Jun 16, 2021
After tons of questions about the difference between a 2 million dollar and a 40 million dollar a year company, now I’m going to show you behind the scenes.
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---Transcript---
What's up everybody. This is Russell Brunson. Welcome back to the Marketing Secrets podcast. Today's episode I want to talk about obsessing over your average cart value. All right. So I've been having so much fun in business recently. A lot of good things are happening. Things I can't tell you about yet. Things that at funnel hacking live will become apparent. And by January 1st of next year, it will become, you guys will see the future. I've been there. It's amazing and I'm coming back and I'm going to show it to you guys.
But anyway, I can't tell you all the details. But I can tell you the things I am obsessing about right now because they're exciting. And one of the questions that I got a lot, there's an episode I did five or six episodes ago where I talked about the difference between a $2 million a year company and a $40 million company. And I just talked about there's two businesses I know of that sell basically the same product. One's doing 2 million bucks a year and one's doing 40. And I talked about just thinking strategically different, but I didn't, excuse me, I didn't give all the details behind it for a couple of reasons. Number one is I'm trying to acquire the $40 million a year company and I'm under all sorts of NDAs and stuff. So I can't talk about it, but after the acquisition is done, I guarantee you I'll be like... Anyway, you know I'm not good at keeping secrets. I'm the worst.
This web podcast is called Marketing Secrets. My books are all called... Whatever secrets I got I just give you all the secrets. Somebody asked me, "Russell, can you keep a secret?" I'm like, "No." I've got no ability to keep secrets. I'm just going to write a book about it or do a podcast. Anyway. So don't tell me your secrets, but I'm sure that I will share with you guys more as I'm able to.
But anyway, this I can share though, is as I'm watching again, the difference between $2 million offer and a $40 million a year offer is obsession with one thing. Can you guess what it is? I told you the intro. So now you know, it's obsession with your average cart value, the ACV. So what's the average cart value? That is how much money on average a customer gives you when they come into your funnel. Right?
So a good example, this is my books, right? So someone buys a book and they may pay $9.95 shipping handling for the hard cover .Com Secrets book, right? So they buy that. But it doesn't mean my average cart value is 10 bucks because from there they can, there's the order form bump and then upsell one, upsell two, there's all, there's the whole process we take people through, right? So as they go through this process, the average person, so for everyone who buys the book let's say we sell a thousand books and some people buy upsell one some buy upsell one and two, everyone's buying different things, but if you do the average of all of them, it means on average how much you make for every book buyer. So a good example is when we first launched the Traffic Secrets book, I remember the average cart value was $70.
So for everyone who bought a book, we averaged $70 in collected revenue during the immediate funnel, the point of sale funnel, right? It's not talking about over the next 30 days, 60 days, 90 days. Because there's lifetime value customer there's always other metrics we look at, but for average cart value is how much money they make immediately, point of sale, while they're hanging out with you. Right?
And so that's the number. Now we launched the book Funnel, obviously when you first launch it, it's like your most excited audience, right? Like all you guys were probably like, "I'm going to buy Russell's book." And you're like, "I'm going to buy all the upsells." And you did and I'm grateful for that. But the average cart value was amazing, it was like 70 bucks a book. And over time as you go to colder traffic, that'll usually taper down and maybe it ends at 35, 40 bucks average cart value. Right?
But knowing that, "Hey, I can spend 40 bucks to sell a book and I'm still profitable." That's a big deal. Right? That's the reason why we're able to sell so many books is because I can spend $40 to sell a free book, whereas everyone else in the publishing world they're selling them on Amazon for 20 bucks, they can spend 20 bucks maybe, and that's about it. So I can spend twice as much to acquire a customer or more because I control the cart.
Plus, again, after the cart's done, then there's the email sequence, all these other things that we monetize and so that customer becomes a lot more, worth a lot more to us over time. But the average cart value is the key, right? Especially in this game, there are obviously companies we compete against who have outside investors and funding and they'll go six. They'll go negative. So they'll spend $200 or a thousand dollars to get a customer and it takes them six months to get their money back.
But for me, and for you guys who are Smart Funnel hackers, who understand this game, for the most part you should be able to break even in real time. Right? So you should, when you spend a hundred dollars on ads, you should make a hundred dollars, worst case scenario, right? Just because that's, we're, we all should be. The amateurs in this Funnel Hacker world, we should be better than the majority of businesses. Right? You should be able to break even at point of sale.
And so that's the first thing, right? That's how we're able to grow with scale these businesses is that we could spend $40 to sell a free book and we still break even. And now everything on the backside of that is gravy. So hopefully that makes sense because I'm going to go a little deeper here now, but that's the first part.
And I'm sorry, there's so many, I know for some of you guys who've been around me for a long time and you're like "Yeah, that's a no brainer." For somebody who's maybe newer, who might be like, "I don't understand how this works. I thought that was my business was my funnel?" And it's like, "Yeah, but that's the first funnel, right?"
One of my first mentors, actually the first seminar I ever went to, I heard Mike Limon say, he said, "Amateurs focus on the front end." And I didn't know what he meant for years, but I was trying to, I was trying to make money on my front end funnel and what he was saying at the time, I remember he was saying he was spending $30 to give away a free DVD. And I was like, "How are you doing that?" But I didn't realize that people gave away the free DVD. They called him on the phone two weeks later, he sold them a 5,000 coaching package and he had this whole business model. And so he's able to go in the hole because he knew that 30 days later he was going to make money. Right?
And so that's, amateurs folks on the front end we're Funnel Hackers, we're not amateurs. We're the ones who understand this game and so we can make really good funnels that are profit on front end and then we've got the backend on top of it. So that's why we're able to grow companies so quickly. Right?
So anyway, I digress. The thing I want to ask you guys about today is obsession over average cart value. So what I typically do, and this is my bad habit is we get together, we launched the funnel, then at launch time we're split testing, we're tweaking, we're testing, we're trying to get the average cart value as high as we can. And then after two or three weeks, Russell gets bored, he goes on to the next offer and he leaves. Okay? And my friend, who we're purchasing his company that did $40 million in sales last year, I've watched him, he's got, I don't know, four or five little front end funnels that he focuses on. Actually for him, he doesn't have a back end, which is why we're acquiring them because ClickFunnels would be perfect backend, right?
But he's making all his money just off the front end funnels. But his obsession is with the average cart value, right? How much can you make for every person that comes through the funnel? And right now, just to put it in perspective, I can't remember exact numbers, but his average cart value is something like $160. So it makes it $160 every single person who buys his front end thing, which is insane. It means he can spend $160 to sell one of his things, and it's things not a free plus shipping. There's, there's a cost in it and I'm not going to tell you the pricing yet, because I can't, but it's crazy.
And as I've been talking to him, as we've been doing this negotiation and buying it, purchasing the company, he'll send me messages about things he's testing and he's still the same offer he's been writing for five or six years now, it's killing it. That I might, I'd be like, there's no way to make this better. He's like, "Show me the things they're doing." And they're not like, a lot of us do split test. Right? I try this headline versus headline this versus this. And that's great, but he's not just doing that. He's been testing so much at such a deep level, he's doing these big radical shifts, right? You show me this process of where when somebody comes in after X amount of seconds this thing pops up and then for a coupon they email in. And then he sends out this email sequence and he's split testing two or three different email sequences, see which one gets the highest take rate and on and on, on. All these things, you know? And that's his obsession, is this deep dive on average cart value, making it better and better and better, you know?
And when he got this focus on funnels initially, the average cart value was $60 bucks. Right? Which is good. I would have been celebrating "Ooh, 60 bucks. Good to go." I think that would have been a break even at that point because they're spending about 60 bucks to break even but then he's obsessed with. Like, "Okay, we need another upsell. What's the down sell? How do we change this? How do we change this? How to tweak this? What's the email sequence? What's the post, the pre, the landing page? What are the, like he geeks out on all these pieces at such a deep level. I started realizing that that's my, one of my biggest problems on my side, is that I do some testing up front, it's good enough, we run it and then our ad team run it, and then it runs till it's not profitable anymore and then we pause it and come back three months later and try to run it again. Right?
Whereas he just keeps going deeper and deeper and deeper. And so on my side, we started building out a team specifically just to do this. He's in of my sites inspired me, "Okay, if I'm making $40 average cart value in a book, what would the metrics look like if I get to $80? If I get to $80 average cart value that changes everything, right?" It's not a little tweak, I could spend an $80 to give away a free book. The metrics on that are insane. Right now I can sell millions of copies of book versus right now we're selling hundreds of thousands of copies of the book. Right? But it's that. But I had to figure that out. So I don't know how to do it yet, but it becomes the obsession. Right?
I did a clubhouse, which is probably going to be on this podcast soon. I did a marketing CS podcasts or clubhouse and on that I asked people their biggest marketing secret and Perry Belcher dropped this bomb. You may have heard this, but he said the biggest thing he found, the biggest marketing secrets he has are now are adding premiums to things. And he specifically said that when Ryan Deiss launched his book, he was getting 3% conversion rate, and so he added a t-shirt with it. Now that adds premium and went from a 3% conversion to 11%. And he didn't talk about average cart value but come on now, you get three times as many customers to buy for the exact same ad spend? Your cart value could three X, right? You can go from a $40 average cart value to a $120 by adding a t-shirt to go with your free thing. Or something crazy like adding a premium. So I don't know if that's going to work or not. I have no idea, but guess what we're testing this week? We're going to test you buy a dotcom secrets book you get an I Build Funnels t-shirt right? Let's see how that works. Because if that increases cart value by whatever, that's insane, right?
The three X of my cart value, now I can spend three times more money to get customers. And then he talks about, he was doing premiums not on the front end, but on the upsells and the down sells and things like that as well. It's like, what are the premiums that can be added that make people more likely to take the offers, which increases the average cart value?What's the email sequences, what's the actual offer? Could we make the offer better to offer to be more expensive? Does it need to be less expensive? There's just a million things you could test.
But most of us are like, "Okay, I tested headline A, headline B and that's it. Right? Or we don't test at all but it's like, man, after you have a funnel that works, like my buddy here, he spends obsessively for four or five years now the same product that another one of my really, really good marketing friends does 2 million bucks a year on, he's doing 40, and the difference is obsession with cart value. Because he can outspend everybody else, 10 to one. Right?
And so that's the question for you is how can you obsess about your average cart value? What things can you do? Can you build a team or a process? I used to have a mantra in our company back in the day, it was when Todd was not developing ClickFunnels for full-time, but he was doing more stuff on the marketing, he would come up with split test ideas and we tried to compete against each other all the time. It was really fun. And so our mantra at the time was like, how do we give ourselves a raise every day? And it's like, well, the way we do it is by split testing, right. Let's test this versus this versus this and keep testing different things. And we have a winner, right? You add a t-shirt premium offer let's say to your book funnel and all of a sudden it goes from a 3% to 11%, you just 30 x your money or more, that's, you just gave yourself a raise today. Right? So that was always the question is how do you give yourself a raise today? How do we give ourselves a raise today? What's the next thing? What's an idea? What could we do to drive the needle, make those changes.
And so for you, that's what I want to post this in your mind, right? After you have a funnel that works, instead of doing what I do, moving on to the next funnel, or focusing on something different, come back and say, "Okay, here's my cart value. Every single day how do I increase the cart value? What can I do today? What can I trust today? What can I try today? What else can I do? How do I shift the offer? How do I position it from... What can I do to it to increase that cart value? And the more you start thinking about it, the more ideas will come, the more bigger highs you have, all these things we'll tweak and change based on that.
So anyway, that's what I want to encourage us to do, is starting to obsess with the average cart value. ACV, average cart value, how much do you make for each customer that comes into your world?
All right. With that said, I'm going to end this podcast because I'm getting into traffic and I don't want to wreck. So there you go. Anyway, I appreciate you guys listening. Hopefully you got some value from this episode and hopefully it starts a new obsession for you on the thing that could take your funnel from a $2 million a year to a $40 million a year thing. Obsession with the average cart value.
Thanks again guys. And I'll talk to you soon.