How To Turn Products Into Cash

This is a letter I wrote myself today.  I have a ton of product ideas and I wanted to get clear on the process of turning those ideas into cash. I kept it simple because I believe it is simple. I hope you like it:

Making Money From Products

Step 1: Create a great product
Step 2: Learn how to sell a lot of them
Step 3: Get paid

Step 1: Create a great product

Great products have a number of attributes, Namely, they make people feel good about themselves, they are affordable, they are beautiful, they add value to people’s lives, they are easy to use, they are better than other competing products in ways that matter to a significant subset of customers, and very importantly, they can be manufactured for a small fraction of the price at which i) people want to buy them, or ii) they can be sold. 

If a product meets all these criteria, it is a great product. Creating a great product produces value in the world. This value comes first from possibility and insight, and then from applying the tools of design, engineering and iteration to work the insight into a product. Out of this process, if successful, comes something new and better than everything that came before. This “new & better” is valuable.

This is not to say that lots of people make lots of money off products that are simply mediocre, or even bad (think Microsoft Windows). Marketing, captive attention and industry lock-in can enable bad products to extract lots of revenue from customers. These customers are still receiving value for every dollar, just not as much value as they could be. In fact, it’s hard to say they aren’t getting ripped off.

So if you have bottomless marketing dollars, an already established big megaphone or captive audience, or a monopoly position in an industry or market, you might be able to skip over step 1.

But for the rest of us, step 1 is creating a great product.  In the startup world, this is called "Product/Market Fit", meaning that you have created something that people want and are willing to pay for.

Step 2: Learn how to sell a lot of them

I like to call this step “Product/Marketing Fit” because it is really the same process as step 1 over again: armed with possibility and some insights about the market, your task now is to figure out what procession of steps might result in lots of people a) finding out about your product, b) seeing it’s value, and c) buying it.

In this step, the tools in your toolbox are somewhat expanded than when creating the product in the first place. They include the same powerful forces of design and engineering, but usually more important are tools like influence, copywriting, audio, video, social proof, word of mouth, viral effects, content, cross promotion, leveraging platforms, partnerships, affiliates, the press, advertising, email, and even less concrete but ultimately essential concepts like belonging and community (ie. “people like me do things like this”).

With all these tools, and their myriad potential co-conspirations, it’s clear that there are as many ways to market a product as there are to make a product in the first place. So what makes a great marketing strategy?

A great marketing strategy appeals to the right people, at the right time, using the right words. It seeks out those who are likely to buy your product, interacts with them at a time they are likely to buy your product, and uses words that inspire the purchase. And of course it does this at a cost that is a small fraction of the price at which customers want to buy.

Just as with creating a great product, it’s very likely that creating a great marketing strategy will take some trial and error. In fact most companies fail because they run out of money before they figure out how to either i) create a great product, or ii) learn how to sell it.

(Note: some companies fail because they skip over creating a great product and then successfully learn how to sell a lot of a crappy product. Don’t do this.)

So here you are iterating and failing to sell your product. At this stage it’s very easy to conclude that no-one cares about your product when in fact no-one knows about it. And it’s just as easy to conclude no-one wants to buy your product when in reality no-one has been sufficiently inspired to see the value. So persist in a methodical way to learn where and why your marketing strategy is failing. Each failure is a learning that will point the way to success. 

What not to do, is to take the scattershot approach. Of course this is the approach that most companies take. The scattershot approach is to try a bunch of things and spend a bunch of money, without the capability of measuring the ROI of each thing you try. Since only 1 or at most 2 of the handful of things you try have a shot of being effective. The results of the entire scattershot won’t be promising or cost effective. And so it’s here that most companies give up and blame the product for not being compelling enough.

And this is an easy, if lazy call: because in most situations it’s difficult to determine if a lack of sales is due to product or marketing. But remember that people bought the hell out of Beanie Babies, The Shamwow, and Crocks (very likely the ugliest shoes ever made).

In fact think about how capricious and malleable human beings are and how our buying behavior mirrors the same. Terrifying and immoral examples aside for the moment, the truth is that people will pretty much do whatever they i) are told to do (either by an authority, or in a way that inspires them), and ii) that they see other people like them doing. Period.

And so if you have conviction based in reality that your product is great, It’s very likely there’s a series of actions you could complete that would have thousands upon thousands of people clamoring to give you money for it. You just need to take some market insight, pick up your toolbox, and use trial and error to find out what those actions are.

Remember to check your actions and results against the following three questions: 

     i) are enough people finding out about your product?
     ii) of those that find out about it, are you effectively communicating it’s value so that people see a compelling value proposition?     
     iii) of those that see the value proposition, are you inspiring them to buy?

Once you tick all these boxes, you have a great marketing strategy. A repeatable method to monetize the value you created when you created your great product.

Step 3: Get Paid

Now that you are creating a great product and selling a lot of them for a fraction of the purchase price, there should be a surplus of incoming cash that you can use to pay yourself. This is the fun bit. Enjoy it.

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