Internet Marketing Business Risk

From goulies and ghosties and long-leggedy beastiesAnd things that go bump in the nightGood Lord, deliver us! (The Cornish and West Country Litany, 1926)

We can get into an Internet business in a short time and with little cash. We can buy a domain name and host it for very little cost. We can sent traffic to the site by article writing, blogging, participating in forums and social marketing. We can give Pay-Per-Click (PPC) a try. We are on our way, right?

Before I get into the “bumpy” things let me give you an example (theoretical given by an executive from GE at a conference on risk management in Miami years ago):

Company A controls most of the market for DooDads. They have good profit margins and they are satisfied with their position. Their engineering department points out that there are technological advances that would permit the company to produce DooDads at still lower cost.

The CEO of Company A asks for an ROI analysis. The ROI request means that he wanted to know what the return would be on the company’s investment for new manufacturing. A reasonable request. He decided not to make the investment because the return was too low. He thought things would go on as usual with the company’s cozy position.

Company B had only a small part of the market for DooDads. They looked at the same engineering information as company A and decided that it would be a very good investment because Company A had a superior cost making it tough to compete. They calculated what it would mean if they could lower their price for a DooDad. They found that the market would shift dramatically toward their company. They made the investment.

Two years later, the CEO of Company A called a meeting in the board room. He reported that the recent reduction in sales was due to the fact that Company B had built a new facility and was taking their market by cutting prices. The engineers were brought in to provide a plan to rapidly regain the advantage they had lost. It would take another two years to catch up.

What happened here was that a good investment for Company A‘s competitor was not considered a good investment. A proper risk analysis in addition to the ROI analysis would have considered what the competition might and probably would do.

The point that I’m making here is that the things that go bump in the night are your competitors. If you are under contract for some reason, that is another subject mainly for attorneys. (You can call my son.) We will ignore it here. Most new marketers have no contracts.

So you promote your business and get it going and earn enough to put some money into it to improve profitability. While you are doing this, you are being watched. Your site is designed to solve specific problems to your niche market. If someone else gives a better solution or a lower-priced solution, your market could and probably will decrease.

There is a thing we call the Product Cycle in business. Products and services are created, modified and retired. New products come from new ideas and they too must be developed. So, part of business is change. To survive, businesses must change.

In Internet Marketing is is suggested that you do not put all your eggs in one basket. You get one business going and then you start another business. That way a downturn in one business may not be reflected in your other businesses.

When we do our keyword studies (JAAXY is best for our Business), we look at the number of sites that we will compete against. As we make our commitment to go ahead, we should have a very good idea of what these sites are offering. This will not only tell us what we are up against but also will give us an edge as we develop our business. Then we have to continue in that activity.

I might add that we must study the people in our niche. We need to know what they eat for breakfast and where they buy their lunch. Do they have kids? How old are they anyway? Do they have a high or low income or something in the middle? Where and how do they live is what we want to know? And of course we must know why they are in our niche.

When I say that the competition is watching assume that you have a PPC campaign going that is bringing in some money. You look at the cost of the campaign, subtract it plus other cost from your gross profits, and the rest is gravy.

Your competition starts out bidding you on the keywords. All of a sudden, you are not in profit. You try other keywords and struggle until conditions improve.

Maybe the competitor will go away, but don’t bet on it.

To remain in a profit situation, we probably will have to cut cost while increasing sales. A tough situation at times.

Our little town had one hamburger joint. Business was good. A competitor moved in across the street and flopped, never really affecting the original fat vendor. Then a major chain move into town. The original joint now has to share its products. They had to increase their product line. They are no longer in fat city but they will survive because they know their customers better than the chain.

Well, you are in business. You shouldn’t have to worry too much about these things to started. They are things that go bump in the night.

Don’t forget to drop buy to enjoy our Wealthy Affiliatate Community for a FREE TEN DAYS! Take a look at my tutorials over there (tjbooks). Also grab a free membership at Affilorama.

John


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4 thoughts on “Internet Marketing Business Risk

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