I’ve talked about conversion pipelines before, market testing your ideas online and maximizing online profit. A critical part of your success in all of these areas is your ability to create a site which converts. There are many pretty sites online which are totally ineffective. Many companies charge you for a flash design, then walk away and leave you floundering. It is quite something else to create a site which consistently converts visitors to paid customers.

I’ve created many sites selling complex products which convert as high as 10% of visitors to software trials, enquires or product sales. There are a few tricks to this which I’ve put into a short lesson which should get you converting traffic to sales in no time. I will focus on creating a killer home since this is where all the action happens.

If you want to look at the example site it is Centeros a dcim product.

Good Design
Good design is a critical starting point for any successful site. The design is the only thing which tells a potential customer if your company is a two man shop in Bangalore or a multi-national. Customers will decide what they think of your company within a couple of seconds of hitting your home page and the design will play a big part in this.

Web trends change like clothing fashions. A site which looked great in 2005 is going to look like brown flared pants today. So get a professional designer to do the design then keep it current.

The Journey
Putting a good design in place is common sense, the next bit is the magic. You need to hook your potential customer in within 10 seconds. This means organising your home page perfectly. To do this you need to understand the way your customer thinks and take them on a journey.

We order the page in a way which takes our viewer’s eye past everything they need to know to make the decision that we are indeed what they are looking for. The following diagram shows the journey and what we show them on the way.
1. Name – Tag Line
Our customer eyeballs the middle of the page then searches for a starting point. The question we are answering is “What company is this?”. That is why the company’s name should always be top left. Associated with the name should be a tag line. The tag line is a way of conveying in a glace what your company does. “Centeros – data center operating system”. Now your customer knows the company name and what the product is. Your customer is not interested yet, but we made it easy for them to determine they are in the right place.

2. Elevator Pitch
The next stop for your customer’s eyeballs is an elevator pitch. Your customer now wants to understand exactly what you do, but will only spend a few precious seconds on this. I’ve been to plenty of sites where it takes longer than 10 seconds to establish what their product does. Most often I give up.

Your Elevator Pitch should be clear, crisp and precise. Describe exactly what your product or service is, no more. Your customer should read the pitch and want to know more.

3. Something Flash
We now need to hit the customer with some eye candy. Show them something flash and sexy, showcasing your product. This is going to excite and leave them wanting more.

4. Credibility
As the customers eye balls browse lazily across your page you need to pop items in front of them which reinforce credibility. How do they know you are a real company? Someone they will willingly trust with their data and probably even credit card details. If you have some major customers, make sure you pop their logos on the front page.

5. Core Messages
If we don’t do the previous steps to warm a customer up they probably won’t read any details. If we did our job well, the previous five steps left them wanting more. This is the time to provide a summary of our key value areas. Keep this simple, something the customer can scan in ten seconds which allows them to understand your product will fulfil their needs. I generally break this up into core messages, each with a title.

6. Some life
A good reason for having your blog posts, or twitter syndicated to the home page is to show some life. Make sure they know there is action happening here, things being released, people buying.

7. A Crowd
Point 6 & 7 are important, people buy where other people are buying. Imagine one evening you are walking down a street with your other half looking to select a restaurant for dinner. You peek in each window checking how they look. You read the menu for sure, but the thing which leaves the biggest impression is the number of other people in the restaurant. I’m sure we have all walked away from a restaurant with no one in it. Point 6 & 7 aim to provide the feeling of a crowd of people buying from you. I often stick pictures of happy customers, quotes etc on the home page. This alleviates the customer’s fear that they are your only customer.

8. Call to Action
Some place high up on each page you also need a call to action. A big bold button with your goal often works, like “Free Trial” or “Free Evaluation”. Once you have the customer hooked you want to lead them quickly in the right direction. The call to action is the first part of this process.

If you follow these steps and design a nice looking page you are on the path to making your site successful. You should get people interested, get them excited about your product, show them credibility and give them an easy way to buy from you. Put it all together and your site will convert.

I'm a Steve Ballmer

General lack of coolness
Microsoft have always been uncool, but it never used to matter. Why? Because back when Windows 95 came out computers were still not really domestic devices. The Internet was still made up of pictures of Anna Nicole Smith, tech articles and university sites. Kids might have played computer games but that was probably about it.

Scroll forward to today and the whole scene has changed. Computers are now true consumer devices and that consumer is the notorious Gen-Y. The same Gen that spends leisure time on Facebook, Twitter, Foursquare, sharing photos of themselves and listening to MP3s is also deeply concerned about what is cool.

It all starts at the top. Go check out some videos of Steve Balmer, then Steve Jobs. The difference couldn’t be clearer. When Balmer talks about photo or music sharing you know he does about as much of that as your dad. They have tried so hard to market cool to the photo sharing public, but are being so outpaced by Apple it’s embarrassing. Meanwhile the Gen-Y’s are out in force pimping their Macbooks in cafes, flaunting their white headphones and ipads.

This will create two serious problems for Microsoft. Firstly Gen-Y is taking over the world, while the Bill Gates generation are retiring. But worse is an old secret Microsoft knew well, that business computing is driven by home computing. In the 90s business users had CD Roms, sound cards and Windows 95 at home. Anything we have at home eventually gets dragged into the office. The same thing is starting to happen for Apple. Innovation at home drives adoption in the office.

Lack of Innovation & Hardware
The best example to demonstrate the way Microsoft innovates is the touch mouse. I remember seeing a video tour of Microsoft labs last year, where nerdy looking guys demonstrated possible future mice designs. There was lots of cutting edge but blatantly awkward R&D efforts showing different designs. Among the pack they showed off several ugly looking prototype multi touch mice they had in development. Apparently at some time in the distant future this technology might make it to production.

Several months later Apple released their multi touch mouse. An elegant curve of translucent plastic containing all the flash goodies Microsoft had predicted for the future. I could only imagine the disappointment back at Microsoft labs.

As another example, Microsoft had the handheld market for 10 years and the best they could do was that horrible cut down Windows Mobile OS. The same OS made damn sure no one was dreaming about having the latest Microsoft mobile device. Apple came into the market and killed them with their first iPhone release.

MS also had a monopoly on tablets, where, like mobile, they simply added some new features to their standard OS. Remember those laptops with the fold over screen and the stylus. Once again blown away by Apples first release of the iPad.

Part of this is lack of control over hardware of course. If the best your hardware partners can come up with is a Compaq iPaq you’re pretty much f@cked no matter what you do.

For Apple innovation is business as usual. Every year they hold Macworld and show off a game changing device, that’s just what they do as a company. The company is tuned to turn out killer new devices and big leaps forward. Microsoft as a company seems to be the opposite, an organisation which stumbles around spending billions on innovation with little to show. Some light was thrown on this last year by Dick Brass, a former Microsoft exec, who released an article blasting the way the internal bureaucracy deliberately gets in the way of innovation. http://www.nytimes.com/2010/02/04/opinion/04brass.html?_r=1&hp

Do you think Steve Jobs would put up with this? No way. He’s a maniacal dictator, but one with a clear vision who gets what he wants. If he sniffed any of this behaviour at Apple there would be mass firings (without a second thought).

It shows once again that innovation isn’t a lab off to the side of a business, it’s the way a good business is setup to work. There is always a competitor coming from behind, if we don’t leap forward each year we loose our audiences attention and someone else will get it. Apple makes sure every year legions of fans are waiting for the next big thing and Apple always delivers this to them.

Update : I have now started a site dedicated to New Zealand Beer.

1. Epic Ale
Epic Ale is the Lamborghini of NZ Beers. With 23 Hops per bottle it is neither subtle or delicate, but totally brilliant. It deserves number 1 spot because it’s bold and daring and has moved NZ beer forward 10 years. However drinker beware, the name Epic could also be applied to the hangover drinking more than 3 will bring.

2. Emerson Pilsner
NZs most delicate, floral and elegant Pilsner has been a big favourite of mine for years. I’m not the only fan, it places every year in the Australian International Beer Awards, distinguished from 1170 beers entered from 34 countries. I love the description on the bottle, “oozes citrus and passionfruit aromas and flavours”.

3. Hallertau Luxe (No 1)
This is something different, a Kolsch ale. The taste is somewhere between a wheat beer, a pilsner and happiness. Exhibiting hits of summer, passion fruit, blueberries and a piece of dry straw.

4. Renaissance Stonecutter Scotch Ale
Malt and salt, chocolate on the nose and palate, a hint of cheese and cigar ash. Half red beer, half stout with huge flavour. Best matched with Haggis and a cold day.

5. Moa Original
This brew is the creation of Josh Scott, winemaker for the Allan Scott wine family. Everything about it feels champagne like to me. Light and bubbly, hoppy with fruit notes and hint of straw. This is one for the champagne flute.

6. Moa Harvest
It takes a good wheat beer to interest me and a brilliant one to make the top 10. Nelson hops and Marlborough cherries brought together by an award winning wine maker. This a summer essential, so refreshing it hurts!

7. Hallertau Statesman (No2)
This pale ale is characterised by strong Malt flavours bordering on oak, followed by a massive hop hit. It’s bold and persuasive, like an arm up your back or a gun to your temple. It tastes like Hugo Boss suits and oak book shelves.

8. Harringtons Summer Ale
Aromas of citrus, ginger and coriander, mixed with honey and a light hoppy finish. This is the king of summer ales and the only one which doesn’t taste of cordial.

9. Wigram Munchner Dunkel
True to the label it starts with crisp sharp hop flavours then quickly follows with hints of coffee and toffee. I’m even getting the advertised hazelnut essence, which greets you from the first sniff. Almost a dark beer in flavour but lacking the heaviness. Perfectly carbonated and fresh, which is sometimes a struggle for fully flavored dark beers.

10. Epic Mayhem
Until the recent release of its Stout, Epic has been a one trick pony. My tongue may be generalising but its three Ales are only differentiated by the quantity of hops. Epic Ale, Mayhem and Armageddon are the Speed, P and Crack of beer. If Epic Ale leaves you searching for more you move on till you have a $12 a bottle habit which leaves normal beers tasting like water and earns you head splitting hangovers. Mayhem is like drinking a freshly mown lawn, big and green enough to make your eyes water.

Bill Gates & Paul Allen getting ready to make their billions

In many ways it is the most critical decision you make because let’s face it, even if you get your product wrong a great team can find a way through.

Founder Skill Mix

When it comes to co-founders don’t settle for anything less than the right fit. Hopefully this will be a long term relationship, any lingering doubts you have now will destroy the relationship later. Look at people you already know and enjoy spending time with. Make sure as a team you have both sales and development (or service, product sourcing etc) skills.

I’ve been misguided enough to work in many Startups, some which have failed and some which have succeeded. Towards the end of last year I did some of consulting work with a tech Incubator which led to a few blogs on startup related subjects, and I can see this continuing. I really believe that success in startups is part luck, but a major part science and process. If you understand the whole process from start to finish, along with all the risks you might encounter, a startup will be more likely to succeed.

Some of the companies I’ve worked with lately were thinking of investing in large product developments. To this end I wrote some blogs around testing your ideas. More recently I’ve noticed people earlier in the process brain storming ideas for their first attempt. If there was a guide to successful startup building, and it had a chapter 1 it might start with an overview of brain storming and what some of the options are. So before quitting your day job to become part of a ‘Get Poor Quick’ scheme read on.

If you are considering options now, soon you will be sitting up late at night putting the first pieces together. Oddly by this stage you have probably already won or lost, all you need to do is spend years of your personal time and a lot of money to find out which one. To mitigate against starting something doomed to failure you need to start your thinking right before committing to anything. Here is the short list of things to understand and consider.

Types of startup businesses

The first thing to understand is the type of business you start now will come with risks later.

1. Services businesses

A service business is one where your staff provide a service to customers in order to earn revenue. Consulting, software development, accounting, legal and graphic arts all fall into this category.

Starting a service business carries some difficulties both early on and later.

1. They are difficult to scale. You will need to employ more and more staff to make money.

2. They are sales driven, which means you need sales people early on. So if you’re not a sales person yourself you will need to employ some.

3. Revenue tends to surge and sag, which is dangerous when you have staff.

I’ve owned a couple of service businesses and worked in many more. The formula for success is to start with an opportunity. For example you are contracting directly to a company and they suddenly need more contractors of your skill set, you have several other friends who could fit the role. Now you have the opportunity to create a Consulting Company and contract them in. Sounds hokey I know but I could name 10 companies who started exactly like this who now have hundreds of employees. You start with a key account then use your reputation and contacts to get other customers. Having the key account before you start is important. I really advise against trying to start a service company without an opportunity, it is just too hard.

2. Product

The second type of business is one which sells a product to customers. The advantage of this is the ability to scale the business without adding staff (to the same extent as a service business). These work nicely as startups because you can keep your costs down, running the business from home after hours. The upside (dream) here is that you create a product then sell it to millions of people over the internet, earning money passively.

The difficulty here is the risk of putting a lot of time into developing a product/business before you go out and sell it. Needless to say a product business is the lottery ticket, lots of risk, lots of upside. More difficult to start than a service business but with much more potential.

3. Hybrids

A lot of product businesses start when a service business packages something up and sells it. The advantage here is that the product adds stable profit to a service business.

There are products that also require face to face sales and require work to implement. This really limits your reach compared to a purely product business with an online channel. Any attempt to go large is going to require reseller channels or many offices.

As you can see the Hybrids contain advantages and disadvantages from each camp.

Finding your Idea

So baring that in mind, what to pick? Well that depends on your skills and the opportunities in-front of you. When you talk to owners of successful tech companies they have a propensity of making their journey sound like a grand plan, carried off perfectly. Most of the time this is not the case, there is always a bit of luck, an opportunity and good timing (right place, right time). The art for you is being able to recognize when you are standing at one of these points.

The good stuff happens at 90 degrees from your focal point….

As a general rule watch for unfilled customer needs in areas you can deliver to. Don’t start something prematurely, watch, wait and discuss. Keep mindful of what is happening on your periphery. I often see large companies as being good starting points for small companies. People often meet and work with large numbers of like minded individuals, discuss ideas and build virtual teams who later go on to start things.

Your talents and skills

A good place to look for business ideas is your talents and skills. What can you successfully compete at? If you where a company what would make it great? These may be a place to start:

- Hobbies / interests

- What do you know more about than others (are better than at)?

- How do you earn your money?

- What could you build that would be world class in a particular market?

- What are your friends great at?

- What have you built or done for other people which is successful?

To illustrate how you can combine the points above (needs, your skills and an opportunity). I worked as a development manager. My skills were in running profitable development teams. I saw a need in that there were no tools on the market to allow me to track pipeline and current jobs, schedule people and manage progress. It also played to my other skill which is developing software. So I spent my weekends and evenings writing an application. Key to this was an underlying opportunity. The opportunity was that as part of my role I interfaced with many other resource teams who also needed the software. You can guess the rest, before long I had an online application and a key customer using the software in 15 different departments.

Next Step – Check your market

Once you have arrived at a short list of ideas you are ready to test each for a potential market. Up to this point you can come up with many wild and convincing ideas. At this stage in the successful startup process you research the market for each idea to determine the customer volumes you might find.

Step 1. Will your product work online (checking there is an audience and estimating revenue)

After you have researched and concluded there is a lucrative market for your product a smart entrepreneur tests those assumptions.

Step 2. Market test your idea online

After you have identified your biggest risk (probably marketing) and tested it online you have proved there is an audience for your product or service.

Summary

In summary you have:

1. Selected the sort of business you are suited for, understood the upside and risks

2. Waited for an opportunity or need to present itself

3. Picked something suited to your skill sets and expertise

4. Checked there are customers online and enough revenue

5. Tested your assumptions, building an audience who are now waiting for your product

Congrats…You are now ready to start a tech businesses, knowing that you did the first step right. The next step is picking the right team. (Blog coming soon)

I’ve always watched this play out with interest and recently I’ve become convinced it’s one of the most important factors which influence a business’s success. I’ve seen people sit around meeting room tables for hours discussing the currently accepted reality without actually touching on anything remotely real.

Often when people tell me why something didn’t work they are describing a symptom, this lack of reality is often the root cause.

Jim Colins, Author of Good to Great researched 1,435 companies to find the factors that contributed to the success of the great ones. Based on this research, “Confront the Brutal Facts” is one of the first chapters.

One of the key factors in the success of the great companies was a series of good decisions. The good decisions flowed from the fact that they all made a consistent and thorough effort to confront reality, internalizing the facts relevant to their market. Having lofty goals can be good, but you can never lose sight of what the reality is on the ground, no matter how much you will it to be different.

To do this a management team must value honesty and encourage everyone to contribute their angle particularly if it doesn’t fit with the current view.

Here are some of the common examples:

Reality Fail 1. Setting strategy based on incorrect assumptions

This reality distortion happens when members of the management team come up with a direction for the company; they have drawn conclusions incorrectly and may have drawn on supporting evidence without fully understanding it. But the company is now convinced and the new reality is this plan will make the company successful.

Reality Fail 2. Failing to understand the company’s real problems

Companies that have executed on bad strategy will eventually come to a place where they have to discuss why things are not going to plan. This is the right time to really dig into the reality of why something is not working. This may take some proper analysis and will most likely dig up problems which may be embarrassing.
For many management teams this is not an option. There will be loose discussion which will surface the new idea of what will make the company successful. Then the company will go forward, the staff understanding the new direction as being reality.

Reality Fail 3. Failing to start bailing water

Later in the lifecycle this phenomenon can manifest itself in companies start to collapse, everyone accepts that everything is going well when what they should be doing is having heated meetings trying to get to the root cause of the companies problems.

The solution

Companies that fall into these traps generally flounder around changing direction till they fail. For businesses to set themselves up for success they need to make reality their common language. To do this they need to introduce a culture where staff and in particular the management team is encouraged to rigorously question and analyze what is accepted as reality. When decisions have to be made egos must be put aside, outside experts drawn into the discussions if necessary and everyone must be drawn on to present any evidence they have. No decision should be made till all the assumptions are verified.

John D Rockefeller is still the richest man in history (by a huge margin) and he did this by being an exceptional businessman. In the history he wrote of this life he found this concept important enough to write in the first page of chapter one.

We had discussed and argued and hammered away at questions until we came to agree, and it has always been a happiness to me to feel that we had been frank and aboveboard with each other. Without this, business associates cannot get the best out of their work.

It is not always the easiest of tasks to induce strong, forceful men to agree. It has always been our policy to hear patiently and discuss frankly until the last shred of evidence is on the table, before trying to reach a conclusion and to decide finally upon a course of action.

You can conclude that he put his ego aside, hired a brilliant team and put in place an environment which fostered good decision making and it worked. As Jim Clark wrote it’s not always pleasant to debate something rigorously but if the future of the business was involved the winning teams he identified did just that. They often had heated arguments which lasted for weeks, bringing more and more facts to the table until they reached a unanimous decision, then they all put aside their original differences and got on with it, comfortable in the knowledge that the direction was correct.

I think there is a lesson here for high tech companies where assumptions about markets with huge potential often go unchecked and direction is often set and accepted as right without analyzing reality. I would be interested to see how other people out there have observed and interpreted this.

Flying Hover Craft
Invented by a Kiwi this backyard invention is for sale on Trademe. An average boating trip contains at least an hour of banging around over waves to get to the good spots. Fly there instead!

http://www.youtube.com/watch?v=6ih_KBru6Co

Tesla Model S
If mainstream car companies won’t step up and produce sexy electric cars they will fail and new companies will create what consumers want. Tesla cars are faster than your average Ferrari, quiet and eco friendly. They are also cheap to run and have great range. Are the large car companies sleeping or what?

Tesla Model S Part 1: A greener automotive future

Tesla Model S Part 2: Pure Electric Power

Gyrocopter
Gyrocopters look like helicopters but are in fact closer to planes because the blades are unpowered. The blades spin due to forward momentum. This makes them safer than a plane at low speeds and allows them to take off in short spaces. For the price of a second car you could fly to your holiday house.

Remote control Fighter Jet
I’ve never really wanted a remote control plane but a remote control fighter jet with real jets gets my nod.

Dolpin Sub
Personal Submarine in the shape of a dolphin.

Many web businesses start with a fantastic idea. We just know it’s going to work. I use the word ‘we’ because I’ve been there (more than once). We come up with a product then many reasons why the market will love our idea. We may be right that customers would buy our product, if and that’s a big IF we could find a way of telling our market about it.

Often the internet gets used as a magic bullet by people who have not tried to slug it out online. Using the net we can put our product in-front of millions of people right?

In my experience this is not a given. But what I do know is there are ways of testing how large the market is and how commercially viable it may be.

In terms of risk it is unlikely we will fail to build the software/site. It’s more likely we will fail to market the product successfully. So before you start spending money to develop your product or service here are some very simple tips on how to determine how it will fare online.

There are many ways to reach customers online but the most common are:
1. Search Engine Optimisation (SEO) – Get listed in search engines where millions of people are searching for your product
2. Search Engine Marketing (SEM) – Use Google Adwords or similar to advertise your product (paid)

If customers exist for your product or service they will be searching for it in Google. Therefore researching the potential for these two methods of marketing is invaluable.

Most people planning an online business are not aware that selling products and services online is fairly predictable. It’s a funnel which has very predictable points. So you can calculate the end result of months of hard but successful work in a couple of minutes, de-risking your venture.

There are many factors which influence how well customers will flow down this pipe but let’s ignore that and assume you have succeeded in building a great site, have a good product and excellent SEO. Thise following exercise will demonstrate a simple way to determine how successfully you will sell your product online.

In this following example I’ve come up with a great idea. I’m going to sell NZ Bio Oil to a worldwide market I estimate to be a million customers per month. It’s a nice little niche which means I can be targeted in my marketing and I’m making a 30% margin. Sounds like a great idea right?

Step 1. Determining Search Volume

The first step is to determine the size of your online audience. You can do this by using Google Adwords. This tool is targeted at people using Google advertising and shows how many people are searching for specific terms. It also shows how many people are advertising for each keyword, which is a good indication of how difficult and expensive it’s going to be to target these people.

adwords.google.com/select/KeywordToolExternal

Open Adwords then enter the exact phrase your customers will search for. You will see a list which includes the Local and Global Search Volumes. The Advertiser Competition bar shows you how many other companies are using Google to compete for your market. This is significant because it will drive the price of advertising up and also means these other companies will be competing against you in the search engine ranks. If you use the Show/hide columns you can also include the Estimated CPC column.

The Estimated CPC figure shows the amount of money you will pay every time someone clicks on a Google advertisement shown in a search for these keywords. Like the Advertiser Competition bar this gives you another view of how expensive this is going to get.

You will generally find a high volume keyword dominates the market but will have high competition. Best practice is to find several smaller keywords which are very specific to your product and use those instead.

So now you know the traffic volume either locally or globally. I now know that 327,000 people are searching for our example product per month. However we are not likely to get in the first page of Google for the broad search term of “Bio Oil” so lets plan around the more specific phrase “Bio Oil 200ml” which yields 27,000 visits monthly.

Step 2. The difficulty of getting on page 1 of Google.

Fighting your way on to page one of Google is not an easy thing. However that is a subject for another article completely. But take my word for it, if you’re not on page one you’re not going to get in the click stream. I’ve been on page two for keywords with massive volume and got at best a couple of clicks a day.

For the purposes of evaluating the market let’s assume the SEO works and you do get to the first page. When this happens you can conservatively assume you will get 10% of the clicks we saw in Adwords.

Step 3. Do the maths for the conversion pipe

So for our fictitious idea of selling NZ Bio Oil to a worldwide market we can work our way through the numbers like this….

Total search market 327,000 unique browsers (ub)
The keyword we think we can successfully target is 27,000 ub per month
If you’re on page one of Google you may get 10% of this traffic which is 2700 visitors
If your web site is well optimized you will convert around 2% of these visits which is 54 paid customers

Note : You may convert a larger number but at this early stage I wouldn’t bet on it. Better to be safe than sorry when considering investing a lot in this business.

Average purchase will be one product ($40) with a 30% margin ($12) 54 times a month = $648 Margin Per Month

Hmmmm $648 a month doesn’t sound too flash to me. As you can see the idea which sounded pretty good didn’t really pan out.

Paid Advertising

The second easy way to reach customers is Google Adwords. You select the keywords you want to target then your adverts are displayed beside the search results we talked about above. The advantage of this approach is you are instantly targeting the keywords from above with no time spent on SEO.

The process is an auction, with companies bidding on the keywords they want. However you only pay when someone clicks on your advertisement.

There are two major downsides. The first is that most keywords are so expensive you will never make money advertising like this. The second downside is that compared to the search results very few people click on these adverts. There are around five advertisements displayed on each search. Together they get around 3% of the clicks.

Also the costs, which are shown in Adwords, are often a lot lower than reality so it’s worth running a few adverts to find the real costs.

Lets run the figures for our Bio Oil example. With a much lower number of people clicking on our advertisement we will have to target the broad keyword “Bio Oil”. Otherwise we simply won’t get enough clicks. In some markets you can advertise using many smaller volume keywords to reduce the cost but we will focus on the main keywords in this example.

Each person who clicks on my advertisement is going to cost $1.35

At a 2% on-site conversion I need 50 visits before I sell something. So it will cost $67.50 to sell one item with a $12 margin. So every time we sell a product we lose $55.50.

It may seem hard to believe but I have seen companies spend a lot of money on Adwords without doing this calculation.

In Summary

So it looks like my idea for selling Bio Oil is a flop. I won’t invest the $15k on a shop and $25k on SEO. I will in fact go back to the drawing board and find something which does work. I might have to run a few ideas through the pipe but when I find one that looks good I have the confidence to take it to the next stage.

Understanding these simple tools allows you to test ideas and will save time and money. I find it also sways my thinking towards marketing based ideas or at very least product ideas which have a unique marketing avenue. These are the ideas you want.

When your research has identified there is a viable market for your product you can test the theory by doing a market test then proceed to invest in the technology with the confidence you have taken as much risk out as possible.

I’ve spent a fair bit of time involved in startups. I love working with passionate people intent on launching ambitious businesses. There are two things startups could be known for, having a huge amount of passion and an inverse chance of success.

These factors almost certainly have a close relationship. People who start tech businesses are generally passionate individuals, they have an idea and they are gunning for it. It is this passion and self belief that drives them to risk income, time and sometimes reputation in their ventures. Unfortunately sometimes passion, self believe and certainty gets in the way of a healthy portion of doubt and some market research.

It always pays to verify your idea as much as you can before you start. But even with all the market research done there is still a reasonable chance of failure. The question is what are you likely to fail at? There are two stages most tech business go through, building the software/site and getting successful customer uptake.

Building software is complex, but lets face it how many companies failed because they couldn’t build the product? A few of course, but most tech startups bomb because they fail to get customers on board. There are many reasons this happens. The most popular being the company fails to successfully market the product, another being that the market is not as hot as originally thought. But history has taught us that even with a good product and good marketing some sites make it and some don’t. There are thousands of failed social media sites and only one Facebook. When you are dealing with customers and the net there is always an element of luck involved.

The classic way to bomb a tech business is to spend a massive amount of time and money on the product then fail in the market. The smartest way to mitigate against this market risk is to flip the process around. Do the product marketing first. It is after all the piece which is more likely to fail.

Instead of spending the majority of your time and money upfront building a product start by proving you have a market. Build the equivalent of a Hollywood set (just a cardboard building front), then move straight into the marketing to see if you can bring anyone to your cardboard door.

How can you market a product or site you don’t have? It’s surprisingly easy, here are some rough examples.

Example 1. SaaS Software

Put up a beta site showing some screen shots of functionality which will be in the final version. Then get customers to sign up to a beta program or to register to find out more. When they sign up send them an email saying either the beta is over subscribed or they are now on the list to get a free version when the software comes out.

Example 2. Web Site

Advertise that your site is coming soon and show some of the content or deals which will be included in the build. Then get people to sign up for a free something, or register to hear when it launches. You can play with this to make it compelling.

I’m sure you get the idea.

Set yourself a target number of visitors. When you hit this target you have done the hard bit and proved there is a market for your product. At this point you can proceed to build it with the confidence that you are about to launch a product/site to a hungry audience.

You may not always be able to fake it so blatantly. A hybrid approach may be necessary where you build something cut down. But what you are creating is the illusive fail fast business.  If you cannot reach your market you have failed quickly and cheaply.

Online Advertising

Another way to test ideas is to try out different online advertising methods. Buy some Google Ads and see how much it will cost to get people to your web site. Then gather stats about how many sign up. You now have the raw data to see if the idea can be supported with online advertising.

Iterate Fast

In a traditional software business the product is developed first. When the product fails to get uptake the product is changed at great expense and the marketing kicks off again. This may happen several times until the product succeeds or more likely the business runs out of money. The brilliant thing is when you fail with a market test you can spend a few hours changing your screen shots, add some more features to your pitch and see if that improves your situation. You may be able to quickly move your product into a receptive audience and succeed.

It may take time to plan how to apply this technique, but it is very powerful and has the ability to save massive amounts of time and money. Enjoy.

I did some thinking and decided I would get my predications in for next year. At least if I’m wrong people will have forgotten and I can quietly compromise my credibility by removing this entry on the sly.

So let’s walk through the facts. Life is good at Apple, Steve is back and the company is booming. MAC sales had flattened to 4% in Q3 but in Q4 chalked up a respectable 3 million units which is up 17% from last year.

They sold 7.4 million iPhones in Q4 or 7% growth from last year. To offer a more telling contrast in Q3 they sold 5.2 million iPhones or seven times as much as the previous year. 700% !

Ipod sales however are down, declining consistently around 8% when compared to the previous year. So it looks like people are finally moving away from music devices towards smart phones. iTunes hit 2 Billion downloads some time ago and continues to dominate online music sales, which one can only assume will be the only type of music sales in a couple of years time.

So we can establish that Apple is now becoming a phone company. So what do smart phone companies do after releasing their flag ship model? To substantiate the answer let’s look at two examples, Palm and Blackberry. We all remember what a hit the original half foot wide Blackberry was. The company followed that up by producing a smaller slimmer cousin called the Pearl. This phone made Blackberry a standard issue amongst corporate warriors and wannabees alike. Somehow it even managed to briefly bring back the rush of prestige business people felt when using a car phone during the late 80s. Once again people started putting their phones back on meeting room tables.

So what about Palm? This year they released the beautiful Palm Pre which gives the iPhone a run for its money, at least in the sexiness’ stakes. With 500,000 units sold exceeding expectations it still comes a little short of the 1 million units the iPhone 3GS sold in its first week. With its sexy flag ship in place Palm are making the obvious move by releasing a second webOS device. The smaller Palm Pixi will be available before the end of 2009.

http://www.palm.com/us/products/phones/pixi/index.html#video

My guess is Apple will follow suit. The mobile phone market is notoriously fickle and today’s hot phone is always tomorrow’s brick. The iPhone is the undisputed aspirational product of the year (again) and its success has already affected iPod sales negatively. The local step is to bring out a slimmer, cheaper and more pocket friendly version for generation Y.

To see how this would look, just check out a picture of the iPod range. Now image an iPhone range, one large touch screen like the Blackberry or the Palm Pre, then a smaller unit possibly with buttons like the Pixi or the Pearl. That is my pick for next year’s hot product, check out my hacked photo and let me know if you have any predications.

iPhone 2010

http://www.gayakuman.com/phone/the-new-concept-of-iphone-3g-nano-designed-by-isamu-sanada/

http://www.ilounge.com/index.php/gallery/category/C87/