Customer Value Optimisation – The strategy for growing your business

Customer Value Optimisation – are you ready to learn the strategy for unstoppable business growth?

If you are just getting started with your online business and are not familiar with Digital Marketing, or if you need a refresher on CVO’s fundamental principles, then this article is for you.

I like to think of CVO as a kind of “treasure map”, because when you have a truly optimised sales system, you practically sell “without having to sell”!

The point is, we all wish to become “the best” at what we do. It doesn’t matter if you’re a beginner in your field or if you are already a professional with years of experience, the ongoing search for an excellent opportunity is a constant for any professional. And that’s part of who we are as human beings.

This article provides you with a good opportunity to broaden your knowledge from a winning system employed by many companies around the world.

So, let’s have a look at it. Ready?

Understanding CVO (Customer Value Optimisation)

CVO is the same system that Starbucks and McDonald’s applied to become leaders in their respective areas. It is also the strategy used by Amazon to excel in e-commerce and it’s very well known worldwide for its applicability to any business.

Do you know what makes CVO applicable to any type of company?

That it’s a strategy launched by the famous marketer Jay Abraham, which exploits all aspects of the “irrefutable laws of business growth”.

According to Abraham, there are three ways we can grow a business:

• Increasing the number of customers
• Increasing the average spend amount per customer (average value per purchase)
• Increasing the number of transactions per client

And when you bring all these things together, you have what’s called Customer Value Optimisation – or simply “CVO” – which is a great way to build unstoppable business growth.

How to apply Customer Value Optimisation to your business

When we study new growth tactics, such as Facebook advertising / how to use Google Analytics or applying SEO (Search Engine Optimisation) concepts to our business practices, it’s extremely important that we constantly remind ourselves of the CVO process. Otherwise, we will only waste time and money.

It’s clear: the likelihood of obtaining great results by incorporating the CVO method into your chosen traffic channels – like YouTube Ads or SEO – is much higher than using these traffic strategies alone.

Here’s a flowchart that can give you an idea and a better understanding of how Customer Value Optimisation works:

So, basically the steps are:

• Fit the product in the marketplace;
• Choose a traffic source;
• Offer a lead magnet;
• Offer an entry offer / tripwire;
• Offer a main offer / core product; 
• Offer a profit maximiser;
• Design a return path.

It doesn’t matter if you are a small company, a startup or just love marketing tactics – I’ll now take you through this process step by step, so that you can apply it to your business.

This strategy works and worldwide companies use this method to sell products and services in a wide variety of niche markets, such as:

Finance and Investments

Beauty

Menswear

Restaurants

Home Solutions

…among many others.

So, it’s time for YOU to apply it to your business!

Let’s understand each of the steps in the flowchart:

• Step 1: Fit your product into the market

A business works very simply. Essentially, those who own it are paid to walk people from the point of desire – before – to when the desire has been satisfied – after.

The logic behind it is this:

“BEFORE“, the customer was not satisfied because of some pain, boredom, fear, unhappiness or any other problem.

“AFTER“, the customer feels better, because they feel the’ve found the solution to what previously made them unhappy.

Sincerely speaking, people do not buy products or services…

People buy results – which means they buy the possibility of achieving the “After” state.

A wonderful product/offer gets the customer to the “After” state they’re seeking, fixing their problem and making them feel good – and that’s what an excellent marketing strategy does: it articulates this change from the “Before” state to the “After” state to the customer’s desires.

At this point, there’s something else that’s important to understand:

And that’s why many companies fail to do this well, especially when they are starting up.

It’s because:

• They are not able to offer a desired “After” state 

(the offer is not good enough)

• They fail in articulating the movement from the “Before” state to the “After” state 

(the marketing is not good)

It’s therefore worth emphasising that it’s absolutely critical to the success of your business that you understand your customer’s desire and how your offer will meet it.

Let’s try to explore this point a little further:

List of 8 “Before/After” questions

Before creating an offer for your product, try to answer these eight questions:

• What does your potential customer HAVE in the “before” state?
• Then, what does he HAVE in the “after” state?
• How does your customer FEEL in the “before” state?
• And how does he FEEL in the “after” state?
• What is the COMMON DAY like for your customer in the “before” state?
• And what is his COMMON DAY like in the “after” state?
• What is the STATUS of your potential customer in the “before” state?
• What is the STATUS of your potential customer in the “after” state?

Let’s now see these 8 questions in action so you see exactly what I mean:

In this example, I imagined a product/ strategy (CVO) that could help a business owner to create a blueprint for his company that could allow him to “win the game”. But of course, this can be applied to any kind of product or service. 

However, the transformation is much deeper.

Most existing online companies focus only on what the customer will get if they buy their product or service. However, great marketers analyse how the customer will feel, what their day-by-day will become like and how their status will improve if they buy your product.

This simple analysis of the eight “Before/After” questions can help to propagate marketing messages more efficiently. 

Check this out:

“Tired of working like a camel and not seeing any great result?

Are you missing out on raising your children by working too hard in your business and not getting what you expect? 

How about going back to having dinner with your family, getting your weekends back, and not worrying about money anymore?

It’s up to you! Now you can choose the team you want to play for!”

Can you see how these phrases convey the idea of the person who has been led from a “Before” state of stress and unhappiness to an “After” state of happiness and confidence?

But it doesn’t stop there! It is important to understand that the way you lead your client from the “Before” state to the “After” state will affect (and greatly) how much you can charge for your product or service.

Extra tip: So, just how much can you charge for your product/service?

The distance between the “Before” state and the “After” state is what I like to call VALUE.

If you want to charge a premium for your products or services, create a great distance between the “Before” state your potential customer is in and the “After” state that they want.

You can do this by:

• Creating a better product or service (improving the offer).
• Articulating the transition from “Before” to “After” in a different or clearer way (improving marketing).

And that’s why, when launching a new offering, starting a new company or moving into a new market, always be clear on showing the “before” and “after” to your potential customer.

Actually, if you can’t clearly articulate how you will get your client from the “Before” state to the “After” state, it will be difficult to promote your product to any kind of market.

The most important part in CVO is understanding how to fit your product or service to the market (and to correctly communicate its benefits), just because all the steps of the process depend on the existence of people who are willing to buy the solution.

• Step 2: Choose a traffic source

You may be shocked by what I’m going to tell you now, but trust me, I guarantee you do NOT have a traffic problem.

Your problem may be related to your business model, your offering or your measurement. But it is NOT a traffic problem.

Bear with me:

If there was a possibility to receive £10 for every visitor that comes to your online shop, would you be able to get traffic to it?

I’m sure you would!

In fact, you would even pay more than £10 to attract a visitor to your page when you really understand how to apply Customer Value Optimisation to your business.

Jeff Bezos, founder and CEO of Amazon, once said: “Your margin is my opportunity.”

And that’s why Amazon is what it is. They know that gaining new customers, selling them more and more often, is how they grow – or in other words, when you really understand and apply CVO, your business becomes unstoppable.

However, getting back to the idea that traffic is not an issue, companies like Google, Facebook, Pinterest, Twitter and LinkedIn, are always looking for ways to sell you traffic. Your SEO agency wants to get you more traffic. Your Pay-Per-Click agency would love to send you more clicks.

But it is critical to understand:

• How to measure the value of traffic.
• How to extract maximum immediate value from that traffic.

You can even use tactics like blogging, Facebook ads or email marketing to drive traffic to your online business, but these actions become ineffective if you don’t understand the system.

After all, the real goal, regardless of the traffic source chosen, is to drive potential customers to the CVO system.

Therefore, another big mistake many companies make is to try to attract all traffic sources and not to give proper attention to any of them. The best way is to work on a single traffic source constantly and then, once you have mastered it, add other traffic sources.

The traffic sources I’m speaking of include:

• Email marketing
• Social Media (Facebook / Twitter / YouTube ads etc)
• Google Ads
• Blogs
• Organic Social Networks
• SEO

Driving visitors into the CVO funnel should be the starting point and endpoint of your traffic strategy – if your goal is to gain new leads and customers.

The next two steps (Offer a Lead Magnet and Offer a Tripwire) show how to grow your business through Jay Abraham’s first method: increasing the number of customers.

• Step 3: Offer a Lead Magnet

Offering a Lead Magnet is nothing more than providing a hook to capture leads. It works as an “irresistible bait,” where you offer a specific piece of value to a prospect in exchange for their contact information.

To clarify, even if you don’t receive any money in this situation, we are still talking about a conversion. And often this is the first conversion you’ll have with the client.

This process is usually done through a simple web page called “landing page” (or it can be presented in a pop-up as well), and it needs to be optimised to convert even cold traffic into leads – and the content you provide as a Lead Magnet needs to have a huge amount of value for your potential client. 

This type of strategy is at the top of the CVO funnel, and the idea is to increase the number of contacts – growing your list will pay dividends throughout the rest of the funnel/conversion system.

Take note that the best performing lead strategies have something in common:

Specificity: the secret to getting more leads.

So, you need to brainstorm about what would be the best thing you could offer as a magnet to attract your prospects’ information.

As I said before, you do NOT need to start with an exaggerated or complex strategy. In fact, the more simple and clear your strategy is, the better it will convert.

Let’s look at a bad example of a Lead Magnet:

These Lead Magnets offer nothing specific in their call to action. These websites simply ask their visitors to subscribe, and from the customer’s point of view, there is very little value offered in exchange for their email.

Your prospect definitely doesn’t want to access something that they don’t quite know what they’re going to find inside. And you’re missing a great opportunity to show them you understand they have a problem that they need to fix.

Now check this another example: 

This Lead Magnet offers something with great value that will save the customer’s time and fix their problem – from the business’ perspective, they now know the customer’s name, surname, email and most importantly, who needs help with social media swipe up headlines. 

Using this example, we can learn what is necessary to create an effective lead magnet. 

• The lead magnet must be enticing, offering value to your customer – something they haven’t seen before or can’t find anywhere else; educational and helpful.
• The gratification they get from the resource needs to be immediate. Ideally, this will be a resource they can access and start using right away.

An efficient Lead Magnet, capable of solving a specific problem for a specific market segment, will surely generate more leads – and more leads mean more sales of the Entry Offer – or Tripwire.

• Step 4: Offer a Tripwire

This is such an important step that if you execute it well, you’ll be ahead of many of your competitors.

At this step, our goal is to generate customers. So far, we have seen how to generate leads. However, we have not yet generated new customers.

Thus, the Tripwire is for those who have already become leads, those who have already shown an interest in the previous step (Offer a Lead Magnet) but are yet to open their wallet.

This “Entry Offer” is basically an irresistible offer, usually at a low-cost price and its primary aim is to convert leads into buyers.

But remember: you must present an offer that your leads can’t resist!

The most common way to make your offer irresistible is to sell it at cost price and, in some cases, even at a loss.

I know that at first, this may seem pointless, but try to understand this: the irresistible offer is NOT your main product – you will only use this step of the strategy to build a list of buyers. And there’s nothing more valuable than a list of highly potential customers.

When we understand the entire CVO process, we appreciate that the Tripwire is the most powerful addition you can make to your business – even if you don’t make a direct profit from it.

Let’s look at this example of an entry offer created by Columbia Records:

Columbia Records understood the value of a buyer’s list and could therefore lead the music market through an absolutely irresistible offer (13 records or tapes for $1). Probably this offer was a “loss” in terms of revenue, but the value it brought to the company was the real big thing.

Types of Tripwire Offers

• Physical products can become fantastic hooks for the core product:

• Offer trials/trial periods as well.

Tripwire Offers are a great way to connect your business with new customers and the strategy behind it is very simple: 

To convert as many lead magnets as possible into customers, even if it means reducing your profit margin, because a paying customer will generate profit in the following three steps:

• Core Offer
• Profit Maximizer
• Return Path

Well, now that you know how to increase the number of customers, let’s talk about how to increase the average ticket spend per customer.

• Step 5: Offer a Core Product

Your digital business probably already has a core offer. The core offer is nothing more than your main product or service.

Existing digital businesses waste time by only presenting basic offers to potential customers – and you’ll actually see your Core Offer sales explode when you add Lead Magnets and Tripwires (your two successful transactions).

The sales from the Core Offer are the ones that will bring you the real profit. However, the process doesn’t stop here. If you follow the CVO strategy, you can reinvest what you made from the Core Offer aiming to gain even more customers.

And this is how you become unstoppable: by building a system in which you can invest more than your competitors to acquire a new customer – something that we usually call “Flywheel”.

While your competitors are out there trying to make a living off their Core Offer, you won’t need to make a dime of yours.

Just remember what Jeff Bezos said: “your margin is my opportunity”. So take the opportunity to, for example, invest in increasing your traffic, optimising the conversion rate or increasing the value of your offers.

Another curious thing I want to bring to the table is that many of the world’s most successful companies DO NOT MAKE A PROFIT until they achieve the next two steps: Offer a Profit Maximiser and Create a Return Path – and this is when things get very interesting!

• Step 6: Offer a Profit Maximiser:

Going back to Jay Abraham’s three methods of business growth, the second way is to increase the average transaction value per customer – and here is where we make use of the Profit Maximiser.

There are not many companies that have entry offers (tripwires) and profit maximising techniques. All of their efforts are centered around their Core Offer.

Did you know that McDonald’s, for example, makes almost zero profit from burgers? In their case, the burger is the Core Offer, while chips and soda are the Profit Maximisers.

This type of Profit Maximiser is also called Instant Upsell.

Let’s take another example: Argos sells laptops and plasma TVs (Major Offers) but the customer can’t resist and ends up buying extra warranties, monthly care and support from Argos Care (Profit Maximiser).

Amazon uses a Profit Maximiser – known as Cross-Selling – when it shows us that note saying “People who bought this product also bought that product” and with this, it increases the average value of the shopping carts.

Again, another example from Amazon is the use of the “Product Bundle Strategy”, showing its customers the “Products that are often bought together”…

Premium Subscriptions (which generate recurring revenue) suggested together with the Core Offer, such as membership plans and other continuity offers, are great Profit Maximisers as well.

After all, the biggest cost for most businesses is the price they pay for acquiring new customers (which is the job of the Entry Offer / Tripwire). So anything you can add on top of that will contribute to increasing the immediate (and lifetime customer) value.

So I strongly recommend you to think about how you could make use of upsell or cross-sell strategies and what you could do to add other offers to your core offer. Find your Profit Maximiser and watch your digital business soar!

But there’s one more way to grow in the CVO strategy:

• Step 7: Create the return path

The CVO’s final step in growing your business aims to increase the number of transactions per customer by creating a return path.

To succeed in architecting this path, you need to maintain strategic and frequent communication with your buyers, which leads them to buy again and again and again from you.

Since you have already received your prospect’s contact information through Lead Magnets, you can continue reaching them through different marketing channels.

This way, you can offer new hooks, entry offers, core offers and profit maximisers as you can redirect them to these different baits if no purchase occurred the first time.

Creating a return path is a way to get your customer (or prospect) to come back more and more often, getting them to regularly commit to your product or service.

• Outbound sales;
• Organic Social Networks (like Twitter, Facebook and LinkedIn);
• Loyalty programmes;
• Content Marketing (like articles or blog posts);
• Outbound Sales Call or
• Retargeting Ads (a way to remind your customers of your products and services after they leave your website without buying)

Conclusion

Customer Value Optimisation is a process of continuous improvement.

If you use it in your business, you’ll not only see your sales increasing but also build strong, lasting relationships with your customers.

It’s important to remember but I haven’t mentioned it yet: as you go through all of these steps, you should always be focusing on making your message highly personalised.

There’s a person behind that screen, and if you show some attention to his/her interests, they will trust and always come back to you.

Now that you’ve got the resources you need to master CVO for your business, let us know how you go applying these strategies to improve your marketing and sales processes. And don’t hesitate to contact me if I can be of any help!