Why Is LTV So Important - YouTube

So today I'm gonna talk about

AOV, LTV, and upsells, okay?

So you have your front end product.

So your first product.

And then say the upsell is $100,

what you would normally do is count this in

and then say the other one was 50.

The easy way to do it is if you know your take rate,

150 for example,

you can work it out.

Say my take rate for upsell one was 20%,

I would know I'm adding $20 per order, right?

Easy.

If you don't know your take rate,

what you guys can do is you can just go to your store,

add up the last 10 sales you made,

divide it by 10.

That's your AOV.

Very simple.

You see?

And yes, I was saying the take rate,

take rate just means if 10 people go through this,

how many bought the upsell?

If 2 in 10 took it?

It's a 20% take rate.

Why is AOV so important?

So say we have Facebook ads, okay?

And then we have our product here,

a $50 product, right?

We could probably run a Facebook ad

and pay 25 to $50,

if it was a good product, a good hook.

A good copy, good ads, everything, right?

We probably could run this to here.

which would mean what?

Years ago we would be profitable on day one, right?

Say it was 25.

My first business, you know, 5, 4, 5, 6 years ago,

I would do this.

I would run this here and I would make money every day.

Some days I made 5, $10,000 pure profit,

from my front end, okay?

I haven't got worse at

what I do I've hopefully got better in the last five years,

but I can't do that anywhere near as easily

because costs have gone up.

In fact, when we try and rerun this,

our costs have doubled or tripled,

just based on what we pay Facebook to show that ad.

And then also you've got way more competition now, right?

So what it means is it's much harder

to break even on the front end.

What you might do now is you might run those ads

and instead of paying $50, you might pay $100.

So who here wants to spend $100 to make a $50 sale?

None of you like that idea?

No, okay.

Now, because we have upsells,

when we get AOV average order value, up to $100.

Now answer that same question, okay?

Answer that same question.

So now, I'm Facebook,

you walk up to me and you give me $100,

And I give you $100 back.

Who would do that?

Interesting.

So now it's like a 50 50 divide.

Now just remember real life setting, okay?

Here you're gonna lose 3% on a payment processor fee,

and maybe 5% will refund.

And then if you're an e-commerce product,

you might have 40% cost and shipping too,

if you're info product, you're fine.

So if you're e-commerce,

you're like still at minus $50, right?

If you're info you're like almost breakeven basically,

minus 8%.

So my question if most of you don't wanna do this,

and this is with your AOV pretty good, right?

It's doubling your front end.

How are any of you ever gonna get Facebook ads to work?

The $50 front end, you go with upsells,

you get your AOV to a hundred.

So you said no to the first scenario, all of you.

But ironically I would actually say yes,

and I would take that all day.

I would actually love that,

I would make lots of money.

And all my businesses do that.

Pretty much all of you said no here,

when I would say yes.

So that's one thing to think about.

Most, half and half, 50% of you here, said yes, right?

So what about scenario three

So this is the AOV.

And then for LTV in thirty days,

you made $200.

So now I'm Facebook, now still remember every day,

every hour, 20 times a day,

you're gonna walk over to me.

I'm Facebook.

You give me $100

and I give you $100 back.

I give you $100 back and then 30 days,

30 days later, you get another $100

for every single transaction of those 20 transactions a day.

Who would do that?

Yes or no?

All of you.

Who can work out in 30 days,

how much profit you would make?

If you imagine you break even here,

how much would you make if you did a whole month

and then another 30 days,

how much would you make?

So remember 20 sales a day

and you make $100 extra per one.

At $2,000 a day you would make after 30 days,

$2,000 a day, 60 K, right?

60 K, $2,000, 20 sales a day,

$100 per sale profit after 30 days, 60 K.

You break even here,

And this is all very realistic for most brands.

If you're in e-commerce,

it's gonna take a little longer to get to that point.

Some brands, software will take longer,

This might be like a 6 month or 12 months, okay?

So $50 say on the front end.

With AOV in it

How much do you think I would pay per sale.

You don't know what the LTV is yet

Just real life. Guess how much we

would pay per sale for a $50 sale.

How much would you pay for a $50 sale?

Now I've given you this figure.

You guys see how your answers change, right?

Now you know this,

most of you are closer now.

Most of you are saying around 200, I'll go with that.

Okay. Which is about fair.

So if I would pay $200, how much profit am I making?

So I make 50 on day one.

So that's my AOV, my CPA's 200

so it's a $150 cost.

But, I come down here and now I make 150 profit.

So you guys see, before I asked the question,

most of you gave lower amounts than 200.

Now that my LTV is here, this is great.

So say this company that does all of this is in the same

space as you and has all of this figured out, okay,

it's going to be hard for you to compete with that company,

right?

Because maybe you don't have all of this figured out

you just have this part,

all of this here is not figured out,

so you're trying to make Facebook ads work with a $50 AOV.

They're trying to make Facebook ads work at anything under

a $300 LTV. You see the difference?

Like you guys know there's generally not secrets,

but if there was one fundamental strategy or principle to

make your ads work it would be to take a

$50 product or whatever the product and make

4, 5, 6, 7 times more as quickly as you can on the backend.

Because then even if you had mediocre ads and you paid

$200 for a sale,

you're making $150 profit,

right?

You guys see how that's really important.

And I didn't know this or value this for like five years

of my career. So I lost, I did the math one day,

in two years of my fitness business.

If I had done what I know now it was $6 million and pretty

much pure profit, a few staff members maybe to fulfill it,

but I had already done the ad spend, right?

So it was literally probably like 5 million

of pure profit just from not knowing this.

How do we boost AOV? How do we boost LTV?

So let's look here. How do we boost AOV?

Everyone?

So we can add order bumps.

So remember, AOV, a good way to look at it,

in my opinion,

is like 60 minutes

or even less like 20 minutes, okay?

So like stuff like email and everything after

would more go into LTV.

Okay, good.

Buy more and save, so bundles.

I'll add one for e-commerce that no one's got,

which is free shipping tiers.

If you're in e-commerce,

put a free shipping tier at $100, boost AOV.

So another one I'll add is like premium.

So, sometimes like softwares or events

and even e-commerce,

you have like the premium package, right,

where they get more stuff

when, you know, you see the little tiers at checkout,

they can get premium.

We got order bumps, upsells, downsells, bundles.

What else? Buy more and save.

So subscription plans, that's good, but that's LTV.

'Cause you're not gonna make money on day one.

It's not gonna add to your day one-

it might add a little, right, if it's an order bump.

but long-term subscriptions: LTV.

Yeah, so I would say complementary.

So if you're like e-commerce,

showing complementary products, right?

You know, Amazon does a good job of this.

You add something on Amazon and then it says

"customers also purchased"... batteries and stuff.

And a lot of the time you guys will use that, right?

You'll buy all three instead of the one.

Okay, good. So you guys got the gist here.

So the big thing that everyone missed

is price split test.

You might be able to just change your price

and boost your AOV on the front end product

and everything else you guys discussed.

Next question: how do we boost LTV?

So who does a good job at selling more products?

There's someone in our space that's good,

and there's someone that's a very big company, right?

I would say a good company

that's selling more products is Amazon.

Good selection of products there, right?

You go back and buy lots of things.

They did a good job there.

In our space, one of my business partners, Tai Lopez's good.

we, you know, for a long time

we released a course a month, okay.

I would say Grant Cardone also pretty good at it.

Like Grant is like,

he makes products out of everything, right?

Even when you go to his event,

there's a million upsells at the event.

You can go on,

he has a yacht, a cruise thing, VIP, lots of tiers.

Every speaker on stage is basically selling.

So he does a lot too, right, for more products.

And then obviously online, he has a bunch of stuff.

Good, sell more often.

So more emails, Facebook group.

So subscription, more products, sell more often,

emails, Facebook group, Prime.

So I'll put Prime/subscription.

So that's putting people on a monthly, right?

Membership. Yeah, I'll put slash membership here.

Good. What else have we got?

Yeah, you can re-offer the order bumps and upsells.

Another a big one, I think, a lot of you,

it's not been mentioned or maybe I missed it.

Holiday promotions.

Big way to jack up your LTV is like

every holiday build in a big promo out of it.

Whether you like it or not, America and the world

is accustomed to buying more on holidays.

They expect almost big promos.

People even wait to buy.

Some of you have probably bought from me

on the holidays.

We do good, cool promos, good offers, discounts.

So affiliates.

So you said partnering with other similar businesses.

That's called affiliates, right?

You can add a lot of money now selling to your customers,

you sell them affiliate's synergistic product.

Higher ticket, of course. Good, high ticket.

Recommend a friend: referrals.

I'll bucket that as referrals.

Most businesses can add 20%, 30% to their business

just through referrals, but no one does it.

Got it. I think a couple of you kinda mentioned it,

but phone sales, right?

Higher ticket, phone sales, right.

Live events. Good.