Jason's How to Build Wealth & Golden Nuggets

[s168]

might aswell re-read the thread again


edit: Found it with ctrl + f

What he said
"No - I don't think Lead Magnets are necessary (I'm using a LP with Tripwire with no lead magnet and its working very, very well)."

IMO, I can see why. He's already offering a relatively low-cost product in the pet niche. If someone isn't interested in spending money on something like that, then future potential sales off an email list that haven't parted cash with an offer for a low cost product is probably not going to be easy. Might as well market to those who have proven the willingness to spend if you have a product for them.

I suspect many of the people clicking to view his lander are curious to see what he has to offer. Then they see it, and either like the idea and buy on impulse (it's not a big money purchase) or don't and that'll be the end of it.

I think some sites / niches lend themselves well to lead magnets (for example educational products or niches where the target goes through defined stages) and some are better off without doing that method.

 

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[JasonR]

IMO, I can see why. He's already offering a relatively low-cost product in the pet niche. If someone isn't interested in spending money on something like that, then future potential sales off an email list that haven't parted cash with an offer for a low cost product is probably not going to be easy. Might as well market to those who have proven the willingness to spend if you have a product for them.
I suspect many of the people clicking to view his lander are curious to see what he has to offer. Then they see it, and either like the idea and buy on impulse (it's not a big money purchase) or don't and that'll be the end of it.
I think some sites / niches lend themselves well to lead magnets (for example educational products or niches where the target goes through defined stages) and some are better off without doing that method.

Exactly, nailed it. Always test.

Some of software guys' lead magnets are Free Trials to their software.

I did this with my Shipping Software. The software worked so well I happily send them $40/month.

 

[BlakeIC]

Jason are you still using magento as a shopping cart?
While looking at shopping cart threads i saw that you mentioned about the steep learning curve (which i can now see)
My question was did you just research a F*ck ton of tutorials to understand it?
I know html/css not php at all

 

[JasonR]

No - Magento is cool, but wouldn't do what I wanted.

Magento is for ecommerce stores, but not really for sales funnels.

I built a funnel - I'm paying $1k/month (yes per month) for the software I use, plus we built our own custom API, to do what we need to do.

Sometimes you have to go big or go home.

I worked with Magento a long time at a previous job, and on my own time. It's not that hard if you use off the shelf stuff, themes, etc.

Honestly, I don't know what you're selling, but I'd start with One Shopping Cart or Ultra Cart. They are supposed to be able to do one click upsells.

 

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[JasonR]

Ok, I've said it before, and I'll say it again.

To build a lasting, scalable offer online, your LCV (Lifetime Customer Value) has to be at least $60 or HIGHER.

It's extremely hard to make money online with something lower than that.

Like Ryan Deiss and company say, you don't have a traffic problem, you have an offer problem.

Continuity/monthly stuff can be awesome, if you have a good offer (product / service) that people need often.

If you can get $60+ out of every customer, you can make a fortune. That's where I'm headed.

 

[s168]

@JasonR

How true. I've always preached the LTV (Life Time Value) to my SME clients when I'm was consulting before, most of them were offline businesses. Knowing that figure allows for more to be spent on upfront customer acquisition costs and still make money on the back end.

But... I've not heard of the $60 LTV / LCV. Where did you get that from?

 

[JasonR]

But... I've not heard of the $60 LTV / LCV. Where did you get that from?

A few big marketers I know. A friend of mine who lives in Scottsdale has personally ran $25m in media in the last five years, initially gave me this number, as the minimum you need.

Upon further research (ex. months and my own experiences) I've found this to be absolutely true.

Look at most affiliate payouts, they START at $45....

 

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[s168]

Good point. I used to do online gaming affiliate sales, and the CPA was about £40 / $60 a few years back. But I'd always expected the LTV's to vary with the vertical concerned, based on what I thought was the not-unreasonable assumption that different niches would have different LTV's / products of different profit margins, etc.

Your buddy who ran over $25m in the past 5 years... didn't he start an AMA thread on here? Or was that someone else?

 

[LibertyForMe]

When a person is looking to start a new business, is there anything that they can do to project a customer LTV? I am looking at a product that retails for $20-25, so to hit that $60 number, the customer would have to order from me 3 times over their life. I don't have any major ideas for upsells or downsells, the product is relatively stand alone.

For a person who has no data, is there anything we can do?

Thoughts?

 

[s168]

When a person is looking to start a new business, is there anything that they can do to project a customer LTV? I am looking at a product that retails for $20-25, so to hit that $60 number, the customer would have to order from me 3 times over their life. I don't have any major ideas for upsells or downsells, the product is relatively stand alone.

For a person who has no data, is there anything we can do?

Thoughts?

From my experience, you have to have a plan to sell something to them on the backend. Ideally related products or services that tie in with or enhance/complement their initial order. Otherwise you'll be losing money.

The other option is continuity, such as membership sites, recurring billing for repeat consumables, etc.

Bear in mind that a big chunk of people may not be buying beyond the first order. LTV is the average value.

 

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[randomnumber314]

IMO LTV (Life Time Value) is the most important number any business can use to leverage/make decisions. The small software company I ran was spending thousands on advertisements with very low conversion. When I took over I saw the traffic, conversion rates, and LTV, concentrated on increasing LTV and doubled the revenue in a year. All by improving our offer and product to convert "triers" into "rebuyers"

Good post, rep transferred.

 

[the5thpgriff]

Being so new to online marketing and sales I was a little slow to catch on to LCV/LTV ... but after you guys broke it down a little more I think I understand it from a different angle. I managed big-box retail so it sounds like a couple metrics we monitored called "accessory attachment rate" and "basket size". So, if you sold and Xbox you also want to sell a controller, game, and warranty plan. Having a high accessory attachment rate helps in increasing the basket size. Depending on the store volume the company wanted a certain basket size for every customer and they also did that with "shouting value" through signing, advertising and promotions for credit debit card holders. Online you want each customer to spend $60 on your site and you help them do that through your offers/up-sells... Right?

 

[twdavis]

Being so new to online marketing and sales I was a little slow to catch on to LCV/LTV ... but after you guys broke it down a little more I think I understand it from a different angle. I managed big-box retail so it sounds like a couple metrics we monitored called "accessory attachment rate" and "basket size". So, if you sold and Xbox you also want to sell a controller, game, and warranty plan. Having a high accessory attachment rate helps in increasing the basket size. Depending on the store volume the company wanted a certain basket size for every customer and they also did that with "shouting value" through signing, advertising and promotions for credit debit card holders. Online you want each customer to spend $60 on your site and you help them do that through your offers/up-sells... Right?

Basically that's the same jist of anywhere you're selling something.

Whether that be retail, food service, etc etc. The idea is always to upsell the customer and to create repeat business with them, which increases their LCV.

 

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[s168]

Being so new to online marketing and sales I was a little slow to catch on to LCV/LTV ... but after you guys broke it down a little more I think I understand it from a different angle. I managed big-box retail so it sounds like a couple metrics we monitored called "accessory attachment rate" and "basket size". So, if you sold and Xbox you also want to sell a controller, game, and warranty plan. Having a high accessory attachment rate helps in increasing the basket size. Depending on the store volume the company wanted a certain basket size for every customer and they also did that with "shouting value" through signing, advertising and promotions for credit debit card holders. Online you want each customer to spend $60 on your site and you help them do that through your offers/up-sells... Right?

The simplest way of understanding the LTV/LCV is that it is the lifetime value of your average customer, in terms of gross or net profits whichever you prefer to use for your accounting. There is no easy way to calculate this for new businesses as it all depends on what you're selling to them in total, including upsells, downsells, and all sales made to that customer post the initial sale until they no longer buy from you. For newly launched businesses, you will have to give it time to work this out.

That's why IMO it is always important to at least break even on any initial teaser offer to acquire that customer if you don't have a clear back end for selling to returning customers. That way you don't lose money. Ideally you should try to maximise your upfront profits without making the total sale value too high in order to get qualified people into your funnel. In the case of @JasonR he is making a great profit on his initial low-cost offer anyway, and is now planning to build his back end to increase the profit he his making from each customer on average beyond just the initial order.

The better the back end, the more the LTV/LCV will be.

 

[Kyle Tully]

Being so new to online marketing and sales I was a little slow to catch on to LCV/LTV ... but after you guys broke it down a little more I think I understand it from a different angle. I managed big-box retail so it sounds like a couple metrics we monitored called "accessory attachment rate" and "basket size". So, if you sold and Xbox you also want to sell a controller, game, and warranty plan. Having a high accessory attachment rate helps in increasing the basket size. Depending on the store volume the company wanted a certain basket size for every customer and they also did that with "shouting value" through signing, advertising and promotions for credit debit card holders. Online you want each customer to spend $60 on your site and you help them do that through your offers/up-sells... Right?

LTV is about the lifetime value.

Not just the initial transaction.

A few examples...

An accountant might make (on average) $2500 per client per year, and keep them for 3 years. His CLTV is $7500. But the initial transaction may have been a $50 tax prep.

An info product business might have a funnel with a $27 report, and $100 upsell that converts at 50%. The initial average client value is $77 ($27 + 50% x $100. But if, over the next few months, they sell 5% of the report buyers into a $1000 course then the LTV might be more like $127.

An ebay guitar shop might sell picks at cost -- an initial sale of a few pennies -- but upsell 0.5% of those buyers into a $4000 custom guitar, bringing the average LTV to over $20.

Some of the biggest financial publishers in the world make around 60c for every $1 they spend to get someone to buy their front-end product... but with back-end sales they are profitable by the 90-day mark... and their LTV may be hundreds of dollars.

All of this is great theory until you actually apply it...

The guy with the higher LTV can afford to spend more to get a client and can buy more traffic than anyone else. THAT'S where the magic is.

 

[wilddog]

Jason are you still using magento as a shopping cart?
While looking at shopping cart threads i saw that you mentioned about the steep learning curve (which i can now see)
My question was did you just research a F*ck ton of tutorials to understand it?
I know html/css not php at all

Most paid carts do not allow you to modify the checkout API and scripts at all. I learned this the hard way.
With Magento, everything is fair game and you can customize just about anything. There are already upsells extensions for Magento when a user checks out. I believe a developer can modify the script so that is appears after purchase.

For a fledgling business, Magento is a fantastic start. Once you have a strong business and need a complex sales funnel, you can move to high dollar software like Limelight.

 

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[the5thpgriff]

Thanks @s168 and @Kyle Tully for breaking it down even more! I really understand now. I should have joined this forum when I read the book over a year ago!

 

[Andy Black]

I've just listened to the full podcast with Jason.
I enjoyed ever minute of it. Some absolutely GOLD information was spoke about.

Ditto. Good work Jason.

 

[Andy Black]

LTV is about the lifetime value.

Not just the initial transaction.

A few examples...

An accountant might make (on average) $2500 per client per year, and keep them for 3 years. His CLTV is $7500. But the initial transaction may have been a $50 tax prep.

An info product business might have a funnel with a $27 report, and $100 upsell that converts at 50%. The initial average client value is $77 ($27 + 50% x $100. But if, over the next few months, they sell 5% of the report buyers into a $1000 course then the LTV might be more like $127.

An ebay guitar shop might sell picks at cost -- an initial sale of a few pennies -- but upsell 0.5% of those buyers into a $4000 custom guitar, bringing the average LTV to over $20.

Some of the biggest financial publishers in the world make around 60c for every $1 they spend to get someone to buy their front-end product... but with back-end sales they are profitable by the 90-day mark... and their LTV may be hundreds of dollars.

All of this is great theory until you actually apply it...

The guy with the higher LTV can afford to spend more to get a client and can buy more traffic than anyone else. THAT'S where the magic is.

Great examples.

Some more related posts:

1. Your Goal Is To INCREASE CPCs
2. (Video) The Most Important Formula in Business
3. (Video) Online Direct Response Metrics

 

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[JasonR]

The guy with the higher LTV can afford to spend more to get a client and can buy more traffic than anyone else. THAT'S where the magic is.

Good post. This is really the KEY to understanding online sales funnels.

Let's say you are my competitor.

You sell a product with a LCV of $40. You can pay up to $39 for a customer (paid advertising, aka CPA cost) and still turn a profit (ignoring margins for the moment).

I sell the same product, yet have a "funnel" with upsells on the back end, and my LCV is $80.

Guess who wins the traffic battle?

Here's the key. The more you can afford to pay for a customer, the MORE customers you can actually acquire. So your LCV becomes ESSENTIAL to how big and fast you can grow your business.

If you can afford to pay more fore a customer than anyone else, you become unstoppable.

Most people think of the product and stop. That's where I was a year ago. And now, I realize, that's awesome, I found a winning product, but we can be so much more, and grow so much bigger and faster.

SEO guys don't typically think this way.

When you tell a potential investor you take $35 and turn into $80, you'll have more money thrown at you than you can handle.

All of a sudden, you can grow from 6 figures to 7 figures REALLY fast.

When you run a subscription model (which I love), you'll need to get data on how long your customers stick, and it can become more of a finance model.

Is all of this making sense? I wish someone would have told me this before I started.

Facebook traffic has become more expensive in the last year. So, do you want to play the cheap traffic source game, and hop to the next cheapest traffic source. Or do you want to be able to pay enough so you can SCALE on any traffic source, and go from 10k customers to 300k?

Also, do the math. How many customers do you need to make $1m at a $30 LCV? $50 LCV? $150 LCV?

I think you're starting to get the picture...

 

[the5thpgriff]

Man... I had never heard of most of this stuff before! I'm glad I joined as I'm just starting out. I have been learning SEO for a couple months and realized it's a SLOW process. The info you guys are providing has definitely painted a clearer picture for me. Thanks!

 

[Andy Black]

Good post. This is really the KEY to understanding online sales funnels.

Let's say you are my competitor.

You sell a product with a LCV of $40. You can pay up to $39 for a customer (paid advertising, aka CPA cost) and still turn a profit (ignoring margins for the moment).

I sell the same product, yet have a "funnel" with upsells on the back end, and my LCV is $80.

Guess who wins the traffic battle?

Here's the key. The more you can afford to pay for a customer, the MORE customers you can actually acquire. So your LCV becomes ESSENTIAL to how big and fast you can grow your business.

If you can afford to pay more fore a customer than anyone else, you become unstoppable.

Most people think of the product and stop. That's where I was a year ago. And now, I realize, that's awesome, I found a winning product, but we can be so much more, and grow so much bigger and faster.

SEO guys don't typically think this way.

When you tell a potential investor you take $35 and turn into $80, you'll have more money thrown at you than you can handle.

All of a sudden, you can grow from 6 figures to 7 figures REALLY fast.

When you run a subscription model (which I love), you'll need to get data on how long your customers stick, and it can become more of a finance model.

Is all of this making sense? I wish someone would have told me this before I started.

Facebook traffic has become more expensive in the last year. So, do you want to play the cheap traffic source game, and hop to the next cheapest traffic source. Or do you want to be able to pay enough so you can SCALE on any traffic source, and go from 10k customers to 300k?

Also, do the math. How many customers do you need to make $1m at a $30 LCV? $50 LCV? $150 LCV?

I think you're starting to get the picture...

And if you're getting $80 LTV and your competitor is getting $40 LTV, then you might be able to buy his traffic by offering him $60 per sale.

I've heard it called "The Unlimited Traffic Theorem"... whoever gets the highest EPC can get traffic from all the other players.

EDIT: I like thinking in terms of EPC, since this includes both the click-to-customer-conversion-rate AND the life-time-customer-value. Also, it's easier for my PPC brain to think about what happens when I keep my CPC less than my EPC, and work to increase my EPC.

 

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[JasonR]

I am looking at a product that retails for $20-25, so to hit that $60 number, the customer would have to order from me 3 times over their life. I don't have any major ideas for upsells or downsells, the product is relatively stand alone.

It's not clear what you're selling, but remember you are selling to a MARKET. I can't think of one market that only wants one product. So, add another product on behind it, create a subscription model, etc.

Also, Magento is completely different than Limelight.

I don't really want to get into software here, but it pays off to do your research.

A couple of ecommerce platforms that can do one-click upsells are Ultracart and One Shopping Cart. Infusionsoft is what Ryan Deiss and company uses.

Trying not to feed you guys an elephant here...haha

 

[Kyle Tully]

I use Nanacast for a lot of my stuff and it can do one-click upsells.

 

[biophase]

I have a question. My business is usually a one-time sale, it's very rare to get repeat customers but we get alot of referrals. So my LCV is equal to a single purchase. But LCV ranges from $500-$1000. My CPC is about $3.50, so I'm trying to figure out how I could apply this to my business. Average "cart" or sale is $5000. I have the opposite issue where my first sale is huge and I cannot think of how to keep the customer as they usually blow their wad initially.

 

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[BlakeIC]

I have a question. My business is usually a one-time sale, it's very rare to get repeat customers but we get alot of referrals. So my LCV is equal to a single purchase. But LCV ranges from $500-$1000. My CPC is about $3.50, so I'm trying to figure out how I could apply this to my business. Average "cart" or sale is $5000. I have the opposite issue where my first sale is huge and I cannot think of how to keep the customer as they usually blow their wad initially.

deleted don't know if it was your niche

 

[Kyle Tully]

I have a question. My business is usually a one-time sale, it's very rare to get repeat customers but we get alot of referrals. So my LCV is equal to a single purchase. But LCV ranges from $500-$1000. My CPC is about $3.50, so I'm trying to figure out how I could apply this to my business. Average "cart" or sale is $5000. I have the opposite issue where my first sale is huge and I cannot think of how to keep the customer as they usually blow their wad initially.

Not sure I understand how LCV is $500 yet average sale is $5000. Is that a mistake or am I missing something?

 

[TedM]

Sorry about this post - I hadn't seen the other - much better - answers that followed & I cannot delete it.

Online you want each customer to spend $60 on your site and you help them do that through your offers/up-sells... Right?

Not spend $60! The value is in the margin, not in the revenue. Net $60!!

But - I can add one thing, though: I recently spoke to one of the very top guys in direct marketing about continuity programs. Based on his overwhelming experience - 6 months is about the max to calculate on.

Now, this is for an info products guy... At the opposite end would be a person who needs a patented prescription medication - he'll be with you forever.

However - if you sell him, each month, more than he can use...he'll build up a back supply and eventually won't need it.

So, continuity? By all means. But calibrate your supply to what your customer can consume and stay specialized.

 

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[TedM]

Jason - just listened to your "ForeverJobless" interview. Terrific! Thank you for sharing.

 

[biophase]

Not sure I understand how LCV is $500 yet average sale is $5000. Is that a mistake or am I missing something?

LCV is profit right? Not customer's spending amount.