MILK YOUR WINNERS, DROP YOUR LOSERS
Copyright 2005 Nick James

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.


About the Author:

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: www.Nick-James.com 

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