There’s no better way to get more customers at scale than using paid advertising.
However, getting started with paid ads requires a lot of investment upfront – and it’s even more difficult to scale, even once you start turning a profit. This is especially true if you’re acquiring customers at a loss in an effort to make back your investment later.
But did you know that there’s a way to offset those ad costs and acquire new ecommerce customers virtually for free? That’s exactly why self-liquidating offers exist.
Let’s discover exactly what self-liquidating offers are and how you can create one to rapidly scale your ecommerce business:
- What is a self-liquidating offer funnel
- Ingredients of a self-liquidating offer
- Benefits of self-liquidating offers for business
- How to create your own self-liquidating funnel
What is a self-liquidating offer funnel?
A self-liquidating offer is a product or service that pays for its own advertising cost. This means that if it costs you $35 to acquire one customer, each customer acquired in your self-liquidating offer funnel will be worth at least $35.
To achieve this, self-liquidating offers are usually high in perceived value and low in price. From the customer’s perspective, this is what such an offer may look like:
A self-liquidating funnel also contains upsells and cross-sells to increase the value of each customer. This is how you can make the offer pay for itself.
The core ingredients of a self-liquidating offer funnel
With all that said, what exactly goes into creating and launching an SLO funnel?
Every self-liquidating funnel typically contains:
- A low-ticket front-end product
- Order bumps that can be applied at checkout
- Upsells and downsells before or after the checkout
- A solid welcome email sequence
Let’s dissect each ingredient to understand why they’re so vital to making an SLO work.
1. Low-ticket front-end product
The front-end product is the main item your customers will purchase in your funnel. This is what they’ll see when you run paid ads.
Because you need conversions to be relatively high to break even, your front-end product needs to be low-ticket. Higher-ticket products typically take longer to convert on a cold audience.
Aim for the $15 to $50 range. Your product should also be as high-margin as possible so that you keep your costs low.
2. Order bumps
An order bump is an additional item that gets shown to the customer at checkout. They’re usually very easy to add to order and only require your customer to check off a box or click “add to cart”.
Order bumps should be self-explanatory – they shouldn’t require a long sales page for people to convert. They’re usually impulse buys similar to products you see when you’re waiting in line at the grocery store checkout.
Upsells are additional or higher-value items people can add to improve their existing purchase.
Here is a common example of an upsell offer that can be displayed in the shopping cart, or at checkout:
In the context of an SLO, upsells are responsible for increasing the average order value. They’re the reason why SLOs can break even or even become profitable.
Did your customer turn down your upsell?
Downsells are the opposite of an upsell: they’re a lower-value product that you can offer when your customer didn’t purchase the original upsell.
So even if a low percentage of customers purchase an upsell, you can still increase your average order value if they add your downsell to their order.
5. A solid welcome sequence
Last but not least, you’ll also need to welcome your new buyers via email. Not only should they receive an order confirmation, but you should also introduce your brand and let them know what they can expect from your emails.
4 Benefits of implementing self-liquidating offers for ecommerce
So what’s the point of creating an SLO instead of advertising your products the traditional way or simply getting people to opt-in using a freebie? Here are the four main benefits to consider when deciding whether this strategy is right for your ecommerce business.
1. Grow your email list virtually for free by offsetting your ad costs
When you capture email addresses on your website, you gain a valuable marketing asset that you can leverage over and over again to grow your ecommerce business.
But growing an email list takes time. It can also be expensive if you choose to take the paid ads route.
On the other hand, an SLO offsets your ad costs. This means that you can grow your email list virtually for free. So, when you make sales from your email list, they’re all profit!
2. Get a return on your ad spend much faster
It can take a long time to get a return on your ad spend with ecommerce ads. That’s because you usually need to spend more to acquire a first-time customer than what each customer is worth.
Because of this, the next sales you make with those new customers don’t really generate profit – they pay off the cost of your advertising campaigns.
With a self-liquidating funnel, you either make a small profit right away, or you break even. All purchases your new customers make after that go towards increasing your ROI.
3. Scale more quickly
If you don’t have a huge advertising budget, it’s difficult to pour lots of money into ads right away, especially if you make a loss on the front end.
You have to wait much later to scale your investment because you’re not making a profit right away.
That’s different with SLO funnels. Because you’re either breaking even or making a profit, you can recoup your investment much more quickly and invest your profits back into your ads.
4. Focus on buyers, not freebie seekers
When you use a lead magnet to grow your ecommerce email list, you can get a higher volume of subscribers than you would if you only use paid products to get people to opt-in.
But not everyone who’s attracted by a lead magnet will become a buyer. Most are only looking for free things.
That doesn’t mean they won’t become a customer eventually – especially if you nurture them well with consistent email marketing.
But when you use a self-liquidating offer to attract new subscribers, you’re attracting buyers.
Of course, you’ll still have to do some work to retain those customers. According to Alex Schultz, the VP of Growth at Facebook, a 20-30% retention rate month-to-month is fairly good for Ecommerce brands.
This means that on average, only about one out of four of your newly acquired customers will purchase from you again. But when you consider that only 2.17% of Ecommerce website visitors convert into buyers globally, the odds are much more in your favor if you can focus your email marketing efforts on existing buyers instead of new customers.
How to create and launch your own ecommerce self-liquidating offer funnel (with examples)
If the idea of breaking even while generating a list of customers sounds appealing to you, then here’s how you can create your own SLO funnel.
1. Find a high-value, low-ticket product with high margins
The product you choose for your SLO is what will make or break your funnel, so choose wisely.
In order for you to break even with your funnel, your conversion rate needs to be relatively high – or your click-through rate needs to be low.
And if you want to achieve that, you need your potential customers to perceive your product as extremely valuable for the price tag.
What’s considered high-value will be different for every type of audience. For instance, this product by Wonderbly could be seen as highly valuable by new parents who value books and other educational activities.
Let’s break down an example to see how this works.
Remember that average conversion rates are 2.17%. Great. Now let’s look at the average cost per click (CPC) for Facebook ads. According to AdEspresso, the average in 2021 was $0.44 USD.
Now, let’s assume you have a product retailing for $35 with a profit margin of $15. If you get 1000 people to click on your ad at the average CPC, you’ll spend:
1000 x $0.44 = $440
And if you get the average conversion rate of 2.17%, here’s what you’ll make:
1000 x 2.17% = 21 customers
21 x $15 = $315 in profit margin
With this scenario, you’re losing $125 per 1000 customers. That’s because each customer is worth $15 in profit, but they cost nearly $21 to acquire.
But don’t despair – we’re just at the first step of your SLO funnel. Your front-end product shouldn’t have to break even on its own – that’s what the rest of the funnel is for!
2. Brainstorm what problems someone with this product might have
You’ll need other products in your funnel for your SLO to break even or even turn a profit.
But don’t just randomly add just any products to your front-end offer. The products need to make sense together.
To come up with product ideas, start thinking of potential problems someone might run into if they use your product.
And no, I don’t mean you should create a sub-par product that creates problems for your customers. Let’s consider some examples to illustrate this point:
- Someone who buys foundation for makeup may need a tool to apply it on their face
- Someone who gets a gift will need to wrap it
- Someone who purchases a new dishware set may want matching accessories to get a more complete look
- Someone who buys loose-leaf tea may need a steeper
Keep all your ideas on hand so that you have various things to test out.
3. Add order bumps, upsells, and downsells to the funnel using your brainstorm
From your brainstorm list, you can get to work with your order bumps, upsells, and downsells.
The best moment to display these offers is right before your customers proceed to checkout. And don’t worry, you don’t need to be a tech wizard to implement that. For instance, you can use a zero-code app like Getsitecontrol to add a popup and set it to appear right in the shopping cart or on the first page of checkout:
The purpose of these additional products is to hike up the value of each buyer. If we go back to our previous calculations, remember that each customer costs $21 to acquire while only generating $15 in profit.
Now, if we add:
- An order bump that costs $15 with a profit margin of $10
- An upsell that costs $50 with a profit margin of $30
- A downsell that costs $20 with a profit margin of $10
- 20% of buyers get the order bump – an additional $42 per 1000 customers
- 10% of buyers get the upsell – an additional $60 per 1000 customers
- 15% of buyers get the downsell – an additional $31 per 1000 customers
With those numbers, you now generate $448 in profit margins per 1000 customers. Because they cost you $440, you’re now breaking even.
Of course, this doesn’t mean you’ll reach those conversion numbers right away. You may need to tweak your offers, try different variations of your products, or test different pricing strategies. But this gives you an idea of what to aim for.
Let’s look at what Wonderbly does to increase the value of each customer. First, they let customers choose between different types of covers for their custom book. Higher quality covers cost more. And they even add an option with extra pages.
Next, they give customers the option to gift-wrap the book with two fun choices.
Finally, they have three upsell options you can add to your book order.
When you check out, they also add a call-to-action to let customers know they can easily add another book to their order. This is a great order bump that can easily double the value of an order!
Some customers may choose to only get one softcover book, and that’s okay. But the customers who choose to get additional products like gift wrap and a coloring book will help Wonderbly offset their ad costs.
4. Promote your SLO funnel
Once everything is in place, it’s time to drive some traffic to your brand new SLO funnel!
If you already get organic traffic to your website, make sure to highlight your new offer on your home page – especially if you’re using a brand new product for your SLO. New visitors who land on your site organically will be more likely to check out your offer if you make it obvious on the front page.
However, self-liquidating offers are usually promoted with paid ads.
When you promote your offer, make sure you drive traffic to a landing page that only has a single purpose – selling your front-end offer.
You shouldn’t drive traffic to your home page or to a page with a huge list of products. That’s because you’ll end up paying for clicks, but those people who click will likely get distracted. Too many choices can discourage people from taking action.
Facebook and Instagram ads are popular options for ecommerce self-liquidating offers. But as competition grows and prices increase, you may want to consider other platforms, including:
Of course, the platform you choose should also depend on who you’re targeting. For instance, Tiktok’s active user base is on the young side, with 47.4% of them being between 10 and 29 years old.
If your product is well-suited to a young audience, then perhaps Tiktok could be an interesting platform to try out for your SLO.
Here’s something important to remember about promoting your SLO funnel using paid ads: you’ll have to adjust the funnel, especially in the beginning. Rarely do funnels break even on the first try.
This means you’ll need to test out different ad creatives, audiences, and placements to see what works best with your audience. You may have to A/B test your product pages as well.
5. Follow up with your customers consistently using email marketing
When you’ve acquired your customers, it’s vital to cultivate your relationship with them to drive customer retention. One of the ways you can do this is by establishing a consistent email marketing schedule.
If you email consistently, your customers will get used to receiving and reading your emails.
And when you run a sales promotion, those subscribers will be more likely to read your emails if they’re already in the habit of doing so.
Keep in mind that even as an ecommerce brand, you can embrace text-based emails to grow a relationship with your customers. HTML emails with lots of design elements are eye-catching and allow you to showcase your products, but text-based newsletters give your emails a more personalized touch.
Not sure which approach is best for you? Test it out! Whenever you’re in doubt, just run a test to see what gets you the best responses.
With that being said, don’t rely too heavily on open rates when you run your tests. Recent iOS updates make it difficult to track all opens correctly.
Transform your ecommerce business with a self-liquidating offer
When done right, self-liquidating funnels can absolutely transform your ecommerce business. Of course, they require a lot of work upfront to get set up, especially if you’ve never created ads and upsells before.
However, with apps like Getsitecontrol, you can make sure your ecommerce website is optimized for conversions. Getsitecontrol will help you create email signup forms, order bumps, and upsell offers without a line of code. Sign up for free to try it out for yourself!
Charlene Boutin is a freelance content writer & email marketing strategist for hire specializing in helping Ecommerce and SaaS businesses increase conversions by growing authentic relationships with their audience. She loves helping business owners tell their unique stories to capture the hearts of more customers.
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You're reading Getsitecontrol blog where marketing experts share proven tactics to grow your online business. This article is a part of Ecommerce marketing section.