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What is the ultimate sales formula on web? (PV – PR = PD)

Posted in How To on February 15th, 2012

This is a guest post by Jeremy Reeves. He is a veteran blogger here and an online conversion and profit strategist. Through his little-known unique and innovative profit-boosting techniques, he’s added tens of millions of dollars to his clients bottom-line in EXTRA revenue. You can grab his FREE report, “The 3×3 Formula For Doubling Your Profits In 60 Days Or Less” at www.3x3Formula.com

When most people think of increasing their conversions, they think of cool little tricks they can do… slight word changes to various parts of the page… or changing the colors.

And if this is you, you’re missing out on an enormous opportunity to not only increase your conversions, but increase the long-term results of your business… including getting the most profit possible.

Let me explain.

YES, testing your CTA buttons is good. It can work. And changing colors can increase conversions. And testing the layout of your pages can increase conversions.

But there’s something BENEATH all of that “surface level” stuff that is the driving force to making your customers buy your products and services.

It makes up what I consider to be the ultimate conversion formula. Get this right, and your conversions go through the roof. Get it wrong, and it doesn’t matter what your CTA says… or where your buttons are… or any of that.

So what is this formula?

I call it…

PV – PR = PD

Which means…

Perceived Value – Perceived Risk = Purchasing Decision

Depending on your level of persuasion knowledge, this may or may look a little complicated to you. In reality, it’s very simple. And very powerful.

Either way, let me explain.

People first look at the perceived value of your product.

That includes what they think (remember, it’s all perception) it can do for them. It also includes packaging, positioning, and many other factors.

They then look at the perceived risk involved. The risk of the product being a dud… of you never sending it to them… of you not honoring your guarantee… and many other factors.

When they subtract the risk from the perceived value, they come out with either a negative or positive number.

If it’s positive, you get the sale. If it’s negative, you don’t.

Here’s an example.

You’re a middle aged guy with 3 kids and a wife. Your wife has given you the opportunity to start researching a new car to buy. She’s busy watching the kids and is limited with time, so she wants you to pick out your top three, and then come back to her. That way you can both come up with an agreement on which is best for your family.

So you walk into a car dealership. You hobble around and spot a nice little sports car for $50,000. Your budget is $40,000… but this car is so magnificently sleek and sexy, it grabs your eye like a supermodel sunbathing on the beach.

At this point, the formula comes in

Remember… Perceived Value – Perceived Risk = Purchasing Decision

Perceived Value: You’ll be able to show off to your friends. Feel the exhilaration and thrill as you stomp on the pedal and tear up the streets. Get an ego-stroke every time you pass by another guy with a “lesser” car as you silently think to yourself “haha… I’m more manly than you buddy!”.

Etc. etc. etc.

Perceived Risk: It’s over budget. Your wife will most likely laugh at you for even considering it. Or, you may get a “lecture”. It’s not safe as safe as something like a Volvo if you get in crash. It’s more dangerous because you’re more likely to drive faster. You probably wouldn’t be able to fit all your kids in it.

Etc. etc. etc.

See the dilemma here?

It doesn’t matter HOW good of a salesman the guy selling that car is. You had a certain criteria you needed to meet (let’s just say it had to be safe and be able to fit the kids)… and the car didn’t meet the criteria.

Even if he dropped it another $20,000 and it was under your budget, it still doesn’t give you a positive number in the equation above because the two main criteria outweigh all of the ego-boosting qualities the car had.

And that’s exactly how your customers are looking at your website.

There are a certain number of positive criteria, and negative criteria, they have hidden away in their minds. Most of it they’re not even conscious of. If the good outweighs the bad, you win. If not, you don’t get the sale.

So my last bit of advice…

If You Want To Make More Sales… Increase Your Perceived Value And Decrease Perceived Risk!

It’s REALLY that simple.

There are literally dozens of different ways to do each.

Let me give you 5 actionable steps you can take to increase your perceived value and decrease your perceived risk.

5 Ways To Increase Your Perceived Value

  • Add a product image
  • Discover the #1 benefit of your product and make sure you explain it thoroughly. And hit their emotional hot buttons.
  • Add a specific value to each specific item in your product/course/service
  • Make it easier/faster for people to consume (people are too busy and want straight to the point advice. I do this for my products and get compliments on it ALL the time.)
  • Increase your price – I know this is counter-intuitive… but try it. 95%+ of people right now can raise their prices without seeing any drops in conversion. Try adding extra value when you do this and I can “almost” guarantee you can increase your price at least 10% with no drop in conversions.

5 Ways To Decrease Perceived Risk

  • Offer your product for FREE before they pay for it
  • Add a risk-free guarantee (the longer, the better)
  • Show credibility and security symbols near your call to action
  • Position your product/service as close to “done for you” as possible
  • Show compelling testimonials and case studies

Go to your main product or service page and see if you can use any of those 10 conversion-boosting strategies. And always keep in the back of your mind…

… “How can I increase the perceived value of this product while decreasing the perceived risk?

Do that and watch your conversions, and profits, SOAR :)

Paras Chopra

CEO and Founder of Wingify by the day, startups, marketing and analytics enthusiast by the afternoon, and a nihilist philosopher/writer by the evening!

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8 Comments
Iris Holidays
February 16, 2012

Exactly what I wanted to say. When you increase perceived value and decrease perceived risk you wont make customer think and he will go in for a smooth purchase. If you ever make your customer think “MUCH” about anything he is purchasing the chances of him converting to a sale is much less.

Theodor
February 16, 2012

There is actually a conversion formula C=4m+3v+2(i-f)-2a that is a bit more thorough than this explenation. Although both these theories are the same but expalained a bit different.

Jeremy Reeves
February 16, 2012

Theodor – Yes you can make any formula you want really. I just decided to simplify it to make it a little easier to understand.

Iris – Yes, you got it exactly!

Etienne Juneau
February 24, 2012

Good one!

Especially liked the “Top 5″ actionable steps toward the end.

Jason
February 24, 2012

Very helpful advice. I’ve never thought about it as reducing risk and increasing value. That really is the underlying reason why A B testing works. Which by the way I love your tool for that. Thanks for the post.

Chris
March 2, 2012

Hey guys – this is a tremendously useful post. I think the ideas to increase value and decrease risk hit spot on. Now I’m rethinking a bunch of stuff on one of my main niche websites.

I’m a new VWO user and absolutely love it. For people who are still new to split testing and looking at the options, this tutorial should help:

http://outsourcefactor.com/split
(It’s pretty detailed and explains why I chose VWO)

Sincerely,
Chris
Co-Creator of OutsourceFactor.com

Paras Chopra
March 2, 2012

@Chris: very well written article. Loved it (and tweeted it too)!

Rajat
March 21, 2012

Extremely helpful. PV – PR = PD actually sticks in your head. Will keep the points in mind.

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