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Mastering the Customer Value Optimization System

Mastering the Customer Value Optimization System Blog Feature

Bob Ruffolo

Founder & CEO, Keynote Speaker, Entrepreneur, Recipient of Comparably’s Best CEO ’17

August 3rd, 2016 min read

Systems are essential for growing your business effectively.

How would you like to get your hands on the same system that companies like Starbucks, Amazon, and Beachbody have used to dominate their respective markets?

The name of that system is Customer Value Optimization (CVO) and this guide is going to show you exactly how to implement it in your business.

What makes this system especially attractive is how easily it scales from mom-and-pop shops to billion dollar enterprises and works for all types of products and services.

Any business can use the Customer Value Optimization system -- and hundreds already are!

According to legendary marketer Jay Abraham, there are only three ways to grow a business::

  1. Increase the number of customers
  2. Increase the average transaction value per customer
  3. Increase the number of transactions per customer

Customer Value Optimization works so well because it accomplishes all three.

Who Created the Customer Value Optimization System?

Customer Value Optimization was developed by Ryan Deiss, founder of DigitalMarketer.com.  Some variation of his funnel model is used by 90% of the most successful online marketers today, making him and one of the most highly-respected experts in the digital marketing space.

Ryan also has several other businesses in over a dozen markets across the world. In just the last 36 months, his companies have:

  • Invested over $15,000,000 in marketing tests
  • Generated tens of millions of unique visitors
  • Sent out over a billion permission-based emails
  • Run around 3,000 split and multivariate tests

What sets Ryan apart from the typical online marketing guru is his real-world experience. He practices what he preaches and shares techniques that are backed by results.

Why Customer Value Optimization Aligns With Inbound Marketing

Inbound excels at bringing quality leads to your website and converting them into customers. Inbound is also great for customer retention by ways of “delight.”

Although it’s important to keep your customers happy, companies also need to focus on increasing the value of their customers so they can grow their business – that’s where Customer Value Optimization comes in.

Think of it like this: inbound turns prospects into customers and Customer Value Optimization turns those one-time customers into indispensable lifetime customers.

Ryan’s theory is that the company who can outspend their competition will ultimately be the winner; so the goal of raising the value of your customers is to, in turn, increase the amount you can spend to acquire those customers.

How to Build a Customer Value Optimization System

Like any good system, the Customer Value Optimization system is broken down into clear steps – five to be exact:

  1. Lead Magnet Offer – A free product/service that’s used for lead generation in exchange for a prospect’s email address (or other contact information). It’s similar to premium content in inbound.
  2. Tripwire Offer – A lower-priced product designed to convert as many leads into paying customers as possible.
  3. Core Offer – The flagship product or service a company offers and is usually higher-priced to increase the average transaction value per customer.
  4. Profit Maximizer – The highest-priced product or service a company offers, typically as an upsell from the Core Offer to maximize the average transaction value per customer.
  5. Return Path – Tactics for increasing the number of transactions per customer, such as email marketing, social media, blogging, etc. This is comparable to the “delight” phase of the inbound methodology.

Before implementing these steps, however, you have to handle two preliminary tasks:

  • finding product/market fit
  • choosing your traffic source

Take a look at the image below to see how it all flows together:

Determining Product/Market Fit

Product/Market fit is all about providing the right offer to the right people. In other words, it’s about creating a solution that people not only want, but truly need.

The two most common problems associated with this for new companies are that:

  1. Their offer doesn’t provide the right solution
  2. Their offer doesn’t appeal to the right people

If your product is a good fit for your market, neither of those problems occur.

Choosing a Traffic Source

The first thing we need to make clear is that you DO NOT have a traffic problem.

Between the various social media networks, search engines, and ability to buy targeted traffic from any niche of the world, you have no shortage of opportunities to drive people to your website.

Ultimately, according to Ryan:

“The goal, no matter which traffic source you choose, is to drive prospects into the CVO Funnel.

Become a master of a single, steady traffic source.  Stay focused on that traffic source and, once mastered, add a second and third traffic source.

These traffic sources include…

  • Email Marketing
  • Social Advertising (Facebook/Twitter/YouTube ads, etc)
  • Banner Advertising
  • Blogging
  • Organic Social Media
  • SEO

Your traffic strategy (if the goal is acquiring new leads and customers) begins and ends with driving visitors into the CVO funnel.”

The first step in getting those visitors into your funnel is offering a strong lead magnet.

Step 1 – Offer a Lead Magnet

A Lead Magnet is something irresistible that you offer a prospect in exchange for their contact information. Although they don’t pay money for a Lead Magnet, this is a valuable transaction that starts your company’s relationship with that person; an ice breaker if you will.

To be effective, your Lead Magnet needs to not only provide tremendous value, but it also needs to provide a specific solution. Specificity is the key to higher conversion rates.

Below is an example of an effective Lead Magnet from Digital Marketer.

 

Step 2 – Offer a Tripwire

The goal of your Tripwire is to convert leads into real customers and ultimately increase the number of total customers your business has.

The Tripwire is priced low, usually between $1 and $20, and it needs to be irresistible to your leads. A simple way to make your Tripwire irresistible is to price it at cost, or even below cost, in some instances.

It needs to be a no-brainer for people to take advantage of. (i.e. Spotify giving new users three months of its service for only $0.99.)

 

Although the Tripwire is one of the most valuable offers in your CVO funnel, you shouldn’t be concerned with how much immediate profit you receive from it. You’re using this offer to build a list of real buyers that you can market higher-ticket offers to moving forward.

Step 3 – Offer a Core Product

Most businesses already have a Core Offer in the form of a flagship product or service. Core Offers are higher-priced and more difficult to sell to cold prospects.

Selling your Core Offer to customers who downloaded a Lead Magnet and purchased a Tripwire Offer, however, is significantly easier.

Now your customers will assume that your Core Offer is worth more than the price - this is why you made a point to over-deliver in the first two steps.

At this stage, some businesses choose to make a profit from their Core Offer, while others reinvest that money to acquire more customers and don’t see a profit until the last two stages.

Step 4 – Offer a Profit Maximizer

Your Profit Maximizer is an upsell you offer to increase the average transaction value per customer.

Some of the most successful businesses don’t even make a profit until their customer buys the upsell.

For example, McDonald’s makes very little off of each burger (a Core Product) they sell. Instead, their profits come from the fries and Coke. The same goes for Best Buy – they sell computers, TVs, and other electronics on thin margins, but make their profit from their warranties, installation, and Geek Squad support.

Your Tripwire (and Core Offer, in some cases) pays for the biggest expense of most businesses – acquiring new customers. Any transaction after the initial sale is a Profit Maximizer.

Step 5 – Create the Return Path

Finally, with the Return Path, you aim to increase transaction frequency per customer.

Some customers will flow right through your funnel, purchasing everything they’re offered, but most won’t. That’s why your business needs a Return Path to follow-up and keep them engaged with your brand so you can try and convert them later.

Common Return Path tactics include:

  • Email marketing
  • Retargeting
  • Remarketing
  • Loyalty programs
  • Custom audiences on Facebook
  • Organic social media

Return Paths are also used to alert existing customers about new offers.

What is Product/Market Fit? (& 5 Steps to Finding It)


The content above was an excerpt of our new guide, "The Inbound Customer Value Optimization System (Using HubSpot). To learn about Product/Market and the rest of the Customer Value Optimization System, get your free copy of the full guide by filling out the form below. 

 

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