This business sells a product that lasts for years.
Customers don’t buy every month or even every year.
Most customers wait four years before buying again.
Yet, each customer this business acquires is worth around $8,000.
Less than 25% of its revenue is recurring.
Yet it profits over $100 billion per year.
Better than consumables?
Apple didn’t become a $3.6 trillion company by selling consumables. (75% of its revenue is non-subscription.)
It grew because it figured out how to maximize the money it receives from each customer.
A friend sells a survival product. It’s non-subscription. It’s highly cyclical.
Yet his cash flow would make most e-commerce business owners drool.
The way his business works is that he must get the majority of his cash flow upfront.
So, he sells a high-margin, moderately high-priced product (in the few-hundred-dollar range), and gets people to buy multiple units and accessories upfront.
Lifetime customer profit (LCP)
Lifetime customer profit (LCP) is the total amount of money an average customer gives to you over a typical lifetime (such as three years) multiplied by your gross profit margin.
For example, if a typical customer spends $300 with you over 3 years and your gross margin is 50%, your LCP is $150 ($300 x 50%).
The whole point of selling a consumable product is to increase LCP.
But, selling a consumable product isn’t always the best way to increase LCP.
We sold $100 million of our Amazing Selling Machine (ASM) training program for $5,000, and we got all that cash either upfront or within 4-5 months if people chose the payment plan option.
That high upfront gross profit enabled us to pay affiliates generously. That, in turn, motivated them to promote our product more than any other.
When we tried switching to a low monthly subscription, it nearly killed the business.
If you get more cash overall by selling a more expensive, higher margin one-time purchase product, even if it’s not a subscription, then that’s OK.
“I would much rather earn a lumpy 15% over time than a smooth 12%.”
—Warren Buffett
5 questions to ask about your next product
Before immediately assuming you have to sell a consumable product, ask yourself these 5 questions to compare consumable and non-consumable products side-by-side:
- What’s the upfront profit when I sell this product?
- Can I get people to buy multiple units upfront?
- Will they upgrade to newer or more expensive versions in the future?
- When will they upgrade or repurchase?
- What else could I sell them after they buy this product?
What product could double your business?
If you own a 7-figure e-commerce business, you’re likely not sure what product to add next.
You know that adding more incremental, Amazon-keyword-focused products is not going to get your business to the next level.
Right now, I’m working with a handful of 7-figure e-commerce business owners to help double their businesses in 20 weeks.
If you want clarity on what product to add next and how to scale your sales off Amazon:
APPLY HERE—Matt