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I began to see that virtually every private enterprise functions that way. To keep doing what you want to do (and to make a profit from
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it), you have to (1) attract customers at a reasonable cost and (2) convert them into repeat buyers.
Let’s call the first task the front-end sale and the second task the backend sale. In the years that have passed since, I’ve learned to look at virtually every moneymaking enterprise in terms of these two selling skills.
This perspective has allowed me to quickly understand how many businesses operate, even ones of which I have only outside knowledge. It’s no longer a mystery to me why, for example, so many restaurants and small hotels go out of business, why people in the travel and leisure business make so little money, why you shouldn’t even try (as I explained to a conference attendee just the other day) to make a business out of a llama farm—and why most good small businesses fail when they attempt to get bigger.
This fundamental perspective on sales has allowed me to provide helpful advice to all sorts of different businesses in almost every conceivable industry. I can see now how every successful start-up business is one that has quickly and correctly answered two very simple questions:
1. What is the most cost-effective way of attracting customers?
2. What is the best way to keep those customers buying?
If you can learn to see your business that way and can one day discover the correct answer to these two questions, you will quickly become recognized as an invaluable employee. That will happen because you will understand your business from the inside out. You will know it better than 90 percent of your fellow workers.
When problems arise—no matter what they are—the solutions must address one or both of two objectives:
1. Lowering the cost of acquiring new customers
2. Increasing the lifetime value of each existing customer
Even the stickiest problems in business—which are always people problems—can be analyzed effectively by considering possible outcomes against these two objectives.
134 AUTOMATIC WEALTH
BETTER YET, TURN YOURSELF INTO A MARKETING GENIUS
Skilled marketers are consistently among the highest-paid individuals in any industry. They earn high salaries, extraordinary bonuses, and the respect and admiration of colleagues and competitors. Marketers who master their trades are all but guaranteed a life of wealth, security, respect, and satisfaction.
Anyone of average intelligence can become a skilled marketer. You don’t need a quick wit, a flair for the dramatic, or a degree from a top business school. What’s required is an understanding of why people buy things.
Basically, the best marketers know how to apply three fundamental principles. I’ll give you a brief overview of them here to help you decide whether this is something that interests you.
The First Principle: The Difference between Wants and Needs
In today’s consumer-driven economy, it’s easy to mistake a want for a need. How many times have you heard one of the following statements:
• “Sally needs a new wardrobe. The clothes she’s wearing make her look silly.”
• “John hates the way his hair looks. He says he needs a better barber.”
• “I simply have to have that new handbag!”
• “We need a bigger house.”
• “We need a nicer car.”
• “We need a bigger lawn.”
None of those things are needs—as in something you can’t live without. Our needs are really few and simple: air, water, food, shelter, transportation (sometimes), and clothing (usually). Everything else we buy is based on our wants. And even when it comes time to purchase needs, such as food and clothing, our buying decisions are usually based on wants. (We want a certain type of bread, a specific brand of clothes, a house in a particular style, etc.)
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When you realize that your customers don’t need your product or service, you recognize that the way to convince them to buy it is to stimulate their desire for it. The most effective way to do that in your advertising is to
• Promise your prospective customer (usually implicitly) that taking a certain action (buying your product) will result in the satisfaction of a desire (want)
• Create a picture in your prospect’s mind of the way he or she will feel when that desire is satisfied
• Make specific claims about the benefits of your product and then prove those claims to your prospect
• Equate the feeling your prospect desires (the satisfaction of a want) with the purchase of your product
The medium doesn’t matter. Wherever you find your customers— on television or radio, in magazines or newspapers, at home reading the mail or on the Internet—the basic process is the same. The moment you forget this first principle—that you are selling to wants rather than needs—your marketing will fail.
The Second Principle: The Difference between Features and Benefits
A pencil has certain features: