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Understanding the Marketing Backend

Aug 17, 2007
I see som many new Internet Marketers quit before they have even given themselves a chance to succeed. It's really sad to see people who really have the drive and desire to make a go of IM give up too soon. It just gets too frustrating because they have been led astray by GRK(Get Rich Quick) Gurus who promise the moon and deliver nothing.

If new marketers would only learn the fundamentals of marketing they might give themselves a fighting chance. So I'm going to cover one of the biggest, most influential pieces to your success as a marketer. It is called the backend. If you've been around and you are having any type of success you probably know what I'm talking about. If you don't, keep reading and make sure what follows is indelibly etched into your marketing mind.

The backend refers to all the sales that happen after the first one. The effect the backend has on someone's business is immense as I will demonstrate in a moment. But for now let's return to why the backend is so important. Many marketers focus on making that first sale as if it's the last sale. If they can't make a profit on the front end then they quit, give up, and pack it in. Instead you should look at the first sale as an entryway into bigger profits and more success. Let me demonstrate.

Let's say you are selling to the IM market. Mmmm, this is a familiar one. You put together a nice little ebook on how to use Google Adwords and sell it for $47. That's nice. For every sale you make you are putting $47 in your pocket. If you get free traffic, you keep it all. But what if you advertise for that sale and you have to spend $20 to get a sale. You keep $27. Now this is your only product and things are going nicely until your competition arrives.

They have a $47 Google ebook too, but they also have a $197 home study course on affiliate marketing that they offer to their customers a few weeks after the customer purchases the ebook. For this example, 10% of their customers purchase the $197 course a few weeks later. Let's assume that they are paying the same amount in advertising as you, $20, to get the first sale. So let's look at the numbers.

Your business:

10 Sales = $470 - $200(Advertising for 10 sales) = $270 profit. Not bad.

Your competitor:

10 Sales=$470 + $197(10% of sales on the backend) - $200(Advertising)= $467

Hmm.

Your ROI is $270/$200 = 135%

Theirs is $467/$200 = 234%

Are you starting to see the effect? What if your competitor had another product, a $995 coaching program that 10% of the home study customers purchase. Let's see how those numbers work out. We'll use 100 sales now.

Your business:

100 Sales = $4700 - $2000 = $2700 Profit

Their business:

100 Sales - $4700(Front end) + $1970(Backend 1) + $997(Backend 2) - $2000(Advertising) = $5,667

Your ROI is still 135%.

Theirs is $5,667/$2000 = $284%

Now you may say that's all fine and good because I'm making 135% on my money and I'm happy. I'm making a profit and everything is good. Well it is until your crafty competitor realizes that they could have more of the market if you weren't around. So they decide that they are going to decrease the price of their front end product to $20. Ouch!! They just put the squeeze on you now to stay competitive you have to lower your price too.

You both take a hit on the front end, and since you don't have a backend you are forced out of the market. Your competitor on the other hand can break even or even lose money on the front end because they make it up on the backend. Too bad for you. Game Over.

Now I hope this little illustration has shown you both the importance of having a backend as well as the importance of knowing what your competitors are doing for their backend. When you know how your numbers work out on the back end, you know what you can pay to acquire customers on the front end. The end result that you must understand is that when competing in your market, the marketer that has created the biggest back end wins.
About the Author
Steve Gray is a successful online marketer who earns income from both online stores and affiliate marketing. To get an inside look at his newest project check out Who Loves Money
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