Last week, we talked about the importance of a Front End offer. Read more about that here.
The beginning of that conversation was Amazon’s announcement of their $89 Fire tablet. We quote from last week:
Amazon is NOT a hardware company; they’re not trying to turn a profit selling those tablets by themselves. Their model is to drive the cost of a tablet towards zero while monetizing customers with e-commerce (“Alexa, order more dog food”) and services like:
- Kindle Unlimited ($109.99 for six months)
- Amazon Prime ($119 per year)
- Audible ($14.95 per month)
In other words, the tablet is a Front End while the subscription services and e-commerce are the Back End. The Front End drives customer acquisition for the Back End’s monetization offer.
The Front End is not always profitable—in fact, it usually isn’t—but its job is not to be profitable. Its job is customer acquisition. With the cheap Fire tablet, Amazon is trying to gobble up market share with an incredible offer and then monetize those customers with Back End offers.
We will be covering these common Back-End Offers:
🚀 Immediate Upsells
🧺 Bundle and Bucket Offers
🔄 Subscriptions (The Holy Grail)
Immediate Upsells 🚀
Amazon is the master of the Immediate Upsell.
For example: when you’re looking at a digital camera, you’ll be presented with other items that are often bought with that camera.
Each of these additional items (if purchased) increases the seller’s Average Order Value (AOV), known in classical antiquity as Average Basket Value.
The upsell will typically convert well if — and only if — it gives the buyer more of what they originally desired. The person buying the digital camera wants to take beautiful, high-quality photographs. Additional batteries, memory cards, and photography books are good Immediate Upsells because they give the customer more of what they want than the camera could by itself.
Immediate Upsells are all around us:
- It’s the “want to add a cherry pie for 99 cents?” offer when you buy a Big Mac at McDonald’s. (Umm… no. Not at all, thank you.)
- It’s Disney’s FastPass offer (skip the lines!) when you buy tickets to the Magic Kingdom theme park.
- It’s Southwest Airlines Early Bird Check-In offer when you buy a plane ticket.
Increasing your AOV isn’t just “a little more hustle for a little more money.” It means that you’re able to derive more value from the orders you’re already getting—which gives you an edge no matter your strategic position.
If your business is in Growth Mode, increasing your AOV means that you can afford to spend more to acquire customers in your marketing; it might even mean that you can outbid your competitors for advertising positions. And if growth isn’t a priority for your business, well, an increase in AOV still means a better cash flow for operating the business (or lining the owner’s pockets). 🙃
Remember that a Back-End offer, for its success, typically has to give the buyer more of the desired outcome they were already wanting. Bundles and buckets fit this standard perfectly.
Bucket Offers are super-common with consumable items, like Scentsy stuff:
Maybe you just wanted one Scent Pak, or a couple—but if there’s a price break and you know you’re gonna use ’em, you’ll be tempted to spend more for a better deal.
After all, if I wanted one Scent Pak, I might want to just load up on them if there is a price break.
- Bucket Offers are all around us:
- It’s why buying a block of 10 consulting hours is cheaper than paying for one hour at a time.
It’s why the sports bar (sports and bars, we still really miss you) charges $5 for a bottle of Blue Moon but only $25 for a bucket of six.
While the Bucket Offer asks the buyer to buy a larger quantity of the same item, the Bundle Offer combines different products or services together, ideally to create a whole package which delivers more value than the sum of its parts.
Disney+ launched its new service using a Bundle Offer:
Bundle offers are all around us too:
- It’s the $3.99 a la carte Big Mac—or $6 for the meal, which includes fries and enough Coca-Cola to fill a hot tub.
- It’s Dave Ramsey’s Starter Bundle of books—which gets you to buy several things you (probably) won’t read instead of just one.
So, what could you Bundle together to create an entirely new value proposition? What could you sell in larger quantities using a Bucket offer? 🤔
Since what seems like the dawn of time, GoDaddy has been running this ad:
According to the Google Keyword Planner, it costs GoDaddy anywhere from $7 to $18 to buy clicks on that keyword (buy a domain) in Google Ads.
So, how can a company pay $7 or more to acquire a customer that pays them less than a dollar?
The answer, of course, is they are monetizing this Front-End Offer with Back-End Offers. In this case, the Back-End Offer is subscription.
During the checkout process GoDaddy will offer:
- Website Hosting
- Monthly SEO Services
- Multi-Year Registration
- Private Registration
They acquire the customer with a ridiculously low (unprofitable) domain name offer and they monetize through monthly and yearly subscription services.
You have subscriptions to the obvious like Verizon cell phone service or Netflix. But subscriptions can be applied to just about any business:
- It’s the $29.99 a month to be a member of the Always Clean Club at the car wash.
- It’s Scout & Cellar’s wine club offer.
- It’s the $20 a month you pay for Adobe Photoshop