Thursday, December 01, 2005
The affiliate marketer's power guide to niche product evaluation.
If you built and sold the first teleportation device you would make some serious money.
If you built the network that connected the teleportation devices and charge a subscription fee to use it, you're set up for a future of enormous passive income.
This is the view many entrepreneurs are taking in the 21st century. Passive income can only be derived from niche products with a sustainable market.
We love niche products because they inherently don't have many competitors and solve the problems of people who have money to spend. It is no wonder affiliate marketers fall over themselves in a rushed "grab-for-cash" type frenzy whenever a niche product with affiliate income opportunities launches. Unfortunately many are too late and end up scraping the bottom of the barrel for the last few customers.
If we analyze niche products closely we can divide them into 2 distinct categories:
Un-Sustainable and Sustainable.
Unsustainable niche products may or may not make money. If they do make money, they only do so for a short period of time, then they need to be re-invented to become new niche products. Affiliates who get in early stand to profit. But sales usually diminish quickly once new competitors or hot products arrive to saturate the market. Take for example a car or a DVD player, when first released the manufacturer sales margin would have been massive. Only the rich would have been able to afford one. But as competitors enter the market, margins start to reduce drastically and there is no longer much profit to be made. Mobile phone handsets are an example of this. The market is so saturated that the phones are often given away for free.
Sustainable niche products are those products that grow in value the more people know about them. Drawing on the mobile phone example, the telecommunications network would be a sustainable niche. The more people on the network the more valuable the phone becomes to the owners. Affiliates of sustainable niche products stand to profit considerably more using this long-term strategy compared to the possible quick profit from unsustainable niche products.
Sustainable niche products can be sold to each individual in the market. They are inherently viral as every individual who has the product can derive greater value when they convince others to use it. For example a fax machine has greater value when everyone has one. With subscription or disposable services, there is generally no market saturation. You can re-sell the same niche product back to the same customer again and again.
So before you invest your time, effort and money promoting another merchants product, ensure the niche product passes the following checks:
#1) Does the product meet a continuous need of consumers? Can you sell it 10 years from now?
#2) How viral is the product? Will people rave about it or keep it as their secret weapon?
#3) How big is the market that would use this product? Is it likely to shrink in the next 10 years?
#4) Does the product lend itself to a subscription based, limited license, or a disposable user pays model? Can you re-sell it to the same customer again and again?
#5) Do the product benefits grow exponentially for every user that purchases it?
Here are some examples of sustainable (past-niche) products:
#1) Internet Telephony
#2) Online Auction
#3) Online Dating Service
#4) Customer Acquisition Exchange
#5) P2P file sharing services
If you're an affiliate marketer looking to derive sustainable passive income, make sure you market the right kinds of product.