PreneurCast is a marketing podcast. Author and marketer Pete Williams and digital media producer Dom Goucher discuss entrepreneurship, business, internet marketing and productivity.
Pete and Dom revisit the 7 Levers of Business framework and focus on how to double the profit in an online or internet-based business (selling information products or other digital goods), with lots of tips for improving each of the seven business areas.
Pete and Dom talk about growing your online business by making small improvements in each of the 7 profit drivers
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7 Levers of Internet Business
Dom Goucher: Hey everyone, and welcome to this week’s edition of PreneurCast with me, Dom Goucher, and him, Pete Williams.
Pete Williams: Hey buddy, how’s things?
Dom: Good, good, good. Firing on all cylinders over here. How about over there?
Pete: There are plenty of good things happening. It’s summer over here, so that’s always a good thing to make you smile.
Dom: Okay, I’m going to let you off with one mention of the weather. Go on, get it out of your system.
Pete: My one credit per episode.
Dom: Yup. Glad to have you back, and glad to be back on the show. We’ve picked up a bunch of new listeners recently. Hello to everyone.
Pete: It’s been great. Obviously, off the back of the Profit Hacks launch and things like that, had a huge influx into the community, which is really cool, with listeners. And also, a new distribution partner, Anthill Online, which is one of Australia’s leading business websites.
They started off as a magazine years ago. I met James [Tucker], the publisher of that. He did an article on me and the book, and bits and pieces quite a few years ago. I established quite a good friendship. He’s built that magazine now into an online website at AnthillOnline.com.
And, they’ve partnered with us to distribute the show to their thousands, and thousands, and thousands of readers every single week. So, if you are an ‘Anthillian,’ I wonder if that’s a term, welcome to the show.
Dom: Indeed, welcome one and all. I try to pick on that actually, Pete, because that’s kind of a great mention. You mentioned there, Profit Hacks. One of the big things that we talk about in Profit Hacks is leverage. Leverage what you’ve got; leverage what you’re already doing.
And that partnership with Anthill is a great example of that, because we’re already publishing the podcast- as listeners will obviously know- and we distribute through iTunes. We have our own website over at PreneurMedia.tv where we publish the full episodes, plus videos and the transcripts, and the show notes.
But there’s lots of other ways to syndicate the content to get a wider exposure. AnthillOnline.com is a great match for us because they have a business audience. By us placing each episode on their site, we grow our audience but they also give value to their audience at the same time.
So, it’s a win-win for everybody. Just a little tip for listeners to look out for. If you’re already producing content, always look for something, somewhere, that you can maybe use that content to add benefit to somebody else’s platform and therefore get yourself a wider audience at the same time.
Pete: Exactly. That’s absolutely right.
Dom: Cool. So, let’s dive straight in this week, Pete. I’m going to do something really kind of out of time, because I’m not a great believer in New Year’s resolutions.
Pete: I thought you were going to say you were going to dance. I’ve seen you dance that one time.
Dom: Yeah, that’s a completely different topic. Thankfully, this is an audio-only show because really, you don’t want to see that. Moving swiftly on- I’m not a great believer in New Year’s resolutions. Not because I don’t believe people should resolve to do things, but I think that waiting until the New Year and then saying you’re going to do something isn’t always the best way to do it.
It’s constant, and kind of decided and supported effort that you need to do to make things change. And that is a big message behind something that we haven’t talked about for a while, which is the 7 Levers of Business. Now, we could have said, “Hey, it’s our January episode and starting in January, you should all look at the 7 Levers of Business and pick an area, and so on and so on.”
And I just thought, I’m going to do a pattern interrupt. Before it gets to January, I think we should remind people that each week, or each month, they should be thinking about the big areas of profit in their business, and taking some action regularly to make a difference. What do you think?
Pete: I think that’s the big thing, and it’s a great business resolution to move forward next year. Say, every week, or even every month- you can adjust as you listen to the show, how you want to apply this- but just regularly having that framework you come back to. And you make that your core driver of your business growth next year. It’s a very, very smart play.
Dom: Cool. What I was thinking was that we have a lot of long-time listeners on, but I’m thinking some of them have fallen off the wagon of the 7 Levers and maybe aren’t sticking with it as much as they should. At the same time, we have all these new listeners. So could you run us through the framework- which is a really important point that it is a framework and we love our frameworks on this show.
Run us through the framework, but can we give it some context? Can we give some real-world examples of how people can do something about each of the levers? Start with what is the 7 Levers. But as you go through each lever in turn, can we give it some real-world context so people can get a grasp on it?
Pete: Yeah, absolutely. Probably what’s worth doing is just running through it quickly to give people a quick context. Then, we can dive into each of the seven areas of the framework. So, the whole idea of the 7 Levers is two-fold. One, as we’ve said about 16 times already on this show- the word ‘framework.’
So many people, when they’re marketing their business- whether it’s a retail store, a consulting practice, or quite often in internet marketing businesses it’s even more prevalent an issue in that you run from marketing idea to marketing idea, from tactic to tactic, without any solid framework to guide you in your business growth, to bring you back to stay on point and stay focused.
The 7 Levers is designed to give you that focus, that discipline, and that direction to grow your business in a sequential, proven, tested method. The other side of the coin is that what it’s designed to do is if you just increase each one of these seven things we’re going to talk about in today’s show by just 10%. So, just a small increase in each one of these levers, the actual compounding effect is you’ll double your business profit.
If you’re running a business right now that’s profitable but not making the money you want to make- and obviously, most businesses want to make more money- by applying these 7 Levers and just once a week, or even once a month over a seven-month period, you focus on just increasing each of these levers by 10%, you’ll double your profit.
Something that I was playing around with the other day, I was talking to a consulting client about which got them so excited, is if you start off with a business that’s just making $12 a day, and then every seven weeks you’re working through these 7 Levers, increasing it by 10%, you’ll have a million-dollar profit business in 12 months’ time, or just over 12 months’ time.
This definitely does apply to people who are just starting out as your framework of Week One, you focus on Lever One; Week Two, Lever Two; go through to the end of the 7 Levers; and then at Week Eight, you start again. And, you continue to work these levers over and over again. Just over 12 months, you’ll end up with a million-dollar profit in your business.
Dom: Now, there are some things about this that I really, really like. I get very enthusiastic about the 7 Levers of Business, and one of the reasons is because it’s basic math. It’s nothing more than basic math. This idea that increasing each significant element, or lever as we call it, by 10%- you can do the math without knowing what the 7 Levers are.
You can see that increasing each one by 10% has a cumulative effect, and over time it feeds back into itself, and I love that. But, the other thing I love is it’s completely business, strategy, tactic-independent. It doesn’t matter what your business is because these areas are areas of every business. They are areas you should be paying attention to anyway.
But, with our framework, it just focuses you. And that’s the most important thing, that you can go out there and you can look for a tactic, you can look something to try- a marketing idea to try- but this framework focuses you into each of these seven areas.
And I just think that’s such a powerful concept. Because so many people are out there looking for the silver bullet, or whatever it is. But as we’ve mention before, and a number of times on the show, that business is business is business. You’ve given examples and I’ve given examples of stories we’ve read, books we’ve read, pieces of marketing we’ve come across from a hundred years ago that are applying the same basic business and marketing concepts that are still valid today.
And that’s what I really like about this. So, I just want to fit that in everybody’s head. Because whatever example we give as we go forwards, it’s just an example. But there’s always going to be a mapping to every and any business.
Pete: I was going to say that you were touching on before, the whole 2013 and making a habit of this, is that it’s very easy to get distracted- understand what the 7 Levers are and get distracted by the next silver bullet, or magic bullet, or shiny object that ends up as a pitch in your e-mail inbox. But you have to make sure when you’re looking at that- how does this apply to increasing one of these 7 Levers?
Because no matter what it is, if it’s going to make your business money, it has to do something to increase one or more of these levers. And if you can’t clearly identify how that fits with one of these levers, and how it’s going to increase one of these levers very clearly- A) don’t invest in it, and B) you’re going to buy it and not use it properly.
You need to also use these 7 Levers as a filter for everything you do in 2013 as well. When offers, products, solutions come across your desk, by all means go and invest in them. But just understand where does it fit into these 7 Levers and when are you going to use it as part of your 7 Levers framework.
Because obviously, hopefully, you’re going start seeing by the end of this show that it’s important to work through this on a continual basis. So, if something comes up, you want to go- okay, this is going to be great, I use it here in this part of the framework.
Dom: Couldn’t have said it better myself. Really, really good summary.
Pete: So, to talk about what the 7 Levers are for those who don’t know.
Dom: Yeah, let’s get into it before people go, “What are they talking about?”
Pete: The 7 Levers are seven things that actually- and the only real seven things that drive profit in a business. And they’re sequential. Let’s go through them really quickly. The first thing is traffic. Obviously, a business can’t make any money and make any profit without traffic. And that’s foot traffic into your retail store, or in the example we’ll probably use today, it’s web traffic- people coming to your website.
The next thing is opt-ins. This is the amount of people who, in a retail example which we use quite regularly, sit down and try on a pair shoes, or a dress, or online- obviously, opt-in to your newsletter, or your e-mail sequence, or download some sort of value-add that you’re giving to get their e-mail address to get them into your community or database.
The third thing is conversions. How many people, out of all of those who opted-in, end up purchasing something from you? What’s your conversion rate from those opt-ins? Fourth thing is average sale value. What is the average value of the items, or the sale- fundamentally, it’s the items- that you’re selling?
Because obviously, the higher the value, higher-priced ticket items you sell, that’s generally going to relate to more revenue and more profit. The next thing is, average items per sale. How many items do people buy per sale from you? Do they buy an eBook and then also buy the upsell which is the audio product version, or a membership program? Or is it a continuity scenario?
Maybe you have a $97 membership platform where every month they spend $97 with you. That’s an average value of $97, but they’re buying 12 times a year from you because it’s a type of continuity. That’s the next thing, average transactions per customer. How many times do they buy from you?
That’s where continuity works really well, as I just mentioned. And finally, there’s profit margin. How much margin do you have in the products you’re selling? That takes into account your cost of acquisition, your affiliate commissions, and your cost of goods, and all that sort of stuff. So, there are the 7 Levers that drive a business.
What you find is if you increase each one of those by just 10%, you will double the profit of a business. Let’s run through that math really quickly and move on, because I know math can scare people; and the people in their car or walking their dog, or things like that, can’t necessarily get a pen and paper out, or a calculator, and do it with us. But, let’s run through this.
Dom: Yeah, can you keep the numbers easy? I’ll have to take my socks and shoes off if I run out of fingers.
Pete: Sure. So let’s say, hypothetically, just to make it easy, you’ve got 10,000 visitors. Your traffic level is 10,000. Your opt-in rate, let’s say 20% of those people opt-in to your e-mail list- which is obviously quite high, but let’s say that is the case. And then, of that 20%, a further 20% purchase.
You’ve got 10,000 people that come into your website, 20% of that opt in, 20% of those who opt-in eventually buy something from you. Your average sale value is let’s say $30. It’s an eBook, or an audio program, or something like that. Right now, you’re only selling one item per transaction. You don’t have an upsell sequence or anything like that.
Your average items per sale is one. Your transactions per customer might be two. So, they might buy twice from you a year. They buy an eBook in January, and another eBook from you in July when you make another offer, hypothetically. Let’s say your profit margin is 50% because you’ve got cost of acquisition, or all your sales are coming from joint ventures, hypothetically.
So, it’s a 50% profit margin. If we calculate that out, what that’s going to give us is a profit right now of about $12,000. You’ve got 10,000 visitors, 2,000 from opt-ins, 20% of that turns into customers (so you have 400 customers). At an average sale value of $30, and one item per sale, you’re making about $24,000 in revenue, based on two transactions a year, which at 50% profit margin, gives you $12,000.
Hopefully that made sense, I know I ran through that pretty quickly. But you’ve got a $12,000 profit margin. If over the next seven weeks, you just spent one week on each of these 7 Levers- so next week, you focus on increasing your traffic (and we’ll talk about some ways to do that in a moment), but you increase traffic by 10%. You’ve not gone from 10,000 to 11,000 visitors.
Maybe you tested a Facebook campaign, maybe you do a guest blog post on someone else’s site and drive traffic to your site. You just increase your traffic by 10% by doing some form of marketing. That’s your focus for next week- set up a Facebook campaign, hypothetically, and to do two guest posts that increase your traffic by 10%. Great! Tick that box.
Following week, you look at something to increase your opt-in rates. You work out a way; you do a split test on your opt-in page, you put some logos of some media outlets you’ve been featured in, you change the headline. And you’re able to increase your opt-in rate from 20% to 22%. This is not a 10% increase from 20% to 30%; it’s just on itself, a 10% increase.
You’re going from 20% to 22%, very easy to do. Split test a headline and you’ll probably find that you might increase that opt-in rate by more than 10% by doing very simple things like that. That’s Week Two. Week Three, we’re now going to work out how to change our conversions and increase them by 10%. Again, from 20 to 22%.
You might change your sales letter- you adjust your sales letter. Maybe you just put an offer in your autoresponder sequence. The week after they opt-in, they get an offer. You maybe do something like Frank Kern’s 4-Day Cash Machine, or a why-what-how sequence, or whatever it might be to increase your conversions. That’s something you can easily do in a week and just get that small 10% increase.
The next thing is average sales value. Why can’t you just increase your prices by 10%? Maybe you can do an audio version- you’ve got an eBook. Well, sit down in Week Four and record yourself talking through the eBook. So you now have the audio version of that product. What you can do now is you can increase your price from $30 for that eBook, to just $33, hypothetically.
Now obviously, the value is more than that, but you could just increase it to $33 and bundle it together. They get the audio version and the written eBook version at the same time. Very easy for you to do, it takes you a day to record that audio and that is your increase of average item value done for that Week Four. Week Five, we want to look at average items per sale.
We want to try and increase that from one, to 1.1- a slight 10% increase. And what you can do is you could split test on the thank-you page. An option could be just rather than giving that audiobook away for free, you just increase the price by 10% just as a test. But on the thank-you page, you offer the audio version.
Don’t need to do any fancy upsell sequences and worry about technology and Nanacast and 1ShoppingCart, or anything like that. Just literally, on the thank-you page, you say- “Hey, thanks for purchasing my eBook. Before you go, I’ve got a special offer for you. We’ve got the audio version available for you for $30 as well.” And one in 10 people might purchase that.
Now, the stats that I’ve seen are about 20% to 30% of people take an upsell, generally. You can easily get, even with a really crappy offer, you should be able to get a 10% increase just by doing something on your thank-you page. That’s Week Five done.
Week Six, you then go and look at increasing your average transactions per customer from two to 2.2. So, you do another e-mail in your autoresponder sequence and sell something else. You sell a consulting session. You sell an affiliate product that gives you the same commission as $30. You work out another product to sell.
That’s Week Six- working out a way to make another offer to your client base so they do purchase again from you. And it goes from two to 2.2. It’s only a small increase again in transactions per customer. And finally, profit margin. Obviously, increasing your prices can help with that, looking at cheaper hosting costs, doing maybe some analysis of your AdWords and decreasing your cost per conversion by 10%.
Things like that can help increase your margin by 50 to 55%- just doing some analytic testing and working out what keywords you’re bidding on that aren’t converting. It will save you 10% and obviously increase your profit margin. By doing that, what you’ve done is you’ve increased your traffic from 10,000 to 11,000.
Then with that increase combined and compounded, or accumulated with an increase of your opt-in rate from 20% to 22%, you’ve now got 2,420 prospects. With a conversion increase, you’ve now got 532 customers, and based on the increase in sales revenue- items per sale and transactions per customer- your revenue from the business has gone from $24,000 to a whopping $42,517.46.
And based on an increased profit margin, you’re now making $23,384.61. You’ve gone from a $12,000 profit in your business to $23,500, basically. It’s pretty much a double profit of your business in seven weeks, by just doing those seven simple tweaks to your business. That’s all it takes is seven weeks of just focusing on increasing each one of those things by 10%.
They’re just some quick examples that I just threw off the top of my head as you work through each one of those levers over the next seven weeks. What happens if at the end of the seven weeks you doubled your profit, you go back and you start again? You go, “First time around I did some blog posts and I did some Facebook advertising.
What about if I split test, or just test some additional keywords for AdWords? Or I do an SEO campaign? Or I do some remarketing or a banner campaign? Of course Google’s network. Well, that could increase your traffic by another 10%. You have to just keep going through this over and over again.
You continually double your profit in the business every seven weeks as you focus on each one of these things. And this is where that discipline to do that, and having that understanding, that framework, allows you to see things in the proper light. When you see a Facebook course, you go, “I can use that to increase traffic.”
Or, you see some upsell product that allows you to do upsells easier. Well, that helps you obviously increase your items per sale. Or maybe you come across some sort of PopUp Domination, which is a great plug-in for WordPress that helps you increase your opt-in rates. Or you see an offer for how-what-why, or maybe Frank Kern’s 4-Day Cash Machine and things like that.
That helps you increase your conversions, or also your transactions per customer. You can identify clearly what that course is meant to do for you and how you can plug it into your business, and when and where you’re going to apply it in this seven-week rotating cycle of focus for you as an online business owner.
And that’s a long diatribe, dialogue there, Dom. Does that make sense? Was it clear? I’m assuming because you didn’t interrupt me, it was making sense, and hopefully really making clarity of this 7 Levers for online business owners.
Dom: Yeah. I think you just got an entire 45-minute episode into about 15 minutes there.
Pete: Was that because I was talking quick?
Dom: It was just amazing. I mean, literally, it was amazing. You reeled stuff off, and I think we should kind of go back and maybe just take one or two of the things that you talked about and just expand them a little bit more.
Dom: But yeah, I couldn’t keep up. Normally I take a few notes when we talk, just for the kind of show notes. And I just couldn’t keep up with the number of ideas you were generating there. As you say, that’s just off the top of your head for an online business. Those are some examples of things you could do.
And that was one pass through. Just to pull out a couple of points from that before we go back through it- what I always get from this, and I said this at the beginning, is that the point you closed with which is the framework against which to view other things, kind of a filter to view other things through.
We did a whole podcast on this a while ago because it’s such an important thing. Whenever something pops up in your inbox, or comes through the post or whatever, or even somebody comes up to you and says, “Hey, do you want to know how to do this,” or, “Do you want to try doing this,” or whatever it is, then you need to evaluate it against something.
And very often, people in various stages of business don’t really know what they’re evaluating things for. If they see something that says, “Hey, get more customers,” “Oh okay, then I’ll try that.” But, to have a framework, a filter to view things through and to say, where does this fit here and am I ready to do it?
Am I going to use it, because that’s another thing to look it, it’s a really big point. Because otherwise, you’re just flapping around, taking the next thing that comes in front of you. So yeah, my brain’s cooling down now. I’m ready to go through it again, a little bit slower.
Pete: Just to jump in, I think part of it as well is that it gives you a framework so you’re focused on all the different drivers of your business, because the thing is that so many people- and particularly online marketers, I see so many times when I do get asked to speak in internet marketing events and things like that- and obviously, information marketing is something that I do, but it’s not my core focus.
We have the e-commerce sites and things like that, which is obviously just as relevant, and the 7 Levers applies there as well. But, so many people at these internet marketing businesses and online business- and you know my feeling about the term “internet marketing”- but what they do is they focus solely on traffic, and maybe go to opt-ins and conversions. Like they’re the three things they spend their entire time doing.
Dom: It’s like an inverted pyramid, isn’t it? Of effort that people talk about these things. Right at the top, the huge thing is traffic. Everybody talks about traffic, then a few people talk about opt-ins, even less people talk about conversions. And then after that, you almost never hear these other things talked about.
Pete: The weird thing is that if you sit down and do some math- if you get home from your walk, or your run, or your ride, and just sit down at the coffee table for five minutes. Get a pen and a calculator and just play around with this. Go to 7LeversCalculator.com.
It’s there, it’s been created by one of our listeners. One of our early listeners to the podcast loved the 7 Levers so much he went off and created an online calculator. So, you can play around with this sort of stuff.
Dom: I’ll put a link in the show notes about that, by the way.
Pete: Awesome. Have a play around with the numbers. But the crazy thing is if you spend all your time over the next seven weeks and try to just double your traffic- find out how much actual extra profit that’s going to generate you. If everything else stays the same- your opt-in rate, your conversion rate, your sales, your average item value, your margins.
If none of those other six things that drive profit in your business change, but you do somehow stumble on a way to double your traffic levels in that seven-week period, what’s that going to do to your bottom line compared to easily increasing each one of these seven things by just 10%. You know, doubling everything is hard.
Increasing something by 10% is easy. So go and do some numbers. It will be interesting to hear people’s feedback of their thoughts- preneurcast [at] preneurgroup.com, you can e-mail us. We answer all our e-mails, and I’d be interested to see what you say because I think a lot of people have been spending all their time focusing on just one element of these 7 Levers thinking it’s going to magically increase their bank balance.
And it definitely will, but what is the easiest path to market? What is the more trusted, proven, structured path to market? And it is going through each of these 7 Levers over that seven-week period, increasing them by 10% compared to slaving away trying to just double one of them.
Dom: Well, absolutely. My perspective on that, from the more mechanical point of view as well, is one, you said in an off-hand way, double your traffic. But, the reality of that is how hard is it to double your traffic? Once you get above a certain number, once you get above one- doubling your traffic to two isn’t that hard.
But then doubling it to four and eight, and 16 and so on, suddenly doubling your traffic becomes a significant undertaking and can cost money, or time and effort and all the rest of those things. You can spend all of your time doing it, unless you say- what’s the end result?
But more importantly, from a mechanical and kind of real-world point of view, what if you have twice as many people come through the door all in one go? Can you maintain your opt-in and your conversion rate? Does your system hold up to it? Is your shop big enough?
Have you got enough staff, etcetera? It just all grows a bit crazy overnight. Whereas, if you’re increasing each thing by 10%, you’re not putting pressure on yourself to achieve, you’re not putting pressure on the systems behind all this, but you’re getting, very often, better results, right?
Pete: Well, yeah. This is something that we’re facing right now, funnily enough. Obviously, being an information marketer selling eBooks and digital content online, you can scale a little bit easier. But, in the Outdoor Gear Store, which is a business we’ve recently got involved with here in Australia and we’re really pushing the e-commerce site and taking that business from where it was to some huge things already.
We’ve got some big plans for 2013 with that. But, we have to make sure we can grow organically. Because the business the way it is right now, prior to us coming in and buying into it and doing what we’re doing, scaling is going to be hard. We can’t turn around and put the jets on with the skills we know how to do, that we’ve done before in our Simply Headsets, Discount Conference Phones, and Big Ears Headphones, and all these other e-commerce businesses that we own.
We can’t just go in and put the jets on what we have before, because there’s some logistics and operations issues we have to address as well to allow for that scale. So, going through these 7 Levers and touching on the different levers, allows us to increase the profits without stretching the operations side of the business.
That’s something that people don’t really consider, which is a very good point that you raised, Dom, that I hadn’t really articulated before either. But that is something that we’re consciously and subconsciously doing right now in the outdoor retail store.
We’re ensuring that we can grow the profit very quickly without putting pressure, as I said, on the logistics and the operations stuff which would do if we doubled the traffic tomorrow. If we had twice as many people walking into the store tomorrow, we’d implode because all the team will be out there on the shop floor dealing with customers walking in the door, and not be able to pack the goods from all the online sales.
And that’s certainly a big concern people don’t think about. That’s one of the reasons that cause so many businesses to fail. They explore one of these levers too quickly without thinking about the actual overall operational issues.
Dom: Exactly, and that’s that upside-down pyramid again. There’s so much emphasis on increasing your traffic, but there’s so many things further down that can trip you up because you’re not paying attention to them. Again, this is one of the beauties of the 7 Levers.
It gets you to focus on each one of these things sequentially, but also it has the kind of net effect that with a small amount of effort in each place (and sometimes it’s a small amount of effort, sometimes it’s a small amount of financial investment) you’re getting a return. And that return can outstrip the investment.
Whereas, again, flip it on its head, to get traffic if you focus solely on traffic and let’s say you invest in offline advertising- radio, TV advertising, magazine adverts; or online, you invest in advertising- AdWords and that kind of thing. It’s all money that goes out the door. And it can go out the door in quite big chunks, and then hopefully you get a result on that.
But, it’s got to go all the way through all these other levers and achieve the right amount on each one, for you to get a decent margin and get a return on that investment. Not only does it protect your business by growing steadily, but your profits grow in a more sustainable manner. So, all around it’s a well-balanced system. You know I like my well-balanced things.
Pete: The interesting thing is that if you ask people, if for a moment they think, in seven weeks’ time, what would they rather: twice as much traffic or twice as much profit? People will think about it, and of course they’re going to say, “The real thing I’m chasing is profit.” But, you look at their actions, what they’re doing, and all they’re doing is trying to double their traffic.
Without really knowing the numbers and the consequences, that can be a bad thing. I really encourage people going into 2013 to focus on the right thing and then look backwards from there, going I would rather grow my profit than grow my traffic. Realistically, would you rather have less customers and more profit, or more customers and less profit?
The whole idea is that like the best business is one client that gives you $5 million a year. And you can easily argue yes, that you don’t want (and we’ve spoken about this before) to rely all your business on one client because if they leave, you’re screwed.
Now, that’s a whole separate argument, and don’t let that detract you and blind you from the point I’m trying to make here. Less customers, more revenue, and more profit, is much better than high volume, low profit, in more instances than not.
Dom: Yeah, absolutely. The thing I wanted to pull out but I didn’t want to interrupt you was, people focus on traffic because people equate traffic with profit. But traffic does not equal profit.
Pete: It’s one of seven drivers of profit.
Dom: Exactly. And that’s really what we’re talking about here, you know. If people have managed to kind of stand still, or tie the dog to a tree, or stop washing the dishes, or whatever they do when they’re listening to us, and have got a pen, let’s just quickly go over those again and just pull out one example.
Let’s go through the 7 Levers and pull out one example, rather than the five that you amazingly pulled out, just to focus people again, so that they can take this stuff away and get started, and get themselves ready for the new year if they really want to wait that long. But hopefully, people are going to start right now.
Dom: We started with traffic, and we’re not down on traffic. We’re absolutely not down on traffic. We don’t think traffic is a bad thing, but it is one of the 7 Levers. So, starting with traffic in an online business, you gave some examples. Can you pull one of those out?
Pete: Yeah. Guest blogging. There’s obviously AdWords and Facebook marketing and things like that- that is pretty common. SEO is another thing obviously. But guest blogging…
Dom: You can’t just do one can you?
Pete: No, I can’t.
Dom: You’re just too full of ideas. Guest blogging.
Pete: I think guest blogging is something that people don’t really think about as a way to drive traffic. You can get a very good influx of traffic to your site with one high-quality article posted on an industry site, or even in a magazine offline- and we talk about it in Going Analogue.
I think something like that, something that you could easily do in one week, is write a whole bunch of articles. Seven articles in a week. So each week, a new article goes out on a different guest post, or a guest blog, that obviously increases your traffic by 10% and gives you that extra wave of traffic you wouldn’t have otherwise got.
Dom: Cool. Alright. But about opt-ins?
Pete: Split test. Using ZenTester, I think, is a great thing to split testing your offer. What is the opt-in box? What is the headline? What is the way you offer? What is the image? So just literally split testing.
Nothing new, nothing sexy, just split testing is a great way to increase your opt-in rate. Although, the amount of times I’ve found what my initial thoughts are, are very rarely correct. It’s normally a split test that gives us the result.
Dom: Absolutely. We’re great friends with Brent Hodgson who’s behind ZenTester. He’s the first one to say whatever you think works isn’t really relevant. It’s the people visiting the page and what they want to see.
And they’ll tell you, if you do a split test and look at the numbers, it will tell you. So, absolutely. And that also goes for conversion as well. I would have answered split testing for conversion.
Pete: I’m going to offer a really different suggestion to this.
Pete: Make an offer. And what I mean by that is so many people I look at that are going, “My business isn’t making enough money,” or, “making the money I want,” or, “I’m not making as many sales as I want.” And when we sit down and ask, show me all your offers. Where are the check moves? It’s a marketing thing we’ve spoken about before.
Where can people go to buy your stuff? How many times are you offering? Do you have it on your page? Do you have it as part of your autoresponder sequence? And it’s amazing how many people are saying, “I’m not making any sales.” And you go, “Show me where people can buy from you,” and they can’t show you that.
Dom: Yeah, that is definitely a topic for an entire show about people missing some of the more obvious factors of business. But that’s a great one. Love it.
Pete: But for all the listeners though, if you just take a moment right now and think, if someone comes into my world and joins my e-mail list or opts into my world or my website, how can they give me money? Just make it easier for people to give you money. That is one way to increase conversions. Just make it more obvious how people can purchase with you.
It’s amazing how many people, after doing split testing say, “I didn’t realize you had that product,” and it’s been your core product for six months. Obviously, they didn’t know about it, so it’s your communication of that. I think that is a very different answer to the increase of your conversion rate.
Dom: Awesome. Love it. What about average sale value then?
Pete: Up your prices for a week and see how that affects your conversion rate and your overall revenue.
Dom: Yeah, I don’t think we need to say anymore on that one, because that’s the one thing that people do least and it’s the easiest thing to do.
Pete: I will throw another one in there which I kind of touched on before, which is just value add, ‘thud factor’ your product. This is a term I know you love, Dom. If you have a digital product- it’s an eBook, for example. Go and record the audio version. Do it yourself.
Go to Fiverr.com and spend a couple of bucks and get someone to voice your eBook so you can thud factor the product. The more value you add into that product, the more thud factor you give it. And the term comes from when it was traditionally used in direct mail where you’d send a box of stuff, and the thud it would make on the desk.
Well, what else can you offer? Can you do a workbook? Can you do a checklist? Can you do swipe and deploy? Transcriptions? What other stuff can you easily and quickly add to your product to increase the thud factor that justifies the price increase?
Dom: But it is important that it is adding value. It’s not just adding fluff and filler; it’s adding value. We’re behind this because it’s about adding value easily from your core product and your core materials- easily for you, but it does add like an extra modality.
Like the transcript of an audio recording or an audio recording of a video that you’ve done, or something like that. It is simple and it adds value. Otherwise, there is no justification for upping the price at the end of the day.
Pete: I also want to make clear before we move on to the next lever, is that just think about the suggestions we’ve been giving you so far. Each one of these things you can do within seven days.
Each one of these things is just a week-long project and then you move on to the next one. So after the seven weeks, you have implemented seven new things to increase each of these 7 Levers. So that’s just a reinforcement. This is how simple and easy it is when you focus on the right things in your business.
Dom: Cool. So, average items per sale?
Pete: The example I gave before is a really good one. Obviously, you can go and get really bombarded and overwhelmed, and just with the tech and do some crazy upsell sequence in your shopping cart. But literally, why not just on the thank-you page, after they’ve transacted and given you money, make another offer?
That way, they make a purchase again, and they go through the same checkout process again to purchase the second item. But you can easily clarify that as the same purchase so it’s more items per sale. Maybe you have a different version, a premium version of the product that comes with some Q&A calls.
Whatever it might be, there’s a number of different ways to do upsells online. You can do them as part of the checkout process if you have the technology there, but don’t let that stop you. Just simply do an offer, if you have to, on the thank-you page for another product.
Dom: Absolutely. And for anybody is remotely questioning whether this works or not, just go and get something from Amazon and see that completely at work all day long.
Dom: Oh yeah. I don’t like the way that GoDaddy do that. I’m sure it works for them. But I prefer the ‘Customers Who Bought This Item Also Bought,’ that Amazon do.
Pete: This is the point with GoDaddy. No one says I like it, yet it works and people still use GoDaddy.
Dom: Oh, do you know what? The number of phone calls that I get from people saying, do I tick the box that says ‘Add everything, yes please’? When they only went to buy a domain and they end up with an entire e-commerce solution.
Pete: But this is the thing- this is, again, a topic for another episode. And we probably should do an episode on this, so if you can make a note that would be great. But you need to watch what they do, not what they say. Just because people say, I don’t like GoDaddy, people’s initial reaction is- well, I can’t do that because of customer loyalty.
People won’t buy from me because they’ll hate the marketing sequence. How many people use GoDaddy as their sole primary domain supplier and buy from them all the time? So, watch what they do, not what they say. If you heard me say, I hate the amount of upsells in the checkout process with GoDaddy, because it’s really annoying I’ve got to click three extra buttons. And it does frustrate me.
But I use GoDaddy every single week. I give them money every single week for domains that we’re buying. So, watch what I do, not what I say. And that goes the same for your business advisors and the people you listen to and take advice from, and buy product from.
Watch what they do, not what they say. Just because they say something works and they’re selling a product, do they do it? Are they out there in the trenches like you with e-commerce sites, with retail businesses, doing the stuff they’re talking about? Watch what they do, not what they say is a very key thing and filter you should also use with everything that comes across your desk.
Dom: Cool. Like it. So, transactions per customer. I’m sure this is going to be another obvious one.
Pete: Have an autoresponder sequence to make another offer seven days later. A very simple thing is to work out what else you can offer. And maybe you don’t have another product. This is, again, what I alluded to earlier. Maybe you don’t have a second product you can sell right now.
You’re just starting out and you’ve got one eBook. That’s fine. And your eBook sells for $30. Why can’t this second transaction be a $60 affiliate offer where you get 50% commission? Which is $30, which is your average sales value right now. So your average transactions per customer can be done by making your customer spend money somewhere else that you get revenue from.
That definitely goes to your bottom line of your business and your profit. Have a think about it. If you only have one product right now and you don’t have time, energy, effort, or the idea to create a second full-out product so that person can buy from you again this month, this year, this quarter.
What other affiliate offers can you offer that person that generate revenue for you, that is a transaction that is made from that customer of yours? Something a lot of people don’t think about.
Dom: Absolutely. Any time that you give a positive referral, which is basically what an affiliate offer is- it’s a referral that you get a commission on. Any time that you give a positive referral, that reflects positively on you. If you refer a good service or a good product, okay, so you’re not getting all that money and they’re not buying one of your products; but you’re getting goodwill as well as some money.
Pete: Find two or three complementary products that support your user that give you good commission, and put them into an autoresponder sequence. That way, once they purchase from you initially, they automatically get upsold and cross-sold to other products and services that can generate you revenue and help drive your profit margin.
Dom: That’s right. Just think more about the goodwill that you’re generating than worrying. Some people worry about giving clients away. The more goodwill you generate, the more likely they are to come back and stay with you. So, don’t worry about that so much. So finally, as we are making it full length on this episode- margins?
Pete: Go and manage where you spend your money. I think so many people have AdWords campaigns, or Facebook campaigns, or remarketing campaigns; go and see where you’re spending your money. Just spend a day or so, or a week ideally, every seven weeks, looking at your expenses. That’s only nine times a year that you assess your expenses. Probably less than that- about eight times, isn’t it?
Go out and look, every seven weeks just assess, what my advertising budget is. How can I lower that? Literally, lower your AdWords bids by 5% and see if that affects your impressions, your conversion rate, and things like that. If not, you just saved 5% of your costs.
Test different affiliate percentages. Do anything you can to lower your costs. Call up your internet service provider and negotiate. That is a cost that affects your business’ profit. What other expenses do you have that you can lower in a simple phone call every seven weeks? Obviously you don’t want to call your internet provider every seven weeks to negotiate, because that’s going to get silly.
But that’s the sort of stuff that can affect- particularly if you’re an information marketer, which is the context of a lot of what we’re talking about on the show today. You can do that if you’re selling products, go and negotiate with your suppliers. We’ve spoken about that before, and we can do an episode at some stage about negotiation with suppliers.
There’s a whole bunch of stuff I’ve learned from my business partners in the telco business and things we’re applying now in the outdoor retail store and the e-commerce stuff we’re doing to get rebates and discounts. But if you’re an information marketer, obviously on the surface of it- well, what I sell is digital. I don’t have any costs.
Well, that’s great. But obviously you do have costs. You have hosting costs, you have video costs, you have internet costs, you have affiliate costs, you have advertising costs. There are costs there that affect your overall margin of the business. So go and reduce that every seven weeks somehow, in some way.
Dom: Yeah. There’s a couple of important things there. One is that whatever the business is, the margin is not just the margin on the product itself. It’s not just markup, which is what a lot of people think it is. The margin is across your whole business. And there’s always an area of your business you can look at.
And depending on your business, there will be lots of different things you can look at where you can save money. That’s the second point, which is that each one of these as you gave your first run through, which took less time than this second run through- you gave five times more examples in each one of these 7 Levers. And they were just ideas off the top of your head.
We’ve gone through again and we’ve given one, maybe two because you can’t help yourself, examples again, in more detail, of how you can easily add a 10% increase to each one of these levers just over a week. So that after seven weeks, even if you don’t achieve 10%- 10% is a great goal because you literally can double the profit.
But even if you don’t achieve 10%, any percentage will accumulate and give you an increase in your profits. Which for the amount of effort you’re going to put in, is a great return. Right?
Dom: Alright, mate. Well, we’re close to time. That was fantastic. You just blew me away with the number of examples that you came up with for each of those seven. And we will, I think, revisit the 7 Levers. Although I say, it’s almost like we’re an accountability partner for the listeners.
Yeah, we talked about this before, about having a coach or an accountability partner. One of the things that we like to do is just be there to remind people of the different ways that they can improve their business. That’s what we’re all about. We’re all about improving business, improving profits, and making a difference to the listeners.
Hopefully, folks, if you enjoyed this episode, please do give us some feedback on PreneurMedia.tv, the site where all the episodes are listed along with the transcripts and the show notes. And iTunes review is very gratefully received- in your particular country. We’ve recently had some good exposure on iTunes, haven’t we, Pete?
Pete: Yeah, the conversation I had with Tim Ferriss was number one in a lot of countries in the Business area. And the podcast shot up to the top spot in a lot of categories and countries too. It’s been very cool, so thank you to all the listeners.
Dom: Definitely. That’s down to you, the listeners. Folks, the amount of times you download and listen to our show, and the amount of reviews you give us- as positive reviews- help us get it up there in the Business section and help more people find out about us, which helps people. And we like to help people.
Pete: That is the way to say thanks. And also too, to all the Anthillians- I’m going to stick with that term. I’m sure it’s not the term that is used over at AnthillOnline.com. But to all the Anthillians who have joined us recently since the show has been syndicated there. Obviously, all the back issues are being promoted and distributed on there as well, over the next couple of weeks.
So, make sure you leave a message there if you’re an Anthill kind of person. Head over to AnthillOnline.com, check out the other great articles that they put up there very regularly. And leave comments there. Let James know that you’re thankful that he’s supporting our show and allowing us to distribute it to you guys on that platform as well.
Dom: Yep. So, there’s lots of ways to give us feedback, folks. We really do enjoy your feedback. We do take it onboard, and we try and make episodes that we think are valuable to you, or that you express an interest in. So, let us know what you think about this one and any of our other episodes, in any of those places. And we’ll see you all next week. Thanks for listening.
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