Microsoft Azure Certification Training

Customer Value Optimization: How to Build an Unstoppable Business

You’ve finally found
it…

The “treasure map” to
building an unstoppable business.

We call it the Customer
Value Optimization process.

(RELATED: The Ultimate Guide to Digital Marketing)

If you’re not
familiar with how we do things here at DigitalMarketer, this is the first
article you should read. It teaches you the foundational
principles of digital marketing.

And even if you’re a
salty DM veteran, you might still want to reread this from time to time as a
refresher. It’s that important.

What you’re about to
get in this post is a 10,000-foot view of how the marketing
process works when it’s done right.

This is vital to
understand because all marketers and entrepreneurs are
at various levels of STUCK. There’s so much to
learn—and the marketing space is changing so rapidly—that no one can keep up
with every little shift in the market.

But when you
understand the big-picture view…

When you can see how
all the different pieces are meant to work together…

You’ll know how to
create a SYSTEM that works to efficiently and
repeatedly attract new prospects, convert them into customers, and get
the maximum profit out of them.

Sound like something
you’d like to have? Then let’s get right to it.

The System

This is the system
Starbucks and McDonald’s used to corner the coffee and hamburger markets. It’s
the same system Amazon uses to dominate ecommerce. It’s how Best Buy, Beachbody
(selling workouts like P90X), and Sports Illustrated
have become household names.

It works for small,
medium, and enterprise-level businesses. It works for mom-and-pop shops and
billion-dollar retailers. It works whether you sell traditional products,
digital products, or services.

This system works
because it exploits each and every aspect of the irrefutable law of business
growth put forth by legendary marketer Jay Abraham. He teaches that there are
only 3 ways to grow a business:

Increase the number of customersIncrease the average transaction
value per customerIncrease
the number of transactions per customer

If you think about
it, this makes perfect sense.

And the system you’re
about to learn—we call it Customer Value
Optimization or CVO—leverages
all 3 business growth methods. That’s what makes it so powerful.

So read this page
carefully. Read it multiple times,
and commit it to memory.

This is the stuff
the world’s best marketers and entrepreneurs know and use daily—but
it isn’t taught in any business school.

(NOTE: Before you can start optimizing your customers, you need to know who your ideal customer is, where they are, and what they will buy. Download our proven Customer Avatar Worksheet now and get clear on who you’re selling to.)

Learn the Steps to Customer Value
Optimization

This handy flowchart
outlines the CVO system:

Download a PDF version of the chart here

Print this PDF and
tack it to the wall next to your work station. If you intend to execute this
plan, you’ll need to reference it often.

This is your big-picture treasure map to building an unstoppable business. Anytime you’re learning a new tactic—whether it’s Facebook marketing, Google Analytics, search engine optimization (SEO), and so on—you’ll want to check in to see which part of the Customer Value Optimization process that tactic fits into.

Otherwise, you’re
liable to end up wasting your time and money.

Take this as a WARNING:
There is little profit in understanding, for example, Pinterest advertising or
email marketing in and of itself. Because individual tactics like that
represent just one piece of the whole.

But there is an ENORMOUS
profit in understanding how to apply these traffic strategies within the
context of the CVO process.

Here is a flowchart
of the entire Customer Value Optimization system:

Customer Value Optimization

When you break it
down, there are 7 steps to Customer Value Optimization:

Determine Product/Market FitChoose a Traffic SourceOffer a Lead MagnetOffer a TripwireOffer a Core ProductOffer a Profit MaximizerCreate the Return Path

Lean into this
article and pay close attention—we’re about to reveal the
EXACT process we use to sell products and services in
multiple niche markets and mainstream verticals including…

Finance and InvestingMen’s
ClothingHome ImprovementSurvival and PreparednessBeauty

… just to name a
few.

Let’s begin with…

Step 1: Determine Product/Market Fit

We begin the Customer
Value Optimization process by getting clear on the most important person in
your business: your customer.

Customer Value Optimization step 1

At its
core, business is pretty simple.

We get
paid to move these customers from an undesirable “Before” state to a desirable “After”
state.

In the
“Before” state, the customer is discontent in some way. They might be in pain,
bored, frightened, or unhappy for any number of reasons.

In the
“After” state, life is better. They are free of pain, entertained, or unafraid
of what previously plagued them.

The Before and After State

People don’t buy products or services…

They buy transformations.

AKA outcomes.

AKA a more desirable “After” state.

This means that a good OFFER will
deliver the “After” state the person wants…

And good MARKETING will articulate
that transformation from “Before” to “After.”

The flip side is also true: when a
new business fails, it’s often because it FAILED to either…

Offer a desired “After” state (the offer was
no good)Articulate the movement from “Before” to “After”
(the marketing was no good)

Needless to say, getting
clear on the desired outcome your offer delivers is fundamental to the success
of your business.

Here’s how to get
that clarity…

The 10-Question “Before & After”
Grid

Before you create or
market another offer, ask yourself these 10 questions:

What does your prospect HAVE in the “Before” state? What does your prospect HAVE in the “After” state?How does your prospect FEEL in the “Before” state? How does your prospect FEEL in the “After” state?What is an AVERAGE DAY like for your prospect in the “Before” state? What is an AVERAGE DAY like for your prospect in the “After” state?What is your prospect’s STATUS in the “Before” state? What is your prospect’s STATUS in the “After” state?What is an EVIL that is plaguing the prospect in the “Before” state? How does your prospect conquer it and bring more GOOD to the world in the “After” state?

Just put your
answers in a simple table like this:

Before and After Grid

(RELATED: Perpetual Traffic Episode 116: Ryan Deiss Breaks Down the “Before & After” Strategy of Chatbooks’ Viral Video)

Here’s
an example, using our own company DigitalMarketer. How do we help our customers
achieve a positive transformation in their lives?

For
this example, we’re going to use our “Marketing Executives” avatar. So these
people are in charge of a marketing department—usually the CMO, the VP of
Marketing, or the Director of Marketing.

We
know from experience that people in these positions run into a lot of problems.
A lot of undesirable “Before” states. So, we’ve created training programs that
can help solve those problems and deliver the “After” states these people
really want.

How do
we do it? By transforming the marketing executive…

From HAVING a disorganized team… to having a team that’s a well-oiled machineFrom FEELING frustrated, overwhelmed, and scared of losing their job… to feeling confident and in controlFrom having an AVERAGE DAY in which they have to “coach up” under-performing team members… to an average day in which they’re free to focus on big-picture strategy because they can trust their other team members to take care of the details correctlyFrom a STATUS of being disrespected and behind the times… to a status of being respected, up-to-date, and even up for a promotionFrom the EVIL of being a victim of an old-school university model that doesn’t prepare graduates for the realities of marketing today… to the GOOD of helping to train the marketing leaders of the future

Before and After Grid filled out for a Marketing Executive

Average
marketers only articulate what a customer will HAVE if they purchase their
product or service.

Great
marketers speak to the transformations around how the customer will FEEL, how
their AVERAGE DAY will change, how their STATUS will elevate, and how they will
solve an EVIL in the world (making them a real-life hero).

With
this simple 10-question “Before & After” Grid, any half-decent copywriter
will be able to create a marketing message that will have an impact.

The
marketing copy writes itself now that you are clear on the “Before” and “After”…

“Turn your disorganized team
into a well-oiled machine that’s ready to kick some serious marketing butt.”“Tired of having to ‘coach up’
your team day after day? With DigitalMarketer HQ, you’ll be free to step back
and focus on big-picture strategy.”“Just imagine feeling confident and respected in meetings,
knowing that your next promotion is coming soon.”

Do you
see how this copy clearly articulates how the product will move a marketing
executive from a “Before” state of stress and frustration to an “After” state
of confidence and success?

It’s
powerful stuff.

Make
sure to complete the Before & After Grid for ALL of your customer avatars,
because each customer segment will go through a different transformation.

Understanding how you will transform your prospect from a “Before” state to a desired “After” state also impacts…

(NOTE: Before you can start optimizing your customers, you need to know who your ideal customer is, where they are, and what they will buy. Download our proven Customer Avatar Worksheet now and get clear on who you’re selling to.)

How much you can charge

What
is the distance between the “Before” and desired “After” state?

That
distance is called VALUE.

Value is created by the distance between the Before and After state.

A
stick of gum is inexpensive, in part, because it covers a very short
distance—from “bad taste in your mouth” to “good taste in your mouth.”

By
comparison, a car covers a much greater distance: from “stuck at home” or
possibly “forced to take a crowded bus to work” to being “free to travel
wherever you want in privacy and comfort.” The car provides much more value,
and accordingly, it’s also a lot more expensive.

Do you
want to charge more for your products and services?

If so,
the solution is simple: create
more distance between the “Before” and desired “After” state by either:

Creating a better product or
service (better offer)Articulating the movement from
“Before” to “After” differently or more clearly (better marketing)

When rolling out a new offer, starting a new company, or moving into a new market—make sure to get clear on your “Before” and “After” states. And as I said, make sure to do it for EACH of your customer avatars.

(RELATED: Learn more about what a customer avatar is—and how to create your own—HERE!)

If you’re not able to clearly articulate how you can take your prospect from the “Before” state to a desired “After” state… you may have an issue with Product/Market Fit.

Product/Market Fit may be the single most important part of the entire Customer Value Optimization system. Simply, because every other part of the process is dependent upon having a group of willing and able buyers.

Once you have that group of buyers, the next step is to find a way to bring those people to your website. Which brings us to Step 2: Choose a traffic source.

Step 2: Choose a Traffic Source

Now
that you’ve achieved Product/Market fit, your next step is to figure out how to
reach that
market and get them to your website.

This
is where paid traffic comes into play.

Customer Value Optimization step 2

I’ve
often said that in this day & age, NOBODY has a traffic
problem.

You might have a business
model problem, an offer problem, or a measurement problem.

But traffic is NOT
your problem.

Want to know why?

You can always buy more traffic.

Google, Facebook, Pinterest, Twitter, and LinkedIn… these platforms are all essentially traffic stores. And they would love to send you more clicks (for the right CPC or CPM, of course).

When you look at it
that way, the question of traffic comes down to cost.
And to generate traffic profitably, you simply need to understand 2 things:

How to measure what traffic is worthHow
to extract maximum immediate value
from that traffic

For example, pretend
that you got $10 in profit every time a visitor came to your website. Would you
be able to get traffic to the site?

Heck yes, you would!

You could pay up to
$10 per visitor and still break even.

In fact, you’ll be
able to pay MORE than $10 to get a visitor to that page when you truly
understand the whole Customer Value Optimization system—because you’ll be able
to extract even more profit from those visitors later on.

This is why CVO is
so powerful. Because it allows you to earn more profit per
visitor…which means you can spend more money per visitor.

I’ve often said:

“He who can spend the most money to acquire a new customer… wins.”

And Jeff Bezos,
Founder and CEO of Amazon.com, once said something similar (in a tongue-in-cheek
warning to his competitors):

“Your margin is my
opportunity.”

Amazon.com sells on
the thinnest of margins, knowing that acquiring new customers, selling them more
products, and selling to them more frequently is how you become unstoppable (there’s
Jay Abraham’s law of business growth again).

Now THAT is a killer
traffic strategy—one that sets you up for long-term profits and steady growth.

And this is also why tactics and “marketing hacks” are worthless if you don’t understand the CVO process.

You can learn about blogging, Facebook ads, or email marketing until you’re blue in the face…but unless you know how to set up a system that wrings maximum profit from that traffic, you’ll continue to be frustrated.

That’s because the goal of traffic generation—no matter which traffic source you choose—isn’t to generate an immediate profit—it’s to drive prospects into the CVO Funnel.

So whatever you do,
don’t hop around from one traffic source to the next, looking for some kind of “magic
pill” that will instantly make your business profitable.

Instead,
become a master of a single, steady traffic source.
Stay focused on that traffic source and, once mastered, add a second and third
traffic source.

These traffic
sources include…

Email marketingSocial advertising (Facebook/Twitter/YouTube
ads, etc.)Display advertisingContent marketingOrganic social mediaSEO

And so on.

(NOTE: Before you can start optimizing your customers, you need to know who your ideal customer is, where they are, and what they will buy. Download our proven Customer Avatar Worksheet now and get clear on who you’re selling to.)

You won’t make a
huge profit right away, but that’s not the point. The profits will come later
IF you use the CVO system.

And the next step of
that system is to…

Step 3: Offer a Lead Magnet

The next 2 sections
(Offer a Lead Magnet and Offer a Tripwire) show you how to grow your business
through the first of Jay Abraham’s methods: increase the number
of customers.

First, let’s talk
about Lead Magnets.

Customer Value Optimization step 3

A Lead
Magnet is an irresistible bribe that gives
a specific chunk of value to a prospect
in exchange for their contact information.

Make
no mistake, although no money changes hands, this is a transaction. It is
often the very first transaction you will have with a prospect.

In
order for your Lead Magnet to be effective, you need to provide tremendous
value with it.

The
Lead Magnet is usually offered on a web page called a landing page or squeeze page that
is optimized to convert even cold traffic into leads.

Your landing page doesn’t need to be fancy to be effective. Here’s a high-performing Lead Magnet landing page from Digital Marketer…

The
purpose of your Lead Magnet is to generate leads so you can continue to follow
up with them. Because your Lead Magnet
is the very top of the CVO Funnel, increasing your opt-ins here will pay
dividends throughout the rest of the system.

But
not all Lead Magnets are created equal. The best Lead Magnet squeeze pages will
convert north of 50% of visitors into leads.

How do
you achieve such a high conversion rate?

The
key is to make sure your Lead Magnet is specific.

Specificity: The Key to Getting
More Leads

What
irresistible bribe could you offer in exchange for a prospect’s contact
information?

The
good news is that you DO NOT need to create something lengthy or complex. In
fact, we’ve found that the more laser-focused your Lead Magnet is…the better it
will convert.

This,
for example, is NOT a good Lead Magnet:

bad lead magnet

There is no offer in this Lead Magnet, much less a specific one.

But this Lead Magnet isn’t much better. There is an offer, but it isn’t specific…

Vague lead magnet offering a "freebie"

The
offer of a nondescript “freebie” is not going to move people to
action. They want to solve a problem. They want an outcome.

(Hint:
Any opt-in form or squeeze page that begins with “Subscribe to our newsletter” is
probably NOT a good Lead Magnet. Just sayin’.)

Contrast
the prior two Lead Magnets with the specific problem that is addressed in this
Lead Magnet…

Lead magnet offering a free blog post audit

This ad gives a very specific promise to “take your blog posts from ‘Meh’ to Magnificent—FAST.”

It’s a
specific promise that appeals to exactly what our customer avatar is looking
for.

Now,
because of the nature of our company, we tend to offer a lot of online
resources—PDFs, videos, that sort of thing.

But
your Lead Magnet could be all sorts of things. If you’re a SaaS company like
Sprout Social, your Lead Magnet might be a free trial:

Lead magnet from Sprout Social

Ecommerce
companies can offer free shipping or even a discount
on your first purchase like Williams Sonoma does here:

15% off from Williams Sonoma

No
matter what industry you’re in, the take-home message is the same:

Make
sure your Lead Magnet solves a specific problem for a specific segment of the
market.

Do that, and you’ll generate more high-quality leads… some of whom will then go on to take the next step in the Customer Value Optimization system.

(NOTE: Before you can start optimizing your customers, you need to know who your ideal customer is, where they are, and what they will buy. Download our proven Customer Avatar Worksheet now and get clear on who you’re selling to.)

Step 4: Offer a Tripwire

Now
you have a Lead Magnet that is generating opt-ins and helping to build your
email list. But your Lead Magnet isn’t generating customers, only prospects.

The
next step in the CVO process is to turn those leads into customers. To do that,
you need a Tripwire.

Customer Value Optimization step 4

A
Tripwire offer is an irresistible offer that exists for one reason and one reason only:

To
convert prospects into buyers.

Typically,
a tripwire is a super low-ticket offer (usually between $1 and $20), although
this can depend on your market. In markets selling high-ticket products and
services, a tripwire offer of $500 might be considered a low-ticket purchase.

The
goal of the Tripwire is to fundamentally
change the relationship from prospect to customer. The conversion of a prospect to a customer, even for $1, is
magical.

The
key is to make a Tripwire Offer that your leads are unable to resist.

The
most common way to make the Tripwire irresistible is by selling it at cost and,
in some cases, at a loss to you.

That’s
correct—you are not trying to make a
living from selling Tripwire Offers. You are trying to acquire buyers because
there is nothing more valuable than a list of buyers.

When you understand the rest of the Customer Value Optimization process, you will understand that the Tripwire Offer is the single most powerful addition you can make to your business—even though you make no direct profit from it.

A
classic example of a Tripwire Offer comes from Columbia Records…

Columbia House Tripwire Offer

Columbia House took over the music market by making an absolutely irresistible offer (13 records or tapes for $1) because they understood that acquiring a list of buyers is the name of the game.

Types of Tripwire Offers

Physical products can make fantastic Tripwire offers…

Free lighter tripwire

and so do physical books…

Poop to Gold tripwire

Service-based businesses will often give a steep discount on services to get new customers in the door—like dentists who offer low-cost exams or teeth whitening sessions:

Dentist offering a cheap exam and whitening service

Or
gyms offering a low introductory price on
fitness classes…

Intro offer at extreme discount from a Jazzercise gym

Heck,
Groupon is FULL of Tripwire offers. It’s a great
place for local businesses (like salons) to attract new customers with deeply
discounted offers:

Groupon for discounted massage service

Even
GoDaddy, the domain registration and website hosting service, offers a
low-priced domain to acquire new customers…

GoDaddy domain offer for $5

Tripwires
are all around us.

It’s
the ridiculous flat-screen TV deal at Best Buy. It’s the rock-bottom price of a
Kindle Fire. It’s every service offered for a measly $5 on Fiverr.

The
strategy behind the Tripwire is simple:

Convert
the maximum number of Lead Magnet leads into paying customers, even at the expense of your profit margin, with the
understanding that acquiring a paying customer will deliver profit through the
next 3 steps:

Core OfferProfit MaximizerReturn Path

OK,
now that you understand how to increase the number of customers, let’s talk
about increasing the average transaction value per customer by selling your
Core Product.

Step 5: Offer a Core Product

Now that you have a bunch of customers who have purchased a low-dollar item with you, the next step in the Customer Value Optimization process is to sell these people a higher-priced product.

We call that your Core
Offer.

Customer Value Optimization step 5

You most likely already
have a Core Offer. It’s your flagship product
or products.

The mistake that many
businesses make is trying to sell their Core Offer to cold prospects. This
almost never works, because your Core Offer is too expensive. It’s too big of a
commitment for someone who’s making their first purchase with you.

That’s why we follow
the CVO process to turn cold prospects into warm prospects and warm prospects
into customers. Because those customers will be much more receptive to your
Core Offer.

Often, simply adding a
Lead Magnet and a Tripwire is enough to explode your Core Offer sales.

As long as you
over-deliver and provide immense value with your Lead Magnet and Tripwire, your
customers will be highly interested in purchasing your Core Offer.

And here’s something to
keep in mind:

In some cases, sales from the Core Offer will make you profitable. But it doesn’t have to. If you follow through on the CVO process, you could take everything you make from the Core Offer and reinvest it to acquire more customers.

(NOTE: Before you can start optimizing your customers, you need to know who your ideal customer is, where they are, and what they will buy. Download our proven Customer Avatar Worksheet now and get clear on who you’re selling to.)

Again, this is how you
become unstoppable. You build a system in which you can spend more to acquire a
customer than your competitors. That means you’ll be able to acquire more
customers and generate more profit in the long run through future transactions.

Compare that strategy
to what most companies do—which is try to make a living from selling their Core
Offer.

But you? You don’t need
to make a dime from your Core Offer.

Remember, as Jeff Bezos says, your competitor’s margin is an opportunity. It is your opportunity to, for example, spend more on traffic acquisition, conversion rate optimization, or increase the value of your offers.

It might stun you to
find out that many of the most successful businesses in the world make no profit
until they reach the next 2 stages, Profit Maximizers and Return Path.

Here’s where things get
very interesting…

Step 6: Offer a Profit Maximizer

The second of Jay
Abraham’s business growth methods is to increase the average
transaction value per customer.

That’s what the Profit
Maximizer is for.

Customer Value Optimization step 6

Most businesses don’t
have Tripwire Offers and they don’t have Profit
Maximizers. They live and die selling cold prospects on their Core Offer.

This is why they struggle… but you won’t.

Would it shock you to
find out that McDonald’s makes almost no money on the hamburger? The hamburger
is the Core Offer, but it’s the French fry and soda Profit Maximizers that
built the Golden Arches.

This type of Profit Maximizer
is called an immediate upsell…

McDonald's Profit Maximizer

Best Buy sells laptops
and plasma TVs (Core Offers) on wafer-thin margins you can’t
resist. They make up
for it on warranties, installation, and Geek Squad support (Profit Maximizers).

Amazon makes a Cross-Sell Profit Maximizer offer when they show you, “People who bought this product, also bought that product” to increase the Average Basket Value (also known as maximizing profit).

But Amazon also makes a Bundle Profit Maximizer offer with their “Frequently Bought Together” offer…

Profit Maximizer: Bundle

And Premium Subscriptions (recurring billing) like membership websites and other continuity offers make fantastic Profit Maximizer offers…

Hint: Any
offer made after the initial sale is a Profit Maximizer.

They’re called Profit
Maximizers because the revenue you get from these sales
will be much more profitable than your Tripwire or Core Offer sales.

Remember: the single
biggest expense most companies will incur is the cost of acquiring a new
customer (which is the job of the Tripwire Offer).

Everything that happens
after that increases the customer’s immediate and lifetime value.

So take some time to
think about what you could be offering as an upsell or cross-sell. What could
you bundle with your Core Offer? How can you incorporate a subscription or
membership site into your business model?

Find your Profit
Maximizer, and you begin to become unstoppable.

But there is one more
way to grow…

Step 7: Create the Return Path

The last way to grow a
business is to increase the number of transactions per
customer.

Enter the Return Path.

Customer Value Optimization step 7

The goal of the Return
Path is to have frequent, strategic communication with your buyers and
prospects that cause them to buy again and again.

Because you have
received their contact information through the Lead Magnet, you can continue
marketing to them.

You can offer new Lead
Magnets, Tripwires, Core Offers, and Profit Maximizers because you have
permission to market to them or bring them back to the Tripwire, Core Offer, or
Profit Maximizer that they didn’t buy the first time around.

The Return Path is
anything that brings the customer or prospect back more frequently, including…

Email marketingExit offersOrganic social media (like Twitter, Facebook, and LinkedIn)Loyalty programsContent marketing Outbound sales callingAd retargeting (More on ad retargeting here)

And that, my friends,
is the system we have used (and continue to use) to grow DigitalMarketer and
multiple other businesses in multiple industries.

It’s worked for
single-member businesses and giant corporations like McDonald’s and Starbucks.

It works because it takes all the jigsaw pieces of digital marketing and fits them together in a way that fits.

And if you begin
applying it the way I’ve just explained, it will help you (too!) to grow and
scale your business.

(NOTE: Before you can start optimizing your customers, you need to know who your ideal customer is, where they are, and what they will buy. Download our proven Customer Avatar Worksheet now and get clear on who you’re selling to.)

The post Customer Value Optimization: How to Build an Unstoppable Business appeared first on DigitalMarketer.

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