Often in business, we talk about the importance of customer acquisition. In other words, how do you find clients — from attracting prospects to making the sale? But the reality is, if you’re going to have a sustainable business, then customer acquisition isn’t the most important thing to focus on…
Video Transcript and Relevant Links
Okay, so we’re talking about money in this little mini series here. And I want to talk about one of the absolute, most important things. You have to get this right. And that’s this idea of making the second sale.
So, people get really enamored with acquiring the customer. With finding that customer. With reaching out into the interwebs, and somehow attracting someone, having them come in, and buy from you. Getting that initial sale. And that’s all great. And frankly, it’s something that I did quite a bit in years past.
But, there’s one rule that is not going to change. It’s continually going to get more expensive to acquire the customer. Advertising costs keep on going up. The cost to reach people keeps going up. That’s not going to turn around anytime soon. It’s just going to keep getting more expensive to acquire the customer.
So, what you need to do, is you need to focus on the second sale, and the third sale, and the fourth sale. But… the next sale – the back end.
What are you going to sell to people that have already bought from you? Because I’ll tell you this, in my experience, it’s about 15 times easier to make the second sale, than to make the first sale. It completely changes the way your math works. And often, the second sale, can be at a higher price. And the profitability is so much greater, because you’re no longer paying the cost to acquire that customer.
So, you have to focus on the back end. And what that does is, it allows you to spend more money to acquire the customer. So, if your first sale is a hundred dollars, but then, of the people that buy from you, a third of them, make an additional purchase for another hundred dollars, then that means that initial acquisition, well, that person’s worth so much more, to bring them into your world. That allows you to spend more to get that initial sale. This will completely change your math.
And at the end of the day, you’re competing against other people in your market to acquire that initial customer. And as I said, the costs will keep going up. And your spend is competing against their spend. And so, what you need to do, is add a back end, and hopefully a higher end, back end, that will completely change the math in your business. You just can’t survive in a long term effect.
When I look at businesses, and occasionally, I come across one where it’s like, wow, that would be really hard to have a back end for that business. Then it would be one I wouldn’t even be interested in. The corollary, or I guess, the tangent off that, is almost every business, you can build a back end. But you absolutely have to focus on that back end, on those additional sales, or else, at some point, the cost of acquisition is just going to be way too high for you.
So, I hope this isn’t… well I haven’t even talked in numbers yet. But I hope this isn’t too conceptual, because this is the one thing you have to nail if you’re going to have a real, sustainable business.
So, I’m Jeff Walker, wherever you’re watching this, scroll down and leave a comment for me, and let’s go get ’em this week.
Mor Maty Seck
Thank you Jeff
It’s really great to know that often the second sale can be at a higher price. And the profitability is much greater, because you no longer pay the cost to acquire this customer.
Great point Jeff. Love your insights. I listen to you regularly. Thanks for today’s tip.
Thank you for your guidance Jeff
I am interested to know why the term’ back end?’
I am familiar with the term for websites but cannot correlate the two.
@Rose: I don’t know the origin of the term… it goes back many decades. It came out of the direct marketing world from long before the Internet existed.
second and third sale profits raise exponentially, as long as the quality stays at least the same. I am an Leadership- & Communications Coach and the recomendations rise with them.
At least that is my experience of the last 30 years.
Best from Germany
Great advice and makes total sense, but I’m actually not sure what your back end is. A $10k upsell? LaunchCon? A private membership experience?
great question – would love to know the answer to this
Indeed. What is THIS BACKEND?
I’ll try to elaborate on what a backend is and how to think about it.
Imagine you run a physical store of some kind. (See the store in your minds eye)
In this store you have your display area of the goods you are selling and you have your cash register where people can pay for the stuff they want to take home.
Simple and easy to understand and this is how most ‘see’ their business.
A one room store with the stuff they sell and they work on getting people into this one room to look at what they have to offer – say a $97 dollar product.
– let’s say it cost $1 to get someone in the room.
And let’s assume that 2% of the visitors buy the product. (2 sales per 100 visitors)
You make 2x$97 = $194 per $100 spent on getting people in the room.
Leaving you with $94 profits.
Not too shabby, but let us look at the same business but WITH a backend.
You still have your $97 product.
Imagine you have the same physical store BUT this time you have 2 rooms.
A smaller front room (front end) and a bigger back room (Backend).
In the front room you sell a part of or a ‘light’ condensed version of your $97 product. And you sell it at a no-brainer price. Say $5 for a $39 value.
And then, AFTER people have bought this no-brainer offer in your front room. You show them the door into your back room and introduce them to the upgraded backend offer of your $97 product.
– You can show them the ’back room’ as an up sell right at the moment of checkout OR as an offer they get while consuming the front end product.
Now your math changes to something like this.
You still pay $1 to get them in the front room. But you make the front end offer SO good that now, not 2% buy but 10%
So you make 10x$5 = $50 in the front room.
But now it is 15x easier to sell the $97 product to the 10 people that have entered into your back room.
So now you close not 2% but 30%
Giving you 3x$97 = $291 from the back room sales.
So now you make $50+$291 = $341
Minus the $100 spent on getting people in the front room.
Leaving you with $241 in profits instead of $94 – spending the same $100 on advertising.
Much better return on the investment.
Not only does this leave you with more cash to reinvest into even more advertising or building a 3rd $297 room to show your 2nd room customers.
But you grow your list of ‘already paid’ customers, who is 15 times more likely to buy from you in the future. When you introduce a front room no-brain offer that leads to your 3rd $297 room.
A backend is simply a ’next step’ for your customers to take after you make the first sale.
And it boosts the number of total sales because people are 15 times more likely to buy from you when they already HAVE bought from you before.
I hope this helps 🙂
Thanks jeff. I always knew there was a reason i let u keep sending those emails. They just make sense. Call me. I would love to chat
Absolutely agree. It’s the cost of getting the customer and understanding “that” value that’s key. Then following your value ladder. Great info video as always. Been following you for over a decade!
This makes absolute sense Jeff, if you look at any long term biz it always has additional aspects and offerings. I work with improving the communication skills of specialists, and people with something to say, which can be a hard thing to present, but I am working on building premium services at the moment actually!
Thank you for your always great tips & guidance – yes this makes sense and will incorporate!
Great advice, Jeff. I really appreciate it. Definitely getting a lot out of this money series. Keep it coming! Thanks – Casey Demchak
Much Appreciation & THANK YOU !
Wow Jeff. That’s a fantastic point. For fiction writers, is the back end the next book? Or are you talking about something else?
I’ve watched many of your videos and always end up wondering, “What is he trying to get at?” It is always so obvious – maybe that’s it. Business is much more obvious than complicated. My point though, is that these snippets are not helpful, unless I dump a pile of money your way – which I have yet to see the the ROI possibility. However, I’ll keep watching, like a sailor searching for the watchtower.
That´s a good reminder. Should do that again.
Hi Jeff very good point , just done my first launch after completing your PLF course , it was a book launch , but tried doing it on Facebook as I am only just setting up a webpage and email responder now , didn’t quite go as well as I hoped , so next one will be a seed launch to build my list , thank you for your course and advice .
My situation as a Life Coach practice (35+ years now) is at the point where I need to create a tangible product for my clients. My pressing inner question on scaling my brand is a 100-300 page book my only product to focus on creating next or is there other options which are just as worthwhile?
Nonetheless, to have the impact I want in my life I must nail this issue. Thank you for reminding me of this matter.
Thank you Jeff!!!
Thank you 🙇
Looking forward to hearing
We are best served when we’re forward thinking. You make it a reasonable and doable approach. The logic makes sense. Thanks.
Thanks Jeff. I love the idea of growing new sales by focusing on my backend. I will certainly apply this to my business. I want to run an experiment on this over this festive season and reach out to my clients with mini bit offers and see what sales I generate. Imagine making money over the holiday. Great advice thanks once again.
Awesome Jeff!! Thanks for the insight.
Muchas gracias Jeff por este enfoque tan importante ….te sigo leyendo para aprender mas sobre este punto..saludos cordiales.
Couldn’t agree more Jeff. I currently work for a wireless carrier and we always talk about COA, ARPU and CHURN and are always looking to lower the 1st and increase the 2nd.
One other important parallel point is that the more variety of things people buy from you, the ‘stickier’ they are as a customer. That goes to your back end analogy.
The same (somewhat) applies to most of the products/services that your followers are looking to sell. I just read your book, Launch and now I’m hooked on your weekly videos. Thanks for reigniting my passion for business again!
Thanks or the valuable insights.
Thanks, Jeff. Always enlightening!
Thanks for today’s post Jeff!
I was just sitting down to work and immediately got flustered by the day and thought, why don’t I see what Jeff has to say today first.
What I appreciate is that I see the rolling-out and continuation of products from my business but am having a hard time with take-off.
Your message helps me focus on the start because I know it will continue as long as people strive to live a life on their terms while, at times, having to navigate systems like healthcare. Providing reliable resource for people to better navigate these systems with more confidence when in need is my goal so taking brave action daily to serve my clients again and again is my driving force.
Thanks Jeff. I’ve heard this said before, but this is a good reminder, and to my current project I am about to ‘seed launch’ – where I have a big idea and a range of products I can include – but this reminds me that I only need to start with one, as once I have that customer I can introduce other products and services.
Hi Jeff, thanks so much for the awesome blog post! Fun fact: I noticed while reading that my most wanted product should indeed be my 2nd sale! So now I will design a first product! Yeah!
If you ever feel like having the birth stories of your children written down, get back to me 😏
When closers get a hot sales lead, they’re on it immediately. If they sense the time is right, they close the deal, right then and there. When closers know that they’ve got something the customer needs, they keep working with that customer until the customer sees the need, too.