{"id":2589,"date":"2018-06-19T08:07:20","date_gmt":"2018-06-19T12:07:20","guid":{"rendered":"http:\/\/creativethirst.com\/blog\/?p=2589"},"modified":"2023-12-03T17:10:24","modified_gmt":"2023-12-03T21:10:24","slug":"funnel-economics-201-how-to-look-at-self-liquidating-funnels","status":"publish","type":"post","link":"https:\/\/creativethirst.com\/blog\/funnel-economics-201-how-to-look-at-self-liquidating-funnels\/","title":{"rendered":"Funnel Economics 201 (How To Look At Self-Liquidating Funnels)"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Building a direct response, self-liquidating funnel seems easy from the outside. Offer a low priced product on the initial sale then make up the loss of revenue with upsells and your back-end offers over time.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">In fact, many direct response marketers don\u2019t give it a second thought. They simply add products in the funnel upsell flow that they have on hand. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">The marketers that do take the time to think, all approach it the same way. They ask what fits as the next step to meet the buyers needs.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">That approach is a great place to start. But when you\u2019re looking to optimize a funnel for maximize profit, it pays to go deeper.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The Art And Science Of Self-Liquidating Funnels<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Looking at a funnel from a different perspective, reveals all of it\u2019s inner levers. And when you pull on one lever it always affects another lever.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Modeling out the economics of a new funnel, or an existing funnel, is a great way to understand the profit potential and improve upon it.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Creative Thirst has developed a way to evaluate a specific funnel configuration against another. (In fact, it\u2019s part of our economic framework that we take all of our clients through.) <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Only through economic comparison can we see how one self-liquidating funnel configuration may be better or worse than another.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">And it works, even if you only have a few products to use as upsells, because there are infinite ways you can offer your products.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">In essence, we model out different funnel configurations to find the flaws (stress testing it) before putting it into the marketplace.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">This approach enables us to optimize self-liquidating funnels for maximum return to our dietary supplement clients.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">We call it, Funnel Economics\u2026<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>An In-Depth Look At Funnel Economics<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Simply put, the economics of your funnel will tell you how profitable that funnel is. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Normally marketers only calculate how much total revenue a funnel has made.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">To compare funnels and different traffic sources, marketers look at Revenue Per Visitor (RPV) to evaluate a funnel.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Revenue Per Visitor = (Total funnel revenue) \/ (Total visitors that came in at the top of <\/span> <span style=\"font-weight: 400;\">the funnel)<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Revenue per visitor is a quick way of comparing the performance of one funnel over another, or over time. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">But there is a fundamental mistake in only looking at the revenue a funnel generates. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Just looking at the total revenue hides many flaws. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">For one, the profitability of a funnel is hidden when you only look at revenue because you\u2019re not accounting for Cost Of Goods Sold (COGS).<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>A Better Way To Look At Funnel Economics<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">The better way of evaluating a funnel is to look at the Net Revenue of each offer and each funnel. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">This tells you how much money your funnel <\/span><span style=\"font-weight: 400;\">actually<\/span><span style=\"font-weight: 400;\"> made. Net revenue is the total amount of the money you made from sales minus your direct expenses.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Knowing your net revenue will help you understand what offers in your funnel are working and by comparison which ones can work better. Then you can make adjustments to your offers to maximize your net. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Net Revenue Dollars are calculated by taking the revenue (or gross sales) made for each offer in a funnel and subtracting out the COGS, shipping costs and fulfillment fees, and any other costs associated with the individual products. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Here\u2019s an example:<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">First you\u2019ll need to figure out the Profit Margin of each offer in your funnel.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">So for each product in your funnel or one that you\u2019re thinking of adding, you\u2019ll need to first calculate the Profit Margin Dollars.<\/span><\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"has-text-align-center wp-block-paragraph\">Profit Margin Dollars =<br \/>(Price + Shipping paid by the customer) &#8211; (COGS + Shipping + Fulfillment Fee)<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">Then calculate the margin percentage:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"has-text-align-center wp-block-paragraph\">Profit Margin Percentage =<br \/>(Margin Dollars Per Offer) \/ (Price Per Offer)<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Profit Margin Dollars tells you how much money your funnel is making after all costs. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Profit Margin Percentage tells you how big, a slice of the pie that your funnel is allowing you to keep. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Looking at Profit Margin two different ways, in dollars and as a percentage, gives you an overall view of the impact per product.<\/span><\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"955\" height=\"350\" src=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2018\/06\/funnel-economics-pt2-1.png\" alt=\"funnel economics\" class=\"wp-image-2605\" srcset=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2018\/06\/funnel-economics-pt2-1.png 955w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2018\/06\/funnel-economics-pt2-1-300x110.png 300w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2018\/06\/funnel-economics-pt2-1-768x281.png 768w\" sizes=\"auto, (max-width: 955px) 100vw, 955px\" \/><\/figure>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Then you need to look at the impact of each item in the funnel by calculating the Profit Dollars and Percentage for the Entire Funnel based on actual or anticipated traffic, conversion and sales.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><b>Ordering Your Upsells For Maximum Profit<\/b><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">As mentioned earlier, many marketers either add products in the funnel upsell flow that they have on hand. They more or less pick them off the shelf and plug them in.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Or they stop to ask, \u201cWhat would the buyer need next?\u201d, and then offer that as the next upsell.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">In both cases never stopping to evaluate how the sales margins look or their impact on revenue.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">If the margin percentage of your upsell offers does not go from high to low in your funnel, as in the previous example, then you might be losing money.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">In this chart I simply reversed the order of the upsells, assuming the same conversion rate for each step in the funnel.<\/span><\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"950\" height=\"201\" src=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2018\/06\/funnel-economics-pt2-2.png\" alt=\"funnel economics - upsell order\" class=\"wp-image-2606\" srcset=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2018\/06\/funnel-economics-pt2-2.png 950w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2018\/06\/funnel-economics-pt2-2-300x63.png 300w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2018\/06\/funnel-economics-pt2-2-768x162.png 768w\" sizes=\"auto, (max-width: 950px) 100vw, 950px\" \/><\/figure>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Ordering upsells by highest net revenue margin ensures you\u2019ll capture the most margin before people and conversions diminish. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">The deeper your funnel (the more upsell stages) the more people will drop off. It\u2019s just the nature of funnels. So, if you\u2019re not net positive until your 2nd or third upsell you have very little chance of making much money.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Also if the top of your funnel has several negative net revenue percentage offers, like soft offers that just collect shipping up front. This might be a sign of a weak funnel, sacrificing profits for conversion.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Typically such a funnel only gets to positive percentages deeper in, once the customers buy more through subscriptions or future backend offers. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">However, you may want to deliberately break these rules if your offers just make more sense in a particular order, regardless of profit margins. Funnels are as much an art as they are a science. <\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">The art of a funnel can sometimes take precedence over the economics. For example, if one offer makes perfect sense as your 2nd upsell but the margin percentage is not as good as the 3rd upsell this does not mean you should switch the order of these.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><b>Start With Funnel Economics <\/b><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">New customers flow into your business through funnels, ascend to higher value customers on the backend, and are the lifeblood to making a direct response dietary supplement business work.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Spending more time examining funnels through the <a href=\"https:\/\/creativethirst.com\/blog\/funnel-economics\/\" target=\"_blank\" rel=\"noopener\">funnel economics<\/a> is critical to success. Yet sadly many marketers don\u2019t take the time to model out a funnel.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"font-weight: 400;\">Even if you\u2019ve been building funnels for years, it pays to break it down systematically, because basic funnel economics uncovers flaws you can\u2019t see by only looking at conversion rates.<\/span><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"alignleft size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"250\" height=\"375\" src=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/revenue-ceiling-250.jpg\" alt=\"\" class=\"wp-image-5168\" style=\"width:190px;height:auto\" srcset=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/revenue-ceiling-250.jpg 250w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/revenue-ceiling-250-200x300.jpg 200w\" sizes=\"auto, (max-width: 250px) 100vw, 250px\" \/><\/figure>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\"><strong>Breakthrough The Supplement Revenue Ceiling<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This diagnostic reveals the specific bottlenecks limiting your supplement brand&#8217;s revenue growth and provides a clear optimization pathway for breakthrough.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-left is-layout-flex wp-container-core-buttons-is-layout-63375db1 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button aligncenter is-style-fill\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/creativethirst.newzenler.com\/f\/break-through-the-supplement-revenue-ceiling-1\">GET YOUR DIAGNOSTIC<\/a><\/div>\n<\/div>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<div class=\"wp-block-group is-vertical is-layout-flex wp-container-core-group-is-layout-4fc3f8e1 wp-block-group-is-layout-flex\">\n<div class=\"wp-block-columns is-layout-flex wp-container-core-columns-is-layout-8f761849 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<figure class=\"wp-block-image size-full is-resized\"><a href=\"https:\/\/hsbm.buzzsprout.com\"><img loading=\"lazy\" decoding=\"async\" width=\"392\" height=\"380\" src=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/health-supplement-mastery-podcast-logo.png\" alt=\"Health Supplement Business Mastery Podcast\" class=\"wp-image-4566\" style=\"width:194px;height:auto\" srcset=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/health-supplement-mastery-podcast-logo.png 392w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/health-supplement-mastery-podcast-logo-300x291.png 300w\" sizes=\"auto, (max-width: 392px) 100vw, 392px\" \/><\/a><\/figure>\n<\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Listen to the <a href=\"https:\/\/hsbm.buzzsprout.com\" target=\"_blank\" rel=\"noreferrer noopener\">Health Supplement Business Mastery Podcast<\/a> for for dietary supplement entrepreneurs and marketers. <\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-columns is-layout-flex wp-container-core-columns-is-layout-8f761849 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<figure class=\"wp-block-image size-full is-resized\"><a href=\"https:\/\/podcasts.apple.com\/gb\/podcast\/health-supplement-business-mastery\/id1501188717\" target=\"_blank\" rel=\"noreferrer noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"400\" height=\"150\" src=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/apple-podcast.png\" alt=\"\" class=\"wp-image-4567\" srcset=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/apple-podcast.png 400w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/apple-podcast-300x113.png 300w\" sizes=\"auto, (max-width: 400px) 100vw, 400px\" \/><\/a><\/figure>\n<\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<figure class=\"wp-block-image size-full is-resized\"><a href=\"https:\/\/open.spotify.com\/show\/6tzo0If1DvE5QMJaAPjrRY\" target=\"_blank\" rel=\"noreferrer noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"373\" src=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/spotify-podcasts.png\" alt=\"Listen to the health supplement business mastery podcast on Spotify\" class=\"wp-image-4569\" srcset=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/spotify-podcasts.png 1000w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/spotify-podcasts-300x112.png 300w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/spotify-podcasts-768x286.png 768w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\" \/><\/a><\/figure>\n<\/div>\n\n\n\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<figure class=\"wp-block-image size-large is-resized\"><a href=\"https:\/\/feeds.buzzsprout.com\/889189.rss\" target=\"_blank\" rel=\"noreferrer noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"260\" src=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/google-podcast-1024x260.png\" alt=\"Listen to the health supplement business mastery podcast on Google Podcasts\" class=\"wp-image-4568\" srcset=\"https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/google-podcast-1024x260.png 1024w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/google-podcast-300x76.png 300w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/google-podcast-768x195.png 768w, https:\/\/creativethirst.com\/blog\/wp-content\/uploads\/2023\/11\/google-podcast.png 1072w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Building a direct response, self-liquidating funnel seems easy from the outside. Offer a low priced product on the initial sale then make up the loss of revenue with upsells and your back-end offers over time. In fact, many direct response marketers don\u2019t give it a second thought. They simply add products in the funnel upsell&hellip; <a class=\"more-link\" href=\"https:\/\/creativethirst.com\/blog\/funnel-economics-201-how-to-look-at-self-liquidating-funnels\/\">Continue reading <span class=\"screen-reader-text\">Funnel Economics 201 (How To Look At Self-Liquidating Funnels)<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":2650,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-2589","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-conversion-rate-optimization","post_format-post-format-gallery","entry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Funnel Economics 201 (How To Look At Self-Liquidating Funnels)<\/title>\n<meta name=\"description\" content=\"Funnel Economics 201 (How To Look At 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