how to understand when to cut a product when dropshipping

What's going on, guys? So today we're gonna be talking about one of the most common questions that I get when it comes to dropshipping, e-com, is how to know when to cut a product test. So throughout this video, I'm gonna give you guys kind of a step-by-step process that I recommend everybody go through. It could be for, you know, MRR products, it could be for a normal product, pretty much any product, this is what you wanna look at. And then at the end, we're gonna go over kind of like a decision-making thing right here. Little Venn diagram that I created for you guys. So number 1, how do you know when to cut a product test? Number 1 is to clearly define your stop loss, right? So how much money are you actually willing to lose? So this depends on your budget. So let's say that you have $2,000 saved up to start e-com, to do e-com. For a product test, you're probably not willing to lose more than $300. So keeping that in mind is a really good thing to understand because the less cash flow, the less money you're able to spend, the more you're gonna have to see profitability up front. So understanding that and kind of understanding what your stop loss is around that per product, that will give you a better figure to kind of clearly define when you should stop. Another one is, you know, obviously how much cash flow you have. So maybe you have $2,000 in cash, but then also you have, you know, $2,000 in, you know, credit card availability to spend, right? So that can change things a little bit. So maybe your soft loss is still $300, but let's say maybe the product is showing some signs, maybe it's at like a 1.2 or something like that. You're willing to invest another $300 because you have this extra cash flow, right? So that's something else you gotta keep in mind. And then also you gotta understand, are you doing MRR up for product? Because these are both different games. MRR, you're playing the long game, like you're trying to get subscriptions in and try to profit on month 2, month 3, where upfront you need to be profitable day 1. So an MRR product, if you're testing and it's at a 0.8 day 1, that's actually not too bad. That's something that you can double down on and make very feasible depending on what we're going to talk about next. Upfront, it needs to be at least above a 1, usually day 1, or else why are you selling it? It's something to keep, kind of keep in mind. And these numbers, they depend on your skill level and your ability as well, which we'll talk about. But the next thing we need to talk about, right, is niche matters. Niche really matters, especially and mostly for MRR. And I want to just briefly talk about this because I know most of you guys don't do it, but if you're doing MRR product, you need to understand what your churn rate's gonna probably be like. So for something that's more actually like health related rather than looks related, the health stuff's going to have a much lower churn rate and the look stuff, because it's more of a commodity, is going to be much higher. So you need to understand that and be able to prepare for what you expect it to be. And you can just use Claude, you can talk to people in the space, Twitter, try to get an idea of where they're at, where people in your niche that you're testing, what's their the rates, you know, what's their churn rate, what's their failed payment rate, which is something that people forget about, um, because every transaction, every rebill you get, it doesn't always go through. The payments sometimes fail. And then you also need to understand demographic in terms of like chargeback risk. So just to sum it up for you guys, the more broke your demographic is, the higher percentage is that they're going to have a chargeback risk. So you can use kind of some stereotypes there to understand what's like the worst and what's And then the next thing is how much buying intent is there? And this is one thing that I tell people over and over again because sometimes, let's say, um, let's say it's day 1, right? You get no purchases, but you get maybe 3 checkouts and like 11 add to carts. That's still some pretty good buying intent. You got some add to carts, got some checkouts, so you're probably going to need to go to day 2 to let it optimize, right? Like this is still has some potential there. Because sometimes I've tested products where they want to do this, and then, um, on day 2, it'd be something more like you get like 3 purchases, you get 6 checkouts, and you get 12 out of the carts. You know, it kind of starts to optimize and find customers that actually want to purchase from you. Meta starts to actually kind of optimize. And so you got to understand that that is how it works as well. And especially with an MR product, one thing that I look for in the add-to-cart rate is an 8% or above, right? So, um, 8% or above is usually a good area where there's a decent amount of buying intent that if you double down on, there's a good chance that you could make it work. Anything above like a 10, um, before I've got like a 20% and then I ended up converting that really well. So You just need to understand if there's any buying intent. If it's zeros across the board, or maybe it's like you spent $100 and it's like 1, 0, 0, that's like almost nothing, right? So that's like, okay, this is probably going to be a dud and not worth my time. So you have to understand the intent. Next thing is how much conviction do you personally have in this product? So your gut is, is a powerful tool, and it's something that you need to rely on more and more the further you get into your e-commerce just entrepreneurship journey. Like, your gut does tell you things, and it tells you things for a reason. And so one thing I like to create is kind of like an opportunity rating. So basically, I'll kind of rate how good this product opportunity is on a scale of 1 to 10, right, based on saturation. So how many Facebook ads are actively running, you know, based on content available. Also based on the product, right? Like, is the product like just super eye-catching? Is it got that crazy— what do people call— there's something called— I forget. It shocks you when you look at it. You're like, wow, that's a cool new product. Does it stick out? Does your product stick out? Does it have amazing content that you can test? And is there like nobody running Facebook ads? If all these things are true, then it could be a 10 out of 10. And then like, okay, yeah, I need to keep going with it even if I don't see results super early on. But if it's not, if it's more like a 3 to 5 out of 10, if it's anything less than that, why are we testing it? Then maybe you got to be like, okay, I'm going to give it a shot, but I'm not going to expect to put a bunch of effort into it because in my opinion, the opportunity rating is pretty low, right? And also your personal feelings, like I said, your gut does matter. Your gut is a very powerful weapon that you need to learn how to trust. And as a beginner, it's hard. Like, your first product test, you don't know anything. Over time, you get to, you know, build some trust with yourself and understand what works and what doesn't and what will probably have a shot. You'll get that pattern recognition, and then you'll understand. Like, right now, my pattern recognition is amazing. I'm able to find products that way. And then another thing, after you've done all that and you've asked yourself those questions— and let's say it's— this is for if it's like a really, like, a 7+ out of 10, uh, opportunity. Have you exhausted all your options? Is it an effort issue or a skill issue? This is very, very important because, um, let's say you're putting in— let's go through a couple scenarios, right? Let's say it's a 7 out of 10, it's showing some buying intent, right? And you're putting in a lot of effort and nothing's really sticking. Um, that could be honestly an issue for the product because I mean, there should already be some decent content if it's at 7+ and you're putting in a lot of effort and it's still not working off the bat, then it probably shows that like there's something fundamentally wrong with the marketing or your skills. And the vice versa could be true as well where like you have high skills but you're not putting in enough effort. So you need to ask yourself, does this product have similar ones already? Is there just too much competition? Do you need to work on a certain area? Do you need to get better advertising? Maybe your landing pages aren't bad. You need to be asking yourself these questions before you even think about stopping to run any product, in my opinion. Is it ideation or execution that's lacking? Do you have a plethora of ideas? Are you doing research and like, okay, this is how I can market it, I could try this, I could try that? Or is it the ads actually don't look good or to you they don't feel like they're actually good enough to, you know, sustain scale? You need to ask yourself all these questions, right, and really understand why is it not working right now so you can understand what you need to fix. And if, if you— if it's just a skill issue, and let's say there's similar ones printing, maybe it's like a very— you don't want it to be too similar, you don't want it to be your exact product, but if it's something like— and yours is like a different form or something like that, I don't know, yours is like even better and there's other ones pretty, then maybe this is a product you double down on and just improve your skill. You just work on improving your skill through a product, which is one of the most beneficial things you can do in e-commerce, to just stick with a product and really try to improve your skills, improve your ads, improve your landing pages, improve your offers, everything. And the next product test, even if this doesn't work, it'll be so much better and more likely to hit. So you gotta ask yourself these questions, um, And then that brings us to this Venn diagram that I made for you guys, right? So in the middle, um, or in the middle, on the left we have cut. So this means you're going to cut the product. If you're seeing signs like this, most likely it's a cut. This side is most likely double down, and in the middle means that you're— I don't know right now— you either need to do more research or you need to learn more about e-com. Simply one of those. You need to learn more, do some more research, or work on your skills or something. So I want to talk about the middle first because I feel like this is where I find most people, most of my students and stuff like that. I see them in the middle, right? They are uncertain. One, they're uncertain about the product, like they don't trust themselves enough. And so clearly there's a lack of knowledge. If you have uncertainty, you should be able to tell if this is a good opportunity or not. If you're doing e-com, like, you should be able to tell that. So if you don't, you need to work on learning and do more research and really dig deeper and get more clarity that way. Um, if there's a learning curve, so if your skills aren't good enough, then it's not really cut or double down, it's just you need to get better yourself, right? It's not the product, it's you. It's lack of direction, it's also not the product, it's you. Because lack of direction, sometimes you'd be like, okay, I don't see where this can go. Any product can sell. You should have direction for any type of product. So if someone comes to me and they have lack of direction, it's a sign that they haven't done their research and they haven't learned enough, right? Uh, they can't tell if it's offer, the creative, or the funnel that's broken. That's another sign that you need to do a little bit more learning, a little bit more research. If you haven't talked to a single customer, this is more advanced, but it's something that everybody should do, honestly. You guys get your customers' emails and phone numbers. You should be asking them why they bought the product and asking questions about it. And so if you haven't done that as well, then you're not doing enough research. No clear hypothesis on why current creatives isn't working. You could do more research, more learn, and honestly, I'll put in more effort as well. More effort. You haven't read the top 3 competitors' ad libraries. So this could be like similar stores or something like that. Clearly, it's you're not putting in enough effort and research. Okay, you can't articulate the customer's before state in their own words. This is a kind of an advanced one, but if you're going to be running a product and you expect it to print 10K days, like, you should be able to do this stuff. Like, you guys don't realize, like, you should know the customer like the back of your hand. Like, if you really expect to market to a product and— or market to a customer and understand them and make them feel felt and seen in your ad, then you're going to have to know them pretty well. So that just obviously goes back to research effort, right? So now let's talk about the cutting. So if you've been doing this stuff, like, you know that stuff and you're good, and you see that no angle is breaking through after 20+ creative variations, and like, yeah, okay, it could be a skill issue, but also it could just be the product, you know, for whatever reason it's just not hitting and it's not working out. And so it's time to cut and focus on a different area because you have the skills and you have the effort. Maybe you just need a different opportunity. And if the direct competitive competition is clearly better, so like you go on Facebook ads and like you're competing with like a Rise or someone who's willing to go a lot more negative than you are or something like that, um, then you clearly are just going to get outcompeted. So you either need to niche down here or just cut or just reframe your product. Doesn't need to be necessarily just straight up cut. It could be reframe your marketing, um, but that's something that you need to understand is where your competitors are at. Uh, one is that you spent too much already. So this goes back to our stop loss example. If you spent too much and it's not showing any signs of life, cut. If your CPA is 3 times above breakeven with no improvement trend across iterations, then definitely time to cut. Um, If there's too much comp, like there's just so many flooded people on the space on your exact product, you should probably cut. If the COGS are too high to manage, so you can't even get, you know, like the shipping and the perceived value, it's just not lining up. Like let's say you have a product that you, the perceived value of it's like $50, but it costs $25 to fulfill. That's just not economically, there's no room for you to make any profit. Forget about making any profit if you are paying $25 to fulfill and $50 for the product price. It's just not going to work out. You're the only one excited about it. This is something that you need to understand is you need to get rid of your feelings. It's kind of like trading. You can't be super emotional. You need to make analytical decisions. So if you're super excited about it because it's something you really like, but there's not really a market for it, you should probably cut it. The hook requires a trend that's already peaked. You should cut it. If there's regulatory or platform risk, like it's a product that's selling cancer angle or I don't know, something crazy, you should probably cut it. It's just gonna give you headaches. Like it's not worth it at all. And also if you hate the customer or category, this matters more than people admit and you won't push through the dip. You won't push through the dip. So if this product is gonna take effort, you don't like the product, you don't like the customer, you're not stoked about it, you're not gonna wanna do it. So you probably should just cut and find a better opportunity. Now for double down, here are some signs that you should double down on the product and actually put more effort into it. There's a genuine gap in the market, so you've done your research maybe on Google Trends, Amazon, um, similar, like, I don't know, you've done keyword research and stuff and you've seen that there's people who want to buy this product but there's no one selling on Facebook, then yeah, double down on it. It's under $200 in ad spend, you probably should double down on it because there's not enough spend to make really any, to make any basically decision about it because it's only $200. And also like, yeah, maybe if it's like 0, 0, 0, like add to cart, checkout, and purchase, but it's likely not going to be that, right? So you haven't even tested enough concepts with $200 spend to really make even a decision. One creator angle is clearly performing outperforming the rest. Maybe you're unprofitable, but this is the truth. That's a sign to double down on that angle. The CPA is trending down across iterations. So like you're actually getting more profitable the more you iterate. That's a sign to double down. It's a strong organic signal. There's unprompted reviews, DMs, and repeat buyers. Like you see a lot of like good people in the comments, like good comments about this product and people are like, where do I buy it? Like double down on it. You can name the customer and angle in one sentence. That means that you have clarity and conviction. Probably double down on it. One ad is carrying the ad account, kind of goes to this one as well. Double down. Hook rate is unusually high, that's a sign to double down. And maybe you just need to find a little bit of a different angle or a different way to sell it. But clearly the product is getting attention, which is a good sign. Category is growing. So this is also, you know, Google Trends, you know, competitors and stuff like that. Like, it's a growing category, which means there's room for you to actually grow into it. There's an opportunity right there for you. And so that's another sign to double down. Create a concept and multiply, not running out. Now, every new test you do, you start becoming up with these new angles, and you're like realizing the more— even just like when you're walking around, you're coming up with these new ways to sell the product. Like, yeah, you should double down and definitely test. Um, if the AOV is climbing as you add all these bundles, upsells, and the customers actually want to buy more either of this product or of similar products, that's just gonna give you more opportunity to scale. It's gonna give you a bigger AOV and more competitive leverage. You should probably double down. And so none of these are exact, but I'm kind of bringing you guys through my thinking process, right? And how when people think about cutting or doubling down on a product, it's as simple as what their meta ROI is. It's really not. There's all of this that goes into it, guys. You should be looking at the bigger picture 100%, and hopefully this gives some of you guys some clarity on what to actually do when you're testing your product. So one of the most common questions I get. Hopefully you guys enjoyed, and yeah, thank you guys.