What exactly is a self liquidating offer, and what should you know about it? And how does it relate to network marketing?
In my opinion, a self liquidating offer is simply a strategy to help you advertise your business so you can generate leads for free. Let me take a moment and elaborate. For every business imaginable, even network marketing, the biggest expense is typically advertising and customer acquisition. Acquiring new leads and new customers can be very expensive.
Businesses need leads, so business owners spend money to promote their business online, in magazines, offline, via direct mail, tele-marketing, and countless other ways.
In most cases, the advertising results in negative cash flow. In other words, the sales generated from your advertisement do not always pay for your advertising costs. Or, if they do, your advertising cost still reduces your bottom line significantly. This is especially true when it comes to network marketing. If you are advertising your network marketing business, you could spend several hundred dollars on an advertising campaign and not sponsor a single new distributor. The same holds true for other types of businesses too.
This is why I believe it’s much better to advertise a self liquidating offer, rather than advertise your business. Let me give you an example. Let’s suppose you own a funeral home, and you do what most other funeral home owners do. You put an advertisement in the Yellow Pages, in the local newspaper, and even create a television advertisement. Let’s assume you spend $10,000 per month to advertise your business. And let’s assume that the $10,000 generates 1000 leads (people who request more information about your services).
Of those 1000 leads, 10 become paying customers this month. You charge $2k per service, so you generate $20k in sales. In essence, that means you spend $10 per lead ($10k/1000) or $1,000 to acquire a new customer ($10k/10). You sell your funeral home services for $2k each, so you generate $20k in sales and make a $10k gross profit.
This is by no means horrible, but I do believe that there is a much better way to advertise. Instead of advertising the “funeral home services” on the front end you could advertise an estate planning kit instead. You could sell the estate planning kit for $29.95 each. Let’s assume you spend the same $10,000 advertising budget. In this example, 1,000 people express an interest in what you have to offer (same as above). Out of those 1,000 people 200 purchase your estate planning kit for $29.95 each. This puts $5,990 in your pocket with immediate sales.
And let’s also assume that you still generate 10 paying customers this month from these 1000 people. This puts another $20k in your pocket ($2k per sale x 10 folks). In this example you made $5,990 from your estate planning kit and $20,000 from your funeral home services. That equals $25,990 in revenue minus $10,000 in advertising costs. You get $15,990 in profit, compared to $10,000 in profit, from the above example. That is the power of a self liquidating offer.
A good self liquidating offer will completely offset or drastically reduce your advertising expenses, so you can generate leads for free (or lower cost). I’ve found that most business owners are clueless when it comes to marketing or advertising. I also believe that it’s much easier to sell information, on the front end, than it is to sell your services. When you sell information on the front end, you offer your services on the back end. I think this is a much better strategy. Once again, this can work for any business. The numbers I mentioned above are just an example, and are for educational purposes only.
When it comes to network marketing, you should follow the same approach I described above. Rather than lead with your business opportunity, lead with a training product, a system or leads. Your prospects will be more receptive to this type of offer than a business opportunity anyway. After people buy your low cost products, back-end them with your business opportunity. A percentage of the people who bought your self liquidating offer will join your business.
Even if they don’t, you still take money and have leads to follow up with! This is the best way to build your network marketing business online or offline.
Final Thoughts
In summary, a self liquidating offer helps reduce or offset your advertising costs, so you can generate sales and leads for free (or a lower cost). Your key to success is to sell information on the front end and offer your product or service on the back-end. This applies to any type of business, online or offline. I hope that helps.
What are your thoughts? Leave a comment below and let me know what you think.
Sincerely,
Chuck Holmes
Network Marketing Professional (21+ years)
Top Recruiter & Top Rep
mrchuckholmes@gmail.com
I was very confused at first, but I appreciate that you went on to include an example in order to help me understand better. It does make sense to do it the way you described because the cost to you is much lower. Plus, given the example you used, the likelihood of those customers who initially bought the estate planning kit returning when they need funeral home services is greater because you’ve captured them as customers with the first product.
Using a self liquidating offer is very important. It helps pay for your advertising costs so you can generate leads for free, or for a very minimal cost.
This is a really good idea! Thanks for sharing it.
I’m glad I could help.