Never Need Another Lead
Lesson 4 - Understand the huge untapped value of your customers
In the last lesson I highlighted the fact that you don’t have to pay to acquire existing customers because, well, they already exist. They’re not possible, someday customers — they are customers. Now I'm going to show you how to upsell and cross-sell to your existing customers, and that starts with your existing products or services.
Finding your most profitable products or services
Start by making a quick list of the products or services you offer. (If you have too many, then group them into categories.)
Next, look into your accounts and identify the top-selling products or services. Rank them from highest sales to lowest sales. Include a description and unit cost. Then list the number of units sold and 12-month sales and profits. And, finally, refer back to your list of top customers and write down which of them bought that product or service.
You’ve just discovered the following valuable pieces of information:
Let's start with the first three items on the list. What percentage of your sales come from your top products or services? Research suggests it might be a solid majority. This is what's called the Pareto Principle: roughly 80% of your sales come from 20% of your customers, and about 20% of your products or services account for 80% of your business. (These are averages. Your mileage may vary.)
As a thought exercise, ponder for a few minutes what would happen if your business focused more on marketing and selling your most profitable products/services, and thus spent relatively little time and effort on the least profitable products/services? What would that do to your bottom line (not to mention your stress level)?
Let's start off with a provocative question: What if I told you that your best customers are trying to tell you something and you weren't listening?
You'd say I was crazy, right? But hang in there with me.
First, they're telling you that they're your best customers because they're your loyal customers.
So? Well, this means that they're predisposed to buying from your company and not your competitors. Therefore it makes all the sense in the world to find new and interesting ways to sell these customers/fans additional products and services. In many ways it will be a much easier sales process — primarily because there's not a whole lot of selling required!
Second, what’s perhaps less obvious is that not only are these customers more likely to buy more of what you offer, but they’re willing to pay more for premium products or services (or experiences) that you create if you can demonstrate their additional value.
Create more value for your best customers
It’s important to note here that whenever someone says additional value, that means you can charge premium prices, complete with higher profit margins. Why? Because you’ve gone beyond sameness to uniqueness.
What exactly does that mean? Let’s take a simple example. If you sell candles, you probably have some raving fans. They love to light your candles, relax, do some yoga…
Wait a second. Did we just say that your best customers, the same ones who buy every type of candle you make, also enjoy yoga? What if you created a premium bundle where you offer some candles and a yoga DVD? Better still, what if you partnered up with the yoga studio down the street to offer your customers a few classes at an introductory rate?
What you’ve done is bundle a product with a service and charged more for it, therefore increasing your profit per customer. And you can do this over and over again!
There's a virtuous circle or feedback loop at play here:
While your ordinary customers will continue to buy the occasional candle, you have some big fans out there who will not only buy all kinds of candles from you, but they'll follow your lead when you recommend ways they can get even more value out of your candles or even more value from their lives in general.
Think about that last statement for a second. The truth for your best customers is that you’re not just selling candles. Or not even candles at all. Rather, your real ‘product’ is a better, more relaxed lifestyle — and candles (and yoga and whatever else) are just means to that end. What you’re selling is the door that opens to a better life. And you are the one holding the keys.
An advanced class in 80/20 selling
While there’s certainly some sound logic behind how you should sell to your best customers, there’s also some research to back it up.
The 80/20 principle we discussed earlier can reveal upsell opportunities with your best customers. The secret is the 80/20 principle applied to buying behavior.
For example, if you offer a premium candle, your top seller, for $39 to 100 people on your mailing list, and 20 people (mainly your best customers) buy it, you make $780. But what the 80/20 principle shows is that you can also offer a premium $190 product (candle + yoga), and 3 out of those 100 customers are likely to buy it. That nets you lots of additional revenue.
What you want to create are pricing options. Think of Starbucks or even your neighborhood car wash. They feature good-better-best pricing tiers because different customers want different things. Only 20% of customers will choose the best pricing tier (a premium offer), but the added revenue (and margin) will more than compensate for the small number of takers. Perhaps more importantly, what you've done with pricing options is to 'anchor' your good and better prices to the best tier, making the other two look like bargains by comparison, thus selling more of those as well.
The creative options for adding value and value pricing are endless. Write down some options. You don’t have to have a dozen new offerings to start, but consider at least a few.
Are you getting excited yet?