Today I wanna get into a big mistake lots of newer business owners make.
This will be a little “math heavy” so please bear with me. Go grab an extra cup of coffee if you need to 🙂
This is something most MaRKeTinG gURuS will never tell you. And not because they’re trying to hide something, but because they don’t understand it themselves.
And that is…
If you invest in your marketing without nailing down your economics, then you’re shooting yourself in the foot. And at the very least, you’re leaving money on the table.
Okay, what do I mean by economics?
Mainly your offers and their price points.
Consider the classic high-ticket model:
Let’s say you don’t have an established brand yet, and you sell a coaching program for $5,000. You invest say $3,000 into ads/marketing and get 20 qualified leads. Out of those leads, 2 convert into customers (10% conversion rate).
So in total, you spent $3k and made $10k, so net profit is $7k
Most people would consider that pretty good and while the margins are great, it’s not enough to sustain a business because of lack of leadflow.
Now let’s look at a model with improved economics:
Instead of getting leads, you sell a high-quality $5 book or info product. And that $5 product gave someone all the same exact high-value information they get in your coaching program, just without the live support.
Let’s say you invest $3k on advertising and make 100 sales. You add some order bumps and upsells, so your average customer spends way more than just $5 with you. Let’s say your AOV (average order value is) $20. So that’s $2k right off the bat.
Now you upsell those 100 customers into your high-ticket program. They will be less qualified than your high-ticket funnel leads, plus not everyone will book a sales call, so instead of a 10% conversion rate, let’s say only you get a 2% conversion rate.
So let’s do the math here…
100 new customers with $20 AOV is $2,000.
And the 2 high ticket sales make you $10,000.
After $3k in ad costs, your total profit is $9k.
Now here’s the best part:
Instead of 20 leads and 2 clients (which is what you’d get with the high ticket model) you get 2 clients and 150 customers with this “ascension model”.
Those 150 customers are more likely to buy from you again because they’ve consumed your products which demonstrates your expertise. And not only that, you can sell them mid-priced products, for instance, a monthly recurring product or $500 course.
At the end of the day, you want customers, not leads.
That’s how you build a real, sustainable business.
This “competing on economics” idea is something I learned from a brilliant marketer named Alen Sultanic. This aligns with many of my own experiences and insights after 10+ years of optimizing for customer acquisition and realizing it only gets you so far.
Some marketers will teach this stuff but don’t explain the theory behind it, which makes people lazy and just copy their funnels and price points without thinking, which of course doesn’t work.
But once you understand WHY this works, you can implement it in your own business and be years ahead of your competition.