Notes from the book: 80/ 20 Sales & Marketing by Perry Marshall (available on Amazon, click here)
80/20 as a fractal (1)
- 80/20 applies to many many things, maybe not in the exact number 80/20, but the pattern is the same; most commonly, 80% of revenues come from 20% of customers.
- 80/20 is a fractal rule meaning that it can be applied over and over by “zooming in” on the top 20%, again & again:
- 80% of profits come from 20% of customers
- from that 20% of customers, again 80% of those profits, come from 20% of those customers (i.e. 80% x 80% of profits, comes from 20% of 20% of customers, 64% of profits comes from 4% of customers)
- apply exponents: (20/80)^n
Rack the Shotgun (2)
- “rack the shotgun” with your customers. This means to set a trigger in your audience to see who’s actually interested in what you’re selling. Focus on those people, forget the rest.
Get customers (4)
- become an expert in a topic and offer a cheat-sheet for free in exchange for data (e.g. email addresses)
- generate leads by solving problems, instead of advertising product features
- become an expert in one sales channel (e.g. Google ads), but then diversify
Power Triangle (6)
- Traffic: eyes on website/ product
- Conversion: convince viewer to take action
- Economics: provide value in exchange for value
- 4 questions to ask of any new idea:
- Who would buy this? (T)
- What can we say to persuade purchase? (C)
- Can we reach them affordably? (E)
- Can they gives us money? (E)
- To develop a sales funnel, start at end and work backwards; e.g what would people want to buy? then work backwards to create C and T.
- Sell results, not procedures; sell complete packages that simply solve the total problem with minimal friction for customer.
- Keep developing new products and ideas to keep cross-selling top customers.
- Purchase qualified lists for warm leads (never cold-call); “response lists” have already racked the shotgun:
Target the right customer (7)
- 5 questions to ask about your target customer:
- Do they have the money?
- Do they have a bleeding neck? Do they have an urgency to solve a problem? A pain or great inconvenience?
- Does the USP appeal to them?
- what does my product do better than others?
- why buy from me versus someone else?
- what guarantee can I offer than nobody else can?
- Are they the right decision maker for my offer?
- Does my product fit in their overall plans/ strategy? Is my product a no-friction add to their business?
- Make headlines speak to pain points
- Sales formula: find problem → agitate problem → solve.
- make sure to spend time on agitating the problem, really make it clear that it’s painful.
What’s unique about your USP (8)
- 4 questions your USP can and should answer:
- Why should I listen to you?
- Why should I do business with you instead of anybody else?
- What can your product do for me that no other product can?
- What can you guarantee me that nobody else can guarantee?
- Examples of things that can make you unique:
- Service: Guaranteed friendliness. Guaranteed Delivery. Guaranteed live feedback, etc.
- Unique market: e.g. only companies with 10 or less employees.
- Product is unique
- Experience is unique
- Price is unique
Test & optimize (9)
- Fixing a sales funnel requires it to be broken into its individual components and testing each piece
- Serial split test your sales funnel:
- 2 adwords ads
- 2 landing (opt-in) pages
- 2 sales pages
- 2 order forms
- Doubling each step results in 16x improvement (tripling results in 81x)
Expanding & diversifying (11)
- focus energy on the 80/20 graph from the highly profitable customers to the low end
- build a solid, reliable sales funnel, then get to branding and exposure
- test sales funnel with paid search traffic first
- verify with email promotions
- take it to affiliates and partners
- once you establish the best sales funnel, you can buy traffic from others
Make more from each customer (12)
- 20% of the people will spend 4x the money (you’re currently charging them)
- 4% of the people will spend 16x the money (you’re currently charging them)
- Multi-dimensionality of the power curve:
- Repeat buyers: 20% of repeat buyers are responsible for 80% of repeat purchases.
- Money: 80% of overall revenue comes from 20% of buyers.
- Quantity: 20% of the orders represent 80% of the quantity.
- Diversity: 20% of the orders represent 80% of the diversity.
- If your business does not have a range of product offerings (100:1), you’re missing out on opportunities to sell to existing customers
- what problem can you solve that nobody else can?
Power Guarantees (13)
- If it doesn’t make your stomach churn (because it’s so crazy), it’s probably not an awesome guarantee.
- If you won’t take take the risk, why should your customer?
- But make sure to establish some disqualifiers to attract the right customer:
- They must follow all steps necessary to use product.
- They much obe instructions and cooperate with you.
- You must have a defined process for determining whether or not all steps were followed.
- All steps must be laid out, simple, in black and white.
- Determine whether the customer really is a fit before exchanging any money.
- Master formula for a Power USP: If you are _________ (qualifying type of customer) and if you ___________ (commit X dollars and follow steps Y and Z), then you will achieve ____________ (specific results) or else ___________ (penalty to me, your vendor).
- A power guarantee is pretty unusual in B2B sales, but when you do it, you should phrase it such that nobody can ignore it.
- Customers who want the cheapest solution right now are usually the worst customers.
- Sell results, not procedures.
Focus on strengths (16)
- what is my unique capability?
- what do i naturally do better than most people?
- plus any other thoughts?
- Make your company culture one where you call out people’s strengths.
- Also create a hate list of things you hate doing, and find team members who love doing those to build a balanced team.
Polarize your market (20)
- No matter what market you are in, there’s a controversy about something; pick a side that you’re passionate about and start advocating
- If you’re not willing to take a stand, you’re boring
- There’s nothing more powerful than selling against an enemy; the existence of a common enemy creates a market
- It’s hard to sell sanity and reason; it’s much easier to sell fanaticism and reactionary behavior
- The best rallying point for your own cause or position in the marketplace is strong opposition
- To take on opposition, begin by immersing yourself in their world so thoroughly that you can pretend to be one of them
Market Research in an Afternoon (21)
- Before you develop a product, you need to find out if people want what you’ve got
- If you could advertise on only one keyword phrase online, what would that keyword be?
- Describe your business in only 1 search phrase; what would it be?
- You can’t become “king of the mountain” until you identify what mountain you’d like to climb
- Once you know the keyword, visit the following sources and take notes in a document:
- monitor twitter for tweets that meet the 3 points below:
- represent frustration in the market
- express direct benefits of a product or service
- suggest a wish the customer may have
- monitor Youtube for the same topics
- use Google Blog Search and Technorati to find highest profile blogs on your keywords, read articles and pay attention to comments
- go to google.com/alerts/ to monitor keyword alerts
- Collect all info in documents, and highlight top 20% which seems longest, most engaged, or most passionate → this provides insight into market gaps
- Notice patterns, or missing things in the market, or contrarian position that may be suggested by the data
- Look for a critical need that might distinguish you from every other competitor; this becomes your “point of difference”
- Additionally, seek out language from customer’s comments and posts to echo it back in your sales/ marketing material
- Send the following survey to your customers or prospects:
- WHAT’s your single most important questions about [keyword]?
- WHY is it important for you to find a solution?
- HOW DIFFICULT has it been for you to find a good solution until now?
- With the responses, keep only the “very difficults”; discard short answers and focus on long answers. Now you know what problem to solve.
Focus on a few metrics (22)
- A short list of things to focus on:
- money in, money out
- click thru rates of google ads
- conversions of specific keywords to sales
- opt-in and lead generation pages
- sales pages and order forms
- individual traffic sources (affiliates, banner ads, etc.)
- If your sales process doesn’t work, break it up and make the pieces work
- If you have 12 products and 12 keywords, you’ll have a 144-box matrix of metrics to measure - not possible
- Reduce your tracking dashboard down to only a few metrics that comprise the largest section of your matrix based on effect:
- top 2-3 keywords
- top product(s)
- top 3-4 pages on your website
- top sales funnel steps
- Figure out what the main thing is and keep the main thing the main thing
- Once you’ve optimized, move onto the next thing:
- a deluxe version of your product at 4x the price
- focus on an unmet need with pent up demand that nobody else in your market is addressing
- if you perform a service, sell a product that teaches them how to use it; if you sell a how-to product, perform the service
- if you’ve tapped out your existing market, take your skills into a new market
- repackage your product or combine it with another to create more dimension of value
- if you sell something on a one-time basis, turn it into repeat purchases with a membership
RFM: Recency, Frequency, Money (23)
- Pay attention to customers who pay attention to you
- Recency: how recently has your customer purchased from you? e.g. who’s purchased something in the last 90 days?
- Frequency: How often has your customer purchased? e.g. repeat buys
- Money: how much has your customer spent? e.g. who’s spent the most?
- RFM is a 3-d model; each variable along one axis, forming a cube. Focus on the small fraction that provide the largest disproportionate results
- How to do it?
- rank customers from most recent to least recent
- most frequent to least frequent
- most money to least money
- score each customer for each parameter (R, F, M) from 1-10
- only focus on customers with a combined score of 20 (R + F + M ≥ 20)
- Have an expert analyze your customers; send your customer list to www.kristalytics.com, and they’ll provide you detailed demographic and psychographic data
- Segment your email lists according to those customer’s interests or purchasing habits, then formulate specific messages for each of those subsegments
- Infusion soft is a good tool to use for doing so
The final book chapters focus on using your newly found marketing genius to do well and give back to those less fortunate.
Here’s a link to the book on Amazon, well worth the purchase.