Targeted Low Volume, High Margin, High Value Products
I always preferred selling targeted, higher priced, high-value products that had little competition. That way I could focus on making terrific products rather than operations efficiency. Someone wisely said, “the riches are in the niches.” Appealing to the passion of a small group of people, going deep, is the perfect launching pad for many entrepreneurs.
We started our company in 1985 with a 6-issue, $55 per year newsletter about the new HP 110 Portable laptop. Then through the years, we created a number of products with profit margins between $50 and $300. It was great if we could sell, say, 500 copies of a product with a $200 margin. If we sold 50, that would be OK too.
For example in the 1990’s for HP Palmtop users we sold the ‘CD Infobase,’ a $129 product that once created cost us almost nothing. The CD included thousands of HP Palmtop-related guides, apps, and eBooks. Each year, for another $79.95, the customer could get the latest version.
Our labor-intensive Palmtop memory and speed upgrades had gross margins of between $100 and $300, plus we sold extended warranties. For twenty-five years, we have sold these upgrades to 1000’s of customers.
After several years of doing our annual Pocket PC awards, we created a $300 app package that contained almost all finalists and winners. We asked the vendors to give us up to 1000 copies of their software at no charge. In exchange, we publicized their product all year in our magazine and online as part of the “Best of Everything CD.” We explained to the developers that most customers would not spend $300 for our product. However, those same customers, when needing a particular kind of software, would look at our description of the best apps within a category.
Two of us spent a lot of time creating an online delivery system. After those first costs, the revenue from the package was almost pure profit. Each year we offered a new CD that attracted repeat customers.
By tapping into your own deeply held passions, you can dream up products you would like to have. Find enough kindred spirits with a high enough profit margin and you have a business.