The Internet Marketing News Watch reported today on the launch of the “Internet Marketing Tax Guide” which I recently launched – you can read the IMNW report on the internet marketing tax guide for domainers and IM marketers .  The tax guide was written and developed for individuals conducting business as domainers, affiliate marketers, ecommerce marketers, and internet marketers.

The Internet Marketing Tax Guide provides insights and strategies into the tax consequences and responsibilities of Internet Marketers.  How are domain registration fees handled?  Can I deduct the cost of all of my computer equipement?  Is the cost of a conference held on a cruise ship deductible?  These are just a few of the topics addressed that are important to Internet Marketers.

One of my favorite professors was focused on new product development.  The course was an exciting course with a lot of theoretical concepts – concepts such as how to create product innovation teams, cycle time, customer fit, etc. - as well as an emphasis on controlling development costs (we will get back to this often overlooked topic).

The typical "theoretical" NPD development cycle is as follows:

1. Idea Generation
2. Idea Screening 
3. Business Analysis
4. Development
5. Test Marketing
6. Commercialization

One of the most interesting statements came during the opening introduction to the course with the statement:

More than 95% of new product development projects fail to earn an economic return!

This same professor had defined me as a "serial entrepreneur" and a 95% failure rate is not something that a serial entreprneur would ever be willing to accept.  Yet that is what corporate america is routinely experiencing in their new product development cycel – 95% of their new products FAIL TO EARN AN ECONOMIC RETURN!

So I thought I would take a few moments to analyze the first few steps of "traditional" NPD process.

Idea Generation:  The course spent a significant time discussing methodologies of new idea generation.  For many, this step is challenging.  I would suggest that it shouldn’t be – if you find it challenging, then you have the wrong people on the team.  One of my favorite quotes is:

There is no shortage of good ideas, only a shortage of good men capable of executing on them.

Idea Screening:  This is an important stage.  It is human nature to favor ideas that conform to our existing biases about who we are and what we do.  Some of the greatest product innovations have occurred  when businesses have been willing to consider ideas that take them in an entirely new direction  Yet *most* people naturally do not want to consider ideas that are outside the traditional scope of their business or experience.

Business Analysis:  Finally we arrive at the business analysis stage.  The traditional "business analysis" uses both quantitative and qualitative methodologies to evaluate strategic, financial and customers.  However the "customer" analysis typically focuses on wants and needs while leaving out on of the most critical issues.

Are they willing to buy what you want to offer – and at what price?

The traditional NPD process leaves this question to the fifth step – Test Marketing – after they have incurred significant development costs!

This is the single most significant causes of failure for most new product development processes or new businesses.  It is absolutely critical that a "proof of concept" be demonstrated in the context of specifically identifying the potential size of a market, percentage of the market that is willing to buy, and the various price point that they are willing to purchase.  That assumes that they are willing to pay anything at all!

Many new product development projects fail to earn an economic return – not because the product idea was necessarily a bad idea.  In fact, many products are in great demand – everyone wants that solution or that product.  But the question of whether or what they are willing to pay was never asked.  Or more importantly – tested and proved.

In the Internet Marketing world (which is simply a distribution channel) – we have excellent tools to evaluate new product concepts.  We have tools that allow us to research search volume for keywords in the search engines.  All too often, the budding internet marketer follows the traditional new product development cycle:

1. They generate ideas,
2. They screen ideas,
3. They develop their business analysis based on the estimated search volume of people searching for related terms.  
4. They spend months (or sometimes years) developing a new product.
5. They beging their test marketing (or take it immediately to the market)

And typically – 95% of them fail.

They fail to generate an economic return.

The internet marketer is often barraged by a variety of messages – if they had only followed this marketing strategy or used or bought this marketing tool or joined this membership site – they will be able to learn that magic bullet that would have allowed them to earn an economic return.

There are always tips and tweaks that could have allowed them to improve their marketing and distribution.  But in most cases, the "traditional" new product development process that they followed failed to simply give them the answer to the most important question.  Are people willing to buy what I want to offer?

Yet this most important question could have been answered in their early business analysis step.  Saving them months or years in the development process.

One of the most common failures is the attempt to build a business strategy around free organic traffic from the search engines.  The typical business strategy often says "why should I pay for traffic or marketing when I can optimize and build a website and get free traffic from the search engines?"  The marketer then builds a website and spends  six months to a year building traffic to the site, creating high quality content, building links, writing articles, and finally develops a product.  They have done "everything right"!

They launch their product – only to find that traffic "aka potential customers" don’t want to buy what they are offering or at a price that they were willing (or able) to sell it for …

The marketing guys recommend all sorts of tweaks to the ad copy – we are getting all of this traffic, so it must simply be a conversion problem right?

Often – the real answer lies in the demographics of the market that is associated with the keywords that are drawing your traffic.  That market demographic just is not willing to buy (often at any price other than free) what you are selling.

Did the marketer do anything wrong?  Not according to the traditional new product development process (NPD)!

But the problem could have been avoided  if the traditional 5th step of test marketing had been moved in front of the Business Analysis step or at least incorporated into that phase.

An excellent methodology to test the conversion rate of keyword demographics is to run a series of test marketing campaigns using PPC (Pay Per Click advertising).   

A simple test marketing campaign can be developed by creating a list of keywords that you *think* will convert and be relevant to your new product idea.  A PPC campaign can be run where you spend $50-$100 on each of these keywords to drive traffic to a simple sales page.  You do not actually have to "charge" anyone to test how many people would have been willing to have made the purchase.

If you can convert 1 in 200 prospects to a sale on a simple sales page, you now have a Proof of Concept that suggests that you should be able to convert at a higher level with a more sophisticated sales process and fully developed product.

You also now know what keywords convert and which ones do not – which can help you in how you develop your product and how you develop and optimize your website and sales process.

And if the project did not convert traffic into sales – you now know that you should move on to the next idea in your idea screening process.

Effective test marketing that includes testing the customer’s willingness to buy is a critical step that should be moved significantly forward in the new product development process.  By advancing this step, you may be able to avoid being part of the 95% of the new products that are developed that fail to earn an economic return.

Let’s take a brief look at his case study.  Jonathan has built an adsense site with 11 unique articles.  To promote the site, he is going to post 600 comments on blogs that do not (*DO NOT*) use the "no follow" attribute.   The goal of the case study is to learn whether links obtained through comments posted on blogs have a positive impact on search engine rankings.

For example, my blogs (including this one) allow you to earn a link 
back to your site simply by posting good and valuable content in 
your comments. 

Now 600 comments is a pretty significant number!  Presumably he has outsourced this task – but if he can get 600 quality comments posted on blogs, this will attract a significant amount of valuable links.

In his case study – he notes that some blog owners will allow you to use keywords in your "name" so that you can also earn a quality keyword link back to your site.  Note:  Not all blog owners will do this.  Many will simply delete any comments that they perceive to be spamish due to keyword stuffing the name field.  However, many will approve them as long as you write quality content.

I have personally been using this tactic for many years.  But it does require lots of hard work which most people are not willing to do.  However, last month a new software product was released that helps automate the process of finding relevant blogs in your niche and monitors new postings 24 hours a day.

The power of this software is that it can notify you as soon as it finds new articles posting – often fast enough that you can be one of the first 1-3 people to comment on the article!

Jonathan Ledger’s case study is evaluating what the value of these comment links that you can get on your search engine rankings … but there is also value in the traffic that can be generated from being one of the first few people to engage in a quality conversation!

If you want to check out a program that can help you with run your own test along with Jonathan LEdger’s, check out this site (note this is NOT an affiliate link).  And of course, I would love to hear your comments!

It can be reasonable to assume that this number is not an "under-estimate."  Which makes the release of this number especially troublesome.  What is the impact of regulatory costs on entrepreneurism? On new job creation?  On job retention?

When an entrepreneur is evaluating the feasibility of creating a new business and new jobs, these costs become a singificant part of the economic and financial calculations that go into the feasibility assessment of a new startup.  Is it realistic to believe that new businesses can be created in an environment where the regulatory costs are so high?

When a small business owner is evaluating the prospects of expanding their business operations, is it realistic to believe that they will take on the risk of expanding their business?

When a small business must compete in the modern global competitive marketplace; can they compete with the regulatory cost burdens imposed upon them by our current regulatory environment?  When businesses are faced with increasing competitive pressures, can they afford to keep their jobs and business operations in the US under these regulator burdens when alternatives are available offshore (where their global competitors are often already operating)?

It is a significant challenge for most small business owners to consider.  It is an even more important challenge for our economic and public policy leaders to consider.  Not only must our elected officials carefully monitor and control the appropriate public policy protections that are appropriate, but they must evauate the effectiveness of the regulator bureacracies that may not be effectively implementing those policies.  It is time for public policy discussions to not only discuss the merits of legitimate public policy needs, but also the merits of the regulatory bureacracies and methodologies used to implement and enforce those public policy goals.

Can small businesses compete in a competitive global marketplace under the deadweight burden of such high regulatory costs?  It is a challenge at best … and a significant contributing factor in decision making processes about new business startups, new job creation, job retention, and offshoring.

Technorati is considered the #1 authority site on the internet for blogs.  One of the features they offer is the ability to "claim" your own blog.  This allows you to create and administer your blog profile on their site.  This includes the ability to maintain your bio, profile settings, and even add a photo.

 Greg Watson