Optimized Ecommerce EP 070 – Average Order Value: Why is this type of metric Important?
This week on the Optimized Ecommerce Podcast, Tanner Larsson talks about what an Average Order Value is and why it is important. Join us for this week’s episode as Tanner discusses the importance of Average Order Value and some of the best ways to increase this type of metric. Don’t forget to subscribe
Welcome to Episode 070 of Optimized Ecommerce – Average Order Value: Why is this type of metric Important? I’m your host, Tanner Larsson, CEO of BGS.
BGS means Build Grow Scale! It is a community that we founded where eCommerce entrepreneurs and physical product sellers come to learn how to take their businesses to the next level.
Here’s just a taste of what we talked about today:
What is an upsell and what it does to your ecom store?
An upsell is the offering of additional products to the customer immediately following the initial checkout and before they reach the receipt page.
What upselling does is, it allows you to sell more products to your customers when they are in their most vulnerable state, it is when you want to take advantage of it. It also capitalizes on the “buyer’s high” at the time of purchase which encourages them to buy more, thereby increasing your Average Order Value (cart value).
When an upsell is set up properly, it can increase your Average Order Value by as much as 60%.
The tried and true upsell example is the front end product would be the burger, the upsell is fries and a coke. This example is also the reason why it’s a myth when people say that you can build a successful online business with only one product.
Reasons why front end only is a dead-end business.
A front end business is a business that only focuses on the front end acquisition of customers, which is 95% or more of all businesses.
This type of business is going to be constantly robbing Peter to pay Paul and trying to extract profit and everything else from the front of your business. You should not be making a profit on your front end, you should be breaking even and then reinvesting everything else into advertising. You should not be trying to extract your customer acquisition cost and your profit from the initial sale.
Seth Godin, a business writer says in his book The Purple Cow that smart businesses know that real businesses make their profit at the second or third sale and beyond.
The 3 ways to build a thriving ecom business.
The problem is that 95% of ecom businesses only focus on one of the ways and completely neglect the other two. This is the reason many businesses struggle because they are not only trying to acquire the customer but also trying to extract profit to live on or do whatever else out of that same sale.
3 ways to build a thriving ecom business:
- Increase your number of customers
- Increase the average order size
- Increase the purchase frequency or increase the number of times people purchase from you
It takes all three of these to build a healthy business. It should be balanced like a triangle in all three of these areas. You can’t just have one of these things or you’ll sabotage your business.
We also discussed a few other fun topics, including:
- The three default types of upsells.
- 1 click purchase technology.
- 1 click upsell/downsell infrastructure.
- 4 most effective upsells that you can leverage in your business.
- The theory behind pricing your upsells for maximum conversions.
But you’ll have to watch or listen to the episode to hear about those!
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Also, Tanner mentioned the following items on the show. You can find that on:
Tanner Larsson 0:07
In e-commerce, actually, in anything leveraging paid traffic, there is one metric that pulls them all for those of you who like Lord of the Rings, What is that metric? Does anybody know? The metric is Average Order Value, how many of you guys know what average order value is? Okay, that is the most important metric if you’re buying paid traffic ever. And if you have trouble with paid traffic, if you’re not converting as well as you want, if you’re not making as much money from your traffic, or if your traffic is not profitable, it’s not your traffic’s fault. It’s your average order value’s fault because if your average order value is too low, it can’t account for the profit or the traffic cost. So we’re going to talk about average order value and why that’s so important. The first thing is, the art of the upsell sounds like a really cool title. But if you don’t know what an upsell is, then this doesn’t mean anything. It’s not a piece of art, you hang on the wall. But it’s something so critical and something that nobody does in the e-commerce space, or if they think they’re doing it, they’re really doing something else. Okay, so what is an upsell? So the upsell is the offering of additional products to the customer immediately following the initial checkout before they reach the receipt page. So they make the purchase before they make reach the receipt page, if it happens before the purchase, it’s not an upsell, despite what some of those Shopify apps say they are. There are no upsells in the Shopify app and a regular app.
Tanner Larsson 1:43
So what the upsell does, is it allows you to sell more products to your customers when they are in their most vulnerable state, which is when you want to take advantage of it. The buyers high, who’s ever heard of retail therapy? It’s real, it’s not just something that women say it’s actually legit. There is a chemical reaction that happens in the brain, there is a dopamine release. The feel good chemical, dopamine floods into your brain when you purchase, It’s called the buyers high, or their buyers rush. And it’s a euphoric state that people feel good about. That’s why people get addicted to shopping because they’re not addicted to the act of shopping. It’s the dopamine the chemical release in their brain. And that’s why eventually it takes them larger and larger purchases and things like that, to really get that same feeling because you’re a junkie, all of you who like to shop are junkies, it’s okay. Now, the buyers hi is amazing, though, because that window when people are the most receptive to purchasing additional products because they feel good, they’ve made a decision, they’re excited, their trust barriers down, they’re like, okay, I like this, I made this thing, now is the best time to position another offering to them, it’s the best time to sell. But this window is a very narrow window. Depending on the person and things like that. There’s been a bunch of different studies on it, they haven’t locked it down perfectly. But it’s between 30 seconds and three minutes is the range. And every second, that dopamine rush gets a little bit less and a little bit less and a little bit less. And the barriers start going back up and going back up and going back up. So you want to strike while the iron is hot. And the upsell is the best way. It’s why we use it in marketing because it capitalizes on this buyer’s high. It encourages them to buy more and thereby increasing the average order value or your cart value. So ACV, AOV it’s all the same thing, average cart value or average order value, they’re used interchangeably, they mean the same thing. What is the average amount that a customer spends with you when they make a purchase? That’s your average value, not the total value that they could make. But how much are you actually making from them? If you only have one product, and the average person only buys one, what’s your average order value? Whatever the cost of that product is, 10 bucks. In our business, most of our average order values are over $65, in our second mimic brand, they’re over $150 you think it’s easier for me to buy traffic than for someone who’s selling the $10 drop ship widget on their Facebook page? Or on Shopify? Yeah, because my average order value is 60 bucks, yours is probably five or ten. You need to have a boosted average order value in order to capitalize on paid traffic, paid media, and things like that. And again, the tried and true upsell example is the front end product would be the burger, the upsell is fries and a coke. This is also why it’s a myth that when people say that you can build a successful business online. Now there are outliers, of course, with only one product. Now, I know you see this on Facebook a lot. You see people posting screenshots, my one product has made 2000 sales and blah, blah, blah and they’re showing you these huge numbers. But they’re only showing you their gross, they’re showing you their total revenue. They’re not showing you their ad costs, they’re not showing you your profit after fulfillment. They’re not showing you anything, a lot of those big numbers that you see posted out there, those guys are negative, but they are acquiring a customer. So if they can survive long enough to resell to a customer, they may make some money, you need to have a product line. Now, don’t get scared, because that’s not a big thing. I’m talking maybe three products, not 10 or 15, or 20, it’s actually a detriment to have too many products, you’re better off having two to three tightly focused, tightly related products that you can upsell people to.
Tanner Larsson 5:42
So front end only is a dead-end of business. A front-end business is a business that only focuses on the front-end acquisition of customers, which is 95% or more of all businesses. Now, we’ve all heard it zillion different ways, that it’s three to five times more expensive to acquire a new customer than it is to resell to an existing customer. We’ve all heard that right? Then how come none of you guys actually sell to your existing customers? How come you’re only focused on that Facebook ad getting that new customer? You’re a front-end focused business. And this is not unique to just this room or any other room it is the problem of almost all online businesses that leverage paid traffic they get so tunnel vision on acquiring that new customer to sell that one product that they forget there’s anything else going on in their business, because would you guys admit there’s a whole lot of things going on in your business trying to keep track of everything, it’s very easy to forget of other stuff. But if your business is all on that front end, it’s a dead-end, you’re constantly going to be robbing Peter to pay Paul and trying to extract your profit and everything else from the front of your business. You should not be making a profit on your front end, you should be breaking even and then reinvesting everything else into advertising. You should not be trying to extract your customer acquisition cost and your profit from the initial sale. Seth Godin was a business writer, he has written a couple of cool books, my favorites, The Purple Cow just because it’s a purple cow, it’s a cool book. But anyway, he says that smart businesses know that real businesses make their profit at the second or third sale and beyond. I couldn’t agree more. The first sale is the acquisition of the customer. It’s like trying to make a baby benchpress 225, the baby’s not ready to do that, you gotta let the baby grow up a little bit, let the customer come into your business and then make them do something extra, then make money from them. So this brings us to the big three and the ignored two. There are only three ways to grow your business, that’s it, three flat ways, I’d love to say that I figured out myself, I didn’t, Jay Abraham taught them to me, and he didn’t figure it out either, someone else did. But there are still only three. And you’ve got to be using all three of them in order to build a thriving e-commerce business. The problem is 95% of ecom businesses only focus on one of the three ways to grow your business. And they completely neglect the other two. This is the reason that so many businesses struggle, because not only are you trying to acquire the customer, but you’re also trying to extract your profit to live on or do whatever else out of that same sale. And the way that you’re focusing on is the least profitable money in your pocket of the three ways to grow your business. So that’s the big three and then the ignored or neglected too. So let’s talk about them. Way number one to grow your business is to increase your number of customers. That means to get more customers, that’s the front end. That’s acquiring customers through paid advertising or any kind of advertising at all. That’s the number one way. Number two, increase the average order size, get people to spend more money with you when they purchase, that’s the average order value. That’s the going from 30 to 70 that we just talked about. And number three, is to increase the purchase frequency or to increase the number of times people purchase from you. This is the whole concept of repeat buyers. It is much cheaper, much easier, and much more effective to get your existing customers to buy from you again. Because you have a captive audience there, way better than trying to go on to find a cold audience that you have no idea who they are on Facebook and hope and pray that your ad works.
Tanner Larsson 9:54
It takes all three of these to build a healthy business or a real business. You should balance the three like a triangle in all three of these areas, you can’t just have one of these things, or you’ll sabotage your business. Now, we work with 1000s and 1000s of businesses a year that come through Build Grow Scale, we see a ton, and they’re all ecom companies. How many of them do you think are actually balanced in their leverage of all three, 1, 2 percent, even the big ones, even the $50 million companies. And almost anybody, if you came from the, make money online space, where you bought a course on how to do Shopify or whatever else, the only thing that you’re taught is to focus on acquiring new customers, there’s almost nothing covering average order size, or increased purchase frequency, when in order to make number one work really well, you got to have the number two, which is the average order size. If your average order size is low, that means you don’t have as much money to pay for your customer. So if your customer costs you 20 bucks, but your average order size is 15. That means you’re negative five, not counting your cost of the product. But if your average order size is balanced, and is up high, now you have more room to work with to acquire more customers. And then in order to be able to do either one of those, you have to have money, you have to have cash flow coming into your business. That’s not being eaten up by advertising expense. And that’s where number three comes in. That’s increasing the frequency by getting your existing customers who you’ve already paid the acquisition cost to buy again and again and again, which creates that ongoing cash flow without higher profit cash flow that feeds the rest of your business. Does this make sense? How many of you guys are using all three of these? crickets? It’s okay, we’re gonna fix that, that’s what we’re here for. And what this presentation is going to focus heavily on number two, because the last thing I want to do is I don’t want you to walk out here going, man, I’m not doing all three of these, I can’t make this work. So what I’m gonna help you do is because there’s a lot of guys coming in here who are going to talk to you about structure, they’re gonna talk to you about traffic strategies, they’re gonna talk about all this stuff. Cool. I want to help you make the most of what you got. So we talked about profit hacking. Now, this presentation is all about how can we maximize that average order value, so that you have the most possible dollar value available to acquire a customer? Because I’ll tell you guys, if your average order value is solid, traffic is easy. If you think traffic is hard, boost your AOV, and traffic becomes way easier, because you have more money to spend. And a $10 conversion doesn’t freak you out anymore, because you can afford to spend that. So we’re gonna focus on increasing that average order size to make it so that when you guys are acquiring your customers, you can acquire more of them and not go in the negative. So upsells versus cross-sells. So upsells happen after the initial checkout. That means after you’ve entered your payment details and click submit, a cross-sell is before the checkout. So if you’ve had to see recommended products, or you may also like or things like that, so Shopify, the smart seven bundle, all those different apps, those are cross-sells, those are not really upsells. They call them upsells, but they’re not because they happen before the checkout. So if you have a recommended product app in your checkout, that happens before the checkout, not after, okay, it happens after it’s an actual upsell. Now, why does this matter? Why am I pointing the differences out? Because people use the term interchangeably because they don’t know any better. But there’s a humongous difference. And the biggest difference, the most important difference to me is that upsells are 20 times more effective than cross-sells. But they’re used by less than 30% of companies. So everybody uses that recommended products, and that you may also like type thing, but they don’t use the upsell. Why? Because most people don’t know the difference and don’t know how to integrate them into a business. That’s fine. We’re going to cover that, we’re going to clear that up. But what I want you guys to understand is you should be focusing more on your upsells than you should be on your cross-sells, but you should also use the cross-sells because everything works together to create a better system. So don’t take them away. But don’t rely on them as your only form of AOV boost. There are three default types of upsells. This is where we’re going to talk a little bit geek here. The first two are real simple, the third one’s a little bit more technical, the default upsell meaning that when they buy a product from you, no matter what, they’re gonna see the same product as the upsell. Example here is if you have three products, and if they buy product one or product two, no matter which one they buy, they’re gonna see product three as the upsell. So you have a default upsell.
Tanner Larsson 14:54
It’s just the blanket, if you have a continuity program or recurring income program like you’re reading about in my book right now. Then that would be the default upsell. Every person no matter what product they buy from you would see your default or your continuity program or whatever your most important upsell is flat right after that. A product specific upsell is if your technology in your store or your platform allows for it. And it would be more customized to the specific product that they purchased. In this case, let’s say they purchased a pocket knife on the front end. What I want to upsell them to a lawnmower. Maybe no, maybe not. But what about a knife sharpener? Way more relevant. Or if I want to stretch a little bit, maybe a flashlight, something along those lines. So you want to make your product your upsell paths, product specific if at all possible. Because the more you can do, the more tightly related you can make them the higher the conversion rate. That’s why you want to have a product line of closely related products that if someone bought product A they would also want to buy a product B and or C because then you can position them as an upsell. A really simple example, and I’ll show it to you again in a second is you buy a flashlight. And the upsell is would you like some rechargeable batteries and a speed charger. Would you guys be pissed if a company offered you that after you bought your thing? like hey, would you also like this? No, you’d be like, Oh, that makes a lot of sense. Whether you buy it or not is a different story. We because we all came through this, we bought info products online or we’ve done things like that we all have this bad taste in our mouth about upsells. We’re like, I hate upsells no, you don’t you hate shady upsells you hate the ones they’re like, they promise you the farm on the front end. And then they say oh, but it doesn’t work unless you also buy this. That’s what you don’t like. And regular people who are not you, you guys are not regular, the moment you decided to sell something, you became totally different than your market. Because you think about things completely differently. So your market does not think about things that way. So upsells, do not piss them off, especially if they’re done nicely. And the third type is the behavior-based upsell. And this one is very technical. And you have to have a pretty high-tech platform to be able to do it. But some do it like Ultra Cart, Magento, some of the bigger storefront technologies, which is not germane for most of the people in this room, but I’m going to let you know about it anyway, just so you actually know what’s available. And this is based on customer buying habits or based on sales data. So let’s say, Chris is my customer. And he’s bought from me before he comes through and he buys another product. And Chris already owns products A, B, and C. He buys product D, the only product of ours, he doesn’t own his product E the system would automatically show him that product, it wouldn’t show him anything he already owns. So it’s behavioral-based. And it automatically happens behind the scenes. 90% of the platforms out there cannot do that. But it is available. And it’s something that is really cool once you reach that level where it makes sense. But up until then, it’s not that important. I only put it out here so that you guys do know that there is technology available to do that. One of the ones that are amazing at doing this is Beachbody. Do you know that Beachbody has 18 different upsells behind their front-end product, but you don’t see 18 of them. You see the one based on what you click and what you take, they have so much data that they are able to look at it and go okay, because you bought this P90x plan, and you signed up for the trial of mixology or shakeology, or whatever their MLM is called, then that you’re probably going to buy this, this or this in this order. So they’ll show you the upsells you’re most likely to buy. They know Data Wise that you’re not going to buy these ones, they’re not going to show them to you. So it’s all a behavior-based type thing. Again, really cool, but not relevant. We have one business that utilizes it, and we only started last year. It’s cool. But it doesn’t take that to build a successful business. So don’t feel like you have to get there, the default and product-specific upsells are plenty. One-click purchase technology is critical. Interruptions in the shopping process are the largest barrier to purchase. Think about this. Like we talked about before, life happens, something gets in your way. Now, let’s say you just made a purchase, you just bought from this company. And then they show you another product and then you have to buy that next product, you’re like, yes, I want it. And they make you fill in all your payment and shipping details again.
Tanner Larsson 19:32
How many of you have ever done that and be like, yeah, you know, I really don’t want it now. Because it’s not convenient. Anything that slows down the buying process or slows down or allows the dopamine rush to get smaller is a bad thing. This is true on both the checkout and the upsells. That’s why you want to be on your checkout page. You want to make sure your checkout is streamlined as possible, with the minimum amount of fields necessary. So they don’t have Fill in as much, like the whole, check the box if your billing address is the same as your shipping address, that little checkbox can increase your checkout conversion rates by like 5 or 6%, simply by allowing that to be enabled because people don’t want to have to type their address twice. And some people are so lazy about it. They’re like, I just don’t want it that much, this is too much effort. Especially if they’re checking out on mobile. How many of you guys like typing into a field on mobile? None of us do. So you got to make it easy. Now, I’m not the only one who thinks this. Do you guys know what company uses those buttons? Amazon, right? Amazon uses one-click checkout, “Buy now with one click”. How many of you guys have Kindles? How many of you guys buy a whole hell of a lot more books on Kindle than you ever bought before? I bought five in the airport on the way down here, because I was in the store like, well, that could be cool. Wait, I just bought five books. And I’ve already probably got 70 books on there that I haven’t read. Because it’s so easy. I just click a button and it automatically does it.
Tanner Larsson 21:12
This is about a 32% increase in Amazon’s sales since they added the one-click in their conversions. Because it makes it convenient for their best customers. Specifically so with the upsell, if you have one-click technology that you got their payment details, it’s still part of the same buying session, they see the upsell, and all they have to do is click a button and it’s added to their cart. That’s the most streamlined process you can give them, so you’re capitalizing on that buyer’s high and allowing them to process through multiple different transaction points without the thought process. You don’t want them to be like, okay, I just spent 18.95 plus $7, shipping on the front end, carry the one divided by two, I’m going to buy this other product and now I got to pay this. You don’t want to think that way you just want them to click. The more they click the more you make. So you want to leverage one-click technology, it’s critical. Absolutely critical. And as I’m saying that, I can guarantee you people here going, yeah, I’m not gonna do that. Okay, because you hate money. It’s fair. So let’s talk about how this works. We’ve all seen it, but I want to make it clear as to how it works. So you visit the sales page, you go to the checkout page, you enter your payment details, you click to purchase. And the very next page you see is the first upsell that I want you to see. So it’s the recommended product or the one-time offer or the special deal. And then it could be upsell upsell upsell or it could be something like this where you have to upsell number one. And then if you say yes, and buy upsell number one, you’ll go straight to upsell number two, or if you say no, you might go to a down-sell. So an example of this upsell down-sell. It may look complicated, it’s not I promise you just think about it this way. Think about supplements. Let’s say you bought a multivitamin or fish oil. You bought some fish oil. And the first upsell is hey, do you have a family? Yeah, I got a family. Well, do they need fish oil too? You just bought one bottle? That’s not gonna take care of your family. Do you love your family? How about four? So now you’re gonna buy four more bottles?
Tanner Larsson 23:18
And you’re like, well, I don’t have that many people in my family. So you say no. And then the downside says, hey, oh, you got a small family? How about two extra bottles? Make sense, right? Would you be upset about that? No, you wouldn’t because it’s relevant. And then app Yes or no? You would show them upsell number two. Now there are a million different ways you can do it. The reality here though, is you want to use multiple upsells. Ideally, three, either three upsells or two upsells and one down-sell. Don’t be that guy or lady. That’s like upsell hell, where you can never get out of it. There are like 500 of them in a row. Carl back there’s is that guy he likes to use like 300 upsells. I’m joking, he actually doesn’t, but he wasn’t looking at me, so I made him look at me. Four most effective upsells the first most effective upsell is more of the same, especially if you sell a consumable product. We just talked about that with fish oil, hey, you just bought a bottle of fish oil, would you like some more fish oil? It is by far the most effective upsell and it does not require you to create or find or build a new product. It’s the same thing you already sold them. And why? Because you know they bought it. Hell if they bought it once, they’ll go buy it again. That’s why you see all these supplement companies almost always going from one bottle to an upsell of four or six bottles. And then they typically go down-sell you back down to two or three or they go upsell to a continuity auto-ship and then a down-sell you to two bottles or something like that. So more of the same continuity, my absolute favorite. Anybody who knows me knows that, that’s my soapbox. I talk about recurring income more than anything else or anybody else on the planet. It’s my favorite thing in the world. It keeps me warm and happy. And it’s awesome. recurring income, you make the sale once and you get paid over and over and over and over again, every week, month, year, quarter, however, you set up the billing. And when you’re like, Oh, I don’t join those. Yes, you do. How many of you guys have car insurance? How many of you guys have Netflix? Amazon Prime? Amazon prime is the biggest members only continuity program in the world. But it’s a yearly program, but you’re still on continuity. And how many of you guys love your prime? I am so addicted to prime it’s not even funny. It’s like, Amazon just knows my house, they just backup the semi and unload it. Alright, because and it’s because of prime. And I’m also that guy like before when you had to pay for shipping, you would buy everything at once. Now how many of you guys might order four times on Amazon in the same day in four different orders? Yeah, because you don’t care anymore. Amazon will ship it out and then they ship you that chapstick in the box that’s this big. So Amazon also is single-handedly The reason that shipping costs are about to go through the roof. With dimensional weight shipping. It’s 100% Amazon’s fault. Because they won’t fix it. But anyway, continuity. So you have a recurring income program as your default upsell or as an upsell in there. The customer buys a product on the front end. And the first thing you offer them is, hey, would you like to get on our monthly auto-ship for our vitamins? Would you like to join our buyer’s program? You want to join our association, our digital membership, our newsletter, our subscription box? There are a bazillion different ways you can handle continuity. It is by far the most important upsell you could ever put into your business. Most people won’t do it. And most people think ecom businesses are not easy enough to do it for it’s actually easier because it’s much easier to sell physical products on the front end and upsell them into a continuity than almost any other sales flow in the world. The next thing is the logical must have. If you bought the flashlight, it makes total sense that you might also want rechargeable batteries and a charger. It does not make sense that if you bought a flashlight that you automatically want to buy my sheepherders tent. But that’s what you see. I mean, granted I’d rather see that than not seen upsell at all, but sometimes it’s just painful. We were on a, what was it? I can’t remember what website it was, but I actually called my wife because I was actually filming it for my ecom insider members. I was filming a sales funnel flow. I bought a solar light, and the upsell was for a bra. And I’m like, hey, babe, come look at this. Do you want this? She’s like, I wouldn’t wear that. Okay, fair enough.
Tanner Larsson 28:08
But I mean, come on, you have too many products, whatever. But the cool stuff is upsells are easy, logical must haves. Hey, you bought my T-shirt. You guys who do print on demand, you bought my T-shirt with this design, would you also like our sweatshirt? Wear this design loud and proud year round. Does that make sense? Absolutely. That’s logical must have. Or stickers. If they’re like the design on their shirt, they’d probably like it as a sticker. One of my mastermind members, Matt Stafford owns Canvas, it’s a print on demand technology, they added because we told him to they added stickers as an upsell to all of their shirts. So now whatever design shirt you buy on canvas, you can check a box and immediately add stickers to it as well. Immediate 16% boost in take rate and it bumped their average order value by $8 per user on stickers. So like a three pack, I think that is what they do. And now almost all of the other print on demand platforms out there have now contracted with Canvas to fulfill the sticker side. So they can all have stickers as their upsells because it’s just free money. I mean, we’re talking millions of dollars a month with just stickers. And then the related profit Maximizer would be something that may not be directly logically related, but it makes sense. So in the survival space, if you sell them a survival whistle or bracelet or all those things those guys are selling right now, or the survival knife and then you upsell them to a freeze dried food pack. It’s not directly applicable but it is very tightly related. And it’s something that hey, this audience does, so those are the four most effective types of upsells that you can leverage in your business. And under that, guys, you can have almost anything possible can be an upsell. Upsells also don’t have to be physical, upsells could be digital. Hey, you just bought our compass, as the upsell, would you like our digital orienteering guide, where we actually show you how to use the compass that you probably don’t know how to use. Yeah, 37 bucks. Here’s an example, so the sales page they land on there, they see a flashlight for 49 bucks. They buy the flashlight. And the first upsell is a lifetime warranty for that flashlight. Says, hey, would you like to add a lifetime warranty the flashlight will pay shipping both ways. If anything happens to it, just let us know for as long as you own it, 19.95. Do I have a fulfillment cost on that? Nope, my fulfillment cost is an email. So you guys write this down, life warranties offer warranties on your products. It doesn’t cost you anything to do. Think about it for yourself. How many people actually fulfill a warranty? Most people never do, you lose the warranty card or whatever. I think we did this as an actual funnel, and we’ve sold over 10,000 of these flashlights and about a 20% take rate on the warranty. I think we’ve had four people contact us asking us to use the warranty. And we are more than happy to send them a flashlight on our dime. We don’t even ask them to send the old one like hell, we’ll just send it to you no problem. Because it’s like 100% profit, It’s just like, rebates. Most people don’t cash in the rebates. That’s why companies offer them, not because they want to help you. But because they know that a good chunk over 60 some odd percent of people don’t ever actually cash in their rebate, or they don’t submit it properly. So they don’t have to pay for it. So it’s free money. But the warranty thing is if you’re going to do it, then you have to actually do it. Don’t be a dick. And be like, oh, a scam, gotcha, no, don’t do that. Upsell number two, in this case, would be the rechargeable batteries and the charger. Why? Because it like in this case, for this flashlight, it uses cr 123 A batteries, which are those little short fat ones. They’re expensive. And that’s one of the big complaints about the flashlight. Man, these batteries are so expensive, so we said hey, why not offer them a rechargeable battery? Or two rechargeable batteries and a speed charger? So they don’t have to worry about it anymore. We have about a 37% uptake rate on that offer.
Tanner Larsson 32:47
Would any of you guys be upset if you were bought that flashlight and went through that funnel? No. And a lot of you will probably be bought just like everybody else did through those things. At the end of it, they go to the receipt page and they see the recap of their order and life goes on. Very simple process, yet, nobody does it. The people who do it are the info marketers, the direct response marketers. They’re the ones who pioneered it. Ecom has been this whole world of like, for years, the ecom people thought the direct response people were spammers. And the direct response, people thought ecom people had no clue what they were doing when it came to business. There was no merging of the two worlds. But leveraging this technology now and it can be done. Now what I’m talking about today with these upsells is platform agnostic. It doesn’t matter what you’re on, Click Funnels can do it, there are now apps through Shopify that can do it. Cart Hook is one of them. Ezra’s one-click upsell through Zipify is another one, you can do this, they are extra fees, but they make you more money. The problem with the Shopify version is that it can’t go through the regular Shopify Checkout, you have to actually hijack the checkout. Meaning that anybody who goes through your funnel actually checks out through your stripe account, not through your actual Shopify Checkout, because Shopify doesn’t release the checkout API to anybody. So is that a problem? No, not at all. You just need to be aware that there are different ways of doing it. If you’re using Click Funnels, lead pages, or any of the other versions, or Ultra Cart and these other ones, they all have this technology as long as you know how to leverage it. Other cool stuff, building on the upsells, we’ve talked a basically beat a dead horse on upsells. Showed you guys over and over and over again, why they’re important, told you how important they are. But now let’s talk about a little bit of the theory behind pricing your upsells for maximum conversions and actually making money and getting in the buyer’s head. So part one upsells succeed when they create the perception of extreme value, perception of extreme value, not actual value. And the best way to do that is with a heavy discount. Ladies, how many of you guys like Hobby Lobby? How many of you guys come home and go Hobby Lobby is having a sale every other day. Basically hobby lobby’s business model is Monday, this side of the store is 50% off, Tuesday, this side of the stores, and they just keep rotating back and forth. So my wife comes home and she goes, honey, I just saved 50%. I go, no, you didn’t you just spent 750. She’s like, no, it was half off, I got, it’s always half off. So you’re not saving anything. But the perception there is that you saved money. So the perception of perceived value is that you’re getting a great value the perception based on the discount. Furniture companies do this, oh, I can give you a huge deal on that couch. No, you can’t, you’re selling it to me for exactly what you want to sell it to me for you just marked it up 900% so that you can discount it in front of my face. Car dealers do the same thing. Use discounting as a conditioning tactic. And this is also an upsell. Because you can position your upsell as a one-time offer. That’s why we call it a one-time offer. And you can say those words, the buyer is subconsciously aware that because the reason they’re getting this discount is awesome offer is because they are already a customer of yours and you spell that out in your offer page, you say, hey, our normal price is this but because you just purchased this XYZ thing today, I want to extend this special offer to you right now for this time only when you leave this page, the offer is gone. The indirect perception of a heavy discount is one of the rewards, they are being rewarded for being your customer. And they can feel that it’s all subconscious. You don’t even have to say it and they know it. And that all builds into that buyer’s high that’s still going on. And you’re just building this subconscious, you’re basically put an army in their head telling them to buy something and preventing them from not. Number two is that the true discount rests in the perceived value, not the price. This is where a lot of people get in trouble even on the front end.
Tanner Larsson 37:01
Have you guys ever heard people say something like I’m gonna offer the best product, the lowest price. Some of you have probably thought it yourself in your own business, I’m just going to beat my competition on price, I’ll just sell it for less, I can do that. That’s the worst example, I’m never going to be the lowest price guy in the marketplace. Typically, I’ll be at the top or right below the top. But the price is not the thing, you don’t want to discount your price, necessarily the true value, and the discount is in the perceived value. So first, the discount approach conveys appreciation to your buyer, demonstrating that you recognize their value, hey, because you’re a customer of ours, I’m going to give you this discount. You’re giving and taking, also you don’t necessarily have to reduce your price to give a discount. You can deliver the same perception of value by providing more for the same or higher price. In the supplement game, they do this a ton. They say, Hey, get two bottles for the price of one. So you’re still getting the exact same dollar value that you wanted to get. And you’re only having a marginal increase in your costs. But the perception of value to the buyer is basically half off, is it actually that to the vendor, because a bottle of supplements probably cost them four bucks. And if they’re selling a $79 bottle of pills, they’re doing pretty good. They’re not hurting when they offer you that Bogo. So you can deliver the same perception of value without necessarily having to reduce your price. So don’t think of your initial, how to make a special offer? Cut the price. Don’t do that. Think of what else you can do. Number three is that maximize revenue comes from balancing price against conversion. This is a little bit weirder for people. Generally, the lower you charge on the upsell, the higher the conversion rate will be. That’s the typical thing. The cheaper it is the more people will say yes. However, maximum revenue—money in your pocket does not come from maximum upsell. So just because your conversion is higher does not necessarily mean you’re putting as much money in your pocket. The maximum amount of revenue that you can earn is achieved by a balancing act between the optimum price and your conversion rate, between your front-end price and your upsell product. So there’s this balancing act going on. How many of you guys are more confused now when I started saying that? Awesome. Because I’m going to show you an example. So the balancing act of price verse conversion. So this product, the front end is $17 we make 100 sales at $1700 were good there. The upsell converts at 60%, just to keep the math easy. 60% conversion, which means 60 people bought it at $17 is $1,000 in revenue, total income for that funnel, if that was the end of the funnel would be $2720. Now, the initial reaction here, and I see it all the time and I’m a victim of it as well I have to remind myself is that you’re like, dude, my upsells converting at 60% we are crushing it. Who would think that? Like, upsell conversion rates are amazing. That’s a huge upsell rate. I would love to have that rate. But the reality is, you might make more money with a lower conversion rate. So let’s look at the other example. Same exact example, same front end sales, same front end price, but we double the price to the upsell. Our conversion rate drops to 46%. Why did I pick that number, because that’s about the average percentage drop, we’ve seen in doubling of a price point. In this range of products, we have tons of data from all different industries. So this is not just a wild guess this is actual, real data that we used to do this. So the percentage and the conversion rate drops by 46%. Nothing else changed, we just raised the price. So we only made 46 sales, but $1242 in revenue. So our total income was 29.42. I suck at math, but I think that 29 is bigger than 27. In fact, your conversions went down 14%, but your revenue went up 8.16%. What’s more important conversions or revenue on the upsell? What’s more important on the front-end conversions or revenue? Conversions because more customers are better than less customers. But as the upsell revenue is what you’re after, not conversion rates, so you have to play with this. This is a juggling game.
Tanner Larsson 42:00
This is basically a split test, I’m gonna change my price and see what happens. Do I make more money or less money? Does my conversion rate go up or down? And the only change is the price point. So the upsell strategy, if you waste your buyers time, you’re gonna waste your own profits, this is the best opportunity that you have to make more money from your customers, this is it, you will get no better opportunity than this. So don’t screw it up. So a couple rules of thumb. A short copy is the best copy. physical products sell themselves. Digital products require sales letters, typically, or sales videos. If you’re gonna do a video, keep it short, less than 30 seconds. But short copy is the best use pictures and bullets, the best converting sales pages we have are a picture and a headline and bullets, and then headline the bullets and pictures. So it just alternates back and forth. For as many bullets as you have. So if you’ve got three batches of bullets, you’re gonna have three pictures staggered, because it makes the eye transition back and forth. And then you put a Buy button at the top right and on the bottom left in the top right Simple, nothing fancy. Why? Because if you try to twist their arm and push the sale, you’re going to turn them off. They’re in a euphoric state, they want to spend more money right now. Just make it easy for him. Tell them what they need to know. And what do you put on your page? Put yourself in your buyer’s shoes. What information would you need to buy this product? Not what you need to convince them to buy it, but what information would they need? Let’s say it’s a tent, I would need to know what the dimensions are. Is it a winter tent? Is it a spring tent? How many people does it sleep? What color is it? How heavy is it? I would want to know these kinds of things, but yet, so many people will put a picture of their product and say, hey, add this to your cart, this is such a great product. And then it’s a really crappy picture. You’re squinting trying to figure out what it really does, what it looks like, or where the thing that makes it work is and they don’t give you any information. Think about Amazon, how many of you guys have ever gone to Amazon to buy a product, and the product description is so amazingly empty, that you don’t buy anything, because you’re like, I can’t figure out if I need this product or not. It happens all the time. So don’t be that way with your customers give them the information if you just put yourself in the buyer’s shoes and thinking I would need to know this information. I would want to see this angle of the product I would want to know this about it. That’s all you got to put on the page. That is not a sales copy. That is basically a list of what the product is, nothing crazy. Then you should use countdown timers on your upsell pages for scarcity. Sub 10 minutes though nothing more than a 10-minute countdown, we tested it in all these different ways, but it always works out better than if you put a countdown timer, your conversions will go up and make it real, if the countdown timer ends, redirect them to the next upsell, or redirect them somewhere else. Don’t just have a fake countdown timer on there. But that simple bit of scarcity will give you a multiple-point boost in your conversions without being too invasive. And you don’t have to give them like some massive oh my god is going to end that kind of thing. Just put the countdown timer there and say, hey, this discount is only good until the countdown reaches zero. offer multiple upsells. Again, the name of the game is the average order value. If one upsell boost, your average order value would two boosts it more, yep, with three boosted even more? Yep, but anything more than three and you run the risk of really alienating your buyer. But if they only have to click maybe two or three times to get through your thing, and you’re offering them relevant products that would make sense. Like Yeah, I’m just not in the mood for that right now. They’re not going to be upset, you’re not going to alienate your customer. But it also gives you that perfect balance between maximizing your AOV and keeping your customers feeling like they’re not just cattle going to the slaughter. Always include a profit Maximizer as one of your upsells a profit Maximizer is at least 2x to 5x the front end price. So if your product front end price is 10, then it’s at least 20 to 50. Why? Because with price thresholds. The way pricing works the way buyer psychology works, there is basically a rule of thirds, there’s always some amount of your customers who are willing to spend more with you and are looking to level up to the next higher price point. If you have a $1,000 product, there is someone who will buy it. And then at that point, you should create a more expensive product because there’s always somebody who will buy it. The rule of thirds is that roughly 1/3 of your customer base will be willing to ascend to the next highest price point. Does that make sense?
Tanner Larsson 46:52
So if you don’t have a more expensive offer, and you’re a $10 front end and a $10 upsell, you’re not giving yourself a chance to maximize that AOV, it’s that whole price balancing thing. What if a third less people bought it at 20 bucks, but you may doubled your money and your conversions balanced out. You would make more money. So the profit Maximizer is, yes, less people will take it. But when it does sell, it’s a huge lump of cash in your pocket. And why this is so important is how many of you guys use paid ads? Everybody. We all use paid ads in our business. Paid advertising has an acquisition cost, there’s a price that it’s gonna cost you to acquire a customer, which is typically between seven to $12 on Facebook, that’s just the rough range of acquisition costs. So the average order value needs to be higher enough to cover the acquisition cost and the cost of goods and if you’re paying for shipping, so you need to make sure you’re maximizing that. Now the cool thing with a profit Maximizer we will have profit maximizers in some of our funnels that are 10x in the price. In our flashlight funnel, we actually have a pen light on the front end. And then we have a $179 flashlight as the third upsell our conversion rates only like 5% on it. But every time it sells it’s 179 bucks, and our cost on that flashlight is like $27. Do you think that will help us with our ad spend? Yeah, it does. That’s why you want to throw a profit Maximizer in there, they shouldn’t all be high priced. And they should be as tightly related as possible. Because getting conversions are better than no conversions. So if you have to have a little bit lower priced product, but it’s more tightly related. That’s still better than a high-priced product that’s not related at all. All right, but you got to kind of mix those things in there. But these are the basic rules of thumb. Don’t overcomplicate your upsells, just upsell, that’s all you got to do. So, thank you keep calm and upsell everything.
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Want us to do an Audit on your e-commerce store and show you how you can make some quick changes that will dramatically increase sales and profits without increasing your traffic?