Many newcomers to Internet marketing (and even some seasoned veterans) take a backwards approach to product development. They create a product they feel will have mass appeal, and then launch it to test audiences before deciding whether to scrap it or continue pursuing profits with it.

No savvy entrepreneur considering an offline business would take this approach. You would do market research, evaluate all costs, and consider your competition before investing in real estate, hiring employees, and putting products on your shelf with a "cross your fingers and hope for the best" approach.

You need to make sure you have a solution to offer your audience. Solutions can be entertainment needs, time management tools, the power of information, and much, much more. Customers will buy things that enhance their lives in some way, shape, or form.

Is Your Market Saturated?

The first thing you want to do is see if your market is saturated with other products or solutions similar to, if not better than your own. This doesn't always cancel out the possibility that you can make your own venture profitable, but it does mean you will have to do extra work to carve out your piece of the pie.

If you're thinking of selling an information product, then visit places like ClickBank, Commission Junction, and to see how many similar or identical products are being sold to your niche audience.

If there are dozens, then it might be wise to drill down your niche even further. But if there are only a few, it can be a sign that it's a profitable solution strategy. On the other hand, zero products may mean others have tested it and it's a niche that isn't easy to make money from.

Is the Target Audience Willing to Pay for Your Solution?

Another area of concern is whether the audience you plan to target is one with money in their pockets. Let's look at two real-life scenarios: One marketer has a special report on how to download and use Second Life – a virtual game where people play and make money in the real world.

Another has an eBook targeting abused women, teaching them how to get out of abusive relationships. The gaming marketer's audience is mostly made up of young males in the teenage sector, the other is made up primarily of stay-athome moms.

You have to look at the entire situation before you make any assumptions. Most stay-at-home moms run the family like a business – paying the bills, making important purchases, etc.

However, in this instance, she may be in controlled environment where her husband has to approve all purchases, and chances that he'll allow a guide teaching her how to leave him are slim to none. The gamers, although they're mostly teenagers, have a higher disposable income. They don't yet have adult responsibilities and they spend vast amounts of money on entertainment. At first glance, though, you may have ruled out marketing to kids.

When you start to consider your audience, ask yourself the following questions:

- Do they have problems for which I can create a solution?
- Are the problems something people would be willing to pay to solve?
- Does my audience have money to spend (emotional buying)?
- What price range will be comfortable for this target audience - $9.95 or $997?

You may find that you can create a broad product for a thrifty crowd and get many sales, but your profits would be higher if you targeted slightly wealthier niche business ideas that were more narrow.

What Will the Expertise or Solution Cost You?

Last on your list is to see what the solution will cost you to develop. Is this area something you already know enough about to write it yourself as an authority figure? Are your writing talents up to par?

Or, if you're offering a software solution, are your skills savvy enough that you can create it without bugs that will generate massive refund requests? Don't try to take the do-it-yourself route if you aren't sure whether or not you have the talent and ability to create a top-notch product.

Remember, once you have made the initial sale, these buyers will be your lifetime customers if you can continue delivering quality products to them. But if you burn them on a purchase once, you'll likely never be able to convince them to hand over their money a second time around.

Expertise may come with a price – whether it's the price of your own time educating yourself about a topic or the money it costs you to hire a professional who has the talent and skill that you're lacking.

If you're considering development of a product that will cost a lot to produce, then you need to make sure it has a paying market with broad appeal so that you cover your expenses and make a profit.

You don't want to spend $1,000 hiring a ghostwriter to create a product only to find out six weeks later that nobody wanted a solution like that in the first place. Do your homework before you jump into product creation, and your profit margin will stay in the black each and every time.