If you auction your goods or services for low prices, you can begin to create a huge clientele base immediately. You are able to penetrate the market quickly with this business model.
Ken used this strategy for Make Your Site Sell! (his first product). He set its price at least one tenth of what its major competitors were charging even though it overdelivered in every way (http://myss.sitesell.com/).
Why would you choose this model? For the same reason that Ken did... Because you recognize that each customer has a lifetime value. That value can be hundreds of times greater than some small profit you might make on the first sale of your product. It’s so much cheaper to keep a customer than it is to recruit a new one.
Take a closer look at the listing below. A satellite dish ... for a penny?...
How in the world can this be profitable? The first thing we need to understand is that he is the representative (salesman or affiliate) for a satellite TV company. He is not paying for these dishes himself. Instead, he makes money by promoting the company’s free dish offer. That is his “business.”
You can go to any Search Engine, type in “free satellite TV” and find this offer everywhere. For example, I did just that at AltaVista and the first ad I clicked brought up this offer ...
Our seller is getting a commission or referral fee on each sale. The company makes its money by collecting the monthly fee for the satellite channels. It gives away as many of the satellites as it can, knowing the real profit comes from a fee structure. This smart person has two key concepts firmly rooted in his mind...
1) Customer acquisition -- He is using an incredibly high-traffic Web site (eBay) to promote his business. Before the auction was completed, he received bids from 362 people. We have no way of knowing what he will receive from the satellite company. But let’s say that his fees were $400. He made $10 per customer which equals $3,620. What a great ROI (Return on Investment).
2) Lifetime customer value -- Most likely, the greatest profit from this deal will come later. He acquired a large number of new customers who may buy all kinds of other products in the future. He probably will receive residual income from these people, as well. I contacted a couple of these companies and each time a customer re-signs with the satellite company, the salesperson will receive a percentage.
Another great way to acquire and keep customers is by publishing your own ezine. Hundreds, then thousands, of your own visitors will sign up for your zine. This is important because...
1) Most visitors subscribe before buying anything. You need to build a trusting relationship first.2) An e-zine makes it easy to generate recurring revenue. You can contact your subscribers about relevant updates, upcoming auction items, new products you are representing, etc. Your business stays on the radar screen.
3) A growing customer/prospect address list is the very foundation for building a business with equity (i.e., a business you can sell). Sure, you’ll get some sign-ups from the eBay traffic and you’ll add a few more from your buying eBay customers. But now you can really grow your own traffic -- which is essential for owning your business and reducing your dependency on eBay.
For more background information, see http://auctions.sitesell.com/