Written by Brian Woodruff

Note from Perry: You can make a LOT more money from your existing list than you’re making right now. The 80/20 Curve shows you how. What follows will force you to THINK, but it’ll be some of the most profitable thinking you do this year. Pay close attention – this is X-Ray vision to higher profits:

Mike is a Planet Perry member with a question about using the 8020curve.com tool in his specific business.

Mike writes:

I do not understand how to read your curve once I put numbers in.

Here is an example:

I invite 300 members to a seminar, I sell them 120 memberships at $10,000
I input it and do not understand how to reads it what it is telling me…

Thanks!

Well, Mike, you have a “Rack the Shotgun” situation.

Chapter 2 of Perry’s book 80/20 Sales & Marketing tells the story behind the phrase. In essence “Racking the Shotgun” is testing the responsiveness of a population. You did this when you made a $10,000 offer to 300 attendees at your seminar.

When you enter this into the 8020curve.com tool, you get this:

(click the image to see this example live at 8020curve.com)

The pink area represents the money you actually made. It is $10,000 tall and 120 people wide. The area of the rectangle is $1.2 million dollars, which is your total sales revenue from the event. You probably already knew that.

But what about the white area to the left of the pink box? That represents money you didn’t make. There are the people who did not respond to your offer because it was more than they were willing to spend with you. This shape represents the number of people willing to pay something and the height of the shape represents how much each member would have paid – but didn’t, because it was less than your price.

What about the white area above the pink box?

That represents money you didn’t get because the price of your offer was less than they were willing to spend. If you’d had a higher priced option (with benefits to justify that higher price), they would have spent more with you.

Now, before you get depressed thinking you left money on the table, I’m going to tell you – we can get that “lost revenue”. And it’s not really lost revenue. It’s revenue you didn’t get because you only had one offering at this time. By making other offerings at different price points, you will get some of those other areas carved out.

Exploring the Limits

The 8020curve.com site is designed to let you easily explore your data and get some meaningful answers. This is what “Examine a Range of Members” is for.

First, let’s explore the whole curve and see what we are dealing with:

(click the image to see this example live at 8020curve.com)

I told the tool to examine the members by rank from 1 to 300 (all of the members). It says:

“Members 1 through 300 can produce $4,542 to $617,900 each”

This means that 80/20 predicts that if you had an offering at $4542, every single person there would have bought it.

It also says that according to 80/20, there should have been one person in the room willing to spend $617,900 with you!

That would be a nice paycheck! The question is, do you have anything of that kind of value to offer? Please realize this does not mean that one person would have paid that much for the $10,000 membership. It means that if you had something that was worth it, 80/20 predicts there was one person willing to spend that much with you.

Predicting Profits

Let me give you one more example of how to ask the tool an important question. This is a question I hope you ask it over and over again. It is “If I had a worthy offering at price point X, how many would I sell and how much would I make?”

Once you tell the 8020curve the responsiveness of the list, these answers come easily. Let’s pick two price points. The first one will be $5000 for a lesser membership, and the second will be $100,000 for an EXTREME membership (whatever that means).

First, the $5000 baby membership:

(click the image to see this example live at 8020curve.com)

I told the tool to examine the members and “Estimate members’ response to a single event” – namely:

“How many members would respond with output 5000?”

The answer is at the bottom of the screen:

“Predicted response for output of $5,000 is 268 members for a total output of $1.34 million”

Well, that’s about the same as what you got before selling a $10k membership to 120 people. But wait – what if you subtract the 120 who are willing to buy the $10k package and then see how many would have bought the $5k package (rather than buying nothing at all …)

268 – 120 = 148 buyers at $5k

148 buyers * $5000 = $740,000 in additional sales volume

That’s an additional $740,000 in revenue simply by creating an appropriately priced lesser package and marketing it to the same list.

Now what about the EXTREME package? What if you had a package that truly justified a $100k price – too rich for their blood? Let’s ask:

(click the image to see this example live at 8020curve.com)

The predicted response for output of $100,000 is 8 members for a total output of $800,000.

Now, some of them might buy the $100k product instead of the $10k product, but still – 80/20 says there’s almost a million dollars on the table.

Conclusion

Once you have your responsiveness entered into the curve using the “Describe Your Audience” part of the tool, you can use the “Examine a Range of Members” to make all kinds of predictions.

Remember you still need to justify whatever price you set. Only your own testing will tell you what the “sweet spot” is when pricing a new product or service.  But once you have established a price, the 80/20 responsiveness curve can help you make some very accurate predictions as to how many you will sell.