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The Law Of Averages is simple math. Although it can apply to every part of your life, for the purpose of this article, we will focus on sales and marketing.
The Law of Averages will simply give you the results of a particular action over a period of time. It’s like a batting average. The 300 hitter gets a hit 3 times every 10 times he goes to bat… as an average. Sometimes, he’ll go 0 for 10, and then sometimes he he’ll go 6 for 10, but over the course of the season he will average 3 hits for every 10 at bats.
Now let’s give another example of an insurance sales person. Let’s say after a 3 month period the sales person gives 100 sales presentations, and as a result of those 100 presentations, 40 sales were made. So that means every 10 presentations will result in 4 sales. Let’s break it down even further. Every 5 presentations will result in 2 sales.
Why is it important to know the Law Of Averages?
There are several reasons, but most importantly, it gives you the ability to better manage your activity. It also gives confidence to get you through a slump. For example, one week you gave 10 presentations and instead of getting your average 4 sales, you only get one sale.
It also tells you how much money you make per sales presentation, versus how much money you make per sale. This is AWESOME, so listen up. Let’s stay with the 4 sales out of every 10 presentations example. Let’s also say that the average commission per sale is $400. So that means after the 10 presentations the 4 sales will make $1600 in commissions… $400 times the 4 sales.
Now you take that $1600 in commissions and divide it by the number of presentations which is 10 and you come up with $160 a presentation. How cool is that. Whether you make the sale or not, YOU KNOW that every presentation you give will make you on $160… on “average”.
You MUST KNOW Your Law Of Averages
If you are presently marketing on line and spending money on getting traffic to your website and this Law of Average thing is new to you, then get prepared to get blown away. In fact, if you are familiar with CPA offers, whereby a company will pay $35 to an affiliate to get them a customer that will only pay a $4.95 Shipping & Handling charge to try their product. Why would a company pay a $35 commission, barely cover their shipping and handling costs and give way free product to boot, without know if that new customer will ever order with them again?
Why? Because they know their Law of Averages. They know ahead of time, how many of those trial offers will continue to order from them and they also know the long term value of their customers over a period of time.
Are you in Network Marketing or MLM?
If you are presently working a network marketing company or MLM opportunity, and you have a good capture page that will create enough interest for a prospect to give you their information so they can “opt-in” for more information on your opportunity, do you presently know what the maximum amount of money you can spend to get that prospect to your capture page and still profit?
KNOWING THIS INFORMATION IS IMPERATIVE TO YOUR SUCCESS
Note: this article is not about increasing or improving conversions, but it’s worth mentioning that tracking and improving conversions is an ongoing practice. Changing just one word in a headline on a capture page can increase your conversions by as much as 300%.
OK, let’s do the math.
Let’s say that your capture page has a 20% opt-in rate. That means for every 100 visitors that comes to your website give you their information to find out more about your opportunity. Let’s also say that for every 20 opt-ins you get one sign up. Ok that’s pretty cool so far.
Note: You also need to track your law of average with different types of traffic. Traffic Exchanges and Safelists will not perform as well as Pay Per Click or other forms of targeted paid traffic.
Now let’s say that for every sign up you make $100.
This is where the fun begins. Here’s what we have so far… 100 visitors = 20 opt-ins = 1 sign up = $100. There are 2 Law of Averages you can come away with.
1. Each visitor makes you $1.00 or
2. Every opt-in makes you $5.00.
So now the next question you should ask yourself is how much money are you willing to spend to get that same type of traffic to your website repeatedly. Of course your marketing budget and how much money you are willing to risk always has a lot to do with the decision you come up with. You also need to ask yourself if breaking even is OK with you, or do you need to make a profit, and again this depends on your financial situation and your marketing budget.
Let me further explain.
Do you remember the example we mentioned earlier where a company will pay an affiliate $35 to get a customer that only spend $4.95 for shipping and gets the product for free? We now know why they willing to take that risk, and that’s because they know the long term value of their customers. They know in the long run, they will get a percentage of those customers to continue to order with them, thus giving them a profit.
What is the long term value of a brand new rep?
Note: Of course, if you are just starting out this information is not readily available to you. Hopefully, your upline leader may be able to help you with a starting point, but of course his or her’s Law of Average will be different from yours. This is where discipline and tracking comes in on your part.
If you are just starting out, you may not know this information, then you may want to be a little bit more conservative in determining how much money you are willing to spend for a visitor or an opt-in.
Tracking your results can be fun.
This may seem like a lot of work, but I promise you it’s not and it can actually be a lot of fun to track your results to determine what your law of averages are. I can assure you that once know your law of averages it can get pretty exciting… and very lucrative.
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