80/20 Sales And Marketing Chapter 11

Expand, Diversify, and Conquer Planet Earth

I can’t overemphasize how powerful the expanding universe principle is. Usually, search engine traffic represents only a small percentage of the people who are potential customers for you. When you roll out to items 2 through 10 (refer to page 82), you can often generate 5 to 50 times as much in sales as you were making with paid search engine traffic. And no longer is it necessary to risk more than a few thousand dollars on a marketing campaign! By the way, you don’t want to become exclusively reliant on AdWords (or Facebook or email or any other primary traffic source) over long periods of time. That’s because Google can be temperamental and bid prices can easily fluctuate. You don’t want too many eggs in any one basket. If you follow this strategy, you’re automatically insulated from whatever minor disaster might turn up in one particular advertising channel.

I put print, TV, and radio last because they’re generally the most expensive for direct-response marketing. However, if you do what I’ve shown you, you have the best chance of anyone of making them work. When you can make TV and radio work with an acceptable ROI, you can get huge volumes, with the bonus effect of brand awareness, mass exposure, and buzz. The expanding universe principle goes on the 80/20 Power Curve too, as in Figure 11–1.

Small, highly targeted audiences are on the right; large mass markets are on the left. The Y-axis measures focus and efficiency. You should always move from right to left, from narrow to wide, not the left to right. “Branding” and mass exposure are on the left side of the Power Curve: high quantity, low quality. Laser-targeted traffic sources like search engine
Figure 11–1. This is what the expanding universe looks like on the 80/20 Power Curve. (Illustration by Danielle Flanagan.)

marketing and email lists (high quality, low quantity) are on the right. As you execute the expanding universe principle, you work your way down the Power Curve. If you’re a small company, you must concentrate your advertising dollars, kind of like when you were a kid burning leaves with a magnifying glass on a sunny day. You must hold your dollars accountable for results. Countless startups have gone to early graves because they tried to “get their name out there.” They failed because they got egocentric and put branding and exposure ahead of building a solid, reliable sales funnel.
Resellers and Affiliates: The Momentum Kicks In You never want your sales partners to be blind test subjects for your experiments. Friends come and go, but enemies accumulate. Distributors, affiliates, resellers, channel partners, or whatever they’re called in your particular industry, want to make money. They like to EAT. (Preferably today.) So the Holy Grail for an affiliate or distributor is a program that consistently sends him very good dollars in exchange for his customer’s attention, as fast as possible. Do your experiments with paid search engine traffic first. Then verify it with email promotions and inclusions in e-zines. Now that you have rock-solid numbers, take it to your affiliates. Great affiliate relationships are extremely profitable. Brick-and-mortar sales channels and “feet on the street” likewise are a bankable asset. And more partners breed more partners. The snowball effect multiplies, and you get so much traffic you can’t make it stop. This is the solution to the yin and yang problem of specialization vs. diversity that I talked about earlier. When people naturally get paid well for sending you customers, you’ll get customers from all kinds of diverse sources.
Treat Your Salespeople Like Valued Affiliates You’ll have much more success hiring and keeping good salespeople if the majority of your products have well-developed sales processes. A salesperson isn’t all that different from a rep, distributor, or affiliate.

If you’re still in the experimental stage with a product, then everyone deserves to know that. And if you’ve figured out a reliable way to sell your product, by all means, train your salespeople!
Kaizen: The Magnificent Power of Continuous Improvement I worked in manufacturing for a long time, and the Japanese word kaizen is a household word in mass production, quality control, and management. Kaizen means “continuous improvement,” and the real power of kaizen is the compound interest of that improvement over time. If you’ve ever listened to investment and financial planning people, bankers, or lenders, you know the Rule of 72—it says that 72 divided by the interest rate tells you how fast the investment doubles in value. If you earn 12 percent annual interest, you double your money every six years, because 72/12 = 6. Compound interest applies to marketing processes, too. The growth rates are much, much faster. You’ve worked really hard for six months to get that 54-fold improvement in sales conversion, and now you’re going to shift your focus. All you’re going to do is split test a couple of things at each step of the process, one time per month. One more AdWords ad, one tweak to the opt-in page, one new version of the sales letter, and one version of the order form. Half the time, the contender isn’t an improvement at all. OK, so every month you get two new winners instead of four. The total improvement each month is still perhaps 5 percent for one and 5 percent for the other. The total improvement is 10 percent. A 10-percent improvement each month means you double your throughput (customers passing through your funnel) every 7.2 months! You nearly quadruple your sales efficiency within a year. The 54X becomes 216X. So when you add these other traffic sources—affiliates, banner ads (bargain priced if you do it right, and yes, they definitely work), and offline marketing sources, you get 10 times the traffic you were able to get from search alone, and the 216-fold becomes 2,160-fold. That’s right, two to three years later, your sales are a thousand times greater than they were the very first day you started. Admittedly, your

first day was pretty dismal, but this should give hope to everyone who’s launched a fledgling new venture.
“Is This Really Possible?” It’s not hype when I talk about 16X, 54X, 216X, and 2,000X improvements in sales and even greater gains in profitability. Here’s why. First of all, understand that in highly competitive markets, where there are 30, 50, or even 100 advertisers bidding against you, AdWords is tricky and it definitely costs you money to do all that initial split testing. The barrier to entry can seem formidable. Most people give up too early. But sales improvements happen in internet time, and that can be fast. Look at what happened to Google—they went from a certified nobody in
Once I had a customer who sold industrial cranes. He replaced four salespeople with paid search engine traffic. He optimized everything to the hilt, just as I’ve described. He was doing very well, but to send his business through the stratosphere, he created new sites with different USPs, so he could attack the market from a new angle. He wasn’t competing with himself, because the new sites appealed to completely different price motivations, service levels, etc. It’s kind of like Pepsi owning KFC and Taco Bell.
He added both diversity and stability and was rapidly becoming a major player in the material handling industry. A year later, three of Google’s 11 ad positions were occupied by his three companies, and he was gaining ground on the organic, free listings as well. He was also gaining exposure at trade shows and in industry magazines.
The last time I talked to him, a European conglomerate was inquiring about buying his mini-empire.
Take this information seriously. This is how you get wealthy with direct marketing. Once you start getting traction, it’s onward and upward. The better your numbers at every step, the faster you get new results and the faster you make more improvements. You’re able to buy more traffic and you become an internet juggernaut. An unstoppable force.

an already-crowded search engine market, to a billion dollars in sales in five years, to eclipsing all print media advertising in less than 15. By year 10 they were already one of the wealthiest companies in history. The world is accelerating. The formula I just gave you is, in principle, the same formula Google used to become the killer search engine that it is—continuous kaizen—improvement based on true numbers, feedback, a “natural selection” marketplace process, and your own unique designs. This is how you dominate your market. You can use the simple math I’ve provided, combined with the cost for clicks in your market, to figure out how much money you’ll have to spend to become the top dog. In most cases it’s not hundreds of thousands or millions of dollars—it’s usually only a few thousand.
————————————————— PARETO SUMMARY —————————————————— p Unlimited traffic technique: When you have the best conversion rate in your niche, you can buy all the traffic from everybody. p You should test your sales funnel yourself before you ask anyone else to sell it. p Sometimes it’s to your advantage to spin off other brands and add new USPs to the marketplace.

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