Today, I’m going to talk to you a little bit about the value scale.
The value scale, if you haven’t come across the term before, is a concept that is not new by any means to internet marketing or marketing in general, and It doesn’t just apply to online businesses.
The reason I’ve decided to make this video is because I speak to so many people who’ll say my business isn’t working. By the time I’ve paid out all my costs, I haven’t made anything on this product or service.
That is in essence where the value scale comes into play.
Let me try and talk you through an example so you can get an idea of what the value scale is all about.
Let’s say you had a brick-and-mortar hairdresser business.
You offer something on the front-end to try and get a new customer in, such as a dry cut or a lower cost service. You may offer this at a cheaper rate or you may even offer it free.
Now obviously when that customer comes in, by the time you’ve paid out staffing costs and bills and the marketing costs it has taken to get that person through the door, then chances are, you’re going to have made very little profit or even a loss.
That’s the first stage of the value scale, is getting them people in the door a rate where you may not have made a profit or you could even be making a loss. If you can break even at that point, fantastic, you’re doing a great job.
What happens then is you would then ‘upsell’ the customer. For example, talking to them and advising on a product or service you feel they would benefit from. Such as ‘Your hair is a little bit dry, perhaps you need a conditioner treatment on this?’
All of a sudden, they are on the next step of the value scale. You haven’t paid out anymore marketing or any more staffing costs, you’ve just got some extra money in. That customer who was a breakeven or a loss, now becomes slightly profitable.
Then what the idea is, is that over time, they will keep returning to you for more of your services or products. And so, over a long length of time, they actually become a very valuable customer to you and you’ve only paid out that marketing cost once.
This works with physical products and it works with services. It’s really important to think about where you stand with your marketing because if you’re making a loss on that initial front-end, it’s not the end of the world. Many many businesses do!
Did you know Mcdonalds make a loss on getting a customer through the door, its the return business time and time again that makes them profitable!
The idea is that you keep providing value to them and they keep coming back for more, and over time, that customer becomes more and more profitable to you.
It works the same if you’re using an online marketing system and you are trying to get opt ins. Opt ins obviously always come at a loss unless you’re offering an up sell straight afterwards, and that’s where the value scale comes in again.
Then the idea is that these people become fans and over time, and will buy a lot more of your products and services. That’s how the value scale works.
It’s really important to grasp that you might not always be on profit in that first stage of the value scale. It’s not impossible. I’ve seen people do it, but more often than not, people will either break even or make a loss on that initial front-end.
It’s just really getting that relationship with the customer, where you can upsell them products and where they will continue to come back to you, so over time, they are going to be worth a lot more to you than what you’ve spent in marketing to obtain that customer.
It’s really important to get your head around that.
One of my mentors actually says that if you can even break even on getting leads and email contacts, then you will be a millionaire because the idea is that yes okay, it may cost you to get these leads in and you might sell them something really cheap on the front end to cover some of your initial marketing costs.But, Over the lifetime, the lifetime customer value is way more than what you’ve spent on the marketing!
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