Here's what 50% discounted pizza will teach 1st-time SaaS Founders about maximizing Lifetime Value (LTV) and referrals - and put more cash in your pocket.
In other words, how being willing to "leave some money on the table" results in a higher LTV & more referrals (*IF* you know your margins)
A new Domino's pizza joint opened up near my house the other day offering 50% off all pizzas as a "grand opening" offer.
Having had Domino's before 🤢, I was a bit skeptical about the quality, but hey - half off is half off, right?
So I bit the bullet.
So imagine my surprise when, unlike my last experience with another Domino's location 3 years ago, the pizza this time was GOOD.
VERY good in fact
Lots of fresh, thick-cut meat and veggie pieces *generously* arrayed over a moistly supple base baked to perfection. We're talking chunky Italian sausage, ham, champignon button mushrooms, red onions, extra cheese - the whole works.
And none of that excessive greasiness from before. Wonderful.
More importantly, they gave away probably 1.5x - 2x the volume of ingredients other stores would use on their pies.
And this Domino's spot was probably doing this for ALL the other pizzas they sold.
So how does this apply to maximizing LTV and referrals as a SaaS Founder launching your first Go-to-Market (GTM)?
Simple - they created new repeat buyers + word-of-mouth
I'm definitely going back even if they (understandably) cut back on the amount of ingredients they use and even when they get rid of the 50% discount at some point.
Others are likely thinking exactly like me too.
This store knew their margins and how much could be “given away” to acquire each new buyer
Don’t just think about maximizing short-term profitability at the expense of medium & longer-term profitability.
This Domino's joint deliberately temporarily cut into their short-term margin to create new repeat customers and referrals.
🎓The LESSON from this story is that when deciding on pricing and your offer, be willing to "leave some money on the table". You don't need to "capture all the value" in the 1st transaction.
Most of business isn't a binary case of win-lose.
Rather, it's about creating situations where you perhaps may lose a bit on the initial sale, but win big on LTV via REPEAT purchases of the same products, UP-SELLS to higher priced items and CROSS-SELL other horizontals produced in-house or in partnership with another company.
You also win when customers drive referrals, thus lowering your overall Customer Acquisition Cost (CAC).
Businesses don't win by winning once. They win by consistently winning on a consistent basis.
KNOW YOUR MARGINS, play the long game and watch your referrals and LTV skyrocket to put more cash in your pocket 🚀📈
Originally published at https://www.richmondwong.com