READ TIME: 5 MINUTES

Welcome back, Renaissance man 👋 .

Trying to maximize your ROI? As a drop shipper, it can be challenging to know where to look. Most people tend to focus on the wrong things. Charging more for products, switching from suppliers, reducing ad spend, etc. But what If I told you that you can implement two other approaches in seconds for much better results?

TODAY, AT A GLANCE

• TURNING $500 INTO $2,000

• STRATEGY SHIFT - X FACTOR 1

• STRATEGY SHIFT - X FACTOR 2

• WHAT THIS MEANS FOR YOUR WALLET

TURNING $500 INTO $2,000.

Today, I want to share two crucial factors that allow you to increase your revenue by at least 400%. As some of you might be new to drop shipping, let me give you a relatively simple example of where your profits come from, and from there, I‘ll build upon and reveal these two approaches that I talked about earlier.

THE BUSINESS MODEL.

It’s simple: most of you are probably advertising through paid ads; let’s say you’re getting an order worth $50, and we’re going to ignore the processing fees and the other little things that might affect your margins by a couple of % of because it’s irrelevant of the point in this issue.

HYPOTHETICAL SCENARIO:

If you want to make a $500 profit per day, in this scenario, let’s say your profit margins are 20%. Where we sell something for $50, you would need to hit 50 orders daily to earn that $500 profit.

SIGNIFICANCE:

Any of these micro-adjustments you can make where you can add $2 to your margins don’t significantly affect your bottom line, yes you can go from $500 to $600 profit per day if you save $2 on your cost per good switching from suppliers and I’m not denying you shouldn’t do that if you can, but the two factors I’m introducing today can turn that $500 profit into $2,000 with the same amount of orders or AD spent.

STRATEGY SHIFT - X FACTOR 1.

X Factor number 1 can potentially increase your margins by 3 or 400%, and I’m not exaggerating here. We’ll go through the numbers here in a second, and funny enough, you will implement this before you even run an ad.

PRODUCT RESEARCH

This is something that you’re going to implement during the product research process. It’s making sure you’re picking the right kinds of products, and I will discuss the one thing that has the most significant impact on my selection process: the potential and the likelihood that someone will buy more than one.

SINGULAR PRODUCT ITEM:

We have this plush remover. As you can see, even the product photo is displayed as a singular item. In my mind, I’m just thinking about the customer’s experience. The type of buyer we’re looking for is not going to buy more than 1 of these because most people don’t need more than 1 of them.

HYPOTHETICAL SCENARIO:

Now, let’s go back to the hypothetical scenario we discussed earlier; your order value was $50, you spent $20 on cogs, another $20 on ads, and your profit was only $10. Let’s also say this is a product where people only buy 1.

SIGNIFICANCE:

Because we’ve not leveraged the potential of products with the likelihood of buying more than one while doing product research, we’re stuck with only a $10 profit, which makes it much harder to make it successful and to scale it to more significant numbers because of the thin margins.

MULTI-PRODUCT ITEM

On the other hand, we have these conch vases that are meant to be mounted on the wall, and you put flowers in them; the likelihood that someone’s going to buy more than one of these is significantly higher because it’s a product that can be hanged on every wall in the room.

HYPOTHETICAL SCENARIO:

Now, let’s go back to the hypothetical scenario we discussed earlier; your order value was $50, you spent $20 on cogs, another $20 on ads, and your profit was only $10. Let’s also say this is a product where people are more likely to buy two or three at a time.

SIGNIFICANCE:

If they bought two items, that already brings your order value up to $100, and then it costs you $40 to fulfill it because you have to send two units. Within this example, you still only have to spend $20 on your ads, and your profit now is $40, a 400% increase over the $10 you got in the first example.

STRATEGY SHIFT - X FACTOR 2.

X Factor number 2 has to do with Post-purchase upsells. This is similar to X Factor number one. However, the customer didn’t need a discount to buy the second unit in X Factor number one. 

POST-PURCHASE UPSELLS - OPTION 1

To still make them buy the second unit, we have our Post-purchase upsells in place, which they immediately receive on another offer page after they complete their order, and we give them a 20% discount; this can be done with apps like Reconvert.

FIRST-TIME BUYER EMAILS - OPTION 2

The other option within this X Factor 2,  which we also employ, is a first-time buyer upsell flow for emails where we immediately send them an email with a 20% discount code an hour after their order, trying to take advantage of that impulse emotion where they’re like super excited they just bought something and all of a sudden they get discount for 20% off their next order.

HYPOTHETICAL EXAMPLE:

Now, let’s go back to the hypothetical scenario we discussed earlier; your order value was $50, you spent $20 on cogs, another $20 on ads, and your profit was only $10. Let’s also say the customer will take advantage of the 20% discount.

SIGNIFICANCE:

If they bought the second item through the discount from option 1 or 2, that already brings your order value up to $90, and then it costs you $40 to fulfill it because you have to send two units. Within this example, you still only have to spend $20 on your ads, and your profit now is $30, a 300% increase over the $10 you got in the first example.

WHAT THIS MEANS FOR YOUR WALLET.

Implementing these two x-factors will make your drop shipping business a whole lot easier.

WHAT’S IN FOR YOU:

• Improving win rate: More room to test new products due to the margins being more spread out.

• Reduces testing costs: You will be more likely to break even if your product fails.

• Higher margins: Increase Average order value while you spend the same amount on ads.

• More scalability: Aggressively scale your products faster due to the more significant product margins.

WHAT YOU SHOULD DO:

• Broad audiences: Focus on categories with mass-appeal products where unlimited scalability is possible.

• Apply filters: You should always ask yourself if someone is willing to buy more than 1. Don’t guess; it should make sense.

• Post Purchases: It’s a must; the same applies to the email flow. Send an email after purchase with 20 or 30%. Do the same with your Reconvert.

I can’t overstate the significance of these two things for your drop shipping business. Simple as they may seem, they are two of the most influential things in anybody’s success, whether they realize it’s happening to them or not.