A typical business model might focus on three areas for each transaction: Recency, frequency, and monetary value.

For example, let’s take a typical fast food joint and use it as an example. There are primarily three ways to grow a business.

  1. You can acquire more customers, which is which most businesses try to do.
  2. You can get them to spend more with you per each transaction (monetary value).
  3. And you can get them to buy from you more often (frequency).

There are other ways, dealing with investments and such, but for the sake of this discussion, will keep it simple and referred to growing your business as building a strong customer base.

So the goal, then, becomes calling how do we do any of those three things? Ideally, we would like to do all three. That’s where your business plan should come into play. When you think in terms of a product, you’re talking about a single instance of something that can be leveraged into greater assets over the long run through the use of this rather simple model.

But back to the fast food model.

When we talk about a cross-sell, that’s similar to when you order a sandwich and they ask you, “Do you want fries with that?” When we use the term, “upsell,” it’s similar to that fast food joint asking you, “Do  you want to supersize that?”

Now you may already know this information. But we have to start with a frame of reference. The real money to be made is on what we call the “back end.” For example, if you order something from a catalogue, perhaps even a small “impulse buy” item, and they later send you information in the mail to get you to
purchase a more expensive item, that’s what we call “selling on the back-end.” It’s where the business is truly grown.

Many times a company will actually lose money on the front-end sale, so that they can recoup that profit on the back end. We call that a “loss leader.” It’s what separates the one-off small-time single product companies from the big boys that are in it for the long haul. And if you have any long-term ambitions for your business, that’s the line of thinking you need to be taking.

Single one-off sales rarely sustain a business for very long. Not only that, the profits they produce are minuscule in comparison with those companies that have a
larger vision.

Let’s take a closer look at why these methods are so successful, and the type of customer you really want to focus on to drive your business into the stratosphere.