Business is changing fast. If you don’t keep up, you will be another failed business statistic.
Before I tell you the main lesson, let me share a story with you.
A few years ago I was hired as a virtual CMO to help a failing business.
They were deep in the red, spending money like a sailor on shore leave.
Their strategy was to just survive which itself is a recipe for disaster in business.
Business and investing share the same rule. A dollar today is less effective tomorrow because everything else is going up and up.
Standing still in business is the kiss of death.
They were making an ROI that would make a Columbian drug lord jealous.
They only focused on the high-end market and laughed at the “amateurs” selling the low end.
They had a brand to protect and even the cheapest offer was expensive to weed out the wrong people.
It would be beneath them to even offer low-end services.
What would the high-end clients think?
I told them they might survive.
Only if they wake up and smell the coffee because business was changing and they would be the victim of disruption.
They laughed telling me what they HAD done and they needed to fix sales and marketing.
If I could not do it within their parameters maybe I was the wrong person for the project.
As a virtual CMO, I had to tell them the truth.
Sometimes clients have a flawed business model, or in this case, the market was being disrupted and they had to evolve with it.
I gave them the facts.
Since I didn’t have the magic bullet, we ended the engagement.
I did make it a point to keep in touch with the CEO.
Things kept getting worse, regardless of what he did or who he hired.
He picked up a rock star sales coach. He doubled down on running ads and revamped operations. Nothing worked.
The business ran out of options for funding because of negative growth. You can’t get funding if you are losing marketing share.
I’m sure he believed his own hype and refused to change when the market had already shifted.
With negative growth and an old business model in place, nobody wants to invest.
Business changes at a breakneck pace.
If you’re not looking to be the disruptor in your market, then I hope you are OK with being put out of business.
The lesson that I’m sharing below is often the type of thing you hear at high-end masterminds where the 7,8 and 9 figure CEOs hang out.
It’s the type of thing that can radically change the economics of the business.
I will admit it’s counterintuitive and will make sense if you understand the theory of disruptive innovation by Clayton Christensen.
Or watch this video.
Just google him and it will be a massive wake up call.
Everybody is focused on traffic and overlooks how to maximize Average Order Value (AOV) for building a moat around your business.
When I hear people complaining about the cost of traffic it tells me one thing.
They haven’t really focused on maximizing the AOV to the point of breaking even with the more expensive traffic.
When you are in a market with plenty of traffic you need to focus on finding that segment of the market that is in hyper-buying mode.
It’s the 80/20 rule in action except it’s narrowed down to the 4% that makes up the lion’s share of the 20%.
When you understand who these buyers are you need to really double down and target them with everything you have.
Some buyers will only buy your cheapest front end product. If you optimize for these people, your revenue will be flat.
You need to spend more per click to target the hyper-buying segment that will buy everything in your funnel and still want more.
After the checkout call and let them upgrade over the phone to a larger purchase.
Your high-value product, service or offer should have a price tag so high you have trouble even saying it.
The hyper-buyers will be happy to invest in everything you have if you only ask.
Here is where most people stop and the theory of disruptive innovation kicks in.
By only targeting the highest margin buyers and ignoring the lower end buyers you make room for competition to come in and suck up large amounts of market share.
This gives your competition leverage. As they become more efficient they start looking upmarket at your high margin buyers.
And before long they have enough data to start eating away at your higher-margin buyers and your profits.
What happens when you focus on the highest value clients and then reinvest some of the profits back into your lower-cost products?
You are supplementing the cost to the point where your competitors would need to go negative to get the buyer.
For competition to come into the market they have to lose money.
The economics don’t work out for your competition.
And this is only possible if you have a nice profit margin that can fund the lower-cost products.
Doing this creates a hard moat around your business to the point that few people want to fight it out. It makes your market cost-prohibitive to enter until the model is disrupted.
Right now I have the opportunity to work with a few businesses one-on-one to help them beat the competition.
We will work together to analyze your market and discover the weakness of your competition.
Next, we will create a game plan for what needs to happen to allow you to win in your niche and create momentum before the competition realizes what’s happening.