Funnel Creation: Summary
Marketing is about taking customers on a journey. You create a set of experiences for your customers and your aim as a marketer is to convince them to stay with you for the ride and take the action you want (optin, share, purchase or something else) at the destination. The technical term for this process is a sales funnel.
The need to build an effective ‘sales funnel’ is essential for your business to attract and convert new customers and keep them coming back for more.
However, before we jump straight into funnel creation I would like to touch on the Customer Value Optimization(CVO) process which the sales funnel is based.
What is Customer Value Optimization and why is it important for marketers and business owners to understand?
Customer Value Optimization (CVO) is the process we use for every business we start, acquire or consult. The goal is to create a sales funnel that allows you to outspend your competition to acquire and keep customers.
Jay Abraham once said that there are only three ways to grow a business,
• Increase the number of customers
• Increase the average transaction value per customer
• Increase the number of transactions per customer
This is a lucrative concept centered around the same system that Starbucks and McDonald’s have used to corner the coffee and hamburger markets. It is also how Best Buy, Beach Body (selling workouts like P90x) and Sports Illustrated have become household names.
This system works for small and enterprise level businesses. It works whether you sell traditional products, digital products or services. Marketers and businesses should understand it because it is how you create an unstoppable business. Those that employ this process are impossible to compete with.
Applying this process makes a business impossible to compete with…So why is it so powerful?
A favorite business quote comes from Jeff Bezos, CEO and Founder of Amazon.com, who often says… “Your margin is my opportunity.”
The belief is … “He who can spend the most to acquire customers, wins.” Read that again, it isn’t who can acquire customers at a high average per customer, but who has the biggest budget to spend to get customers. You are probably not one of those who can, so you have to use every trick in the book to get, acquire, and keep customers.
The idea behind the CVO process is to build a marketing funnel that allows you to spend more than your competition to acquire customers.
We use a 5-step process…
• Lead Magnet Offer
• Tripwire Offer
• Core Offer
• Profit Maximizer
• Return Path
The first two steps (Lead Magnet + Tripwire) increases the number of customers. The Core Offer plus the Profit Maximizer increases the average transaction value per customer. And the Return Path increases the number of transactions per customer.
With each of these five steps in place, you’ll be able to spend more than your competitors to acquire customers.
Below is little more about each step of the process with a real-world example of how businesses use them to grow revenue.
A Lead Magnet is a valuable piece of information given in exchange for contact information (usually an email address). This is your headline of your ad – getting people to click to your landing page.
A Tripwire Offer is a low-dollar (usually $1 to $20) that is intended to convert the maximum number of leads into customers. (once on your landing page, you want them to convert to a low end cost item, to get your foot in the door)
A Core Offer is what most businesses already have. This is the flagship product and is usually a higher dollar amount. (this is what you wanted them to buy in the first place, but the tripwire allows them to be more willing to convert as they already bought some of your stuff already)
A Profit Maximizer is the upsell, cross sell, bundle/kit, etc that is used to maximize the transaction value of each new customer. (another upsell, above the Core Offer to further drive up revenue, margins, and average value of a click on your ads).
The Return Path is the tactics used to bring existing customers and customers back into the funnel.
Step 1. Lead Magnet
If your goal is to acquire new leads and customers, then your traffic strategy should begin and end with driving visitors into the CVO funnel with the Lead Magnet.
Definition: The “Lead Magnet” is an irresistible bribe that gives a specific chunk of value to a prospect in exchange for their contact information – usually an email address.
The Lead Magnet is usually offered on a web page called a landing or squeeze page that is optimized to convert even cold traffic into leads.
The technology is simple. Any decent email software can build a form where contact information can be entered and saved for your follow-up marketing. If you build your Lead Magnet properly to provide tremendous value it will convert well, even to cold traffic from sources like facebook.
Lead Magnets will be most effective in your CVO Funnel if they are,
• Relevant to your offers
• Ultra specific
• Priceless
• Easily “consumed”
The Lead Magnet exists to increase leads. Because the Lead Magnet is at the very top of the CVO Funnel, increasing opt-ins here will pay dividends throughout the rest of the system. The best lead magnets will convert north of 50% of visitors into leads and you’ll be relieved when I tell you that the highest performing Lead Magnets have one thing in common.
Specificity: This is Key to Getting More Leads
What irresistible bribe could you offer in exchange for a prospect’s contact information?
You DO NOT need to create something lengthy or complicated. In fact, the more laser-focused your Lead Magnet is the better it will convert.
There are several types of lead magnets:
- Cheat Sheet/Handout
- Toolkit/Resource List
- Video Training
- Software Download/Trial
- Discount/Free Shipping
- Quiz/Survey
- Assessment/Test
- Blind/Sales Material
Reports and Guides are amongst the most common types of Lead Magnets offered by information marketers. The advantage is that they are usually mostly text and can be delivered digitally (instantly).
Ok… this is a HUGE one.
Why do we keep insisting that it is important that the Lead Magnet be quick to consume?
The answer lies in the greater Customer Value Optimization process.
Wherever possible, when we are executing a marketing funnel we want to make the next offer in the funnel sequence immediately after making the prior offer.
Generally speaking, it looks like this…
• If a prospect takes the Lead Magnet, we make the Tripwire Offer immediately
• If a prospect takes the Tripwire Offer, we make the Core Offer immediately
• If a prospect takes the Core Offer, we make the Profit Maximizer offer immediately
There is (usually) no better time to make an offer than directly after someone has taken a prior offer. Allow me to throw out a general rule of thumb…
For every 10 people that take an offer, there are 2 people that want more.
This is why it’s important to, if possible, to create a Lead Magnet that can be consumed quickly.
Your prospect doesn’t want a 20-Week E-Course. They want to solve a problem. They want an outcome.
It will be 20 weeks before we are able to consume this Lead Magnet. This a perfect example of a lead magnet that you do not want to display.
Step 2. TripWire
A Tripwire is something that you offer your prospects at a low dollar entry point — normally $7 to $20. If you notice the graph above, the Tripwire should complement your lead magnet and feed into your core offer. The strategy is that once someone purchases a low dollar product, they are more likely to purchase a higher priced item – your core offer.
Definition: A super-low ticket offer that is available for one reason only, to convert the prospect into a customer and warm them up to the Core Offer. Your goal is not to earn money from the TripWire, your goal is to earn money from the Core Offer…but you are using the TripWire to gain their trust and to give them a small taste of what they really could have.
The goal of the Tripwire is to fundamentally change the relationship from prospect to customer. The conversion of a prospect to a customer, even for $1, is magical. The key is to make a Tripwire Offer that leads are unable to resist.
The most common way to make the Tripwire irresistible is by selling it at cost and, in some cases, at a loss to you.
That’s correct — you are not trying to make a living from selling Tripwire Offers. You are trying to acquire buyers because there is nothing more valuable than a list of buyers.
When you understand the rest of the Customer Value Optimization process you will understand how the Tripwire Offer is the single most powerful addition you can make to your business — even though you make no direct profit from it.
Don’t get confused into thinking that a TripWire is a coupon or some sort of discount, it is not. Let me give you an example.
Let’s say my Core Offer is a $500.00 personalized weight loss program. My trip wire could be a $39.95 supplement and 7-day detox PDF, in their hands for $7. Yes, this is a “lost leader”, but it gets them in as a customer and allows me to market to them over and over until they upgrade.
Types of TripWires are:
1) Physical Products
2) Trainings
3) Books/eBooks/Reports
4) Consulting Offers
5) Paid Webinars
6) Software/Plugins
Step 3. Core Offer
Your core products/services are the heart of your business. Most customers need nurtured prior to reaching this stage of your funnel – in the graphic above, customers only reach the core product offer if they’ve first purchased your tripwire offer.
You likely already have a Core Offer. The core offer is the flagship product or service that your company is ultimately trying to sell. This is what you are known for, and this is where most of your time and energy is focused.
Definition: The core Offer is what most businesses already have. This is the flagship product and is usually a higher dollar amount. (this is what you wanted them to buy in the first place, but the tripwire allows them to be more willing to convert as they already bought some of your stuff already)
By making Core Offers to cold prospects is the main reason why most businesses get nowhere. With the addition of the Lead Magnet and Tripwire, offer you’ll see your Core Offer sales explode.
After all, you’ve already had two successful transactions with this buyer.
This is why it’s critical to over deliver with the Lead Magnet and Tripwire.
Sales from the Core Offer in some cases will make you profitable. But this is not always the case. You could take everything you make from the Core Offer and reinvest it to acquire more customers, if you follow through on the CVO process.
The key is to build a system in which you can spend more to acquire a customer than your competitors.
Don’t be like your competitors who are making a Core Offer and then trying to make a living from it. You don’t need to make a dime from your Core Offer.
Remember, as Jeff Bezos says, your competitor’s margin is an opportunity. It is your opportunity to, for example, spend more on traffic acquisition, conversion rate optimization or increase the value of your offers.
It may surprise you to find out that many of the most successful businesses in the world make no profit until they reach the next two stages, Profit Maximizers and Return Path.
Step 4. Profit Maximizer
Whether it’s an upsell (offering someone more of what they already bought) a cross-sell (offering them a related product or service) or a subscription (offering them access to a club, every offer needs something on the backend to increase immediate average customer value and overall engagement with the buyer. Because while a buyer is good, a multi-buyer is even better.
Definition: A Profit Maximizer is the upsell, cross sell, bundle/kit, etc that is used to maximize the transaction value of each new customer.
The second of Jay Abraham’s business growth methods is to increase the average transaction value per customer. The Profit Maximizer does just that. Most businesses don’t utilize Tripwire Offers and they don’t have Profit Maximizers. They just rely on selling cold prospects on their Core Offer.
This is why they struggle and you won’t.
- Immediate Upsells
- Cross-Sells
- Slack Adjusters
- Bundles & Kits
- Value Buckets
- Line Extensions
- Affiliate / CPA Offers
- Premium Subscription
Step 5. Return Path
The last way to grow a business is to increase the number of transactions per customer.
Enter the Return Path.
The goal of the Return Path is to have frequent, strategic communication with your buyers and prospects that cause them to buy again and again.
Because you have received their contact information through the Lead Magnet you have the ability to continue marketing.
You can offer new Lead Magnets, Tripwires, Core Offers and Profit Maximizers because you have permission to market to them or bring them back to the Tripwire, Core Offer or Profit Maximizer that they didn’t buy the first time around.
The Return Path is anything that brings the customer or prospect back more frequently including…
• Exit Offers
• Organic Social Media (like Twitter, Facebook and LinkedIn)
• Loyalty Programs
• Content Marketing
• Outbound Sales Calling
• Ad Retargeting (More on ad retargeting here)
… but none is more powerful than automated email follow-up.
Let’s take an example from Digital Marketing.
Here is a simple funnel an information marketer might be running. In this case the marketer is running traffic from an email list (built through a Lead Magnet) to a Tripwire Offer.
Here’s what the metrics look like for this funnel…
• Tripwire Offer – A $9 Information Product is converting at 8%.
• Core Offer – A $197 Information Product is converting at 4%.
• Profit Maximizer – A $497 Coaching Offer is converting at 6%.
Once you have these conversion rates… it’s time to calculate two VERY IMPORTANT metrics that will tell you:
How much a customer is worth
How much you can pay for traffic
What is the importance of these two metrics and how do they relate to each other?
Well… remember that the goal is to be willing and able to spend more than your competitor to acquire a customer. To do that —> you need to know what a customer is worth and how much you can pay to acquire a customer.
To calculate how much a customer is worth, you need to calculate Average Customer Value or ACV.
And to calculate how much you can pay for the traffic to acquire a customer you need to calculate Average Visitor Value or AVV.
It’s pretty simple to do… the formula looks like this:
Tripwire Price + (Core Offer Price * Core Offer Conversion Rate) + (Profit Maximizer Price * Profit Maximizer Conversion Rate) = Average Customer Value
For the funnel above it would look like this:
$9 + $197(.04) + $497(.06) = $46.70 Average Customer Value
This means that you can spend up to $46.70 to sell a $9 product before you go negative.
Now… to find out how much you can spend to get a click, you simply take ACV and multiply it by the Tripwire Conversion Rate.
For the funnel above it looks like this…
$46.70(.08) = $3.73
This means that you could spend as much as $3.73 per click to acquire a new customer on the front end of this funnel before you go negative.
That’s good information to have.
A lot of business owners focus so much on attracting new customers, they forget to market to what may very well be their best source of new sales… their existing customers. Is that where the Return Path comes in? So how does that work?
The Return Path is about increasing transaction frequency with your customers. If you have a funnel in place there will be some customers that will go all the way through purchasing each offer. For all others you will need follow-up in place.
You also need to create systems by which you can notify existing customers and prospects of new offers you have available. The big tactic here is, of course, email marketing. But retargeting, remarketing, loyalty programs, custom audiences in Facebook and all forms of organic social media are also great ways to get people to come back and buy more often.