Ebook Marketing System: “Magic Ratio” Turns This $15 Book Into $100,000 A Month (Guess & Win!)
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Wanna know how much money you'll make in 2009?
Punch in these 2 numbers on your keyboard calculator.
1. Revenue from your marketing
2. Costs
Revenue/costs = magic ratio
In a second, I'll tell you how you can guess a magic ratio and
win something neat….
So one of my friends sends out direct mail offering a free
book.
People request the book and he sends it.
To GET the person to request the book AND to send it out all
costs himm $15.
4% of the people who GET the book spend $4,000 with him because
the book sells a software program in the back.
Here's how it works:
100 books sold x $15 cost of acquistion = $1500 spent
4 orders x $4000 = $16,000
Now, you take revenue/costs.
$16,000/$1500 = 10.66
That is the “magic ratio.”
REVENUE/COSTS = MAGIC RATIO
For ever DOLLAR he spends on marketing, he gets back $10.66.
That is your business slot machine.
You put a buck into the slot. And you get back $10.66.
How many times you wanna do that in a month?
My friend does it enough to bring in $100 g's a month in revenue.
He doesn't want to manage a business any larger than that although
he easily could.
Now, to the people who request the book, he sends 7 back-end offers,
3 for recurring billing services.
So he has automatic bux coming in also.
But here's my point.
Do you know your magic ratio? If you do, you have a magic key to
the lifestyle you want.
You may have your head swimming with confusion about WHAT the heck
to do in this new year to pay bills or grow and expand or create
the lifestyle you want.
You may ignore almost every email you get because you've been
dissapointed because something didn't work for you.
You may just not know if “this Internet deal” will work for you
or it's a pipe dream.
You may have retirement staring down at you and wonder where
the bux will come from.
But get ALL THAT out of your mind. Dump the skepticism. Dump
the worries. Dump the past experiences.
Here's all you need to FOCUS on — getting a magic ratio going
for you.
Now, you need to know your MINIMUM magic ratio. What's the minimum
number you need to end up with when you divide revenue by costs
for a marketing campaign?
So let's say you spend $100 on an ezine ad. How much do you need
to get back in LIFETIME VALUE of the customer over a period of
one year?
So if you spend $100 on an ad, how much do you need to get back
over the period of a year in customer purchases for it to be
worth your while?
What's the minimum you should shoot for to grow a healthy
business?
Post your answer and I'll select the first right answer and publish
your name and url in my email tomorrow!
Submit your answer by 7:30 a.m. CST January 9, 2009.
Void where prohibited. No purchase required.
Marlon
Hey Marlon – modification to the above post.
I went back to study the example you presented and realized that that it included life time value for the whole year! So, therefore a magic ratio of 1 would mean working for a whole year without profit.
So, assuming you would settle for a minimum of $1 profit from everyone on your list, (industry average roughly) you should aim for a 2:1 minimum magic ratio. So that, for every $1 you put in you get a $1 profit. Then grow your list and scale up your offers and sales in future years.
Hey Marlon – I love your newsletter.
I my mind the minimum magic ratio is: 1
because if for every $1 spend I get $1 back, that means I've got that customer for free, (or break even)!
So, now I can build a relationship with him/her and market good stuff to the customer all year, and yes make lots of sales and profits = profitable business by doing all this over and over again.
Norf
I want to point out how I got the sales revenue that I mentioned in an earlier post. (Thanks Marlon for calling it an awesome comment)
First off, this was not my product. I found a hot product on CB in my market that had a high % payout plus a recurring on the backend.
I have a very small list, but used it effectively to test my email campaign. The conversion was 12%.
Used those figures to approach a friend in the same niche who had a modest list.
The 50/50 split on revenue was the affiliate income from the product. That campaign converted at 6.5%
I was prepared to write the email campaign and learn about the product (I used it first). I also handled the support questions, which meant that my JV partner had to do nothing other than mail to his list.
Anyone can do this – just don't try and go for big list owners without any sort of track record. They have no need to share with you in this way because they usually have back office staff who could handle it all, therefore keeping 100% of the affiliate commission.
I figure it will work best with small (under 10k) list owners because they are likely to be just one person in the business. That means that if you offer to take all of the load and provide the tools, you could both make good money.
A great way to get started and build up some income that you can invest in your own products down the line.
If they make easy money the first time round, then there is a very good chance that you'll be able to do repeat business with them.
Graham
1.1 minimum…I hope I got here on time !
Hey Marlon.
Great way to initiate discussion. As brother DK likes to say, you gotta know your #s. What you didn't mention is what someone's total overhead is. If ad cost is $100 and total office overhead is $100 per client, then I'd say ratio should be 4:1 for a net 50% profit margin factoring in all costs.
As an author and fellow info-marketer I shoot for a net 50% profit margin, so I look to keep product cost at 10% to 20% of my gross and other costs (supplies, staff salary, systems cost) at 30% to 40% max for a net ratio of 2:1. So with that target net profit margin, if you TOTAL overhead was $100/client generated then I'd say 2:1. Doesn't matter how great your revenue/ad cost ratio is if your other expenses are out of control.
With a 10.66/1 ratio I'm thinking your client has got to be earning a decent net after his other expenses. Take care, amigo!
Hi Marlon,
I'd say 1 buck in to get a minimum of 3 out. Not because i've ever mamaged to make a buck online yet, but that is what we worked offline in the past.
Perry Keenan
Hi Marlon,
This is Tian Yan from Malaysia.
If the answer you are looking for is the MINIMUM magic ratio for my marketing campaign… then it should be 1:1.
I only need to break even on this campaign to acquire new customers like crazy to sell them on the back-end.
But if the answer you're looking for is how much do I need to get back over the period of A YEAR in customer purchases, then the Magic Ratio should be at least 100:1 and above.
Over a period of a year, there is so many back-end opportunities and if I'm not working hard to sell my acquired customers what they want, then I'm not serious.
A high-ticket coaching program alone is enough to get that kind of returns.
Be Well,
– Tian Yan
I think the correct answer is "there is no correct answer."
I think every business owners "perfect ratio" is different based upon ones personal goals, along with the nature of the business, the products, services, as well as overhead costs etc.
For example: If I am selling office furniture, it could quite possibly take 2 or 3 years before I see another dime from that customer.
So obviously I would have to recoup my advertizing costs, along with my profits right away. Otherwise I would be out of business pretty fast.
I have no idea what I'm talking about when it comes to running a retail outlet, like an office furniture store.
But I would imagine the markup would be somewhere in the neighborhood of 25 to 35% after my costs, of course.
So even though I would like my magic ratio to be much higher (like 3:1), I guess a realistic ratio for that type of business would be more like 1.5:1 or 2:1 at best.
On the other hand, if I am selling a subscription service that costs $34.95 per month, my magic ratio would be quite different.
If we assume that a customer is going to continue paying for 12 months (and hopefully more), I could actually afford to break even (or even lose money) on my advertizing in the first month… Just like AOL spending millions sending out all those CDs.
Based upon this information, and assuming I am ok with breaking even and seeing profits starting in month 2…
My magic ratio would be:
$419.40/ $34.95 = $12.00 OR 1:12
Tim
We don't muck around down here in AUSSIE mate.
If I can't have 10
;1 then i"m not playin
Hi Marlon,
Great article as always.
I look for something that is SCALABLE and then if I can make $1.01 for ever $1.00 I spend initially, I'll tweak and scale it to make it better.
Cheers
Rocky
Hi Marlon,
My magic ratio is 10:1 minimum and I would actually hope to do better than that.
Wishing you Good Health
Kate
Hi Marlon,
If I spent $100 on an ad, I would need to get back $1,200 over the period of a year in customer purchases for it to be
worth MY while?
My minimum to grow a HEALTHY business would be a 10:1 ratio.
Alice
Hi Marlon,
My magic ratio answer is…
1:3
I'm shooting to get $3 in revenue for every $1 invested.
Adios,
Jeffrey Levesque
The Affiliate Mechanic
1 buck in – 4 bucks out
good to go!
My minimum ratio would be $4.25 earned for every $1 spent.
There is no simple answer to this. Because it's different for everyone. My 1:1 would not satisfy a 10:1 or 3:1
And…somehow your math did not make sense to me (but math is not my specialty, so I'll use a calculator)
100 books sold x $15 cost of acquistion = $1500 spent
4 orders x $4000 = $16,000
(you did not specify number of books per order, but if 100 books = 1 order and that = $1500 spent, then 4 orders at 1500 would be 6000. So this should be 4 x 6,000 or $24000
and that would make your magic ratio 16 based on the math below of now $24000/$1500 = 16
Now, you take revenue/costs.
$16,000/$1500 = 10.66
But like I said Math is not my specialty so all this could be moot.
Michael
[Michael, I may have divided wrong. I didn't sleep that well last night. I'll check it tomorrow. Be that as it may, it's a great multiple, whatever the number is!]
For every dollar in I'm happy with $1.01 out. That's plenty of profit if I'm growing a list. Plenty of businesses run on slim margins and would be happy to stop right there.
The benefit we have as Internet Marketers is that there are always ways to improve your margins if you have a healthy growing list and back end product line.
There's always more money in your list. I'm not even worried if I break even on growing my list (i.e. I bid aggressively on PPC) because I rely on the back end to make money.
Marlon,
You might want to reread my "entry" 🙂 — I didn't say 5 to 1, I said 1.5 to 1 (the numbers and dots blur to the eye).
I said 1.5 to 1 because as a minimum, if I can put in $1 and get $1.50, I can scale significantly and yet have a bit of a cushion "just in case".
Thanks.
I only have the experience of one marketing campaign to work from. But it surprised the hell out of me just how much can be made.
I'm not talking big numbers, but I'll run through it.
Affiliate sale campaign using a JV to someone else's list.
My costs were in time only and I estimate 8 hours over the campaign. That includes writing the email copy and then answering support emails from buyers and prospects.
I split the frontend revenue 50/50 with the list owner and I kept the backend recurring income.
So this is how I work out the magic number. Not a minimum, but a great starting out point.
Revenue on sales $12000
Backend recurring $870/mnth
Time costs at $100/hr = $800
Therfore I take the revenue on sales and divide by 2 (my 50% share) $6000
Add on the 870 recurring = $6870 and that is my income for one month from this campaign.
6870/800 = 8.58
Therefore my magic number is 8.58 for a single campaign.
But if I add in the recurring income for a whole year instead of one month then it changes like this.
6000 + (870 X 12) 10440 = 16440
16440/800 = 20.55
So that is my magic number from one campaign with the income from 12 months factored in.
Just shows the value of backend recurring income.
Graham
PS Marlon's emails are one of the very few that I always read because he constantly gives value. A trick we all need to learn.
Marlon I've found that in anything I do I need to either add or subtract a factor of 3 or 4 to that number. While 3 or 4 to 1 sounds good, I think 12 or 16 to 1 is ideal when you consider other costs in.
Marlon,
I'm looking for a 15:1 ratio. The ByReferralOnly training I studied for the past four years recommends that ratio.
In your example, I did gave the question of whether you were spending that $100 each month? But regardless if that's a monthly cost….I'm sticking with the 15:1 ratio.
Thanks for the ideas.
Andrea
Difficult one to get right.
However I would estimate ratio of
1 buck in to get 5 bucks out.
OK, if I look at this like a manufacturer, we're manufacturing profits and clients, then the ratio needs to be between 4:1 and 8:1, say 6:1. That would work for me. How about you?
1.5:1
[Hey Terry, how are you? Any reason you'd say 5 to 1 vs 3 to 1 or 6 to 1? Just curious. And also trying to stimulate some good thinking on everyone's part here. Marlon]
Of course, if you're building a list… you could be very happy to simply get it for free, which is to say 1:1 is quite good enough. Then it's all on the backend.
[Steve, we're INCLUDING the lifetime value for a year, i.e. the back end revenue. So if you put a buck in, how much do you need to get back in that year to build a solid business?]
$400 for every $100 4/1
Hi Marlon. I think the minimum ratio is 1:1. In other words break even. Because you still have the person on your list, and as long as they are on your list you have a chance to generate revenue through them either directly or maybe indirectly at some point.
[Craig, we're including the lifetime value for a 1 year period of time. So theoretically you could break even that first year and profit in the next years. But do you have the pockets to do that? Most people don't.]
$2 in revenue for every $1 invested
Kat
It's a little too simplistic to say there's only one ratio. If I had a system that handled all the details and reinvested money that came in immediately from the front end, a ratio as low as 1.1:1 would be a money gusher eventually, if the market was large enough to handle a long rampup. On the other hand, if I'm handling details at all, I want at least a 4:1 and ideally something closer to that luscious 10:1. Ten baggers are a dream.
I am just guessing… 1 out of 10?
For years, I have been reading everything about marketing… there are different schools of thought…
As for magic ratio… a dollar has the potential of creating tens times more… And, wait a minute… it may sound simple but truthfully, it all depends on content also… there is a lot more involved than just the cost/revenue. If the product is a flop or a dud, then nothing will happen, regardless of how it is being marketed and to which target audience. That's the fact.
I have known someone who spent over $5,000 dollars (learning how to…) then create products and market them but NO revenues at all. The problem is… ineffective or wrong leads… period! It has nothing to do with products… purchasing great leads are the key to success to Internet Marketing in general, I believe.
I'm going for $2. $2 revenue for every $1 invested.
best wishes
Tim
Hi Marlon
I would say that the minimum magic rato that you need to get back from such and ad placement is 10
The minimum magic ratio you need to have for a great business in 2009 is $16,000/$1500 = 10.66
That is the "magic ratio."
$60,000 over a year
[Hey Jane, the question is this: If you have a business marketing machine, and you put a buck in like a slot machine, how many bucks do you need to come out on that advertising investment to build and grow a solid business?]
$520
Marlon
I think it is 3 to 1 ratio.
Thanks
Dave
P.S. Awesome article by the way