What’s interesting is that many successful leaders adopt an an alternative approach. One example of this was Sir Alex Ferguson’s response when his Aberdeen team won the Scottish Cup. Did he congratulate them?

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How to Batch Schedule Tweets with Hootsuite

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Why you should stop saying ‘No Problem’?

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How to Write a Marketing Plan for Twitter

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Should you use Twitter as part of your Marketing Plan? If you’re looking to increase sales, generate leads, or connect with prospects, it seems a no-brainer, right? The problem is if you’re starting out with Twitter it can be hard to see where it compliments your Marketing Plan. The most practical approach is to create a dedicated Twitter Plan in the same way you’d create any marketing plan.

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How to Increase Customer Signup Rates by Email

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If you had a choice between email and Facebook for web marketing, which would you choose? I hope you chose email as it’s more effective for long-term customer engagement. Try to segment your customer list on Facebook and see how hard it is. But there is a problem with email. Email Marketing – Increase Signups [...]

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Winston Churchill’s Alternative Clean Desk Policy

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When’s the last time you read something about productivity that made you stop and rethink how you manage your time? I just finished reading Winston Churchill’s biography and one of the many treasure buried inside the book was his own version of the notorious clean desk policy.

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29 Ways to Increase Traffic to a Niche Blog

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Making money from blogs in an inexact science. What works one blogs fails on another. I’ve launched over 200 websites since 1998 (mostly ecommerce) and about 30 blogs (mostly technical). If your blog has a technical slant, for example, it’s target audience is technical writers, analysts, architects, or others micro niche areas, then use some of these techniques to increase your traffic.

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Why Everyone’s Forgotten Charlie Sheen?

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Remember Charlie Sheen? Why does no-one talk about him anymore? If you want your blog to succeed, write something that people will want to read today, tomorrow and the next day…

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