Your clients can be your lifelong affiliates
Most businesses make it hard for clients and employers to start a relationship with them. The key is to lower or eliminate all the barriers that may hinder the potential relationship. Even if you deliver amazing value, service, and tangible results, you need to gain your prospective client’s confidence! Only then would they consistently come back and choose to deal with you, and only you.
You need to take on all the risk of the business transaction to show that you really stand behind your products or services. This efficiently forms a buying or advisory relationship, the faster someone will convert from a prospect to a lifelong client.
How to provide the ultimate offer for long term profits
Repurchasing allows you profit from clients continuously all through their buying lifetime. But you need to a strong clientele base to gain revenue from, hence client acquisition is vital.
When you are acquiring clients always try to focus on the long-term end-goal, rather than be caught up with the short-term profits. Give out an offer they can’t resist! This should be at a break-even or even a slight loss to gain a priceless relationship with your prospect.
But don’t worry! After which, you would capitalize on the relationship and recuperate your profits on the back-end. Make sure to nurture this new long term buying relationship so that they would always repurchase from you. This often goes unnoticed. Hence it is an under-utilized methods to grow your client base!
This is especially powerful if you are in a business or practice that has a characteristically higher probability of clients coming back, again and again, to repurchase from you the same or different products or services. Thus, your focus should be on channeling your efforts on getting prospects into the buying system as quickly as you can.
Leverage on the lifetime value of your client
Analyse and understand the combined profit a client represents to your business for the life of that relationship. Essentially, just calculate the lifetime value of your clients. Only then would you understand how much time, effort and expense to allocate towards acquiring a new client in the first place.
How do companies increase their clients and profits? Many do it by shifting their focus from trying to make a huge profit on the acquisition of a new client to making most of their profit from repurchases that result from those new clients.
They make millions of dollars from clients who were first enticed by that break-even proposition. For example, many credit cards give a 6% or lower interest rate for when you use the card in your first year.
They also have a few hundred dollars of cashback bonus if you are new to signing up for the credit card. Even in the workplace, ambitious employees take the initiative to volunteer for extra obligations or relief a supervisor or manager for no extra money. Why? All for that potential, future promotion! It has been proven time and again that exploiting the marginal net worth of a client is a key profit driver for your business.
Calculating the current lifetime value of one of your clients
Take the total profit of an average client over the lifetime of his/her patronage – including all residual sales – less all advertising, marketing, and product expenses.
Let’s say that your average new client brings you an average profit of $50 on the first sale. He/she repurchases three more times a year, with an average reorder amount of $150, and on each $150 reorder you make $100 gross profit.
Now, multiply this by the average patronage life lasting two years, every new client is worth $650. Therefore, you could, theoretically, afford to spend up to $650 in order to acquire a new client and still break even.
Don’t be short-sighted: Short-term loss, Long-term gain
Here is an example from Jay Abraham’s client. His client ran an $6 million air conditioning business that had a marketing sale of $19.95 tune-up and cleaning service for your air-conditioning or heating system twice a year. It actually cost him about $30.00 to perform the service.
So why on earth would he take a $10 loss on every client who responds? After an analysis, he discovered that after his profits improve drastically because of his promotion. The $10 loss ends up being more than recovered, as 50% of the people having a service done have an immediate, new problem that needs to be repaired. This results in a minimum of $125 additional highly profitable service charge that occurs right after the tune-up is being performed. In fact, over $2.5 million from new clients result from these $19.95 small loss-based acquisition programs. Furthermore, half of all the newly-acquired clients became regular, full-paying repair clients over the years.
Same Strategy, Different Tactics
Don’t aim to slash the price of the first purchase, but rather making the first purchase offer so irresistible that people would be flocking towards your company.
While reducing the price of your product or service is the most common and easiest way to get that first sale, there are other potent ways to obtain first-time buyers.
For example, you can calculate your “allowable marketing or selling cost”. This is defined as how much money you are willing to either spend or forgo receiving (by reducing the selling price), in order to make that first purchase more appealing to a prospective client.
Financial Incentive for your salespeople
Instead of reducing the selling cost, you keep the selling price the same. Then, you could invest that “allowable marketing or selling cost” into financial incentives for your salespeople, to bring a larger quantity of first-time clients.
Up the value proposal on the 1st offer
Another way would be using this allowable cost to buy more products. Thus, prospects get twice the quantity and vale on their first purchase. You could also use the money to purchase other complementary products or services (at wholesale). Then package these items with your product or service without raising the price. This makes your first offer far more attractive and valuable to prospects.
Up the sales and marketing efforts
Invest in advertising, hiring more salespeople, free webinars or any other marketing and selling campaigns. Alternatively, you could use the money to rent a promotional space in someone’s store or a trade show booth. Then, pay them a commission of $100 for every new client you gain through their facility.
Test and Optimize
The main limitation is that you should spend your allowable marketing or selling cost to help you strategically breakeven on the initial sale using ethical and legal means. Remember to test and analyse the results. Feel free to pivot your strategy based on the trends and insights you derive. Most importantly, ensure that it is economically sustainable in the long-term.
Your typical , non-strategic competitors would start to look more expensive and appear to offer much less value than you. Your offer instantly becomes distinctly attractive.
Make a list of every product or service you or your company sell. Think about the most effective way to lower the resistance barrier to a prospective client, employer, or prospect by lowering the entrance fee you ask. This should be grounded on the demographic of your target market, the characteristics of your industry, product or service and any other relevant statistics.
Remember to keep focused on the long-term goal: attracting a client who buys over and over at full margin in the end. Do not get caught up with the short-term profits or even losses of a new client first coming in for a lower-priced base offer.
Test it out in a small, safe way first to ensure results before you expand it across your entire business. Here’s wishing you every success in using this logical strategy of lowering the barrier of entry to generate tremendous numbers of new client relationships. Now you are definitely ready to witness drastic improvements in your business and career results!