The Money Making Secret of The Toll Booth Position
May 18, 2008
I’m a marketing consultant and at one of my client-companies, acompany that, in less than 10 years, has gone from a $10 millionto a $100 million dollar business one of the people I work withfrequently has jokingly given herself the title, ‘Vice President,Back-End.’
Although that clearly opens her up to be the butt of many jokes,it does very accurately describe her very, very important area ofresponsibility, in direct marketing parlance. At least 80% of thecompany’s profitability depends on her contributions.
If the term “back-end” is new to you, it means everything yousell your customers after their initial purchase (that firstorder is called the “front-end”). For instance, let’s say yousell instructional video tapes to golfers on how to play better.You advertise in golf magazines and your lead product is a $25video on putting strategies. That’s your “front-end” becausethat’s what people buy first. But then once people purchase thatfirst video, you send them a catalog offering them over 50 othergolf videos ranging in price from $50 to $99. Those follow-onvideos are your “back-end.”
In many businesses, there is a relatively brief period of timeduring which there are significant, exciting profits on thefront-end, that is the very first sale to a customer.
But that happy situation dissolves over time, as you “cream” themarket. And, as you go deeper and deeper into a market, the costof making the first sale (acquiring a customer) goes up and up.For instance, in the above example of the golf videos the firsttime you run a magazine ad you might pull 100 orders. But if youkeep running it every month, your order volume will probably dropoff steadily. Within six months, you’d be lucky to be selling 30videos from the same ad in the same magazine. As some point, itgets so high it is no longer practical to advertise and sell thatproduct to that market.
Nothing is forever. This fact of life is what mandates beingsmart about making all the money that you can from the back-end.
The good news is that your satisfied customers are probablywilling to buy other things from you — and they don’t even haveto be your own products/services. You can make deals with othercompanies to offer their products/services to your customers inexchange for a piece of the action.
For instance, let’s go back to our example of the golf videocompany. You might do a “joint venture” with a manufacturer ofspecial golf clubs which sell for $1,500 a set. You’ll mail aletter to your customers telling them how well these clubs willimprove their golf game and you’ll get $750 on each order placed.If your customers trust you, they’ll be much more likely torespond to your letter than they would be if the golf clubmanufacturer mailed to them directly.
Of course you only want to recommend high-quality products andservices which will be of value to your customers. But you getthe idea. You could make similar deals with other companies whosell what golfers want — golf apparel, golf trip and excursionoperators, even custom home builders who sell houses near golfcourses. They’d all happily pay you a ‘toll’ commission to selltheir wares to your customers.
No matter what your business, one of the most valuable assets youhave is a list of satisfied customer, predisposed to buy from youagain. When you control a sizable list of customers who boughtfrom you, know your name/business name, are happy with what theybought and with the ensuing relationship … and are pre-disposedto read your mail and buy from you again, it’s like owning yourown “toll booth.”
A pioneer of direct marketing, Harvey Brody, taught me the powerand value of getting into “The Toll Booth Position” and I’ve beenteaching it for years. Imagine owning your own toll booth on thehighway near your city. Anybody who wants to get to the otherside of that toll booth has to pass through its gates and pay youmoney.
As the controller of a responsive customer list, that’s exactlywhere you are; sitting there in your own toll booth and anybodywho wants to get their appropriate product or service to thosecustomers you control, has to pay you money.
You can collect a toll through joint ventures, as described abovewherein you do an endorsed mailing to your customers and get apiece of all sales that result.
Or, if you build a list of 50,000 or more, through outright listsrentals. I have a number of clients who pay all their overheadexpenses every year just with the checks they get from the listbroker representing their list to others.
I have often paid others to pass through their toll booths —and done so cheerfully. I have also been paid by others eager toget through my toll booth, to my customers, with my endorsement.
In the direct marketing business, it’s a well-known fact thatmost of the profits is derived from back-end sales to existingcustomers. Yet outside that business, I rarely encounter acompany which comes anywhere close to tapping the potential ofestablishing their own “toll booth position.” Get startedbuilding yours right now and start charging others to go downyour road.
Dan Kennedy is a marketing consultant and copywriter who helpsentrepreneurs cut waste out of advertising, end cold prospecting,sell at prices higher than competitors and dramatically increaseprofits.The author of “No B.S. Business Success” and other books,as a speaker he has frequently appeared on programs with formerU.S. Presidents, General Colin Powell, Larry King, Zig Ziglar,Brian Tracy and Jim Rohn. For info on his monthly “No B.S.Marketing Letter” go to http://www.DanKennedyLetter.com
Copyright 2004 by Dan Kennedy, DanKennedyLetter.com.
NOTE: You may run this article provided you run it with the biobox intact. Please email a copy of your publication with articlein it to Mr. Kennedy’s publicist at ArticleDeptBill@rtir.com
