The Money Making Secret of The Toll Booth Position
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. For info on his monthly "No B.S.
Marketing Letter" go to http://www.DanKennedyLetter.com
Copyright 2004 by Dan Kennedy, DanKennedyLetter.com.
NOTE: You may run this article provided you run it with the bio
box intact. Please email a copy of your publication with article
in it to Mr. Kennedy's publicist at ArticleDeptBill@rtir.com
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