The $1M Ecom Product Formula That Actually Works

If you run an e-commerce business, there's likely two categories that you fall under with the types of products you're selling. You either sell some sort of consumable products like chewing gum, and that chewing gum is something that is consumable. I can chew a piece of gum and I can buy another piece of gum from you, and I can keep buying gum from you so long as I want to keep chewing it. The other category is a one-off product. So it's something that you buy once and you don't necessarily need to use again. For example, a camera like the one that I'm filming on, or this sweater. Now I can buy multiple sweaters or lots of cameras if I want to, but typically when people buy your product, they don't have to and they don't have a huge need to buy that product again. Now, with the first category, with consumable products, usually because of the nature of the product, your product has lower profit margins. With the second category, you usually have slightly higher profit margins. However, if you have a product that you can only sell once, you have a crucial flaw in the business, and that is that you cannot keep selling stuff to your current customers. With consumable products, great, you can keep selling things. However, let's say I'm selling somebody $20 worth of chewing gum come every single month, the maximum that I can make off of them is $20 every single month, so $240 a year. The best kinds of businesses are businesses that have the ability to keep selling you products as you grow. These are businesses where I can come in, I can spend $50, $100 on my first purchase, and next time I can order, I can spend even more money if I want to. I can spend less, but if I really like your products and I really like what you're doing as a company, I can come back and I can spend more money with you. And that is what you want to build into your business. So we'll discuss a couple of ways that you can do that in a second. Now, with a one-off product, people buy your product once, and no matter how much they like your product, they really cannot come back and buy it again. So that's a big problem, and that's a really urgent problem that you need to fix if you have a one-off product. If you have a consumable product, you can get away with just selling that product and continuing to grow it. At a certain point, you'll probably need to make new products. Either way, the point of this video is some point within e-commerce you need more stuff to sell. And if you want to be successful and you want to grow as fast as you possibly can, you'll have a way for people to come back and keep spending money with you. Now, there's 3 kind of levers that you have to pull when you're selling products and you're looking to increase the value of your customers. And when we determine the value of a customer, we look at the amount of profit that we make on average per customer. Right now, if I sell chewing gum and it's $20, my profit margin might be $5, $10. Let's say it's $5. If my customers buy chewing gum from me every month, I make $5 every month. I make $60 a year. Let's say an average customer is a customer for 2 years. I make $120 in profit. Let's say I'm selling a camera. It's a camera that you only would buy once, like an Instacam 360. If you've seen those 360 cameras that come on those selfie sticks that you can walk around with, they sell for $300. I might have 30% profit margins and make about $100 every time someone buys, technically $90. Both of these make me around $100 in profit, and that's cool. But again, the problem then becomes how do we get more money out of our customers? And the 3 levers you have are you either have higher profit margins, so you charge more for your products, or it costs you less to make them. You get more referrals from your current customers. So people that buy your products and love them so much that they tell 1 or 2 or 5 or 20 of their friends about your product. Or the third lemur, which is to sell more products. If you care about growing your business, then you'll probably be trying to improve your product and your customer experience. And as you do that, you'll get more referrals naturally. And that's something you should always be working on. However, that's great and it's something that you should be doing anyway. The second one, charging more, having higher profit margins, is something that you can also work on, but it might not always be the best strategy for you to spend less money on manufacturing your products or creating them or charge more for your products. You might want to do that. So while referrals is something that you can always be working on, it is something that you should always be doing. You should be asking your customers about their experience with their product. You should be surveying them after they buy. There's lots of great apps like Nocommerce that you can install on your Shopify store, essentially asking questions to your customers about what made them purchase the product in the first place. Once somebody's used your product, you can also send them a survey via email or text App Store, or however you contact them, survey them and ask them about their experience with your products. You can call them if you want to, and you can get feedback from them. And getting that feedback is going to help you improve your product, which is going to lead to more referrals. The second thing, lowering costs— I'm going to skip over that right now. There's a few strategies, but I'll make a different video about that. The third thing is you can sell more product, and that's what I want to talk about. No matter what kind of business you are, if you look at the biggest companies in the world, they sell more than one product. And lots of people will say focus on only one product and focus on only one marketing channel, and that true to an extent, but it usually doesn't apply in quite the same way for e-commerce businesses. So if I have an e-commerce business and I currently sell one product, let's say I sell this one type of tree, then I can look at other similar products that I could sell. I could start selling other types of plants, I could start selling other types of trees, I could start selling seeds for product. But I could build a community of people that pay to be in that community. Maybe they pay one time or they pay monthly to stay a part of that community. A plant or a tree is a really easy example, a niche, a category, a type of product where you could easily find other products to sell and you can start producing those products or getting your hands on those products and offering them to your current customers. But the simple concept is if I have a product that I'm selling that is one-off right now, I need other adjacent products to sell. So you need to go out there, whether it's using ChatGPT, whether it's asking your customers what other types of products they're looking for, what other problems they have, and finding products that are similar in their niche and their style, and then going and getting your hands on them and selling them. These things were incredibly important. Because again, you want somebody to purchase from you and you don't want that first purchase to be the last purchase. You want to create this kind of lifetime, this journey that people go through with you where they come back and they're introducing friends to the business, they're buying more products themselves, and you're continuing to make more money from those customers. Because that way I can have one customer. Theoretically, I can continue making money forever. And that means if I go out and acquire a second customer, not only is my first customer now making me more money, the second customer, I've made money on their first purchase. I'm starting to make more more and more money as time passes. And that way, when you're doing all of your marketing and you're promoting your company, you're not only making money from acquiring customers in the first place, you're also making money from active customers you have. It sounds simple enough, but most people don't do it. So go look at your business and figure out what other similar products you can sell. And don't go haywire either. Way too many people go, they hear this as a concept and they go, oh, perfect, I'm just going to upload 400 products onto my store and I'm going to sell them all. That itself is also a problem. There's a limit to the amount of focus that you have as an individual. There's 24 4 hours in a day, and you can't have incredible focus into 400 products unless you're doing hundreds of millions of dollars a year, unless you have a giant team that can help you, help support you. If you're watching this video, you're probably either a 1-person or maybe a 5-person show max. And as a result, I wouldn't recommend focusing on more than 5 to 10 SKUs until you're doing at least $10 to $50 million a year in revenue. Once you're at that, those revenue ranges, you can worry about selling more than 10 products. But up until that point, focus on 5 to 10 products and get really, really good at selling all of them and cross-selling them between your customers as well. So upselling those products and finding ways for people to buy more of them as time progresses. If you do that, I guarantee you, you'll be able to build a $10 million business so long as you stick at it and you, uh, make sure that you're profitable. Sounds simple enough, right? More or less is. Watch some of my other videos and you'll find out other ways that you can actually grow an e-commerce business. Cheers.