How to Make a Million Dollars - Part 2

(continued from page 1)

The number one reason that so many companies struggle to acheive a profit is that they are spending more to enable each transaction to happen, than the transaction is actually worth in profits.

A while back, the books and music giant, Amazon.com was spending a little over $30 to aquire each customer. Now, that's all well and good if each customer aquired immediately brought in around $50 of profit.

However, Amazon.com had, and still has, far too many competitors to afford to place a high mark-up on each product, and it also has to pay a percentage to its affiliates very often. What that actually means is that a customer generally has to make several purchases before that aquisition cost is made back, and only after that can Amazon.com actually make a profit on further transactions.

As you see, they are banking on engendering customer loyalty. The problem is that internet customers are not very loyal - many go wherever the best deal is at any time. If they were loyal types, they'd still be using the off-line music store they used before.

Heck, we live in a society where almost 2 out of every three marriages end in divource - and the number one reason for that divorce rate? You guessed: disloyalty.

However, Amazon may misjudge loyalty, but they have two other things that make up for it. They have amazing presence (everyone knows who they are and what they do) and they make it very easy to buy your books from them.

Amazon have spent a lot of time, thought and energy into devising means to engender customer loyalty. In general, they have done a superb job in this regard. Amazon gets to know its customers well, predicts their needs, and so offers a value that few can match in that regard. The value of any offer is never just a matter of the price.

For several years Amazon.com were referred to as "the best known company that has never made a profit". However to make that profit they simply needed to scale down their customer aquisitions. That way they allowed the existing customers to make enough purchases to pay back cost of aquiring them.

The people who for years mocked Amazon.com tended to forget their undoubted position as market leader, but the people at Amazon should likewise not forget that the purpose of being in business is to make money, not just be known.

And that brings us back to looking at how you too can make your millions ... Continue...

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