This is part 4 of a 4 part series, in which we explore setting up and automated online marketing machine designed to keep the sales coming in, even when you are not at work. In part 1 of the series, we explored the main reason that many online businesses fall flat, or fail and we explored the solution that makes many businesses a success: The sales conversion funnel. In the second one of the series, we learnt about about designing sales funnels the right way. In part 3 of the series we discovered how to create a sales funnel, and in this part, part 4 of the series,how to feed your sales machine by attracting quality affiliate partners.
Using the Front-end the Right Way
By now you should understand the structure of the sales funnel and you should be comfortable with the concept of sacrificing immediate front-end profit in the interest of long term back end profitability. As I mentioned earlier, some marketers completely dispel the front-end profit altogether. They do this because they are in it for the long haul and know that they’ll make the loss up later on down the road. They might send out a free book and eat the cost of postage. They might send out a DVD and do the same. They can do this because they know their product, they know the sales structure and they know that their sales funnel is built for end profits. Their business back-end structures are so stable and predictable that they never have to worry about losing money at the beginning. They see it as a natural business cost and plan accordingly.
The front-end of your funnel is also a prime opportunity to gather information about your customers. The quantitative data that is gathered in the front end can be used to build products that really speak to them. In addition to this, the personal data that can be gathered in the front end of your funnel, such as phone number, date of birth and the like can increase your sales potential in the beck-end of your funnel exponentially.
What I would like to communicate more than anything is the importance of your back-end. This is where you are going to make your money long-term and build a viable business that sustains you financially. The most successful marketers know how their sales funnel works from step A to step Z. They can tell you exactly how much of a return or loss they are going to experience at any given step of the way. This is why a loss at the beginning isn’t daunting. Just think of having a strong back-end… if you need to offer affiliates 100% commission on their efforts, how is this a problem? You know that though you pay them for their affiliate efforts now, in the end the numbers are stacked for you and will recoup your loss and then some! With a structure like this, you also are building a win-win situation:
- Your affiliates will receive a great payout
- Your affiliates’ efforts will bringing you an abundance of prospects
- Your initial product offering will be high-value and bring in qualified customers
- Your qualified will customers invest more in your mid-level and high-ticket products
To be confident enough to bear the cost of 100% commission on the front end for your affiliates, you will need to understand the Life Time Value of your customer. In doing so, you will know that wherever costs you bear on the front end, will be recuperated, with certainty, on the back-end of your funnel.
Calculating the Life-time Value of your Customer
Money makes the world go around. There’s no doubt about that. People market affiliate products to make money, so it’s not rocket science to work out the biggest motivator for affiliate partners. Therefore to attract the best affiliate partners, and to get the best results from them, you need to create an affiliate program with multiple rewards. In order to be able to do this, it is essential you understand the Life Time Value (LTV) of your customers. Once you know this, you can create a plan to build a funnel that will make your money long-term and build a viable business that sustains you financially.
The most successful marketers know how their sales funnel works from step A to step Z. They can tell you exactly how much of a return or loss they are going to experience at any given step of the way. This is why a loss at the beginning of the funnel isn’t daunting. So if you need to offer affiliates 100% commission on their efforts, how is this a problem? You know that though you pay them for their affiliate efforts now, in the end the numbers are stacked for you and will recoup your loss and then some! With a structure like this, you also are building a win-win situation.
There are a number of ways you can calculate the Life Time Value of your customers. Here is a basic LTV formula to get you started:
(Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months or Years)
So let’s take a look at this in a real life example. Let’s take a look at a members of a website (subscription plan), subscribed for $47/month for their membership for 2 years. Let’s say we have had a hundred members all signed up on the same subscription plan, and we have calculated the average number of months of membership over the previous 5 years,
$47 x 12 months x 2 years = $1,128 in total revenue (or $564/year)
This is a simple scenario, but if you have a more complex scenario you need to find the lifetime value of each individual customer segment.
In addition, you can also test your products and pricing constantly to better serve your customers. With this sales funnel, you can test your products, their viability, your pricing, specific segments of your customer base, conversion rates, conversion rates based on slight changes in marketing, etc. You have an abundance of information at your fingertips that is infinately useful to you as the marketer.
Monitoring your conversions, analyzing your products, their viability, your pricing, and specific segments of your customer base, will provide you with an abundance of information that will give you a strong competitive edge over everyone else out there. Make no mistake, there are a lot of marketers. But if you are offering more, and better, products than they are, you have a reliable, stable sales funnel and you are all over your CLV and your testing and your conversion statistics, you are going to win in the end.
While building this sales funnel I have been talking about is hard work, with consistency, commitment and dedication you can build your business to become a leader in your niche.
