Acquiring clients at a breakeven or a slight loss and then making substantial profits on back-end7/6/2013
Acquiring clients at a breakeven or a slight loss and making substantial profits on back-end repurchasing is one of the most overlooked and underutilized methods of client growth and generation available to you. But it can’t work for you until you first recognize a very important fact. If your business or practice is one that has a high probability of clients coming back, again and again, to repurchase from you the same or different products or services, you owe it to that business or practice to do everything within your power to get clients into the buying stream as quickly and easily as you possibly can.
Many companies increase their clients and profits merely by shifting their focus from trying to make a huge profit on the acquisition of a new client to making their real profit on all the repeat purchases that result from those new clients. Knowing how much a client will spend with you over a period of years tells you how much you can spend on the process of acquiring a client. The most profitable thing you’ll ever do for your business or career is to understand and ethically exploit the marginal net worth of a client. What is the current lifetime value of one of your clients? It’s the total profit of an average client over the lifetime of his or her patronage—including all residual sales—less all advertising, marketing, and incremental product or service-fulfillment expenses. If you haven’t calculated your clients’ marginal net worth yet, here’s how to do it: 1. Compute your average sale and your profit per sale. 2. Compute how much additional profit a client is worth to you by determining how many times he or she comes back. 3. Compute precisely what a client costs by dividing the marketing budget by the number of clients it produces. 4. Compute the cost of a prospect the same way. 5. Compute how many sales you get for so many prospects (the percentage of prospects who become clients). 6. Compute the marginal net worth of a client by subtracting the cost to produce (or convert) the client from the profit you expect to earn from the client over the lifetime of his or her patronage. Once you’ve calculated the lifetime value of a client, you have many ways to accomplish your break-even objective. Remember, the goal isn’t just to cut the price of the first purchase. The goal is to make that first purchase so much more appealing that people find it harder to say no than yes . . . please! While reducing the price of your product or service is the most common and obvious way to get the first sale, there are other powerful ways to obtain first-time buyers. For example, you can calculate your allowable marketing or selling cost, which is how much money you’re willing to either spend or forgo receiving (by reducing the selling price), in order to make that very first purchase more appealing to a prospective client. Let’s say your product or service sells for $200 and your cost is $100. Also assume your average client repurchases several times a year for several years and you will realize a good long-term profit. Obviously you can reduce your price by $100 on the first sale to reach a break-even point and gain a new client. But you could put that $100 to a number of other uses. You could keep the price at $200 and use the $100 as “spiff” or extra selling incentives to your salespeople. Giving salespeople greater financial incentive to bring in new, first-time clients can produce tremendous results in the right situation. You could also use that same $100 to buy more of your product or service. So you still charge the full $200, but you give prospects twice the quantity on the first purchase. Or you could take the $100 and use it to buy other complementary products or services (at wholesale) to package and add to your product or service without raising the $200 price—so the value of your offer becomes far greater and thus more attractive. Or you could use that $100 to invest in advertising, sales letters, additional salespeople, free seminars, or any other marketing and selling programs. Or you could rent promotional space in someone’s store or trade-show booth and pay them the $100 for every new client you gain through their facility. The only limitation you have on how to use your allowable marketing or selling cost to help you strategically break even on the initial sale is that it must be ethical and legal. And after testing it out it must be economically viable in the long term. Getting Everything You Can Out of All You've Got: 21 Ways You Can Out-Think, Out-Perform, and Out-Earn the Competition by Jay Abraham Forget about blending in.
When you run a blog, you want to stand out from the crowd. To become one-of-a-kind as opposed to one-of-many, get comfortable with taking a stand and having people line up on either side of you. Dr. Theodor Seuss Geisel (a.k.a. Dr. Seuss) said it best: “Be who you are and say what you feel, because those who mind don’t matter and those who matter don’t mind.” Once your blog is operational, meaningful content has been added, and you’ve begun cultivating traffic, Pat (Flynn) offers three powerful rules for creating momentum and generating income: find partners, sell products and/or services, and spread your wings. One of the most effective strategies for building major traffic is to contact top bloggers in your niche. First, tell them you’re an up-and-coming blogger who respects their work and enjoys their content. Then, add you’re writing an article and would love to get quotes from industry experts like them. The vast majority will take time out of their schedule to answer your questions. Once the article is published, send each contributor a follow-up thank you note with a link to the article. Most will post the link on their site and/or offer a link to your homepage, thereby introducing their audience to your work. This provides you with free exposure and credibility as these top bloggers are effectively endorsing your content. Few things establish brand recognition faster than endorsements from renowned peers. With significant effort and patience it is certainly possible that your blog may become so popular that other bloggers will get in touch to obtain quotes from you. Offer Products And Services For Sale To profit from your blog traffic, you can create products and/or services that best serve your tribe. Examples of content-based products include books, interviews (in video, audio, and/or transcript form), white papers, and research studies. Alternatively, you can become an affiliate by offering products and services created by others for sale and receive a percentage of each transaction. A growing trend is to create a membership program. Some memberships require a one-time fee and provide access for life. Others, known as continuity programs, provide ongoing content and require subscribers to pay a monthly, quarterly, or annual fee. The membership model works great for certain industries—e.g., finance, in which many customers will gladly pay for ongoing news and analysis. One of the great things about a blog is its flexibility. For example, it’s simple to update text and photos so information remains current without the need for relying on an expensive programmer to update the site. It’s also easy to modify on the fly to adapt to the changing needs of your audience. You can even run A/B Split tests, in which you post two versions of the blog to determine which strategies are most effective for achieving higher conversion rates. Remember, online, no one builds monuments. Be willing to periodically play around with layout, content, and structure in order to keep attracting the largest number of potential customers for your message. You should also consider including advertising to generate additional passive income and/or to capture your audience’s contact information. Options include: • Google AdSense (and other ad networks) • Banner ads • Ads for training or certification programs related to your field • Paid guest posts • Ads for teleseminars and webinars that compliment your offerings • Advertorials which feature beneficial products and services • Ads for personal and group coaching • Ads for on-and off-site consulting • Ads for newsletters (often free in exchange for a visitor’s contact information) Internet Prophets: The World's Leading Experts Reveal How to Profit Onlinee by Steve Olsher First off, reality check.
Very few apps make real—if any—money. There are two key reasons for this: 1. Competition: Tens of thousands of apps have been created and more are released daily. Working through the muddle of options and being noticed is difficult. 2. Price: The majority of apps are available for free, and many are them are quite useful. This has made it increasingly difficult to get customers to pay for an app. And even if you sell an app, your marketplace will receive a commission on each sale. That means you need to sell a ton of product to earn real money. You should absolutely think twice before spending substantial cash creating an app, because recouping your investment is far from a sure thing. But if you are ready and committed: First, you must be clear about what app you’d like to create. Ideally, the app should compliment your business or reflect your unique abilities and/or interests. It is crucially important to understand your audience, what they can most benefit from, and deliver desired content via preferred learning modes. Three proven ways to start include: • Determining your client’s needs. • Researching existing apps serving this market. • Drafting your plan. Internet Prophets: The World's Leading Experts Reveal How to Profit Online by Steve Olsher The first point is self-explanatory. The second may seem basic, but it’s surprising how many skim past this step with a mere cursory glance, only to find out after significant time and resources have been expended that a more sophisticated tool exists. Do not be afraid to identify competitive products that may thwart your plans. Successful entrepreneurs embrace similar products and focus on what they can do better and more effectively. The third point is essential. You want to strategize and formulate your vision before the clock begins ticking. Thinking on someone else’s dime is not only expensive, but also unnecessary. Instead, brainstorm with partners, friends, and other trusted sources and create and refine an outline of how the product will look and how it will work. Unless you have money to burn, start the fire with the kindling of your efforts and let the professionals toss in the heavy logs. Finding A Programmer With your idea formalized, the next step is identifying a suitable programmer to bring the concept to fruition. There are multiple options. FREE Numerous free development options exist. However, it’s important to note that in app-land, you really do get what you pay for. That said, if giving things a test run before fully committing is your preference, consider the following: • Sencha: Sencha.com/Touch • AppMakr: AppMakr.com • Free iPhone App Maker: FreeIphoneAppMaker.com • Free Android App Maker: FreeAndroidAppMaker.com Each enables you to create a functional app which can be a great tool for creating a working prototype and begin securing feedback. The downside to free is that, once your name and brand is associated with the app you’ve put forth, an impression has been made and there’s no turning back. If the app’s functionality, appearance, or value is minimal, the consumer will tie this directly to you. Make 100% sure the app is fully representative of the impression you want to make before hitting the “release” button. Minimize costs to produce your app A fully functional, cost-effective app can be built for less than $5,000. Many capable developers have the ability to create a professional looking product that represents your brand and image well. Three sites are solid resources to consider when searching for a developer: • ELance: Elance.com • ODesk: oDesk.com • Freelancer: Freelancer.com Each enables you to provide various criteria such as developer location, experience, and total budget. Talent, of course, varies so be sure to check references and ratings. The caliber of developers available can be outstanding as many have salaried positions and moonlight to make extra cash. Ask for examples of their work and, contrary to popular belief, do not be afraid to select the lowest bid. HIGH-END Developing a full-blown, highly robust app can be prohibitively expensive. It is not unusual for companies to spend upwards of $1 million to create an app with virtually every bell and whistle. Such apps typically involve detailed, interactive components and move far beyond the options offered by template-oriented products. For most, developing a high-end app is not an option. When it is, there are multiple companies who are more than capable of delivering per your specifications. Internet Prophets: The World's Leading Experts Reveal How to Profit Online by Steve Olsher How to monetize your app Not every app is created to generate income. Many companies seek to spread goodwill and garner exposure by giving their apps away for free. This is not unusual as thousands of firms implement this approach. If generating awareness is the core objective, the app typically serves the singular purpose of being a digital brochure. If the plan is to monetize your efforts, there are three proven tactics to consider. 1. Sell It! Fees typically range from .99 to $2.99 with more robust apps costing significantly more, such as VIPorbit’s Business version which sells for $9.99 on the iPhone and $19.99 for the iPad. While seemingly expensive, the robust functionality ofVIPorbit is equivalent to desktop software that can cost significantly more. Additionally, it is available at your fingertips 24/7, which no desktop software can claim. For example, Sage ACT! was recently available for $466.99.…on sale! 2. Sell Ads Within Your App In similar fashion to AdSense, Google’s AdMob.com has made it extraordinarily simple to place ads on your app via their proprietary platform. AdMob “allows earnings to be generated by placing targeted ads based on the site’s content and users.” Additional options include Greystripe.com and Smaato.com. Revenue is directly tied to traffic. Therefore, as more ads are shown, income will increase accordingly. And, while a significant number of views and clicks are required before more than just pocket change will be generated, each provides a reasonable opportunity to offset a portion of development costs. 3. Offer A “Light” Version And Encourage Upgrading This strategy can be very effective. VIPorbit offers a free “light” version, as do thousands of other apps. The free version typically provides customers with a solid user experience, but refrains from allowing access to many key components. In consumer product marketing, this is often referred to as sampling, whereby a taste is offered to whet the consumer’s appetite and, hopefully, leads to the product being purchased. Remember: • Modern technology has largely killed the intimacy associated with developing tangible rapport with vendors, clients and even, employees. • Few apps make real money due to competition and price. • Ideally, your app should compliment your business or reflect your unique abilities and/or interests. • It is crucially important to understand your audience, what they can most benefit from, and deliver desired content via preferred learning modes. • Over 300,000 apps were developed between 2008 and 2010, translating to an astonishing 10.9B downloads. • By the end of 2011, more than 25 percent of mobile web users reported owning no other device to access the Internet. • Apps can be lucrative but must be viewed as a component of the overall marketing/branding mix. Internet Prophets: The World's Leading Experts Reveal How to Profit Online by Steve Olsher A guy I met a while back used to be a drug dealer in another country, a long time ago, back when he was a young man, (He as since gone into IT which makes a twisted sense).
We were talking about pricing strategies, and he told me that he had back in the day, the best way to know when his pricing is right where it should be and he knew that he was cutting the best deal when selling. First off, we all agree that pricing is not an easy thing to do for most of us. People have all kinds of theories about how to set pricing, and how they know when they have the right price to still sell yet make the most profit. Every system feels like guess work, and no one ever says they had it perfect, but this system made sense. Some people just care to match what others are charging, basically match the market, but that is dangerous, because you don't have a system or a methodology, and what is the difference between you and the competitor? If he has better margins than you, your business is in trouble. You need to know what the customer is willing pay, and to do that, you have to know and think like your customer. Other businesses price just below others in the market, again, dangerous, as it just gets you those customers that care only about price, which means that you will lose them easily when someone else has a lower price. This is not a long term strategy. Works if your margins are better than everyone else's margins, but I wouldn't bank on it, as there is always someone out there who will compete. Any time your strategy is to be smarter than everyone else, you have a problem. There is always someone smarter than you out there. Trust me, someone is always willing to give them a lower price. You just end up in a price war that no one wins. There are theories of how to price, but the key to remember is that price is fluid, and that what you are selling on changes in value depending on who you sell to and their situation. How your customer views the product and how he uses it, and your customer's individual situation determines that customer's price. The cookie cutter one price fits all model doesn't work, and it just leaves money on the table. Which leads us back to the drug dealer. My friend told me that he always asked questions about his customers, and he knows their history, their likes and dislikes, which considering what he was doing was illegal back then, was a smart play. You only do business with other people you know well and trust, and he told me that when he discussed price, he asked them what was going on, what they were doing, and by that, got an idea where their mind was at, and then gave them a price, always slightly higher than what he felt was the market. He would sell the convenience factor, remind them of the trust between them, as the customer didn't want to keep looking, and the customer sure didn't want to have to find a new source, which is a time consuming process, and in this case, also might possibly be something that could get you put in jail. My friend said when he gave a price, if they took it right then, he knew he had priced too low. He was really happy when they hesitate and then say they have to think about it, and then they hang up. I ask him, you are happy you lost them? He said, I didn't lose that, I am happy because that is what you want, to know that the price you quote to them is close enough to make them want to buy right then, but just over what they wanted to pay, so that they say they have to think about it. Then they call up twenty minutes later and take the deal. When that happens, you know you got the most money you could out of that transaction. PS. Another point of the story, there are business lessons everywhere, listen to everyone. I do. Drop me a note, say hello. D We must discover whether we are on a path that will lead to growing a sustainable business.4/23/2013
Yet if the fundamental goal of entrepreneurship is to engage in organization building under conditions of extreme uncertainty, its most vital function is learning. We must learn the truth about which elements of our strategy are working to realize our vision and which are just crazy. We must learn what customers really want, not what they say they want or what we think they should want. We must discover whether we are on a path that will lead to growing a sustainable business.
In the Lean Startup model, we are rehabilitating learning with a concept I call validated learning. Validated learning is not after-the-fact rationalization or a good story designed to hide failure. It is a rigorous method for demonstrating progress when one is embedded in the soil of extreme uncertainty in which startups grow. Validated learning is the process of demonstrating empirically that a team has discovered valuable truths about a startup’s present and future business prospects. It is more concrete, more accurate, and faster than market forecasting or classical business planning. It is the principal antidote to the lethal problem of achieving failure: successfully executing a plan that leads nowhere. Lean thinking defines value as providing benefit to the customer; anything else is waste. In a manufacturing business, customers don’t care how the product is assembled, only that it works correctly. But in a startup, who the customer is and what the customer might find valuable are unknown, part of the very uncertainty that is an essential part of the definition of a startup. The effort that is not absolutely necessary for learning what customers want can be eliminated. I call this validated learning because it is always demonstrated by positive improvements in the startup’s core metrics. Remember that validated learning is should always be backed up by empirical data collected from real customers. The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries Startups are designed to confront situations of extreme uncertainty.
Usually, companies like Intuit fall into the trap described in Clayton Christensten’s The Innovator’s Dilemma: they are very good at creating incremental improvements to existing products and serving existing customers, which Christensen called sustaining innovation, but struggle to create breakthrough new products—disruptive innovation—that can create new sustainable sources of growth. Innovation is a bottoms-up, decentralized, and unpredictable thing, but that doesn’t mean it cannot be managed. When you have only one test, you don’t have entrepreneurs, you have politicians, because you have to sell. Out of a hundred good ideas, you’ve got to sell your idea. When you have five hundred tests you’re running, then everybody’s ideas can run. And then you create entrepreneurs who run and learn and can retest and relearn as opposed to a society of politicians. The amount of time a company can count on holding on to market leadership to exploit its earlier innovations is shrinking, and this creates an imperative for even the most entrenched companies to invest in innovation. A company’s only sustainable path to long-term economic growth is to build an “innovation factory” that uses Lean Startup techniques to create disruptive innovations on a continuous basis. I explained the theory of the Lean Startup, repeating my definition: an organization designed to create new products and services under conditions of extreme uncertainty. Brad explained to me how they hold themselves accountable for their new innovation efforts by measuring two things: the number of customers using products that didn’t exist three years ago and the percentage The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries I believe that entrepreneurship requires a managerial discipline to harness the entrepreneurial opportunity we have been given.
There are more entrepreneurs operating today than at any previous time in history. This has been made possible by dramatic changes in the global economy. To cite but one example, one often hears commentators lament the loss of manufacturing jobs in the United States over the previous two decades, but one rarely hears about a corresponding loss of manufacturing capability. That’s because total manufacturing output in the United States is increasing (by 15 percent in the last decade) even as jobs continue to be lost (see the charts below). In effect, the huge productivity increases made possible by modern management and technology have created more productive capacity than firms know what to do with. We are living through an unprecedented worldwide entrepreneurial renaissance, but this opportunity is laced with peril. Because we lack a coherent management paradigm for new innovative ventures, we’re throwing our excess capacity around with wild abandon. Despite this lack of rigor, we are finding some ways to make money, but for every success there are far too many failures: products pulled from shelves mere weeks after being launched, high-profile startups lauded in the press and forgotten a few months later, and new products that wind up being used by nobody. What makes these failures particularly painful is not just the economic damage done to individual employees, companies, and investors; they are also a colossal waste of our civilization’s most precious resource: the time, passion, and skill of its people. The Lean Startup movement is dedicated to preventing these failures. Lean thinking is radically altering the way supply chains and production systems are run. Among its tenets are drawing on the knowledge and creativity of individual workers, the shrinking of batch sizes, just-in-time production and inventory control, and an acceleration of cycle times. It taught the world the difference between value-creating activities and waste and showed how to build quality into products from the inside out. Progress in manufacturing is measured by the production of high-quality physical goods....the Lean Startup uses a different unit of progress, called validated learning. With scientific learning as our yardstick, we can discover and eliminate the sources of waste that are plaguing entrepreneurship. The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries For providing my name and email address, I receive valuable content. That’s more than worth it.4/15/2013
Though metrics vary wildly, consider Internet marketing standards:
• Marketing response rates hover around 2%. As an example, for every 1 million impressions, approximately 20,000 visits are generated. • Of the 20,000 visits, 11.5% opt-in to join a mailing list or receive a free product. • In addition, 3.5% convert to paying customers within three months. Therefore, for every 20,000 visitors or 1 million impressions: • 700 customers are secured. • 2,300 potential clients are added to one’s database. As indicated, assuming a median cost of $2.52/CPM, a typical expenditure will be $2,520 for one million impressions. Based on the above metrics, the lifetime value of a single customer must be $3.60 to break even ($2,520 per 700 customers). This is certainly a viable proposition if $24.95 books, $97 workshops, and other items are being sold with reasonable profit margins. However, if the ultimate goal is to sell high-end coaching services (e.g. $300/hour with a 3 hour minimum) or multi-session workshops (e.g. $10,000 for six weeks of training) the metrics look pretty darn appealing. That said, conversion is a byproduct of multiple tangible and intangible factors and there’s no guarantee things will happen as planned. Further, many Internet marketers simply cannot afford pay-for-placement/performance marketing and must pursue other options. If this is the case, low-cost or free traffic must be generated to sustain one’s operation if online sales are the primary component of revenue. Providing free, high-value products and driving traffic through synergistic partnerships leads directly to the second step of the equation, bypassing the upfront investment required in step one. Given no out-of-pocket expense, this equates to an immeasurable ROI as each opt-in costs nothing to secure. Even if less than 1% of the 11.5% of visitors who opt-in become paying customers, the metrics are phenomenal. Best of all, the customer views the relationship as a favorable exchange of value: “For providing my name and email address, I receive valuable content. That’s more than worth it.” Internet Prophets: The World's Leading Experts Reveal How to Profit Online by Steve Olsher Although you must submit to the authority of mentors in order to learn from and absorb their power to the highest degree, this does not mean you remain passive in the process. At certain critical points, you can set and determine the dynamic, personalize it to suit your purposes. The following four strategies are designed to help you exploit the relationship to the fullest and transform the knowledge you gain into creative energy.
Choose the mentor according to your needs and inclinations. The choice of the right mentor is more important than you might imagine. Because so much of her future influence upon you can be deeper than you are consciously aware of, the wrong choice can have a net negative effect upon your journey to mastery. In selecting a mentor, you will want to keep in mind your inclinations and Life’s Task, the future position you envision for yourself. The mentor you choose should be strategically aligned with this. If your path is in a more revolutionary direction, you will want a mentor who is open, progressive, and not domineering. If your ideal aligns more with a style that is somewhat idiosyncratic, you will want a mentor who will make you feel comfortable with this and help you transform your peculiarities into mastery, instead of trying to squelch them. Mastery by Robert Greene What is my unique selling proposition or USP? (Why do my clients buy from me—what is it about my product and/or service that distinguishes me from my competition? Do I have more than one USP for different product/service lines or segments of my business?)
Is my USP a consistent theme in all of my marketing and sales efforts? If yes, how, and if no, why not? Briefly describe my marketing program or marketing mix (all the different types of marketing I use and how they interrelate—i.e., sales letters, direct mail, direct sales, personal networking inside, outside my company, industry, marketplace, Yellow Pages, spot advertisements, etc.). What do my clients really want (be specific, don’t just answer “a quality product or service”)? How do I know? Do clients buy from me exclusively or do they also patronize my competitors? What steps can I take to get the main portion of their business (preempt and dominate)? What’s my market potential (universe) and my current share of that market? 30. What does it cost me to get a new client? (If I ran an advertisement that cost $1,000 and I obtained two new clients, my cost would be $500.) Translate this to whatever your acquisition cost is. What is my biggest and best source of new business, and am I doing everything possible to secure this business? What has been my biggest marketing success to date (defined as a specific promotion, advertising campaign, sales letter, etc.)? Getting Everything You Can Out of All You've Got: 21 Ways You Can Out-Think, Out-Perform, and Out-Earn the Competition by Jay Abraham |
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Some of the links in the post above are “affiliate links.” This means if you click on the link and purchase the item, I will receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.” |