The Money Making Secret of "The Toll Booth Position"
Author: Dan Kennedy
I'm a marketing consultant and at one of my client-companies, a company
that, in less than 10 years, has gone from a $10 million to a $100
million dollar business one of the people I work with frequently has
jokingly given herself the title, 'Vice President, Back-End.'
Although that clearly opens her up to be the butt of many jokes, it
does very accurately describe her very, very important area of
responsibility, in direct marketing parlance. At least 80% of the
company's profitability depends on her contributions.
If the term "back-end" is new to you, it means everything you sell your
customers after their initial purchase (that first order is called the
"front-end"). For instance, let's say you sell instructional video
tapes to golfers on how to play better. You advertise in golf magazines
and your lead product is a $25 video on putting strategies. That's your
"front-end" because that's what people buy first. But then once people
purchase that first video, you send them a catalog offering them over
50 other golf videos ranging in price from $50 to $99. Those follow-on
videos are your "back-end."
In many businesses, there is a relatively brief period of time during
which there are significant, exciting profits on the front-end, that is
the very first sale to a customer.
But that happy situation dissolves over time, as you "cream" the
market. And, as you go deeper and deeper into a market, the cost of
making the first sale (acquiring a customer) goes up and up. For
instance, in the above example of the golf videos the first time you
run a magazine ad you might pull 100 orders. But if you keep running it
every month, your order volume will probably drop off steadily. Within
six months, you'd be lucky to be selling 30 videos from the same ad in
the same magazine. As some point, it gets so high it is no longer
practical to advertise and sell that product to that market.
Nothing is forever. This fact of life is what mandates being smart
about making all the money that you can from the back-end.
The good news is that your satisfied customers are probably willing to
buy other things from you -- and they don't even have to be your own
products/services. You can make deals with other companies to offer
their products/services to your customers in exchange for a piece of
the action.
For instance, let's go back to our example of the golf video company.
You might do a "joint venture" with a manufacturer of special golf
clubs which sell for $1,500 a set. You'll mail a letter to your
customers telling them how well these clubs will improve their golf
game and you'll get $750 on each order placed. If your customers trust
you, they'll be much more likely to respond to your letter than they
would be if the golf club manufacturer mailed to them directly.
Of course you only want to recommend high-quality products and services
which will be of value to your customers. But you get the idea. You
could make similar deals with other companies who sell what golfers
want -- golf apparel, golf trip and excursion operators, even custom
home builders who sell houses near golf courses. They'd all happily pay
you a 'toll' commission to sell their wares to your customers.
No matter what your business, one of the most valuable assets you have
is a list of satisfied customer, predisposed to buy from you again.
When you control a sizable list of customers who bought from you, know
your name/business name, are happy with what they bought and with the
ensuing relationship ... and are pre-disposed to read your mail and buy
from you again, it's like owning your own "toll booth."
A pioneer of direct marketing, Harvey Brody, taught me the power and
value of getting into "The Toll Booth Position" and I've been teaching
it for years. Imagine owning your own toll booth on the highway near
your city. Anybody who wants to get to the other side of that toll
booth has to pass through its gates and pay you money.
As the controller of a responsive customer list, that's exactly where
you are; sitting there in your own toll booth and anybody who wants to
get their appropriate product or service to those customers you
control, has to pay you money.
You can collect a toll through joint ventures, as described above
wherein you do an endorsed mailing to your customers and get a piece of
all sales that result.
Or, if you build a list of 50,000 or more, through outright lists
rentals. I have a number of clients who pay all their overhead expenses
every year just with the checks they get from the list broker
representing their list to others.
I have often paid others to pass through their toll booths ---and done
so cheerfully. I have also been paid by others eager to get through my
toll booth, to my customers, with my endorsement.
In the direct marketing business, it's a well-known fact that most of
the profits is derived from back-end sales to existing customers. Yet
outside that business, I rarely encounter a company which comes
anywhere close to tapping the potential of establishing their own "toll
booth position." Get started building yours right now and start
charging others to go down your road.
Dan Kennedy is a marketing consultant and copywriter who helps
entrepreneurs cut waste out of advertising, end cold prospecting, sell
at prices higher than competitors and dramatically increase profits.
The author of "No B.S. Business Success" and other books, as a speaker
he has frequently appeared on programs with former U.S. Presidents,
General Colin Powell, Larry King, Zig Ziglar, Brian Tracy and Jim Rohn.
Copyright 2004 by Dan Kennedy, DanKennedyLetter.com.
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