Small offer, big profits

In a bad economy, it’s always tempting to increase the “thud factor” of your offer. Give away more bonuses… offer better payment terms… special discounts for repeat customers… longer guarantee period… you get the picture.

The problem with this is that you cut your profit margins to the bone and can easily look just like all your competitors’ offers. So why not turn this on its ear and go in the complete opposite direction?

I’m talking about shrinking your offer in order to generate a lot more business – without compromising your profits. Here’s how to do that.

How I discovered the immense value of a tiny offer

About 25 years ago (yes in the dark ages of pre-Internet history), I published a newsletter about direct marketing called “Results” that sold for $97 per year. I had been invited to speak at a business conference about my experience with publishing newsletters and building a loyal subscriber base.

The conference presenter said that instead of paying the normal speakers’ fees, he was going to allow all the speakers to sell from the stage and keep the proceeds. Although this is a common practice now, this form of compensation was new at that time.

Two days before the event, which required that I fly 3,000 miles, I received a call from the conference presenter informing me that the terms had changed. He was now demanding a 50% share of my sales.

I told him that if that was the case, I’d pass and wouldn’t be participating. He became irate and threatened to sue me because my name and picture had been featured in the promotional materials and people were expecting to hear me speak. Being fairly new to the game, I was properly intimidated and reluctantly agreed to show up.

But I was determined to turn the tables on him…and still get paid handsomely at the same time.

Selling a “slice of the pie”

Originally, I was planning to sell my copywriting program which was priced around $500. But I couldn’t help but do a slow burn every time I thought about giving the conference presenter $250 for every copy I sold after he pulled his bait and switch on me.

So here’s how I created my tiny offer and the very interesting results it produced.

Once I got on stage, I did everything in my power to deliver the most valuable, usable content I possibly could. And the audience seemed fully engaged.

After sharing a lot of great information for creating a paid newsletter and selling subscriptions, I closed with my offer for the audience.

Now, remember, a subscription to my newsletter was priced at $97. And in those days, that was considered a fairly high price.

But what I offered the audience members was a 3-month subscription for just $1. All they had to do was meet me at the back of the room and give me one dollar and their business card to get a full 3-month subscription delivered to their mailbox.

Now, financially they were getting a great deal. But at the same time, they were also getting a “slice of the pie” – a mini-subscription rather than a discounted offer on a full year subscription.

I can still recall the exact numbers. There were 360 attendees in the room and I sold 342 mini-subscriptions!

After I collected all the money and business cards, I walked over to the conference presenter and handed him a stack of 171 dollar bills and said with a big smile, “Here’s your 50% share”. He looked dumbfounded as he took the stack of bills.

The real magic of the tiny offer

So maybe you’re wondering what the big deal is. After all, I traveled 3,000 miles and paid my own plane fare and hotel to make a measly $171.

True.

But that’s just the starting point. Once I got back to my office, my assistant entered all the names and addresses into our database and we sent out the first issue. Along with that first issue, these new subscribers also received a flier promoting my copywriting course.

Then, when it came time to mail the third issue, we included a flier offering the one-year subscription at the full price of $97.

Between the copywriting course, the paid subscriptions and a couple of consulting engagements I got from those new subscribers, I ended up taking in about $60,000 in sales.

And the conference promoter? He didn’t receive a penny of that. His total take was the stack of 171 dollar bills I handed him.

And that’s where the real magic comes in. You see, anyone who pays for a product – even if it’s just a small amount – is far more likely to buy from you again than someone who starts by getting something for free.

So why not take advantage of this for your business? Take a popular product or service and create a “slice of the pie” that you can sell at a low price. I’ve done this many times for my own business and for my clients. I’ve used it to successfully sell software, information products, vitamins, health club memberships, consulting services, newsletters, electronics, dental and medical services, and much more.

Two key points to remember. First, because you’re selling a “slice of the pie” rather than discounting the full version of your product or service, all future sales are at full price. But when you start by selling the full version at a discount, it’s extremely difficult to ever get the full price later.

Second, my extensive testing has shown that it’s important to keep your price below $10. I’ve had excellent results with prices of $4 or $7. Once you break the $10 barrier, it no longer seems like such a great deal. So keep your price low, remembering that a customer who pays any amount for a product is far more likely to buy that same product later at full price than someone who took a freebie offer.

Alright, now it’s time to go slice up your pie.

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12 Responses to Small offer, big profits

  1. Brian Carson says:

    Bob,

    I love the story and the lesson. I’ve thought about doing this same thing with some of my products and services, but was on the fence about it.

    After reading this, I’m going to give it a try.

    Thanks for this awesome post.

    I would have loved to have seen the conference presenter’s face when you gave him the money!! Awesome.

  2. Ellery says:

    Interesting story, I like it!

    Instead of making your offer “free”, which “may” imply a crap, make it “a steal” can indeed raise your response rate.

    Thanks Bob.

  3. Chris says:

    Hi Bob

    thanks for this great insight!

    I’m wondering… how did you do this with vitamins? People need to take them some time before the results kick in. So do you offer them a whole “month package” or just a smaller dosis so they can see what the pills look like, how big they are, etc?

    • Bob Serling says:

      Hi Chris,

      I would have been more accurate if I said supplements. These were supplements that weight lifters use to improve recovery. When you take amino acids, you can feel the effects almost immediately. But I’m sure this could be crafted for vitamins as well. For example, if there are 60 vitamins in a bottle and you take one per day, a 15-day supply should give your customer ample time to feel the difference.

  4. Treadmill says:

    I suggest adding a facebook like button for the blog!

  5. Hi Bob
    Great post as usual. I have a question. Could this same paid ‘slice of pie’concept be applied to the strategy of putting on a webinar or tele seminar to make sales? The normal approach is to give a free webinar or tele seminar and provide helpful information on a particular subject. You try and get lots of people to attend this webinar or tele seminar and then offer a high priced programme or offer at the end of your presentation. Would you recommend charging a token fee for the webinar or tele seminar ($1, $4, $7 etc) so that you get people to attend who have paid money for it and are therefore more likely to buy afterwards? I assume by dong this you would get smaller numbers attending but because they have all paid money they would be far more likely to buy other things at the normal price. Just like your 300+ people who all paid $1 each for your 3 month newsletter trial. I would be interested in your thoughts on this.

    • Bob Serling says:

      Hi Graham,

      I like the way you’re thinking! This would work well and I’d advise using the $7 price.

      Having done many teleseminars and webinars, I know that even when 900 to 1,000 people sign up, you’re lucky if 200 attend. Few people place any urgency on something they get for free. Personally, I’d rather have 150 people who paid $7 attend than 500 who come in for free. Because the paid attendees are far more likely to stay through the entire event and to purchase whatever you offer at the end.

  6. Adam Gordon says:

    Great concept, and I really like the idea of applying it to webinars. I’ll definitely be trying this in the new year.

  7. Franklyn says:

    Just where is the facebook like button ?

    • Bob Serling says:

      Hey Franklyn – Next time I post (probably next week), I’ll make sure to have my web master add the like button. Thanks, Bob Serling

  8. Great story with a very valuable lesson! I also really like your idea of charging a small fee for a teleseminar as a way of utilizing your small offer, big profits strategy.

    By the way, saw you speak at Mass Control 2.0 in San Diego a couple years ago and really enjoyed your presentation!

    Keep up the good work~

    Michael

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