Episode #008 The “Math Problem” that changed my Business (and Life).

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Episode Summary

What if you could put $1 into a machine and predictably get $2 to come out. Wouldn’t you do it over and over again? On this episode, Ben walks you through how he figured out the “math” behind doing just that.

Episode Transcription

So I’m absolutely ashamed to say what I’m about to tell you because this is something that I should have realized a lot sooner. And as a marketer, this is sort of your 101 stuff. But it’s something that even being super successful with being a digital entrepreneur and selling stuff online, I seem to miss this one.

It took reading back to someone that was doing what I do before the internet even existed, to really help me with this. This is all about the math that sort of changed my life. And I recently discovered this, and it really took me by surprise with what I could predict when I started looking at this stuff.

What is this math problem that ended up changing my life? Well, I was reading some stuff by Gary Halbert. And if you don’t know who Gary Halbert is, he is a copywriter that’s made a lot of people a lot of money. And he made some good money with direct response.

If you don’t know what that is, what direct response basically is, is back in the day when you would go to your post office box or your mailbox and you’d check your mail, and you’d get something from someone that was an obvious sales pitch or not so obvious a sales pitch, but you’d get something in the mail, and it was trying to sell you something. And what Gary was really, really good at, both in newspapers, and sending out things in the mail, was putting together these sales messages that actually sold a lot of something.

And how Gary would do this is, Gary a lot of times would help clients buy a list of people that were probably interested in something. So maybe it was people that subscribe to a certain magazine, or a certain newspaper and they would send out this promotion, this physical sales letter to this group of people, or they’d put in the newspaper that was targeted.

And what’s so interesting about this is, when you really started looking at the results of what came through, it became very predictable. And what I mean by that is, is you could literally look at okay, I sent this out to a thousand people, so we bought a list, of people that were subscribers of this magazine. We sent out this promotion and this percentage of people bought.

And this is what’s so interesting. If you could break even or make a profit, then you were on to something. So, what was interesting is, let’s say that you actually sent out a thousand of these, and you ended up with a let’s say a four percent conversion. If your price was right and everything went well you could absolutely make money off of only four percent actually buying from you with this thing.

This is where things started to get really interesting to me. I realized that some of the Titans, the people that taught me what I know like Gary Halbert, people that had been doing direct response before the internet ever existed, they were out there, they were actually doing the numbers. And they realized if they bought a list for a thousand people, and they sent this thing out there, and they made money off four percent, what happens if they send it out to 100,000?

And this is what’s so powerful. This is the math problem, the direct response math problem that when I really started thinking about it, changed everything for me. And I’ll get into how I applied this to the digital work and how this applies to how I’m running my business today.

If you do that, then it becomes a real question of how much money can you spend? I can spend more money to make more money. So you can really do the math and say, if it’s four percent, and I’m making money off a thousand people, and if I send it to 2.000 people, I’ve just made more money. If I send it out to five, I’ve made more money. It’s pretty interesting.

Somewhere along the way, I’ve been selling digital products for years. And with these digital products we’ve got these sales funnels. And with the sale funnel it basically works like this. Somebody comes to me, we’ve got a product. There’s a digital sales letter that they read, and they say, “Okay cool, I want that, let me buy it.”

And when they buy that, we’ll maybe have an up sale that helps them automate, simplify, or scale the thing that they bought first. It’s an extra, would you like fries with that sort of thing.

And then maybe after that we’ve got some more up sales that do the same for the first. There are a lot of people that think that these up sales are really annoying. But, what you have to realize is the folks that don’t think their annoying actually buy. And this is where things get really interesting. If you look at the percentages, let’s say I’ve got a page that is promising you something simple.

Right now let me just give you a behind the scenes. One of my companies is called Closers Café. And Closers Café has an opt in page where we’re giving away something for free. Meaning you put in your email address and your name, and we give you something for free that you want. And what this is, is it’s called six magic funnels.

These are these funnels that we built over the years, that help certain kinds of small businesses to grow. So I can go into a small business, put the funnel together, run an ad to it and it gets people through their door. I’ve got six of these, and they’ve been dialed in, they work.

And a lot of people would love to go run these, for dentists, or chiropractors, or whatever. We’ve got this, and we give away six of these. Now, heres what’s so interesting. I know that if I go online, and I buy a thousand people hitting that opt in page, I know that, and this is what’s gonna blow your mind, I know that at least 40 percent of the people that I buy, as long as the list is really targeted, the list of people that I buy, if I put it in front of those thousand people, that I know 40 percent are gonna come through.

They’re gonna give me their email address. Now that’s powerful right? Because I know that if I target the list correctly, 40 percent of people that see this offer, are gonna come through the door. Here’s where it gets really interesting and this is the math problem that absolutely will change your life. After I give that away, I make them an offer. And the offer is for, super simple here, it’s a $7 thing.

And it’s a master class. It’s like this online class where I walk them through and I show them how I get 99 to 199 payments every month by posting on social media for businesses. I post on social media for businesses. I automate it all, and they pay me to do it.

And we sell that class for 7 bucks. Now, right away there is another product. That’s how to get your first five clients which pairs really well with that class, that they can buy for $29. So they can add that to their order.

And heres where things get sort of crazy. Out of the 40 percent, a thousand people came to the page to opt in. Out of the 40 percent that come through, so 400 people, I can pretty much at this point tell you exactly how many people, the percentage are actually going to buy the first product, you know the $7 one.

I can also tell you the exact percentage of those people that are gonna buy the $29 product and add it to their order. Heres where things really start to get good. After they see that, there’s a $99 product. Then there’s another $99 product that is a continuity because we do some things for them. And then after that, there’s a $299 product. Now, of all of those steps in that funnel, we’ve run enough traffic to it at this point that I can tell you the exact percentage of people that are going to come through the door.

Now, I can also always go back to each of those pieces and improve the sales copy, do all kinds of things to improve it. But I can tell you the percentages at this point. And this is the math that starts to change your life. Let’s say that I’ve been running a few thousand clicks, a few thousand people to these pages for a few months now. You take a step back, and you start looking at the data.

And what the data will tell you is the exact percentage when you start to scale up the traffic. So instead of 1,000 people through. I could run 10,000 people through. This is what’s interesting. I actually have a model that I rock with this thing. And the whole set up is, it’s a spreadsheet.

And I can literally put in a few numbers with this spreadsheet now, and predict if certain percentages are correct. And we can test that by running traffic to it. I can tell you exactly how much money we can make month after month by running traffic to it because traffic or people will behave in the same way typically and they will follow a percentage even when you hit the larger numbers.

Listen, this particular podcast episode may not be for everybody. But what’s so interesting about this is, when you really dive into the percentages of what people will do when they’re faced with a certain situation and you start following them all the way through the path, you can start to predict. And when you start to break even with this particular funnel, and you start to actually make money with this funnel, then it becomes a question of just scaling. So running more traffic to it, buying more traffic, going more places.

And what’s so nice at that point, you can afford to buy all this traffic because you’re making money. Not only am I making enough to pay for the traffic in the first place, but I’m making more money to come through and I’m making a profit. So every time I send 1,000 people I’m making a profit. If I send 2,000 I’m making more profit. And 50,000 I’m making a lot more profit.

And this is what’s so interesting too about the online marketing business. You take a step back and this is what allows me to work from a backpack. You take a step back and you realize that not only are you paying for all your traffic so you can scale up in these sales funnels, these online sales funnels. Not only are you making a profit, the more people you send through the bigger the profits you’re making. But you’re also putting all of these people onto an email list, as customers, and as people that are potential customers.

So later on, you can go back and you can make them offers for something else. I hope you enjoyed this one. This was just a walk through of some realizations I had a little while back and how it’s absolutely changed my life. And trust me, if you’ve got something that you’re good at, you’re a doctor, you’re a lawyer, you’re great at shooting free throws, you’re great at teaching kids how to swing a bat and hit a ball, if you’re good at any of those things, you could put together a set of products that works like this.

You could absolutely go in, put a set of products that shows people how to do the things that you know how to do, and instead of doing it one on one, instead of teaching people piano one on one, instead of teaching people how to play the guitar one on one, you can now multiply your income by having people that will buy from you all over the world.

And those numbers start to stack up. Especially when you start to figure out, hey this product that I’m gonna sell first is 7 bucks, it’s $7. But by the end of the funnel if they make it all the way to the end. It’s a $300 product and all those things really start to add up.

Okay, I hope you enjoyed this one. If you are enjoying the Serial Progress Seeker podcast do me a favor, click the subscribe button or maybe leave me a review too. Let me know what you’re thinking and everything.

Alright, I hope you enjoyed this one. More good stuff coming. I’ll talk to you soon.

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5 comments on Episode #008 The “Math Problem” that changed my Business (and Life).

  1. Orvel S. says:

    Never understood the answer to the question I’m going to ask.
    Here goes……If you have 1,000 prospects and it’s costs $1,000 to reach them and your conversions and sales bring in $8,000. And that percentage to $ return holds true at 10,000 prospects you return $80,000, and a $100,000 ad spend/prospects return $800,000, then WHY aren’t you or others spending that larger ad amount IF the numbers/closing/return equation hold true no matter the higher the ad spend? Does there come a point of diminishing returns? I’m just thinking that IF the above formula you spoke about on your podcast was that black/white….WHY NOT just keep throwing/spending larger and larger amounts of money to hit it really big?! Such as a $800,000 ad spend to return you $8 million dollars. and so on. just askin’.
    ALWAYS love hearing from you.

    1. benadkins says:

      Great question Orvel!
      Two big answers to your question:

      1) It’s not always easy to find enough traffic to scale up as quickly as you like.
      2) Traffic from different sources can behave differently.

      For example: If am making $2 for every $1 that I spend with Facebook ads, it’s not as simple as just kicking my $100 a day adspend up to $1000 or $10,000. That throws off the algorithm and can affect the quality of traffic and price.
      When you’re scaling up, you have to make sure the network you’re using for traffic can provide as much traffic as you want…. and you have to climb slowly when you add more traffic on a network like Facebook.

      The way I think of it is this…
      If I have a campaign that I’ve proven to make me 2x my investment… I’m looking to scale it up over the next 12 months. That allows me to slowly see whats happening and make tweaks to make sure everything works.

      The folks that really crush it dial in campaigns over time. It’s not hard to buy a ton of leads at once. But when you’re wanting sales, you need to scale things up carefully.

      In short…. The formula works when you build the funnel… but patience is also involved. Most people aren’t patient and throw away winners because they rush things and it doesn’t work when rushed.

  2. John Brack says:

    Hey Ben.
    Great marketing strategy.. Write great copy, test, and scale to do well.

  3. Peter P says:

    Hi Ben,
    I tried signing up for that $7 product, but it’s changed to $0 and you can’t sign up unless you buy the $29 product first?

    1. benadkins says:

      Thanks Peter! Got it fixed!

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