Online marketing or for that matter any marketing strategy require a research for checking the profitability of the product that you are going to market. Profitability checking includes but not limited to the checking of the demand of the product, its competition and whether there is an opportunity for additional suppliers of the same product given the current demand and supply situation.
Importance of profitability research
In plain economic words if there are more supply than demand you will ideally reach a situation where you will be in a price war. The best option would be to enter a market when there is less supply than demand and there exists a healthy inflation and opportunity to make the profit.
Profitability checking also ensures whether you will make enough profits by selling the product in question and thus be able to reach your revenue goals.
Selling in a market with very less profitability which is thin and not enough to justify the efforts to source, stock, market, sale and provide customer support and after sales service is an absolute mistake. Thus profitability checking prior to product launch is an absolute must.
How to approach a profitability research?
Approaching a research for profitability online, the best option would be to check the market where you intend to market and sale your products. Say you are trying to sell an e-book on eBay on ‘how to house train your dog’.
The first thing that you should do is to check out eBay for yourself and find out what is the relative competition from other sellers who are selling similar dog training books. As described in the opening paragraph the less the supply compared to the demand the more are your profitability chances.
You can set a higher price and make more money than having to live at a thin profit margin. There are several tools to check the relative concentration of products for the same or matching keyword. Say you want to find out how many products are listed on eBay with the keyword phrase ‘dog training’.
There is a tool called Terapeak research which will provide you with valuable insight into the total number of such listings of such products, what is the selling rate and also the average sales price of such products. Cool! Isn’t it?
this is invaluable when you are making your product profitability planning as also to find out details about the market and the demand of the product in that market. With this research material, you can accordingly rethink the pricing strategy and also whether to even go ahead and sell it to the target market that you originally decided to.
Checking the demand.
The next thing that you should do is find out what is the demand for books on dog training on eBay. Again more demand is better for you and your profitability chances.
An easy to find what is the demand on eBay is to check the relative selling rate you have discovered using Terapeak in the last paragraph. This should give you an insight is how fast-moving is the competitive products on this site.
Checking the competition.
The more are the competitors in the target market the stiffer is going to be the opposition and hardships in getting your product sold. It is advisable to check out the pricing of your competitors and also their comparative sales and selling strategies before setting your own price.
If they are selling at a higher price and not getting enough sales, that should give you an indication of the market response. Some markets are very price conscious. Slight fluctuations are going to determine the difference between sales and no sale.
Say your product is targeted at home improvement tips (which is obviously a topic that has been written much on) and you are targeting a section which is very price conscious then chances are that a stiffer price will offset the buyers while your competitors who are asking for a lesser price will get their products sold.
Check out your primary competitor and find out as much as you can about his selling strategy and product. Check out your product and your pricing strategy. If there is a possibility that your products have distinct edge over your competitor than it is obviously better to highlight those areas in your marketing strategy and accordingly use as your
Following the products trend in the market and what the customers are looking for is an important aspect of profitability checking. This helps in not only your current product sales but also the future sales because if you cannot predict or assess the trend and demands of the customers you will probably miss a trick or two which your competitor more tuned to the market may not.
One of the important aspects of checking product profitability is to find out a steady source of the product. Say you are dealing in imported White coffee from Ipoh (Which is a city in Malaysia) and selling it online.
Your first priority would be to have a steady supplier of the product from Ipoh, may be more than one, so that you know that when your current stock is hitting the re-order level you already have a reliable source to get fresh stock.
If your product sourcing is not reliable you not only have a problem of profitability because your orders will get cancelled, but your reputation will also take a plunge with your customers. Sourcing reliability also means that the price is relatively steady and is not going to have a situation when your supplier is going to withhold supply and ask for windfall gains at your expense.
Ancillary costs to sale the product.
Additional things to consider in a product profitability research is the handling, stocking, shipping and distribution costs involved in the selling of the product. These costs are important aspects of selling and do affect your final pricing and your profitability margin.