Work Backwards: The Key to Effective Marketing and Sales

0:00Hey, everybody. Welcome to another episode of the Business Lunch Podcast with your hosts, me, Roland Frazier, Ryan, Ryan, how are you doing today? Should we warn everybody that we're both brain dead because it's freaking May? May summer? This has been quite the day. So this is the behind the scenes. You're paddling a million miles an hour underwater while you're trying to float effortlessly on the top. Yeah, man. My God. Nobody warns you that when you get kids and stuff like that, that May is just bonkers because it's already crazy enough. like there's graduations and you know all this other stuff and finalizing like a billion different banquets that you have to go through and it's and if you're in business everybody else is trying to like wrap crap up because they want to like do stuff over the summer so i truly do feel like i've decided that may is like december without the presents nice i like it so it's just like all the busyness all the craziness all the hecticness but no presents so yeah anyway so if you're listening to this we're definitely going to talk about some awesome stuff i don't know what it is yet but it's going to be freaking fantastic just know we're a little bit stupid i i do know because we did it yesterday we did um we did a meeting with one of our roundtable members and um roundtable is our highest thing that we do it's basically how we work towards having um a longer term partnership with people and kind of test driving what a partnership like that might look like.

1:32And so quarterly, it's a one-year thing, and quarterly we do these meetings, and we did one yesterday with one of our clients, and I thought there were a lot of really good takeaways. We had other things that we talked about talking about, but I mentioned to Ryan as we were getting ready to go on today, I thought there was some really good stuff in there, particularly about where to focus and mistakes that we have made in the past and that we see people making in where they're spending money for media, what kind of offers they're making, what does the customer journey look like, what does the funnel look like, that really applies to anything.

2:09And so I'd love to chat a little bit about that, Ryan. And I know that's more the marketing things that you do, but also kind of how sales related to that, the application of the sales team was in perhaps the wrong place in that deal that we were talking about. So I think maybe just starting out and saying, so if we're looking at something, like if we were doing a consultation with you guys, whoever's listening, if you were part of Roundtable, we would start out with kind of simple things like, when's the last time you raised your prices? And what do you think about doing stuff like that? Because those are quick wins.

2:49But as we kind of dig down a little bit deeper into what's going on and where can we really add continuing value, we start to look at what are you actually trying to accomplish on the end and what's the beginning that hopefully will lead people there. And I thought that maybe chatting a little bit about that would be helpful because I think that probably a lot of people who are listening or watching are making the mistake that we saw that was being made with our client and that, you know, we may, we learned this almost everything because we're kind of thick headed sometimes by doing things wrong and then figuring out that we were doing them wrong.

3:30So I think that'd be a great place to start. Yeah. You want me to set the, uh, kind of give some context at the stage for what would have been going on? Yeah. Yeah. So for this particular client, um, and this is the case with a lot of, with a lot of businesses, they're, they're focused on lead generation. They're focused on, you know, initial client acquisition and lead generation in particular. Like how do we get people on the list that we can eventually sell to? This person has a little bit longer sell cycle. It's they're not an e-commerce company where, you know, somebody clicks, they go to a website, they buy today.

4:03So the idea is to generate a lead. That lead can then be nurtured. So that lead can be turned into, you know, in this case, they're basically recruiting for a professional services type, a type, type solution. Obviously you don't want to reveal the the client and their specific business model. What their goal was, and this is the goal of a lot of business owners that I've seen, and it's what I used to teach. So I'm sympathetic towards it. It's what we used to do, which is their goal was to completely self-liquidate their lead acquisition cost within the first 24 to 48 hours of that lead coming in.

4:36And so what I mean by self-liquidate, when somebody becomes a lead, and that can mean different things to different businesses, but for them, it's name, it's email address, its phone number, its permission to follow up, it's some basic information about the individual. When that person becomes a lead, there's a cost associated with making that happen. They had to pay for advertising to make that happen. Now, obviously, in an ideal world, that you would generate a rapid ROI on that lead, so you're basically able to generate leads for free. And so in other words, so that you're not investing in media and going negative for a period of time while you're waiting for that lead to actually buy.

5:11The goal is our leads are for free. And that's SLO, right? Self-liquidating offers. Self-liquidating offers, yep. All the rage. Yep, whether self-liquidating offers or tripwires, all the stuff that we would talk about, kind of what was the core of really funnel architecture when people would think about the marketing funnel. It was how do we get a lead in and then how do we ROI that lead as quickly as possible so that the lead is effectively free? And on the surface and on paper, this sounds like a really good idea. And it can be. Like there are times when it can work. But what we found is that there is a cost associated with extracting immediate value from that lead.

5:51And there's a couple of ways that this cost is associated. One of the first things that can happen is what we found is that when a lead comes in, if you immediately try to sell them something right then and there, which that's exactly what this client was trying to do. So they're trying to recruit and to get people into their program. And when they get somebody in, one of their clients is worth anywhere between$40 ,000 and over$100 ,000 a year to them. So just for context, that's a lot. Now, what they're trying to do is how do we get people in and how do we basically sell them like a book and some other stuff so that we can immediately self-liquidate this lead?

6:28Well, the problem, what we found, is when you do sell somebody a low ticket, a low dollar type thing, what you're basically giving them the opportunity to do is to scratch that itch to attempt to solve that problem on their own. And when you do that, you're actually making them less likely to buy your most expensive thing. So in seeking to basically pull more of that future forward to get more of the money earlier, and not a lot of it, mind you, just enough to quote unquote offset the lead cost, you're actually lowering the chance that some of these people are going to buy. And we've experienced this.

7:04Like we would have really good quality leads come through. We had a service that we were trying to sell them. But before we offered them the service, we'd say, oh, let's sell them a course to see if they could do it themselves. You know, and then we can say, oh, you got the course. Now buy this like service where we'll do it for you. And it sounds like a good idea. We're gonna offset some of the acquisition costs. We'll make some money off of that. What we found, though, is some of our best leads who bought that course, when we'd follow and be like, hey, you want some help doing this? They're like, no, no, no.

7:32I'm going to try to do it myself first because I've already made this investment. And I think it actually does a disservice that you don't think about, which is that they had pressure enough to seek the solution. And you've given them this escape route to not actually have to do it and be able to put it off because instead of like an assisted thing where you would actually have to go and start the work of doing whatever it is you're going to do, you've given them this magic pass to put it off. And so they're not getting the true pressure relief they want. Whatever caused them to do this is still going to be there because 90 % plus of people that acquire a DIY solution don't ever even open it.

8:17But it makes you feel good that you took that step. it takes that pressure off, even though it's still going to continue to simmer. So you're really allowing them or enabling them to not get the result that they want by doing that, right? That to me is something that I think is important for people to realize. It's not bad to say, let me do the high-end help you thing first, because most people need that more than they need another information. Yeah, you're selling them guilt reduction. And one of the key aspects in sales is you actually want to widen the gap, right? You want to expand the, you know, make people even more aware of the problem that they're dealing with and the right way to solve it.

9:03Not like in a cruel, knife twisty kind of way. Just this is what persuasion is. It's look, this is the problem that you're facing here. And when you sell somebody something that has the perception of being a solution, but it isn't actually the real solution. What you've sold them is guilt reduction and you've actually narrowed the gap in their mind. It's my favorite example of this is the old rule with gym equipment was you wanted to make sure that the gym equipment could be folded up and slid under the bed because if it just sat in the corner and made them feel guilty about the fact that they weren't using it, then it was gonna come back.

9:37Well, if we actually care about solving this problem for our clients, like if that's what we're doing, if that's what we're selling, is a true solution on the other end, then we don't want them to buy a less expensive thing that's going to alleviate the guilt and then be able to slide it underneath the bed so they never see it again. But that's what happens all too often with these lower ticket offerings. And so one of the advice that we gave them is, get all those things out of the funnel. Like, get them out of there. You'd be better off just bringing the lead in, absorbing that cost right now, and just nurturing the lead and selling the 3 % to 5 % who are actually ready to buy your most expensive thing now, figuring out how do we get those people to raise their hand and say, I'm ready to buy now.

10:22And for everybody else, leave them the hell alone. Don't let them scratch that itch. Allow that itch over time to get even more itchier. And then the job of marketing is to continue to identify those 3 % to 5 % who are ready to buy now, have them raise their hand, and then move them through the process. Don't let them scratch the itch for an inexpensive amount. Yeah. So the other challenges is I think that people will think, well, but aren't I supposed to create awareness and nurture? And then once I've established, you know, faith or once I've had a free line where I give this thing to them, that's a value and they feel, you know, reciprocity and, um, and things like that.

11:03Um, does that, does this, in your opinion, obviate that? Does it take that out? Or do you try to give them the solution that you would like them to have that you know will help them the most? And then for those that aren't ready for that, move them into that. So it's kind of reversing the order that most people teach. Yeah, that's exactly it. I mean, and so what I would encourage people to do and what we told this client to do is effectively to flip the funnel. So to make it to where when you have a lead who comes in, your job right then and there when that lead comes in is to find out, are they ready now?

11:40And this can be done, by the way, with a simply somebody, let's say you're giving away a lead magnet, because I'm still okay with free stuff, like give away free stuff, because free stuff doesn't make somebody think, well, I invested a lot in this, I should at least try that first. So if you give somebody a free ebook or a free tool or something like that, that's still fine. That's how we get the lead. But once you have the lead, now what you want to do is you want to ask them, hey, you download this thing, you requested this thing, that's probably because what you really want is this big result.

12:07That's kind of what we do as a company. If you want our help doing that, sign up here, fill out this form, book this meeting, apply for this thing, click this button. Give some of these people who say that they want the thing now the opportunity to raise their hand. Again, about 3 % to 5 % of the people are going, well, probably about 10 % to 20 % of the people, 10 % to 15 % will identify in 3 % to 5 % of the total. so call it 30-ish, 20 to 30 % of that will wind up actually becoming a client now. Those are the people, those now people, those are the ones who will help to self-liquidate your lead costs.

12:41But for everybody else, going back to your question, yeah, we want to nurture them, but we want to nurture them by, again, continuing to give them free content. But the goal of the free content should, again, be to stretch the gap, not to narrow the gap. We don't want to give content that's going to make people think, Like, oh, this is great. I now have it all figured out. So we want to give content that might completely address one small sliver of an issue they have, but it should point out, okay, we talked about this and this is going to be great, but if you want the solution to the big thing, we should talk.

13:16And so you're just looking to re-engage them, even though they're already on your list, with the same basic mechanism that got them on the list in the first place. So we're just going to repeat that activity and that's the job of marketing. And every time they do that, we're going to again ask them that same question. Are you ready now? And whatever mechanism we use the first time. It may make sense at a certain point in time to offer certain low dollar, lower ticket kind of things to generate some revenue and to activate. We do that at the Scalable Company. Tomorrow, as we're filming this, I'm going to be doing a workshop that cost$100.

13:50But that workshop is on a very specific thing. Nobody who invests in that workshop and shows up for that is going to decide that, oh, I've now got every single thing I need to scale my business and achieve my ideal exit. Completely solve for little things, but don't give them the perception that they can solve for the big thing. The other thing that I heard you mentioned that I think what I heard was something I hadn't really thought about is that would you say that you said keep giving them free content. So after you offer the larger thing that you ideally would like for them to get, and you find they're not ready for that yet, don't downsell to something less than that, or, and instead keep giving free content because if they make an investment by making a purchase for money, then they feel like they need to ROI that investment first and that creates delay or no for that.

14:52Yeah, that's, I mean, so yes, if they're not ready, then if you do say, well, okay, then let's go ahead and downsell you to this, you know, to this other thing, look, there's a really good chance there, what we found is the conversion rate on that downsell is going to be incredibly low anyway, because they just identified, they're not quite ready to fully dive into this. They're just, in terms of like the nurture cycle and the life cycle, they're just not there yet. And so when you ask them to make another purchase, all you're actually doing is you're further extending the ready period. You're just pushing it out even further.

15:31We have found, and this is if you're selling a more complete service or solution on the back end, or at least something that is promising to deliver a more complete service or solution. So if what you're offering, and this is important, if what you're downselling them to is the same promised end result as the big thing that you want to deliver. That's, I would say, a no-no. If you want to try to downsell them to something that is a micro solution to a micro problem, that's a slightly different scenario. I think that's less risky. I still, though, wouldn't do it immediately when you get a brand new lead.

16:10I would let them, I would nurture them with free content and see if we can get them back through for probably at least the first 30 days. Yeah. Okay. So the other thing that we were talking about with that client was where is the sales force focused? And so I think we should say a couple of things. One, I believe that we have identified that very frequently, particularly for higher end purchases, simply selling online isn't enough. simply making a presentation or a pitch without or giving content and then saying, you know, please buy my expensive thing was something that was working in 2022, but not something that's working in 2026.

16:54And the only people I see making it work are people teaching you courses on how to make it work. Yeah, yeah. And with income claims, it'll probably get them in trouble. Almost certainly. Yeah. No, but I mean, we've tried it across, boy, a dozen plus industries, Like, how do we get people to give us$5 ,000, you know, plus, even with payment plans and stuff like that? Certainly, if you're, you know, if the service or solution that you're offering has a, you know, contract value of, you know,$20 ,000,$50 ,000,$100 ,000, which a lot of service contracts do, this is not going to be a somebody goes to a website, reads it, or watches a video, fills out an order form type deal.

17:31So the first thing is, is if you don't have salespeople, a sales team will ultimately be very likely to make you more money if you get it deployed in the right way, which we can talk about a different time. But when you have the sales team, being sure that they're focused on selling the right thing is important as well. And that was something that we identified when we kind of dove into the client that we were talking with. And I think it's also something that people could benefit from hearing. Yeah. I mean, so for this particular client, they had a sales team, but the sales team was really focused on once somebody became a client, how did they get them activated and how did they help them actually go out there and sell the stuff?

18:14So I don't know that it was necessarily misapplied because the reason that their clients are worth as much as they are worth. And again, this person, let's say this person is in the financial services industry and so they're recruiting other financial service professionals. I think that's, we can keep it narrow to that. And so, yeah, so they've got somebody now in the business as a financial service professional. The way that they make money is if this person goes out there and does the thing, right? And so the sales team that they had was charged with getting this, you know, their client to do the thing.

18:47And that's amazing. But there wasn't a sales team for the actual getting of the clients. And that sounds like obvious. but for this particular client in their defense that they had previously been able to do recruiting and things like that without needing a sales team so they didn't even as a even as the people that were helping them we just kind of assumed that the sales team was doing that like we that was a sales people yeah i'm thinking they do both and and it kind of goes to a bigger sort of macro thing i mean so this is specific to sales to sales teams um but it applies to a lot of different uh It applies to a lot of your departments.

19:27Where you have fundamentally different ideal clients that you're talking to, you're likely going to need a different sales team for that. And so in the case of the sales team that they had, this sales team was basically selling financial service products to end consumers, to small and medium-sized businesses and things like that. That's what they were good at. Well, you can't take that exact same sales team and say, well now we also want you to sell you know the program to bring in more people just asking a salesperson to sell a fundamentally different product or service line to a fundamentally different type of person and quick switch between those two it's not going to happen so you're going to tell you though like just just because i know i did i think you did um but like we pushed back on this forever because it's like you got two things thing one thing two you talk about thing one if you're selling thing one you talk about thing two if you're selling thing two you should be able to switch calls every other call no problem but it just even though to me that seems like it's something that should be easy and obvious that it should be easy that is an incorrect assumption based on our experience founders can do it founders can do it and this is one of the reasons that that a lot of business owners have such a hard time shifting from founder-led sales to actual, like, to having an actual scalable sales team is just that, is because the founder's able to sell anything they got to anybody they talked to.

20:57They just can't. Including, like, investing in the company. Yep, that's the founder's gift. And when you're building out sales teams, and I believe it also applies to marketing teams, and you and I have talked about this before as well, but having these single-threaded sales team where this sales team is gonna sell, And I believe that one sales team can sell multiple things. Like, so if you have, you know, three or four product lines, that's okay. As long as they're selling it to the same basic person with the same basic problem, it gets a little bit more consultative. So if it's okay, I'm always talking to the same people, but what I'm doing is I'm trying to diagnose what their specific problem is so I can slot them in the right, you know, product or service line.

21:41That's something now that is a harder sales task. I'm only ever selling this one thing to this one person. and that's what might separate a junior account executive from a senior. But that's something that people can develop into and that you can still scale. But asking a sales rep to talk to different people with fundamentally different problems and then try to back in what the specific solution, I'm not saying nobody can do it. I'm just saying it's gonna be really difficult to do at scale. And so you're better off splitting them up. And same with marketing teams, by the way. If you've got a marketing team and that marketing team is used to marketing to a specific type of ideal client, a specific ICP with very specific problems and they want to generate leads that are that person that have that problem and then you say, hey, in addition to this, we also want you to market to this other person over here.

22:31They're probably going to fail. This, by the way, is why a lot of agencies, the bigger they get, the worse they get. It's not just because they add teams, it's because their knowledge of who it is that they're serving starts to get diluted. and and so the really big agencies who actually do this stuff at scale they have partners that focus on individual clients they might only have a portfolio of you know two three four five clients because they need to know those businesses um so i think having single-threaded sales teams single threaded marketing teams customer support and definitely on the fulfillment side by the way you're probably going to thread that one as well those are going to be important and so that's yeah with this client.

23:11It's like, you got salespeople. It's like, oh yeah, I'll just have some of my salespeople sell this instead. No, you won't. You will not. You're almost certainly going to have to hire a totally new salesperson. It's probably going to need a different sales manager because they're managing to different metrics. And the way a coach is going to be different, maybe all the way up to and through they're reporting the same chief revenue officer at some point. But those are two different groups. The other thing that we talked about was budget because the nice thing about a salesperson versus say hiring a CFO is that the timing that you have, if you don't really have it in the budget to add right now immediately a sales team, it might not be as expensive as you think because of the structure of the compensation.

23:56So I think that would be worth chatting about for a minute as well. Yeah, I know for us at least, I believe in account executive, there's different, a sales compensation could be not just an episode all on its own, it could be like an annual series all on its own. So much that goes into sales compensation. But I'll just broadly say, we believe, for the most part, we pay our sales rep a base, plus they're going to earn a commission. Now, there are some that have commission only, and there's pros and cons to that. But let's say that you are going to pay them some base. You know, for us, an account executive is going to earn a$5 ,000 base.

24:36Now, I'm not saying that's nothing, but it's not like, to your point, going out there and hiring a$300 ,000, you know, C-level type person who's also going to be earning, you know, bonuses. We're going to pay this person$5 ,000 and then they go fast. They need to ROI within, you know, 30 to 60 days or they're gone. And so if you look at the actual risk associated with, let's say this person never sells anything, it's probably going to be a$5 ,000 to$10 ,000 risk. That's a decent risk to take when you figure that person could after, you know, a week or so of onboarding, depending on how complex your sales motion is and your talk tracks are, that person could and should be increasing your sales if only because you have one more other person to do it.

25:23Not to mention the fact that they're ideally better than you are at it because they're like a sales professional. And so they should be accretive very, very quickly. Also on the budget side, because this is one of the things that our client said, he's like, well, the problem is cash flow is tight. And so I need my marketing to self-liquidate, right? My marketing's got to self-liquidate. It's got to generate this immediate ROI or we're not going to be able to afford to go and spend. That is not the right way to think about ad spend at scale. The way that you need to think about ad spend at scale is what percentage of your revenue are you willing to budget for advertising?

26:04And at a minimum, it should be 10%. On average, companies spend 14 % on average. If you're high growth, it should be 20 % to 25%. Now, you might be like, that's ridiculous. I can't do that. Yeah, the 20 % to 25%, those are usually funded companies. But at a minimum, it should be 10%. If you're saying, well, I can't possibly budget 10 % of my revenue towards advertising, then you don't have a marketing problem. Don't put it on marketing to self-liquidate day one, put it on finance and operations to find 10 % of the budget to allocate towards this. I mean, when we were asking this client, how much do you think you should be spending?

26:44He's like, well, at a minimum, I want to start with a$10 ,000 a month test budget. Now, this business is doing a lot more than$200 ,000 a month, right? But if it were only$100 ,000 a month, that would be 10%. And so what we were really talking about here was less, way less. It was probably like two-ish percent. Actually, probably even less than that. Now that I think about it, it's probably less than 1%. But he was saying, oh, I can't afford it because he's thinking about$10 ,000 when he should be thinking about what is the percentage of my revenue that I should budget for this. And if your advertising is working, your revenue goes up, which means the percentage, even if you keep the percentage of the same, the amount of money that you can spend, but also assuming revenue is going up and you're managing it appropriately, margin should increase.

27:29So maybe you can increase that as your percentage. So all of these factor in, think about budgeting. This is what real companies do. Don't think about self-liquidating offers and, you know, how do I get an immediate, you know, return on this investment? That frankly is what marketing, internet marketing chuckleheads do. And I can say that because I am a recovering internet marketing chucklehead.