John Murch

Building a Monetization Wheel

01 Feb 2011
Building a Monetization Wheel

With sites like Groupons and other flash deal sites you see these amazing discounts, up to 90%! You think, how can you possibly make money? Well the term Life Time Value (LTV) should be SCREAMING at people. Most online or even marketing people don’t get what a LTV is. This is VERY sad. OKay, so what is it. A LTV is the term used to describe the monetary value of a customer to a company over the customers lifetime. So say your the GAP and you just gave $25 away as the famous $25 for $50 worth of product. Gap is betting by getting you in the store you will spend more than the $25 gift card and possibly breakeven or make more money.

The most interesting thing about this model is if you look at media budgets. For example, the Superbowl is coming up and companies like Pepsi, Coke, Budweiser, etc. will spend millions on seconds of television advertisement. These campaigns are more focused on branding or maybe even actionable like buying a domain on Godaddy to see more hot chicks. Rather than spending all that money on branding, you could spend it in terms of savings for a customer. You are basically saying here is $25, go buy something from our store. The goal is to get them to spend more then $25, hopefully $50 to make back that money or break even if you have a 50% mark up.

Now that we understand LTV, let’s take a look at a monitization wheel. You need at least 2 products, sometimes 3 to get started. The first product should either be free or dirt cheap (less than $30). If you are doing 3 products you give one for free as a $X value. This will be your giveaway product to incentives potential customers to give you their first name and an email address. Once you have that you can then try and upsell them or pitch your front-end product, something to get them to pull out a credit card and use it. This establishes a pricepoint with them. So if you have another front-end product you could sell it for the same amount as they have already confirmed they would be willing to buy something at that price.

Now the backend product, this is your cashcow. You set the price on this really high, like 100x or 1000x your front-end product price. The goal is sell a few of these a month.

In order to create the monetization wheel you need to get affiliates to pitch and sell your front-end product as much as possible. You should offer a high 80% or 90% of the price to the affiliates. It can even be a lost leader by offering 200% of the price where you are losing money. Why? You make it up with your backend product. This will accelerate the building of your customers and you can leverage that LTV by knowing and adjusting the front-end product affiliate payment. Keep in mind that your affiliate payout on your front-end can make or break you depending on the sales an the backend.

Math time:

Product A) Free -> Lead capture Name & Email
Product B) $20 -> Front-end to get a paying customer
Affiliate for Product B) $19 -> Pay them $19 for every $20 they make you, so $1 profit
Product C) $2,000 or $20,000 -> Backend-end Cash cow product.

How is this a wheel? You rinse, wash, and repeat.
You have to release new products all the time and get customers to continue through your “system” or wheel. Or better yet, expand your market and just try and find new customers over and over again who have NEVER heard of you or your product!

Product D) Free -> Lead capture Name & Email
Product E) $20 -> Front-end to get a paying customer
Affiliate for Product B) $19 -> Pay them $19 for every $20 they make you, so $1 profit
Product F) $2,000 or $20,000 -> Backend-end Cash cow product.

This process repeats ALL the time in Internet Marketing. People want to BUY themselves a solution or system to MAKE MONEY. This is bad, but when you think about a business that offers REAL value and something that people WANT, it works as well.

Now take this same philosophy and apply to SEO and how you could automate your lead generating using SEO.

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