How To Profit From Selling Digital Products (Part 2)

Advertisement

This is the second and final article on how to sell and profit from digital products. In part 11, we covered many of the benefits of digital products over physical goods as well as the marketing philosophies to help you build an audience for your products. Today, we will be discussing more of the tactics required for a successful digital product business. There’s also a dark side to this world, which we’ll get into towards the end.

Let’s jump in.

Sales And Fulfillment

Remember how one of the best things about digital products is that you don’t have to ship anything? Your profit margins are much higher, and fulfilling orders is so much easier! You still have to deliver the product to the customer, but e-commerce software will do that for you, so you don’t have to be involved at all.

This means you can be sipping Mai Tais on the beach or (more likely for me) playing with the kids while people are buying your product.

To set this up, you need some kind of software to show the product, accept purchases, process credit cards and then make the file available to be downloaded by the customer. PayPal has been the industry standard for more than 10 years, but it also hasn’t improved much in that time.

In fact, digital e-commerce solutions (at least the ones that are best for selling standalone products) were pretty stagnant until Gumroad82 launched a couple years ago.

When I was working on selling my first book, The App Design Handbook3, Ryan from Gumroad reached out to me to get me to consider the platform. I had a few questions about particular features, but what really sold me was the fantastic checkout experience.

The world of online payments has always been plagued by a frustrating checkout process, unnecessary fields and other design failures that make customers abandon their purchases. Gumroad changed that. Its checkout process is incredibly simple and elegant. The result is more purchases from less-frustrated customers.

Because my first books were about designing great software experiences, I felt that using a payment provider with a second-rate checkout process would be hypocritical.

All in One

Gumroad handles the checkout process from end to end. With many other providers, you need one tool to handle checkouts and deliver the file and another tool to process the actual payment. With Gumroad, one tool does everything. You upload the product, add your banking information (so that you can get paid) and start accepting sales!

The Overlay

Normally, you would need to set up quite a bit in order to get e-commerce working directly on your website. Linking to the payment page on a third-party website is easy, but keeping the customer from ever leaving your domain is more work (both in configuration and security).

Gumroad’s payment box4
Gumroad’s payment box. (View large version5)

So, one of my favorite features of Gumroad is its overlay checkout process. The checkout button on your sales page will trigger a modal overlay that contains the entire checkout process. Because that happens in a secure window, you don’t need to worry about security on your website, but you still get the benefits of the customer never leaving your website to pay.

No, I’m Not Being Paid by Gumroad

Yep, I love Gumroad. And, no, I’m not being paid to endorse it. Quite the opposite. I’ve paid Gumroad over $20,000 in payment-processing fees in the last one and a half years, and I’m still their biggest fan!

Product Launches

Once you’ve identified your market and set up your sales page and credit-card processing system, you’re ready to start accepting sales, right? Wrong.

Product launches fail for a number of reasons, and the most common is that the customer hears something like the following leading up to the launch: Silence… silence… silence… “Go buy now!”

Compelling, isn’t it? I know that would make me want to buy… not.

A Good Launch Requires a Launch Sequence

After blogging for a while and successfully launching The App Design Handbook and Designing Web Applications, I had an email list of about 5,000 designers. Because a few friends had been successful with online workshops, I wanted to try them as well. The result was a carefully planned (at least for the content) workshop on “Designing Web Applications.” I sold seats for $400 each and capped attendance at 25 people.

I thought this was going to be easy. I’d already done the hard work of building an audience, so my thought process was, “With an email list of 5,000 designers, how hard could it be to sell out 25 seats?”

With that mindset, I devised a strategy consisting of one email — which I thought was a really good email — to launch the workshop. The email was educational but tied nicely into a sales pitch at the end.

Monitoring Sales

After hitting “Send,” I tabbed over to Gumroad and waited for the sales to roll in. You know what? They didn’t come.

That really confused and frustrated me at first. In my previous product launches, I had seen up to $1,000 in sales within the first 10 minutes of launching. Why was this different?

Anticipation

When was the last time you bought a product within a few minutes — or even an hour — of hearing about it for the first time? That doesn’t happen often.

If you see a product that you sort of like and have the opportunity to buy it right then, chances are you will put it off until a bit later, and then completely forget to purchase.

With my previous launches, I had built up the anticipation over weeks. Every time I talked about it, the likely buyers got more and more excited. Then I gave a clear date for when the product would be available for purchase.

Providing Every Detail

The day before launch, I would send out an email providing every bit of information that my subscribers would need to make a purchase. The email covered the benefits of the product, pricing information and even frequently asked questions (which actually hadn’t been asked yet).

The one thing the email didn’t include was a link to buy the product.

Instead, I told them exactly when the product would be available (for example, 8:00 am EST tomorrow) and to expect another email from me at that time.

I was trying to get each person on my prelaunch list to decide whether to buy the product before giving them the opportunity to buy. The last thing you want is someone thinking, “Oh, that’s an interesting product — I should buy it. Well, my credit card isn’t handy. I’ll buy it later.”

If that happens, they will usually forget and not come back to buy.

Launch

Then, on launch day, my job was easy. I wrote a simple email saying, “Hey, the product is ready. Buy it here.” And I hit “Send.”

Whenever I followed that process, with anticipation building up over weeks or months, I’ve made at least $1,000 in the first 10 minutes after launching.

It’s the times when I got lazy and cut straight to the sales pitch that my product flopped.

If you want to have a successful launch, then repeat after me: “In order to have a successful launch, I will build up anticipation and excitement before giving my customers an opportunity to buy.”

Dealing With Fraud

Fraud is an unfortunate side effect of selling online. Until I started selling books, I had no idea how common fraudulent payments actually are. In fact, it didn’t even make sense to me why someone would buy my books with a stolen credit card.

It turns out that there is a reason why criminals want to buy ebooks about designing better software. It’s not because they want to get into designing iPhone apps as a side business. Rather, they need to validate the credit cards they’ve stolen.

Let’s say Joe the criminal has bought a list of thousands of stolen credit card numbers. Most of the numbers are no longer valid, so he needs a way to easily find which numbers can still be used to purchase products. That’s where my ebooks and your digital products come in. Joe writes a program that automatically attempts to make a purchase one card at a time until a number isn’t denied.

Then, Joe takes that valid number and either goes on Amazon to buy physical products (ones that have resale value) or creates a physical card and has someone make purchases at the local mall (again, physical products).

Why I Was Upset About $1,500 in Sales

Just last week I saw a huge spike in sales. Nearly $2,000 in a single morning is pretty awesome! At first, I figured that an article must have mentioned one of the books, driving traffic over. Then, I looked more closely at the sales. A single email address was responsible for $1,500.

This person had purchased the top-tier package of two of my design books ($250 each). That happens sometimes, so it wasn’t odd. But I saw that they had also purchased a team license for one of the books ($1,000). Why would you purchase both the complete package and the team license of the same book? That didn’t make sense.

I plugged the email address into Rapportive (a Gmail plugin for finding out about email addresses). If the address belonged to a design or development shop, I wouldn’t have been surprised, but Rapportive didn’t pull up any kind of profiles from around the web, meaning that the email address was most likely a throwaway and that the purchase was fraudulent.

One of the reasons I love selling on Gumroad is that I was able to just refer the purchases to its support team, which quickly verified that they were fraudulent. The charges were refunded and I moved on with my day.

Chargebacks

You might be thinking, “Why not just keep the money and hope that the original card owner never finds out?” Besides being morally questionable, doing that can hurt you financially.

Have you ever looked through your credit-card statement and found a charge you didn’t recognize? Chances are you called your credit-card company and told them that you didn’t make that purchase and asked for it to be refunded. That’s called a chargeback. It’s a wonderful part of using your credit card for online purchases. Your credit-card company protects you from liability if your card number is stolen. That’s fantastic for the consumer — not for the merchant.

Do you think the credit-card company or bank swallows the cost of that fraudulent purchase? Nope. They pass it on to the merchant — that is, you and me and anyone who makes a living from selling digital products online.

When a chargeback occurs, the bank takes the money out of your account, so it’s like the purchase never happened — except that the bank adds a fee. The amount of the fee depends on the payment provider. Stripe charges $15, and PayPal charges $20 (although only sometimes). This means that, after refunding the customer, you still have to pay the fee on top of the lost revenue!

Stopping Fraud

That’s why catching fraud early is so important. You don’t want to be liable for the extra fee for each chargeback. Gumroad has fantastic fraud prevention. For starters, it has excellent security measures to detect fraud purchases and prevent them at checkout. If something does get through, it covers all of the refund and chargeback fees.

If a fraudulent charge gets through and a chargeback is issued, you only lose what the customer paid and aren’t liable for any other fees that other payment-processing companies might charge.

Fighting Chargebacks

Not all chargebacks are because of fraudulent purchases. Sometimes a customer buys a product, decides they don’t like it and calls their bank to ask for a refund instead of talking to you directly. This sucks because it can be expensive for the merchant. So, to all customers out there, please don’t ever request a chargeback unless you have first talked to the seller and requested a refund!

That’s part of the reason why I always issue refunds when asked. Risking a chargeback is just not worth it. Just refund the money and move on.

If the purchase was obviously fraudulent, then you have very little recourse to dispute the chargeback. But if you can prove that the purchase was made by the owner of the card, then there is a decent chance you will win the chargeback, keep the money and avoid having to pay the additional fees. Some people are scammy enough to buy a product, use it and then issue a chargeback, even though nothing is wrong with the product.

When a legitimate purchase is charged back, Gumroad will actually fight the bank on your behalf to try to win the dispute. It does this by sending a nicely formatted document to the credit-card company showing who made the purchase, where they were at the time, and other information to prove that the owner of the card made the purchase.

It’s hard for a customer to dispute a purchase when they submitted information that matches their information on file with the credit-card company and did it from their home IP address.

Don’t Let Fraud Discourage You

This whole process is frustrating sometimes. A lot of seedy characters use the Internet for crime, and sometimes your products are a tool in their larger scheme. It happens.

First, don’t stress about it. Many things are out of your control. But secondly, sell through a provider that will prevent fraud, fight chargebacks and cover all of the fees in the process. Being relaxed about online fraud is easy when I know that the team at Gumroad has my back.

Theft And Piracy

One of the most common questions I get is, “How do you prevent people from stealing your product?”

You don’t.

Look at the movie industry. It has massive amounts of money and has spent many fortunes on digital rights management (DRM) to prevent unauthorized viewing of its movies. Has it worked?

Not at all. A quick Google search shows download links for any popular movie. Those who want to pirate your content will. You can do nothing about it.

The only thing you will accomplish by adding DRM or the like is upsetting your customers. Everyone who pays will feel like you don’t trust them and will resent the inconvenience you’ve added just for them to use the product they’ve legitimately paid for. Starting a relationship with a customer by telling them you don’t trust them is not a good idea.

Really?

Yep, I don’t do anything to prevent my books from being pirated. Instead, I focus on the customers who have paid and will continue to pay for more products. It’s not worth worrying about something you can’t control.

One Thing You Can Do

In the last few weeks, I have started doing one thing. Sometimes these torrent and free-download websites will pop up on the first page of Google’s search results. That’s not good. I’d rather that people who are searching for a way to buy my book not be shown a way to pirate it on the first page of results.

So, every so often I have someone on my team go through the results and submit takedown requests to Google, which is really good about removing the results from its search engine.

I don’t “go after” anyone. I just try to get the links unlisted from Google. It takes maybe 30 minutes every few months and makes me feel better.

One More Thing

While I was traveling with my family a year or so ago, I got a rather frustrated email from a purchaser of The App Design Handbook. He said, “I bought your book on Amazon, but the formatting is all messed up and the book is barely readable!”

A couple of things bothered me about this email. First, I care about design, so the reading experience ought to be good. That’s important to me, so clearly something had gone wrong. Secondly, I don’t sell my books on Amazon. That’s what confused me most.

After a few more emails and a little research, I learned that someone had stolen my book (to be expected) and was selling it on Amazon and pocketing the profit (not to be expected). Luckily, Amazon took it down, and the gentleman got a refund. So, if you complain about people stealing your work, just remember that at least they aren’t selling it.

The Power Of An Audience

The last two years of my life have been crazy. I quit my job, started selling digital products, doubled my annual income, wrote more books and doubled my annual income again.

Many tactics helped in the process (including the ones we’ve just covered), but none of it would have happened without my readers. I made the decision early on to focus on teaching and sharing everything I learn.

Those readers are the ones who have enabled me to sell books, teach workshops in cities around the world, get paid to travel and get access to so many people whom I now call friends.

A Portfolio Approach

When I started selling digital products, I was going for a “portfolio” approach. I would pursue any project that I thought could get a return on my investment.

My idea was that I needed to replace the salary from my design job ($5,000 a month), so I would stack revenue from these otherwise unrelated apps together until it reached that magic number.

I had products for small-business owners, speech language pathologists, students, sign-language interpreting agencies and productivity enthusiasts. Yes, each one got me closer to my $5,000 a month goal, but my time got scattered.

An Audience-Centered Approach

Anytime I worked on promoting OneVoice, my app for speech language pathologists, it did nothing to benefit Commit6, my app for productivity enthusiasts.

There was no overlap between those two audiences. The same with promoting the flash cards app and the ebook about design: zero meaningful overlap.

That meant that each bit of effort I put into promotion benefitted only a single product.

I’ve since changed that approach to focus on serving a single audience — well, really two overlapping audiences: designers and marketers. The topics are ones I care about deeply, so I can write about them without getting bored. More importantly, any effort I put into promoting The App Design Handbook also helps to market Designing Web Applications.

Every hour I put in returns twice the results (or more) in revenue.

Serve the Needs of a Single Audience

I still have a portfolio approach to products. My revenue this year comes from at least six distinct products. But they all serve a single audience (at least as closely as possible).

Think about the audience for your product. What else do they need? How else can you help them? Could you provide tools or training on top of what you already offer?

How To Get Started

Hopefully, through this series of articles, you’ve learned enough theory and tactics to make your digital products successful. Here’s how to get started:

  1. Decide on what to sell. If you don’t already know, look at the byproducts you create in your everyday work.
  2. Plan what you will teach or what stories you will share to attract attention.
  3. Set up a landing page and email-marketing app to build your list (use ConvertKit7).
  4. Create your product.
  5. Decide on how to price your products. If possible, use multiple price tiers to increase revenue.
  6. Set up an account on Gumroad82 to sell your product.
  7. Set a launch day, and build up to the launch with a sequence of information and training.
  8. Launch the product and start selling!
  9. Take a break.

Strategize where to go from here and how to use your audience to meet your long-term goals, whatever they may be.

That’s It

This concludes the series. I hope you’ve learned some valuable techniques to make selling digital products more profitable!

If you’d like to keep learning, I’ve written a free course that goes into more detail on using email marketing to increase sales: “5 Days to Selling More Through Email Marketing9.”

(al, il, ml)

↑ Back to topShare on Twitter

Nathan Barry is the founder of ConvertKit, an email marketing application, as well as the author of The App Design Handbook and Designing Web Applications. His latest book, Authority, teaches authors how to profit from self-publishing.

  1. 1

    “Because that happens in a secure window, you don’t need to worry about security on your website” -> http://www.troyhunt.com/2014/06/lessons-in-insecure-ssl-courtesy-of.html

    3
    • 2

      That’s not the same situation at all. The main site doesn’t have any access to what is loaded over HTTPS in the secure iFrame.

      4
      • 3

        No, but the main site is controlling the URL of the iFrame. If you change that URL (because you can change the HTML of the main site, which is not secured), you can redirect your customers to a look-a-like site, that will happily take your payment and transfer it to Russia.

        1
        • 4

          Rob, phishing is not fixable by security on your own website. It can occur without you being involved what so ever.

          4
  2. 5

    ok piracy CANT be prevented but you can make it harder, don’t listen to the OP, place an HTACCESS on your downloads to prevent direct access, or password protect the directory, also password protect your RAR, ZIP or PDF files

    also add metadata too all your products so if ppl are curious and display it they will know where it came from.

    2
    • 6

      I like security measures that are transparent for customers like these. But the truth is that they are only good to make you feel better. Bare minimum stuff still has to be there (like having to login to download) – otherwise the material looses value too much. But anything that takes too much effort or customers’ time is counter-productive.

      1
    • 7

      this is now a spiderman thread!

      -1
    • 8

      This does nothing to make piracy harder. At all. Please don’t confuse readers and suggest it does. Some things are common sense (password / user account protected downloads), but that’s about it. Passwords on zip files? Hidden meta data? Serial numbers? Online activation? Physical hardware crypt keys? All are children’s toys. They won’t make any difference.

      Focus on your customers first, support them, nurture them, make their lives easier – always. Pirates will pirate and there’s nothing you can do to stop them. In fact you could even argue you should consider going the other way: finding ways to help them, making it as easy and painless as possible to convert them into a real customer should they want to become one (and lots do) without blackballing them.

      0
  3. 9

    Hey Nathan, thanks so much for sharing! The part about catering your products to one audience is really good. Niching down the market you serve always feels wrong at the start, but it almost always leads to higher revenue and better products in the future!

    Two questions for you.

    What software do you use to design your ebooks?

    Do you have any method to validate ideas for a new ebook or product? I have several ideas for ebooks, but I would like to know if they would help people out and actually make money before I write them.

    Thanks,
    – Caleb Mellas

    1
  4. 10

    Hello nathan, Thanks for awesome article.
    Everybody enjoys reading,

    0
  5. 11

    A very enjoyable read over the 2 articles. Thank you for sharing Nathan.

    0
  6. 12

    Hello Nathan, thanks for share this great article. Very pleasant to read and learn throughout it.
    I will continue reading about your products, and I hope to buy some of them.
    Sorry if I make a mistake in my syntax, spanish is my navite language.

    0
  7. 13

    Josh Ludin | NeverJobHunt.com

    July 24, 2014 7:04 pm

    Man I loved this series. that was awesome. I currently run a business that sells physical products and our fulfillment and distribution SUCKS – I absolutely hate it. I’ve decided I want to spend the next couple months working on a course to sell digitally, and this was an amazingly helpful post. I’d love to touch base and bounce some questions off you as I progress.

    0

Leave a Comment

Yay! You've decided to leave a comment. That's fantastic! Please keep in mind that comments are moderated and rel="nofollow" is in use. So, please do not use a spammy keyword or a domain as your name, or else it will be deleted. Let's have a personal and meaningful conversation instead. Thanks for dropping by!

↑ Back to top