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The Art of Selling Online Courses
The Art of Selling Online Courses is all about online courses.
The goal of this podcast is to share winning strategies and secret hacks from top performers in the online course industry. We are interviewing successful business owners, asking them questions on how they got to the point where they are right now, and checking how their ideas can help you improve your online course!
The Art of Selling Online Courses
Optimizing Business Strategies with Perry Marshall: Unpacking the 80-20 Rule and the Espresso Machine Concept
Ready to revolutionize your business strategies? Dive headfirst into the magic of the 80-20 rule with Perry Marshall, one of the world's most expensive business strategists. He unveils how 80% of results stem from just 20% of effort and shares his unique perspectives on what it means to be fractal, the power of the tactical triangle, and the concept of espresso machines as a metaphor for boosting revenue.
In the bustling world of marketing, it's the survival of the smartest. That's where Perry Marshall steps in, guiding us through the four crucial elements that spell the difference between success and failure - traffic, conversion, economics, and the 80-20 levers. We tap into his expertise to discover how to increase revenue per sale through order bumps and upsells, and how to skyrocket conversions by polishing your offer, guarantee, and headline on your sales page. Beyond that, imagine the power of expanding your email list, creating an irresistible lead magnet and propelling it across more platforms.
We also take you behind the scenes of our own experiences with the first version of our Facebook Advertising Book, where the 80-20 rule played a key role as an elimination tool, zeroing in on the best ideas. Perry leaves no stone unturned as we explore how to pick the most effective ideas and avoid wasting time on ones that won't make the cut. We wrap up with the fascinating concept of the espresso machine in business, shedding light on how software as a service companies and course creators can maximize profits through affiliate relationships. Don't miss the opportunity to transform your business approach with Perry’s deep dive into the power of the 80-20 principle.
When you wake up in the morning, you have to decide which of these four things do I need to work on today? Do I need to work on more traffic? Do I need to work on converting the traffic? Do I need to work on the economics of the conversion? Or do I need to adjust 80-20 levers with the existing stuff that I already got to get rid of waste and make the stuff that works work even better? Those are the only four things that you ever do in marketing. Everything in marketing fits right here and it's simple and it's elegant and I just explained it in five minutes.
Speaker 2:Hello and welcome to the art of selling online courses. We're here to share winning strategies and secret hacks from top performers in the online course industry. My name is John Ainsworth and today's guest is Perry Marshall. Perry is one of the most expensive business strategists in the world. He's endorsed in Forbes and Ink Magazine. He's authored 10 books. At London's Royal Society, he announced the world's largest science research challenge, the $10 million Evolution 2.0 prize. His reinvention of the Pareto principle, or also known as the 80-20 principle, is published in Harvard Business Review, and his Google book laid the foundations for the $400 billion digital advertising industry.
Speaker 2:Perry is one of the people that I personally have learned the most about marketing from. He's the person who goes into the marketing principles the deepest and talks about like how the foundations of all this works more than anybody else. So today we're going to be talking about the 80-20 principle, how it applies in marketing, what it means for it to be fractal, the tactical triangle, what it is, how it was discovered and how to use it to grow your revenue, and what espresso machines can teach you about increasing your revenue. Now, before we dive into the interview with Perry today, I want to talk you through what you can get from us in terms of support for free in order to grow your course of business.
Speaker 2:Martina, one of our funnel engineers, does these incredible funnel video reviews. If you want to get your funnel, your sales page, your checkout page, reviewed by Martina, and then you know exactly what to do to increase your revenue, go to PimpYourFunnelcom and fill in the form. I'm just going to ask you for a few different details there. I'm going to do 10 funnel reviews for free this month. We normally charge a thousand bucks for it, but we're going to give away 10 to listeners of this show for free this month. So go to PimpYourFunnelcom and get your free funnel review. Perry, welcome to the show. Thanks so much, man.
Speaker 1:I got to pit my funnel man. I mean, I know about optimizing, but pimping is a whole other level.
Speaker 2:I've got this whole presentation that I give based around. Do you remember that TV show back in the 90s? Pimp my Ride? I don't think I've ever seen it. No, ok, so what these guys do, it was, I forget, some rapper and he would come in and people would have this terrible car and he would rock up and he'd be like, oh, we're going to Pimp your Ride, man, and they would put news giant spoiler on it and a TV in the back and just ridiculous stuff. You know, absolutely stupid good fun for TV. And so we have got this presentation I do that's based around that, the whole thing based on how we're going to Pimp your Funnel up overall. So that's where that one comes from.
Speaker 2:So tell our audience please, if you will, about the 80-20 rule, because I just want a little bit more context, actually, just before we start. It's one of the Perry's written, one of the what I think some of the best books in marketing, which is 80-20 sales and marketing, and I'm in a couple of business networks and we talk about some of the stuff in this business in this book quite a lot, and so overall, perry is real expert in how do you actually take the 80-20 principle and apply it to marketing. So could you talk everybody through what is the 80-20 rule?
Speaker 1:It is the most useful single thing you can understand in business. If you really wrap your head around the 80-20 principle, you will see levers everywhere and you'll never see the world the same. I read a book 20 years ago called the 80-20 Principle by Richard Kosh, who's now one of my friends. He's a billionaire, and when I got to page 14, he dropped this little comment, which he never returned to anywhere else in the book. He just said the 80-20 principle has a lot to do with chaos theory and fractals, and then he never said anything else about it. I was like wait a minute. So I'm going to explain what the 80-20 rule is. I'm going to explain what does it have to do with chaos and fractals and why does this mean there's levers everywhere.
Speaker 1:So 100 years ago, a guy named Vilfredo Pareto in Italy did a study of a bunch of countries and he found out that all the different countries he studied, it didn't seem to matter what kind of government they had, or it always was the case that 20% of the people own 80% of the land and 80% of the people own the other 20% of the land, which, if you stop and think about it, it means the people that have have 16 times more stuff than the people who don't, and this became known as the 80-20 rule. And it's not just true about land ownership in countries 100 years ago. It's true of ownership of just about anything for all time. And it's also true of just about every Excel spreadsheet in your entire business, and it applies to your traffic and applies to your conversions, and applies to your product sales and applies to your support tickets and the size of craters on the moon and rabbit populations and church donations on any given Sunday morning and the output of dairy farms in Wisconsin, or just about anything. It is so consistently predictable. It's the law of inequality and most people spend most of their life fighting it instead of harnessing it, and they end up on the wrong side of it instead of the right side of it.
Speaker 1:And so when I read that little piece of Richard's book, I suddenly realized, oh my goodness, this is everywhere. I just didn't know it until right now and I jumped up and I ran home and at this time I had been in business for a year and a half. So I think everybody who we're talking to and you, we all know it. It's like to have been in business a year and a half. You're wobbly. You're probably making your car payment. Maybe you are some months and you aren't other months. You're starting to get some traction, you're starting to get some clients. And I looked through my web stats and my invoices and my clients and I'm like he's right. This is everywhere. This explains everything. Oh, my word.
Speaker 1:And I ended up a few years later working out a math formula. That's on my website, 8020curvecom, where you can literally say I own a Starbucks. I sold 5,000 lattes this week. How many $2,500 espresso machines will I sell? And it will be right. It's scary how powerful this is.
Speaker 1:And so 80-20 says that 20% of what you do produces 80% of what you get. And it also says that 20% of 20% of what you do produces 80% of 80% of what you get. So that's 4% generates two thirds of your results. And then you can do it again. That's what fractal means. It means a pattern inside a pattern, inside a pattern inside a pattern. So 80 of the 80 of the 80 comes from 20 of the 20 of the 20. So that means 1% of what you do produces 50% of what you get.
Speaker 1:So, for example, last year, whatever you made last year, half of what moved the needle happened in about three days, and I'm not saying it was three days in a row, I'm not saying it could have been a quarter of a day over here and a half a day over here and another day over here, but when you string those together, that three days worth of time generated half of your income and the other 362 days generated the other half of your income.
Speaker 1:And if you're not aware of this, it'll just go by. If you're aware of this, you'll suddenly realize hey, wait a minute, there's a bunch of stuff I should be doing a lot more of and there's a whole bunch of stuff I should do less of. There's even stuff just by stopping doing it I will make more money, because it's actually making me negative money. And so when I discovered this, my hair just was on fire and I've turned it into everything in my business. I mean, I've worked with thousands of entrepreneurs and thousands of businesses and every kind of industry that you can imagine in 80,. 20 is the backbone of the whole thing. I don't know of any more elegant principle that applies to more things. It's like how come they never taught you in school? Probably because it worked, because it works, and they know it works, and they'd rather use it on you and see like obedient drones who just smoke their cigarette and do what they're told.
Speaker 1:It's incredibly powerful and I can't say enough about it. It will totally change your life if you wrap your head around it.
Speaker 2:So one of the ways that we try and use that here at Data Driven Marketing is to do the analysis of what is it that's actually working for one of our clients. So one of the things that we did about a year and a half off a go, something like that is we track for every single project we do for clients how long did it take to do the thing, what result did it get? And we went through and did this 80 to 20 analysis, like I said, about a year and a half ago two years maybe and we found there were these very limited number of tactics that we'd implemented on our client's behalf that actually got the majority of the results. And there are various reasons for this, like. So one of the things that wasn't working was webinars. It doesn't mean that webinars as a whole don't work. It meant that webinars wasn't working for our clients because there was a whole bunch of reasons they didn't like doing them, they didn't wanna do it, they didn't ever get around to it. So it didn't matter how much time we put in, they didn't do it. All kinds of stuff right. And we boiled it down to these eight tactics that we were implementing. And we did that because we were trying to turn what we did as an agency into a group coaching program, like, so we could actually explain it to other people. Like, can we boil this down to the crucial thing?
Speaker 2:What we found really interestingly at that point was we stopped doing every other tactic for our agency clients as well, cause, like, if these are the tactics that always work, why would you do any of the other? If this is the 80 to 20 for teaching it, this is the 80 to 20 for delivering it as well. So we're just in the middle of going through doing that again now. So, like, okay, we've done that for a couple of years for people and we're like, I think there's more. You know, there's factual, like you say, right, I think there's another go round of this of like, okay, what other bits can we cut out? What we found when we started doing just that 80 to 20, was all of our delivery clients started getting way better results because we were only doing the absolute best things for them and cutting everything else again. And the things that we found what we managed to combine that with was actually the tactical triangle and implementing tactics specifically around the three different areas of that. Could you explain to everybody what the tactical triangle is? No, why?
Speaker 1:don't, I take a walk into my the next room here, I'll draw it on the board here. So I have a colleague who used to work for me. His name is Jack Bourne. He came up with this. I think it's one of the most brilliant things I've ever seen. It says everything in marketing comes down to four things.
Speaker 1:So everybody's heard traffic and conversion. That's very amazing. That's the answer. Everybody's heard you need traffic, you need conversion, you need traffic, you need conversion. Well, you also need economics, because if you're converting but you're not making money or even losing money, then you're just hurrying yourself to the poor house faster, and so traffic.
Speaker 1:So think of it as a circle. You generate traffic, you convert the traffic, you get money from the traffic traffic conversion, economics and you take your money that you made and you reinvest it in traffic and you make it go around. And what any good business does is it makes the wheel spin. And Jack said to me but there's a triangle inside the triangle and that's 80-20. He said it's fractal. He said let me explain what I mean by fractal. He says in traffic, there's another tactical triangle inside the traffic triangle. He said so. For example, if you have a Google ad, the traffic of the traffic is the impressions on the ad he said. The conversion of the traffic is the click and the economics of the traffic is the cost per click. And the 80-20 of the traffic is the fact that inside your Google account, every single column just about is 80-20. 80 percent of the clicks come from 20 percent of the ads and 80 percent of the clicks come from 20 percent of the keywords.
Speaker 1:He went around and he showed, and once they get on your website, there's a traffic conversion and economics of just the expectation, right up to the point that the person clicks the buy button. And then this just blew my mind. I have developed this now into an entire thing, but let's simplify this to what people can just understand and use on a podcast. When you wake up in the morning, you have to decide which of these four things do I need to work on today? Do I need to work on more traffic? Do I need to work on converting the traffic? Do I need to work on the economics of the conversion, or do I need to adjust 80-20 levers with the existing stuff that I already got to get rid of waste and make the stuff that works work even better? Those are the only four things that you ever do in marketing. Everything in marketing fits right here and it's simple and it's elegant and I just explained it in five minutes. Why don't you talk about how you guys put this to use and we'll jazz improvise.
Speaker 2:Sure, what we found was the easiest way for most of our clients to increase their revenue was by increasing revenue per sale. This is one of the things you've talked about. Is you actually do this backwards? Sometimes you start with the economics and we're back. What they were currently doing is they would have something off of for sale and they wouldn't have any other offers to go with it. We added in order bumps and upsells. What we've found since is the order bumps on average increase revenue by 19% with our clients just from adding this one step in. If anybody doesn't know, an order bump is an additional offer on the checkout page and upsell is an additional offer after somebody's gone through and bought. We added those in first and then we're like okay, but that's great, we've increased revenue about 40%. What can we do to drive more sales? The average we get more of those average order values.
Speaker 2:What we did there was we worked on how do you increase the conversions to the email list? Do more email promotions? More people are getting from the email list through to the sales page. Improve the sales page so more people will get to the checkout page. Improve the checkout page so more people then go and buy. When improving the sales page. You could break down into lots of steps, like improve the offer, improve the guarantee, the headline, et cetera, et cetera. The final one was how do you build so?
Speaker 2:For us, the way we see the traffic side of things is how big is the email list? If we can have a bigger email list, then we've got more traffic coming into our email promotions. The reason we do that is because we don't focus on driving the traffic in the first place. We don't do ads, we don't do YouTube traffic whatever. How can you get more people from your audience, from your YouTube channel, your website? What have you onto your email list? The tactics there were. How can you get a better lead magnet that people want and promote it in more places on the website and more places off the website, for example, on your YouTube channel or your Instagram or what have you? I'll be mentioning it in every video on YouTube, that kind of thing. So you grow the email list there, beautiful.
Speaker 1:Can I make this bigger? Can I make this bigger? Can I make this bigger With?
Speaker 2:80, 20, it's usually. What do I get?
Speaker 1:rid of One of the most powerful things I ever learned in sales. I learned from John Paul Mendocha, and he called this the five power disqualifiers. It's the five things that are always true every time anybody buys anything from anybody. Here's what they are. Number one they have the money. If they don't have the money, they're not buying your stuff. This elementary is that may sound. When I was a sales guy, I spent years, I don't know, holding hands and singing kumbaya and like somehow thinking that if I got him to like me enough that these people with no money would somehow materialize money Like. I don't know if you've had that experience, but if they don't have money?
Speaker 1:like stop trying to sell them stuff If they don't have the money, stop. Two do they have a bleeding neck? Like do they have an urgent desire? If you go to the emergency room with a broken arm, you think you're having an emergency and the lady gives you a clipboard and you go sit down next to a bunch of better homes and gardens magazines and you sit there for two hours with your broken arm after you filled out the form and you're like I guess they don't think I'm having an emergency. But some guy walks in with a gunshot wound, like they don't make him fill out anything, like he just go work on it, right. That's what I mean by bleeding neck. Like is this actually an urgent problem? Number three do they buy into your unique selling proposition? If they don't, they ain't gonna buy anything. Number four do they have the ability to say yes? Especially in corporate sales situations, there's tons of people that can say no to you but they can't say yes, they can't approve the purchase order, they can't sign off on the thing, they don't have the funding approved, and so you could spend weeks and months in committee meetings never talking to anybody that can say yes. I did that for a long time and number five it fits their overall plans.
Speaker 1:Well, when John first went into sales, his boss gave him 200 leads. He goes I want you to go see all these people. Now John had been a professional gambler and just from pure street smarts he didn't really have formal sales experience, but he's like there's no way 200 people are worth talking to. I'm not gonna go see 200 people. That'll waste the next three months. How do I chisel this down to 10 or 20 people that I should actually see? And he came up with a five power disqualifiers and he would just go through, like, do you have the budget for this computer system? And he would go through it. And then he had I think he had 12 appointments with actual people and six of them bought. That's how sales should work, and then you can apply it to marketing.
Speaker 1:Now, the way you guys apply it, the way you were talking a few minutes ago, was well, we have all these things that we've come up, that we've done with clients and we've had all these clients and we've tried all these things, but we really found out there's only five or six things that move the needle. And these are the things that we do. And look, entrepreneurs are idea people. They're supposed to be idea people, they're supposed to always be thinking of stuff and they're working rounds and splitting the atom and like all that great.
Speaker 1:But at the end of the day you have to chisel that down to the small number of ideas that actually work or that you have some empirical reason to think they will work, like you've done some kind of experiment or you pre-qualified somehow or another, or you went to your network or your mastermind group, or you got some intel from somebody like no, don't ever do that. You get rid of stuff and you make your short list. And man, this might have been pretty important 20 years ago. It's insanely important now because 20 years ago the world was so much less efficient and if you could just like write emails faster than the guy next to you like you would get ahead that's not true anymore Like you can spend months or years doing stupid stuff and it just makes you poor.
Speaker 1:So what the power disqualifier says is that sales and marketing is not a convincing people process. It's a disqualification process. If you can start with who should I not sell to Cross him off? Cross him off, cross him off. Cross him off. It changes your whole demeanor. It has you not chasing people anymore.
Speaker 1:So here's an example of this when Tom Malash and I came out with the very, very first version of our Facebook book it's like the world's first Facebook advertising book Facebook. This was 2011 and Facebook was very green. They did not have all of the crazy demographic, psychographic voodoo that everybody's scared of, right? They didn't have that and, frankly, it was hard to make Facebook work. And if you didn't have the right kind of business and the right kind of situation, frankly you just shouldn't do it.
Speaker 1:And so we made this quiz called is Facebook for me? And page three of the book it said go to this website, take this quiz, get your score and if your score is less than six and a half out of 10, don't even bother. And it was a disqualification quiz and we did that because we did not want a bunch of one-star reviews from a book that promised to be the be all end. All that ended up. It only works for 15% of the businesses out there, like only for bands and political things and restaurants and churches. Like the early days of Facebook, it only really worked for certain kinds of things, and when you're reading a book or a website and the author tells you ignore everything I say and go do something else unless, like you meet this qualification, it completely changes the psychology of the relationship between you and the customer, cause they can clearly see you're not trying to blow smoke up their butt.
Speaker 2:Yeah, one of the things we do when we have. If someone gets as far through as having an actual sales call with us, then we save them at the beginning. The point of this call is for us to try and figure out if we're a good fit to work together, cause we only work with 11% of people who apply to work with us, which is true Because there's all of these filters before that. If they've got that far, then there's a decent chance we'll work with them at that point. But like, first of all, someone's got to fill in the form on our website and we go, okay, do they look like they might be a good fit? If they fill it in and they might be a good fit, then we'll send them through the opportunity to book a call. If they book a call, that's 15 minutes where we're checking if they are a good fit. If they're a good fit there, then we put them through to the next stage.
Speaker 2:It's just like everything is there's no point as working with people who are gonna be. I mean there's some point working people who are gonna be unhappy. You could charge them money, I guess, but it sucks right. You know it's really shit Taking someone's money. They're not happy, they don't get a result. It's not great for word of mouth. You don't feel good, they don't feel good. The whole thing's a waste of time, really.
Speaker 1:Yeah exactly so. 80-20 is an elimination tool and it says yeah, I know you're in love with these ideas, but the good ones are 16 times better than the bad ones and in fact they might be 100 times better. And the differential is way bigger than you think it is. The stuff that works is 10 hundred, a thousand times better than the stuff that doesn't work, even though when you put it on a to-do list it all sort of looks the same. Yeah, so if you make your to-do list five minutes from now or tomorrow morning, just understand 80% of the value is in 20% of that to-do list and the bottom three or four things on your to-do list are moving you backwards, not forwards.
Speaker 2:And if you can figure out which ones those are, you're way ahead, so the way that we've managed to successfully use this is going through after the fact, looking at everything we did going, which things worked, which ones didn't. It's kind of time consuming, though. So what's some tactics people can use to figure out ahead of time which ones they should do and which ones they shouldn't?
Speaker 1:Well, first of all, is it rooted in some kind of principle when we write all of our online books? So we have a YouTube book just about to come out, we have a TikTok book, facebook book, google book. We wanted these books to have a long shelf life, which is hard to do when Google and Facebook are always changing their menus and their features and all that kind of stuff, and so we would always focus on, like what is the eternal marketing principle that you would find in scientific advertising by Claude Hopkins from 1918? Like what things? Right now there's some version of that 100 years ago, and Nassim Nicholas Taleb has this great saying something like it's a lot easier to figure out what's not gonna change in the next 100 years than it is to figure out what's going to change or how it's gonna change. So, 100 years from now, I'm pretty sure that people will be sitting on chairs at tables, eating food with knives and forks and drinking wine, beer, tea and coffee. You think that's a fair bet, that 100 years from now? Why? Because people were doing all of those things 100 years ago, 200 years ago, 3000 years ago, people were doing all those things, so those things are not going to change.
Speaker 1:I look for the things where. Is this just a different example of something that's always worked, or is this some completely new thing that nobody's ever seen before? If it's completely new thing that nobody's ever seen before, I'm sure it's exciting and I'm sure it's sexy, but 99 times out of 100, it's not gonna work, and 999 times out of 1000, you are not the first person that's ever done this. It's very rare that you are the first person to ever do this. So who already did it? I mean, that's why we have mastermind groups, that's why we read books. I think your best odds of doing something new is to borrow it from another industry. Oh, the chiropractors do that, but the bowling alleys never do that. But always works when the chiropractors do it. So it's gotta have at least a prayer if we try it at the bowling alley. So that's kind of how I eliminate things.
Speaker 1:And then another thing is very few people really measure things and look at their numbers carefully. It's astounding how seldom people really know their numbers. Or, if you have a Google account, it's astounding at how few people actually split, test their ads and try a better one, and try a better one and try a better one. Or some people should be split testing their video reels, or they should be split testing which lead generation magnet they're using or which upsell they're using. And what we always test is what worked on a small number of customers in an improvised situation. That wasn't a formal test, like we went to a workshop and we were talking to customers here. I'll give you an example of that when I was very, very new in my business in fact, it was that same time period where I talked about reading the 80, 20, but I had this CD that I was giving away on my website. It was lead generation magnet and the first title of the CD I used was the cold call curse and I was trying to help people get rid of cold calling and have advertising work for them instead.
Speaker 1:I went to a trade show and I booked a presentation in one of the presentation rooms at the trade show and then I walked through the trade show and I would go booth to booth and I'd say, hey, I'm doing a presentation this afternoon. Here's a little invitation, you can come to it at three o'clock and I would try different name, different titles of my presentation. And I went to one booth and I said it's called guerrilla marketing for high tech sales people and the guy's like, oh, that sounds great. And then I went around and like the next booth, like yep, they like that title. Next booth Yep, that became the title of my CD.
Speaker 1:I find that most of what you test with traffic and money and advertising dollars, if it doesn't come from an organic conversation somewhere, it's probably wrong, because you and I are talking and you're talking to me and I'm talking to you and if I say something that makes your eyes light up, that didn't cost me anything but a few seconds of oxygen coming in and out of my mouth. Clicks might cost five bucks a click. We pay very close attention to what lands with people when we're talking to them on Zoom, on the phone, on a group meeting at a live event. You have your name for your product, but what do your customers call your product? If your customers consistently call your product something a little different than what you call it, maybe you should change the name of your product because, it's to resonate with the way they think.
Speaker 2:All right. So what I'm hearing in terms of how do you figure out the 80-20 in advance before spending tons of time on something and looking back is look at principles. Is this thing been the same for a long time? Because if it's something too new, that's probably a bad idea. If it is gonna be new, then you want it to be a different version of something that's already worked. So go look back 100 years ago. Is it a tweak of something that worked or is it something that's working in another industry and that's gonna give you a decent chance that it's gonna work? Read books, go to masterminds, find. I think what you said.
Speaker 2:One place is find other people who've done that thing, who are running a similar business to you maybe, and go. Okay, is it worked for somebody else? In my kind of situation, kind of like your, is Facebook ads for me. Test who is there who might know whether it's likely to work or not, because they've tried it and they've got some similar situation. Maybe you ask 20 people that question and try and get an idea of it. Then go. If you're looking for messaging, or maybe even tactics in terms of marketing as well, look for what's worked, where you can see the person's eyes, where you can go like oh, I can see their facial expression, I can see how they reacted, how they're talking about it, how we go back and forth and then use that to figure out your test that you might run on ads or on a landing page or whatever it might be.
Speaker 1:Right on, that's exactly it.
Speaker 2:Beautiful, all right. So another way that people can apply the 82 inch principle is based around the espresso machine, and you mentioned this briefly before, but could you explain the concept of this to everyone?
Speaker 1:So 80-20 says that if 80% of your money isn't coming from 20% of your customers, it wants to. The amount of money that comes from your customers wants to be very unequal. If you have a coffee shop and you sell $5 lattes and you only sell $5 lattes, then if you sold a thousand lattes for $5, you collected $5,000. And 80-20 says 20% of those people want to spend 20 bucks, not five, and 20% of those people want to spend 80 bucks. Like I'm just going times four. One fifth of the people will spend four times the money and one fifth of those people will spend four times that much money. And one fifth of those people will spend four times that much money. That is literally what 80-20 tells you and you just keep applying it until you're literally down to one customer and if you run the numbers on that, what it will tell you is if a thousand people will spend five bucks, one of them will spend 2,500. Because the money is burning a hole in their pocket.
Speaker 1:We all know somebody who has a huge number of domain names, let's say, or a huge number of watches. I do a thing when I talk to crowds and I go, so stand up if you own more than one pair of shoes. And then I start you know five pairs of shoes and 10 pair of shoes and 20 pair of shoes, and by the time you get to 20, it's there's like one man and 10 women and the most shoes I've ever had in a crowd. One time I had 300, one time I had 600, one time I had 800. In most large crowds there is somebody who owns 500 pairs of shoes, and I know we can all only wear one pair of shoes at one time, but it's ridiculously unequal. And so that means that if you don't have an espresso machine, you're leaving a ton of money on the table.
Speaker 1:This is why Starbucks sells a $2,700 gleaming, stainless steel espresso machine, because one latte buyer in 1,000 will buy one, and they know that. And so if you analyze the profits of the business, the lattes only keep the lights on and they pay the health insurance, and you don't make any money on lattes. You don't make any profit on lattes. You end up making a profit on an espresso machine. That's how the business actually works. And so there's many, many businesses that look like this. Where you think so, like people think, mcdonald's is in the hamburger business, they're actually in the real estate business. Now, that's kind of a weird example of the espresso machine business, but don't you agree that a $3 million plot of land in a building is a lot more money than a big?
Speaker 2:Mac, but they're not selling the land, so how do you mean?
Speaker 1:Well, but they're buying it and eventually somebody will sell that land to somebody. It might be only once every 20 years, but that's where the money actually is. So even land is McDonald's espresso machine and that's the genius. Or a more ordinary example of that, that is a dentist. In most dentistry practices the equity value when the guy retires, the money is made by selling the building that he did the dentistry in. It's true, in fact there are in the US. There are certain tax structures that you can take advantage of that maximize what you would put in your pocket after you did that. And so many times the real money in a business is not in what you see the business doing most of the time. In the music industry maybe everybody knows by now you really very few people make any real money on albums or streaming. The money is made on merch and front row tickets and VIP passes from a very small number of fans who are insanely rabid.
Speaker 2:Now, in the course industry it's if someone's mostly selling courses for $99, $149, maybe 500 bucks, something like that. It seems to me that the majority of the money the espresso machine in there, the obvious one is selling a group coaching program or a seminar or some kind of one-to-one coaching. Yes, yes. Now the downside for most people who are selling courses to that is they don't particularly want to do that, but it's where most of the money is.
Speaker 1:And look the naked truth is, unless you're in a really narrow niche doing some obscure thing that most people have never heard of or thought of, you're not gonna make much money selling $100, $200 courses. You're gonna pay your light bill or your video crew or something and you're not gonna have much left over. And so the espresso machine principle says that you know the 1%, the 5%, the 20% of people in your market who really know what they're doing are going to figure out espresso machines. A not very obvious good espresso machine for a course creator is an affiliate relationship with a software as a service company, because they have equal and opposite problems.
Speaker 1:A course creator, if you know your subject and you're prolific and you know 100 different angles, you can keep cranking out courses. You can have a new one every month about some weird aspect of what you do and you can sell it. But then you sold it to all hundred people that don't wanna buy that and then you can't sell any more of them. The problem with a software as a service person is they have a way of monetizing something over a long period of time, but they have a ridiculously hard time getting a new customer and grabbing them by the lapels and saying buy this, it's very expensive. So if a course creator and a software as a service company team up and become affiliates, then okay, you run around with your hair on fire and you generate courses and you generate seminars and stuff and then you get it back into affiliate commissions like maybe even lifetime affiliate commissions On the software as a service guy.
Speaker 1:I've been getting lifetime affiliate commissions from a software company for 17 years. I wish I would have sold more of their stuff when I did, but I still get about three dollars each every month. And so you look for things like this and this is the real art of economics in business Just having a transactional business where I have this thing and I take your money and I give it to you. Thank you very much. That will buy your groceries today, but it's not the business that you're dreaming of.
Speaker 2:Beautiful. Thanks so much today for coming on Power. I really appreciate your time.
Speaker 1:Thank you, it's great to meet you in London. At a crazy thing introduced by Alex McCarskey, I said, yeah, any friend of Alex is a friend of mine. Yeah, bring him to dinner. So you showed up and we had a great conversation.
Speaker 2:Yeah, that was awesome. If people had this and they want some more of your wisdom, why should they guy? What's some of the links I wanna point them to?
Speaker 1:Go to sell8020.com and you can buy the 80, 20 sales and marketing book for seven books, including shipping in the US, 14 international, and we're taping dollar bills to that book to send it to you. We literally are doing that. But so let me tell you a funny statistic 21.8% of the people who buy that book buy other stuff Okay, and 78.2% or whatever the other don't yeah. And because of the one out of five that does, we've gotten a lot of really great customers out of that offer. The risk is on me go to sell8020.com. The book will change the way you see everything. You'll never think about business or really even the rest of your life. Like 80% of the foot traffic is on 20% of the carpet in your living room. I mean, this is this 80, 20 thing is everywhere and when you see it you can't unsee it and you'll see all kinds of levers all over the place. And it'll make it a lot easier to run your business and make it be what you really want it to be.
Speaker 2:And there is no fat in that book. That is a very, very cut down but like it'll be a section on USPs, for example, unix selling proposition, and it'll be like five pages. You're like what, how's that, you know? Like it's just boom, boom, boom, boom, boom the whole way through. So thoroughly recommend it. I've read my copy many times. So sell8020.com, is that right?
Speaker 1:Yes, yes, it'll take you right to a sales page and you can check it out and it'll change your life. It's the kind of book you should read once a year for the rest of your life Beautiful.
Speaker 2:If you found this interview useful and you wanna get future episodes, please subscribe wherever you listened. Thank you so much for listening today and Perry thanks again so much for coming on.
Speaker 1:Thank you, John.
Speaker 2:It's a pleasure.