How does a product launch work?

As an Internet attorney and online business owner, I get to analyze many product launches. There are good products out there, ethical product launches, and product launch managers who know what they’re doing when promoting things that bring value to the lives of customers who buy.

Let’s use a hypothetical launch to show you how things really work on the dark side of product launches. We’re talking the get-rich-quick launches that will sell you something of limited value but pretend you’re buying your ticket to wealth without putting in the effort.

Who wants to be a trillionaire?

Billy Bob and Willy Bob decide to launch Trillionaire Blogging Secrets (TBS), an auto-blogging product that sells for $1,000 and pays out a 50% commission to affiliates and 75% to super affiliates.

Let’s assume that Billy and Willy actually pay their affiliates, programmers, affiliate manager, copywriter, and web designer.

The TBS launch will take up 2 solid months of the guys’ time to cover pre-launch, launch, and post-launch.

Thanks to promo from some big list owners  as super affiliates, Billy Bob and Willy Bob build up a list of 25,000 subscribers. Most launches won’t have super affiliates so these guys got lucky and built up a list at least three times larger than they’d otherwise create without the super affiliates promoting.

At launch and a small window post-launch, 15,000 of those subscribers show up and read the sales letter for TBS. 4% decide they want to become trillionaires and buy the product.

But 1 out of every 4 buyers charges back or demands a refund, leaving a net 3% conversion rate. Some even get their Internet attorney involved in order to squeeze out a refund…or they file complaints with the government, anti-scam websites, etc.

But 3% of 15,000 is still 450 sales. And 450 * $1,000 = $450,000.

Does this figure make Billy and Willy trillionaires?

Not quite. Let’s break the numbers down further. After paying out affiliate commissions, handing out affiliate prizes to the top sellers, paying production costs, etc., the guys are left with 1/3 of the money.

$450,000/3 = $150,000.

And then there are income taxes (assuming they’re not committing tax fraud). Let’s conservatively write off $30K for that, leaving $120,000.

Then the funds are split between Billy Bob and Willy Bob, i.e. each is getting a $60,000 pay day.

From a timing standpoint, the guys are looking at a maximum of 3 launches per year. More than that isn’t feasible logistically because of seasonal dead zones, competing launches, etc.

In other words, 3 launches will earn each of them $180,000 annually. Nice money but not building wealth if they’re blowing it on the “guru lifestyle,” that is, spending the money as fast as it comes in to fake it until they make it.

If Billy Bob and Willy Bob want to boost their income, they’ve got to promote heavily to their email lists regularly. This means promoting for stuff with a big affiliate payout (assuming they don’t get “stomped” by nonpayment). They pike as affiliates for products that often have little value but are sold to newbies who don’t know they’re getting screwed.

And the vicious cycle continues…at some point, an Internet attorney representing a deceived customer, or a government agency deciding to make an example, will nail Billy and Willy for misconduct when they cross the line by making unsubstantiated claims. It’s a natural response to part of this disturbing trend in Internet marketing.

Product launches have their place in a successful business model. But they can be misused in Internet marketing to hurt a lot of people…customers who mistakenly placed their trust in the wrong “gurus” because of lack of knowledge, financial desperation or greed.

Caveat emptor.

To your online success!

-Mike the Internet Attorney