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Milk Your Winners, Drop Your Losers

In my previous article How To Be 100% Sure That Your New Product Is A Winner We have discussed dropping losers.

I hope I have given you the message strongly enough. But the same principle applies to milking winners. When you get a winner in-demand product, it is a license temporarily to print money.

You will have so much of the folding stuff pouring through your letterbox or credit card numbers blocking up your email account... that you will hardly know what to do with it.

HOWEVER: Every product has a strictly limited life-span. It doesn't matter how well the product performed in the early weeks, the response will gradually tail-off over a couple of months - year to a point where the product starts losing money. There are two big factors which cause this:

1. Everyone has seen your marketing material (emails, web-pages, direct mail letters, postcards, newspaper ads etc) a hundred times, and those that are going to buy the product, have, in the main, bought it already.

2. You 'lucked-into' a mood of the moment. For example, everyone's suddenly worried about car security at exactly the moment you advertise your steering-wheel lock. This mood will rapidly pass as the population (driven by the media) move on to the next area of worry or concern. (What a terrible cynic I am.).

I have seen people make lots of money on a product, and then hand up to 50% of it back to the newspapers as they attempt to breathe life into a dying market. I have seen a single advert in The Sun take one thousand orders for a £49.95 product. Then, six weeks later (after the product has been heavily advertised), I have seen the identical advert pull in only eighty or so replies (and of course, lose big money). You must listen when the market says it has had enough of your product. Getting out early is a sure-fire way of keeping most of the money you have made.

It's the same with the stock market. Everyone aims to sell at exactly the peak of the market, and buy at exactly the trough. But, of course in reality, these peaks and troughs are impossible to predict accurately. The stock-market winners sell early, and buy early. The losers sell too late and buy too late - they stay on the roller-coaster too long. They hang on to a rising market out of greed, thinking the market will rise forever.

The same is true of product development and direct marketing. When you get a winner, it is tremendously exciting. But your greed can make you hang onto the product long after it should have been dead and buried.

Want to know a sure-fire indicator of when to pull out?

Quite simply, you should pull out when all the other developers and marketer boys (and gals) start piling in after your initial campaign. This takes tremendous self-discipline, but pays enormous dividends. The strong temptation is to hang on, and hang on. If an advert fails, you attribute it to something funny about that particular issue of the paper, or day of the week. You advertise again and again, spurred on by the glint of gold.

Also, another factor comes into play here (and I'm telling you 100% solid truth); it is the distraction factor. You see, you don't run this huge mail-order organisation, do you? There is no 'packing and shipping' department; that's YOU in the shed/garage, late at night. So when you get a winner, the chances are that you will be overwhelmed trying to keep up with sourcing and shipping the product. This will take 100% of your time. Meanwhile, every newspaper from Golden Labrador Weekly, to Clay Pigeon Shooting Times will be on the phone pestering you for an advert. The danger is that you will just say 'Yes, yes, yes' to all these people, and end up spending tens of thousands of pounds on a dying product.

The solution is to keep your eye firmly on the ball. Retain your policy of only taking adverts in the mainstream press I advised. Don't go too crazy with the adverts, as this will alert all the other mail-order boys, and push the rates up. As soon as the papers see that you have a winner, suddenly the rates go up, and adverts become hard to get away. You must play a double-double bluff game here. Above all, never let on to anyone how well your advert is doing. If asked by someone trying to sell you space, you tell them that the response was lousy, but that you are going to give it one more go. Could they offer a cheaper rate? When you have a mail-order winner, beware the fatal combination of:

1. A falling market - and it's nearly always falling after your first few adverts.

2. A diminishing market share due to everyone else piling-in.

3. Rising advertising rates (sometimes steeply) due to the papers 'locking-on' to the fact that you have a winner.

Most direct marketing successes are quick 'in and out' jobs. You know this is true, because you rarely see exactly the same product advertised week after week, month after month and year after year. You want to be in there, and out within a few weeks. Then you can sit back and smile as everyone else piles-in and tries to emulate your success in a falling market against stiff competition. Sure, you'll lose a few orders, sure, you might have been able to milk it a little bit more before diving out, but at least you creamed off the most profitable share of the market, and kept all of it. This is what it's all about. Don't learn these lessons the hard way.

There is nothing more heartbreaking than making £100,000 clear profit in the first two months of a campaign, and then handing £50,000 of it back to the media over the next six months of hard slog. In other words, you work hard for two months and make £100,000, then you slog for a further SIX months and LOSE £50,000. I have seen this happen time after time after time. To get rich in this business, you must develop a sense of timing. Knowing when to get in, and more importantly, knowing when to get out.

For this reason, I advise against trying to follow the crowd into a product idea. If the papers are full of adverts for steering-wheel locks, the naive player thinks: "Great. This must be the thing to get into." So they rush around like crazy trying to source a product - often at too high a price because they are desperate to get into the market. They then advertise this product in a falling market which is fiercely competitive and at extortionate advertising rates (because the papers have 'locked-on' to the 'success' of this product). The result is that they lose big money.

My favourite strategy for mail-order is as follows:

1. Come up with your own, unique product idea. I don't mean 'invent' a product and have it tooled and manufactured. I mean source a product which YOU believe will sell, and that you can't recall seeing in a newspaper or magazine as a mail-order item.

2. Test the product in a suitable cheap advert. If it flops, drop it.

3. If it looks good, then buy a single insertion in a big-league paper like the Mirror, or the Sun.

4. If this works, then plan a campaign which ramps up quickly over (say) three weeks, holds steady for (about) four weeks, then ramps down over (say) three weeks. Aim to be out of the product in three months maximum.

In this strategy, the 'me too' brigade will only start piling-in as you are ramping down your campaign. This is perfect. If your product is 'paper and ink', then it will take much, much longer for the competition to copy you. It takes quite a while to write a book or a course. Also, the general mail-order chaps aren't very keen on this type of product. They prefer plastic gizmos and 'real' products. A book or a course can have a much longer life - often years if you are subtle about it. Also, if you have a great 'back-end' product and are buying advertising at low, low rates, then you can go on for years and be untouchable. People will try and copy you (periodically, I see 'Midas' type adverts coming and going), but they soon die because they are paying twice the money you are paying, and they are not exploiting the 'back-end' - where most of the money is made.

They retire broke, puzzled and confused. They wonder at how you can possibly keep advertising when they know that the product only takes half of advert cost. You know the secret. You are buying distressed-rate space, and you have a great follow-up product which makes more than the original sale of the book.

Nick James is a UK based direct marketer and product developer. During the last 3 years Nick has sold in excess of £1 Million of products and services. Subscribe to his Free Tip Of The Week email at: http://www.Nick-James.com