More Backend Secrets
If there is one business rule that every online marketer I’ve ever met has memorized, it’s that it costs less to retain an existing customer than to fight for a new customer. We all know this rule and we all run our online business based on it.
But have you ever stopped to examine why this is? In business school, they teach that the reason why a new customer is more expensive is because of the advertising that it costs to reach him. But online, most traffic is either free or so cheap, that it shouldn’t really make much of a difference. Traffic should be traffic, no matter if the person is already a customer or has yet to buy from you. Right?
Well, most people don’t realize how faulty this logic is. In fact, I recently took a poll of some of my marketing friends and found a stunning series of replies. When asked why existing customers are more profitable than new ones, almost everyone answered the reason given above. When I posed the follow up question, no one could provide me with a reason.
It seems that everyone is following the right rule for the wrong reasons.
So what is the correct reason?
The reason that existing customers are so much more profitable (in my experience about 70% more profitable) is that they can be solicited for purchase in many, many different ways. This is what’s known as building an effective backend.
Let me give you an example. I’ve got a friend named JJ who runs a computer store. He told me recently that he has the highest profit margin on mice and keyboards. He can sell a desktop, a 19″ monitor and laser printer, but if he doesn’t also sell a mouse and keyboard, he’ll barely break even.
JJ is the type of friend who likes to talk about his business, so without even being asked, he told me why he even bothers selling computers if he pretty much sells them at cost. His reason? No one will even walk into his store if he doesn’t sell the big ticket items. And he couldn’t be more right.
This is a perfect example of a backend sale. A customer will come into the store for the computer, but he will leave with the profitable item in his shopping cart as well. This is what a good marketer will do and this is exactly how to make money online.
When a customer surfs over to your online store, make sure that they don’t leave your site without buying the product you want them to buy.
To cap the little seminar on backend activity that I’ve been writing about this week, I’m going to tell you a story about how I got suckered into spending way too much money and only by getting taken in, did I realize exactly how to make money online. It’s a story that I’m not entirely proud of, but I’m 100% convinced that if it hadn’t happened, I wouldn’t be where I am today.
When I was first starting out, I saw an ad online for a free beginner’s internet marketing seminar course.
I went to the course knowing full well what was going to happen, so I wasn’t at all surprised when at the end of the course, out came the sales pitch for the intermediate course. I seem to remember the intermediate course costing around $500.
The teacher/sales guy had his sales pitch down perfect. He included the usual limited numbers, discount if you’re one of the first twenty to order, so on and so forth. Aside from the sales pitching stuff, to which I mumbled ‘I know your game’, I actually learnt a fair amount in the beginner’s course. I decided to continue with the course and signed up to learn more. The teacher had taught me a lot, but he made sure to teach me just enough so that I knew that there was a lot that I still needed to learn.
Ok so fast forward four or five months. I attended the intermediate seminar. Great stuff. Really. I learned a lot, but of course there’s always more to learn.
At the end of the intermediate course, there was a pitch for the $3,000 advanced class. I quickly signed up for this as well. I reasoned that since I had already learning a lot, I was confident that I’d learn more.
After the advanced class I was offered a super advanced (I forget the exact name) course for $5,000 which included a free laptop. At first I jumped at the offer, but then I settled down and figured enough was enough.
After the third course I sat down and read through my notes, but the only thing I could focus my attention on was the fact that I had just paid $3,500 and didn’t have anything real to show for it. I knew I had a learnt a lot, but that just didn’t seem tangible to me. My mind kept returning to that number. $3,500. $3,500. $3,500. I couldn’t get away from it.
Eventually, the number lost all meaning and I realized what had happened. I’m pretty thick, but even I got the concept eventually. I was suckered into their sales pitch.
I didn’t get ripped off, I knew that I had received a great product in exchange for my money, but I also knew that I had walked into the first course because I wanted something for free.
This is the way backend sales processes work. You get a customer in the door and then you do whatever you think you need to, to make sure he doesn’t leave before his wallet is empty.
There are three points that you should have picked up from my example.
First, trust. I knew how great the first product was so I was more inclined to purchase the second two. I knew my money would be well spent so I wasn’t scared to purchase. Don’t even think about offering a free product unless your product is the best you’ve ever created or you’ll fail, and your freebie hunters won’t become your customers.
Second, I don’t spend my free time sitting in front of a computer and letting someone hard sell me and I wouldn’t expect you to either. If you tell me I’m going to get something from your entry level products, I want to get it. Whatever you do, make sure your low priced or entry level products are real products, not just glorified sales pitches.
Third and finally, you should have your backend system structured this way:
Freebie –> Low price product –> Higher Priced –> Premium priced.
Whatever product you’re selling online, if you’ve created it yourself, I highly recommend you follow this sort of pattern here, simply because it works.
I hope my story is enough to show you why promoting free products and investing in your backend is so profitable.
Please leave a comment and let me know if you found the above useful and whether you also have any stories of backend offers.
Best Wishes,
Ben Shaffer
