Todd Brown is the expert other experts go to when they need help with their own business. With clients in over 33 different countries, operating in over 65 different mass and niche markets, it’s been said that Todd has helped his students engineer more six and seven-figure funnels than any other expert online today.
The two things. Number one is clarity over creativity. And so meaning that at the end of the day, you want to know exactly what moves your market, what moves your audience, what they're fired up by what they're compelled by what they're interested in, what they're not interested in, what is the language that they use? How would they say it? How would they convey it? How do they picture it? What do they want? Right. We've got to, got to get ourselves out of the way and we want to be, we want to use the clearest simplest language that we possibly can. And so in this context, right, creativity is thinking like, let's come up with a better way to, to say it. Let's come up with a better way to, to, to take their words and let's come up with a more creative way. But the more you do that, the more you detach from the, um, the prospect.
The other thing, the second kind of thing that I learned early on is it's very easy to start to believe that the creative can make up for a lack of a message or idea that is just a gut punch to the market. There is nothing like at the end of the day, man, if you've got a good idea of good marketing idea of good marketing, a hook theme for your campaign, for your message, the single best thing that you can do is to let that shine through clearly and simply pull away everything else that adds noise. Everything that could mask it. It's when people start with a weak idea, a weak angle, a weak hook that they try to prop it up either with puffed up language or creative, like let's make it look really nice. Even though the copy sucks, the message stinks. It's an ordinary idea. Let's make it look really nice and hope that people don't notice and it doesn't work.
Speaker 2 (01:50):
You're listening to the rich add poor ed podcast, where we break down the financial principles that rich advertisers are deploying today to turn advertising into profit and get tons of traffic to their websites without killing their cash. These advertisers agencies, affiliates brands are responsible for managing over a billion dollars a year in ad spend. You'll hear about what's working for them today. They're rich ads and we'll roast their Epic failures and crappy ads on the internet with core ads. Let's get into it. Welcome to another episode of the rich dad. Poor dad podcast is your host sack Johnson. I'm with Mr. Dylan Carpenter today. Dylan, are you ready to dive into some metrics, some marketing numbers with a legend and Oh gee. Oh yeah, man. I'm about to fanboy over here. I'm a fan boy moment. You're like a little junior high school girl. I love it.
Well, today's guest, uh, Nisa introduction, man. We'll just get right into it. Todd Brown. Welcome to the show, man. I'm excited to be here. What you guys? Yes. Ma'am. Well, I, uh, I was buttering you up before man, but like real, literally the reason why I wanted you on this show is because I think you are most qualified out of any other marketers out there in this space to really help bridge gap in terms of what, what ultimately happens like after somebody knows all their metrics, their numbers are LTV, their payback period. Like once they've kind of gone through your world, they know that like really then starting to think about what are some of the financial levers that they can start to pull to really pull some juice. Right? The, the best example that we know as marketers is the people that win, you know, is, it are people that are willing to go in the hole for like six months before they need to break even. Right. And, uh, and so I'm excited to dive into that, um, today, but it'd be cool. Just tell me a little bit about like what's, what's new with you and, uh, what's, you're up to these days.
Uh, so just having a blast, working with, uh, sharp entrepreneurs, you know, folks that are, I would say probably, uh, ranging from 3 million to, you know, over a hundred million direct response driven entrepreneurs, we really were a training education and coaching company. And so we really are guiding these entrepreneurs in two core areas. One is a aggressive customer acquisition. So, uh, you know, customer acquisition at scale or client acquisition at scale. And then of course, backend monetization where all the profit is made in this business. And I think it's a perfect tie in with what we're going to, uh, likely have a lot of fun talking about today because, uh, it's all driven by math, arithmetic. It's all, it's all about numbers and making sure that those numbers work and understanding that from an investors perspective, man. And so, um, so yeah, just good stuff. All the same, been doing this now, almost my gosh, almost two decades. And so, uh, I've seen it all through it all. I feel like, um, you know, I'm decrepit now and, uh, you know what I mean? I'm starting to have that weird old person odor and it's yeah. It's not,
Well, then I was watching, so, you know, your testimonial reel, I was just going through some of your latest stuff and like, dude, people are getting some insane results, like big numbers, right? Like I I'm, I'm like super impressed of, uh, some of the businesses that you're working on. I thought like some guy was like, yeah, we made a couple million dollar. Like, it was like $7 million, like last month. It was like some big numbers in your, in your world, man. I love it.
Yeah. I, I think it's, it's interesting. And look, man, I think I'm blessed with, we just, we happen to attract really good entrepreneurs. And what I mean by that are just like folks that understand, you know, they got to do the work they got to put in the time they got to learn and grow in areas that maybe they're a little bit uncomfortable with. And, um, and they're coachable. And so, you know, look, man, I approach all my clients as, as if you know, their business was my business, my money reputation livelihood is on the line. And so as much as I want to have a good time and you know, and, uh, get to know these folks, I'm there, you know, like we're there to get a job done. And most these folks will, when we say turn right, they turn right. When we say turn left, they turn left. And people like that tend to get good results. And so they make me look good.
So I want to know, like we, we asked all our guests this, right? Like how much ad spend do you think you influence in your ecosystem? Like every single, every single year. I mean, revenue wise, like your number is up there in terms of like help drive new revenue for your clients, but what do you think it is in terms of ad spend?
Oh my gosh. I wouldn't, even if I had to wager a guess and I would say annually, uh, in the high hundreds of millions.
Yeah. Almost, almost a billion maybe somewhere between like 500 million and a billion
It's, you know, we, we like, look, there are some clients that skew it radically, you know, there are some clients that, you know, spend, you know, millions of dollars a month, um, themselves, you know, uh, but a lot of money, man, you know, a lot of money gets spent on, uh, on media in our world. And it's because they know they understand what you guys are really preaching. They understand that it's all about, you know, it's all about thinking and operating like an investor because that's what we are, man.
Yeah. So man, well, let's get into it. I want to know what's your rich had these days, like what's a campaign that's working for you, you know, in turn and for your clients, right? Like the game is the game is change and it's always evolving and changing. And so what's, what's uh, what's something that's surprisingly working well.
Oh man, that's a great question. Um, I think in an interesting thing, I don't know how exciting this is going to be for, for most of your listeners, but this was something that just really surprised me, um, and how this has been working. So, uh, we run these weird, uh, and we've only been doing this for a handful of months. Now we run these. We basically, we have a, we have a Facebook group in addition to our Facebook page, nothing, we don't, we don't put anything. Uh, like we, we don't focus extensively on this Facebook group, but we do keep people engaged every two weeks. We, we give away something in the group and you know, we're giving away, you know, call it a lead magnet for lack of a better phrase, the lead magnet that we're giving away. We're trying to give something that is targeting our ideal audience.
Um, all they have to do to get that freebie is comment in the, uh, you know, in the, in the feed below the post. And then we have somebody on our team reach out to them via messenger. Uh, and there's a whole process that they use to then move those folks over. If they're qualified to talk to somebody on our, um, on our consultative sales team. And it's just crazy how well that works for whatever reason, it's this combination of, you know, like, you know, uh, a little, some automated stuff, some content with, you know, actual personal, we don't automate that interaction between the person on our team. We have a little team that is just responsible for responding to those, um, comments and
Straight w what has ha I want to hear what the results are of this, of like how effective this is. But like, if I'm understanding this correctly, all you're doing is you're having a private Facebook group community. You're making a post into the community, offering a lead magnet. They have to comment on the posts. You're keeping people engaged in the group, which is awesome. And then you have a team member that's going in a messenger delivering the lead magnet and then offering a call. So I've actually seen this done, not in groups, but like I've seen people do it like Dan Martell is doing this, like on LinkedIn a lot with like a bunch of like PDF, like downloads and templates.
I didn't, we didn't, I didn't create it like other, you know, we've seen others do it. A couple of our students have done it in their business with great success. And we were like, Hey, let's, let's roll with it. Like, it should be very easy, very quick for us to test. And so, um, we did. And, um, and it's great, you know, again, you know, we, the majority of our growth, the majority of our acquisition of course comes from media. We don't like, we don't focus on SEO. We buy media, uh, because we understand what it is that you guys understand and preach and teach. But we looked at that as we've got this, you know, captive audience. Uh, and so let's see if we can kind of get them to raise their hand based on this topic that we're putting out in the lead magnet and then have somebody reach out to them. Right. And then based on that little conversation, which there's a process that they follow, they identify if the person is qualified and then if so, they give them the chance to schedule a call with, uh, somebody on our team to talk a little bit more about our methodology and process for helping folks with acquisition. And, uh, and it's been great,
Dude. That is awesome. I mean, there's so many people I used to call them like these funnel jumpers, right? Like these, all these like high level entrepreneurs that like, they're not going to watch your webinar. They're asking to watch your VSL. Like, they're going to hit up your support tickets. They're going to like hunt you down on, on, on your profile. And that what you're talking about there just appeals to somebody that doesn't want to mess around. Right. They're just like, Oh, this is real value, quick conversation, quick chat. And, and, uh, I'd imagine that those, those sales are pretty high value and with some pretty high caliber individuals as well. Yeah.
Yeah. It's, it's, uh, it's great. I mean, look, man, sometimes the shortest path like, or the best path is the shortest path sometimes, right? Like we can, you know, today with all the complexity in, uh, in online marketing, all the options, all the things that we can do with optimization or that's the new term, that's what we focused on automation, personalization, dynamic content, like all that. Sometimes you can get enamored with the new ways of doing things. And the reality is is that sometimes the best path is the shortest path, man. It's so true, man. I want to hear one edition. One edition. Oh no, no, no, no. There's no more. I'm that's for paid clients. The more is for paid clients. This is what your podcast listeners get. That's awesome.
That's awesome. This episode is brought to you by funnel Nash's add card, the only charge card exclusively for your digital ad spend. And if you're an ad agency that manages seven or even eight figures a year in media and ad spend for your clients, and you're looking to double your profits over the next six to 12 months, then check out, add card, see the typical agency model is this. You charge 10% of your spend and you make 10 to 20% margin at the end of the day. So that's really one to 2% of your clients spend that is profit in your business. The easiest way to double that is a really find a way to earn in that one to 2% cash back of the card that is on file of your clients as ad account. And before add card we had to do was invoice all your clients for their ad spend up front.
She's really difficult on a cash flow basis and very difficult ask. And then you had to put the card on your own Amex or whatever card of choice to get that level of value back into your business with add card it's entirely different in streamline. You simply get your clients on add card and make yourself the agency of record, and you'll get the cash back. As long as you're managing the ad spend, it's a great way to double your profit without doing any additional work. Check it [email protected] I want to hear about a poor at something that, something that, uh, you were really excited about. You seem like a really disciplined guy, Todd Lissa, like, you know, you're so direct response. And so you're just like, if it doesn't work, I feel like you're one of the guys just like, shut it, move it down. Like, let's go. But I want to hear about something where you got a little over your skis. You're a little bit more committed to it. You really wanted it to work, but, but it didn't quite turn out the way that you want it to.
I'll give you an example. This isn't, this isn't an an ad because it never got to the ad stage, but I will tell you my biggest, my biggest flop flop, complete flop. This shows you what happens when you can get too close to something. Um, I am very much when it comes to our ads. I'm very like, I, you know, I'm very, uh, like, look, it either hits the benchmark, the KPI, or it doesn't, if it doesn't, we move on, we're done. We're not going to try to turn a dud into a home run. That's one of the things that my early, uh, one of my early mentors, Mark Ford, uh, really drilled into me early on, you're going to turn a dot into a home run. So if out of the gate, the thing is a Doug. Don't try to don't think that you're going to, you know, like, don't think you're going to button color this bad boy, all the way to home loan status. It ain't happening. And so here's the, here's the flop. So, uh, so somebody on my team, uh, convinced me, I thought it was a good idea as well, to do a dollar shave club style commercial for our company. Um,
It's like a great idea. Yes.
Like, look, man, I think it's going to be so much fun and like, right. And I think that it'll work. I think my desire to have fun doing a commercial, like led me to convince myself that it was going to be really good. Anyway, we poured money into this thing we had, there was like a, uh, the week we had to rent out like a floor, an entire floor in an office building. We had like a cast of like, um, like 15, 18, um, people, full blown film crew to the point dude, where, and like, some of these people have like their, their actors card, I don't even know. Right. But they were like legit. We actually had somebody come in with a rare monkey because this monkey was part of the, like a rare monkey. Um, and we filmed the whole thing and we were like, Oh, this is going to be great killer, blah, blah, blah. We went through, we filmed the whole thing. I have it. And, and then we showed our team like the rest of the team and they, and like, somebody that I trusted at the time was just like, don't ever let this see sunlight, like ever show anyone. And I was like, really? And then like, I showed my wife and she was like, do not release
Me. Yeah. I may have to. It's it's I may have to pass on a clip to you guys that is protected by several layers of passwords. And, um, no, it's just really like, it's, it's like bad, really bad acting and you know, yeah, no good. And so that point being full blown, scripted storyboards, met with the rector team, hiring all this thousands and thousands and thousands of dollars and just pulled the plug, like said, we're not doing it. Like, just count it as a loss and move on. Um,
Good for you on that discipline. I don't know that I could have done that. I'm like, well, let's at least put a couple hundred dollars.
I was just like, man, the like I'm already, you know, I'm financially, I've already lost. And now on my line is my reputation and my self-respect. And so
I feel like this is a theme. We see Dylan and the, in this show is like the most common thing with poor ed is like creative. I honestly, the second people get way fancy on their creative, like this, like the running theme of the rich ed for ed show is like, like Billie. Jean was like, so we ran it up, these billboards and I got this helicopter. And like he was telling this whole story about like, and, and the way he salvaged the billboard campaign, uh, was getting a video of it. And then like running a Facebook ad that was built for,
You know, what all kidding aside. I think, you know, you hit on something that was also a lesson that I learned, um, early on. And that's the idea of really like the two things. Number one is clarity over creativity. And so meaning that at the end of the day, you want to know exactly what moves your market, what moves your audience, what they're fired up by what they're compelled by what they're interested in, what they're not interested in, what is the language that they use? How would they say it? How would they convey it? How do they picture it? What do they want? Right. We've got to, got to get ourselves out of the way. And we want to be, we want to use the clearest simplest language that we possibly can. And so in this context, right, creativity is thinking like, let's come up with a better way to say it.
Let's come up with a better way to, to, to take their words and let's come up with a more creative way. But the more you do that, the more you detach from the, um, the prospect. The other thing, the second kind of thing that I learned early on is it's very easy to start to believe that the creative can make up for a lack of a message or idea that is just a gut punch to the market. There is nothing like at the end of the day, man, if you've got a good idea, good marketing idea, a good marketing hook theme for your campaign, for your message. The single best thing that you can do is to let that shine through clearly and simply pull away everything else that adds noise. Everything that could mask it. It's when people start with a weak idea, a weak angle, a weak that they try to prop it up either with huffed up language or creative. Like let's make it look really nice. Even though the copy Sox, the message stinks. It's an ordinary idea. Let's make it look really nice and hope that people don't notice and it doesn't work.
Oh gosh, just speak the truth, man. Just, just keep going. Just ran on that all day. It's so good. Yeah. And even the amount of people we've had who have spent, you know, a thousand
Dollars on creative and turns out the free video
Worked way better. It's just wild. Michael Sam was on here talking about his grew falls campaign and the amazing success they've had. And he is just like the one that worked as he calls it, the breather where he's just got his mouth open. He's like half asleep. And it's just like a screenshot of the video. That's a worst screenshot. And he, his pride was just like, please guys, can we like find a better one? So he had like all these other ones where he was just like trying to, trying to prop himself up. And he had to just like stop about creative and let
The guys run with the brief.
Yeah, man, sometimes, like I said, dude, you, you, you know, you find that, you know what, the, let it shine through, man, when you got a good idea, when you got something good, let that goodness do the heavy lifting, not the creative, not the, not the mask, not the costume, not the makeup. You know, like I say, and it's harsh on it's crude, but I always say like so many marketers entrepreneurs they'll take their campaigns, their funnels, their promotions. And they right at the root of it at the foundation is again, is a weak idea or an ordinary run of the mill idea. It's, there's no, let's say unique mechanism. So there's no real key differentiation point. And then they try to prop it off, like with, again, with exaggerated, uh, copywriting, you know, just like they'll steroid like explosive, you know, jealously guarded growth or whatever the reality is putting lipstick on a pig. And I mean, I hate to say it that way, but like at the end of the day, if at your core is a garbage message, it's whether it's a pig or a pig with lipstick, it's still a pig. Excuse me. But that's the reality
Dude. I mean, so I just, I'll just fess up to something here real quick. I mean, this is like where I was with FunnelDash like a year and a half, two years ago is like I, we had audit tool. I wrote the agency growth book with, with digital marketer. We had this know, and then I wrote the, the rich ed poor ed book here. And it was just like all like these sales pages where we were selling like the free plus shipping, the physical book. And we always had to like come up with, you know, some new headline, some new funnel to keep people on the top of funnel. And I basically was like done with it. I was like, I'm going to go build like a massive moat and I'm going to disappear for about 18 months here. And we ended up going down this whole path of this journey to create ad card we'd partner with MasterCard in the process, created this ad ad capital product in this.
And now like we talk with ad agencies and it's like, how much media do you have going through your ecosystem? They're like, ah, we manage a hundred million a year in media. What's your profit on that? Well, we charge five, 10% of spend. We make 10% profit margin. And so we profit. 1% of our clients spend is like most ad agencies, profit. And then it's like, what would it look like to double your profit? If you could get all your clients to use your agency's ad card, you know, your co-branded ad card. And they just had to put this on their ad account, you know, this, this card on file on the ad account that you're managing that you dictate and it doesn't cost you anything. And like, we're going to make money from MasterCard. It's free to you. And it was just like this, like no brainer offer. And they're just like, I could put my logo on the card and like I could earn 1% and I could double my profit. And it was just like, there's no funnel for this. Like, it's just this like direct offer coming back to like your Facebook group was just like five values, the shortest path. And we just kind of stopped like all the marketing gimmicks of where we kind of got lost for like the first couple of years of funnel dash, honestly.
Amen brother. Amen. I mean, look, you know, you said something that I just want to jump back to first. I think, you know, that is an amazing example of when you, when you, you guys, that's really a disruptive innovation, right. That really is a disruptive innovation. You know, that's a beautiful thing for the average entrepreneur. Who's not, let's say as sharp as you guys.
Yeah. They're not as sharp as us, especially to dealing with his mustache.
I mean, not mustache is, you know, I have not stopped looking at that mustache for most of this podcast. I gotta be honest with you. Um, I'm fascinated. It feels like on this podcast, there's actually four of us right. Being one of them. And, uh, I love it, but what you, you know, but the, the reality is is that, you know, for the, for the majority of entrepreneurs, they're, you know, they're not going to have that, uh, disruptive, innovative idea, product idea, but they can develop, uh, uh, creative or I don't want to say creative, innovative ideas for their marketing and those ideas for their marketing or what they use to get attention. You know, you said something at the very beginning that I just want to jump back to. You said, you know, we were, we, we had, you had these books and we were creating these different campaigns.
And we were like, Hey, this campaign isn't working, let's jump over here, create a different campaign. And maybe we'll try, you know, a free plus shipping or maybe let's try a blah, blah, blah. You know, let's try VSL or try a webinar. Let's try this out. And there's this weird, there's this weird perspective in online marketing today that the magic is in the funnel pages. Like there's this thought process, right? That like, um, the key to generating emails, if that's part of your business model, the key to generating emails is having an opt-in page as if like, right. Like they don't realize that it's not the opt-in page. It's not the, the opt-in page. There's nothing magical about an opt-in page. It's the message. It's the promise. It's the hook. It's the idea. It's the mechanism behind that page. And when that is not good, it doesn't matter if you like this idea that, Hey, I'm delivering my thing as a webinar and it's not working.
And so I believe I'm going to switch it to a VSL and I think it's going to kill it is ridiculous. Right? Like they think the magic is in the funnel, the pages, the delivery medium. It's not it's in, what are you saying? It's what you're saying. Is it compelling? Is it interesting? Is it different, right? Are you bringing a different story, a different angle, a different perspective. Do you have something to say to the market that they haven't heard before? Something that is both intellectually interesting to them and emotionally compelling, they're looking for what is different? They don't want more of the same. They people experience mental opt-out when they see more of the same. Oh, I've heard that. I've seen that there's YouTube videos on that there's books on that there's blog posts on that. There's a touch they want to know in your message, the idea behind it. What is different? What's the different perspective angle story that you are bringing to the marketplace. That's where the average entrepreneur can and needs to innovate if you're going to use that word.
Yeah, I think, uh, uh, yeah, man, just go ahead and say whatever you want now on the podcast, because this is a great,
Yeah. I'm going to give out my PayPal address and free tips. Yeah, exactly. That's so good, man.
Yeah. I think, you know, part of now that I think about it, like what agencies, um, you know, responding to about to be able to co-brand this ad card co-brand, you know, this capital division is they, they actually identify exactly what you're saying, Todd they're they come to us, they don't ask like, Hey, I'm going to go get my logo on a card. They're not asking us, how do I have a Capitol they're coming to us and saying, how do I differentiate myself in the market? And they're like, these are two ways for me to do that. And like, how much does that cost? Like, I want that. Right. And it's just like, Oh, you, you, you, you saw that for me. And so some of the world, you know, the banking world and like the finance world, like does not understand that at all. They're like, well, what are people Googling to find?
Those are the people that are still using words like malarkey in their advertising. Right. You know? Yeah. That's so funny.
Dive into some financial principles here. I feel like if there's anybody in, in the world of, uh, of direct response marketing that has graduated from the principle of, I got to break even on day zero, or I got to break, even within 30 days, I got, I feel like a small sliver of those people live in your universe. Right. And, and so w how, how do they ultimately get there? How long did it take for them to really uncover, uh, that LTV and like, tell like, yeah. Like w like, what do you have to say about, like, how does, how does somebody get to that point?
You were doing so good in that little, like segway, and then you started rambling there, the end. Um, let's point that out. [inaudible] no, I'm kidding. I love it. I love it. It's so important that you started you, you got fired up. So let's, let's start with this, man. Let's take a step back for one second. And, and this is right. Like I said, I, I love to have fun, but this is serious stuff, because this is really critical to business growth. So, first and foremost, I think one of the best lessons for your listeners is to realize that as an entrepreneur, you are really in an investor and you, meaning you are investing in the acquisition of assets. Those assets happen to be customers, clients, buyers, whatever you want to call it, right? But you are an investor acquisition, uh, uh, investing in the acquisition of assets.
Those assets have a value today. What we call days zero day zero, the day zero value is average order value. The average amount of money that a new buyer spends with you when they go from being a prospect to a buyer, that's their day, zero value to you, but just like any good asset, they're going to grow in value. So your buyers are going to ideally assuming that you have a, a decent business, those assets are going to grow in value. How do they grow in value? They grow in value through additional transactions. So, right. We, the first transaction is what we call the front end. The second transaction on is what we call the backend front end. Marketing is all the marketing that you do to turn prospects into a buyer for the first time, day zero they're there today, value backend is all the marketing that we do with existing buyers, uh, to create that second, third, fourth, fifth, and sixth transaction and, and so on.
And so your buyers have a value today, and they have a future value. The difference between what we're doing and the typical let's say equity investor is yes. We both know what the present day value is, but unlike the equity investor, who is speculating on the future value with the right tracking and the right metrics, which we'll get to, we know what the future value of the average customer is. We know what the 14 day 28 day, uh, a three month, six month, nine month, one year lifetime value is of a buyer. Lifetime value is just the average amount of money that the average customer spends with you over the life of their patronage. So with that being said, instead of thinking like a marketer, instead of thinking like the typical traditional entrepreneur, um, I think like an investor, meaning I say, here's what this asset for us is worth today, right?
Here's what the asset is worth today. We know that based on a historical AOV, and we know what the average lifetime long-term value of that asset is using those two numbers. I am able to determine what I can and should be willing to invest, to get a new buyer. Now, when it comes to business, really, you could say in, in investing in general, he or she, who is willing and able to spend the most will have the easiest time in this game, right. If we're going after the same customer, the same asset, the same investment, and you're only willing to spend 50, and I could spend a hundred double what you are, who's going to have an easier time being able to acquire those assets, right. Me, right. The one who can spend double. Right. And so first and foremost, before we go on make sense for your listeners.
Yeah. Like I would almost say that was part of, um, there was a, uh, there was a really good blog, uh, posts that came out by this like, well, two venture capitalists, really one is that on the, on the venture funded side of things, turns out that 40% of venture capital is actually spent on paid advertising. That blew my mind. But in reality, like venture's all about growth, right? So they're, they, they live and die by like year three LTV and they'll go negative for a whole year and they're raising more and more venture dollars to fuel that beast. Right? Most businesses can't afford to go negative for like 12 months, right. Like 30 days, 60 days, 90 days at best before they have to really start tapping into that backend revenue. And then part of, part of, um, we see this, this opportunity, you know, in our world of embedding financial products as a way to boost LTV.
So like, um, this, uh, this, uh, investor called Andreessen Horowitz, they're like, like the best VC, like the Bay area. They said that by bolting on and offering financial products to like vertical businesses boost LTV by two to five X, like across the board, um, by offering, like whether it's banking products, card products, like lending products. And, um, and so that was, that was a big driver for us as well. You know, getting into the space that we're at now was like, where is that? Where can we maximize like LTV here? And, um, it was on the finance side. So yes, a, hopefully that's an example, you know, for everybody to follow, but like, I think you set it up great. Like, I think I jumped right into it. And then I appreciate you like pulling everybody back and kind of saying, Hey, here's the journey to ultimately get to this conversation. Um, so yes, thank you for doing it.
And I, and I think to add just a few more, a few more things. So, you know, look, you know, I always say, you know, I refer to this as acquisition aggression, right? This is something that we teach our students clients. Uh, and this is what we, we, this is how operate. So acquisition aggression is really, uh, how much you're willing to invest to acquire a new buyer. So there are three core levels to, this are three levels. The first level is the typical mom and pop, right? Those are the people that run a physical store and they operate the way the typical entrepreneur does. They have a very transactional business, meaning they're not really looking at the difference between front end back end. They're not looking at the difference between acquisition monetization. And so they want to operate at a margin on every transaction.
So maybe they want to have a 50% margin, whether it's the first transaction or the 10th transaction to them, it doesn't matter. They're just looking for a certain amount of profit, uh, on every transaction. Uh, then you've got the second level. Second level is really what I refer to as just break even meaning I'm willing to, whatever it is that I invest into a media, Facebook ads, YouTube ads, Google, whatever. Um, I am, I just want to earn that money back in the form of new buyers. So if I, if we put out a thousand bucks today, let's say we just want to bring a thousand bucks back in the form of new buyers, right. Break even, and right, right off the bat, you can see that if you're operating at break, even you're acquiring the single most valuable asset in any business for free, there is no cost, right?
There is zero cost. You're you, you put out a thousand, you get the thousand back. Whether it's two days later, three days later, whatever it is, right? You put out a thousand, you get a thousand back, except now you've got the single most valuable asset in every business, which is a buyer. If you could do that all day, every day, you should, right. You will become very wealthy. Why? Because of the backend right now, the thing to understand if we really want to break this down so that, so that people can kind of start to see this in terms of marketing metrics. So at level one, the mom and pop, right, they are using what they are willing to pay, to get a new customer, their maximum allowable, CPA, maximum allowable cost per acquisition cost to acquire a single customer is always a percentage of AOV, right?
So at level one, mom and pop, they look at their average order value. If their average order value is a hundred bucks and they want a 50%, you know, whatever, their, their maximum allowable CPA is $50. They're only willing to spend $50, a percentage of AOV at break, even at level two, your AOV and CPA match your maximum allowable. CPA is directly determined by your AOV. If you want to be able to spend more, to acquire a customer, you have to work on increasing your AOV. The higher your AOV goes. The more you can afford to spend, to acquire a customer and still remain at break. Even as long as there's a one-to-one ratio between your cost per acquisition and the average order value the cost to acquire a customer and what that customer is worth on day zero, right? You are operating at break.
Even like you can't go wrong that way, right? You're not losing money. You're not profiting, but you're not losing money, but you are acquiring customers. Then you've got level three. And level three is really this idea of, of thinking like an investor where you are now, you are using 100% of AOV, just like you were at break. Even you're using, you're willing to invest 100% of the AOV and a percentage of lifetime value. So you're willing to look at what's the average amount of money that a customer spends on day zero. Let's call it a hundred bucks. And we know that the average customer is worth an additional thousand. Well, maybe we're willing to take 10% of that. Plus we're willing, we're willing to spend $200 to get a, um, a new customer. Why? Because we're investors and we know what the customers work today and what the customer will, will be worth to us in the future.
Now, there are just two things very quickly, uh, that folks need to, in order to like everybody on here at a bare minimum, everybody listening, if you're using direct response, uh, principles, direct marketing principles, direct response principles, you should be willing to operate at level two. You should be willing to break even on the front, knowing that right, all of your costs to acquire are handled on the front. But if you want to go to level three, which is where the, which is where the fast and big growth occurs, which is where all the big players in direct marketing direct response operate is at level three, you need two things. Number one, you need to know your metrics. So your tracking and reporting has to be dialed because you need to know what a customer is worth at different intervals, right? The second thing that you need is you need cashflow because you're, you, you have to know, right?
It's one thing to be able to say, Hey, would you, would you go out of pocket $10 to get a customer? But it's one thing to say that because most people would say, of course I would, but, uh, can you do that at 5,000 new customers a week where you're not going to get back to break even for 60 days, right? Can you do that? See that's where the cashflow comes in. And so, but it's all a game of, it's all a game of math. It's all a game of metrics. It's that mentality of we're investors. How much can you afford to invest to acquire a, a new customer? The more that you can afford to invest, to acquire a customer, the safer, less vulnerable your business is going to be the faster you can grow, the bigger you can grow. And the easier the game becomes cheap traffic is a loser's game, trying to pay the least amount possible. That's a loser's game, trying to setting your business up, setting your marketing up, to be able to spend more and more to acquire a customer is a winner's game.
Uh, while you were saying that I was just looking up some LTV, some ridiculous LTVs, cause there's even segments of that, right? Like which customers like home Depot, for example, their average lifetime value of a customer is, uh, $67,000. But a homeowner,
Somebody that recently bought a home is $150,000. And then they have a program called own the pro, which is the professional, the contractor that builds homes like for a living right, is worth $500,000 to them. And so they have this like whole marketing initiative and you need to just look at it like that's like where you're selling, like more and more expensive, right? And like you're selling higher things over time on the back end. And then you have Starbucks, which is frequency, right? It's frequency over the course of a decade. And the, uh, the LTV of Starbucks is $14,000. Uh, crazy. Is that right?
Understands like the significance of that, like how valuable that kind of insight is to the typical business owner, right. Is that shows you what it is that you can and should be willing to invest, to get a customer and why you should be willing to segment right. And invest differently for different types of customers. When you understand their value again, when you have that perspective of an investor, you, it should shift like, there's this, again, there's this, this people are enamored with like the creative side of marketing and, and that's fun and it's cool. And I get it. But at the root of what it is that we're doing is, you know, it's psychology, communication and math, that's it?
Yeah, yeah, yeah. You left out one important thing is I think it's the X factor though. It's just a win, right? Cause there is backend revenue, but when I step back in revenue gonna show up, right? Like this, this is very obvious. Like in the world of subscription, businesses is like the best example, right? Is yes, there is LTV. But like when I first learned about LTV, like I was so confused, I was like, how long is the life of a customer? Right. Like I did not know. I'm like, should I measure LTV by 10 years? Like, like Starbucks. And so it was finally like somebody told me that it was like, Oh, no. LTV is like, you have a know average order value. Then you have a 30 day LTV video was six month LTV and you have a 12 month LTV. It's just kind of moving target. And
I thought, I actually said that if you roll back the tape on this podcast, I think,
Well, I was probably actually publicly
Before you publicly throw me under the bus. And, uh, honestly, you, you are absolutely right because the, the beautiful way to look at it really, um, is, and I think that you're so spot on that, you know, it's about like, what is the 30 day value? What's the 60 day value. What's the 90 day value, for example, just look at those. Right. And the reality is, is that like, look, you know, you may only want to float your money for 30 days. Right. Um, so now let's look at what is the 30 day value of a customer. Let's look at what the average order value is. So day zero, let's look at what the 30 day value, um, is. And does that give us like, uh, you know, does that give us the ability to go negative and how much, how, how negative on the front, knowing that, all right, we're going to float it for, uh, you know, for 30 days now, some of that timeframe right there, there's, you know, this is why, uh, it's not a, you know, it's not a very simple calculation because the other thing that needs to, to, to come into consideration is the volume of new buyers, right?
So that's another thing, length of time and volume of new buyers. That's why I said cashflow, because cashflow is going to tell you, like, all right, you know, if we're only acquiring 10 buyers a month and we're going negative 10 bucks. Yeah. We can do that for a very long period of time. But if we're acquiring, you know, a thousand buyers a day and we're going negative $30, man, we need to get to break even in three weeks or two weeks, or maybe we can't even sustain that. And so you got to look at all of those, uh, all those components,
How, how many people you think your, your world actually graduate to this like final tier, right? Where they're hitting volume that are being able to go negative, they're operating at the highest level of direct response.
Um, I would say a small percentage, a small percentage. I think some of this is I think the we've a lot of people get it. Like they understand it, we drill it into them. They know it. Um, it's, it's their comfort level. They just don't want, you know, like, they're not like they'll, they'll go maybe a couple bucks negative or something like that. Like, but they're never willing to, let's say go $50 negative on a buyer, $30 negative. And, and to a large extent, I don't blame them. I get it.
It's like coming back to this investor, right. What is your risk appetite at the end of all of that, right? This is like what went full circle for us. And, and I know you played in this space with conversion flying the analytics game for awhile. It was like, and most agencies still believe there's a hundred percent correlation between if I give my clients better marketing numbers and better attribution, and they know their LTV, then they will change their behavior and give me more spent. And that could that be further from the truth, because then there's risk, right? Like, well there, and then you just like, you start going negative and people just like, don't like, don't like that. It's like the difference between like, you know, investing in tech stocks and like startups and IPOs versus like a dividends, right? Yeah.
I mean, look at the end of the day, you know, people, you, you got, you know, we know people are complex creatures, right? And the reality is, is that, you know, everybody, you know, people have a worldview, they see the world a certain way. They see things a certain way. And that's why two people can see the very same statistics study evidence and see two completely different things, because it's not just the, the number of the staff, the statistic, the metric, the performance it's, it's being filtered in their view. And to some people, they just, you know, they think better marketing should be, uh, less negative on the front. Like they think that I should be profiting. They think that, right? Like, there's this view of like the more we're profiting on the front, the better that we're doing and to a savvy direct response entrepreneur, they realize that that means you're sacrificing the volume of, of acquisition.
You're sacrificing what you could be, what you could be generating in terms of new customers, by being willing to spend more, to get even more customers. Right. So if you're, you know, if you're doubling your money on the front end, don't, you know, don't, don't be too quick to celebrate that, recognize that you should just be spending all that money to get even more buyers. Even if it's incremental, like more buyers, the goal of the front end is maximum new customer acquisition, maximum new customer acquisition at a reasonable cost reasonable cost. Right. Is that that maximum CPA is different in every business.
We'll be sending this to all my clients. Like I think of all the businesses I talked to, I feel like 75%. I'm always like, how do you gauge your goal CPA? And you know, the LTV model, you know, they understand it, but they don't, you know, graph more or less. I think that risk kind of, you know, behavior, it plays, hand-in-hand there too, where it's like, man, you want everything up front to where there's so much on the back and you can kind of really get the fruit of it. So
I think the business is, you know, for your clients. And, um, uh, like I love hearing, I mean, the business is the backend. That's what, like, you know, the business is the back end. Like that's the, the front end is, is almost, you could say is a necessary evil, right? It is there, right? It's there are the maximum number of new buyers, but the business, the real business, and certainly the profit is in the backend. And you could somewhere, if you remind me, I'll send you a video that you can use, uh, you can show as is, or you can just do it in your own, uh, you know, do your own version where mathematically, you can show them what happens when you are willing. You're not willing to, let's say, go break. You're not willing to go negative. Like you could show them mathematic.
It's not a, there's no opinion in this. Right? All else being equal, um, all else being equal in terms of backend value and whatnot, the it's all about maximum customer acquisition. And so sometimes what people don't realize is like, think about it like this, let's say just typical business, let's say a hundred dollars AOV. So a hundred dollars average order value. That's what the average customer spends. Let's say that, you know, over the next X number of months, those go on and spend another 500 bucks, just keep it real simple. A hundred dollars AOV, another 500 bucks over the next few months. Well, it's baffling to me to see how people aren't willing to go, like call it $10 negative. If they could acquire, you know, um, you know, three or four more customers knowing that like, right. Like, you know, like you look at how much you're sacrificing on the back because the money is the back end.
Remember is the second, third, fourth, fifth, sixth transaction. The front end is only the one transaction. And so they're kind of, it's like they are stepping over dollars to pick up dimes. They want the profit today, even though they're sacrificing big, big money on the backend. And that's the difference between sophisticated savvy, mature, direct response, marketers, understanding the business is the backend understanding the goal of the front. The aim of the front is maximum customer acquisition at a reasonable cost. And recognizing that the more you can and are willing to spend to acquire a customer, the easier this game becomes at the end of the day, right? At the end of the day, think about it like this. We can wrap with this, uh, or maybe we should wrap with a positive, upbeat message here is this what I was going to say was this, that, um, that look, man, if you're willing to spend enough, you could, you could have crappy marketing. If you're willing to spend enough to acquire a customer, right? You, you could even have crappy marketing, meaning like at the end of the day, the different crappy marketing compared to great marketing, the differences, what it's going to cost you to acquire customer great marketing. It's going to cost you a less crappy marketing. It's going to cost you a lot more. But at the end of the day, if you've got the cash right, that, and you can, you can afford it. Then by all means, do it. And you'll be able to acquire
Like all the banks in the United States, right? Like free bank has all the cash in the world, but like the worst marketing man, Todd, this has been an amazing episode. I think this, uh, Dylan's going to share this with all his clients when they, when they budge with him or they're they're negotiating ad budget for next quarter. Um, man. Well, tell me a little bit about how we can support you and, uh, what, what you got going on next.
Um, so if, uh, you could go check out, um, jeez, I think, uh, go learn from todd.com I think is a place where you can go learn. Uh, you could speak to somebody on my team. Like we talked about, uh, earlier about what it is that we do and how we could potentially help you. You can go to Todd brown.me, which is kind of like our blog. It's like our main, I don't even know what the team has up there. You can see for yourself. Um, and, um, and somewhere on Facebook, I think Todd Brown marketing, I think they've got it. As you can go check it out, you search hard enough. You'll find someone it's a pretty easy search. Yes.
I love it, man. This has been awesome. Thank you so much.
Of course, man. My pleasure. I had a blast with you and
Speaker 5 (53:26):
Uh, I can't wait to see what's next for you guys.
Speaker 2 (53:29):
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Jason Hornung is the founder and Creative Director at JH Media LLC, the world’s #1 direct response advertising agency focusing exclusively on the Facebook ads platform. Jason’s proprietary methods for ad creation, audience selection and scaling are responsible for producing $20 million + of profitable sales for his clients EVERY YEAR