{"id":220,"date":"2010-07-09T08:54:00","date_gmt":"2010-07-09T15:54:00","guid":{"rendered":"https:\/\/fishingforcustomers.com\/how-to-make-money-by-losing-money\/"},"modified":"2021-12-29T10:13:56","modified_gmt":"2021-12-29T17:13:56","slug":"how-to-make-money-by-losing-money","status":"publish","type":"post","link":"https:\/\/develop-my-site.com\/fishing2\/how-to-make-money-by-losing-money\/","title":{"rendered":"How to Make Money by Losing Money – Part 1 of 2"},"content":{"rendered":"
\"Light<\/a>

Money Idea!<\/p><\/div>\n

Would you buy a dollar for 50 cents?<\/p>\n

OK, that one was easy. If you could hand me 50 cents, and get a dollar back every time, you’d push as many fifty cent pieces in my direction as I’d be willing to accept.<\/p>\n

What about for 99 cents? Would you be as excited about that exchange?<\/p>\n

Maybe. As long as there’s a profit to be made you might be willing to make it slowly.<\/p>\n

How about $1.35? Could you imagine spending $1.35 to get back one dollar? Your first reaction is likely “no,” but the correct answer isn’t so obvious.<\/p>\n

How could anyone stay in business losing 35 cents on the dollar?<\/h3>\n

Pretend with me that your music store consistently sells twelve guitars a week, at an average price of $850, and an average profit of $332 (39 percent).<\/p>\n

You’re planning an Anniversary Week guitar sale, and have budgeted $10,000 for advertising. Knowing that you’ll get to keep 39 cents of every dollar you take in, it would seem that to recover your $10,000 advertising investment you’ll need to generate $25,641, or roughly 30 additional sales (for a total of 42) just to break even.<\/p>\n

But wait a minute. Selling 42 guitars this week doesn’t have you showing a profit. You’re merely recovering your costs.<\/p>\n

And what happens if you don’t sell 42 guitars? Wouldn’t you have been better off not advertising this sale at all?<\/p>\n

Maybe we need to re-think this Anniversary Week sale idea.<\/p>\n

Then again…<\/h3>\n

We probably will sell a lot of accessories. We’ll probably draw some new people into the store, and remind former customers that they used to enjoy shopping with us.<\/p>\n

OK. Even if we can’t sell enough guitars to pay for the Anniversary sale advertising, we might sell enough other items to recover the ad budget.<\/p>\n

And then there are the rumors of the way the new competitor does business. You’ve heard he will happily lose money on the first sale if he gains a new customer in the process. What the… How can anyone stay in business with a silly business model like that?<\/p>\n

Well, your competitor has recognized that the customer who buys the guitar will also need a case, maybe a strap. Over the next weeks he’ll see the value of a battery-powered tuning standard, or a capo. He’ll need picks, and strings. Over his lifetime as a player, he’ll need lots of strings.<\/p>\n

Then, too, over his lifetime as a player, he may purchase several other instruments, and all of the accessories. Maybe he’ll even need lessons.<\/p>\n

If a business is willing to invest money in advertising to gain new customers, why not invest in the customer himself? <\/h3>\n

When we consider the probability of all those additional purchases, and all of the profit derived from them, would you be willing to lose a few bucks on the “front end” of this relationship to “buy” the customer, and gain a profitable “back end?”<\/p>\n

Twenty years ago Jay Abraham brought up the concept of back end sales by telling the story of a coin dealer. The dealer offered a $23 starter coin set at cost, and gained 60,000 new customers.<\/p>\n