Have you
ever heard of the "Pareto Principle"? If you haven't,
you are missing out on one of the MOST EFFECTIVE routes there
is to bigger profits.
Also known
as "The Vital Few and Trivial Many Rule," the Pareto
Principle was named after the Italian economist who observed
in 1906 that 20% of the Italian population owned 80% of Italy's
wealth. He then noticed that 20% of the pea pods in his garden
accounted for 80% of his pea crop each year. Coincidence?
Well, it got him thinking...
Vilfredo
Pareto applied this 80-20 rule to pretty much everything --
and whether or not you agree with it is your prerogative.
But when it comes to your e-business, you're missing out on
a lot of profit if you don't realize that...
20%
of your customers are responsible for 80% of your sales!
With other
applications of the Pareto Principle, it's often impossible
to determine the accuracy of the ratio (i.e., 20% of the food
you eat is responsible for 80% of your health). But in your
e-business, you can easily track which customers are buying
customers...
It's a
little-recognized fact that at least 20% of people who have
purchased from you once will buy from you again... IF
you follow up with them. One-fifth of your customer base
is just waiting for you to offer them something new.
So if
you are not following up with your customers, you're actually
ignoring 80% of your business' profit potential.
1.
Follow up with your key customers
If you
don't follow up with your customers, you are losing a
lot of profit -- it's as simple as that.
The fact
is, when a person trusts you and likes your product or service
enough to buy from you once, they'll often buy from
you again and again. Your existing customer base
is four or five times more likely to buy from you
than a "cold" market... and the "lifetime value"
of these customers is one of the greatest assets of your business.
Repeat
sales can be so profitable that some people even offer their
product or service below cost on the first sale --
just to get their potential customers to buy (think of all
the mail-order book clubs and CD clubs that let you purchase
11 books or CDs for a penny!). Because once people have bought
for the first time, at least 20% of them will buy again...
And this
backend market should be where you focus a good deal
of your attention.
You have
already cultivated a relationship with your customers -- you
have put in the time and money to get their attention, establish
credibility, and close that first sale. That's by far the
most difficult part -- not to mention the most expensive.
Think of all the planning, advertising, and promotional activity
that goes into getting those initial sales...
But once
you've acquired those customers, you can develop their "lifetime
value." Show appreciation and offer special incentives
to them. Send them "thank-you for your purchase"
messages, renewal notices, and free information. Reward them
for being loyal customers and they'll become even more loyal.
And offer
them more products. If they liked what they bought, they'll
buy from you again.
2.
What to offer
The most
brilliant thing about follow-up offers is that they
don't cost you a single red cent. You've already
dealt with the salespeople, the brochures, the mailouts, the
ad placement, etc.
But now
that you've made those initial sales, and in the process collected
the e-mail addresses of your customers, you can simply
e-mail all of your previous customers your special follow-up
offer... so all of the sales you garner are 100%
pure profit!
Of course,
you have to ensure that what you're offering is something
your customer base is actually interested in -- so the kinds
of follow-up items you offer will depend on your business.
But consider the following types of offers and think of how
they could apply to your business...
- Offer
products that complement your initial product.
For example, if you sold golf clubs, you could offer customers
a golf club bag to carry them in. But it doesn't have to
be quite that closely related -- for example, if you sold
memberships to fitness programs, you could also offer fitness
clothing, fitness books... you could even promote daycare
programs to provide fitness moms with more options!
Even if you have to struggle to come up with an idea for
a complementary product, it will be well worth the effort.
You've already got the interest of your customers, so at
this point you have to think of any way possible to keep
them buying, because buy they will... unless you
don't offer them anything!
- Sell
more of the same product at a discounted price.
Show customer appreciation by offering them a "special
discount" on the product they're already buying. If
your product is refillable, you've got it made. Your "Vital
Few" customers will purchase the product repeatedly
over a lengthy period of time -- and this gives you a legitimate
reason to get in touch at regular intervals.
But even if your product isn't refillable, you can offer
upgrades, newer versions, improved models, or add-ons to
the original product. And
each time you contact your customer, you can offer a special
discount on a new or related item also -- even offer something
free to maintain their interest!
- Use
newsletter subscriptions as up-sell or backend products.
Once people trust you enough to buy from you, they'll likely
be interested in hearing more of what you have to say. Newsletters
are also an excellent way to stay in constant communication
with your customers, answer their questions, respond to
their concerns, and provide them with the kind of knowledge
they'll need if they're using your products.
In the process, you will establish yourself as an expert
in your industry and a reliable source of information.
- Try
splitting up your current product and selling it
as separate segments. For example, if you were selling a
book on research methods on the Internet, you could offer
a basic version for $9.95 to generate a large volume of
sales at a low price. Then, 30 days later, you could offer
them an advanced version for $29.95 or even $39.95, and
increase your profits dramatically!
You could sell the smaller, individual parts of your product
separately, but also offer a package deal with everything
included for a bit of a discount. That way, you'll cover
a couple of different price points and appeal to a wider
range of customers.
- Try
selling your customers an upgrade to their product.
If they've used and liked your basic model, they'll be open
to suggestion, provided that you can show them why and how
the upgrade is better.
- Offer
someone else's product! I know it sounds a bit
odd, but as long as the product or service is not in direct
competition with your own, you can make a good profit (and
further develop your relationship with your customers) by
offering a great backend item as an affiliate.
Joining affiliate programs can be a very lucrative way to
increase your sales. With an affiliate program, you have
the opportunity to give a highly credible personal recommendation
to your customer base (which is one of the most effective
sales techniques) and claim a percentage of each sale...
without having to develop a new product of your own!
This can be an enormous timesaver and, done right,
can make up a significant part of your business.
In fact, many people earn considerable online incomes these
days just by promoting affiliate products. You have to do
your research accordingly, however, and only recommend products
that you truly believe in before you can make a business
of selling them. Also, keep in mind that selling too broad
a variety of products as an affiliate will do nothing but
confuse your market -- and lose you sales. Keep your focus
narrowed and your niche well-defined.
If you are interested in checking out affiliate programs,
the following are a few good places to look for the programs
that are right for you:
And,
of course, you can always join the IMC Affiliate Program.
We offer excellent promotional tools and other resources...
and some of the highest commission rates in the industry.
Go to http://www.marketing
tips.com/assoc/ to see if this opportunity suits the
needs of your business and your customers.
- Offer
incentives and information to keep your business
in your customers' minds. You don't always have
to be pushing products -- in fact, if you try the hard-sell
approach each and every time you contact your opt-in list,
they'll start to see you as a nuisance.
So offer a "tip of the day" or contest entry to
entice your customers to your site. Stay in touch through
newsletters and discussion groups. Observe holidays and
special occasions... (you could tie in promotions
to these events).
Because while you certainly want to sell more products or
services to this lucrative group, you also want to balance
sales with relationship building... developing more trust,
credibility, and customer loyalty each step of the way.
3.
Automate your follow-up
Okay,
maybe I was wrong... maybe this is the most brilliant
part about follow-up offers: Not only do you not have to spend
any money to make follow-up offers -- you don't even
have to spend any time!
You can
automate the entire process using autoresponders
that will...
- Send
a "thank-you for your purchase and order confirmation"
type of message -- you could also offer a discount on a
related item in this message
- Send
instructions for use that may also mention your newsletter
or discussion group (you probably wouldn't want to include
a "hard sell" here)
- Follow
up with a message a few days after the purchase that asks
how things are going and then offers a discounted related
item
- Send
another message a few days later to remind your customer
of the discounted offer and urge them to buy before the
offer ends or the product runs out
- Send
"time to refill" reminders or "time to upgrade"
messages as appropriate
If you
use autoresponders in this way, you can start confirming orders
automatically... providing instructions automatically...
and generating huge profits in follow-up sales --
automatically!
| Important
Note: Using software such as Mailloop,
you'll have access to unlimited autoresponders. This means
that you can easily use Mailloop to e-mail your past customers…
with only a few clicks here and there. Even
better, Mailloop will allow you to automatically
personalize each of your messages, so that
each customer is greeted by name and receives a personal
e-mail tailored with their purchase date, product bought,
etc… You can even send HTML e-mail that'll increase
your response by as much as 40%!
|
And
when you automate your mailings, you'll not only tap into
the 20% of your customers who will be responsible for 80%
of your profits -- you'll also save yourself an incredible
amount of time in e-mail chores and customer service!
Final
Thoughts:
Focusing
on your "Vital Few" customers is the best way possible
to increase your sales through your backend products. Once
you've done the initial promotion work and made the first
sale, promoting to this highly responsive group is FREE...
and once you've automated the process, it won't even cost
you any time to do it!
As you
can see, putting an automated follow-up system in place is
hardly the most difficult aspect of Internet marketing, though
it is definitely one of the most profitable techniques
out there -- and one of the most often overlooked.
But now
that you know how profitable it is to follow up with your
key customers, and now that you understand how the Pareto
Principle applies to your business, you can start running
your promotions more effectively and increasing your profits
exponentially.
And who
knows... maybe you can start getting more peas out of your
garden, too!
