Look at your payment frequency
So conversions are good, but my sweetheart of this equation is the frequency. Just at the moment, one of my great students, and I’m talking great in terms of execution, has really taken this on board. And he sent an email out to his customer base saying how he’s changing his business, and he’s changing it because he realized that what he was doing before, selling one-time products, was OK, but it’s not the best way to solve the customer’s problem. And he really cares about his customers, and he wants to help them, so what he’s doing instead of selling one-time products is now creating a recurring subscription membership.
And this is what I’ve built my business around, is recurring subscriptions, because I see the power of recurring subscription. That effectively takes frequency from often, one, or maybe 2 if you have a good CRM system or customer relationship marketing system, that takes it up a notch.
That puts people on a customer for life program. It basically is going to up that frequency to 12, 30, 60. I have some customers who have been in my SilverCircle program for the entire time I’ve had it. Six years, so 6 times 12, what’s that, Matthew, you’re smart, 72? Seventy-two purchases at hundreds of dollars per month, not quite a thousand dollars per month.
And also, when I started my retail SEO/Internet marketing agency, at exactly the same time I quit my job, because it was the thing that got me out of there, I had 2 customers who were paying $5,500 per month, each, and I had those customers for 7 years straight. So think about the recurring nature of that. Imagine 7 times 12 times $11,000. That’s a lot of money.
So the frequency part’s where I would suggest a business have a look at. What products or services could be put on recurring billing? That’s a good start.
Matthew: Yes, it is.
James: In the car business, it’s finance that has recurring subscription. If you can’t have a recurring subscription, and if you have a longer sales cycle, let’s imagine a car where the average sale cycle might be 24 months, or 21 months, somewhere around that depending on the model. Some of them are 18 months, like AMG. Family cars can be more like 36 months. On a long cycle like that, it’s imperative that you have your direct response letters going out at certain intervals, bringing people back into the service department, where you can sell some time. And I said time then, I know, that’s not a mistake. That’s what service sells, time. It’s weird, right? They sell time and they sell parts.
And then you want to send out a reminder to refinance the vehicle. And then you want to value that vehicle when it’s in for service and sell another vehicle. And when they’re there, why not sell some umbrellas and key rings and jackets? So if you think of your business into different divisions, how can you have at the very least a recurring relationship, but if not, a recurring subscription?
I’m pretty sure your newsletter is a recurring subscription business, right?
Matthew: Yeah. We have a couple of different tiers. You know, there’s the free tier, where I make money from advertising, there’s a paid tier for $15 a month, and then there’s the higher end tier for $35 a month. I know that the average customer will stick around for 25 months, so if I can get somebody paying 15 bucks a month, that’s 15 times 25, so I think maybe $325 out of a person instead of just selling a one-time product, which is kind of nice.
And then if you get people to buy 2 products, that’s, you know, just double that. I think it’s great business.
James: Right, so if we want to have a look at some of the other areas, things like the dollar amount, that’s where you look at packaging. I had this idea that to increase the average dollar amount, we need to sell more expensive vehicles. So what I did is I rang up head office, and I said, hey, what’s the most expensive car you’ve got? And they said, oh, we’ve got an S600 sitting here. And I said, can you send it over here and let me put it in the showroom?
And we were able to do that on consignment. In other words, we didn’t have to pay for it. We could loan it from head office, and if we sold it, we then buy it, if we didn’t sell it, we send it back. I said, listen, do you want it sitting there in the paddock gathering dust, or do you want it all polished up on the chance that someone might buy it? So by someone purchasing a $430,000 vehicle (by the way, our cars are really expensive here) then that is going to lift the average sale price.
The 10-10 principle
Now, I’ve got a 10-10 concept here. Pretty straightforward, I don’t know if I invented this or if it’s someone else’s idea, and apologies if someone has walked before me, and possibly they have, but my idea with the 10-10 is that you’ve probably got 10 percent of your customers would be happy to pay 10 times more for whatever you’re selling.
So a simple thing is to just add a top level product from the get-go. And this is why I got a bit of a problem with people who talk about the ascension model. I don’t believe in the ascension model. It’s flawed. The one where someone has to buy – they get something for free, then they buy a little priced product, or a tripwire, and then they buy an expensive product, and then you can offer them the more expensive product as an upsell, etc.
The problem with that is that there’s a lot of people who just want to have the most expensive product right now. So a simple win for a business that’s struggling is to go and find your most expensive product, and then 10X the value and the price, and then market to your database and find that 10 percent of people who want it right now.
Matthew: Yeah. I think there are people that have a lot of money, and when they’re buying something they just want the best one. Like if I go to a conference, I want the VIP level ticket, because I don’t want somebody else to have a better experience than I do. It’s like I don’t care what it costs, like I want the VIP, whatever, I want to talk to the speaker. It’s like, OK, just show me what the most expensive option is, and I’ll take it. And there are people like that. People just want the nicest watch, the nicest car.
James: And there are people who have a lot more capacity. That’s right, I have a nice watch, I have a nice car. Some people say, what’s the point of having that watch? I’ve got a watch that’s $7 that tells the time perfectly. In fact, it probably tells the time better than my watch. My Rolex is notoriously not accurate for time, just as an aside. But that’s not why I have the watch.
Matthew: No, you have it because you wanted it.
James: I have capacity, and it’s within my means, and it’s nice. So same if I go to a sporting goods store and I want to buy a nice warm jacket to go travelling with. I want the nice one. It doesn’t matter if it’s $400 or whatever.
Matthew: Just imagine walking into a car dealership and you say, I want the nicest thing on the lot and they say, well, we’ll just sell you a keychain first and then we’ll sell you this used junker and then maybe we’ll sell you a nice car.
James: Exactly. That’d be ridiculous. Yeah, start with a bicycle here, give that a roll and if you like that… So they’re actually underselling. And they’re not meeting the customer’s requirements, because that’s not going to satisfy the client. So simple win is increase the price of your most expensive product. Put a product above it, that’s an easy win, and it’s so simple to do.
Online business, information business. If you sell a sub $100 product, then 10 percent of those people will probably pay for a sub $1000 product, and 10 percent of those people will probably pay for a $10,000 product and 10 percent of those people will probably pay for a $100,000 product. And if you think I’m joking, try it, and come and post the comments, because it’s just such an easy win.
Have you considered this margin win?
I’ll tell you some of the other easy wins, too. I’ll tell you an easy margin win. This is something that I’ve asked most people. When they come on board for coaching, I have a diagnostic audit. So I formulated this checklist when I was at the dealership, which really went deep into each part of the profit formula. And I had sort of transferred that idea to coaching.
So when someone comes on board, I go through a complete diagnostic audit of everything that they’ve got. And one thing that I find quite common is that they never ever asked their merchant or PayPal for a better rate. And if you can imagine, let’s say you’re doing $1 million per year in sales transactions, and you’re paying 2 ½ percent with PayPal, you can probably get it for 1 ½ percent, which would save you 1 percent on $1 million. And again, that’s not an unsubstantial amount.
Matthew: No, and I’ve done that with PayPal, where the default is 2.9 percent in the United States. Just by going on a website and clicking the right button, you can get it down to 2.2 percent pretty easily if you have a decent amount of sales volume. And I’ve done that with Stripe too. You know, Stripe says that they don’t negotiate their rates, but they definitely do. I’ve done that with multiple businesses.
James: They definitely do. And they’ll be really interested if you’ve also, if you’re comparing to PayPal, for example. So introducing competition is a good way to do it. But I have for multiple million dollar per year revenue, and I’ve asked PayPal and my merchant for a better deal, and both of them provide that. And that is worth a lot.
There are other things too, some super cool windfalls. I talked about one in a recent episode with a student of mine who travels around the world. In Australia, you can access an export marketing grant that will pretty much fund your airfares and every day away from home to develop your marketing business overseas. They might even help you with your staffing costs, and your advertising costs. Like, imagine if your AdWords and Facebook campaigns can be funded for 7 years. Pretty good windfall.
Matthew: It’d be a pretty good deal. I wish that was available here.
James: Right. Good old Australian government is very interested in us developing business overseas, because we bring all this business back and then we pay tax. So it’s a good idea, and it works for the right reasons. But that is another way to really hack up that margin there, is to basically have your marketing costs paid for. These are things I share with students, so someone might pay $1,500 to come on board, and I’m showing them how to get $100,000 a year back straightaway. That’s not bad.
Matthew: Yeah. And there are more of these things out there than you think. I live in a small state, United States, and they want people to create jobs here. So if I create a job as an internship, they’ll give me the first $2,000 to pay that, just to give the employee a salary. We just have to go out and look for those kind of things.
A summary of points
James: Exactly. So it’s a good idea to go through your business, and have a look at each of the parts of the business. Where do you get your leads from? Someone asked me today, why do I focus more on podcasts and Twitter and Facebook, and not so much on Instagram and Periscope and Snapchat, I don’t even use that, Pinterest or LinkedIn? It’s because that’s where I found that I get the best leads from, I get a really good return on my investment of energy, and I’ve like quadrupled down on it, because it’s so effective.
So that’s a simple thing, is just turning up the things that work. So find your best lead source, do more of that. Do less of the ones that suck. Have a look at your conversions, where are you converting your customers? It’s all analytics, pay attention to your marketing channels. I know that podcasts drive sales for me, because people listen to us over and over and over again and they get to know you and trust you.
Then look at your dollar amount. Put a package on top of your best package, and then, you want to go for gold, turn it into a recurring subscription. Imagine if you 10X the highest priced product you have right now, and then put it on a month-to-month subscription. That is definitely a possibility.
And then go and have a look at some ways that you can shave some of your margins, whether you use a pay for things as you need it service instead of hiring someone full time, whether you ask a high-volume provider for a better deal…
And by the way, I learned this one in the car dealership, because we did so many repair orders. That’s what they call them when you put your car in for service, it’s called a repair order or an RO, this is industry slang. What we found is if we offered people to update the batteries in their remote control, then we could sell 50 batteries a day. Twenty-five repair orders a day, 50 batteries a day at like $10 each, that is, what, $500 over 280 workdays a year? That’s quite a big boost. So small hinges swing big doors. That’s why we focus on the little numbers.
And your profit is going to go up if you work on one thing, the top thing for each area, starting with the smallest numbers first, you could have a 10 times, 20 times, 100 times change.
Matthew: Yeah. And if you think about your business as a funnel, out of every 100 people that land on your website, say 10 of them might get to your landing page, and out of that, 50 percent might make it to the payment page, 20 percent of those people might actually buy, and if you can widen the funnel between one step to the next step to the next, it tends to have an exponential effect. So if you can make 3 or 4 different improvements, those will compound each other and make a dramatic difference in the number of sales that you make.
James: Exactly. Stacking good ideas on top of each other is the secret. Also have checklists. Just have checklists that you revisit, because you want to start doing some new things, you want to stop doing the things that don’t work, and you want to continue doing things, you got to lock them down into a pattern.
I always like to look at that Pareto Principle phenomenon of the 80/20. It’s so powerful that people don’t really realize it, but just 4 percent of the things you do get 64 percent of the results. So I would suggest, list everything you can think of under each of the columns, and then circle the one that is by far more important than everyone else. Because there will be one that’s far more important. Start with that. Then do the next one and then do the next one. You can quickly turn a business around, often in days.
The power of one email
And here’s another concept, and it might be Gary Halbert that said this, it’s been big in my own coaching group lately, and it came about because I’m about to go away on a trip, and my friend wanted to come on the trip too, but he said, oh, I can’t afford it. And I said, listen, you’re only one email away from a big payday. And I crafted an email for him, it was a 9-word email which was a Dean Jackson-style email.
If you have existing customers, this is so much easier than any other possible way. Your existing customer is where your next profit will come from. Just send a well-crafted offer to your existing customers, and you’ll be surprised at the reaction. It might be for that 10 times program, it might be that you’re moving to subscription, it might be something that helps initiate a sale. In this case, he’s a surfboard shop owner, and the email was, “Hey, Matthew, do you happen to have any surfboards sitting around that you’re not riding at the moment?”
That was the email. And the email is designed to flesh out existing customers and to have them make inquiries about perhaps selling that surfboard they’re not using, and possibly even trading it in on a new one. Because we’re changing season here.
It’s just a simple email. His biggest fear was that he doesn’t want to upset people, he doesn’t want to cause them to send him hate mail. But then here’s the way that you can think about that. My friend Dean Jackson, who was with me at the time on this rescue mission, said to the shop owner, “If you had a customer walk into the shop right now, would you ignore them?”
James: And he said, “No”. And he said, “Well, that’s what you’re doing with your opt-in. You’re not sending them any emails, it’s pretty much they’ve said, hey, I want to find out about stuff, and then you’re ignoring them.” He goes, “Well, when you put it like that…” So it all made sense. So if you have a resistance around making an offer, just keep in mind that people decided to get your information. They want to know what solutions you have, to solve their problems. And if they want to invest more in themselves and you can provide a solution, hey, why not?
Matthew: Yeah. I mean, what’s the worst thing that’s going to happen if you send an email offer, is that somebody unsubscribes from your list or they just ignore it or don’t respond to it. It’s not like somebody’s going to come through your computer screen and attack you and say, “Why did you send me that email?” It just doesn’t happen.
James: That’s what I learned when I was debt collecting on the phone. They can’t punch you in the face over the phone.
Matthew: No, they cannot.
James: Matthew, it’s been fun. Do you think we’ve covered the topic sufficiently?
Matthew: I think so. I think we’ve come up with a lot of different ideas to turn around a business or just help grow a business that’s doing OK but could do better. I think there are a lot of great principles in this podcast, just recurring revenue is huge, obviously, selling stuff to people multiple times, conversion optimization… there are many things that if people just did them in their business that they could see big growth.
James: Exactly. And the action step from this Part 4 of 6 is to write down the top 1 idea, or if you’ve written a whole lot of notes, which you probably have, circle something. Circle it right now, and commit to doing that thing.
Come back to the comments section and tell us what you did, and what result you got. That would be sufficient fuel for Matthew and I to feel very excited about what we’re doing here, and knowing that we’re making a difference. And we look forward to joining you on Part 5 of 6, which is the next one in this series, called How To Successfully Change The Name Of Your Business.
And if you want to check out more information for Matthew, head over to MattPaulson.com, and of course you already know where SuperFastBusiness is. Take care.
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