Sustainability and Lifetime Offers
As a business owner we know that it can be pretty lucrative to earn a large sum of money on a single day and within some niche’s this is done by doing what is called “Lifetime Offers”.
A lifetime offer is nothing more than you, the business owner, offering product(s) or service(s) for the lifetime of the member within their membership.
And this can be great because if you sell 10 lifetime offers for $100 a piece, you just made $1,000 (minus commissions, fee’s, etc..) If you have never made that much in a day, this can be pretty overwhelming and further entice you to do it more often. However, there are a few problems with doing this and that is what we will look into today.
To start, let’s build our lifetime offer. So I own a site called MyAwesomeSite. At MyAwesomeSite members can earn “credits” for viewing other members advertisements or by purchasing them. I want to add this to my offer. Normally credits are purchased at the rate of 10,000 credits for $25. There is also a timer on viewing advertisements of 10 seconds, lets lower that for this offer to 3 seconds. I also have banner and text ads on my site that members can purchase for 10,000 for $5. When members are viewing advertisements they also earn .5 credits for each advertisement shown, let’s increase this to 2 credits for our lifetime.
So our lifetime offer will consist of:
- 10,000 credits every month
- 10,000 banner and text ads every month
- 3 second timer
- 2 credits per advertisement viewed
And we will sell this lifetime offer for $100. Okay, let’s do the math. To start, I give out 30% commissions for all affiliates so I am only making $70, minus fee’s and we are around $68-$69, but we will keep everything at $100 as a “best case scenario”.
This offer looks GREAT to the member, they are getting all this stuff forever for a one time payment. BUT, as the business owner we have to understand that now we are giving away 10k credits every month (at $25 each, their credits are free after the fourth month). Every single month after the fourth month your members are getting something for nothing FOREVER. This is not including all the other stuff we threw in to make it more “lucrative” to the buyer.
Okay if we have 10 people purchase our offer we made $1,000. But we are also responsible for giving away 100,000 credits every single month. This is where credit dilution comes in. Does your site have 100,000 views every month? Unfortunately MyAwesomeSite does not, so now credits are worth less and members are stockpiling credits because they cannot be used up within the month. Even though we have made it easier for these members to view more advertisements with their lifetime offer, they no longer need to view any because they have more credits than are using. So now IF we only sold 10, we have 10 members that don’t ever login except to check their credits. So over time less and less people use the site because even though I only have 500 credits in my account, all the credits don’t get used every month because the total amount of credits across the membership is in the 100-200k range. So some people will join and view, but after some time members don’t really login anymore because they have too many credits.
That is only a singular problem and effect of lifetime offers. Another one is now that you have sold lifetime offers to people, those people almost NEVER need to purchase anything else from your site. They will always have more than they can use.
Now fast forward 6 months you are not making money, except the random $100 lifetime offer that comes in once every few weeks to the further detriment of your site. And because nobody is buying anything anymore, because of the lifetime offers, you cannot continue to make money.
There is almost NO sustainability in a single lifetime offer, unless you continuously bring in new members (this would have to be in the hundreds plus range) every single week. A task not so easily accomplished.
MyAwesomeSite is a business that provides a service. There is nothing wrong with charging a monthly fee for products and services that keep both MyAwesomeSite sustainable and alive as well as earns me money. If I launched MyAwesomeSite today and offered lifetime offers to members when they join, it looks GREAT to members and affiliates today, but in 6 months, it is worthless.
Let’s not forget the affiliates, because as an affiliate myself, I would be much happier with earning $7 from a single customer than earning $30 one time from the same customer. Because of compounding efforts, it is better for me, the affiliate, to refer members to products and services that make me money month after month and not just one time.
That is all for Building a Better Business today. In future episode we will talk about affiliates and commissions! As always, please leave a comment and let me know your thoughts!