Building a Business With Back-End Products

A back-end product is anything you sell to your customer -- after your initial sale.

Why Develop Back-End Products?

Getting new customers is the traditional way to build your business. But it's also the most expensive. That's because the highest marketing costs are incurred up front to attract new customers.

Or stated another way, it's five times cheaper to sell to a current customer than to a new prospect, according to a study by Fortune Magazine.

There is often much more money to be made in back-end product sales than in the primary product. Why?  Because customers tend to be reticent in a first purchase.

Once trust has been established, they will more readily buy other products from you than from an unknown vendor. By providing customers with other items and services they want and need, you help them -- and yourself.

By adding new products to sell those customers, you increase their Customer Lifetime Value. This gives you a far greater return on your marketing investment.

Selecting A Back-End Product

A major factor to consider when developing your back-end product line is to keep them consistent with your main product or service. If you own a computer printer repair service, for example, selling toner cartridges would be consistent, while selling car parts would be inconsistent.

An inconsistent product line can undermine your customers' confidence by giving the impression that you lack expertise in, or commitment to, your chosen field.

If you need ideas for back-end products, ask your customers what products or service they would like from you. Most people appreciate being asked their preferences, and the survey should bring you good-will benefits in addition to valuable information.

Conducting A Survey

If you have a current customer list, the survey can be conducted by mail (or by phone). Produce a simple survey questionnaire and mail it with a self-addressed, stamped envelope to make it easy for your customers to respond.

If you do not have a customer list (and for heaven's sake, WHY NOT?), then instruct your sales clerks to ask the survey questions in person with each sale.

Another way to decide what to sell is to see what your competitors are selling. If it works for them, it should work for you, unless your customers are substantially different from theirs. It also just might be the only reason their customers selected your competitor over you.

Selling Someone Else's Product

1. You can acquire the rights to sell someone else's product, which is often cheaper than starting from scratch. For example, a company going out of business may have a good product that you can acquire fully developed at a bargain price. Check your local newspaper for bankruptcy listings and business opportunities.

2. A good source for finding a domestic product is the Thomas Register of Manufacturers, found in most public libraries. It lists American manufacturers by product type, and alphabetically, with descriptions of their products.

3. There are thousands of manufacturers overseas seeking access to the American market. Products as varied as toys, décor items, crafts, hardware and plumbing items, foods, clothing, gift items, and ethnic artifacts are available. You can find them in newsletters like the Hong Kong Trader, the Taiwan Directory, the Philippine Directory, and others.

4. Many inventors get patents on new product ideas, but lack the wherewithal to produce and market them. You can find out about patents in your field by contacting a local patent attorney. The attorney can put you in touch with local inventors, and can get you a list of patents in your field of interest.

5. For more information about how to find products, consult the book How I Made $1,000,000 in Mail Order by E. Joseph Crossman. It lists dozens of directories and resources for finding manufacturing firms with products you may want to sell.

Creating Your Own Product

If you're interested in developing a new product, an excellent source of ideas is the U. S. Government's R & D Reports. These reports come from government-funded research, detailing new processes and applications that can be used for new product ideas. For more information, write to the National Technical Information service, U. S. Dept. of Commerce, Springfield, VA 22151, or contact a local field office of the Department of Commerce.

Information Products

Most businesses can successfully sell written reports pertaining to their product or service area. The profit margin on information products is among the highest of any product type.

If you're in a service business, you are probably able to create your own report or book. As an expert in your field, you no doubt have knowledge and information, which the layperson lacks. You can use your knowledge to create a back-end product that will enhance your service and provide value to the customer.

For example, an accountant might produce a report on Ten Tips To Save You Money At Tax Time. A professional office organizer could offer seminars on How To Use Your Rolodex To Get More Business.

The U. S. Government Printing Office provides printed reports based on government research for purchase at a nominal fee, which you can resell at any price. For example, a water store may sell government reports on water quality, or on the health hazards of water pollution.  Vitamin companies can sell reports about research on nutrition.

Another good product to consider is a book related to your product or service. Once publishers have gleaned the initial profits from new books, they often sell them as "remainders" at a fraction of the original price. You can contact publishers directly, or contact wholesale remainder dealers to find out about books available in your subject area. Visit your public library for a list of publishers, national paperback distributors, and wholesale remainder dealers.

Testing Your Product

Since by definition there are no customer acquisition costs (i.e. you are only selling to existing customers), it is almost always profitable to add back-end products.

However, before you spend significant money on a new back-end product, make sure to test it. Many fortunes have been lost by companies who rolled out a new product they knew would sell, only to discover there was no market for it after all.

If you are manufacturing a new product, make up a limited run of samples first.

If you're reselling someone else's product, buy a small sample first. Then test market under real selling conditions, and see how it fares.

Test marketing can show you quickly and cost-effectively whether your new back-end product is worthwhile.

A Final Word

When selecting your back-end product, remember: to be truly successful, it must, like your primary product or service, be something you endorse.

If you're ambivalent about your products, other people will sense it, and will be reluctant to buy. If you love your products, your enthusiasm will motivate others and will ultimately benefit your bottom line.