Part 5: A New Hope - Revamping the Offer
Evolution of the Offer - Ecommerce Funnel
Starting in December, we began the process of building and implementing a paid cold traffic strategy and by January, we had created a process to give us a consistent volume of inbound traffic to our store. The purpose of this was to give us a base of users for us to test branding, messaging, our offer and all the back-office operations and fulfillment processes prior to scaling traffic and the business. After testing a variety of audiences, ad sets and messaging, we were able to put together a formula to dial-in a $0.03 per session acquisition cost with our winning ad-set for our target demographic
Although we had the ability to generate traffic extremely inexpensively, as you can see in the above analytics chart, we had a conversion problem within our store. To summarize, people would come to the store, browse the products but something about the messaging, offering or price made it where they decided not to buy what was being offered.
Root Causes of a Conversion Issue
- Brand & Messaging: What we have isn't being properly communicated to our target customer base
- Offer: What we have isn't compelling to our target customer base
Due to our ability to acquire traffic inexpensively, we were profitable on a unit basis ($18.07 gross margin on sales inclusive of advertising). However, I felt that we were leaving a lot on the table, and in late January, we capped traffic at approximately 1,000 sessions / day so that we could work on our conversion issue. Although we were aware by late February that our conversion issue was primarily offer based (see previous post), prior to rebuilding our offer, we continued to gather data for another 3 months to gain a better understanding of our market and maximize our chances of successfully re-building our offer to actual market needs.
Rethinking the Offer
The video excerpt below (thanks Clickfunnels) gives an overview on my *aha* moment regarding our offer.
My Framework for Growth: Packaging the Offer
Although I am fortunate to be an instinctive marketer, after making the INC 5000 at the age of 25 with my first $10+ million bootstrapped business, I wanted to know if I had just *gotten lucky* or if I could take what I knew and build it into some type of repeatable system or process. For the past 10 years, I had been deconstructing the process of how companies come to dominate their respective market niches and in doing so, I have laid out the framework of a system for bringing an offer to market. In addition to experiencing this first hand in multiple 8-figure business launches of my own, companies like Starbucks, Home Depot. Amazon, etc all use some variation of this system. In fact, I’ve found that every 800 lb business gorilla in their respective niche uses a variation of this system.
This is my *secret sauce* behind profitably bootstrapping multiple 8 figure businesses.
Traditionally, these don’t go together. Companies that grow sales don’t get profits (and actually lose money to fund additional growth) because they spend so much money along the way.
This system is all about “how” you sell your stuff, how you grow your business with sales and with profits at the same time.
While none of the steps are revolutionary in it by themselves, they key behind the system is in the sequence of "how" they are put together
Growth System Explained
- Lead Magnet
The Lead Magnet is a method by which to get someone to raise their hand to say that they're interested in whatever it is that you do. This has been going on forever. If you tear a sheet out of a magazine to use a coupon that says ask for more information, that is a lead magnet. If you go online today, in most websites, there's a phone online where you can give them your phone number or email address. There's something that they give you, a bribe there usually, in exchange for your contact information. If you go to a store, you'll generally find that you can get a discount if you sign up and give them your contact information. There are a number of ways to do this, but here's the thing. The average person who gives you their contact information or raises their hand and says they'd like more information or they'd like to know more about what you're doing is GIVING YOU PERMISSION TO SELL TO THEM and you have a 300% HIGHER LIKELIHOOD of them responding to your offers in the future if they've raised their hand and said they'd like to see them in the beginning.
By getting their contact information, you get the ability to sell to them over time.
A lot of people make a huge mistake by neglecting this step. Imagine, someone walks into a store, they look around for a bit and because you don't have anything they need today, they walk out. Every bit of effort you spent to get the customer to walk in the door is gone if you didn't gather some sort of information from the customer to keep in touch with them or to show them what you've got new. Maybe you just didn't have what they wanted that day but tomorrow or next week they may change their mind or you may have something new that they want in the future.
Also, in that constant communication, you give your customer the ability to know, like and trust you. To learn who you are so that you can become their friend, their adviser or their protector and to build a relationship with your brand.
Everyone knows that the leads that come to you are much more likely to buy from you and contact information is key.
- Tripwire
The Tripwire is probably the most misunderstood element to most winning marketing campaigns and most competition crushing businesses. Executed properly, you'll enter a new market, take it over before your competition knows what hit them.
The objective of a tripwire is to make the customer buy something. It doesn't matter what or how much it is, if it's $1, it's fine. For every business, getting a new customer, regardless of the size, is the most valuable thing to grow your business. He who can acquire the most customers always wins.
The amazing part of everything is that people just don't understand that a new customer who spends $5 is just as good in most cases as a $50 customer or $500 customer because they're generally much more likely to come back and spend more money than a person who's never bought anything because their ability to buy something much more expensive is equal to a buyer who has paid full price.
That's the trick to the tripwire.
Here's why. Once somebody buys anything from you, anything at any price, the relationship changes. You're no longer a guy "selling" to them. They are no longer a prospect being "sold." They are your client and you are now "advising" them. Once money has changed hands, the entire relationship changes.
What you have to do is to reduce the barrier of entry down, so low so that there's zero risk, it's a no-brainer, like buying a stick of gum and it doesn't matter. And when you exchange money you then OVER-DELIVER on the offer.
- Low Cost: The goal is to change the relationship from prospect to client
- Low Risk: It's got to be like a no-brainer that doesn't require thought
- Sequential: The Tripwire needs to be essential to the core offer (e.g., Step 1 of a 3 Step System)
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Overdeliver: This is your chance to "WOW" them with something amazing
- Core Offer
- Profit Line
This important line is called the Profit Line.
In my business, I'm willing to ignore 100% of everything to the left of that line. To ignore 100% of all the money made there and to spend that money give my customers a great experience and to buy advertising and marketing to get more people to enter my funnel. I'm willing to spend 100% of what's made in my Tripwire and Core Sale to get to this dotted line.
I want to do 2 things with that money
1. Advertise to let more people know that I exist. To bring more leads into my funnel through my lead magnets
2. Spend the rest of that money delivering an incredible WOW experience to the people who have spent "little" money with me on the left.
The goal is to get to the next step, which is where the big money comes in...
- $$ Maximizer
The next step is called the Profit Maximizer.
This is also known as upsells, cross sells, bundles. This is where all the money is made.
A Profit Maximizer sale is a sale made after the core sale is made.
The very best time to sell somebody something else is INSTANTLY after they've bought something from you. Once they've bought the Tripwire, we're INSTANTLY going to offer them the Core Offer. Once they've bought the Core Offer we're going to INSTANTLY offer them the Profit Maximizer sale.
Here's why:
It's back to dopamine, human psychology, & the magic of what we start feeling after they start buying online (the anticipatory effect).
And the beauty of this is your competition doesn't understand this. They look at your business and all they see is some crazy Tripwire offering; they can't see all of this because all of this stuff is under the iceberg.
- Return Path
The last step is called the Customer Return Path. All this means is getting your customers to come back to you.
This is the most overlooked asset of many businesses. Customers that have already bought from you are 20x more likely to buy from you again.
The main secret is constant communication.
Don't be the friend that only calls when they need to borrow money.
Keep in constant communication and don't focus on the offer (SEINFELD sequencing). Build the relationship with your customers and get them to know, like and trust you more.
Applying this methodology to Prescribd
As I stated above, the most critical part of the process is figuring out the right tripwire. I call this finding my "Hero Product." As stated by Rebecca Minkoff regarding growth and the secrets behind how she built her 8-figure brand.
So combining the two ideas above, I believe that I need to restructure my offer and focus on dialing in my messaging to come up with a process to convert cold traffic into a tripwire that is transformative and addresses a big issue within my market niche. In reviewing our niche market data, I noticed that Walker & Company recent $24 million series B round was focused on launching a product around shaving.
Based on the assumption that they know what they're doing and confirming this with the results of our gathered data from the last 6 months, I decided to hone in on hair removal with the goal being to figure out another *angle* that wasn't being addressed.
A Brand Partnership
Back when I initially invested in Prescribd, I had met and become friends with another former software / tech turned beauty entrepreneur. What had happened was that they had accidentally developed a formulation for ingrown hairs that they then patented. Their story was as follows:
In 1985, in an office in South Florida, a dentist was working on a patient. The patient was a private investigator. Medication was given to the patient to alleviate the pain associated with his treatment. Two days later, the patient noticed a dramatic improvement not only in the pain level, but in his skin as well. His face, which was full of razor bumps, had cleared up!
The man couldn't wait to tell the dentist what had happened.
He called the dentist on the phone. He asked the dentist what he was doing to him. The dentist was worried and asked what he was talking about. He told the dentist that something the dentist was doing was clearing up his razor bumps. He told the dentist that since he started shaving 15 years earlier, he had tried everything available for razor bumps and nothing had worked until now.
The investigator began to tell the dentist how important this discovery was. He mentioned that the dozens of products already on the market did not come close to producing the dramatic results he had achieved. He also said that this was a big problem in the military where a clean shave was required or you would have to get a shaving clearance from the dermatologist. Lawsuits had been filed in industry by workers who were fired because they were unable to get a clean shave for example where gas mask use was required Police must have clean shaves and so on.
The dentist realized the importance of this discovery and determined which ingredient in the medication was improving the skin. Realizing that the ingredient could not be taken internally for long periods of time, the two men experimented with the formula in an attempt to apply it directly to the skin. It worked.
It then took nine long years work to create a workable product and learn how to reach the market. . The dentist had a great discovery.
Other uses for the formula arose in the same "chance" way that the formula was discovered. Women who bought the product for their husbands or boyfriends started trying it on ingrown hair problem they had from shaving, waxing, and having electrolysis on their legs, bikini lines, and underarms.
And the rest is history………
They had a great product that had developed a bit of a cult following on Amazon and in niche beauty supply parlors
Outside of Amazon and their website, they had minimal online presence. They were also in the process of trying to negotiate a nationwide launch within CVS in the fall of 2017, so a brand partnership made sense because we would bring traffic & online awareness and they would provide a proven product that worked. Coincidentally, their product also happened to fit perfectly within our existing packaging
And with this new hero product for our tripwire, we updated and revamped our offer...
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