Mike's breakthrough is a classic example that undermines one of the sacred cows in marketing these days.
I call it ‘The Funnel Myth.’
Before we come back to Mike's two specific tactics, let me share a little anecdote which is a pretty good example of where so many people are going wrong.
***
I HAVE TO ADMIT, I DIED A LITTLE INSIDE when the influencer looked at us and smiled earnestly:
‘This is my first attempt at a funnel… what do you think?’
I was sat around a boardroom table at another mastermind event in central London.
Alongside me were six people who, in their own relatively small ponds, were pretty well-known.
And certainly, from the outside looking in, this lady was no slouch.
Well known in the US and beyond.
Skilled.
Audience loved her.
Credibility and goodwill to burn.
What she lacked was the right business model.
Because so far all her profile was getting her was the odd training day, speaking gigs and custom client work – not a business.
A Rat's Nest
I squinted at the piece of paper mapping out her proposed ‘funnel.’
Wow.
A rat’s nest of complexity.
14 boxes.
19 arrows.
Seven products.
Three ‘tripwires.’
Three ‘lead magnets’.
And, most tellingly of all: ‘
Potential future high end products’ (my emphasis).
Sheesh.
You could easily see it would require 50+ different web pages just to support the selling of all this.
Just looking at it, the same basic thought formed in all our minds:
‘This theory is never gonna work in the real world!’
We set her straight, but I’d seen this movie too many times.
The widely received wisdom of the ‘product funnel’ or ‘product ecosystem’ is not only deeply flawed, over-complicated and unnecessary.
In fact, in diverting attention away from what truly matters, it is dangerous.
Funnel Theory vs. Practice
The theory goes like this:
The ‘product funnel’ is where you take a prospect through a series of gradually ascending commitments.
First, you let them try you out with a $7 product (or ‘tripwire’).
Then you offer them a $49 product.
Then a $199 product, then a $499 product, and so on.
You ‘have’ to do this because prospects are a suspicious bunch.
And this is the only way you’ll ever convince them to part with the big bucks.
Where do we start with this flawed logic?
There are six big reasons why this model breaks down on contact with reality.
The first of these – the Cargo Cult - is perhaps the overarching problem.
1. The Cargo Cult
After the second world war, Melanesian islanders formed what became known as ‘cargo cults’ near to abandoned US military airstrips.
They believed that if they only replicated the rituals they’d seen American troops performing on these airstrips, that planes and cargo would arrive.
So they’d march up and down, dressed in improvised uniforms and holding wooden rifles, performing parade ground drills.
Believing that it was only a matter of time before the planes returned.
Because they were going through all the 'right' motions.
Most who try to launch ‘product funnels’ are Cargo Cultists, too.
They blindly copy what high profile, apparently successful marketers seem to be doing.
Often because they’ve been sold an ‘exact template’ to copy.
What the Cargo Cultists don’t realise is that what makes these systems work for the high profile people are assets Cargo Cultists typically don’t have access to:
2. Attention is inevitably drawn to the wrong end of the ‘funnel’ – the unprofitable end
Here's another fundamental problem most Cargo Cultists run into.
They tend to copy only what they can easily observe on the surface - which is the 'front end' marketing systems.
It's like looking at the 10% of the iceberg you can see above the water, and assuming that's the whole damn thing.
Seasoned direct marketers typically seek only to acquire new customers at breakeven.
Thus the ‘front end’ – the most easily visible part of the business, consisting of lead generators and low ticket products – is not the business, because it typically makes no money.
Indeed, it may always lose money.
That can be acceptable in a properly structured business.
Because the real business – the profit - is in high ticket offerings that are generally only presented to existing clients.
Thus, high ticket offerings cannot be an afterthought.
On the contrary, in successful businesses they are the unwavering focus… the bullseye… the centre of gravity.
Typically, even if Cargo Cultists are able to create potentially good clients via low ticket offerings, they have no plan to execute on high ticket offerings at all.
3. Because of this, cashflow is terrible
Because Cargo Cultists typically lack proper high ticket offerings, they are essentially following the low ticket high volume model all over again.
Cashflow wise, this is horrible.
Any revenue is sucked up by the time and expense of setting up complex funnels and probably advertising…
...to say nothing of the long-term optimisation project required to get a funnel working optimally and reliably.
At the same time, if you sell one hundred $7 ebooks, you now have a service burden of 100 customers.
And don’t think that because people have only invested a small amount, that they won’t bother to contact you - they will.
4. It adds the ‘Toxicity of Complexity’
Richard Koch made enough money as a management consultant to retire aged 40.
He became an early investor in Betfair, Filofax, Belgo, Plymouth Gin, Capstone, FanDuel, and Auto1.
These investments have returned between five and 53 times his original equity stakes; he knows something of business.
So it's worth heeding his observation in his must-read book The 80/20 Principle:
‘Business people seem to love complexity…. but business returns abhor complexity… the act of making a business more complex depresses returns more effectively than any other means known to humanity.’
Let's see...
Does a ‘funnel’ diagram consisting of 14 boxes, 19 arrows, seven products, three ‘tripwires,’ and three ‘lead magnets’ strike you as at all complex?
And all that before you even build it.
Let alone figure out where the web traffic comes from to feed it.
The truth is, it’s simply not necessary to have a string of ‘feeder’ products, if you:
a) solve the right problem for the right people in the right way, and
b) can provide adequate proof of your competence and ethics
With a good enough sales presentation – say, in a webinar – it’s absolutely possible to take a prospect from zero to a $25,000 purchase. It happens every day.
Maybe after you have high ticket offerings and their sales processes working like a well-oiled machine, there can be merit in experimenting with low ticket offerings.
But this belongs well down the list of priorities, if at all.
5. It’s not necessary
In fairness, there is something in the concepts of ‘commitment and consistency’, as highlighted by Robert Cialdini.
This recognises that – all things being equal - prospects will tend to buy again from a vendor who they’ve previously purchased from.
But all things are not equal.
Cialdini’s other forces of influence – authority, social proof, say - can be exerted to be even more powerful.
Imagine you give an advertising budget of USD $1,000 to Richard Branson.
You task him with promoting a day of one to one business coaching with him, at a price of $10,000.
Would people buy that?
Yes, I believe they would.
So what happens if you give the same scenario to Joe Schmoe, unknown and generalist business coach?
Would people spend $10,000 for a day with Joe?
I really doubt it.
Branson sells out, Joe Schmoe sells nothing.
Yet Branson didn’t need to ‘warm anyone up’ with a $7 product, did he?
Why is that?
Because Branson has perceived authority in the area of business.
All this means is that, rightly or wrongly, most people take Branson's strong competence and ethics as a given.
As a result they are likely to perceive a $10,000 investment as at least a reasonable trade-off for a day in his company.
Thus the challenge is not in creating a 'funnel' because that will magically solve all problems.
It is simply in making people comfortable enough in your competence and ethics to buy your high ticket offering.
There are a number of ways to achieve that, and having them buy a $7 product is not a pre-requisite.
6. Funnels are a marketing automation process, too often applied wrongly by novices to unproven products
Just because the internet offers the theoretical possibility of selling without any human contact, does not mean this is what we should try to do in every situation.
Journalist Alexis Madrigal calls this thinking the ‘The Estrangement of Scale.’
Years ago when I first set up my own business, I made this mistake repeatedly too.
I was well aware from my previous job that building and maintaining your own 'platform' was the thing to do.
Because when you command the attention of an audience, you can create demand for your products and services at will.
So I set about building an opt-in email list of around 1,000 people.
And I nurtured it with regular, high quality content.
Doing all the 'right things' everyone tells you you should be doing.
In tandem with this I spent probably a couple of months, all told, creating an ebook to train people in Google Adwords.
This, I knew as an online marketing professional, was what these people needed.
So sure was I that my audience needed this material that I never took the trouble to do something important:
To ask them if it was in fact what they wanted.
I'd built up so much credit by showering these 1,000 people with my lovingly prepared free content that they must buy in their droves, I thought.
So I got everything ready for people to buy.
I crafted an email to tell everyone about my genius product, and got ready to send it.
As my finger hovered over the 'send' button, I thought:
'I wonder how many people will buy? Fifty? A hundred maybe?!'
I was getting excited.
Rubbing my little hands together.
Bracing myself for the tsunami of orders I anticipated hitting my PayPal account.
Because, after all, this product was exactly what they needed, right?
So I hit the 'send' button.
Can you guess what happened?
Two people bought.
Yes: for all my months of careful nurturing and product creation, I'd grossed a grand total of £94 (about USD $120).
I think I went through all five stages of grief:
Now, I could have concluded at that point that everyone on my list was a cheapskate.
That if they wouldn’t buy a £47 product, there was absolutely no chance any of them would buy an £18,000 offer (approx. USD $23,000).
But what do you know?
Because, not long after that experience, I ran a one day seminar on online marketing.
I invited the same people – the thousand or so on my email list.
This time though, I thought really hard about the value I could create for these clients.
And at the end of that seminar, to the 10 or so people I had there, I presented my offer.
The investment was £1500 per month, for a minimum of 12 months. A total investment of at least £18,000.
Two gentlemen at that event were co-founders of a training business.
They bought the £18,000 offer.
Not only, that, they stayed with me happily for 5 years.
It worked for them very well.
Their annual revenues quadrupled, and the net worth of their business tripled.
It wasn’t bad for me at the time, either.
Because I got a periodically increasing monthly fee that ended up at £3250 per month, I ended up earning over £100,000 (USD $130,000) from that one sale.
Thing is, those two men got the £47 ebook promotion too.
In fact, what the book showed was the exact same strategy as the work we ended up doing with them.
But they didn’t buy the £47 ebook.
They did buy the £18,000 offer.
So it’s not a question of money.
The question is:
Is the offer -
('offer' = everything they get, and everything they must give to get it)
- is the offer you’re making right?
You almost certainly won't figure this out hiding behind your computer.
Behind your ‘funnel.’
The best way to find out what kind of offer your audience really wants is to talk to them.
When you do, you'll find the last thing people really want is your 'brain dump' on a topic you think they need to care about.
Precisely because of your status as an expert in your topic, it is not only likely but inevitable that you will make this mistake, unless you are on your guard.
As the expert, you see what is truly important in what you do.
If clients could see that, they’d be the experts and they wouldn’t need you in the first place.
Most course creators are in for a world of pain because they never take the time to do their research and find out what their market actually does care about.
Like I did, they just create content then hope for the best.
With the model I recommend now, the approach is completely different.
Instead of creating and hoping that someone will buy, you very deliberately create your program collaboratively with clients from the very start.
So the whole thing is driven by what the market tells you it wants, not by your pre-conceived ideas about what it needs.
We also don’t create anything at all until our first clients prove they want our program by buying it.
Had I known about this approach when I started my business, it would have saved me years of wasted effort.
It would have put me on the correct path - and disabused me of my incorrect ideas - immediately.
So how do you ‘create your program collaboratively with clients from the very start?’
It comes back to something I mentioned earlier:
A different approach to launching a product than ‘create and cross fingers.’
It’s one which completely removes the ‘will they buy?’ uncertainty if you do it right, and creates positive cashflow almost from the outset.
***
EARLY ON A CRISP PARIS morning, and Mike sat in one of hundreds of large, glass walled offices in a complex shaped in a huge arc in the business district.
Opposite him sat his prospects.
A man and woman representing the large multinational which took up the whole building.
‘The interesting thing about this company was they were new to me.
'I got referred to them by someone, but they’d never hired me or seen me train at all.
'So in that sense it was an ideal testing ground for the sales approach I was developing.
‘I ask, “out of interest, how many people are you thinking of giving my program to?”
'The gentleman looks right back at me and says “20,000.”
‘Gulp!
‘After I’d recovered my composure, the first thing I said to them was: “think about the logistics of all this.”
‘For example, let’s take one of the cohorts in my current program.
'I've got a team of 40 senior managers, many of them CEOs, covering at least 20 countries at the moment.
'They're getting a monthly webinar with me backed up by videos and then a monthly activity.
‘My online program with them is going to run for 12, 13 months.
'Now, imagine we met up in one country a month and did a day or two training for a year covering that same content.
'Then factor in hotels, flights, not to mention the jet lag…
'The costs and time wasted for the client just to make all that happen would be enormous.
‘For that Paris meeting, I actually developed a spreadsheet which calculated those costs, and I shared it with them.
'I do it all the time now - I compare classroom training with the online option.
'That's quite a nice contrast to have because when you show them that, companies generally go “holy shit!”
‘But it makes sense that a company would want to do it this way.
‘You don’t have to be a genius to see that it's the future of training, delivering it online which then means you can potentially go global with it. That's the way it's going.
‘So that was one key thing: the spreadsheet.
'I’ve now developed that idea, I have a second tab on that spreadsheet that projects the revenue and cost saving benefits of having more effective, more motivated staff in the organisation, based on research we’ve done afterwards with previous clients.
‘The second key came about by accident really.
'For the larger corporate sales, often the decision is a group decision.
'So you often get asked by someone in the group if they can review the material to help them reach a decision.
‘I came to call this the “Test Drive.”
'But one thing you must not do.
'You mustn’t just say “have a look and come back to me”.
‘I learned quite quickly that if you do that you’re setting yourself up for a lot of frustration and delay.
‘What I do now is, one, ask them how long they’ll need to review it.
'Then two, book the follow-up call with them, right then and there in that first proper conversation.
'That way, you’re in control and you’re not chasing.
'For this particular one in Paris, we agreed a price in Euro that worked out at about £100,000 (approx. USD $130,000).
'They promised me a decision in a month.’
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