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People are always coming up to me and asking, "What can you tell me to help increase my internet sales?" And all too often, when I ask them to tell me about their business model, I discover they're selling only one product. So I ask them, "Have you ever considered selling backend products to your customers?"
Backend products are simply other products you can offer to your existing customers after they've made their initial purchase. Because you know what they've already bought from you, you should have a good idea of other things your customers would likely buy. And that should make it easy for you to think of new things they'd want to purchase. In fact, by adding just one more product to your site, you can increase the lifetime value of your customers--and increase your revenue--by 30 to 50 percent.
Here's an example: The other day, I got an e-mail from Amazon.com telling me about a new internet marketing book they just got in stock. They knew I might be interested in it because I'd bought other internet marketing books from them before. And I was interested in that new one, too. In fact, as soon as I got the e-mail, I immediately clicked through to the site, checked out the book and bought it. And in doing so, I boosted my lifetime value to Amazon by another 20 bucks.
Lifetime value is simplythe income generated by a single customer over the course of your relationship with them. If you sell only one product--and if it's something that doesn't need to be reordered--then your customers' lifetime value will be limited to the net income that comes from a single sale of your product.
But if you sell a wide range of products, your income can grow exponentially. In fact, I've bought maybe one book a month from Amazon over the past five years at an average cost of $20 each--meaning my lifetime value to them so far is about $1,200.
And selling to existing customers is easier and cheaper than selling to strangers because you've already cultivated a relationship with them. You've put in the time and money to:
- Get their attention
- Establish your credibility
- Build their trust in you
- Overcome any resistance they may have to buying online
- Close that first sale
On top of that, you now know what your customers like. The important thing to remember is, the backend products you offer have to be things your target market is going to be interested in. So how do you find the killer products that make this strategy so profitable? It's a lot easier than you think. For example, you can:
- Offer products that complement your initial product. For instance, if you sell golf clubs, offer your customers a golf club bag to carry them in. Or you could sell golf balls, golf tees, golf shoes, golf training videos--the list is endless.
- Sell more of the same product at a discounted price. If your product is refillable or needs to be regularly replaced, this strategy works especially well. For example, if you sell things like printer cartridges or batteries, you've got it made. But even if your product isn't refillable, you can show your customers you appreciate them by offering them a special discount on the product they've already bought. That way, if they like the product, they can buy it as a gift for family and friends.
- Use paid subscriptions as backend products. If you've established yourself as an expert in your industry, you can build on your reputation by offering a subscription to premium information, available only to members. For example, if your main product is a fly fishing kit, you could sell a subscription to an exclusive course on advanced fly fishing techniques as a backend product. You could deliver this paid-for content through a members-only website or by e-mail.
- Try splitting up your current product. For example, if you were selling a book on how to organize your home, you could offer a basic version for $9.95 to generate a large volume of sales at a low price. Then, 30 days later, you could offer your customers an advanced, expanded version that includes home office management and scheduling software for $29.95 or even $39.95--and increase your profits dramatically.
- Try selling your customers an upgrade to their product. If they've used and liked your basic model, your customers will be open to receiving offers for an upgraded version. For example, if you sell e-books that teach people how to use a particular piece of software, you can sell updated versions to previous buyers when the software package in question is upgraded.
- Write a book or create a video. E-books are great backend products with high profit margins. Consider writing a short book on a topic related to your product or service. For instance, if you sell gourmet puppy food, you might consider writing a book titled "Training Secrets That Will Have Every Puppy Housebroken and Learning Basic Obedience in Less Than One Week." You could even offer a special video that complements your product or service: If you sell barbecue equipment, you might offer a video that teaches people how to perfect their barbecuing techniques.
- Offer someone else's product. Probably the fastest--and easiest--way to add new products to your site is to join another business's affiliate program and recommend their products in exchange for a percentage of each resulting sale. Selling affiliate products can be a very lucrative way to increase your sales, especially since you don't have to spend any time or money developing a new product of your own.
The bottom line is, if you're not offering backend products to your customers, you're losing out on a lot of potential income.
Derek Gehl is Entrepreneur.com's "E-Business" columnist and the CEO of the Internet Marketing Center, an internet marketing firm that has helped thousands of people learn to start and run their own online businesses.