Keep a close eye on the math in your marketing or your client’s marketing and you’ll consistently find ways to be more profitable.

For the simple reason that …

Your ability to generate massive amounts of new customers is directly determined by your ability to do simple arithmetic.

Let’s look at this in terms of return on investment. For this example we’ll use a simplistic online new customer acquisition banner ad campaign that looks like this:

Prospects see the banner ad and click on it. This takes them to squeeze page offering several FREE reports and a free subscription to a newsletter. Once they opt-in they are redirected to a landing page selling a product.

This is just one way to successfully run one of these campaigns. It’s not ALWAYS appropriate to use a squeeze page, sometimes it’s better to use a product landing page that has sign up options, but that’s for another article.

So you run those ads on four sites you think perfectly target your prospects.

Unfortunately, the margins from one media placement to the next are very different:

• Site #1 hits it out of the park with an up-front ROI of 250%
• Site #2 pulls breaks even with 100% ROI
• Site #3 gives us 50% ROI
• Site #4 a mere 25% ROI

For the sake of argument let’s say each one of those cost you $3,000. And each one gave you the exact same number of new customers, say, 300.

So the numbers look like:

• Site #1: $3,000 x 250% ROI = $7,500. 300 new subscribers generated at a profit of $15 each.
• Site #2: $3,000 X 100% ROI = $3,000. 300 new subscribers generated for $0 each – they’re FREE!
• Site #3: $3,000 x 50% ROI = $1,500. 300 new subscribers generated for a cost of $5 each.
• Site #4: $3,000 x 25% ROI = $750. 300 new subscribers generated for a cost of $7.50 each

Which of these campaigns would you continue to run?

Many people’s first reaction is to say to keep running the ads on sites one and two and cut their losses on three and four. But those of us who know basic arithmetic say HOLD ON!

Let’s look deeper.

When you combine those four campaigns together what do you get?

Exactly, you just ran four tests with an initial cost of $12,000 to grow your list by 1,200 and gave you sales of $12, 750. You made a profit of $750 and got 1,200 new customers.

You use the high-performing campaign to subsidize the lower performing campaign so you can build a bigger list.

“So what,” you say, “If I cut out the low performing sites I can make a bigger profit.”

To which I say, “Keep up with me, Sparky. You’ll make more money this way.”

The better your backend sales are
the more aggressively you can go after new customers

If you were completely ignorant of direct marketing fundamentals and the only product you had to sell was the product you used on your acquisition campaign – you have to make money on the initial transaction.

Because you’ve already sold your only product when you acquired the customer.  And that dramatically limits where and how you can market your business.

But, as a savvy direct marketer you’ve got a second product … a third product … product … a fourth product and more to sell to new customers.

And if you bring 1,200 new folks onto your list in a month a certain percentage of those people might buy something else. And the better you are at helping them find additional products or services they want to spend money on, the higher that number will be.

Let’s do some more math.

You’ve now got 1,200 new folks on your file. It’s time to promote something to them.  Say you have a $300 product they haven’t seen yet that would be perfect to help them achieve whatever it is their interested in doing.

If you create an email campaign to those people in the first month they join you and you get a measly 1% response rate, what happens?

Exactly, in the first 30 days you made an additional $3, 600:

1,200 x 1% = 12 x $300 = $3,600

The next month you do the same thing with a $500 product and this time you get only a .5% response:

1,200 x .5% = 6 x $500 = $3,000

Two months out from your initial campaign and those 1,200 names produced an additional $6,600.

Apply those numbers back to your acquisition campaign and look at the numbers again:

• 12,000 names at an initial $750 profit
• At 30 days, your profit is $4350: ROI of about 141%. Each one of those names was $3.62 to you in the first 30 days.
• And at 60 days your profits are $7,350: ROI of about 167%. Each name is worth $6.12 at 60 days.

If through testing you can keep these numbers relatively stable you can actually go after even lower performing media placements because you’re able to make up the cost in the first two months.

And that means you can go after more new customers even when you have to lose money on the initial transaction.

This is all about backend marketing.

The more products you the more opportunites your customers have to deepen their relationship with you.

The more effective you are at promoting your products the more your customers will buy.

The better your relationship is with your customers the more products they will buy.

And that means you can spend more money to get more new customers.

Obviously, all of these numbers are just examples.

One thing that surprise many markets is the fact that customers you get from different sources will behave differently.

• Customer you get from different types of media will buy differently: You might find that a customer who comes to you through pay-per-click spends three times as much a customer who comes to you through co-registration.
• Customers you get from different locations within the same media will buy differently: Customers generated with the same copy from two different websites may have two dramatically different purchasing patterns. So one traffic source is fundamentally more profitable than the other within the same media.
• Customers you get from different promotions will buy differently. That first promotion is your first impression and the first product delivery is your first date with the customer. Changes to that experience will create different buying behaviors.

By staying on top of these variations in your business you can make much more intelligent and profitable decisions when planning your strategy.

If you’ve been studying or working in direct marketing for awhile you’re probably already familiar with the concept of lifetime customer value. This is simply, the amount of money a customer will spend with you over the course of their lives.

But industry to industry, business to business the amount of time a customer sticks around is different.

In the newsletter industry customers often stick around for about 7 years. So someone who’s only been in business for a year or two can’t determine their true lifetime value. They have to go on shorter term projections.

In other markets a customer may only stay with a company for a few months.

So the numbers change. But it’s all still basic arithmetic.

Yours for faster success,
John Newtson

• Why the promotion you THINK is your biggest winner could be cause of your falling profits …

• The principle that proves “Nice Guys Finish FIRST” …

• And much, much more!

In the land of the blind, the one-eyed man is king.

And in direct marketing your numbers are your eyes.

Without understanding them you could be blind to the fact that the biggest winner you’ve ever had is actually killing your business.

And after months or years of throwing good money after bad you’ll be forced to close up shop, scratching your head and wondering what the heck happened.

Don’t assume you’re immune, it even happens to sophisticated marketers.

Direct mail guru, Denny Hatch, once revealed how a postcard “control” for a magazine subscription was really a loser from the perspective of a year down the road.

How? Because customers who signed up using the “FREE subscription” post card offer didn’t renew their subscriptions. And what’s the “second-sale” in the subscription business? Right, the renewal.

So getting the first subscription isn’t the money-maker, getting the renewal is. Turns out, postcard subscribers who just had to drop a pre-printed card into the mail weren’t committed readers like the folks who came in through a sales-letter.

But marketers blind to the long term behavior of the customer thought that because the post card mailing produced a higher response that it must be better than the sales letter.

Who knows how much money they poured down the drain to get those useless subscribers? And who knows how long they would have kept throwing good money after bad chasing bad customers while ignoring good customers if no one had bothered to check their long term behavior?

Tracking customers can be a huge task, for starters though, check out Jim Novo’s website.

How over-hyped sales copy can kill your business

Michael Masterson of Early To Rise once wrote about how over-the-top, unrestrained sales-copy built a $5 million business in two years, and killed it in five.

Why? Because it wasn’t bringing in quality buyers (they were spending about one-fifth of what they should be). In this case, Michael explained the problem:

“The reason is simple. Your customers may initially be responsive to bells and whistles, but in the long run what they want from you is honesty, sincerity, integrity, and value.

“Yes, you can make quick bucks in the direct-marketing business by bowling your customers over with inflated claims and exaggerated promises and hyperbolic language – but those bucks won’t keep coming once they figure out who you really are and what you’re really up to.”

Your sales copy, every last bit of it from your customer acquisition to your house file promotions, contributes to the experience your customer has with you and your business.

Direct marketing as a sales channel is a relationship business. You make your money on the second, third and fourth sales. That means the longer customers stay with you the more profitable your business is.

You’ve only got one chance to make a first impression

The promises you make to get a customer color that customer’s experience with your business. Promise the moon and deliver hot air and you’ve ruined your chances of developing a long-term, profitable customer.

The industry’s great soft-offer marketers, like Boardroom and Rodale know this lesson well.

The success of a soft-offer promotion is rated on two numbers:

1. Up-front response
2. And actual pay-up

Because when a customer doesn’t have to pay anything to try your product out, they get to decide BEFORE they write the check whether you’ve delivered on your promises.

Can’t you just picture it: An excited customer eagerly waiting for the delivery of the product he’s sure is going to solve his problems. When it arrives, he tears into it like a kid on Christmas morning, only to find it’s nothing more than a box of socks.

Crestfallen, and a little ashamed of being suckered by your promises, he doesn’t pay.

When selling a hard offer (people pay before getting the product) you might see a high refund rate. Problem is, not every under-whelmed customer asks for a refund.

Most follow the “fool me once shame on you, fool me twice shame on me” philosophy of simply refusing to buy from you again.

In essence, by over-promising you’ve created an objection to buying again that is almost impossible to over come.

If you catch someone in even a seemingly harmless white-lie, how long do you think it takes before you’ll stop thinking of that person as a liar? I read a study once that said it takes two years of almost daily contact – without any more lies, before the average person truly gets over being lied to.

And that’s two years of personal contact. What are your chances with a customer in today’s cluttered world where the click of a button banishes your ability to communicate with a customer in a tenth of a second?

I don’t know about you, but there are several businesses I will never buy another product from because the product didn’t live up to the promise. Nothing those businesses ever say to me again will convince me to buy their products because I simply don’t trust them.

Your customers are the greatest asset you have.

Mishandle them by over-promising in your copy and under-delivering in your product and you’re marketing becomes a Sisyphean task http://en.wikipedia.org/wiki/Sisyphus of constantly struggling to get new customers –while they constantly turn around and refuse to buy a second time.

Jay Abraham’s Strategy of Preeminence
(Why Nice Guys Win Over the Long Term)

This is a simple strategy: Put your client’s needs ahead of your own and success will naturally follow.

In Jay’s book, “Getting Everything You Can Out of All You’ve Got” he draws a distinction between customers and clients. Customers are people who buy from you. Clients are people under your protection.

By looking out for what’s best for your customers you are treating them with honesty, integrity and sincerity while bringing value to their lives. And that’s just good marketing because you’re bonding with your customers and becoming more than just someone who sold them something.

You’re becoming an advocate for them and a trusted advisor to help them achieve their goals. And that’s how you build long-term, profitable relationships.

As you’re building you business, or your client’s business, these two things – tracking customer behavior and understanding the customer’s experience with your business – are critical to your long term success.

No promotion exists in a vacuum. They are momentary, though critical, contacts with your prospects and customers. Value your customers and what you can do for them and you’ll avoid over-promising and under-delivering.

Likewise, be careful judging your success on the results of a single promotion or a single campaign because your business has goals beyond the initial sale. Your long term success is determined by your ability to achieve those goals.

Yours for faster success,

John Newtson

Because the backend is your primary profit center. If you think about it you realize your #1 hard cost is the media you buy to generate leads & customers. Once you have the customer it’s time to milk the proverbial cow.

The funny thing is is that this is one of those principles everyone “knows” but almost everyone is miserable at applying to their actual business.

Let me drive this home.

Close to twenty years ago a very well known financial publisher who now generates well over $60 million a year was at the time barely making $4 million a year in sales. That’s pretty good but a far cry from where they would end up.

An outside copywriter came to them with a proposal – he’d craft a promotion and product of considerably higher-price point than they had been selling – and they’d mail to their existing customer base. He’d even offered to do it for purely a % of sales – so the only hard cost was printing & postage to send out the promotion to their house file.

The publisher thought is was worth testing.

They rolled it out and over about 4 days added about $12 million to their bottom line -  TRIPLE their total annual sales prior to that promotion.(If you want to know what they did then see “Step Two” below.)

The Bottom Line: What you do with a customer AFTER you get him is one of the keys to explosive growth & sustainable businesses.

From $1 million to $11 million
WITHOUT getting “more” customers

This is one fundamental area we can really use to produce explosive sales. And the principles are relatively simple, well established and easy to understand:

• STEP ONE: Systematically multiple the NUMBER OF TIMES each customer buys from you
• STEP TWO: Systematically multiply the DOLLAR AMOUNT each customer spends with you at each purchase
• STEP THREE: Systematically increase the LENGTH OF TIME each customer keeps buying from you

Here’s an example to show the power of doing these three simple things.

STEP ONE: When we increase the frequency customers purchase we dramatically increase revenues.

STEP TWO: We create another dramatic increase in revenues when we increase the average size of purchase.

STEP THREE: Finally, if we keep a customer actively buying longer we multiply revenues again.

This is why what you do with a customer AFTER you acquire him is the key to explosive growth.

Consider what happens to your total revenue when you multiple annual revenues per customer from $100 to $1,197:

BEFORE:

Annual revenue per customer: $100
Total Customers: 10,000
Annual Revenue: $1 million

AFTER:

Annual Revenue per customer: $1,1971
Total Customers: 10,000
Annual Revenue: $11,197,000

One million or eleven million – that’s the difference.

This is the fundamental key to multiplying your profits. Because, like we established earlier in this Business Growth Series, the number of customers you get is largely determined by how much money you can spend to get them.

This is also where most marketers fall down on the job.

In order to sell tens of millions of dollars in product you need to continually create more opportunities for your existing customers to buy products from you.

I’ve seen one direct response financial publisher with 170,000 names struggle to make $1 million in sales annually while a second financial publisher with about 150,000 names sold well over $20 million a year.

The difference rested entirely on how they converted existing leads to customers; converted one time buyers to mutli-buyers;  and moved customers from purchasing at lower price points to higher price points

And when the $20 million financial publisher decide to generate a bigger list it became relatively easy to add 100,000 new, qualified leads to their email list in a matter of months because they could easily pay more for a new qualified lead. (To understand how that works check out:  Customer Acquisition Basics & Breaking Even on New Customers )

The fundamental point is that because they’d already refined their backend marketing it was simple for them to add millions in sales to their bottom line.

How well does it work? I’ve personally used this basic framework to build a $10 million publishing business in 18 months.

Hope that helps,

John Newtson

They do a special promotion – a discount or coupon or some such thing – and it increases sales on the promotion. So they get excited and start turning every promotion into a discount promotion. Hey it worked once it’ll work again, right?

Here’s the funny thing that happens, yes, their “response” is higher on the promotion.

But their profits start to tank.

And when they try to come back from the brink and do a strong full price promotion – response sucks.

For two reasons:

1. The big discounts moved demand forward. People who were putting off a purchase were motivated by the discount. Think of Cash For Clunkers, the big government discount for car buyers, at first it looked like it “generated” an extra 360,000 car sales. Turns out it just cannibalized future sales and the months after the program ended saw a missing 360,000 car sales.

2. People got used to the idea of a major discount and pushed back their purchases until the next promotion. Why pay full price when they know a 35% or 50% discount is usually right around the corner.

By the time the business owner notices the problem they’ve inadvertently trained their email & mailing lists to look for the discount.

I’ve seen this happen with a client who started doing big quarterly promotions on all their products – response was huge the first time. Great the second time. And good the third time – but in the between the sales started to tank. And it became harder and harder to sell products without a major discount.

So before you over-coupon or over-discount your business to death read this excellent article from Jim Novo.

Jim is one of the best resources for understanding and intelligently applying customer data to increase your profits.  His book, Drilling Down, is an absolute must-devour book for any serious marketer. And he just explained in detail how to tell When does your customer need a coupon?

I highly recommend you check it out.

John Newtson

He got me started in this business when he awarded me Grand Prize in his Power Copywriting Challenge and I started freelancing for his agency where I earned my first royalties and had my first real winners.

Then he called me up one day out of the blue and offered to move my wife and I down to the mountains of Western North Carolina so I could be his first ever in-house copywriter. (Good timing too – we sold our house near the top of the real estate bubble too back in early 2006 before the market went into the tank.)

I jumped at the chance to work with the man who’d help build four separate $100 million direct response businesses. I knew you couldn’t buy that type education and boy was I right.

I learned more than I could’ve possibly imagined about crafting sale copy, structuring marketing campaigns and building direct response businesses.

And what always amazed me is that Clayton never held back a single secret from his readers. The Total Package should be required reading for anyone who really wants to make money using direct response marketing… and online, we’re all direct response marketers.

I’m honored to have been a copywriter and marketing director at the Total Package & Clayton’s agency Response Ink.

And I realized I contributed quite a few articles to The Total Package over the years – here are several of them:

• Old School Social Media
• The Dangers of the Blind Pursuit of Higher Response Rates
• Build a Bigger List with Basic Math
• A Master Key to Why People Buy
• Story Based Products & Businesses
• Grunt Work Does a Copywriter Good
• The Stuff Americans are Made of
• A Weird Lesson About Logic & Proof in Sales Copy
• Making Money With Super-Models
• Are all the Top Copywriters using THIS Technique… or is it just me?
• Email Marketing 101
• Keep Your Customers Longer
• Free Swipe File

And to dig into what is an honest-to-goodness goldmine of copywriting and business building information make sure you bookmark The Total Package Archives.

Visit it often – it’ll make you money.

John

And it’s something I’m sure, in your heart of hearts, you believe too …

In short, your prospects and your customers will be loyal to you, pay premium prices to you, and refer their friends and family to you in direct proportion to how much value you bring into their lives.

And that value has to be more than just a good price on a good product.

You have to show, through every contact with your prospects and customers, that you care about them. By proving you are looking out for their best interests.

That you will fight for them – at every turn.

I believe every time someone markets their product or business in a way that goes against their customer’s best interest, that person is slowly killing their business.

No traffic strategy, no sales-funnel, no brand-building, no advertising campaign, no marketing plan and no business strategy can make up over long haul for putting your customer’s experience on the back burner.

I believe championing your customers is a fundamental key to your business’s success.

But I DON’T believe that alone
is enough to build a terrific business

Putting customer first DOES NOT mean putting smart business last.

History is littered with the failures of entrepreneurs with great products who deserved to succeed if you only looked at how well they served the customer.

But they failed.

Anyone who tells you having a “great product” and “treating customers right” in and of themselves is a sure path to success is selling a pipe-dream.

Ignoring sales fundamentals and the fundamental economics of your business, your industry and your marketing will kill the business of the nicest, hardest-working and  most dedicated entrepreneurs.

A terrific business is composed of three things:

1. Free cash flow – your revenue minus all of your costs of doing business
2. Tangible Assets –like real estate, customer lists, proven sales funnels, proven promotions, etc
3. Intangible assets like your customer relationships, business relationships, reputation, ability to generate new selling ideas and more

To create explosive growth you need to market and build your business with a close eye and deep understanding of these fundamentals.

Having a great product and first-class treatment of your customers is the price of entrance.

Having a “great product”doesn’t do you – or your customers – any good unless you convince lots of people to buy it

If you want to serve your customers and your market over the long term – YOU HAVE TO BE ABLE TO STAY IN BUSINESS.

So you need strong sales funnels – from lead generation to conversion to buyer to conversion to multi-buyer.

You need killer customer acquisition systems – which is only possible when you understand your Break Even ROI.

Great customers service is, in my opinion, a “must-have” for long-term business success. Considering studies show that up to 90% of your lost customer left you because of the way you or your staff treated them customer service is ultimately a marketing issue.

But it can’t stand on it’s own and if you’re an information publisher and marketer it certainly is not going to drive new customer acquisition and generate back end sales all on its own.

You can’t ignore the fundametnals at the heart every organic growth strategy:

1. Attracting more new customers
2. Getting them to buy more products
3. Getting them to spend more money per sale

The truly terrific business will serve it’s customers, serve it’s market and plan and execute rock solid business growth strategies.

In business being good to your customers is simply not enough to survive. If you disagree try spending some time with a small bookstore gonig out of business because of the new Barnes & Noble who moved in down the street or who lost huge amounts of business to Amazon.

I do believe championing your customers is a fundamental key to your business’s long term success.

But it alone is not enough that’s why you need strong, lead generation and sales conversion strategies combined with a backend marketing strategy to continually generate consistent revenues.

John

I’m going to give you a giant, steaming pile of horse-crap – fresh out the horse. It’s all warm and crumbly with that fresh-off the farm assertive nose present in only the highest grade horse-crap.

And you’re getting 50 pounds of it.

All for $1 – a screaming deal considering this isn’t just any horse crap it came out the rear end of a Grand Prize winning Arabian race-horse. This is the kind of horse rich pretentious folks go gaga over and spend thousands of dollars just to be around.

And you’re not going to just “spend some time” with it…you’re going to take home this fully digested food of what in every respect is the Babe Ruth of equestrian sport.

But wait – there’s more!

I’ll include a brand spanking new wheelbarrow (black with flames on the side and a bright red racing stripe down the middle) to haul your horse crap around in.

And I’m just getting started – if at any time in the first 30-days you’re not thrilled with your big pile of steaming horse crap – just say the word and I’ll refund your ENTIRE $1 and the horse-crap and wheelbarrow are yours to keep.

Just click here and I’ll rush your steaming pile of horse crap over to you today.

What’s that? You’re NOT interested? Did I mention shipping is FREE?

Where else are you going to get 50 pounds of horse crap wrapped up in a slick wheelbarrow delivered to your door for $1 and free shipping? Nowhere, that’s where.

Still not interested? Really?

Hmmm… but the offer is killer… this is in fact the best horse-crap on OR off the market.

Lemme see… I had a great offer … removed risk … threw in a premium with a perceived value far and above the cost of the product … I even made it easy to order and deliver to your door – what’s wrong?

Oooohhhh wa-ait a second – you’re NOT in the market for horse-crap?

You’ve never bought horse-crap before, have no intention of buying horse-crap and wouldn’t want it if I delivered it to your door and just gave it to you?

You can’t think of a single reason to buy 50 pounds of horse-crap – well look buddy get a little imagination but I guess that means you’re the WRONG prospect for this offer.

This must be what they mean when they say making sure the LIST & OFFER MATCH is the most important part of direct response selling.

Even a well designed offer ONLY works if it’s going to folks who have an emotional interest in buying horse-crap!

The next time you hear someone say “Everybody wants or needs my product” smack ‘em over the head and tell them they might as well be selling crap.

Because unless you’re selling water in a desert everybody DOES NOT want or need your product.

And of the group that does “need” it – only a small fraction will want it.

The first obstacle to successful selling is finding people who want to buy what you’re selling.

If you can’t do that then you better figure out a way to sell what people want.

Otherwise no matter how good the “Deal” is you’re sales will suck.

The art & science of list selection and development is about finding and building lists of people who

1. Have an innate desire to buy products like your selling
2. Have a history of buying products in your market.
3. And who will buy your particular brand of crap over and over again

That’s the front door to sales success folks.

Time and time again though I run into entreprenuers who are convinced EVERYBODY wants their particular brand of crap -and they’re always wrong. Worse, because they’re convinced everybody wants their products they never take the time to sit down and figure out exactly who is ready to buy them.

Even the guys who are good “marketers” often just try to craft a killer “offer” by loading up on “valuable” premiums while ignoring the simple fact that people don’t want to buy that particular product as it exists.

Not every product can be sold to every prospect.

Unless of course you talk to a copywriter looking for job than – if you’re ready to write a check – whatever the hell you’re selling IS something everyone wants to buy … just write that check and they’ll write you the “ad your business has been missing”.

If you find a good one maybe he’ll even come up with a creative sales approach for opening up a new market for you like ….

How to pull off the Halloween prank of the Century!

You’re past the age when a few handfuls of candy really make your Halloween

You’re ready to move up to something better. Something BIGGER.

They call it “TRICK or treat” for a reason and, if you’re willing to forgo the ‘treats,’ I’ve a got a trick for you today that will make you a LEGEND.

Like all good pranks this one starts with crap – 50 pounds of fresh, noxious horse-crap to be exact. You’ll also need 50 small brown paper bags, a good pair of running shoes, one small lighter and an alibi …

You get the idea =)

John Newtson

It’s not easy to uncover.

99.9% of products fail miserably to deliver it. I can guarantee you will only uncover it after a long, arduous search.

Warren Buffett said selling products with this quality “Is like selling needles to addicts.”

BUT … if you find or create a product with this simple-to understand quality you’ll not only have no problem selling it, you’ll quickly corner your market.

You’ll have a bullet-proof product your competition will simply be unable to match. And the ONLY way you’ll lose market share or revenue is if your entire market dries up and disappears.

Your sales will boom in good times and remain solid and steady in the worst of times (the examples below continued to sell like hot-cakes during the Great Depression – the greatest historical measure of what sells in hard times.)

What’s more; not 1 in a 1,000 entrepreneurs or marketers can name that element.
Frankly, I’d be surprised if 1 in 10,000 could name it.

Warren Buffett, the billionaire investor who is one of the greatest business minds of the last 100 years didn’t know it. He needed an information marketer, a publisher to explain it to him.

The man, Walter Annenberg, owned Triangle Publications which was crowned by not one but two products with this holy-grail marketing quality.

This is the man who dreamed up Seventeen magazine & TV Guide.

One of those two products had the magic quality for guaranteed product sales – the other was just a brilliant product.

Can you guess which as the bullet-proof product?

I’ll give you a hint, the second holy-grail product Annenberg published was the Daily Racing Form – the single most comprehensive source of information for handicapping horses.

It sold 150,000 copies a day – even during the Great Depression.

Annenberg, summoned a younger Warren Buffett to his house once to pass a message through Buffett to Kay Graham of the Washington Post.

In his authorized biography, Snowball, Buffett recalls Annenberg starting in on “essentiality”…

“There are three properties in the world that the quality of “essentiality.” They are the Daily Racing Form, the TV Guide and the Wall Street Journal.”

Buffet explains. “What he meant about ‘Essentiality’ was that, even during the Great Depression he saw the Racing Form being sold for two and a half bucks a day in Cuba… If you were headed to the racetrack and were a serious handicapper, you wanted the Racing Form. He could charge whatever he wanted, and people were going to pay for it.

“It’s like selling needles to addicts. So every year Walter would go in and saw, “Mirror, mirror on the wall, how much should I raise the price of the Racing Form this fall?”

99.9% of products on the market lack “essentiality.”

But anyone who’s ever discovered or designed a product with that quality became a billionaire or close to it.

Take Michael Bloomberg, the billionaire mayor of New York.

Do you know how he made his billions?

Right, with an “essential” product – the Bloomberg Machines – the digital “Daily Racing Form” for Wall Street –it connected and delivered all of the essential information any serious Wall Street trader needed in order to trade.

If you were trading without Bloomberg’s machine you faced the same danger of trying to bet on horses without the racing Form – you were at a fundamental disadvantage to everyone you’re betting & trading against who had the “essential” product.

You couldn’t win without them. The essential product became the portal through which you had no choice but to walk through if you wanted to succeed as a trader or as a horse handicapper.

The TV Guide was Annenberg’s OTHER “essential” product –though with a different take.

You’re TV Guide became the portal through which television watchers knew what there was to watch & when – and fulfilled viewers insatiable need to emotionally connect with and “know” the stars, stories and behind the scenes goings-on of the television business.

So what is ESSENTIAL to the people in your market?

What is the fundamental portal they need to walk through in order to succeed in the context of your industry?

If you can answer that question you’ll start to open up opportunities others will never see until it’s too late.

This concept also lets you figure out the hot-spots in your market –even if you don’t have a product that can become the ONLY “essential” source for your clients you can use this principle to discover the white hot selling spots in your market.

Think of individual day traders- they NEED a trading platform in order to place trades efficiently. Online entrepreneurs NEED Traffic, web hosting, etc as the basic costs of entry.

Find the essential center of your customer’s buying decisions and suddenly the reason behind product success & failures often become clearer.

When you look at failed products in your market or your business look at how “close” to the essential center of your market the fundamental product was.

You’ll find the losers are almost invariably several steps removed from that essential center because the closer you get to it, the easier it is to sell.

In the internet marketing space if you track the products that sell the most they are almost always “traffic” related because that is the white hot center of the market. It’s an essential need for every internet marketer.

So every “new,” “sexy” traffic-related product that comes out is easy to sell. Then all the copy-cats come behind and still do reasonably well for awhile because of the essentiality of traffic in this market.

Step up your product marketing game with this little insight.

John Newtson

P.S. Google is another story of “essentiality” – by becoming the search engine of choice advertisers have no choice but to involve themselves with Google. Essentiality is the cornerstone of Google’s billion dollar digital empire.

His info-publishing business was already thriving, doing close to $4 million in sales a year.

When he was approached with an idea to increase sales he thought it was reasonable. Maybe it could bring in some good numbers.

But $12 million in four days?

That wasn’t even on his radar.

They put the promo together, sent it to their list, and sat back in disbelief as $12 million in sales flooded in over the next four to five days.

It was a watershed moment and changed the way they sold products forever.

Nearly 20 years later another (very famous) online info-marketing company found themselves in a similar position.

They did the exact same thing.

Adding close to $12 million in about a week.

Then washed, rinsed & repeated generated somewhere in the neighborhood of $26 million in sales total over just a couple of months because of it.

This event ALSO changed the way this marketer approached their business.

What did these two marketers suddenly do that they weren’t doing before? And can you do it too?

For starters let’s look at what these two info-marketer’s got RIGHT. Because they both already refined their customer acquisitions campaigns.

And had generated large lists of buyers of what I would consider “front end” products – products with a lower price point within the overall market that are sold to subsidize your media costs to get to a Breakeven ROI.

This concept of front-end products is specifically designed to help you subsidize major media costs which are easily the #1 hard cost of any direct response marketing business.

So  these info-marketers were very good at lead generation and very good at getting new customers.

What were they missing?

Simple, their primary sales model was cross-selling NOT upselling.

They generated customers for a product at a price point between $49-$299 then worked hard to sell them similar products at similar price points. In order to succeed like this they had to be very good at media-management, getting customers, etc.

And both were making several million a year in sales with this model.

The breakthrough was adding upsell products – something simple, something fundamental. But in every business I’ve come across you’ll find some fundamental lacking – often more than one fundamental – and its usually costing them millions in lost sales.

When these two marketers each added a $997 or higher-price product to their business and promoted it to their customer base – revenue exploded.

And after the initial windfall you can track the change in their promotional activities as they started generating new high-price product campaigns on an almost monthly basis. One continues generating new products every 6 weeks to sell to their customers, and continues cross-selling in between major product launches.

And the other keeps running new back end product campaigns. And both are now well beyond $20 or $30 million in sales – in good years at least one of them is flirting with the $100 million mark.

You might be tempted to run out and start adding back-end products to your business right now.

Obviously, that’s where the immediate profit is.

Before you do though, consider that in order to generate these windfalls both of these marketers had already built up their lead generation and customer acquisition systems.

Getting large volumes of new customers is the hardest part of any direct response marketing business -online or off – and if you ignore that fact you’ll never generate those big paydays.

But once you crack that nut – generating windfall profits on the backend becomes easier & easier.

One danger for most info-marketers is that they get such a large windfall once or twice with a high-end product, or new product launch that they chase that success for years and see it as the ONLY way to make money with their business.

And treat any method of generating new customers that does not bring in an immediate windfall profit as almost not worth doing.

That’s a mistake. And one of the reasons so many of the marketing “gurus” are in a position where they need to keep re-launching the same products over and over again to generate customers & sales.  And rely almost exclusively on affiliate arrangements to sell their products.

Essentially, they have one way to get new customers.

But those entrepreneurs who choose to attack new customer acquisition combined with a strong upsell product marketing strategy are the ones who build larger, more sustainable businesses.

In late 2008 I was reading through the Annual Report of Investtools, another direct response financial publisher, who had just reported a $91 million QUARTER and purchased the online brokerage service Think or Swim -  I was struck by the fact that this HALF A BILLION marketer listed no-less than SEVEN customer acquisition channels as the source of their customers.

This one-two combination of broad, rigorous customer acquisition strategies combined with a smart back-end sales strategy is the key to direct response product sales businesses.

Entrepreneurs who understand this and focus on this are the ones who succeed on a large scale.

These are the entrepreneurs I continue to be excited to work with.