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Home The 5 key components of exponential profits

The 5 key components of exponential profits

Last week I outlined how improving your conversion rate is the easiest way to double your income. I discussed how most of the time it’s far easier to double your conversion rate than it is to double your traffic.

This week, I want to take it a step further and discuss this principle beyond conversion rates.

If you want to make a lot of money online you need to get a good understanding of the elements that work together in synergy to make the big profits possible. You need to understand the individual pieces of the puzzle that can turn what might appear to be a loser into something very profitable.

I have to admit that it took me far longer than it should have to fully appreciate the power and the potential of this information. This information now shapes almost every profit generating exercise I do online.

What I’ve discovered over the years is that small incremental changes to 5 critical components can have dramatic, profitable outcomes.

The 5 key components are:

Traffic Volume
Cost Per Visitor
Visitor Quality
Conversion Rate
Lifetime Value of the Customer

These critical areas have a compounding effect on each other. If you can get them working together in synergy, you can make a lot of money.

Let me give you a simple yet powerful example to highlight this. Example 1 is probably what most of you experience. Example 2 demonstrates how small improvements in all the right places have profitable outcomes.

Example 1

Let’s say you find a good affiliate offer that you decide to promote via pay per click (PPC). You buy 200 clicks a day at 50 cents a click. The affiliate merchant pays $45 in commission and the conversion rate is 1%.

So:

1) Buy 200 clicks for 50 cents each.

2) Send it directly to an affiliate offer that pays $45.

3) The affiliate merchant converts that traffic at 1%.

The profit and loss would look something like this.

Expenditure:
200 clicks x $.50 = -$100

Income:
200 clicks x 1% = 2 conversions
2 conversions x $45 = $90

Daily Loss = -$10
Monthly Loss = -$300
Yearly Loss = -$3650

Not so good. Most people will run this advertising campaign for a while, realize it’s not making any money, give up and move on to something else.

However, someone who understands the power of the numbers will figure out that a few tweaks in all the right places can turn this into something big. They just need to work to make small improvements in the 5 critical areas.

Example 2

Now let’s have a look at this same affiliate offer, but make small improvements to each of the 5 critical components and see if we can get some of these exponential improvements I’m talking about.

Traffic Volume and Cost Per Visitor

The interesting thing about PPC is that the ads that feature in higher positions get much more traffic than ones down the page. However, as we saw in example 1, we simply can’t pay any more or we’ll be losing more money.

No so I say!

We could use a product like SpeedPPC (shameless plug) to improve the campaign structure and improve the click through rate on the ads. As you probably know, position is determined by the price you’re willing to pay per click multiplied by the click-through rate (CTR).

So all we need to do is write more targeted ads to improve our CTR. If we can improve our CTR we can pay the same amount per click for a much higher position on the page. This higher position means higher exposure so instead of getting 200 clicks we now get 400 clicks. We’re still paying 50 cents a click, but are getting more people clicking.

Visitor Quality

While we’re doing this, we can improve the click quality by adding a whole bunch of negative keywords to better qualify who’s actually seeing our ads. Of course because our ads are being clicked on by more targeted visitors, we’ll give our conversion rate a boost.

Conversion Rate

As an affiliate we don’t have much control over how well a merchant sells on their website. However, we can send the visitors via our own bridge page that pre-sells the visitor. We can also offer a bonus on the sale to help increase the conversion rate.

The net effect of the negative keywords, the presell and the bonus increases the conversion rate by just 1% which doesn’t seem like much but we’ll take it anyway.

Lifetime Value of the Customer

As we’re now sending the user through a bridge page, we have the opportunity to capture the prospect’s email address. In the same way, we are also able to build a buyers list based on the people who coming back to claim the free bonus.

We can then plug them into an autoresponder series that continues to market to them complementary products for years to come. This adds another $30 to the lifetime visitor value over the next year as they buy other products through our affiliate links.

Here are the little improvements we made.

Increased the number of clicks we’re getting by tweaking the ads.
Kept the cost per click at 50 cents.
Added negative keywords, offered a bonus and pre-sold the visitor for a 1% bump in conversions.
Plugged the visitors into an autoresponder series that sold to them over time to add an extra $30 in commissions.

So:

1) Buy 400 clicks for 50 cents each.

2) Send via a bridge page to make the lifetime visitor value $75 ($45 + $30).

3) Converts at 2%.

The new profit and loss would look something like this:

Expenditure:
400 clicks x $.50 = -$200

Income:
400 clicks x 2% = 8 conversions
8 conversions x $75 = $600

Daily Profit = $400
Monthly Profit = $12,000
Yearly Profit = $146,000

Can you see the power of exponential changes here?

The changes for each part were not dramatic, but when combined together turned what most would consider to be a loser into day job quitting profits. Also remember, you’re not just creating cash flow, but also establishing the foundations of a major asset with the email list you’re building.

I believe this is one of the defining differences between people who make a lot of money online and those who struggle. Highly successful affiliates are mastering the art of improving each of these 5 critical areas to experience exponential profits. Are you?

If you’re interested in learning the art of using PPC to promote affiliate products like this, check out SpeedPPC now.

Aug 21, 2008Jay Stockwell
Website tweaks cause spectacular rise in salesSBI $100 Back to Work Special
Comments: 13
  1. Zak
    17 years ago

    People new to the affiliate scene could waste a lot of ad money on this trying to get the synergy right.

    ReplyCancel
  2. Jan Smith
    17 years ago

    Thanks Allan ~ this is one of the fullest explanations I have seen for a long time. It makes all 'this and that' tweaking come togther to make a logical whole. And to encourage one to continue tweaking and to stop looking for that magic bullet.....

    ReplyCancel
  3. Alexander Fernandes
    17 years ago

    Dear Allan,
    Thank you for this wonderful infomation. I was not thinking beyond the first sale. The lifetime value of the customer was an eye opener.

    Thank you,
    Kind Regards,
    Alex

    ReplyCancel
  4. Albert
    17 years ago

    What is a negative keyword?

    [Here's an example. Let's say you're buying advertising on AdWords. You choose certain keywords or phrases. For example, you choose to display an ad when someone searches for "affiliate tips". However, you don't want an ad to appear when someone searches for "free affiliate tips" because that sort of person is not the customer you're aiming for. So you would make "free" a negative keyword. Allan.]

    ReplyCancel
  5. Ann
    17 years ago

    Allan

    Great and usefull information as always. Thank you

    ReplyCancel
  6. rebecca
    14 years ago

    Great post as I was just working out the numbers this last week. I think when you start working this out you realise what might work and what absolutely won't work.

    I worked out that PPC selling my own product (an ebook at $27) would make a substantial LOSS at .30p (Brit pence) for my keywords - it is so expensive for a newbie selling their own product online and at a 1% conversion just doesn't bring a profit (don't forget to work out your TAX too)...I couldn't find a cheaper PPC rate for other keywords in my niche, so it's back to PLAN B - organic traffic.

    Plan B is yes, using organic traffic generation methods: posting good posts often a week, building up a blog which I've been doing for the past 6 months quite successfully. I now do the math and without the very expensive PPC costs I could make an excellent profit which can then be compounded by your 5 components above - notably the conversion rate interested me the most...2% you double your income..WOW...5% you're getting there:a nice monthly income,..then TIMES your number of ebooks, etc... - wowey-now I'm hooked!!...

    Only THEN the money can be ploughed back into doing some PPC...but not straight away as it's a money eater and starting out I just don't have those funds. The focus initially in my opinions should be to work long and hard and see your ebook sell evergreen. Don't forget PPC is like a tap - when you pay it's ON, but when you stop paying it dries up...and turns off....it's got to be very carefully applied I think or you lose huge ãã.

    Anyway, enough talk on this - time to actually write my ebook(s) as I've got a hungry audience needing my help:-)!!

    Thanks for great post.

    Rebecca

    ReplyCancel
  7. Gagan
    17 years ago

    Allan, you're just awesome. I love reading your articles. The only problem is I tend just skim over them sometimes. It's really hard to keep your mind on one thing when you're running this business. Maybe you can do a post on how to manage your time and emotions in this business. I find myself always trying to rush through things. Don't know why?
    Gagan
    niche-affiliate-marketing.com

    [Thanks for the suggestion. Focus is a huge problem for many of us. Here's an article I wrote which may help:
    How to actually get those affiliates tasks done
    https://www.associateprograms.com/articles/569/1/Ho...
    Allan.]

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Jay Stockwell

Jay Stockwell is an Online Marketing Expert with over a decade of experience helping both start-up and multi-national companies get "stacks on deck".

17 years ago 13 Comments Improving Sales, Monetizing A Site, PPC AdvertisingImproving Sales, Monetizing A Site, PPC Advertising121
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