Trying to scale a brand without having an LTV baked into the average customer journey is…
Incredibly difficult
And honestly
negligent
Every single business has the opportunity to improve LTV beyond the first transaction
There is no niche
where this isn’t true
The equation to understand how much scale potential you might have is known as PSM
This is profitable scaling margin
This is the most important equation when you are trying to grow a business
Because it tells you future cash flow and current efficiencies and accounts for costs
The more money that we will make on a customer journey…
*Especially revenue that comes without the need for a paid media investment to acquire
…The larger volume of investment we can make into growth and acquisition, at a lower efficiency
This is what unlocks scale
The most difficult and least successful path to growing a business is to rely on ROAS
If you absolutely need to make every inch of margin on every transaction just to maintain cash flow
You will never be able to project future cost, or inventory, or invest in your growth
Think of it as hunting and farming
If you have to hunt for every ounce of food and you can’t store that food you’ll starve if you have two or three bad days
However if you can farm, i.e. generate LTV, you’ll never be hungry again
And LTV is the easiest metric to improve in PSM
Because of compounding interest, If you are able to make a 5% profit on every transaction and you decide to invest a little bit of that profit in two more spend tomorrow
Every day you’ll be spending a bit more
& every day you’ll have even more money didn’t come from spend at all
The more touchpoints you have with a customer
In the more transactions you get with each customer
The more opportunities you have
To do a better job
And improving the profit of any one of those transactions
Also each additional transaction should come at a lower cost to acquire
The biggest differentiation between a product, and a business, is that a business is the ability to transact multiple times with a customer
This is often done with a journey through multiple products or services or experiences
That are complimentary & have continuity
I challenge you to think of a single business, brand, or retail store
That doesn’t thrive on meeting evolving customer needs past the first transaction with them
Think of every business you know that has failed…
It didn’t happen because people love to come back again & again
Taking cues from very commonly successful business models, is a great way to avoid commonly made mistakes
They say success leaves clues
Sometimes vertical integration is extremely straightforward
Other times it takes some creative thinking
But without it, you’re in a bad way
Our customers are likely already telling us how they want to view our brand and a vertically integrated product offering.
Brands that listen to their customers and lean into that proven consumer behavior that occurs organically, see much greater success much faster
It is unfortunately far too common
that online marketers and advertisers don’t think of their business
in the same way as proven direct response and retail businesses have
for decades
We don’t need to reinvent the wheel
We just need to re-interpret proven standard strategies
It is overwhelmingly popular cheap discount products to make sales
And we see this every day in retail locations
DTC business models are not the same as retail ones
We are not selling somebody else is good for a profit, with the ability to send that back if it doesn’t sell
The point here is that the profit margin on a sale, and the revenue over the course of a customer journey, is the lifeblood of a business
You must have cash flow
Sacrificing the volume of cash flow
for a volume of transactions
Is a cripplingly shortsighted strategy
It is rarely ideal to focus on just one position of an offer
Having a rebuttal upsell positions as your primary offer as having more value
When we compare a primary offer to a bundle
we are no longer comparing it to all of our competitors at the same offer
Psychology matters!
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