Customer Value Optimization (CVO) is the process we use for every business we start, acquire or consult for. It involves developing strategies to increase the number of customers, increase the average transaction value per customer and increase the number of transactions per customer.
According to Jay Abraham, 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
The Customer Value Optimization System
This is the same system Starbucks and McDonald’s have used to corner the coffee and hamburger markets. It’s the same system Amazon uses to dominate ecommerce. It’s how Best Buy, Beach Body and Sports Illustrated have become household names.
And it involves just 7 carefully crafted steps:
- Determine Product/Market Fit
- Choose a Traffic Source
- Offer a Lead Magnet
- Offer a Tripwire
- Offer a Core Product
- Offer a Profit Maximizer
- Create the Return Path
The steps are explain below
- Product/Market Fit:
Product/Market Fit is sufficient demand in a defined marketplace to allow the efficient expenditure of capital (human or financial) to scale company processes such as marketing. Put simply, it’s when you stop wondering if your product actually solves a problem and you start wondering how you’re going to deal with all the people trying to buy your product.
Product-market fit is the golden rule for any startup or small business. However, defining product-market fit can be challenging for some startups, as it takes time and requires a deep understanding of your target market.
- Choose a Traffic Source:
Google, Facebook, Pinterest, Twitter and LinkedIn, just to point out the obvious, are lining up to sell you targeted traffic. Your Search Engine Optimization agency wants to send you more traffic. Your Pay-Per-Click agency would love nothing more than to send you more clicks. You simply need to understand: How to measure what traffic is worth and how to extract maximum immediate value from that traffic. You can approach a Digital Marketing agency like us to help you analyse your Social Media Assets and predict the value you can get from traffic originating from this platforms
- Offer a Lead Magnet:
The lead magnet is a Digital Marketing tool used to attract potential customers in a bid to convert them. It is an irresistible bribe that gives a specific chunk of value to a prospect in exchange for their contact information. The Lead Magnet usually leads to a web page called a landing or squeeze page that is optimized to convert even cold traffic into leads.
You will need to provide tremendous value with the Lead Magnet.
- Offer a Tripwire:
The Tripwire is an irresistible, super low-ticket offer (usually between $1 and $20 that exists for one reason and one reason only; to convert prospects into buyers.
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.
- Offer a Core Product:
You likely already have a Core Offer. It’s your flagship product or products.
Most businesses get nowhere by making Core Offers to cold prospects. You’ll see your Core Offer sales explode with the addition of the Lead Magnet and Tripwire Offer. 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.
In most cases, sales from the Core Offer will make you profitable.
- Offer a Profit Maximizer:
The second of Jay Abraham’s business growth methods is to increase the average transaction value per customer. The Profit Maximizer does just that.
Would it shock you to find out that McDonald’s makes almost no money on the hamburger. The hamburger is the Core Offer, but it’s the fry and Coke Profit Maximizer that built the Golden Arches. This type of Profit Maximizer is called an ‘immediate upsell’.
Best Buy sells laptops and plasma TV’s (Core Offers) on wafer thin margins you can’t resist and makes it up on warranties; installation and Geek Squad support (Profit Maximizers).
Amazon makes a Cross-Sell Profit Maximizer offer when they show you, “People that bought this product, also bought that product” to increase the Average Basket Value, also known as maximizing profit.
What could you be offering as an upsell or cross-sell? What could you bundle with your Core Offer? How can you incorporate a subscription or membership site into your business model?
- Create 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.
This system works for small and enterprise level businesses. It works for mom-and-pop shops and billion dollar retailers. It works whether you sell traditional products, digital products or services.
If you understand and execute on this step, you’ll be ahead of most of your competitors.