(Transcript continued from the Episode 154 show notes and audio podcast)

One of the things that something like that does is it reminds you of the importance of mindset in everyday life. I talked last week about affirmations. I have those affirmations in place, using the app that we talked about last week. I continue to see in everyday life where these places pop up where people are looking at things with limiting beliefs and just the kinds of things that were addressed at Free the Dream.

Rather than all this foo-foo rah-rah stuff about how you should feel good and be happy, I want to give you some concrete examples and maybe help you recognize some things that are going on in your own life that you could change and take some real action.

I’m a member of many Facebook groups, as you know, including some Facebook groups around course creation. I want to tell you the story that was posted in one of these Facebook groups, I want to read you an edited version of the post to protect the innocent, and my response. Here’s the post from this person who created a course…

She says:

“My nightmare came true! I recently launched my course. Of the two people that bought the course, one wants a full refund. She’s taken the full course and was disappointed that one topic wasn’t covered. She reached out to me at 11:00 PM on the weekend and I emailed her back acknowledging that I got her email and that I would respond with answers to her questions.”

“I did that, even though the thing that she wanted to know about was already covered as a big topic in my private Facebook group. I do state that I have a 100% money back guarantee within 30 days, by default, but I’m so frustrated that this person has the information already. I even went out of my way to answer her question, and she still wanted a refund. I feel like this person is stealing from me. What do you guys do with customers like this?”

I want to tell you, there are so many things. First of all, let me say I totally understand this person’s angst and anger and frustration. There are a lot of things to unpack in this email that go to mindset.

When I see someone with all this kind of stuff packed into one or two paragraphs on Facebook, these are the kind of people that I really worry about and want to help. Anyone with this many negative points of view and limiting beliefs all crammed into one idea, they’ve got real trouble ahead. It’s really hard to be successful as an entrepreneur when this is your mindset.

What I said was,

“I know that’s frustrating, but you can’t control what other people do. You can only control what you do. You could choose to spend energy being frustrated or you could focus on giving this person a great customer experience. She wants a refund within the policy, so you should give it, in my opinion.”

“Then you could thank her for spending time taking your course and tell her you’re sorry it didn’t work. Ask her what you could have done differently, because some of her ideas, complaints, or issues could be the one thing that makes your course a true winner in the future. Instead of focusing on the empty part of the glass, you have to focus on the full part. Wish that person well and go off and sell another 100,000 copies of your course.”

That was my advice. You can kind of see where I’m going with this. If you break down that original Facebook post, there is a lot of stuff going on there.

The first sentence says, “My nightmare came true.” What does this say? This says that this person was sitting around worried about refunds. I’m going to tell you what. That’s what she was focused on. She was focused on these refunds. There are so many problems with that.

The first thing is what she is really saying is she’s not sure that the content that she has created is worth the money that she is charging for it, and therefore people are going to ask for their money back. I’m going to tell you what. Her customers can pick up on that uncertainty. They can sniff out that value uncertainty. That’s going to create more refunds.

In fact, I will tell you will manifest the things that you focus on. Your subconscious mind will find a way to go get refunds if that’s what you’re thinking about.

Sure enough, here comes the refund, which just makes the cycle worse because she is focused on refunds. “Oh, there you go, I was right, here come the refunds.” That is such a negative destructive sort of way to think about anything.

Then she says, “Of the two people that bought my course,” as if she is saying, “I’m a failure because only two people bought my course,” and one wants a full refund. She’s choosing to interpret this whole situation as a 50% refund rate.

Another interpretation is she has an opportunity to get valuable feedback from one person who didn’t meet the needs and a second opportunity to help somebody who took the course who maybe can provide a testimonial and give more positive information.

There’s another thing here that she needs to be asking, which is, “I’ve only sold two. Why is that? What opportunity does that illuminate for me?” That either illuminates the opportunity to do better marketing, maybe it means that her initial viability research for a course wasn’t good and that she doesn’t really have a viable product and now she knows. There’s lots of things that could be going on there.

In this post, I read to you all of the stuff about how she doesn’t deserve the refund because she delivered everything, she went out of her way, she answered this email at 11:00, she covered all of this in the private Facebook group, she doesn’t deserve this refund. She is what? She’s the victim. She’s being victimized. This refund is an attack on her and she is the victim. Don’t you feel sorry for her, the victim?

Look, that’s the wrong approach. She has made this whole thing about herself, that she is being impacted by this refund. Really the right point of view is the customer. Why is the refund happening?

If you come from a place where you expect to delight your customers because you know you’re delivering amazing value, you should be surprised by the refund and curious about either what you can do to make the customers experience delightful or what you can do to change the course so that future refunds don’t happen. Both, really.

All of the language here is messed up about how “I don’t deserve this refund because I’ve done so much work.” That may be true, and good on you if you’re doing all of this stuff and you don’t deserve refunds, but when you get one the focus shouldn’t be about how you’re the victim. The focus should be on what you can do to help the person who is dissatisfied, because that is the point of your business is to delight and satisfy customers.

Then she says, “I have 100% money back guarantee in the first 30 days by default” of the software that she is using. Now she’s trying to shift blame almost in this language that she’s using, because she’s using the standard refund policy that comes with her software platform that she’s using. Somehow it’s their fault, she shouldn’t have to issue this refund, but now she has to because she accidentally accepted this return policy. I say if the customer wants a refund, you should give it to them and make sure they have a great experience anyway. Who cares about this? This is just blame shifting. She doesn’t want it to be her fault.

Then she mentions that she went out of her way to help this person and somehow she shouldn’t get the refund, again she’s the victim. What should she do? Should she eat it? That’s her language. Should she eat the refund and be happy the person is gone and not causing anymore trouble? Again, this is all kinds of messed up language. The refund is not about eating it.

You are delivering value in your business. When a person agrees that value has merit and there really is value there, they exchange money for that value. If they evaluate your product and they don’t agree, for whatever reason, that the product is valuable for them, then they want their money back. That is perfectly reasonable, because they didn’t see the value.

It doesn’t mean the course is bad.

There could be a brain surgery course from The Mayo Clinic that is the best brain surgery course on the face of the planet. It could be the most incredibly valuable brain surgery course on the market today, worth ten billion dollars. Guess what? I’m not a brain surgeon. The value of that brain surgery course to me is zero.

In a similar way, if your customers are expecting one thing and you give them a little something different that they weren’t quite expecting, it doesn’t quite meet their expectations, their value that they place on that is less. In some cases, that is going to result in a refund. It doesn’t mean that your course or your product is bad. It just means there’s not a good match between your offer and the buyer. We expect in this business a certain non-zero rate of return, so it’s okay.

The point of all this exciting discussion is I want you to pay attention to your language. I’m not exactly even asking you at this point to change your language. What I want you to do is pay attention to the words that you use.

Words are powerful. This is one of the things that is discussed extensively at Free the Dream. It’s why it’s on my mind. Here’s Cliff infecting me with his vision of the future. It’s true. It’s something that we’ve both talked about for years.

I want you to be aware. The first step in all of these things is always becoming aware. I want you to just spend some time this week being aware of the language that you use.

Is it positive, affirming, constructive language? “I wonder what this person saw that I didn’t see. I wonder what I can learn from this situation. I wonder what I can do to make my course better as a result of this feedback.”

Or, is it this destructive language of, “I can’t believe this person is doing this to me. I’m the victim.” Is it that kind of language or is it language about how stupid the other person is and how they’re wrong? What is the language that you’re using?

This doesn’t have to be limited to your business. This can be about your spouse, or your children, or the people that you work with on a daily basis. What is the little voice in your head saying? What words is that little man or woman in your head using? What words are coming out of your mouth? I’m going to tell you, those words that come out of your mouth are critically important and you need to pay attention to them.

Your action for this week isn’t to try to change your whole approach and language this week, but pay attention, make an assessment, and let me know if you recognize some words that maybe you ought to change, some language that you ought to change. Drop a shout out in the show notes or send me a note to [email protected]. I’d love to hear from you on this topic.

When Is It Time to Move On From an Idea or Project?

Our second mindset topic is all about what I’m going to call cutting stuff off. Sometimes you have to decide, “I’ve been doing this thing and it’s not working. I need to go do something else.” Especially for people like us, entrepreneurs, and maybe me especially, we have more good ideas than we have time. Let’s be honest, some of our good ideas turn out to be not all that great.

This is something that I’ve learned, relearned, and heard and had beaten into me by my good friend Michael Stelzner from Social Media Examiner. Sometimes you just have to stop doing a thing, either because it’s not working or because it doesn’t have value, or because it is keeping you from working on something else. When you say yes to something, by definition you’re saying no to something else.

You have to make these choices all the time. The problem is sometimes we’re doing things and we just doing them, or we have these things in the back of our mind that we’re going to do someday. I’ll give you my example.

My example is a long time ago I had this idea for a podcast that would go alongside this podcast, called the Late Night Internet Marketing Minute. You can find it on iTunes. If you’re listening to this soon enough, you’ll find it. If you can’t find it, it’s because of what I’m about to tell you.

For a long time, I put this podcast out there and the idea was discoverability, little short bites. Actually, this came out of a conversation that I had with Pat Flynn, who often in high school was called Fat Pynn. That’s another long topic that we could have at another time. Pat Flynn and I were having this discussion around the time he started Ask Pat, which is now called Ask Pat 2.0, about short format shows. I started one and he started one.

I couldn’t keep up with mine. While I like the idea of it, it has been sitting there for a couple of years. It’s still on iTunes and it’s dead. I’ve been thinking about revising it, but now I’ve made the decision, because I’m focusing on this show and a couple of other things, I’m killing that off.

My question to you is; what things have you been dragging along that are either using up your mental energy, your emotional energy, or actual work that you need to stop because they’re not going in your true direction, they’re taking cycles away from something else that you really should be focusing on? What are those things for you? Can you identify them?

Here are a couple of actions for you this week…

One thing I want you to do is think about that. Maybe the answer for you is no, there aren’t things. But, I bet there are things. They may be outside of your business, things that you have been doing that you shouldn’t be doing where you’re wasting time, you’re wasting energy. What are those things? Can you summon the courage that it takes to stop them?

Here are two resources that I want to offer you:

One resource that I want to offer you is a really good book called Necessary Endings by Henry Cloud. It talks about this idea that sometimes in order to move forward there are things that we need to give up. Sometimes the things are people, sometimes they’re activities, and sometimes there are other things in your life that you need to give up in order to move forward.

The other book that I want to talk to you about is The ONE Thing book by Gary Keller. This is a book that is about focusing on the most important thing. It’s the simple surprising truth behind how people get extraordinary results. The gist of the book is if you really want extraordinary results, sometimes what’s necessary is to really focus.

These are both books that I’ve read that I strongly recommend. If you are feeling defocused, if you are feeling like you’re going in a million different directions, these two books are the right books for you. I want to encourage you to read those.

Your actions for this week; think about the things you might need to stop, take a look at these two books over on Amazon, read the synopses and see if those turn on any lightbulbs for you this week.

Three Different Amazon Business Models

Last but not least, maybe most important, is I wanted to start talking to you guys about Amazon. I’ve been working on this Amazon business. I have serious intentions of making this a longstanding and long-term part of my internet marketing revenue that I generate at Late Night Internet Marketing.

I want to talk to you about it, because I think what it represents is a kind of business that would be easy – well, not easy, no online business is easy. You heard it here first, online business is hard. I think it’s the kind of business that a lot of you might be interested in starting, so I want to talk to you a little bit about it today.

I’m going to argue that there are sort of three different kinds of Amazon business. That’s what we’re going to talk about today. I just want to explain to you the three different kinds of Amazon business that people are currently engaged in so that you get a sense of what’s out there in terms of Amazon.

If you’re like me, Amazon is this thing that you know it’s going on, but you haven’t paid much attention to it, so you don’t know much about it. That’s where I started. If that’s where you are, that’s absolutely fine. That’s where we all start.

The one that you hear about all the time, and if you go looking for courses on Amazon, the thing that you hear about time and again is Amazon Private Label. What this business model essentially boils down to is the following. You look on Amazon or elsewhere to identify a product that you can sell on Amazon as your own.

For example, you might notice on Amazon that there is a birdhouse, let’s call it a Purple Martin Birdhouse for the bird people out there. I know you’re out there. My wife is a bird person and I know there are others like her. I know you bird people are out there. Let’s say you look at the most popular Purple Martin birdhouses out there and they all have three-star reviews, and they all have a couple of problems that are common with every Purple Martin birdhouse.

Let’s say you put up Purple Martin birdhouses very high on a pole, let’s say the big problem with all of these birdhouses is after a period of time the pole connection at the top wears out and the birdhouse falls down. I’m totally making this up, but you can imagine these reviews on Amazon, “I put up this birdhouse and six months later it fell off the pole.” Maybe that’s a common problem.

You can recognize that, and you see that there is a big demand for Purple Martin birdhouses. You can see that on Amazon that those are selling, but you can also see that there is an easy way to improve Purple Martin birdhouses, or to improve this thing. You look for these kinds of opportunities.

Another famous example, the guys over at Jungle Scout looked and saw that there were a lot of marshmallow roasters out there, but they were hard to cleanup. The ones that were made out of metal were hard to clean up. The ones that were made out of bamboo were too short and people burned their hands or they got too hot. What was really needed in the marshmallow roasting marketplace, which these niches sometimes are amazing, was a really long bamboo disposable marshmallow roaster that would hold up to the fire and all of that.

Those guys over at Jungle Scout, which is an Amazon research software-as-a-service kind of company, as an example they made these and they sold more than a million dollars, I think, hundreds of thousands of dollars at least, of these sticks that you can use to roast marshmallows.

They recognized a spot in the market where there was demand – people need sticks on which to roast marshmallows, because you have to have Smores, but the right thing in the marketplace was not available on Amazon. They contracted with someone in China to make these things to their specifications.

They patented them when appropriate. I don’t know if you can actually patent a stick. If it’s possible to protect your thing, you can do that, either with a design or a utility patent. Maybe we’ll bring my brother on some time to talk about the difference between a design patent and a utility patent.

Then you sell it on Amazon under your label, like Jungle Scout Stix. No one else can sell Jungle Scout Stix, in the same way that no one else can sell a Porsche 911. Only Porsche can sell a Porsche. Only Jungle Scout can sell these Jungle Scout Stix.

That is private label. You have someone else manufacturer something, usually in China, and then you sell that on Amazon. That has all kinds of challenges and interesting opportunities. We’ll talk about those in a future episode. That’s business model number one.

Business model number two is something that got started sort of on the complete other end of the spectrum, called retail arbitrage. You’ll also see this sometimes as online arbitrage.

I don’t know if you know this, but you can get an account on Amazon and you can sell anything you want on there, including used items. In this model that we’re talking about, if it’s something that’s already for sale on Amazon you can also sell it.

Let’s say for example that you have a new in the box camera – a Canon Eos camera – and you want to sell it on Amazon. In general, whether it’s used or new in the box, you can get an account on Amazon and you can list that thing. In fact, you can pause this recording right now and go around and collect up all of the junk in your house and you can sell it on Amazon.

In that way, it’s kind of like eBay. A lot of people did this for a long time on eBay, they sold stuff on eBay. But, eBay has kind of declined since then and Amazon of course is taking over the whole world.

If you go to buy some box of wooden train toys on Amazon, you’ll notice that the wooden train toy is for sale and you can click Buy Now or there are 17 other sellers that sell it and there is also used pricing, because people with that exact same toy that want to sell it used can do that on Amazon.

Retail arbitrage is this idea that you go to different places, either in the real world (retail) or online (online arbitrage), and you find clearance sales and other amazing deals. You buy up a bunch of inventory, then you bring it home and label it, and either send it in or place it for sale on Amazon.

For example, let’s say you go to Walmart today and in the clearance bin of Walmart you see these nose hair trimmers. How’s that for a delightful product? You find these nose hair trimmers that are normally $19.99 retail, Walmart normally sells them for $14.99, but they have them in the $4.99 closeout bin because for whatever reason Walmart has decided they’re not going to carry them anymore. Let’s say there are 20 of these nose hair trimmers on the shelf. Normally full retail for these is $20 and you can buy them for $5.00.

You can see where I’m going with this. You can fill your cart to the ceiling with nose hair trimmers, which is going to get you some funny looks when you go through the checkout line. Assuming these are selling well on Amazon, which there is software you can use to figure this out, you can bring those home and you can start to sell them on Amazon. In fact, you can go to every Walmart in your town and the next town over and you can buy all of nose hair trimmers out of this deal bin. You can get them all in a 100-mile radius, you can load your whole garage up with these and sell them all on Amazon.

That’s what people that are doing retail arbitrage do. They label these things one at a time and they send them in. Some people are making good money doing this; hundreds of dollars, thousands of dollars, in some cases tens of thousands of dollars. Maybe in a few limited cases $100,000 a month. Maybe. I haven’t seen that case. Certainly, tens of thousands of dollars a month can be made aggressively doing retail and online arbitrage.

The online part helps because you can find those same kind of clearance deals online. What’s great about online is you don’t have to spend time driving to every Walmart within a 100-mile radius, you can sit in the comfort of your own home and order this stuff and have it shipped to your house, and then do the arbitrage thing.

That can be done and that is the second business model, retail and online arbitrage. I don’t think that scales very well. Those deals are hard to find. You have to go to Walmart and I don’t like that.

There’s this middle ground that you’ve probably heard a lot about online, this third business model and the one that I am doing, and the one that we’re going to talk about extensively over the coming months; the wholesale business model on Amazon.

It’s exactly what it sounds like, but it requires that you understand one thing that a lot of people don’t realize. When you go to buy something on Amazon, usually what it says is ‘for sale by Bob’s Warehouse’ and ‘fulfilled by Amazon.’ What that means is the guy who is supplying the product to you is some company named Bob’s Warehouse, they’re the ones that actually own the product that you’re buying, but Amazon is doing the fulfillment.

What that means usually, nine times out of 10, is that Bob has shipped the product into Amazon’s warehouse and it’s sitting there in Amazon’s warehouse waiting on someone to buy it so that a robot (yes, an actual robot) can grab this product and ship it to you through Amazon Prime. For that privilege of shipping you the product and providing the platform marketing to you on Amazon.com, Amazon charges Bob something on the order of one-third of the retail price, one-third to half of the retail price, depending on what it is. Amazon gets a big chunk, Bob gets the rest, and out of the rest Bob pays for the products.

Let’s take an example. Let’s say Bob buys 100 boxes of rubber bullets. I don’t know, can you buy rubber bullets on Amazon? I have no idea. He buys 100 boxes of Granny Smith’s Rubber Bullets; a very specific brand, a UPC code, in the 100 box count.

Let’s say you buy 100 boxes of 100 rubber bullets. You can buy those, label them for sale on Amazon, it requires a special label. Let’s say you pay $5.00 a box. You ship them into Amazon. Let’s say that you and seven other guys like you are selling rubber bullets on Amazon for $20 a box.

Of course, Amazon are doing the marketing. They have the traffic, so that’s what I’m calling marketing here. They’re providing the sale and they’re doing the fulfillment, they’re shipping the rubber bullets from the Amazon warehouse to whoever buys them. For that privilege, let’s say they take $7.00. You paid $5.00 for the bullets, Amazon takes $7.00, sold it for $20, so that’s $12 out of $20. You keep $8.00. Out of that $8.00 you have some other expenses, like the cost to prep the product for Amazon. Maybe you make $5.00 a box on those rubber bullets sold on Amazon.

This is wholesale. You buy things in bulk wholesale, you get wholesale pricing. Just as if you had a real brick and mortar retail store, you set up relationships with wholesalers and you buy stuff, you send it into Amazon and you sell it, and you keep the difference between the cost to buy the product and the cost that Amazon gets you, the difference between that and the retail price is what you get to keep.

There are a lot of complexities to this that we’re going to talk about, but I think that this is a business that most people can get up and running. Since I’m in the business of helping people start businesses, this has become very interesting to me. I think it’s a real thing that people can do.

There are some challenges with it that we’ll talk about, but these are the three business models. Private label on one end of the spectrum, which has benefits and issues that we’ll talk about in a future episode. Retail or online arbitrage on the end of the spectrum, where you’re onsie twosie finding products that you can buy and resell on Amazon. Then what I consider to be the middle ground, wholesale sourcing for Amazon where you buy products wholesale and you ship them to Fulfillment by Amazon and sell tens of thousands or hundreds of thousands of dollars worth of product a month.

Now, you may be asking, “What’s the profit on $10,000 worth of sales or $20,000 worth of sales?” Most of the gurus will tell you that once you get to volume it’s pretty straightforward to make 20% margin on this kind of business.

I’ve seen that kind of margin on individual products, but I’ve also made mistakes that caused me to lose money. I’ve run the business everywhere from break-even on up to a few percent, but my goal is to get it up to 20%. We’ll talk some more about that.

This is a very interesting business, one that you can scale almost arbitrarily large with a little help. With a little simple outsourcing, you could easily get, I think, to $100,000 a month in retail sales, or more, and make 10-15-20% of that. If you’re making 10% to 20% of $100,000 a month in sales, that’s starting to sound like real money to me.

Those are the three models we’ll be talking about more in the future. For now, I want you to think about your action items that we talked about.

I want you to think about the language that you’re using. I want you to think about whether or not there are some things that you need to put an end to. I want you to do that thinking between now and when we meet next week on the Late Night Internet Marketing Podcast.

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