Are you aware of every single off-invoice cost that’s eating away at your margins? Most people aren’t.

There are a lot of ways to incentivize sales. But so often we get careless and have no idea just how much we’re actually spending—and how much we’re putting in our pocket. On today’s episode, host Roland Frasier walks us through a whole list of purchase incentives that might seem insignificant but, when added up, can affect your margins in a big way. Things like affiliate programs, free shipping, satisfaction guarantees, incentives for your sales team, discount-stacking and more. Incentives aren’t a bad thing. You just need to make sure you know how much they’re costing you—so you can make necessary adjustments.

Listen in to learn how to eliminate hidden costs and put more money in your pocket—even with inflation rates on the rise.

IN THIS EPISODE YOU’LL LEARN:

• Which incentives are worth the money and which aren’t
• How to keep people from discount-stacking so you don’t lose money
• Ways to rethink your value ladder without losing customers
• How to appeal to quantity-sensitive, quality-sensitive, and price-sensitive customers

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What are we going to do with this inflation thing that's happening

really find free money and and deal with it so that it doesn't affect

So there's a lot of ways to incentivize sales.

And so what the, pocket price waterfall does is basically goes through and says,

This is our standard list.

Right.

So standard list price is a hundred and then I've got all

I've got distributor discounts and special discounts and end

So these things show up on the invoice.

They're not as hard to find and identify as the off invoice soft costs.

Right.

This is where you can really get into trouble, because you're probably thinking

So what the pocket price waterfall does is it gets us thinking about all the

net also, you have to be aware of what is the true margin, what is the margin

So there are lots of purchase incentives that can affect margin.

And so this I'm leaning more towards our.

Sellers and our learners and things like that.

But are you paying affiliate performance incentives?

Let's say that you have a leaderboard of affiliates on your launch and

Are you taking that into consideration or are you just thinking, oh,

Isn't necessary to do that.

Is that a price that makes sense?

Am I getting that much more benefit from it?

Am I getting a multiple of benefit from.

Can you do cash discounts to drive immediate purchases.

So do you enable your sales team to say you've got somebody that

I'm selling, but man, if they only have 12 or 14, seven, go ahead.

Right.

Do you enable any kind of discretion there?

What about coupons?

Are you offering coupons?

Do you have coupon programs either with affiliates or just to drive

And are you calculating that into how much you're actually running?

What about free training and coaching?

There's a labor cost associated with that.

If you offer onboard or free training or free coaching to facilitate consumption

sale, do you figure in the actual cost of delivering that when you're figuring

What about free shipping?

Are you shipping the cost of goods?

Are you shipping any goods to the customer?

Right.

What about gratuity?

Right.

Excuse me, guarantees, quantity guarantees, quality guarantees,

How many people take you up on that?

You're not putting that in your pocket.

Okay.

What does, or do you offer discounts or rebates associated

Hey, you know, I know you didn't like it, but you enable your sales team or

You can give them a discount of up to X percent.

You can give them a renewal at 50%.

Okay, because you're not getting that money either.

If you're not doing that, you should, because it can help

And are there any off invoice promotions, like customer rebates or other things

What is the cost of carry?

How many of you offer a payment plan of any kind of sort to any of your clients?

Okay.

Just the people over here, you guys are sleeping.

It's okay.

Lunch as soon.

Okay.

Product bonus costs.

Right.

Are there any physical products or soft product costs that you're giving as.

What about promotions?

Are you targeting specific segments?

Are you offering specials to people?

Are you incentivizing your Salesforce?

Salesforce?

Do you have competitions and sales incentive awards for your sales team?

Right?

Most of us do.

What about second tier affiliate costs?

Do you offer finder's fees?

Do you have JV brokers that are helping you?

Is that figured into.

What about surprise and delight costs.

If you have a shock all box or some really cool thing that you send, we

Right.

We barely break even, you know, but that's a joke, the but it's, but it's 500 bucks.

Right.

So that does come off.

It does impact margins.

So are you sending things like that?

Are you sending gifts on a regular.

Right.

That's gotta be figured in as well.

What about tech support, training or service bundles?

All of that stuff, right?

You want to use all of these incentives?

It's just important to know the real cost.

Okay.

And it's, it kinda sucks doing this.

So hopefully you have an accounting type.

That will do it for you and run the calculations and just show them this

are we actually getting, how much of the price that we sell things for?

Are we putting in our pocket and how much of the margin do we

Okay.

So you can do a pocket margin waterfall as well.

This is exactly the same thing as the price pocket only it's done with margins.

What you can see in this example, that's kind of interesting is that

They're literally going negative on sales.

So the more of those people that you sell, the faster you go out of business.

Okay.

So don't sell to them, sell over here and think about how can I

If you do something like this, you'll know where the profit sits.

If you know where the profit sits, then you know where to focus your.

Okay, so run the pocket price analysis and the margin analysis on product by product,

It could be a group of customers that you've tagged.

It could be a source that customers come from, whether geo or channel, right.

But run this analysis.

This is really cool.

And if you've never had a data center, This is kind of

So you can actually, you think this is agony, but someone

Okay.

Not any of us, I hope, right.

Because it's not the highest and best use of your time, but

It really is.

So typically we find that there's a one to 5% minimum benefit that

And so, as you recall, 5% can be a pretty significant increase in.

Okay.

In some cases like for us, where we typically operate about 25%.

So some action steps, the first thing is to set targets, right?

So set your target pocket to prices.

How much of what you actually sell your list price?

Do you want to go into your pocket?

Right?

Do it by customer, do it by size, do it by type, do it by segment, play with all

or somebody that you hire to do that so that you actually know the second one.

Here's something that happens a lot when we offer a lot of discounts,

We will let people stack them and they will find ways to do it.

Right.

They will absolutely find the coupon that you put out one time that was 70% off at

Right.

What the hell?

Like, you know, where's this coming from because they found it

Right.

Don't let that happen.

So, in your terms of.

Don't allow discount stacking beyond.

Figure out what your minimum acceptable margin is, and then don't

That's a really, really important thing.

Okay.

Reprice or eliminate the things that are below your target.

. So if you're not getting the margin that you want, reprice them, and

Can you test price increases?

Of course, but definitely don't go below your minimum.

Acceptable.

That's really important.

Prioritize, selling more.

high pocket price, high pocket margin accounts.

So you prioritize those accounts and then don't forget to account for all

All of the things that are the cost to serve, you want to account for this.

Okay.

The second thing is adjusting your product and customer mix.

What are some things that you can do with that?

Right.

Well, folks.

Your acquisition, budget and efforts, obviously, but not all of us do it.

You know, we're guilty of this, right?

Because the team does its thing.

They get into the, the, a whirlwind of doing whatever they're doing.

And they're not focused on this focus on the highest margin products and

Right.

Who knows just a few of you, right?

So you want to run that analysis because it's going to change your

And by the way, these people.

They are sucking us dry there.

We're losing money on these people.

Let's fire them, right?

Let's not use them anymore.

Eliminator restructured the low margin products and customers, and

Excuse me, high profit, low cost offers.

What are the offers offer by offer that are yielding the sales of the

performing lowest cost product sales, three, rethink your value ladder.

How many of you have actually thought out your value ladder?

Nobody really.

Okay.

They're like, I'm trying to raise my hand.

Okay.

Right.

If I do it this way.

Yes, sir.

Yes.

Right.

Okay.

Rethink your value.

Ladder start higher.

This is something we learned from Russ Ruffino who spoke.

We've learned it from a whole lot of people.

Chris Cron does this.

They start at multi thousand dollar products.

I think Russ is least expensive is just under 10,000.

And by the way, he said in extensive testing, 10 K is the big.

That when he went over 10 K sales fell by so much that it made sense to go back.

Okay.

We're testing prices all the time, start higher, and then you can always down sell.

So on your value ladder.

Can you start your offer at $2,000 instead of 500, even though you're willing to sell

off of the $2,000 offer so that it can become a $500 offer without upsetting

You can, there's a lot of ways to do that.

And we'll talk about, okay.

Create or add low cost, high margin products and services, right?

What are some of those one-on-one coaching one-on-one coaching or product

It's I say low cost because you're looking at a high ticket thing, right?

This is something that can be very low cost.

It can even be automated, right?

You can provide automate.

You can provide done for you.

You can provide done with you.

You can provide download insurance.

I hate it, but it does actually work.

I don't personally, I wouldn't offer it because it just annoys

Now, why do I say that?

Extended coaching and extended membership are low cost because you

If you already have coaches in place that you.

To add people to a group coaching session costs you no dollars unless

Right?

If you've got software, you're only talking about minimal bandwidth costs

extension, but that can be a really big perceived value for people.

What about extended warranties?

Can you give somebody extended warranties on your products

Third-party extended warranties, which have ridiculous margins.

And a lot of people like it actually makes them feel comfortable.

The opposite of download insurance for me.

Right.

It's like, yeah.

You know, if I drop my iPhone and it breaks into a million pieces,

Right.

Group coaching group coaching is so inexpensive.

You just add people to the group live event, tickets for events that

There's a zero cost really to that.

I mean, it's very, very in.

Okay.

Longer access to things upgrades.

This is something Chris crone does a great job of it's a $2,000

But if they can't afford the 2,004,000, they can get it for six months.

But if they can't afford the thousand for six months for four or

Right.

So he's starting higher up the value chain and then chunking back by removing simply.

In most cases.

This is a few bonuses too.

Okay.

What about masterminds and user groups that you already have?

What about software as a service enhancements?

What about upgrades and updates or tech support or training packages?

All of those are basically low cost because if you've already got them,

of providing this to somebody is very low and the perceived value in what

Okay.

Number four, create profit optimized.

So one thing that I would recommend that you do just throughout this

all of the things that you're offering and figure out what your actual out

Each of those things is including the bonuses and then subtract that cost

Thumbnail, one of those pocket price waterfalls.

That's that's a good way to do that.

Well, then think about, well, what could we do differently?

How could we recreate this offer?

Could we bundle, could we take high, perceived low cost items and

that we've got so that we can get a higher AOV and a better margin?

Or can we, could we unbundle?

Right.

So my attorney friend grant people has a client and all she does is

bundled products and unbundled them products that have product suites.

She goes in, she acquires the company and then she just unbundled the products

The bundled products, because they're just not serving that market anymore.

She also buys companies that have unbundled products and bundles them.

Right?

She goes, she goes both ways on bundling and unbundling, but that's something

you have key products that would be good to get people in that they'll

What about thinking about sensitivity?

So maybe your customers are price sensitive and you've done a test and you

It negatively impact sales.

I'm at the 99 99 mark.

And if I go to 102, it's just not going to work.

I've tested it.

Right.

Well, what about quality?

Is there a quality component that maybe you could replace parts so

You're not the high quality provider, but you are the functional provider.

People are willing to accept quality reduction for lower price.

That's important to test.

The one that I love is quantity sensitivity, because tests have

So when you buy that bag of potato chips that has 90% air and seven

time, the height of those chips in that bag has declined because,

So they've been able to maintain the same price, but either maintain margins or

And nobody really cares because you can't see through the bag in the first place.

Now I think those guys are shady and disrespectful for doing that.

I don't think that's cool, but can you, maybe you're selling a supplement and you

Right.

But that reduces the shipping cost and it reduces the ingredient costs.

Right?

Maybe you can use a smaller.

So think about things like that, whatever you're offering, is there an opportunity

price sensitive, quality, sensitive, and quantity sensitive things in your

So a few things example wise, right?

A hundred calorie snack packs.

They cost more than the full product because we, you you're paying us

Okay.

What about a Coke that cold Coca-Cola that's at the checkout

Then the six pack of counts.

And it's just in the aisle probably facing you on an end cap as

Right.

What about 30 day express sprints?

What we found is that people like sprints more than they like courses, but a sprint

So maybe you offer.

Instead of the 90 day course, maybe you offer a premium priced 30 day sprint.

It's actually less for more, but personally I would pay for

Right.

So that's something to think about too.

And what about custom products and services?

Can you charge more for those and provide longer lead times for

The answer is yes.

Almost everybody has proved it in the current.

Right.

So rather than that, people that are price sensitive will then not

And people who want custom are willing to wait.

So you kind of eat your cake and have it too.

And what about repositioning the value so that you're recreating overvalued

And then you're thinking about identifying the offers that people

and you're raising them because at any given time we all have products and

Right.

We're charging too little for something and we're charging too much for something.

So thinking about adjusting those things on a regular basis.

Okay.

Other things you can do sell multiples, offer multiples of

AOV reduces effective customer acquisition costs.

What about adding no cost or low cost digital?

Right.

They typically cost us nothing.

What about the sunk cost bonus?

Right?

The event that you've already scheduled, the mastermind that you've

An existing membership that you've already got.

All of those can increase AOV and margin and then the last, but not

? So can you capture more product, more profit margin by acquiring up and down?

Manufacturing or your creation and distribution chain.

So even if you're not in the business of selling products, there are still

Does it make sense for you to acquire media?

Does it make sense for you to acquire agencies so that you can reduce

Because now you own that margin, right?

Does it make sense to acquire distributors and wholesalers or

These are ways to dramatically increase the profit margin that you've got without

So if you know what your minimum profit margin that you want is,

Okay.

So we talked about optimizing your pricing strategies.

That's the first thing I would like for you to look at.

And then we talked about adjusting the mix of your products and your

Can I start higher?

Can I add things that don't exist that are significantly more profitable?

Can I create.

Profit optimized offers.

So that maybe there's something in my offer right now.

When I go through my sales letter that I know costs a ton and we all hate it.

And it doesn't really matter to the customer.

When we create irresistible offers, we really throw in too much stuff.

It might actually help you sell better.

If you test it to take some of that stuff out and lower your cost, particularly

They might just not care.

And then acquiring across the value.

Is that helpful?

Okay.