Market analysis part one: 2%-5% CR principle

Image 4: Market analysis

Market analysis is researching the market in order to get information about a specific market or product. This includes information about the competition and the target.
This is one of the most important aspects of the business plan. I must inform you, though, that a market analysis is based on predictions and assumptions. This is one of the reasons that makes doing business a risk.

The first thing you must do is make sure that there is enough demand for your product or service (or to use the internet term, “enough audience”) to achieve your financial goal. You can do this by using the 2%-5% Conversion Rate principle. The principle states that between 2% and 5% of the customers who visit your site will buy your product. This is a general statement based on a healthy business.
For example, if you have 100 visitors to your site, between two and five of them will buy your product. If you have 1,000 visitors, between 20 and 50 will be buying your product. The MORE VISITORS you have, the MORE CHANCES YOU HAVE TO MAKE A SALE. In the section on Marketing I will show you how to attract traffic to your site.

If you have more than one product it will be difficult to know which products will be selling the most. What you could do is make an average of your commission. Let’s go back to my product: fishing gear. I have 30 articles in my web shop, all having different commission rates between $0.20 and $15.00. I will count all the 30 commissions and divide by 30. I will come to an average commission of $6.35. If you know what product or products will be selling the most, you can use this/these product(s) to estimate an average commission. This will give you a more accurate average. The best way to calculate your average commission is when you start selling (actual commission).

Let’s summarize all the information we have until now. My goal is $1,275.93 a month, the standard CR is between 2% and 5% and my average commission on a product is $6.83. So, if I want to earn $1,275.93 a month I will need between 3,740 and 9,350 visitors a month.

Image 5: Calculation amount visitors

Now I have an idea how much traffic I will need to send to my website. In the second part of this section I will show you how you can find out if you have enough audience to reach the needed traffic.

Note:
- The 2% - 5% CR is an indication; this doesn’t necessarily mean that this will be your case. You can have 7% CR, maybe even 10% CR. I’ve heard of starters that had 70% CR in the first months of their business. Some factors that can influence your Conversion Rate are: your competition, the economy, the market, the quality of your product and the quality of your content.
- I have use the keyword "fishing gear" as an example. You should researching each product that you are selling to understand your target and determine if you have enough audience.

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