When direct response marketers fail, it’s often because they don’t understand how to calculate what they can afford to spend on the front end. In fact, they think that the front end is where they make their sales and profit.
This is just plain wrong.
The front end simply helps you break even on your ad spend. The real money is made on the back end sales.
In fact, the goal of the back end is to grow lifetime customer value (LCV), which is one of the two most important metrics in any direct response-based business. This is because the LCV plays a big role in what you can afford to spend on the front end in the first place.
Look, if you have an average lifetime customer value of two thousand dollars, you should certainly be willing to go negative on your ad spend by ten dollars in order to acquire a new customer.
Trade 10 bucks for two thousand
Who wouldn’t do that? Would you trade ten bucks for two thousand? Would you trade a hundred bucks for two thousand?
The more money you make on the back end, the more money you can afford to invest on the front end. He or she who is able to invest the most amount on the front end is going to win the direct response marketing game, all else being equal.
This is one of those big direct response things that most people just don’t talk about, don’t teach, and don’t really get into because it’s not the most popular or most exciting topic.
The reality is this: you must be aggressive on the front end if you want to grow your business. You’ve got to know what you can afford to invest in order to acquire a customer.
What can you afford?
Initially, if you only have one product, or one funnel where you’ve got a product with a couple of upsells, the reality is that you can’t afford to go negative in ad spend.
The lowest that you could do is break even, which just means that you’re not going to make a profit until you add on a back end funnel, and back end products. You can’t afford to go negative on the front; you can’t afford to spend more to acquire a customer because you have no way of recouping that money if you only have one funnel.
Another way to look at it is just to ask, “What can I afford to spend to get somebody to opt into my funnel?”
Think of it this way: if you weren’t going to pay affiliates a percentage of sales, but instead you were going to pay them for every new opt in they sent you, what would you be willing to pay to generate an opt in?
If you’re only able to afford to pay a dollar per opt in — if that’s all you’re willing to pay or that’s all you can afford — but I can afford five dollars an opt in, I’m going to crush you.
If you can afford five dollars and your competition can only afford one dollar, you’re going to crush them.
You’re going to crush them because you can then afford to invest more up front than they can: you can use all the traffic channels they can’t use; you can get affiliates; you can afford to pay for costs per click (CPCs); and you can afford to have a lower opt in rate.
So when you look at it this way, you see that what you can afford to invest in ad spend up front, ultimately comes from your back end.
This is the game, and whoever really gets it, and does it well, wins.