Reframe the Framework to Generate More Cash

March 3, 2012  

This article originally appeared on the American Express OPEN Forum

The way we frame our business world can significantly impact our success. Frameworks are useful, but they can also be limiting. Perhaps it’s time to rethink the way things have been done in the past.

One useful framework is often called the product funnel or the accelerant curve. This framework typically refers to speakers, consultants, Internet businesses and those who create “intellectual property.” But the concept can be applied to any business, especially small businesses.

The general philosophy of the product funnel is to have products and services that increase in value so that you can continue to up-sell over time.

In this framework, customers enter your pipeline to buy a low- or no-cost item. This helps you to build trust, which in turn, lets you provide more robust solutions to your customers and put more money in your pocket.

I work with a lot of professional speakers. They would probably draw the curve as it is depicted to the right.

Most speakers offer a $25 product, typically a book. This is the low end of their curve. And, at the high end, they deliver a speech for which they charge $25,000.

Given this framework, the natural tendency is to fill in the curve with products priced in between. This might include CDs, DVDs, membership sites or coaching. They create a $250 product, a $750 offering and a $2,500 service.

The boundaries established by this framework—$25 and $25,000—delineate how you think about innovation.

While this tends to be the practice of most people who offer such services, looking at the curve this way may limit your true growth potential. Instead of $25,000 being at the top of the curve, what if it were actually near the bottom?

What if the top of the curve is closer to $1,000,000, or higher? If that is the case, you need to create products that are more than $25,000, not less. These could include assessments and diagnostics, consulting arrangements, sustainability programs that bring a speech to life over an extended period of time, or anything else that adds value.

From this example, you can see how the framework you create dictates your production. A small framework produces only the results that fit within that structure. Expanding your view opens up possibilities for greater value and financial gain.

This concept can apply to any business.

Are you a plumber? Maybe your typical project generates around $2,000. You may be tempted to offer a lower-cost option, perhaps a do-it-yourself kit, for only $200, which is valuable.

But what if, instead of $2,000 being the high-water mark for your services, you created a $200,000 offering? This would certainly get your creative juices flowing. Maybe, instead of selling your services to individuals, you target condominium associations, selling them an all-inclusive deal for every unit. It would challenge you to think bigger than you have thought before.

Are you a restaurateur? So many businesses offer their customers low-cost meals through Groupon or Restaurant.com. These may be reasonable entry points for your product funnel and are effective for driving new traffic.

But instead of focusing your efforts on smaller “transactions,” what if you shift your view to incorporate a higher-value, higher-dollar, relationship-driven option? How can you create a $10,000 meal?

Think big. Consider catering or developing an annual diet program that delivers meals to your customers to meet their dietary needs. Who knows what you will think of? But it is time to think big.

When you think small, you produce small.

You could even sabotage the business that you already have. I recently purchased a Groupon deal for a cleaning service. The owner’s hope was that Groupon would help her acquire new customers. She has been in business for seven years, but this low-price mindset might have killed her company. So many people subscribed that she could not adequately service her regular customers, let alone the new ones, and she risked losing them.

No matter what your business, avoid the “transactional” mindset. Find ways of engaging with your customers by providing both lower- and higher-priced offerings that will ultimately create a long-term relationship. But even more importantly, think big. Find ways of creating massive value, beyond anything you have considered before. Redraw your funnel or your curve by blowing the top off it.

How will you rethink your business?

Please comment on this article on the American Express OPEN Forum

Extra added bonus content:

When I originally posted this article on my Facebook page, someone commented that,

“The assumption that you are even worth $25,000 is a stretch for many folks. And for product companies, like shoes, for example, why spend hours thinking about a $200,000 shoe? Certainly that time would be better spent figuring out how to lower costs or enter new markets.”

Great point!  Here was my response:

“The usefulness of this concept depends on the evolution of your company. Regardless, it is a useful thought exercise. Most small businesses get stuck with a mental model which limits their thinking. I have this product, so this is what I sell. Just asking the question, ‘What product/service could I offer that is 10x what I offer today?’ can get a mature and established business thinking about bigger opportunities with greater leverage.

“And sometimes it is not about a bigger product.  For example, with my self published book, it is easier for me to sell 500 books to one client than it is to sell 500 books to 500 individuals. There is no leverage in the latter. Instead of a $15 sale, I discount and sell 500 in bulk for about $4,000.

“The question isn’t necessarily even new products but maybe different sales channels/methods for increasing $$ per sale.”

Leave a Reply

Old Comments

One Response to “Reframe the Framework to Generate More Cash”

  1. Multiply Your Price by 10 | The [non]billable hour on March 8th, 2012 11:46 am

    [...] Shapiro, in this post aimed at professional speakers, suggests that your all-inclusive price is probably too low — way too low.  Steve suggests [...]