Hey, guys. Ken Courtright here from Today’s Growth: Growing Business Today. This is episode 19. I’m titling this Prepaid Versus Postpaid Advertising. Again that is Prepaid Versus Postpaid Advertising, and this episode is the result of our 2 companies using 50% prepaid advertising over the last decade or so, and 50% postpaid advertising. I’m going to go into some detail about these forms of advertising. I think we tracked that we did 7 different forms of advertising in the last decade or so, and there’s no question that 1 of the 7 specifically has put us on the Inc 5000 list 3 of the last 4 years. I’m going to go into some detail on that one.
Here’s the thing, both prepaid advertising and post pay are excellent methods of advertising. There is a difference, and it sounds somewhat sarcastic is one of them you prepay into a platform, a system, if you will, and then you hope and pray it works. If you hit the right vein in certain prepaid advertising, whether it be radio, billboards, magazine ad, paper, click, some of them are just truly explosive. Again, we used to do a ton of prepaid advertising. For the most part, to a degree, they’re cost effective. They’re not very scalable in most cases, unless it’s a national situation, but they work. However, post pay advertising, as you’ll see here at least in our space, in our case, as this is a case study of our company … Post pay advertising was explosive. Incredibly scalable where the others, as you’ll see in a second, we’re not. Some forms of post pay advertising would be using affiliates, commission only sales reps, JV partnerships, paying out referral bonuses if people sent us business. There’s a very big difference between prepaid and postpaid.
This whole episode is simply a case study of, what exactly did we do the last decade or so? What methods did we use? What were the numbers? How much did we put in? What exact results did we get out? I think even though is this is our company and we have a premium product that’s fairly pricey, I think you can take the lessons here and the platforms, and just scale them into your industry, your business. I think you’ll have no problem doing that.
Just to understand why we chose these 7 platforms you have to understand our products at least on a surface level. I’m not going to go into any details or any pricing. Bottom line is we have 2 companies. One is known as TGC, or Today’s Growth Consultant. That offers a website called an authority website. Think WebMD. We didn’t build WebMD, but WebMD has 500 doctors that write content every month. It’s an incredibly awesome website. Again, we have no part in this website, but it’s a huge website. It makes over a half a billion dollars, $534 million last year. It’s awesome. It dominates, I think 1.9 million medical terms on page 1 of Google. It is the bomb diggity.
Our one company does many versions of that. It’s a very hands on application. We partner up with authority figures that are authors, or ex-executives, or current executives, or GMs of NFL football teams, and we partner. They write all the content, we build the website, and then we split revenues into perpetuity. Our second company, known as Income Store, is very hands off. It’s totally different from the first company. Where in Income Store, people are just looking to purchase an Income. It’s almost a franchise mentality, where they want a guaranteed return. People know if you buy a McDonald’s or a Subway, you’re probably going to do well. Totally different market, and so the challenge is we had to find advertising platforms or advertising mediums that could appeal to both of our challenges.
Here’s our challenge number 1, both of our products are too good to be true. On the surface, both of our products, that’s from both companies, come with double digit guaranteed returns into perpetuity. It doesn’t matter what the returns are, the fact is they’re double digits, they’re guaranteed in writing, and if people work with us they can will these revenues to their kids and grandkids. It took us a year just to work up the contract to get a perpetuity contract because our judicial system doesn’t like those. We were able to pull that off, and we offer a very too good to be true product. That was challenge number 1, How do you find an advertising medium that can work for both companies?
Here’s the real problem we had. Our 2 companies have 2 completely different audiences. One is an audience that’s hands on, and they aggressively are looking for more leads for their company. The second one is completely hands off. They don’t want anything to do with anything. They just want to throw us some money and literally get a specific amount of money or more every single month the rest of their life. The bottom line is, 2 completely different audiences. Now we’re dealing with it’s too good to be true and we have to appeal to 2 completely different audience sets, so the first thing that we did is we started doing trade shows.
We went and pulled a Seth Godin. Seth Godin, who I believe is the greatest living marketer of era right now, says if you want to sell something you go fishing where the fish are. I think most of us know that you can go to Florida, the Cayman’s, and you can charter a boat and they will guarantee you a catch. How do they guarantee a catch? The first thing they buy once they buy their boat, it’s not fishing rods and fishing lures, no. They buy fish finders. Because if they don’t have the best stat e of the are fish finder and can immediately race to where the fish are there’s no point in putting your pole in the water.
Learning from the best, learning from Seth Godin, we knew, “Hey, we’ve got a very interesting product set here. We’ve got a very interesting audience with specific needs. They want leads. They want this. They want guaranteed returns.” We knew there are groups of people looking for leads that would hang out in certain places, certain business expos. Then we also knew there’s certain audiences that wants hands off just good returns. They can buy a franchise. They can put a manager in play. They want to run their other company, but they want a second, third, fourth revenue stream. What did we do? We listened to Seth Godin. We put a booth, and we would spend $3,000 to $5,000 on the booth plus airfare. This advertising medium of trade shows, our numbers after 2 years were $5,100 per trade show, and we would net just over 1 new website partner. Somebody that would invest in a website and get a guaranteed return.
It was incredibly profitable for us. However, we stopped it eventually because it wasn’t scalable. It took time and it took bodies, and there was only a couple people out of company that could take the time, and leave their kids, and set up these booths because they’re all over the world. We hated giving that up, but it was not scalable and it was not going to take us where we needed to go, so while still doing trade shows we said, “You know what? Why don’t we try highway billboards?” We put up some billboards. We did not get one single deal from these billboards, and we found out we were trying to deliver a message … I wonder how many people listening to this podcast sell a product that’s similar to ours. That is we were delivering a message of what is called an unseen consort.
When we’re targeting our audience it’s very difficult to lead with, “Hey, we sell authority sites.” People go, “Well, what is that?” An authority site is a platform that ends up generating tremendous leads. You can write books. You can become nationally famous. How do you say that on a highway billboard? The other product we have, bottom line, just provides huge financial returns. Guaranteed in the perpetuity. Too good to be true. We put both of them up on a billboard, nothing, zero. I don’t how much was invested in that. Did not get a single deal.
Then the third thing we tried, which worked phenomenally was national radio. We used a reverse auction service where it got us into WGN, ESPN, ABC, and it was about a $16,000 cost per 1 new site partner acquisition. Now, our websites are $40,000 to $4 million, and we get to split revenues into perpetuity on these things, so $16,000 in would allow us to break even in year 2. To our fate the reverse auction service folded, and we could not find a replacement to go direct to WGN, ESPN. It was just too expensive. We couldn’t do it, so that was definitely some tears of sorrow in the coffee cups for a little bit around here.
Then we stumbled on number 4, business brokerage websites. We’re still doing these today. About every $4,500 we put in ads, advertising some of the websites that make money that we have for sale, we get 1 new website partner to buy 1 of these. $4,500 in, website partner comes out of it. Again, these first things I’m explaining, they’re all prepaid. They all provided a linear return. We could mark on a piece of paper X amount of dollars in equals 1 new website launched. Our goal was to get to 1,000 websites. We’re at 700. We’re not done yet, but the point is, we knew exactly what it would cost us to get website partner. It was a linear return.
Then we started trying Facebook ads. We came up with 107 different size, different shape, different colored ads. After a year of tweaking, after sending people to our base website, after sending people to a landing page, a squeeze page, a this, that … After a year, we have today 107 different ads that send everybody to Incomestore.com/learn. It’s not a separate domain name, which is key for us. It doesn’t confuse people, so it’s Incomestore.com/learn. In which we then stripped out all navigation buttons. There’s nothing you can click on. It’s just a 4 minute video and that’s it. People can either watch the video or leave. If they watch the video then they can either submit an e-mail to contact a sales rep or not.
It’s very focused, very simple. We control what they see, and we average 5.7 leads per day, and we add site partners on a regular basis strictly from Facebook to what I’ll call our tutorial video page. Bottom line there is we control it. Here’s the deal, it’s still linear. There’s only so many ads. There’s only so many verticals that we can attract through with Facebook’s options of who you can target. It’s still a very linear return.
Now, moving on to advertising method number 6. I’m still doing prepaid. I’m still doing linear returns here, but this is where things began to change for us. I began doing what has been done for decades in the financial advisor industry, and that is, I began doing restaurant dinner presentations. We would send out, say, 2,000 mailers. If you come to such and such fancy restaurant, you get a free steak dinner, couple glasses of wine, and you can hear Ken Courtright blab for an hour or so about their products and services. Trust me when I tell you, 99% of the people come for the steak and the wine, and, “Oh, by the way, if there’s a guy yapping, I’ll pay attention to him.” This method is used for a long, long time in the financial advisor space. It’s still, from what I hear, is maybe the number 1 revenue generator in new business for large financial firms.
Here’s what we found, although this one was awesome, we got way more business from this method than anything else. Of our 72 employees, there’s only myself and 2 others that are willing to travel and speak, and that is not scalable. It did show us that anybody that gives us 30 to 60 minutes hears enough information that they eventually go home to Incomestore.com and click a little button that says, “How it works.” That button would lead them to X amount of videos, and within 2 days to 2 weeks if they were interested … We had no sales reps following up, we had no e-mail follow ups.
We were not, I would say, a good company doing this by any stretch because we were busy. With no sales rep follow up … I can guarantee you that I never followed up on anybody that I spoke in front of, which I’m not proud of that, but it is the reality of where our business was at. Bottom line is within 2 days to 2 weeks our e-mails would blow up, our phone calls would blow up. People that sat through those restaurant presentations, they heard enough to then go to the how it works page, which had some explanatory videos, and they would hear enough to seek out a sales person to find out more.
Here’s what we found out, of those first 6, they were prepaid advertising. I had to pay for all the dinners before I spoke. I had to pay for the highway billboards. I had to pay for the radio. All of it was prepaid, and then I would simply wait and hope people would follow up with us. People would have enough interest. What we found in the sixth one was that speaking, when I would physically go out and speak, or my brother or Mike [Ingstrom 00:13:26], would go out and speak, it proved to us the marketing concept called Squeeze the Charmin.
For those of you old enough, there was a commercial in the ’80s where you could go in the aisles of the grocery store and squeeze the different toilet papers. If you squeezed Charmin you knew right now, “Okay, that’s the best toilet paper.” In our world we realized when people would hear any of the 3 of the main guys here that would go out and do presentations, if they could physically meet us, and hug us, and shake our hand, and in essence “squeeze the Charmin”, they live presentations eliminated, literally took away, the too good to be true aspect of our second challenge. Our second challenge of too good to be true was very tough to beat.
Well, we then said, “Whoa, wait this is powerful. What if we then bring in some of our site partners? People that have been buying websites with us for years. What if we would get them to come with us to these restaurant meetings, how would that be?” This is when the world changed for us because our other problem is it’s too good to be true. Our other problem is we guarantee returns into perpetuity, which is what triggers the too good to be true. Our other challenge was, which later got proven in something called social proof, is even though people would fall in love with the concept when I spoke, or my brother spoke, or our GM spoke, the reality is they would still then have to go back and talk to their spouse, their business manager, their attorney, this, that, the other.
What we found was if we say it, the leaders of our company, the head sales person of our company … If we say it we’re still viewed as the sales person, but when we brought our site partners who had 3, 4, 5, 8, 10, even 100 websites with us that were getting guaranteed returns on all of those, when they said something we watched and it was absolute magic. As the people that heard us speak ate their steak, and then stayed around for Q&A, I would stay in the back in the corner and just let them talk to our clients and our customers. I couldn’t believe it. If I said it, yeah, that was cool, but if our client said it, if our site partner said it, it was like we couldn’t do deals fast enough. After a couple of these I realized, “Wait a minute. We’ve got to think bigger here,” because still these restaurants, even if we bring some site partners in, it was not scalable. This is where the world of postpaid advertising hit us in the face.
Three years ago, 2013, 2 huge changes were made. Number 1, I made the decision no more restaurants. Even though these were the most profitable thing we’ve ever done by far, I said, “Nope. Large stages only.” If we’re going to let people “squeeze the Charmin”, instead of having 8 to 30 people in a restaurant, how about 2 to 500 people on a stage, on a real big stage? We began holding our own events. We began speaking at other people’s events, and we made a decision we will never do less than 10 large stages per year. We said we’re going to try postpaid advertising. Now, this would be what’s called a Q-tip moment. If you have some Q-tips, get it out, clean your ears. This is a game changer.
In early 2013 I met someone that approached me and said, “Ken, what you’re saying obviously sounds too good to be true, but if your company can truly build or buy revenue generating websites, and then you guarantee in a contract double digit returns into perpetuity then I cannot image how many people I could refer to you if we could do form of a JV offer.” Well, without even thinking … I remember this vividly. I know where I was standing. It was like I shook, but without any thinking, knee jerk reaction, I said, “Well, tell you what, if you think you can throw us deals on a regular basis, for every person you send our way, if they end up doing a website with us, I’ll give you choice. I’ll either give you $1,000 up front or 5% of our half of the website’s revenues for life.” He says, “I don’t understand. What’s the difference? Which one’s more money?”
I said, “Well, $1,000 up front is obviously $1,000, of if we buy, say, a $50,000 website … If someone gives use $50,000, so if you refer us to someone and they say, “Ken, I’ve got $50,000. I want you to go buy us a website that makes money.” I’m going to take the $50,000 and I’m going to go buy a site making $25,000. Now, we split that in half, so whoever gave us the $50,000 they get $12,500, and we get $12,500. We have to take that $12,500, we’ve got to write content, we’ve got to market the content, and then about a third of that is payroll and profit. The point is this, of the $12,500 that our company gets for life into perpetuity, we’ll give you 5% of that for life.”
He goes, “So I would get $500 to $600 a year for life, or I could just take $1,000 up front. I could get 2 years worth up front or I could take half of that and get it into perpetuity.” He goes, “Is this a trick question?” I said, “No, I’m just literally making this up on the fly with you because you said you could refer us a good amount of business. I’m willing to try something.” He goes, “Done. I’ll take the 5%.” We wrote a quick paragraph. He signed it, I signed it, and the rest is history. Because he was good to his word that person today is on track to earn close to a million dollars in their lifetime from that conversation right there, and we didn’t stop it. We made that deal with everybody moving forward.
Now, watch this. Here is the real power of post pay advertising, but before I get into that let me explain. With this gentleman whose name is Bill, I didn’t give Bill any money up front to go advertise what we do. I didn’t give Bill any money up front to go to a trade show, to go put an ad in the newspaper. I didn’t give Bill anything up front, but if Bill brought us a piece of business then that business became an official transaction, and that business started generating revenue. From the brand new revenue we received, I would give a tiny portion of that back to Bill as a thank you into perpetuity. That’s post pay.
Here’s 2 things. Prepay, again, is radio, TV, ads, and billboards. You pay and then you hope, and it’s often very expensive. Post pay is joint ventures, affiliates, referral bonuses. I think everybody in your hometown, your car dealership, if a new person buys a car and you referred them, I think they usually give you a $50 Visa card, something like that. That’s a referral bonus. What does it cost to do post pay advertising? Nothing. It doesn’t cost anything up front. The only way you pay post pay advertising is out of new money brought into your company.
Here is the hidden value of post pay advertising. It’s awesome. Number 1 is you allow everyone to hear your advertisement. With post pay advertising everyone gets to hear your message. With prepay advertising they can screen it out. They can ignore it. They don’t have to listen, but with post pay advertising you allow every person to hear your ad. Watch this. This falls under what is called the rule of 2%. The rule of 2% says if you walk into a room, say, full of 300 people. Let’s say you’re at a wedding or you’re at a big business convention. The rule of 2% says the odds of somebody in that 300 people that at that moment in time need your product, want your product, could use your service, or could afford at that time to buy your product is 1 out of 50. This has been proven over decades in different industries.
As a matter of fact, if you go back to the original Yellow Pages there was on average 17,500, we’ll call it, different business in the average large city in the Yellow Pages. Yet the average homeowner would only use 250 of those services in their lifetime. Well, what about the other 17,250? People don’t need them, don’t want them, don’t care to hear about them. Watch this. The rule of 2% says if we know right now in a large setting that only 1 out of 50 can or would want to hear your message, if I’m speaking on stage to 300 people the last thing I want to do … I want you to picture 2 scenarios. I want the rule of 2% to hit you so hard.
Picture these 2 scenarios. Scenario A, I, Ken Courtright, walk on stage. I tell 300 people, “Hey, guys. Guess what? We sell websites. You can have us build one or buy one. Each website’s between $40,000 and $4 million each, but if you buy one you’ll get a 10% to 25% to your family for life, and you can will it to your kids and grandkids.” Right now everybody listening to this podcast knows 98% of that room is going to completely shut me off, not hear a word I say moving forward because A, they don’t want one or can’t afford $40,000 to $4 million. They’re going to literally shut their minds. Now I’m all the sudden a salesperson. Brick and mortar, brick and mortar, get defensive, protect their wallets, don’t listen to Ken any further he’s selling me.
That’s what most people do. Most people just go out in the world and sell. They aggressively go sell. What if I walk on that stage and I say, “Hey, guy. How are you doing?” Three hundred people in the audience, “How are you doing?” You go, “Who came from the farthest away?” Whatever, blah, blah, blah. Then I say, “You know what? Before I share what our companies do and what our product set is I want you to understand something. Our products are a little bit pricey than the average product in the marketplace. However, I think I can get 100% of all of you to hear everything I have to say, and he reason I know this is I have never met a company that offers a larger referral bonus in the world. I’ve spoke in Canada, London, Dubai. Everywhere I go I make the same presentation, same explanation. I’ve had not 1 company ever say, “Yeah, we have a bigger referral program than you.” Listen to this, before I even say what we do I want you to understand. As I’m explaining our product set I want you to think of who you might know that might need or want one of these somewhere in the future. Because if that ever happens, and you refer them us, if those things become real official deals, we’re going to give you 5% of the revenue from that transaction that comes to us for life.”
Then I go in and explain the $40,000 to $4 million. I explain the 1 gentleman that’s referred us business that’s going to make a million dollars in their lifetime. Whether he ever bought a site not, that person, for a referring us business is going to make a flat out fortune. I said, “If you’re 14 years old, I don’t care. If you’re 85 years old, I don’t care. If you refer us a piece of business you’re going to get 5% of our half of that site’s revenue for life.” Then I go on, I present.
Watch this now. Here’s what is so powerful about the rule of 2%. The rule of 2% says if you’re selling you only have 1 out of 50 ears. 1 out of 50, but if you’re fishing for referrals, and you’re selling for scout. If you’re selling for people to go out and scout the world for you, what are the chances of all 300 people in the room having people that are friends on Facebook, following them on Twitter, reading their blogs, clients in their business … What are the chances that they know 50 people in their life that maybe, 1 out of 50, might need one of these websites? The chances are infinitely greater. Infinitely greater.
Here’s the key, when you understand the rule of 2%, and then you understand the power of post pay advertising, instead of going out there and selling the world your products and services you’re actually selling a cause. You’re selling a reason to listen. You’re selling the fact that you allow everybody to participate. We began this in March of 2013. We then shut down all forms of advertising. Every form of prepaid advertising is done. We haven’t done it since the summer of 2013.
First mention, March of 2013. That year, which only had 8 months remaining, we grew 230% as a company. We were already a mature company doing 7 figures. We grew 230%. In 2014, we doubled again, and as a reminder we stopped all forms of prepaid advertising. In 2015 we doubled again, so 3 of the last 4 year Inc 5000 company, doing now 8 figures. How did we do it? We stopped all forms of prepaid advertising. Now all we do is post pay advertising, and it’s scalable. The thing that is the hardest for me to still absorb is this is completely scalable. The more people referring us business, the more people as our brand ambassador. It’s awesome.
Here’s what I have to ask you. What crazy offer can you build for your own company, your products, your services? Here’s the drill. Number 1, you’ve got to find out what is your lifetime value of a client or a customer. If you don’t know you better figure it out. What is the lifetime value in net profit as a new customer, new client comes into your book of business? What are you willing to pay as a referral fee? I’ll challenge you right now. If you want to jump start your company do what we did. Get crazy with it. Offer some ridiculous options and just get attention. What are you willing to pay out for a referral bonus? Then what fun way can you roll it out?
Remember my previous episode where I mentioned Purple Cow by Seth Godin? Can you make your referral bonus a purple cow? Can you make it remarkable? You’ve got to just trust me. Getting 5% of a 2, to 3, to 400,000 dollar transaction, which is going to run $100,000 a year in revenue, and getting 5% of that for life for just referring someone, that is remarkable. It’s not something you can hold in. You have to tell people about it.
Some mainstream examples that you guys probably remember. Back in the day MCI did friends and family. In the late ’80s, early ’90s if you referred a friend to MCI World Com, who had never used them before … Actually, it was just MCI at the time … Your next bill was free. Your next monthly bill was free. That put that company on the map. That was an absolute remarkable campaign. Many, many, many companies have replicated that concept.
Tony Shay came up at Zappos and said, “You know what we’re going to do? We’re not going to tell anybody, but 1 out of every 3 people that order a pair of shoes from us,” in the early days, “we want to do next day guaranteed shipping for free. Don’t tell them. Don’t tell them. They’re going to take standard shipping. Don’t bill them. Ship it the next day for free.” What happened? People jumped on every social media platform and said, “You cannot believe what Zappos is doing. I ordered 3 day shipping, regular shipping. They said it will be about a week. I got it the very next day in a FedEx, “Congratulations, you’re a lucky winner of free day shipping.”” The customers did the marketing for Zappos.
Here’s the question for you, what crazy, insane gift or kickback can you offer your potential clients, your potential customer? Here’s a huge tip. That that is rewarded will get repeated. Let me say it again. That that is rewarded will get repeated. If you do something crazy for your clients there is a chance that if they receive the benefit they go, “That was easy. I could do that again.”
Final reason why post pay is often better than prepay, social proof … Again, if you guys have not heard the podcast Trust Trumps Everything, I would drill down and make that the next podcast you listen to. Social proof has proven that we, the leaders of our companies, the salespeople of our company, we can no longer sell as well as our tribe. Meaning, if we say it as a salesperson, if our website says it, which is a salesperson, if our market materials say it, which is a salesperson, only 50% is even absorbed or believed. However, if our audience, our tribe, our clients, our customers say it, well, then it must be so. If we say it, 50% roll their eyes, but if our clients say it, it must be true. The definition of social proof says if the world says it so it must be so.
Post pay advertising puts the incentive into the greatest mouthpiece of your company, your client. You’re incentivizing your client. Again, think Tom’s Shoes. Who does the marketing for Tom’s Shoes? The client. If they buy a pair of shoes they put a brand new pair of shoes on a kid that’s never worn shoes before. They cannot keep that quiet. They have to tell their family and friends. Here’s what I need you to do, hang up of this podcast right now and think of 3 crazy things that if you offered them to total strangers or your clients it would be a strong enough incentive for them to start referring business to you immediately.
I am Ken Courtright from Today’s Growth: Growing Business Today, using today’s techniques that work today. If this podcast hit you, please jump onto a desktop version of iTunes, shoot me a review. Take care. See you on the trail. Talk to you soon. Bye. Bye. Bye.