Asi Erenberg is CEO Ecommerce Partners &
Dr. Roni Horowitz Chief Consultant for Ecommerce Partners
The preliminary stage for building Internet-based sales systems is an initial marketing test in which we try to evaluate (even roughly) the income and profits.
In this article I’ll demonstrate the process. I’ll choose a product and check its initial sales potential on the Internet. You can check the sales potential of products or services offered by you in a similar way.
The product I’ll check is called Backlife. The function of this product is to ease back pain. You can find information about this product on the website http://www.backlife.com
The price of the product is approximately $340
We start the test by checking the popularity of the relevant search words for the product as well as their costs (that’s the cost for each click if your ad appears at the top of the Overture list).
Here are the relevant keywords for Backlife and their prices:
Every line contains three words. The search word or phrase appears on the left, in the middle is the number of searchers per month per click, and on the right is the cost of the ad.
Back pain 59512 $0.10
Lower back pain 22802 $0.10
Low back pain 7387 $0.10
Back pain relief 6050 $1.30
Back pain exercise 2148 $0.49
Cause of lower back pain 2034 $0.10
Chronic back pain 2017 $0.96
Lower back pain exercise 1921 $0.16
By the way, take note that search words connected to treating back pain, such as back pain relief are much more expensive than the general ones such as back pain.
There are approximately 100,000 searchers for relevant phrases on Overture. To proceed and check the sales potential we need to make two estimates:
1. What will the clickthrough of your ads be? (Meaning, what will be the rate at which surfers will click on the ad once exposed to it?)
Of course this data influences the quality of the advertisement.
2. What will your conversion rate be, meaning which part of the visitors on the website will indeed purchase the product? This data is influenced from the quality of the sale process on the website.
Because we don’t have all this data at this stage, we don’t have any other choice but to use the general data about those two numbers.
A reasonable assumption regarding ad click through is that approximately 2% of those exposed to the ad will click on it, and 2% of those entering the website will actually purchase the product.
According to this, the number of purchases through Overture only is 40 per month. And because the price of the product is $340 our sales will be $13,600 per month.
The cost of the campaign will be approximately $400 (simply add the cost of each phrase, that is itself a multiplication of the cost of the phrase, the number of searchers and Click through).
Let’s assume that the profit from selling Backlife is half the price to the customer (a reasonable assumption), the expected profit from our campaign in Overture is therefore approximately $6400 per month.
Of course Overture is only one channel. The sales on Google Adwords may be much larger
The overall sales through the Internet may be much bigger if we add to it the traffic from affiliate programs, viral marketing, net public relations and other channels.
In any case, using a per click advertising channel is an excellent way to start the sales process and it’s therefore better to check that this process is profitable.
