KaChing: How to Run an Online Business that Pays and Pays

by Comm, Joel

  —Jane Smith, Owner, Knitwear, Inc.

  If you used this, immediately after it you’d have to add:“Most knitters who used these strategies saw increases of at least 12 percent.”

  That’s not terrible and using “at least” does allow you to show that there is room for buyers to do better, but it does show that your best-case scenario isn’t the one that buyers can typically expect.

  Kevin came up with a great idea that allows marketers to use both their best testimonials and the typical results that the FTC wants. Instead of presenting the best results as a testimonial, you use them as an example of what’s possible and explain what the customer did to achieve those results. If the account makes clear that the results are exceptional and not typical, the FTC has no problem with it.

  So instead of using the previous (verbatim) testimonial by Jane Smith and qualifying it with the necessary disclaimer (i.e., “Most knitters who used these strategies saw increases of at least 12 percent”), you could write something like this:

  Jane Smith’s Story

  In September 2009, Jane Smith had just about given up hope. She’d been knitting for almost 20 years and had been selling her sweaters, scarves, and gloves online for almost 2 years, but she’d never earned more than $120 a month in revenue.

  “I was just about ready to give up,” she says. Within just six months of using the strategies in “Make Money with Knitting,” though, Jane’s revenues rocketed to $12,000 a month. She’s since sold her studio apartment and now knits from her beach house in Cancuń.

  How did Jane create her dream life?

  Jane did three things that massively boosted her income.

  • She created an entirely new range of knitwear products. (We explain how to do that in Chapter 3—“Creating Novelty Knitwear Products.”)

  • She created unique sales pages for her best-selling items (Chapter 6—“Building Sales Pages That Sell.”)

  • And she leveraged her friends and family, used social media to build a brand, and managed to put her items in stores across the country.

  All of those actions, together with her dedication, hard work, and her amazing designs, enabled Jane to boost her business and turn her passion for knitting into a six-figure income.

  As far as the FTC is concerned, the details in the description should be enough to show that the results are specific to Jane and not typical of customers as a whole. It’s the difference between a testimonial that says, “After drinking two weight-loss shakes a day for six months, together with diet and exercise, I lost 110 pounds,” and one that says, “Every day, I drank two WeightAway shakes, ate only raw vegetables, and exercised vigorously for six hours at the gym. By the end of six months, I had gone from 250 pounds to 140 pounds.” That’s the example of a fair testimonial supplied by the FTC.

  A description like this doesn’t just meet the FTC’s requirements, it also brings to life what your product can do. It makes your testimonials a little more human, and that’s not a bad thing at all.

  In practice, I think we’ll find that marketers are going to respond to the FTC in a number of different ways. Some, no doubt, will ignore the new guidelines and continue in their old ways, at least until they get a letter suggesting that they’re in trouble. Certainly, there are going to be lots of old sales letters on the Web that were written before the new guidelines and haven’t been updated.

  Many will do what the FTC wants and put up their best testimonials with a rider pointing out the typical results.

  And some—the smart ones, perhaps—will turn their best testimonials into detailed stories.

  TRANSPARENCY

  The other issue that Kevin highlighted concerns transparency.

  The FTC feels that if you’re recommending a product, and you’re earning money from the sale of that product, buyers should know that you have a vested interest.

  That sounds reasonable, but in practice it’s hard to imagine that buyers aren’t already aware of affiliate connections. Affiliate links don’t look like standard HTML links: They contain the affiliate code, which is a bit of a giveaway. I doubt that anyone who receives my marketing e-mails isn’t fully aware that, in addition to these products being carefully chosen and recommended by me, I have an affiliate relationship with the seller. If I think a product is good, of course I’ll want to cash in on it. And if I don’t think a product is good, I won’t want to go near it.

  A number of publishers go even further by adding “(aff),” short for “affiliate” after the link, to let everyone know that they earn from a purchase. That’s been common practice for years, and it might well be something we’ll all have to get used to doing, even if it might put off the odd buyer whose eyes wander to the term in brackets instead of focusing on the link.

  It’s important to remember that the FTC’s rules are guidelines and difficult to enforce. The best strategy is to show that you’re doing everything you can to be in compliance and to market fairly.

  Affiliate selling has now become a traditional part of Internet marketing. It can earn giant amounts of cash for you, or it can add nothing more than a pleasant extra KaChing to a site that brings in money in a number of other ways. Used carefully, on a site with plenty of traffic and a close connection with readers, and it can be a hugely valuable and simple way to deliver income.

  6

  Membership Sites—Turning Your Internet Business into a Passive Revenue Machine

  One of the biggest challenges in marketing is the fact that it’s never-ending. Making profits means making lots of sales, but at the end of every sale, you have to return to the marketplace and find another buyer.

  There are things that you can do of course to bring your old buyers back. Newsletters, e-mail marketing, and a constant flow of good content will all keep attracting those buyers and ad clickers. But each time you send out one of those e-mails or put up a new post, you still have to persuade users to buy a product or click on an ad. Internet marketing is a constant process of attracting, selling, and converting.

  Wouldn’t it be great if every time you converted a lead into a customer, those customers agreed to pay again and again, without fail, every single month?

  Instead of wondering how much you’re going to earn each month, you’d know that your subscribers will give you a set amount of money. Your business would have a firm financial foundation, allowing you to focus your efforts on creating new products that can bring in large, immediate bursts of cash to supplement that steady flow. Create a system in which the products your subscribers buy are created and distributed by staff or freelancers, and you’ll even have a high-paying passive revenue stream.

  That’s what this chapter teaches you to do. It explains what membership sites are, what they should offer, how to price your subscriptions, what you have to do to keep your subscribers, and how to set the whole thing up without giving yourself a migraine.

  What Is a Membership Site?

  Continuity programs are as old as newspaper subscriptions—probably older. Members sign up for a product or a service and are billed on a regular schedule as long as they want to enjoy the benefits of that product or service. It’s the model that’s allowed the print media to become an established business. It keeps TV programs flowing through your cable box, ensures that you remain connected to the Internet through your Internet service provider, lets you talk on your mobile phone, and has even allowed Reader’s Digest and others to create book clubs to deliver novels you never read to your doorstep every month.

  Programs like these have proven their success on the Internet, too. Although newspapers and other content sites have struggled to persuade readers to pay to read their products, sites that offer services have become a multi-million-dollar industry. The online dating industry, for example, is predicted to be worth $932 million by 2011 in the United States alone. In Europe, where growth has been more consistent, dating sites are predicted to be worth about 549 million euros by 2011. That’s an incredible amount of money, and almost
all of it is coming in month after month on a regular basis.

  Members of these sites sign up, enter their credit card details, agree to pay their monthly retainer, and in return are granted access to parts of the site that nonmembers can’t reach. While those nonmembers are confronted with a pay wall when they try to access the site, members are waved through after entering their username and password. Once inside, they can view complete profiles, send and receive messages, and chat online with potential dates. Their membership makes them feel like part of an exclusive club and lets them enjoy all of the benefits and features that come with club membership.

  The sites, for their part, work hard to ensure that as few people as possible cancel (at least not until they’ve found the love of their life) and that their members get the benefits they’re paying for.

  The principle itself isn’t complex, and it’s likely to be one that you benefit from every day. As long as the benefits keep flowing toward the customer—whether that’s in the form of information, entertainment, or networking—the funds will continue flowing toward the seller. The key is to understand which benefits Internet users are willing to pay for.

  What Do Online Membership Sites Have to Offer?

  It might seem surprising that sites like Match.com and eHarmony are doing so well. While those sites have millions of members, there are also plenty of free dating sites on the Web that make their money through advertising. Anyone can join them, anyone can view the profiles, and anyone can send and receive messages and browse the site for potential dates. Some of those sites are doing very well. But none of them are doing well enough to pose a real threat to the market’s leaders—all of whom charge a monthly fee.

  That isn’t true for other sectors. At the moment, only a few content sites have successfully managed to charge people to view their articles, and those sites tend to be in the finance sector. The Wall Street Journal demands just over $100 for an annual subscription to its web site, delivering only short previews to nonsubscribers (although subscribers can send articles to their friends, allowing the publication to benefit from viral marketing). The Economist asks for about $90.

  These kinds of sites—dating sites that demand a membership fee and news sites that demand a paid subscription—are offering something that users are clearly prepared to pay for. In the case of dating sites, that’s exclusivity.

  When they can pick up the same service on a free dating site, members see the pay wall as a filter keeping out people who aren’t serious. If someone is prepared to dip into their pocket to pay a $25-a-month subscription fee, then that’s a great sign that they mean business. They’re less likely to be looking for a short-term relationship and more likely to be active on the site and prepared to invest in building a new relationship with someone they meet online. They’re also likely to be financially stable enough to afford the membership fee—a decent sign that they’ll make a good date!

  For readers of the Wall Street Journal’s online edition, the return is value. Subscribers may well feel that the content available on the site does more than satisfy their curiosity; it gives them professional information that’s worth more than the price they’re paying for it. The knowledge that they gain by reading the paper’s reports every day, for example, may give them a better understanding of what’s happening on the stock exchange, thus helping them to make smarter investments, which will in turn bring in more money than the $100 subscription fee.

  Create a site that offers either a sense of exclusivity similar to that found on Match and eHarmony, or provide the kind of high-value content offered by publications like the Wall Street Journal, deliver it to them in a steady, undisturbed flow, and you should be able to persuade your users to pay you every month, too.

  Those are the principles that have allowed my own membership site to grow and prosper. The Profit Vault (www.TheProfitVault.com) is a membership site that doles out valuable training and content to my members over a 13-week period. For those who want to learn practical strategies for making money online, we’ve organized our content in a consumable manner that provides weekly objectives, motivation, instruction, and action items so that users can pursue their online goals. Members pay $47 per month to enjoy this content (Figure 6.1).

  The Profit Vault is an online example of a membership site or continuity program. But that doesn’t mean you can’t create physical products and receive recurring payments from customers.

  One of our popular offline products is the Top One Report (www.TopOneReport.com). As a magazine format, this publication offers fresh, original content written by me and members of my staff. We tackle all things business-related, with a special focus on online business. But unlike a typical magazine subscription, the Top One Report commands a premium of $29.95. Just as people will pay more for an e-book that provides instant gratification and valuable material, our subscribers are willing to pay more for our report because of the quality of the information found within. Remember, it’s all about providing value. If people can justify a purchase that promises a larger ROI than its cost, they will be willing to sign on (Figure 6.2).

  Figure 6.1 The Profit Vault is an example of a membership site that people will gladly pay for on a recurring basis. As long as you are providing value, customers are all too happy to continue subscribing.

  That may sound slightly odd: a publication explaining how to make money on the Internet that is produced using old-fashioned ink and paper and dropped in a physical mailbox outside subscribers’ homes.

  Of course, I could put all of the content in the Top One Report online. I could post it on a web site, and I could distribute it by PDF. But there are a couple of reasons I don’t do that.

  Figure 6.2 Subscription models are nothing new, and sometimes the old way of doing things is still the best. The Top One Report is a printed, monthly magazine packed with advice and articles about Internet entrepreneurship.

  The first is piracy. This content is exclusive. People have paid for it and I want them to continue doing so. If I put it online and charge for it, I can be sure that some copies will be e-mailed, shared, and passed around. Some people won’t be paying for it. Printed distribution reduces the number of people who are reading my publication for free.

  But a print publication delivers something even more important than piracy protection: It comes with a high perceived value.

  Readers expect online content to be free and are unwilling to pay for it. They will, however, pay for magazines, because they assume that the information those magazines contain has been carefully chosen and well researched. Because anyone can create a web site and place content on it, new visitors can never know whether they’re about to get some truly valuable information or something that just came off the top of someone’s head. A print magazine—like a book—costs money to produce. If someone has decided to invest in that publication, it’s a good sign that it contains information that other people are going to find valuable.

  In fact, as we’ll see, it doesn’t cost a great deal to produce a print magazine, and it’s possible to do it with no risk at all. But sending out a print publication helps the content contained therein to stand apart from information online. It increases the odds that people will read it and take it seriously.

  Pricing Your Membership: How Much Is Too Much?

  Setting a price for a product usually means coming up with a number that’s both as high as possible and one that attracts as many people as possible. When you’re setting a price for a club membership, the philosophy is a little different.

  You want a price that puts people off.

  Obviously, you don’t want to put everyone off. An empty subscription site isn’t going to make a great deal of money for you. But you want a price that’s high enough to keep out people who aren’t completely serious.

  That amount is going to vary. According to Forbes, when Sebonack Golf Club opened in 2006, the initiation fee for new members was said to be a record $650,000. Today, it is rumored to have reached sev
en figures. Those prices guarantee that the person sitting next to you at the eighteenth hole is equally important, equally successful, equally interesting ... and equally rich. If you have to ask how much membership costs, then it’s probably not for you. Other golf clubs might not require that their members hand over checks for $1 million, but most have fees that are designed to strike a balance between attracting new members and putting off people who might cause current members to head for the door.

  On the other hand, even a small fee can be effective. Elance extracts a service fee of between 4 and 6 percent on every job outsourced on the site. With over $235 million already earned by providers, even at 5 percent, the company would have pulled in almost $12 million. But Elance also requires that providers pay a monthly subscription fee that ranges from $9.95 for individuals to $39.95 for businesses.

  Surely it would be in Elance’s interest to have as many providers listed as possible. The more providers the site has bidding for jobs, the greater the choices for buyers.