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Secret 5: Give Your Products Away For FREE

Home » Secret 5: Give Your Products Away For FREE

Are You Absolutely Crazy? This will kill me. I’ll be out of business before I know it.

One thing most business owners never think of is the average lifetime value of a client. Here’s what I mean by this. Let’s take a mechanic as an example. A client may come in for an initial service, which was worth $100. Now that’s what most business owners see. What they don’t realise is that over the next 5 years, that clients is going to spend $1,000 a year with them, taking it from a $100 client to a $5,000 client. How would you look at your business differently if everyone who walked through the door was worth $5,000 to you?

Now here’s the 7 step process to work out the average lifetime value of a client

1. Average Value of a sale (per client):
minus
2. Cost of Goods to service sale
equals
3. Average Profit of a sale
times
4. Average no. of sales per client per year
equals
5. Average profit per year per client
times
6. Average number of years as a client
equals
7. Lifetime Profit Value of each client

Okay, Let’s take an example of a beauty salon. The average value of a sale when a client comes in is $50. It costs $20 to service this sale, which means each sale brings a $30 average profit. On average a client returns 8 times a year once they become a client, which means they are worth $240 in profit per year. Now on average they stay with you for 3 years, which means every client that walks through the door is worth $720 to the beauty salon. Some more, some less but $720 across the board.

Would you give me $50 if I gave you $720 in return? I bet you would.

WARNING …

This Strategy will drive you broke quicker than any other if you offer sloppy service. Bad word of mouth spreads quickly!
So here’s the potential of this exercise. Let me apply this to 3 different businesses so you really get it. Now firstly, this strategy will only work if you have a high repeat business such as a restaurant, hairdresser, beauty salon, fruit shop, etc. It will not work if you have a business such as real estate, or roof restoration. In those cases you are better off providing a FREE Consultation or a FREE REPORT of some sort.
This one is easy. Rather than making the average offers such as a 10% discount, make a compelling offer:

EXAMPLE 1: RESTAURANT

FREE $20 Meal if you come into our restaurant over the next 2 weeks, and enjoy a dinner on us. Now how much will this really cost you? Probably about $5 in real costs for the food. After all, you are already paying for staff, rent, electricity, phone, cleaners, etc. whether anyone comes into your business or not. Now what happens to your advertising dollar. Do you think you will now receive a better Return on Investment when you offer something for FREE rather than just sending a brochure?

EXAMPLE 2: LAUNDROMAT

Target key potential clients in the area and offer FREE Bag Wash valued at up to $25.00. Your hard costs are probably about 25% of the $25, so around $6. Now how much could that customer be worth? Well, if you get one good customer and they order off you every week, that’s $25 x 52 weeks. $1300 over one year not bad for a $6 investment. Even if you gave a free wash to 200 people and only one of them stayed with you for a year, ordering once a week, you’d still be ahead.

EXAMPLE 3: CONSULTING INDUSTRIES

Let’s say you are an accountant, a solicitor, or a marketing consultant (like me!). The number one fear of your customers is that you are going to stitch them up, and rip them off. The other fear is that you really don’t know what you are talking about and they are going to waste their money. So how do we overcome this?
Firstly, you’re reading the way I am doing this a free report to educate you where you read it and say SHIT some of this stuff makes sense. Maybe I should talk to this guy a little more. Right now I as the publisher of this report have more credibility (I hope, anyway!) if you’ve read this far, than I would if I cold called you on the telephone prospecting for business.
Ok, so that’s all well and good. But what if you are an accountant? How about a FREE Report called “7 Secrets to saving anywhere from14% – 46% in tax over the next financial year.” Would that get most people’s attention?
What about a solicitor? How about a report titled “What everybody ought to know to avoid getting sued.” Consultants could also offer an hour of their time as a FREE Initial Consultation, depending on how busy you already are. You get the picture.

Now listen, it basically works like this. If you have an item, which has, a high repeat purchase frequency (a hairdresser, Laundromat, beauty therapist, etc.) give your services away for FREE. Now if you are a one off service, which charges a higher fee, like a solicitor, educate your customers so that they trust you – and so that you can differentiate yourself from every other solicitor in the marketplace.

The reason this works so well, is because, basically as humans we are a little bit lazy. And we like to stay with the people and companies we trust. So why should I try your laundry service over anyone else’s. Ok … it’s FREE. Why not give it a try. Once a customer is satisfied with your service, will they come back? More than likely! Will anyone take advantage of your offer? Probably … Yes, but there is the law of reciprocation in play here. If somebody does something for us, we have an innate human need to return the favour. Its a part of who we are. This theory has been tested. I don’t have time to go into it now, but you will find it expanded on in more detail in Robert Cialdini’s bestseller, Influence – The Power of Persuasion.


© Copywriting That SELLS 2005 – sbywater@copywritingthatsells.com.au


Scott Bywater is a professional direct response copywriter and the author of Cash-Flow Advertising. To get access to his highly prized complimentary copy of his special report ‘7 Ways To Boost Your Turnover… No Matter What The Economy’ (valued at $29.95) and a free subscription to his “Copywriting Selling Secrets” newsletter where you’ll discover how to write ads and sales letters to get people lining up and almost begging you to take their money, jump onto his web site at http://www.copywritingthatsells.com.au