My Back-End Look Big In This?
by Martin Avis
Do you want to hear a secret? Something that high-priced gurus would charge you a fortune for?
Okay, I'll tell you, but only if you promise not to spread it around. This is how the big players make real money on the Internet.
It is called selling to your back-end. Does that sound painful? Well, believe me, learn about this and you will feel no pain.
The term 'back-end products' is jargon that simply means selling additional items to existing customers.
The traditional mail order business, and more recently, Internet selling, depend largely on the power of leveraging (that magic word) existing customers to make maximum profits.
How does it work?
The first point is that there is no rule that says you have to have back-end products. There are many people online who sell a single product and make good money at it. But, in truth, they are wasting a valuable resource, and making a lot more work for themselves, as we shall see.
Let's look at two examples of how back-end selling works well online.
There is a lady I know online who sells a fantastic topical cream that helps eczema sufferers. She spends time and money targeting her advertising to the right audience so that she can sell as much cream as possible. But she is a one product company. She only sells that one cream and has no plans as yet to introduce new products.
What is her back-end?
More cream. Everyone who buys becomes part of a new 'super-targeted' audience. She can email them special 'repeat purchase' offers at virtually no cost to her. So she makes these existing customers feel special by giving them great cost savings - and ends up making a higher profit-per-customer than she would have done otherwise. Along the way, these 'super targets' also recommend her to their friends and family, so she makes even more sales.
That system works for her because she sells a consumable product, that really works, and is not available elsewhere.
But what about one-off purchases that do not have a repeat function built in?
As a second example, let's suppose you want to sell information products, or ebooks. Having created your first book, take a moment and think how you can expand it to add interest to the type of people who would buy. Perhaps a special report, another book on a related topic, a video, a member's site - the list is almost endless. Only after you have created this second-string product should you launch the first one.
How might this work in practice?
In order to sell anything on the net, you need to invest some money. Don't believe the people who tell you that it can all be done for free. it can't. Maybe you need less to start up a business online than in the 'real world', but you still need some seed capital. You need money for search engine positioning, money for advertising, web hosting, domain names and so on.
If you are clever and well advised, you will waste as little of your cash as possible. But, spend you must.
Suppose you spend $500 and you get 5,000 targeted hits to your web site. If you have written a really good sales letter and have a clear message, you might be very lucky and convert 3% of the visitors into sales (very lucky!). That would mean that you sell 150 items and each sale has cost you $3.33.
If your ebook sells for $9.99 you are looking at a healthy 200% profit.
Now, here comes the magic.
You have not just created 150 happy customers, you have also created a list of 150 'super-targets'. People who have shown themselves to be predisposed to buy from you.
The next step is to send them an email saying that as a valued customer, you would like to make them an exclusive special offer - a prelaunch special deal on your new ebook - instead of the normal price of $24.99,which it will cost when it goes on general release, they can order it right now for just $17.97.
Your conversion rate against these super-targets should be much higher than before. Perhaps as high as 20%. So you may sell 30 copies and gross $539.10 from these customers that you would not have otherwise got.
At zero advertising cost!
Instead of making $1,498.50 for your $500 investment, you have made $2,037.60. 308% return on investment instead of 200%.
And that is just the beginning, because you now have a loyal following to pre-sell your next product to - and the next.
The lifetime value of your select band of 'super-targets' could be enormous.
I have done a lot of mail order marketing in my time (I worked in the advertising industry for 25 years) and have seen back-end marketing make companies millions. I even did it myself when I ran my own mail order company. We advertised a 'free' bottle of aromatherapy oil, which customers just paid carriage on. Thousands responded. We then sent a sales letter with every free bottle selling a great value pack of 6 oils. That sold a lot. Then every customer got a regular order form with additional products on it.
It worked well, and everyone was happy, but believe me, it works even better on the Internet. Repeat contact of customers (often called relationship marketing) offline still carries a considerable cost - paper, printing, envelopes, postage, fulfillment.
Online, all of these cost just melt away.
Leaving you with that lovely, cuddly six-letter word: PROFIT.
So to answer the original question, yes, your back-end does look big.
(c) Martin Avis, 2002
Martin Avis is a management and training consultant.
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