Increasing Lifetime Customer Value: One-Time Offers
One of the easiest ways to increase your customer value is to make a one-time offer after the initial sale. So when a customer joins your website for the first-time, offer them a related product at a steep discount (50% works well). If you ignore this technique, you almost certainly won’t be able to spend as much money on advertising as you could, and may even jeopardize your ability to grow a successful membership site.
This upsell should be priced roughly two to three times higher than the initial purchase. If the initial sale is $39.95, then this upsell should be roughly $80 to $120. But this is just a rule of thumb, and you should test several price points for your upsell. You might want to try very low priced upsells as well, say 30% of the initial purchase price. Again, this one-time offer is a major source of profit, and you need to have the ability to capture this sale without requiring the customer to enter their credit card details again.
You should be able to get around 15%-20% of your customers to take a high priced upsell (and as high as 50% for a very low price point). What matters most is how many dollars per name each upsell is adding. For instance, if you have a $97 upsell and 7% of the customers purchase, then a simple trick to figure out how many dollars your upsell is adding to your average customer value is to multiply the price point times the conversion rate. In this case: $97 x 7% = $6.79. So, by having the upsell in place, you’re increasing your average customer value by $6.79. Your actual upsell rate could vary quite a bit depending on the market and what you’re offering. Just use this figure as a benchmark and always work to improve it.
One optimization trick is to make the “Yes, I Want This” option to be a large button, and the “No Thank You” option to be a text link below the button. This makes the “yes” option stand out. Simple, but effective.
Remember: you need to offer the customer something immediately after they purchase, because you will not get a better opportunity to sell them something else. Better yet, offer them multiple items in sequence. If you’ve ever purchased anything from VistaPrint.com or GoDaddy.com, you have witnessed masterful upsell chains in action.
Dan is a business strategy, positioning, and copywriting guy. He’s sold over 10M dollars direct to consumer over the web. Dan believes that developing high quality products that solve widespread, urgent needs is the key to business success—and that recurring revenue models are the easiest businesses to scale when you make lifetime customer value your highest priority metric. You can read Dan’s Success Guide to learn his approach to growing a membership site into 7 figures. He’s been featured in MarketingSherpa and Mixergy.