At 3:12 a.m. on May 24th, my wife woke me up in a panic.
“Jer, I’m having contractions and they’re consistently 5 minutes apart”.
At first, it didn’t register. I laid in bed trying to wake up, my mind still groggy.
Then, after a few minutes… it hit me.
Holy crap – we’re having a baby!
Four hours and 1 minute later, Logan was born.
He decided to visit us 3 weeks early, but everybody is completely happy and healthy.
His brother (Connor) is having a hard time adjusting and putting Katie and I through the ringer, but that’s another (long) story.
Here a few pictures of both my little guys…
These little rascals are the ones causing me to lose sleep (and my patience), but they’re my main motivation to keep driving and working as hard as I do.
So you have them to thank when I’m working on your projects 🙂
With that said… let’s get to today’s post…
Getting To Profitability In A New Market
A few months ago, John came to me asking for help. He wanted to get into a new market selling an information product to a group of people suffering from a certain disease.
Keep in mind he had zero connections and zero previous experience in this market… so I told him there was a good chance we wouldn’t be profitable the first time around. I was blatantly honest with him (like I always am) and let him know it might take a few tries.
His plan was pretty simple. Create a salesletter. Create a PPC campaign. Drive traffic from Google Adwords to the salesletter.
As you probably know, that strategy worked like gangbusters about 5 years ago but is incredibly hard to make work these days. So I wasn’t expecting much.
Plus, he only had the budget for a salesletter and not a full marketing campaign like I normally recommend (which would include a landing page, various autoresponders, free trial pages that come after an exit pop up, stick letters to buyers, etc. etc. etc.).
Somehow – the first attempt brought us close to breakeven.
I’m very happy with it, considering we had to dramatically tone down the claims in the salesletter to where we’re sidestepping nearly every major benefit just to make it legal.
The more important part is – I want to tell you what I’m planning on doing with him to get it to profitability. This is something I do a lot with clients, and I can’t stand when people give up early… considering the big breakthroughs always happen when you keep testing and tweaking.
Here’s what we’ll be doing.
Round #1: The Positioning Trick
First off, the salesletter is (if I say so myself) fantastic so I decided to play with the offer instead of the copy, as I believe it will have more impact.
So the first test we’re doing is putting the information course into a video format. I think it will be perceived as a higher value. This means we can either A) Increase the price while keeping the same conversion, therefore increasing profit… or B) Keep the same price while increasing conversions, therefore increasing profit.
But I’m taking it a step further…
Instead of “just” creating a video format for the course, I’m going to set up a test where we make the offer something like this.
- Just Text Version (PDF) – $37
- Text + Video + Audio – $67
- Text + Video + Audio Physical Version – $97
Now I want you to notice something.
Right now, it’s just $37 with no other options. That makes the perceived value just $37.
But by adding these higher priced options, we get two things.
1) Offering “decoy offers” like the $97 physical version juxtaposes the $97 price against the $37 price, making $37 appear much cheaper. Making it appear cheaper in your mind decreases perceived risk. I regularly talk about how a buying decision comes to do having perceived value outweigh perceived risk.
2) There is a certain portion of every market that simply loves to buy. If you offer them a $999 massage, they’ll buy it because of the novelty. One of my clients bought a $26,000 dinner. I can guarantee the food itself wasn’t worth that much 🙂 In having these higher priced offers, some people will take us up on it. It might only be a small percentage, but that small percentage can increase average order size by, I’m guessing, 10% – 20%.
So what I’m assuming will happen is that conversions will go up, and average order size will increase as well. As of right now we only need about a 20% increase to hit profitability and I believe doing this will get us there easily.
But that’s not all…
Round #2: Improving The Back-End
Next up (actually, simultaneously) comes the back-end. Since we initially launched this “just to see what would happen”, we didn’t get any upsells in place. We agreed to do this after launching and seeing if we were near profitability.
If you’re familiar with Internet Marketing (which 95% of you are), you know about one-click upsells. We will, of course, be adding at least 1-2 of these to the funnel. In fact we just agreed on a price this morning as I edit this.
Again, this alone should get us to profitability even if we did nothing else.
But then we’re also going to be adding in what I call the “buyers autoresponder sequence”.
This is an automated email sequence that goes out to buyers. It stays in contact with them to help them get the most out of the product, add surprise bonuses, talk about results other people are getting, etc.
This sequence reduces refunds, increases customer loyalty, and begins to cross-sell them and upsell them on other products. mostly affiliate offers in this case since the business is so new and not much is in place yet.
I estimate this buyers autoresponder sequence will add at least 5% net profit to the bottom line by itself. For those with bigger businesses it can add quite a bit between reducing refunds, improving the customer bond (i.e. turning them into raving fans) and cross-selling.
After all of this, we should be well above profitability.
(Update: Him and I agreed this morning to do both rounds #1 and #2)
But I’m a bull. When something works, I take it to the moon.
And that’s why we’ll then begin…
Round #3: Increasing Metrics
Once we have a semi-good funnel in place, I’ll be focusing on the metrics. The metrics are where you begin to decrease marketing expense and increase overall profitability by finding new gems in the market, and is one of the areas most business owners focus almost no time on.
I won’t let him get off that easy 🙂
Here are the 7 main growth drivers we’ll be looking at…
#1: Traffic – Can we add more keywords with PPC? Add remarketing? What about setting up promotions to attract JV’s? Or maybe we’ll create a few strategic alliances. Or create something free to give people in other businesses who can give it to their audience. The list goes on and on.
#2: Leads – Then we’ll focus on increasing the number of leads. By this point we’ll have some type of free offer to build his list. Then we’ll split-test it like crazy.
#3: Product Sale Conversions – There are a million things we can test on the main salesletter to increase conversions. A new hook… video… new pricing structure… different offers… longer guarantee… design… etc.
#4: Average Sale Value – The decoy offer I listed above will help with this. So will adding a proper upsell/downsell sequence, having bundle packages, adding higher end services like coaching, and others.
#5: Transactions Per Customer – This one is easy. Communicate with your target market more often! It’s really as simple as that. We’ll add stick letters, direct mail promotions, voicemail blasts, text message promotions, 4-day sales, as well as simply keeping in touch with existing customers. Because that’s where the real profits are.
#6: Margin – We’ll also be focusing on increasing his profit margin. This one is easy when working with PPC. All we need to do is get a higher quality score to decrease his cost. Or focus more on SEO to get free traffic, therefore reducing overall cost. And, of course, many other ways which are hard to estimate since this is all just an example for now 🙂
In many businesses I would also include “items per sale”. However for his business it isn’t applicable until we add things like supplements and coaching into the mix (which would be much later on), so I’ll leave that one out for now.
And that brings us to the final step in this example (of course, there will be more, since marketing is an ongoing process)
Round #4: Slingshot To The Moon
Most people think small.
Most people with info products would be happy just having a few products they sell, with a couple upsells.
But if you really want to skyrocket your growth, you have to think bigger. I like to think big and “shoot for the moon”.
Here are just a few things this particular client could do with his business…
- Add one-on-one coaching (and hire people to be the coaches, so it’s hands-off for him)
- Conduct health seminars
- Partner with huge industry contacts for enormous exposure
- Secure strategic partnerships with doctors groups and have them recommend his course/coaching to people who find out they have the disease he’s solving
- Create a new vertical and cross-sell back and forth between the two businesses
- Conduct a scientific research study proving his exact system works (and then leverage it with industry officials, the government, etc.)
- Develop a line of supplements to get people on a monthly shipment program
- And many more.
I hope you got a lot out of this. I’ll be developing a coaching program soon (later this year) and thought it would be helpful to get your feedback on the way I think. (I do coaching for clients, but don’t have an “official” coaching program).
Until next time…
P.S. If you’d like to talk about creating or optimizing your sales funnel, like I did in this letter, just shoot me an email or go to www.JeremyReeves.com and use one of the various ways to get in touch with me. You can also call me at the number you see in my website header.