I’m going to show you one of the fastest ways to get cash out of any business that’s been running successfully for at least 6 months…
This won’t necessarily work for startups. And if you’ve never had a customer, it won’t work for you. But if you’ve been running successfully for a few months and you’ve helped a few customers, this is certain to generate at least some significant cash flow and profits.
In fact, in some businesses, it can be used to instantly generation thousands, tens of thousands, even hundreds-of-thousands in sales, in days or weeks, not months and years.
And, it’s relatively easy. In fact, I know a bunch of marketers who’ve made names for themselves doing this little trick with clients first, because it is such a fast and easy way to get cash for the business. One direct mail company I know ALWAYS does this first because it’s the surest way to get high ROI from your direct mail.
Just imagine. You walk into a business for the first time (virtually, if not physically). You give them this idea, as a test. They agree, and so you spend a couple days putting it together. They test it. It works. It generates as much as 50% more sales for the month — sales they wouldn’t have had otherwise — and the same fundamental approach can be repeated over and over and over again.
I recently did this for one financial publisher, and we generated a couple million in sales. Other campaigns of this type have consistently generated high-six-figures into the seven-figures.
When I create record-breaking promotions for clients, it’s often because we followed this simple approach.
To old-hat direct marketers, this will seem obvious. But even if you’ve done it a few times before, consider seeing the idea like you’re seeing it for the first time. Maybe you have a situation where it would work particularly well right now, that you simply haven’t applied it yet.
So… What is it?
The hidden value in your past customer file…
Most businesses don’t have a clue the cash flow and profits that lie hidden in their business, inside their past customer or client file.
They don’t know it’s there. They don’t know how easy it is to get.
One of my first illustrations of this principle came selling IT training. We had been selling individual training titles and training packages. We’d launched a catalog subscription, and we offered credit for past purchases to anyone wanting to upgrade. I ran a list out of our database of people who qualified for an upgrade credit, and wrote a very simple, short 1-page direct mail letter.
We sent it, and I sold a very fast and easy $10,000-plus worth of subscriptions, with very little effort. Then we sent the letter again, and kept selling subscriptions that way.
And that was before I really knew how to write a sales letter. I simply made the offer, and it worked.
In the high-end, direct response financial publishing world, there are really two kinds of promotions. These are meant to take full advantage of this phenomenon of being able to sell more to your past customers easily.
There’s the acquisition promotion, meant solely to go out and get as many customers as possible, without losing too much money. These sell a monthly newsletter to the tune of $99 per year or less (often much less).
But once someone has bought that, they get put on the house list, which is used to send out more marketing. This list gets back end or house file promotions, which sell higher-end trading services for anywhere from a few hundred to a few thousand dollars. Some publishers offer lifetime subscriptions for $10,000 or more.
The idea is that once someone has bought from you once, a few things happen.
First, they’ve had a positive customer experience (or at least, they should have). At this point, they know, like, and trust you more, and are more prone to do business with you again.
Second, they’ve had experience with your products. They can have more confidence you’ll fulfill on your promises.
Third, they’ve proven themselves as a buyer of your product type, as someone who will spend money getting what it is that you offer.
Combine these three things, and you’ll find that your conversion rates and ROI selling to this list of past customers is far, far higher than trying to sell cold, or even selling to people who simply signed up for free information.
And you don’t have to be in the financial publishing business for this to work. It works in just about every business, in just about every industry.
The 80/20 of this…
My friend and associate Perry Marshall wrote a book called 80/20 Sales & Marketing, that showed just how powerful this can be.
The basic premise, if you don’t know it yet, is that 80% of your profits comes from 20% of your customer base. Perry also popularized the idea of levels of 80/20 in selling, where 20% of the top 20% (4% of total) generates 80% of the 80% of profits (64% of total), and so on.
If you really use this as a tool for generating offers to your past customer base, you’ll find a huge opportunity.
Let’s say, as an example, you run a business where you’ve had 10,000 customers each respond to a $50 offer over some recent time period. That’s $500,000 in revenue.
Assuming the 80/20 ratio (as opposed to 90/10, 95/5, or some other distribution in which the exact math is different but the principle still applies)…
If you make an offer for a $500 product, you’re likely to have about 690 people reply, delivering you total revenues of $345,000. (That’s an additional 69% of revenue above and beyond what you had before — and, if your experience matches that of most businesses in this situation, it’s probably a much higher profit percentage.)
Make an offer for a $1,000 product, and you’re likely to sell about 308 of them, for another $308,000 in revenue.
And in that same customer base of 10,000 who each bought a $50 product, you’re likely to find 21 who’d spend $10,000 each, for $210,000 in revenue.
Perry Marshall points to the coffee machines you’ll find for sale in most Starbucks as a great example of this principle in action. The vast majority of people who walk into a Starbucks are very unlikely to end up buying a home espresso machine, to make their own lattes at home. But since they’re already there, it costs Starbucks almost nothing to put the offer in front of them, and it generates significantly more profit from that one customer who says “yes” than if they hadn’t offered it.
Put this on repeat…
The best, most profitable businesses use this principle on a daily, weekly, or at the very least monthly basis.
They build it into their systems, like Starbucks, to always have an upsell available. McDonald’s, when creating the “would you like fries with that?” offer, was putting this principle to work — and again when they created their meal deals.
Amazon.com is constantly doing it in their shopping cart, as well as on the product pages.
Google offering YouTube advertising alongside search and display is doing the same thing to marketers.
Little businesses, big businesses — new internet businesses and decades-old brick-and-mortar businesses all stand to profit by applying this one principle.
Make it part of your operations. If you’re doing regular campaigns to your audience, consider how you can maximize the 80/20 principle in your offer, by creating an offer that justifies adding zeroes, meant only for your most responsive customers who want the most from you.
And then, put it on autopilot, so it just keeps happening with every customer that comes through the front door. (This is the principle the modern internet “funnel” leverages to the hilt.)
It will completely change the financial picture in your business.
One more idea…
How to use this if you DON’T have a past customer file…
One more application. This is something that Jay Abraham used to make his name in marketing. And that continues to apply incredibly well, in countless business situations.
Let’s say you have a really good offer, and maybe have served your first few customers, but you don’t have that big customer file. What do you do then? You can create a partnership with businesses that have the customers and aren’t leveraging this principle to its fullest, where they make your offer to their customer base, and get a portion of the profits.
For example, when we sold IT training, we were able to instantly generate cash and customers for ourselves and another business by offering example test questions for the same certification exams that we sold training for. It was a way to better serve our customers, by teaming up with a company that had a complimentary product.
I’ve worked with companies that send advertisements for other companies’ products alongside their paid newsletter content — it’s a fast and easy way to get relevant offers in front of their buyers. I’d go on, but you’ll probably get more breakthroughs at this point by spending a couple minutes letting your creativity run…
Yours for bigger breakthroughs,