How to Go From $2.7 Million To $7.2 Without Spending A Dime

Hello,

Marlon here.

Pretend your business is a slot machine.

Everytime you put in $32, you get back $125.

Or everytime you put in $203, you get back $1,126.

How many times would play that slot?

Well, that IS how your business works. Let me explain:

I want to explain how to boil your business down to only
two numbers. And then use that to show you how one business
went from $2.7 million to $7.2 million without spending an
extra dime.

First….

You can boil your online business down to two numbers.
This is how you cut through complexity and find simplicity.

Which is what I do for people.

I help you cut through the noise and get down to the heart
of the matter.

Any idiot can make things complex. Think about it. You probably
do a really good job at making things complex without anyone
else’s help!

The challenge is to make ’em simple so you can take action.
You can’t act on complex plans.

If you’re having troubles getting into gear, you need to simplify.

Here are the two numbers:

1. Cost to get a new customer

In marketing we call this “customer acquisition cost.”

2. The Lifetime Customer Value

You’ll see this referred to as LCV or LVC, however you want
to state it. Or just referred to as lifetime value for short.

Here are examples from the book Managing Customers As Investments
by Sunil Gupta and Donald Lehmann.

Example one:

In 2002 Ameritrade spent $203 to get a new customer. The lifetime
value of a customer was $1,126.

So they spent $203 and got back $1,126. See how this is something
you can understand and sink your teeth into?

Example two:

In 2003 Netflix had a lifetime customer value of $125 according
to the book. And the customer acquisition cost was $32.

So you put in $32 and you get back $125. How many times do you
want to put $32 into your slot machine?

Now, obviously those numbers are averages. And I’m SURE Netflix
has very different numbers today. This is just an example.

Example three:

Vincent James sold supplements via direct mail.

He took a business that normally would make $2.7 on the front
end to $7.2 million just by adding forced continuity or
recurring billing.

His customers would buy the first bottle for $59.95, call it
$60. Then they’d buy three more bottles for $40 on continuity
or recurring billing.

So if you add $60 to the three additional purchases for $40
($120 over 3 months) you get $180 customer value.

In other words, he took a $60 sale and turned it into a $180
sale. It cost him $30 to make the sale.

So he spent $30 and got back $180.

How many times would you do that if you could?

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The recurring billing back end was an extra $4.8 million
in sales.

In another business, Vincent tells how he ran full-page
ads for a book. The ads broke even.

Then, a week after he sent the first book, he’d send a letter
for a related product at $200. 5% would buy.

Say he had 100 book buyers. Five out of the 100 would buy
the $200 offer. 5 x $200 = $1,000. One thousand dollars
divided by the 100 letters mailed equals $10 per customer.

In other words, he just added $10 to the lifetime value
of the customer.

He did that over and over. So it built up to where for
every $10,000 he spent on ads, when he included the back
end sales, he’d make $40,000.

So he put $10,000 into the business slot machine and got
back $40,000.

Now, if you know about Vincent, he got in trouble with the
FTC and they took away most of what he made.

But that is a totally separate issue from understanding the
numbers of how business works.

So this is how a business works.

Let’s say you run an affiliate program.

You sell a $60 product and pay out a $40 commission. Each
customer has a value of $20. For simplicity sake, I won’t
include the cost of fulfillment.

But out of 1,000 customers over a period of a year how much
more revenue do you get?

That becomes your lifetimme value.

And now you have your business slot machine running.

Your goal over the year should be take that $20 per customer up
to say $100 or more.

Marlon Sanders

PS: If you want to start an affiliate program for YOUR products
so you can really crank the traffic, get my complete A to Z
system I’ve used for many years in my OWN business:

http://www.TurboProfits.com/tracking/go.php?c=1_7_09affdash

Get your business slot machine geared up today!

9 thoughts on “How to Go From $2.7 Million To $7.2 Without Spending A Dime”

  1. Dear Marlon,

    Thank you for the 'Best of e-book'.This will become 'newbies bible' in no time.It is great!

    Kat

    ———————

    PS.

    Marlon,one thing, since you read this emails.People who bought you promo-dash months ago still getting sales letters for it.I have all your dash products and some times get sales letter from you.You use AWeber so here's what you do. You can accomplish this by setting up two things: an email parser,

    which will add paying customers to your customer list, and an

    automation rule, which will remove your customers from your prospect list.

    First, make sure that you have two lists: a prospect list and a

    customer list. The prospect list should be the one that people

    join initially, i.e. via a web form on your site.

    Next, you will want to set up an email parser in the customer list:

    The parser works by "reading" the notification email, sent out by

    your shopping cart, when someone purchases from you (which you

    would direct to be sent to your AWeber email address). At that

    point, they would be sent a verification message, and once they

    click on the link in that message, they would be added to your

    AWeber list.

    [Hey Kat, we have all that set up. I just forget to uncheck the buyers lists! But a lot of times my promos are offering a FREE bonus…and I like customers to get them because they're grandfathered in and need to know about the bonus. But I think you bring up a really valid point and I'll try to pay more attention to it in the new year!]

  2. Hi Marlon,

    "Wise words of wisdom"

    Thanks for the easy to understand explanation of the lifetime value of a customer. Just the thing for budding Internet marketers and entrepreneurs. You are dead right about people making things complex when they don't have to be. Looking forward to your next posting.

    Regards,

    Bill Knight

    [Hey Bill, appreciate your comments. I'm going to try to build on the topic tomorrow. Marlon]
    http://www.money-harvest.com

  3. Hi Marlon

    Great article, I agree simplicity is the key. Many of the products on the market today put too much spin on things. It gets to the point where the product that was suppose to help creates more confusion. I like your approach; best wishes to you and your readers in 2009

    [Hey Ken, thanks! I really think that when we simplify things, it helps us take action.]

  4. Hi Marlon!

    Thanks a lot for easy explanation in this post and thanks a lot for your usefull subscribe letters!

    Best regards,

    Mikhail Trishin

    Russia
    http://www.inkrisis.ru

    [Hi Mikhail, glad you found that explanation useful. I owe a lot to Vincent for explaining it so darned well.]

  5. Hi Marlin – Just read your post about the Life Time Customer Value (LCV) of a customer.

    This is one of the most crucial elements in starting a long term profitable business, but this is even more vital in an online business where the customer needs to develop trust in the online merchant.

    I would go so far as to say that your first "sale" to an online customer should be a "loss-leader" or even a freebie.

    Get the online customer in your sales funnel, and follow-up with a similar product a few days later.

    Good post Marlon!

    [Hi John, thanks for your comments. And yes, it's critical to online marketing and not many people talk about it in terms you can understand. Thanks for commenting today. Good luck in 2009!]

  6. This is a great blog post for several reasons Marlon. First and foremost you are talking about real marketing not a bunch of regurgitated tripe and useless blathering.

    What you describe in this post is real world where real companies spend real money marketing real products and services. More simply it is business actually works and not a lot of half cooked over hyped theories.

    You provide a honest context for the realities of marketing that defines important principals which every one selling anything online or off should take to heart as being absolute.

    To many so called experts water down the truth about marketing and as a result many people who have no experience use this anemic advice at their peril.

    My congratulations on putting forward a more balanced and honest overview of a true and fully fledged marketing model.

    [Hey Marvin, thanks for your post and I'm glad this resonated with you. I find not many people talk about this and it's really an important topic! So thanks for your comments today! Marlon]

  7. Marlon:

    Thank you for that no nonsense, simple way to explain the value of the customer. The people often make the mistake to spend all efforts to acquire new customers while neglecting the existing ones. You have a gold mine in your existing customers. They already know you and trust you. So, keep up the relationship with them.

    The lifeline of any business is its customers. Every business needs an infusion of new customers to keep it alive. (Invariably, some old customers will either leave or become inactive; so you need to replenish them. Plus, you need to grow your business too.) Marketing is the key to acquiring new customers (along with viral tools such as referrals from existing customers.) So, knowing the lifetime value of a customer is important when you evaluate the cost of acquiring a new customers.

    Good article.

    Dr. Mathew
    http://www.EntrepreneurismBible.com

    [Hi Dr. Mathew, thanks for your comments today and I hope people check out EntrepreneurismBible.com! The lifetime value of a customer isn't often discussed in terms where it makes sense. Vincent does a marvelous job of it in his book. Have a great 2009! Marlon]

  8. Products products products!!!

    Marlon,

    I am almost set to go live with blastyourtrack.com

    As a service…. However I am starting to think:

    What if I hold off and make this a product instead.

    What is your opinion?

    I don't think I have enough hours to turn over

    2.7 million from a service , let alone 7.2!!

    Should i launch the service and get going,

    Or put the brakes on, re-evaluate and launch a

    Product???

    Love your work btw!

    [Hey Rick, since I don't know your target audience, customer list or prior product launches, I couldn't even begin to give you advice without knowing more. There's nothing wrong with a service. Not at all. And you CAN do $2.7 million if you have a way to get the traffic and scale up. You CAN get the traffic you have the back end numbers. In other words if you have a slot machine where when you put in $10 to get a new customer, you get $150 then you can BUY all the advertising you can get your hands on. By the way, I consider a SERVICE a product. It's something you sell in exchange for money. Marlon]

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