Hey there Rainmaker — I’ve noticed something…
Most people don’t put nearly enough thought into their offers. Those who do, make fortunes.
I don’t have a lot more to say than that!
The following chapter is called, “A Compelling Offer Changes Everything.”
One of the biggest “innovations” in direct marketing in the last few years is the introductory offer.
In some circles, this is called the “tripwire offer.” In others, the “welcome mat offer.”
And, if you go back far enough (because everything old is new again), this is the “self-liquidating lead-generation offer.” Or, in more mass-marketing terms, the “loss leader.”
Put very simply, this is a low-priced offer, often sold at a loss or very minimum of profit, meant to bring new customers into the door.
There’s a lesson learned in business and marketing, that applies here.
It’s infinitely easier to get someone to place order #2 and #3 and #4 and #5 with you… Than it is to get them to place order #1.
Put another way, it’s infinitely easier to get someone who has spent ANY money at all with you — even $1 — to spend more money with you… Than it is to get someone who requested something free to spend money with you the first time.
That’s the principle behind the introductory offer.
Your goal is to simply get a new customer spending even a nominal amount of money with you, as soon as possible, because that will increase their likelihood of spending more money with you in the future.
And so, in the direct marketing world, we’ve seen a proliferation of these offers.
Examples include the $1 or $0.01 or free book, that you get when you just pay shipping.
(It’s mentally easier for people to attribute the cost they’re paying to shipping and handling than it is to the product. You could say it’s $5.99 for the book, with free shipping. Or you could say the book is free, if they pay $5.99 shipping and handling. The free book usually wins that test. Which seems counter-intuitive because Amazon.com has largely grown to an online retail behemoth on the back of free shipping. Until you realize that Amazon is in a different business than you are. But that’s getting ahead of myself.)
Also, I’ve seen similar offers with DVDs, survival knives, seeds for your garden, and so many other items.
The value is in the offer.
You’re extending an offer that’s almost impossible to resist, that’s easy to say “yes” to, and that is highly-appealing to target customers.
You run this offer at a loss or at break-even (this is where the term “self-liquidating” came from — the revenue offsets the cost).
And you bring as many paying customers in through the door as possible, on the back of this offer. With the idea that you will make up any loss and start to make profits on the second or third or later sales.
The lesson of this is that “what you’re selling” — your offer — can have a dramatic impact on your business.
And yet the “self-liquidating lead-generation offer” only scratches the surface.
You may or may not know, but Amazon.com didn’t start by offering free shipping. Like many other websites, they sold products, charged shipping, and spent a bunch of money bringing new customers in through the door.
Then Jeff Bezos and his team introduced free Super Saver Shipping. Spend enough money, and your order shipped free. They decided to stop spending money on advertising, and instead funnel that money toward offsetting the cost of offering free shipping to customers.
The word of mouth and media attention this new offer generated was enormous. Amazon never looked back. Their sales exploded, and they continue to be the largest online retailer by a country mile.
Then, they introduced Prime. In addition to a number of other services offered free to Prime subscribers, you can pay $99 (once $79) per year, and get free two-day shipping on almost anything you order.
What they lose in the cost of shipping individual items, Amazon makes up in total customer revenue. Last year, the average Prime member spent $1,500 during the year, while the average non-member spent about $625.
Not once, but twice, Amazon has found a way to incorporate “free” shipping (in quotes, because with Prime you pay $99 for “free”) into their offers, and it’s been a coup on the online retail industry.
Another example, from my past.
The IT training publisher I worked with began with a focus on individual exam-packs as its primary offer. Many IT certifications require a number of different exams to be taken — some required, some elective — in order to earn the certification.
And so you could go to this publisher, decide what exams you wanted to take, and get training for each exam. Each exam-pack would retail for $99 to $199.
The next logical step here was packaging. Rather than offering each individual exam-pack, the publisher decided to put them together into certification packages. This meant rather than selling individual training at $99 to $199 each, the publisher could sell a bundle of training for 7 exams for $899.
This benefited both the customer and the company.
Previously, customers wouldn’t necessarily have a clear sense of direction about which exams they would take to get a certain certification. And because they were confused, they would hesitate to take action. This would prevent them from getting the certification that could advance their career. By being given a package of exams they could take to get the certification, they had clarity. They’d get all the exams in a bundle, then take each one in order.
For the company, this increased the customers’ value. Often, a customer buying training piecemeal would spend a few hundred dollars on a few exams, then disappear before buying even enough to get the full certification. By packaging the exams, and offering them at a discount but still more than the average per-customer value when exams were bought piecemeal, they automatically increased average customer value by selling the package. Further, there was a natural upsell path for customers who’d bought the individual exam training. They could be offered the package, with a discount for training already purchased.
This transition from individual exam training to bundled certification training was enough to double the company’s revenues in a couple short years.
The next natural step for this company was to offer their entire training library in a subscription format.
This allowed customers to purchase training for all certifications at the same time. They could stay on top of multiple subjects, and had training available as-needed. For the company, it had a similar impact on per-customer lifetime value, and again the revenues doubled, and have continued to soar.
We’ll get into more specific offer-building in upcoming chapters, with this main lesson to give us context and clarity for what is to come…
What you have to offer — what the customer gets in terms of products and services (and experience), in exchange for what they have to pay — can completely transform your business.
The old lesson that the success of a direct marketing campaign is 40% list or audience, 40% offer, and 20% creative must not be forgotten.
Your offer has a substantial impact on your ability to make sales, and your company’s total catalog of offers has a substantial impact on your total profits.
We will get to both in the coming pages.
Yours for bigger breakthroughs,
Editor, Breakthrough Marketing Secrets