What is Customer Value Optimization?
The customer value optimization (CVO) process is a proven success strategy for increasing revenue and profitability. We will cover the CVO process, which starts with placing ads and driving traffic to your website, then offering a lead magnet that offers something of value in return for their contact information. Next we offer a tripwire offer, or a low-priced offer (usually $1 – $20) that converts your prospects into buyers.
The next step is offering your core product (the main product or service of your business), followed by a profit maximizer, an add-on that increases the average transaction value per customer.
Finally we create return paths that encourage your buyers to buy over and over from you.
This strategy will work for just about any business model, and it’s a perfect compliment to the inbound marketing methodology. Remember, we don’t sell to businesses or consumers – we sell to other humans.
The 3 No-Brainer Rules to Grow Your Business Profits
In order to sell grow profit in your business, you need to focus on these 3 core rules:
1) increasing the number of customers you have,
2) the average transaction value per customer, and
3) the number of transactions per customers.
This isn’t rocket science, and it makes total sense if you think about it.
Determining Product Market Fit
If you’re looking to grow your profits, the first thing you need to look at is product market fit. In other words, you need to make sure that your product is the right solution for a specific customer. So, take a minute and think about one of your core products or services, and the person who typically buys that product or service.
What problem does it solve?
How would they describe the product or service to a friend who is looking for help in that area? What do you envision this customer being like, where are they coming from when searching online? Who are their friends and influencers on social media channels? Where do they spend their time online?
Choosing the right advertising source
Once you have a pretty good understanding of how your audience and your product intersect, it’s time to decide how you want to advertise to them. If people are actively searching for your solution, Google Search ads will likely be effective. If you’re trying to introduce your product to people that may otherwise be unaware that your product exists, Facebook, Instagram, and Youtube can be very effective. If you’re selling to other businesses, LinkedIn is probably a good channel to explore.
The goal of this advertising is not to become profitable right away, it’s instead to enter people into the Customer Value Optimization Funnel.
Offer the right lead magnet
The next two steps of the CVO focus on the first no-brainer way to grow your business – increasing the number of customers you have. A lead magnet is an offer that you make to your visitors on your website that they can’t refuse.
The lead magnet should be something extremely valuable, such as a guide or ebook packed with information that is relevant to the problems that they are facing. For example, if you’re selling accounting services for small businesses then an effective lead magnet might be “7 Must-Do Tips to Get Your Financials In Order Before Tax Season”. Remember, provide a specific solution to a specific problem with your lead magnet. (“Subscribe to our newsletter” is not a great lead magnet.)
Offer a tripwire
Way to go, you have the perfect lead magnet and you’re getting new leads in the pipeline. But, these are still leads – they’re not yet customers. If the goal is to maximize profit, which it is, then we need to turn them into customers. Enter the tripwire offer.
A tripwire offer is a low-priced product that makes customers want to buy more from you. For example, if I am selling accounting services for small businesses then a tripwire offer might be “Basic QuickBooks Setup for $19.” By giving away this service which is typically $200-$250 per hour, my customer will have the opportunity to see me as valuable and worth their time. You might be asking, “Brian, am I losing money on the tripwire offer?” The answer is, “Probably so!”, and that’s a good thing.
The goal of the tripwire offer is not to turn a profit – it’s to turn your database of prospects into a database of customers. As a business owner, there’s nothing as valuable as having a list of buyers in your database.
The strategy is pretty simple. You want to convert the leads that you gained on your lead magnet into customers, so that you can know propel them through the next 3 steps.
Offer your core product
Now that you’ve generated leads using your lead magnet, sold them a low-cost product or service, it’s time to start offering higher-priced products or services. This is probably the core offer of your business, so you probably already have that ready to go.
The challenge that you’ve probably run into in the past is that you tried to sell your core product to cold prospects. This can be a very difficult thing to do, because you haven’t yet built a relationship with your prospects.
But now that you’ve run your prospects through the Customer Value Optimization process and they’ve already responded to your lead magnet and spent a little money with you, they’re probably interested to see what else you offer that may be of value to them.
In our accounting business example, our core service might be bookkeeping.
Now, this is where most businesses really start to leave money on the table.
They take the profits from their core product and they use that to put food on the table. And that’s fine – but we want you to think bigger.
What if you took the revenues from your core offer and used that to reinvest in acquiring new leads, getting those new buyers, and selling more core products or services. That can trigger exponential growth, and it sets the stage for our next stage, the Profit Maximizer.
Offer a Profit Maximizer
“Would you like fries with that?”
McDonald’s makes $.18 selling a basic cheeseburger. When they sell fries and a coke, they make $1.32. That means they make 7 times more revenue when someone buys the combo meal. Holy smokes.
When you buy a new TV, the profit maximizer is the warranty. A subscription to a service after an initial purchase or trial period is a great profit maximizer. If you start looking, you’ll see profit maximizers all over the place.
For our accounting client, you might make relatively thin profit margins on your core bookkeeping service, but the margins might be GREAT on a Fractional CMO service, where you provide financial strategy and recommendations at a premium price (and you’re able to leverage your existing experience to offer a lot of additional value).
(Oh, and before we move on, did you catch that this addresses No-Brainer Rule #2?)
Create the Return Path
The final no-brainer rule to growing your profits is to increase the number of transactions per customer.
This is where we set up a plan to get them to buy again and again. Do you have more than one core offer – then set up a second Customer Value Optimization path for a second product or service and offer them the lead magnet for that!
If they dropped out of your CVO funnel – bring them back to the offer where they dropped out to see if they’ll buy from you now.
Don’t forget about all of the traditional digital marketing tips in your toolbelt – email marketing, social media, content marketing, outbound sales (I know, I know…), retargeting ads.
Automate all of it
Here’s the final piece of advice – there are a lot of steps to creating the Customer Value Optimization funnel, and we don’t think that you should try to recreate the wheel. Use a marketing automation tool to set this up and keep track of where everyone is – and every week add to your funnel so you’re always building it out.