What is the secret of business success? You may think it is
to sell your product at the highest price to the most
people. Think again - you can actually make more money by
giving your product away!
The Secret of Successful Business
This is a technique which reveals the secret of practically
every successful business. It relies on repeat sales, built
up from the initial purchase of the product. The problem of
generating the initial purchase is overcome if the product
is free, so eventually you should be left with legions of
loyal customers and you can hardly fail to make a fortune.
The Benefits of Repeat Sales
Before we explain this in more detail, take the example of
Coca Cola - a company whose business has been based on the
success of basically one drink. How far would the company
have grown if they had sold a can to everyone in the world,
but nobody bought another one?
The success of the company is, of course, built on repeat
sales. Coca Cola drinkers don't just buy one can, they buy
lots of them, over years and years. The success of the
business depends on gaining a customer, providing them with
a product they are satisfied with, and then reaping the
benefits of repeat sales.
Brand and Company Loyalty
This doesn't just apply to consumable, low cost items. A
motorcar is a very expensive purchase, and an infrequent
one. Yet the fortunes of motor manufacturers are dependent
on selling not just one car to a customer, but several over
their lifetime.
Why does the Ford company continue to prosper, and why is
the Ford Escort still a number one seller? Those with rose
tinted spectacles would like to think it is because Ford
produce the best, most reliable car with the greatest range
of features and benefits, at the best price. Most
independent observers would differ from this view, pointing
to the cars coming from Japan and Europe.
At one time, however, Ford did produce this type of car,
and this is the point. Once customers start to buy from a
supplier they are notoriously hard to move. Put simply, if
they bought Ford last time they are likely to buy it again,
irrespective of any arguments to the contrary . The Initial
Sale
The phenomenon of brand and company loyalty is very
important and explains why companies spend such huge sums
of money in order to persuade someone to try out their
product. The initial sale forms only part of the benefit of
advertising, and is often little more than incidental. If
MacDonalds only encouraged people to enter their
restaurants once, never to return, their advertising
expenditure would be wasted and they would quickly go out
of business.
Gaining Customers
So what does this mean to you? Whatever business you are
in, it is likely that it actually costs you money to gain a
customer. There may well be no profit in the initial sale,
which will be swallowed up in marketing costs, whether
advertising, direct mail, telesales, personal
representation, or whatever.
The fact is that this initial sale is crucial, in order to
make subsequent sales which make a profit. Or is it?
Giving your product away, in the context of the above,
seems to make sense.
Here is an example. Assume that you produce and market a
food supplement which sells by mail for £5. Your
product cost is 75 pence, and postage and packing another
50p. The gross profit margin is quite high, although this
will be eroded by advertising costs when trying to attract
new customers. It could cost between £5 and £10
to attract the new customer, which you would hope to make
back when people re-order the product.
Here's an alternative - offer the product free of charge.
The cost to you including postage and packing is
£1.25........ much less than it would cost to make a
'sale'. Also, the take up rate will be far higher. You will
have a massive database of people who have now sampled your
product, and hopefully benefited from it.
Advertise For Free
You may have spotted a flaw in this argument. What about
advertising costs? You still have to inform potential
customers that they can have a sample for free. Well, yes
you do, but you don't necessarily have to pay for it. Get
others to do it for free.
Here is just one way of doing it. A recent copy of The Mail
on Sunday carried an article about a young man who had
built his video tape business to a turnover in excess of
£2 million using this method. One of the main methods
he had used to achieve this was giving away his product
free.
For example, a series of his products was aimed at anglers.
He contacted one of the major angling magazines and told
them that he had several thousand videos to give away to
its readers. They were naturally delighted, because being
able to make such an offer helps to sell magazines. The
magazine featured the offer heavily and it was a tremendous
success.
Although the initial result was a cost incurred, the
entrepreneur was able to enclose literature promoting
associated videos with the free one. This resulted in many
thousands of pounds worth of sales.
Potential Uses and Spin-offs
You will probably be able to think of many potential uses
and spin-offs from this technique. It can be adapted to
many different products and markets. Perhaps you have
something to sell which could benefit from this approach.
Don't forget the next time you are pondering over how to
sell more of your product, consider giving it away instead.
It's a lot easier and it could definitely be more
profitable in the long run.
----------------------------------------------------
Nick James is a UK based direct marketer and product
developer. During the last 5 years Nick has sold in excess
of £1.6 Million Pounds worth of products and sevices
online. Subscribe to his Free Tip Of The Week email at:
http://www.Nick-James.com
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