SmallBizResource Blog -- Business Know-How

Back-End Sales: Your Real Pot of Gold

Posted by Janet Attard, Courtesy of Business Know-How Thursday, Jun 12, 2008, 10:49 AM ET

I stopped at the supermarket on the way home from work last night to pick up some Italian bread. It was on sale: two loaves for $3.

On the way to the bread aisle, I passed an end cap display of those huge packages of paper towels. I remembered the last 12-pack I had bought was almost gone, so I threw one in the cart. I got the bread from the bakery section, and while I was there, picked up a small crumb cake for dessert. Then on the way back to the checkout, I passed a display of Fourth of July party plates and cups, and figured I might as well pick them up now instead of waiting. By the time I reached the checkout and paid the cashier, the $3.50 or so I was planning to spend for bread had mushroomed into over $25 in purchases.

I'm sure you've had the same thing happen to you. But what does food shopping have to do with your business? What can you learn from supermarkets?

The important lesson is that any customer who buys a product or service from you is likely to be a qualified prospect for buying additional products or services if you have them available and promote them.

That's important because the most costly sale to make from a marketing perspective is the first sale. Once you've won the customer, those additional sales -- known as back-end sales to mail marketers and information marketers -- are where the biggest, and sometimes the only, profit is made.

Here’s an example: Suppose you're selling a product on the Internet for $39.95. The product costs you $8 to buy or produce. You spend $500 on pay-per-click ads. One thousand people click through your ad to your product page, making your cost per click 50 cents. Two percent (20) of those people buy the product. Your total sales are $799. Your total costs are $660: $500 for the ads + $160 ($8 product cost times 20). Thus if you have no other costs, your profit on 20 sales is $119, or $5.95 per customer. Hardly the stuff Internet millions are made out of!

And that's where a lot of would-be business owners give up. What they don't realize is that the serious profits come from having a line of products and services that will appeal to their customers. If you have a line of products, you can build sales and profits without greatly increasing your marketing costs just by contacting your existing customers about new product offerings. Depending on what you sell and at what price levels, doing so will allow you to turn that $5.95 per customer profit into hundreds of dollars profit per customer over the course of a year.

Bottom line: If you really want to make money in business -- any business -- have more than one product or service to sell to your customers. If you don't have more of your own products, consider teaming up to sell someone else's products to your customers for a commission on the sales.

Business Know-How