Posted in Marketing and Strategy Terms, Total Reads: 1258
Definition: Back End
Back end refers to the set of products or services which a company sells or resells to a customer who has already made an initial purchase with the company. In other words, back end sales refer to the sales made to existing customers.
Back end is the profit centre of most businesses. Most companies are ready to make a break-even or even a loss in the initial transaction with a customer because when the customer comes back at least a minimum number of times, the loss is more than offset by the profit made by the repeat purchases. As the trust level increases, front end customers become back end customers, as shown in the fig. Selling at the back end is normally inexpensive because the major cost of customer acquisition is incurred at the front-end i.e. the initial purchase stage. An additional advantage of back end is that the customer has a certain amount of trust and respect established with the company by now, so response rates and conversion rates are high. Because the customers who are willing to buy from you again are ready to purchase higher priced products, companies have their high end products or the products which are priced higher than their other products in the back end. Most companies do not realise the potential of back end, and hence do not concentrate much on this aspect of marketing in both B2B and B2C segments. Frequency is an important factor in back-end because the more frequent your customers are, the more profits a company can make.
Every business is or should be a back end business in order to make profits. For example,
• A grocery store is a back-end business because the customers who like the pricing or product quality of the store visit the same store regularly to purchase their goods
• A salon is a back-end business because customers who like the service re-visit the store the next time they need a haircut or any other relevant service