No matter which Business Advice book you read eventually they all tell you to concentrate on repeat orders to keep your business cash-healthy and growing. More and more I see the terms: Front-End and Back-End sales (or purchases) creeping up.
There are now two types of sales: Front-End (to new clients you have managed to find) and Back-End (selling more items, more frequent and for higher prices to your existing clients).
Or in other words:
Front-End = customer acquisition
Back-End = lifetime value
Last week I finished reading Richard Lomax's "The 7 secrets of Highly Effective Marketing" - not yet available from amazon.co.uk, only from his own "common-sense-marketing" website after going through the IMHO most ineffective extremely long landing-page I've seen recently, and I don't really understand why he keeps sending me emails to encourage me to buy the book and get 7 FREE marketing reports with it when I'm one of the first 100 buyers of his book?!?! He's not practising what he's preaching in free report 2: "How To Avoid The Six Most Common, Deadly Sins Of
Sales Communication" - but that's beside the point now).
Anyway, back to the subject on hand: back-end versus front-end sales, marketing and strategies.
Richard Lomax states (pages 100-101, secret #6):
"The critical step at the front-end is to make it so absolutely irresistible for a targeted new customer or client to buy from you for their very first time, that they find it impossible NOT TO.
The back-end purchases are where the true profit and growth potential of your business really lies. So how do you go about achieving a powerful Front-End customer acquisition strategy?
Instead of offering your complete, normal product or service in the first instance, think of how you can make just one aspect or facet of segment of your offering available for a fraction of the normal price.
Don't focus on making your maximum income at the front-end.
Be content to gain new customers on a minimal margin or for free on a break-even basis"
Let's look at this from a printing company point of view: offering to print business cards with a 50% discount to any new qualified lead. If successful and done with grate care and great overall service a business will be over the moon and decide to have its letterheads printed by the same printing company (at normal rate of course). Then follows the envelops with logo, complimentary slips, the yearly Christmas cards with logo and seasonal wishes, one-off marketing projects, company brochure etc in the following years.
Or in other words: 50% discount on a small item (and business cards aren't the most expensive stationery you will ever buy) turns a qualified lead in a loyal client for an average lifetime of 5 years. So a true statement? The chart below does indicate so.
Now lets look at it from what I've come to call a NCO' - "New Customers Only" business - point of view, great example our own company: wooden flooring.
Chart below shows our standard life-time value build-up per average customer:
Don't focus on making your maximum income at the front-end?
Wooden flooring is a definite NCO - our maximum income does come from the Front-End first purchase of a converted qualified lead. We can't be content with a minimal margin or to just break-even on that first purchase.
And we're absolutely not an unique business.
What's your type of business: Front-End or Back-End based? I really would like to know the following of all NCO's:
How do you look at all those plentiful highly effective marketing strategy books, blogs, article, reports etc that all seem to focus on Back-End businesses?
Tell me right here in the comment box, please!