I come across many webstore owners that have ambitions to do great things with their business. It’s not just financial goals, but ideas and concepts they have outside of acquiring money for their business.
The issue I seem to come across frequently with store owners is their anxiety about not converting new customers at a profit with a frontend offer on their ads.
By this I mean…
Buying traffic from the likes of Facebook with the goal of making profit on a frontend sale. This can be a difficult goal to achieve, especially when you are starting out as a newbie. The advice I want to offer in this article is something both complete newbies and more advanced web store owners can learn from.
Buying Traffic To Make Profit on The Front End
We all know as web store owners that driving consistent targeted traffic that converts is paramount to success. But where I see people go wrong is they look to profit on a front end offer and build their empire from that on scale!
This is difficult to consistently achieve & sustain… especially when you are not a recognized brand. It’s also hard to achieve a profit.
If you really excel with paid traffic, you just might know how to make a 2 – 3 X ROI on your ads using a high ticket frontend offer, or havin
However, your goal for customer acquisition should be to break even. Going in the red a little won’t harm you either.
Here’s why….
A Quick Hypothetical Example:
Let’s say you sell a T-shirt for $10 and it costs you $10 in ad spend to acquire a customer for your T-shirt. Your costs for producing the T-shirt might be $2-4. So you’re actually $2-4 in the red.
You might think to yourself that the ad you are running to convert a customer for $10 is a failing ad, because it’s not producing a front end profit.
But is it really a failing ad? Well… not really. Why?
Because you’ve acquired a customer from this sale and you now have a valuable piece of info… The customer’s EMAIL 😉
Now you can retarget via email with more value in the form of free content to build out more rapport with these customers as well as presenting offers to them. That means an opportunity to sell to them repeatedly over the months that follow.
So even though your acquisition costs are minus $2-3 (in the example I gave on the previous slide), you can make that up by selling more products to your customers and increase their life time value.
Taa-dah!
Now you’ve made your business and its goals that bit more realistic and achievable. Because you can move yourself from red to black by retargeting your customers with more offers, thus increasing the chances of more revenue.
Not every customer will come back and buy… BUT! Many will with the right offers that you market to them via your email channel. It’s all about how well you nurture a relationship with your list.
Understanding the Value of Your Customer
What’s important to understand at this point, is to figure out the value of each customer over the months that follow AFTER they become a customer of your brand.
Using the T-shirt example –
Customer A
You initially made $10 from customer A. Consider that month 1.
What value do they bring to your business in month 2, 3, 4… even 6 months down the line?
As you continue to sell them more products from your store, their value increases.
So instead of $10 for customer A. After they have bought product X, Y & Z over the course of say 3 months, their value is now worth $50 to your business.
See how that works?
Your original T-shirt ad isn’t failing because it’s bringing you a new customer at a slight loss.
But as you track these customers in a good CRM, you’ll be able to see the revenue generated from a customer over time. Making your original ad more profitable with a backend system that can increase your revenue.
You’ll need a CRM that will allow you to track the life time value of your leads and customers. Also allowing you to send emails based on purchasing behaviour.
Stop Trying to Profit on Your Front End
Now you see that in order to make your business grow, it’s ok to lose a little money up front acquiring a customer… because you have a backend in place like email to help you generate more revenue per customer over time.
You can also use a chatbot to remarket to a list of customers who have bought from you in the past. Why not combine both email and chatbot? 🙂
Knowing your LTV allows you to potentially outbid your competition, which generates you more customers and builds your business faster!
Instead of spending $10 to acquire that t-shirt customer, you can up your game to acquiring a customer for more and beat out your competition.
Yes you’ll lose money upfront, but you make it back on your backend using email and/or chatbot. You can spend more money to acquire a customer… but you know that 3 months from now the average lifetime value of a customer is worth $50 to you.
Lifetime Customer Value Example
Example –
You spend $15 to acquire a customer, but you know that you are typically making a 3 X ROI ($50) on a customer.
LTV is such an important metric to understand for your business because it illustrates the value in your business.
Knowing this… you can now start getting more aggressive with your ad spend to get more customers in the door and grow at a quicker rate.
Just imagine…
Example –
You spend $15 to acquire a customer, but you know that you are typically making a 3 X ROI ($50) on a customer.
LTV is such an important metric to understand for your business because it illustrates the value in your business.
Knowing this… you can now start getting more aggressive with your ad spend to get more customers in the door and grow at a quicker rate.
Just imagine…
You run an ad and spend – $1000 a day.
That gets you – 100 sales
Each sale is – $10
You generate – $1000 in revenue
You break even on ad spend… BUT…
You know that for every customer you acquire, you generate on average $50 back in 3 months.
So your $1k a day spend is returning you $5000 from the example above after three months.
What if you were to spend $10k a day?
That would be $50k on your return….
That’s how you increase your ecom sales!
By having a backend system in place that allows you to retarget your customers over time, boosting the revenue generated and allowing you to bid higher and win more impressions than your competition and dominate your market.
Your buyer retargeting lists can come into play here too. Giving you another highly targeted channel to utilize… driving more revenue to your business.
Summary
To conclude…
– Stop worrying about making profit on your frontend offer.
– Create a backend system that allows you to build more rapport and value with content and offers to sell.
– Calculate your lifetime value for your customers
– Acquire customers knowing your ROI 3-6 months after a customer is acquired.
