The secret to making money "toll booth position"

I’m a marketing consultant, and at one of my client companies, a company that, in less than 10 years, has grown from a $10 million business to a $100 million dollar business, one of the people I work with frequently has been herself jokingly titled it, ‘Vice President, Back-End’.

While that clearly opens her up to be the butt of many jokes, it very accurately describes her very, very important area of ​​responsibility, in direct marketing lingo. At least 80% of the company’s profitability depends on their contributions.

If the term “back-end” is new to you, it means everything you sell to your customers after their initial purchase (that first order is called “front-end”). For example, suppose you sell instructional videotapes to golfers on how to play better. It advertises in golf magazines and its main product is a $25 video on putting strategies. That’s your “front-end” because that’s what people buy first. But then, once people buy that first video, you send them a catalog that offers them over 50 golf videos ranging in price from $50 to $99. Those follow-up videos are your “back-end.”

In many companies, there is a relatively short period of time during which there are significant and exciting wins early on, that is, the first sale to a customer.

But that happy situation dissolves over time, as you “cream” the market. And, as you get deeper and deeper into a market, the cost of making the first sale (acquiring a customer) goes up and up. For example, in the golf videos example above, the first time you run an ad in a magazine, you might get 100 orders. But if you continue to run it every month, your order volume will likely drop steadily. Within six months, you will be lucky enough to sell 30 videos of the same ad in the same magazine. At some point, it gets so high that it is no longer practical to advertise and sell that product in that market.

Nothing is forever. This fact of life is what it takes to be smart to make as much money as you can from the back end.

The good news is that your satisfied customers are probably willing to buy other things from you, and it doesn’t even have to be your own products/services. You can make deals with other companies to offer their products/services to your customers in exchange for a share of the action.

For example, let’s go back to our golf video company example. You could do a “joint venture” with a manufacturer of specialty golf clubs that sell for $1,500 a set. You’ll send your customers a letter telling them how well these clubs will improve their golf game, and you’ll get $750 for every order they place. If your customers trust you, they are much more likely to respond to your letter than if the golf club manufacturer sent it directly to them.

Of course, you only want to recommend high-quality products and services that are valuable to your customers. But you get the idea. You could make similar deals with other businesses that sell what golfers want: golf apparel, golf tour and travel operators, even custom home builders that sell homes near golf courses. They would all be happy to pay you a ‘toll’ commission to sell their products to your customers.

No matter what your business is, one of the most valuable assets you have is a list of satisfied customers, eager to buy from you again. When you control a sizable list of customers who bought from you, know their name/business name, are happy with what you bought and the resulting relationship…and are willing to read their mail and buy from them again, it’s like having your own “toll booth”.

A direct marketing pioneer, Harvey Brody, taught me the power and value of getting into “The Toll Booth Position” and I’ve been teaching it for years. Imagine having your own highway tollbooth near your city. Anyone who wants to get to the other side of that tollbooth has to go through its gates and pay money to it.

As the controller of a responsive customer list, that’s exactly where you’re at; sitting there in your own tollbooth and anyone who wants to get your appropriate product or service to customers you control has to pay you money.

You can collect a toll through joint ventures, as described above, where you do a supported mailing to your customers and get a share of all resulting sales.

Or, if you build a list of 50,000 or more, through direct list rentals. I have several clients who pay all of their overhead each year just from the checks they receive from the list broker who represents their list to others.

I have often paid others to go through their tollbooths, and have done so with joy. I have also been paid by others willing to go through my tollbooth, my clients, with my guarantee.

In the direct marketing business, it is a well-known fact that most of the profits are derived from the final sales to existing customers. Outside of that business, however, I rarely find a company that comes close to realizing the potential of establishing their own “toll booth position.” Start building yours right now and start charging others to go your way.