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Have you ever heard of the "Pareto Principle"? If you haven't, you are missing out on one of the MOST EFFECTIVE routes there is to bigger profits.

Also known as "The Vital Few and Trivial Many Rule," the Pareto Principle was named after the Italian economist who observed in 1906 that 20% of the Italian population owned 80% of Italy's wealth. He then noticed that 20% of the pea pods in his garden accounted for 80% of his pea crop each year. Coincidence? Well, it got him thinking...

Vilfredo Pareto applied this 80-20 rule to pretty much everything -- and whether or not you agree with it is your prerogative. But when it comes to your e-business, you're missing out on a lot of profit if you don't realize that...

20% of your customers are responsible for 80% of your sales!

With other applications of the Pareto Principle, it's often impossible to determine the accuracy of the ratio (i.e., 20% of the food you eat is responsible for 80% of your health). But in your e-business, you can easily track which customers are buying customers...

It's a little-recognized fact that at least 20% of people who have purchased from you once will buy from you again... IF you follow up with them. One-fifth of your customer base is just waiting for you to offer them something new.

So if you are not following up with your customers, you're actually ignoring 80% of your business' profit potential.

1. Follow up with your key customers

If you don't follow up with your customers, you are losing a lot of profit -- it's as simple as that.

The fact is, when a person trusts you and likes your product or service enough to buy from you once, they'll often buy from you again and again. Your existing customer base is four or five times more likely to buy from you than a "cold" market... and the "lifetime value" of these customers is one of the greatest assets of your business.

Repeat sales can be so profitable that some people even offer their product or service below cost on the first sale -- just to get their potential customers to buy (think of all the mail-order book clubs and CD clubs that let you purchase 11 books or CDs for a penny!). Because once people have bought for the first time, at least 20% of them will buy again...

And this backend market should be where you focus a good deal of your attention.

You have already cultivated a relationship with your customers -- you have put in the time and money to get their attention, establish credibility, and close that first sale. That's by far the most difficult part -- not to mention the most expensive. Think of all the planning, advertising, and promotional activity that goes into getting those initial sales...

But once you've acquired those customers, you can develop their "lifetime value." Show appreciation and offer special incentives to them. Send them "thank-you for your purchase" messages, renewal notices, and free information. Reward them for being loyal customers and they'll become even more loyal.

And offer them more products. If they liked what they bought, they'll buy from you again.

2. What to offer

The most brilliant thing about follow-up offers is that they don't cost you a single red cent. You've already dealt with the salespeople, the brochures, the mailouts, the ad placement, etc.

But now that you've made those initial sales, and in the process collected the e-mail addresses of your customers, you can simply e-mail all of your previous customers your special follow-up offer... so all of the sales you garner are 100% pure profit!

Of course, you have to ensure that what you're offering is something your customer base is actually interested in -- so the kinds of follow-up items you offer will depend on your business. But consider the following types of offers and think of how they could apply to your business...

  1. Offer products that complement your initial product. For example, if you sold golf clubs, you could offer customers a golf club bag to carry them in. But it doesn't have to be quite that closely related -- for example, if you sold memberships to fitness programs, you could also offer fitness clothing, fitness books... you could even promote daycare programs to provide fitness moms with more options!

    Even if you have to struggle to come up with an idea for a complementary product, it will be well worth the effort. You've already got the interest of your customers, so at this point you have to think of any way possible to keep them buying, because buy they will... unless you don't offer them anything!


  2. Sell more of the same product at a discounted price. Show customer appreciation by offering them a "special discount" on the product they're already buying. If your product is refillable, you've got it made. Your "Vital Few" customers will purchase the product repeatedly over a lengthy period of time -- and this gives you a legitimate reason to get in touch at regular intervals.

    But even if your product isn't refillable, you can offer upgrades, newer versions, improved models, or add-ons to the original product.
    And each time you contact your customer, you can offer a special discount on a new or related item also -- even offer something free to maintain their interest!

  3. Use newsletter subscriptions as up-sell or backend products. Once people trust you enough to buy from you, they'll likely be interested in hearing more of what you have to say. Newsletters are also an excellent way to stay in constant communication with your customers, answer their questions, respond to their concerns, and provide them with the kind of knowledge they'll need if they're using your products.

    In the process, you will establish yourself as an expert in your industry and a reliable source of information.

  4. Try splitting up your current product and selling it as separate segments. For example, if you were selling a book on research methods on the Internet, you could offer a basic version for $9.95 to generate a large volume of sales at a low price. Then, 30 days later, you could offer them an advanced version for $29.95 or even $39.95, and increase your profits dramatically!

    You could sell the smaller, individual parts of your product separately, but also offer a package deal with everything included for a bit of a discount. That way, you'll cover a couple of different price points and appeal to a wider range of customers.

  5. Try selling your customers an upgrade to their product. If they've used and liked your basic model, they'll be open to suggestion, provided that you can show them why and how the upgrade is better.

  6. Offer someone else's product! I know it sounds a bit odd, but as long as the product or service is not in direct competition with your own, you can make a good profit (and further develop your relationship with your customers) by offering a great backend item as an affiliate.

    Joining affiliate programs can be a very lucrative way to increase your sales. With an affiliate program, you have the opportunity to give a highly credible personal recommendation to your customer base (which is one of the most effective sales techniques) and claim a percentage of each sale... without having to develop a new product of your own! This can be an enormous timesaver and, done right, can make up a significant part of your business.

    In fact, many people earn considerable online incomes these days just by promoting affiliate products. You have to do your research accordingly, however, and only recommend products that you truly believe in before you can make a business of selling them. Also, keep in mind that selling too broad a variety of products as an affiliate will do nothing but confuse your market -- and lose you sales. Keep your focus narrowed and your niche well-defined.

    If you are interested in checking out affiliate programs, the following are a few good places to look for the programs that are right for you:


    And, of course, you can always join the IMC Affiliate Program. We offer excellent promotional tools and other resources... and some of the highest commission rates in the industry. Go to http://www.marketing tips.com/assoc/ to see if this opportunity suits the needs of your business and your customers.

  7. Offer incentives and information to keep your business in your customers' minds. You don't always have to be pushing products -- in fact, if you try the hard-sell approach each and every time you contact your opt-in list, they'll start to see you as a nuisance.

    So offer a "tip of the day" or contest entry to entice your customers to your site. Stay in touch through newsletters and discussion groups. Observe holidays and special occasions... (you could tie in promotions to these events).

    Because while you certainly want to sell more products or services to this lucrative group, you also want to balance sales with relationship building... developing more trust, credibility, and customer loyalty each step of the way.

3. Automate your follow-up

Okay, maybe I was wrong... maybe this is the most brilliant part about follow-up offers: Not only do you not have to spend any money to make follow-up offers -- you don't even have to spend any time!

You can automate the entire process using autoresponders that will...

  • Send a "thank-you for your purchase and order confirmation" type of message -- you could also offer a discount on a related item in this message

  • Send instructions for use that may also mention your newsletter or discussion group (you probably wouldn't want to include a "hard sell" here)

  • Follow up with a message a few days after the purchase that asks how things are going and then offers a discounted related item

  • Send another message a few days later to remind your customer of the discounted offer and urge them to buy before the offer ends or the product runs out

  • Send "time to refill" reminders or "time to upgrade" messages as appropriate

If you use autoresponders in this way, you can start confirming orders automatically... providing instructions automatically... and generating huge profits in follow-up sales -- automatically!

Important Note: Using software such as Mailloop, you'll have access to unlimited autoresponders. This means that you can easily use Mailloop to e-mail your past customers… with only a few clicks here and there.

Even better, Mailloop will allow you to automatically personalize each of your messages, so that each customer is greeted by name and receives a personal e-mail tailored with their purchase date, product bought, etc… You can even send HTML e-mail that'll increase your response by as much as 40%!

And when you automate your mailings, you'll not only tap into the 20% of your customers who will be responsible for 80% of your profits -- you'll also save yourself an incredible amount of time in e-mail chores and customer service!

Final Thoughts:

Focusing on your "Vital Few" customers is the best way possible to increase your sales through your backend products. Once you've done the initial promotion work and made the first sale, promoting to this highly responsive group is FREE... and once you've automated the process, it won't even cost you any time to do it!

As you can see, putting an automated follow-up system in place is hardly the most difficult aspect of Internet marketing, though it is definitely one of the most profitable techniques out there -- and one of the most often overlooked.

But now that you know how profitable it is to follow up with your key customers, and now that you understand how the Pareto Principle applies to your business, you can start running your promotions more effectively and increasing your profits exponentially.

And who knows... maybe you can start getting more peas out of your garden, too!

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ABOUT THE AUTHOR: Derek Gehl specializes in teaching real people how to start profitable Internet businesses that make $100,000 to $2.5 Million (or more) per year. To get instant access to all his most profitable marketing campaigns, strategies, tools, and resources that he's used to grow $25 into over $60 Million in online sales, visit: http://www.marketingtips.com/t.cgi/880448

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