Adapted from "The Small Business Marketing Bible" by David Frey

A Secret on How People Buy.

May I share with you a little secret about how people buy? It may sound strange but people don't buy 'things,' they buy opportunities!

It's true. People don't buy cars, office equipment, electronic gadgets, or even ideas. They buy opportunities like special discounts, long-term financing, bonus products, and simple payment terms.

When you package up all the opportunities you’ve created to sell a product or service it's called an 'offer.' They key to selling any product or service is to create an irresistible offer that your prospect can't refuse. Your challenge is to create an offer so irresistible that your prospect says to herself, 'I'd be a darned fool if I said 'no' to this opportunity.'


The Risk - Reward Response Rate Equation

Before you learn how to create an irresistible offer its important to understand why people respond to offers. Once you know this formula, it will be easy to create an offer that is so compelling that it will be difficult for your prospect to say, 'no.' There is a risk - reward conversation that takes place in the mind of a prospect when considering your offer. They ask themselves, 'Is the promised reward greater than the required risk?' If it is, the prospect will usually buy. If not, they won't. To break this principle down further, people respond to offers based on two factors:

1. The perceived value of the offer (what you get)


2. The risk involved with the offer. (What you give)

In essence, you could express this relationship as...


Response Rate = Perceived Value / Risk

If the perceived value goes up and risk stays the same, your response rate will increase. If risk goes up and your perceived value stays the same, your response rate will go down. BUT, imagine if your perceived value went up and your risk went down, what would happen to your response rate? It would skyrocket!

That's exactly what you want to do when you create an offer. You want to increase your perceived value and lower your risk. To do that we need to know what's inside the components of 'perceived value' and 'risk.'


Perceived Value & Risk

As I've already mentioned, perceived value is defined as what you get from the offer and risk is what you have to give to receive the benefits of the offer. Again, the trick is to increase your perceived value and decrease your risk to create an irresistible offer.
So let's look at several elements that will increase the value of your offer and several elements that will decrease the risk of your offer.


Elements to Increase Perceived Value:

1. Adding free bonus items such as accessories or third-party addons.
2. Giving two or more products or services for the price of one.
3. Packaging multiple complimentary products together with a lower overall price as compared to buying the products separately.
4. Explaining why your product or service is unique and its specific advantages over other competing products or services.
5. Explaining how well built the product is and giving proof to how long it will last.
6. Describing in detail the specific benefits that will be received when using the product or service.


Elements to Decrease Risk:

1. Provide the strongest guarantee possible.
2. Provide free or low cost extended warranties.
3. Try-it-before-you-buy-it offer.
4. Provide low, affordable payments.
5. Provide a pay-for-performance only offer.
6. Delay payments with no accrued interest.
7. Give access to follow-on help after the sale.
8. Prove a fast or large return on investment.
9. Give actual proof of the results of the product or service using real case studies.
10. Have other people give proof of the results.

Using one or a combination of these elements in your offer will increase your response rate. The more elements you use to increase the benefits and decrease the risk, the higher the response rate you'll enjoy.


Value is Based On Perception Not Reality

You'll notice that points 4, 5, and 6 all start with either the word, 'explain' or 'describe.' That's because value is based on the prospect's perception and not reality. The quickest most inexpensive way to build value is to simply explain in detail how valuable the product or service is. This can be done by explaining that the product or service:

• Is performed by most qualified and professional people.
• Is built with the highest quality parts.
• Is created using a very meticulous and careful process.

You can also build value by describing the benefits that the prospect will receive in terms of 'universal benefits.' By universal benefits I mean, those benefits that appeal to every warm-blooded human being. These universal benefits include the desire to:

• Be beautiful
• Be popular
• Be wealthy
• Have fun
• Not have to work
• Have sex
• Be smart
• Have power
• Be healthy
• Be loved
• Avoid pain
• Avoid guilt

Now take the features of your product or service and express the result of these features in terms of universal benefits and you will have created immense value out of thin air. For example, let's use the 'Thighmaster.' The Thighmaster is one of the hottest selling products ever sold through an infomercial. It was promoted by Suzanne Somers who became very wealthy as a result of promoting this product.

The Thighmaster was a simple device that you put between your legs and squeezed together to exercise the lower half of your body and supposedly, tighten up your 'buns.' According to the infomercial the Thighmaster...

• Made you more beautiful because of your tight 'buns.'
• Because you were more beautiful you would be more popular with the men.
• It was even fun doing exercises with the Thighmaster because it was easy to do. No running, sit ups, squatting, or walking. You could even lay down and watch T.V. while doing exercises with the Thighmaster.
• The Thighmaster increase your health and vitality and kept you in shape with minimal work.
• You would never have to worry about the embarrassing pain of being fat, out-ofshape, and having buns that jiggled like jello.
• And because you didn't have to spend a lot of time at the gym you wouldn't feel guilty of not being at home when your family needed you.
• In fact, you would love you even more because of the increase time you'd now be able to spend with them.

Did the Thighmaster actually do all those things? Probably not, but after watching the infomercial the thousands of people that purchased the product probably thought it did. People bought it based on its perceived value (versus its actual value).


How to Decrease the Risk In Your Offer?

To reduce the risk in your offer you need to address the following questions that people have in their minds when they consider an offer:

1. Is the price too high for what I will receive? (price)
2. If I don't like it can I get my money back? (guarantee)
3. If something goes wrong can I get help? (warranty)
4. Does it really work? (performance)

Each one of these areas should be addressed when creating your offer. Let's look at each individually.


Your Price

The asking price is most often the 'risk' that people take to get the product or service you offer. The closer you get to making your offer free (or perceived as being free) the less risk you expose your prospect to and the higher your response rate will be.

There's no wonder why the most powerful word in marketing is the word, 'FREE.' Because it reduces the risk down to zero. Who wouldn't take advantage of an offer that provides relevant benefits and is free? Even if it didn't work there was no risk so there's no harm done. However, you can't just give away your product or service for least not forever. But you can give:

• Free samples
• Free demonstrations
• Free trials
• Free information
• Free 'stripped-down' products

All these reduce the risk of responding. You can also give a perception of a lower price by...

1. Selling the monthly installment price (versus the entire price)
2. Delaying payment for an extended period of time.
3. No accrued interest with extended payment.
4. Offering a rent or lease-to-own option.
5. Offering guaranteed buy-back agreements.
6. Providing resell rights.
7. Displaying the ending numerals in a price as $.97 or $.99.

You can also reduce the perception of price simply by the way you present it. Always give an apples to oranges comparison of your price. For example, you could introduce your price by saying, 'This Valuable System Can Be Yours For the Price of a Starbucks Capuccino.' or 'You Can Have Your Very Own Private Airplane for What You'd Normally Pay for a Used Honda Accord.' Then you would go on to explain and justify how the simple monthly payment that you'd normally pay on a Honda Accord will buy you a new airplane. To go one step further you can actually reduce the price of the product or service by offering:

1. Sliding scale discounts
2. Volume discounts
3. Time limit discounts
4. Seasonal discounts
5. Discounts based on payback time (i.e. 2-10 net 30 days)
6. Manufacturer discounts (rebates)


Your Guarantee

Your guarantee is your secret weapon to decreasing the risk in your offer. You should always provide the strongest guarantee possible. Go out on a limb. Don't be afraid to provide a strong guarantee because statistics are on your side.

The large majority of guarantees are never executed. There's a erroneous perception that if you provide an aggressive guaranteed that a slew of customers are going to take advantage of you. That's simply not true. Most people DON'T...

1. Send things back when they get broke.
2. Ask for their money back if they are dissatisfied.
3. Complain when they are frustrated.

Why? It's human nature not to be disruptive. Most people are passive and don't take action to resolve conflict.


Your Warranty

Warranties are like insurance, they provide security in the case that something goes wrong. How many of you who have been paying for insurance for years and years have actually made a claim? Statistically, very few will ever make a claim on their insurance and the same goes for a warranty. So, like guarantees, why not provide a strong warranty?

If the part on a hot tub usually lasts for seven years but statistics say that most people only keep their hot tub for seven years why wouldn't you provide a 'lifetime warranty?' You might have a few people take you up on the warranty after seven years but the perceived value of a lifetime warranty will far outweigh the cost of honoring a lifetime warranty.

In fact, you can provide a perception of a strong warranty just by providing a phone number or physical address to call in case things go wrong. Most people won't use it and if they do, studies say that it will be used only within the first three months of ownership.



And if you really want to make your offer 'risk-free' you might consider a 'pay-for performance' offer. Pay-for-performance is when you give the product or service away with the agreement that the customer will pay only when they've received the benefits of your product or service. This is the ultimate risk-free offer because it's as close to offering your product or service for free as possible. If your product or service doesn't perform, you don't get your money. When entering into this type of agreement, you should increase the price because you (the seller or service provider) are taking all the risk and hence, your reward should be higher.


Make Your Offer Believable

One of the worst mistakes overzealous direct response marketers make is to create offers that are so full of hype that they are not believable.

This addresses the, 'Does it really work?' or 'Is this too good to be true' questions that are barriers to closing the sale. We've been taught that if an offer is too good to be true, it usually is. And it's true! One way to offset the believability issue is to PROVE IT!

There are several ways to prove your offer but the best way is to provide customer testimonials and case studies. People believe comments from other people that have no vested interest in your success.
Pictures with testimonials are strong but video testimonials of actual customers can't be beat. That's why infomercials are packed with testimonials. Case studies are also great ways to prove that your offer really does provide results. A case study should described by...

1. Explaining the problem or situation
2. Providing the solution or how the problem got solved
3. The results of the solution

Real case studies that show statistics, graphs, before and after photos, bank account statements, etc. provide compelling proof that your offer really is true and that your product or service really does work.
Reason Why Ultimately, if you have an Almost-Too-Good-To-Be-True offer you need to tell the reason why you can make that offer. Even if its a far-fetched reason people still need to reconcile in their mind why and how you're able to make such a great offer.

Common reasons why are that...

1. 'We goofed and ordered too much stock and now we've got to clear it out.'
2. 'My accountant (or boss) is out of town so he doesn't know I'm making you this offer' (Note: Yes, this one is a stupid reason but people still fall for it)
3. 'Our year end is here and we are going to get killed on taxes if we don't clear out our stock before December 31' (Note: Actually, this will increase their tax burden but it still works)
4. 'I buy from a secret source in India (or some far away land) and I can get unheard of deals so I'm passing the savings on to you.'
5. 'After inspecting our warehouse we found a bunch of slightly damaged inventory so our accountant says we have to unload it at less-than-cost.' (Note: Even I've fallen for this one.)
Whatever the reason is, then tell it. People want to know the reason why! Inject Scarcity To Compel People to Action An offer without a compelling reason to act now is dead in the water. 99% of all people are passive. They don't act even if its a great offer. You have to give them the extra incentive to compel them to act now.
One of the greatest motivators is the fear of loss and by injecting scarcity into your offer you're playing on people's fear of not being able to take advantage of a good deal. The two most popular ways to inject scarcity into an offer is to...

1. Limit the time that people can respond to the offer


2. Limit the quantity that you are offering.


Limited Time Offer

Time sensitive offers provide deadlines in which prospects can take advantage of your offer. That's why you see so many weekend sales that end on Sunday. It compels people to get up out off their couches and get down to the store. It's a good idea to always include a deadline with your offer. The shorter the deadline the
higher the response (almost). You can't make it so short that people don't have enough time to act but if you hold an offer open for a month people will just put off responding and eventually forget your offer. Of course this depends on what you're selling as well. Once you've made your offer you should continue to remind your prospect how much time is left to take advantage of it.


Limited Inventory Offer

This past Thanksgiving Walmart ran some commercials that offered a 3.1 Megapixel digital camera for $150 to the first 200 people who arrived. People camped out there all night long to take advantage of that offer!
Another type of limited inventory offer is to simply mention in your offer that there are only 150 in stock and you're selling them on a first-come, first-serve basis.


Limit Your Choices - Confused Minds Always Say 'NO!'

Always limit your choices when creating an offer. You can give one option or two options but once you give your prospect a third option they get confused. This can kill your offer.

A marketing friend of mine from Canada, Don Campbell, teaches that confused minds always say, 'No.' It's true. People would rather not choose than have to go through the agony of making a complicated choice. With that said, I do believe in giving two options when doing direct mail or on a website, Option A and Option B. Option A might be the 'basic package' while Option B might be the 'deluxe package.' But when you're developing a print advertisement you should focus on the one action you want your prospect to do. Build your whole ad around the prospect doing that one action and nothing else.


Tell Them What You Want Them To Do...Exactly

People need to be taken by the hand and told exactly what to do. You must be clear and concise when giving instructions on what you want your prospect to do next. Do you want them to...

• Visit your store today?
• Pick up the phone and call?
• Click the order button?
• Fax in their warranty now?
• Email you within 24 hours to register?

Notice that each of these 'call-to-actions' starts with an action verb. Even though you might think its obvious what your prospect should do, you still need to tell them.

Then you need to tell them what will happen when they do respond. For instance, 'If you call right now and order your free report, I will personally go down to the post office and send it to you via priority mail.' When you add 'what happens next' the offer becomes clear and concise and leaves no confusion. Remember, confused minds always say, 'No!' Know the Objective Of Your Offer So far, we've just been talking about offers for a product or service but there are offers to get your prospect to do many things.

For instance, you might just want your prospect to call your place of business or you might want them come down to your store. Before you begin to develop any advertisement, design your website, direct mail piece, promo video etc. you MUST KNOW YOUR OBJECTIVE! What is it that you want your prospect to do? Then, and only then can you create the right offer. Here are some examples from the pool and spa industry:


Offer to call your store:

The first 20 people that call today will not only receive our Special Report titled, 'Five Steps to Eliminating Back Pain Using Hydrotherapy' but you'll also receive a 30-minute taped seminar titled, 'The Secret to Raising a Close-Knit Family.' This audio seminar is usually sold for $29.95 but is yours FREE if you are one of the first 20 people to call today.'


Offer to come down to the store:

Acme Pool and Spa was able to make an awesome deal with a major travel company to send 20 people on a relaxing three-day vacation. We had to do some serious arm-twisting to get these wonderful vacation passes, but we finally prevailed.

We will be awarding the first 20 visitors to our store today with a complimentary three-day, two-night vacation package to any one of ten vacation areas in the U.S. This offer won't last for very long so get here early before all the free vacation passes are taken!



Creating an irresistable offer takes time but the rewards are great. If you increase the perceived benefits and lower its associated risks, you will improve your response rate dramatically.

here is a checklist that you can use when you create an offer  :

- Is your garantee as strong as possible?
- Is your warranty as strong as possible? 
- Do you tie your features to universal benefits?
- Did you inject some form of scarcity?
- Is the objective of your offer clear clear and concise?
- Does your offer have a compelling headline?
- Have you eliminated price as a stumbling block?
- Do you have a strong call to action? 
- Have you limited your choices?
- Have you given the reason why you can make the offer?
Here's one final piece of advice. Always make an offer. Make offers in your ads, on the phone, when you network with people, on service calls, even in your email correspondence. Every chance you get...make an offer. A bad thing happens when you don't make offers...NOTHING. If you don't make an offer you'll never get a sale. Start making frequent and targeted offers to your prospects and customers. Make irresistible offers and watch the sales roll in!

Adapted from "The Small Business Marketing Bible" by David Frey another great reference and a highly recommended marketing book. 

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