TJ52 – Pareto Rule: 80/20 Law of Sales and Marketing That Multiplies Results ~ Perry Marshall

Hey there listener! Welcome back to Traffic Jam. This is episode#52 of the podcast show that teaches you how to get more traffic and build a profitable audience online. I am your host, as always, James Reynolds and I do today want to jump straight in to the episode but just before I do that, please head on over to TrafficJamCast.com/52 where you can download some special bonuses I have prepared for this episode. Now you’ll find there the downloadable MP3, a full transcript of today’s show plus a special mind map that will help you get the most out of this episode. And I promise you, if you do all of the steps mentioned in today’s show, you will 10X even 100X the results you are getting right now.

So let me introduce our guest, and he almost needs no introduction. He’s the number 1 author and the world’s most quoted consultant on Google advertising. He has written several books including the world’s most popular book on Google Ads, The Ultimate Guide to Google Adwords but he’s also written The Ultimate Guide to Facebook Advertising and the 80/20 Sales and Marketing book. His Chicago Company both consults online and brick and mortar companies generating sales leads, web traffic, and maximize advertising results online. And at $2,000 per hour, he’s the world’s most expensive and sought after and loved marketing consultant.

This guy is someone who has had a very early influence in my venture online. In fact, to the best of my recollection his Ultimate Guide to Google Adwords book was the first e-book I purchased online. And perhaps, who knows, a real push in my direction setting up a business all around Google several years later.

So let us introduce him, without any further ado, here is Perry Marshall as we discuss the 80/20 sales and marketing principle.

James: Welcome back listeners! This is episode#52 of Traffic Jam and joining me right there is Perry Marshall. Perry, how are you?

Perry: I am great! James it is a pleasure to have you hear, a pleasure to be talking to you and your audience today and hello from Chicago!

James: Well, hello. So you’ve got this principle that most people will be familiar with, this whole idea of the pareto principle, but in your latest book, the 80/20 Sales and Marketing book, you’ve essentially taken the pareto principle and applied the whole pareto principle back on it, right? Essentially sort of conditioning it down practically many times over. When did you first come across this whole idea of the 80/20 fractal rule?

Perry: Well, this fractal idea is really important and if you’re not sure quite what that means, stick around because it will be worth your time. I first discovered that when I read Richard Kasia’s book the 80/20 principle not too long after it came out and it really just rocked my world. In fact, it was just a glancing comment. He did not really go in to it in his book but he just mentioned it but I had actually studied fractals and fractals are one of these geeky little subjects but it turns out it’s really one of the most pervasive patterns in all of nature. And so this book has been recommended to me and I took it to my favorite coffee shop, started reading it, and I was just 14 pages in and I said, boom! He makes this comment and I was just like I went over a cliff. It was like a thousand connections happening in ten seconds and it was like oh my word, I have got to go see if this is right! And I go home, get a calculator and all these pieces of paper and I start looking at my business. My wife comes home and she was like, what happened to you? This is what happened! So what was the connection that I was making? A long time before, my wife had brought home this book from the library, she just saw it, it was kind of beautiful and she thought I would be interested in it and fractals for those who have never seen it, you should do a Google search and you’ll see exactly what I am talking about but these are these computer generated patterns where there is a spiral inside of a spiral inside of a spiral and they just go on infinitely and I read this book and realized, well, you know that is just the computer version of it. There is actually an actual version of it and so like, if you look at a tree the branches have a branching pattern, and the branches have a branching pattern, and the twigs on the branches have a branching pattern, and the leaves are in a branching pattern and then you can get a magnifying glass or a microscope and the branches just keep going and going and going until you get to the cellular level because it is a repeating program and so that pattern is fractal. The branching is at every scale and so you see this with rivers, you see this at the solar system, and galaxies. Well, what Richard had pointed out, again, he just kind of mentioned it, he was like, oh, yeah, 80/20 comes out of the same phenomenon. And I was like, wait a minute, that means there is an 80/20 inside every 80/20. Whoa! I had known about 80/20, I think most businesses do, they know that 80% of your business comes from 20% of your customers. But what I had not realized was that, oh yeah, if you chop off the bottom 80% and you just look at the 20%, it’s true again. And then you could chop off the bottom 20% of that and it’s true again, and it is true again. And it will keep going until you are down to one person. And then not only is it true of one particular thing like customers, but it is also true like your sales people. How much they sell, or your Google ads, how many impressions and it is true of your keywords and it is true of your ad groups. And it is also true if you have 20 different ways that you advertise, like maybe you are advertising in magazines, in Google, in Facebook, in newspapers, in radio, in TV – 80/20 is going to be true of that whole list of things, it’s just crazy. Why is it such a big deal? Because it is like a universal mother pattern. And when you see a universal pattern, what it will do is it will unify all these different things in your life and it will explain a million things with the same explanation and when you find a simplification like that you should go as deep in to the rat hole as you can and so I did and literally for ten years, I used the 80/20 and mostly only taught it to my very best students in my coaching programs, people that basically gave me a lot of money. And finally in one point, I said, you know, I am going to turn this whole thing upside down and I am going to put it in a book, and I am going to kind of give everybody the secret sauce that I have been using for everything all this time, Google book, the Facebook book, all these stuff that I do, and so it is all in there and I think people are really going to be helped by that.

James: Yeah, I was going to ask you that question because if I go back to some of the first times that I became aware of you through the ultimate guide to Adwords, I mean if I think back to that content, it is very evident that you understood and taught the concept of leverage even if it wasn’t in that exact kind of format. I mean it was concept that you really understood and worked with. It is interesting to know that you have been kind of keeping it in closed doors for such a long period of time.

Perry: Yes, it is so powerful and the thing is you never really get to the end of it. I think that is the beauty of it. When you just tell things down to the seemingly simple principle, it is actually deceptively simple because as soon as you think you’ve done it, all you need to do is zoom out and guess what? You get to do it again except in a different context. And I am really finding this to be true where I have done all this marketing stuff for 15 years and I have been working with lots of people but then you find out, hey wait a minute, I just discovered even more questions and I just need to find out by asking myself, and they’ll short cut this even more. That is what’s exciting about mastering things and learning things, so there is a big pot of gold at the end of this rainbow and the first time that I ever had a conversation with Richard Kasia years ago and he said, what do you like about 80/20? It’s like one of those magical excepts except it actually works. People are always hyping all these different things, oh, you should get rich in real estate, or you should get rich in internet marketing! Or you should do this or that or the other thing. The thing is, how about applying 80/20 wherever you are? Because there is always somewhere where somebody is failing to do that.

James: Yeah, well let’s talk a little bit about how you apply it and in fact in your book you tell a really nice story about a friend of yours named John Paul who hitchhiked to Vegas, and had a bit of a run in with a shotgun but it was kind of a nice metaphor with how you split the 80 from the 20. Share that story and perhaps how it could be applied to marketing online.

Perry: It is one of my favorite stories. So John, yeah, when he was 17, he dropped out of high school, hitchhiked to Vegas, and he became a professional gambler. So he’s bouncing around Vegas for a few weeks and he was like, man, this is harder than I thought it was going to be and so he said, I need to find myself a mentor. Somebody who can teach me how to do this. So finds this guy who runs a gambling ring and so they shake hands and say, ok John for a percentage of your take, I will teach you. And so they agree, jump for a jeep John and they go for a ride. So they are going down the highway and they go okay, so how do I win more poker games? And he goes, you need to play with people who are going to lose. You don’t want to play with a real good poker guys, you want to play losers. And losers are called marks. And you need to find marks and play poker with them. And he was like, how do I find marks? And he was like here, I will show you and they drive in to a parking lot and they go in to a strip club, and they walk in and they sit down, and his new mentor Rob, pulls a side off shot gun out of his jacket, and he holds it under the table and he opens the chamber and then he shots it really fast and when it makes this noise, there is a few people that had looked around like what was that? And then the owner comes up to him, he was like, hey, is everything okay over here? Just fine, just teaching the lad a lesson, don’t worry about us, we’re alright. And then he says to John, did you see those people who turned around when they heard that sound? He’s like yeah, and he goes, don’t play poker with them. They’re not marks. Play poker with everybody else. Now, that is what marketing is. It’s racking the shot gun and seeing who turns around when they hear that sound and who just completely ignores it. And that is exactly what you do, every time you put a billboard on the motorway and some people see it and some don’t, some people call the phone number and some people don’t. You are racking the shot gun, you send an email, some people open it, and some people don’t rack the shotgun. Some people click on the link, some people don’t rack the shotgun, some people fill in the form and go opt in for the webinars, some people give you a hundred bucks, and all of those things are racking the shotgun. And the whole point of the actual rack the shotgun story in the strip club in Vegas was you eliminate the wrong people before you start ever playing any game. And this leads to something very important and it is very 80/20 which is sales is not a convincing people process, it is an elimination process. It is a disqualification process. And so, 80/20 redefines what sales is. Most people think, sales is I have to convince you and then the person is like, well, if you are slick enough to convince me, are you slick enough for my skepticism? And we get in to this little game that we’re playing with the customer and like, no! That’s not what you do. here’s what you do, and John is a brilliant guy by the way, he’s a brilliant sales trainer, a brilliant strategist and he’s got this thing called the five-power disqualifiers. And they are the five things that are always true every time a sale is made and this is really ingenious because it is one of those need to know five things. So here it is. #1, the customer has to have a bleeding neck. If they don’t have a bleeding neck, don’t try to sell to them – an urgent problem that needs to be solved! Secondly, do they have the money? If they don’t have the money, they’re not buying. Right? #3, do they have the ability to say yes? There’s a lot of people we try to, they have the ability to say no but they don’t have the ability to say yes and since we are talking to them, we are automatically in the losing position. #4, did they buy your USP (unique selling proposition)? Do they like your value proposition? If not, move on. And #5, does it fit in to their overall plans? Hey I am trying to sell you this house in Houston, I know but I am moving to Dallas next week. They are not going to buy the house in Houston so the five disqualifiers they are all eliminators. Now, if you go through all five with anybody with any topic, you are only going to have like 1%-3% left. Sell to them! And if you are selling to them, it is not going to be very hard to sell. It is so much less work!

James: Yeah, exactly. Well, this is a concept that a good friend of yours and mine talks about and it is James Schramko’s idea of having seed questions and we have this conversation in our mastermind quite a lot just qualifying these people who are clearly not in the right time, right place or with the right budget to do business with you and just talk to the right people because business is just so damn easy if you have the right people because business is so much more damn easy when you’ve got the right person in front of you, right? I mean, this is the process that we are trying to get to here.

Perry: Well, yeah and frankly, I just think, a lot of us we make it too hard. When I was new in sales, I spent so much time basically doing missionary work and train uneducated, disinterested people. Life is way too short for that. So what is going to happen if you use the power disqualifiers is you’re actually not going to be frantically crazy busy. You are actually going to end up having a lot of space, or at least some space which is kind of disturbing to some people. I think people have this idea that they need to be in motion all the time or something like that. Like oh, you know if I am not working my buns off, then I am probably an iffy, questionable guy. That is a bad mindset to bring to your work. 80/20 is about the fact that outputs and inputs are very, very, disproportionate. Small outputs, big inputs, big outputs, small inputs. And they are almost never equal. And so when you understand that, and you make your life all about the output. Even when it is like the whole concept of getting paid an hourly wage, it certainly is the easiest way to speak about the value of time so I am not faulting anybody that would think this way, but, paying somebody for the hour is basically paying them for the input and not for the output.

James: Yeah, so let’s talk a little bit about outputs. You’ve run plenty of campaigns, especially direct response especially Google and Facebook ads, does this whole concept run true for you while you’ve had a certain set or if you’ve campaigns for you that have delivered the vast majority of your results?

Perry: Well, yes. And in fact, the most important Google technique that I have ever taught, it’s kind of the mother of the whole thing, it’s called peel and stick and peel and stick says, alright, so you started a Google adwords campaign, maybe you knew what you were doing and maybe you didn’t but in any rate, you put some keywords in an ad group, and you bid on them and you wrote an ad or two. And peel and stick says, alright, 95% of the traffic is going to 5% of those keywords. So 95/5 is just a little bit different version of 80/20 and there’s a lot of things that are 95/5 or 90/10 or 99/1. 95% of traffic is going to go to 5% of those keywords so what you should do is to pick the highest trafficked keywords and what you do is you peel them out of the ad group, stick them on the new ad group and you write new ads that are just exactly perfect for that keyword. And you’ll probably do it with the same in your landing page and all of the sudden, you have the one keyword with the idea ad with lots of traffic, and you just did 80/20 in your adwords campaign. So you are going to get 95% of your time and your optimization is going to be focused on 5% of your keywords. And then when you do that, you’re going to find, in fact there is a chapter in our brand new adwords book that is just coming out right now. I had this campaign where I tested 300 – 400 different ads, and this is not unusual for serious ad marketing ninja. This is like what you get paid to do pretty much, it is test stuff which is kind of fun actually and I am going to say it is actually for a period of years, probably 3-5 years, probably 15% of that traffic came to 1 ad because that was just my killer ad, that was the best one I came up with, and all those other ones are just attempts to beat it. So that is 80/20 and really what my Google book is even though it does not exactly say it, pretty much, every chapter is just the 80/20 of yet another slice of the things that you do in adwords campaign, whether it’s the organization of your groups or whether it’s switching certain things on and off go on. And it is all 80/20 so if you get 80/20, you can walk in to any situation and realize, hey wait a minute, there is a place or two. Like I did a star principle seminar with Richard Kaise which was a different application of 80/20. I don’t know if we have time for that but one of my staff members, she was watching the videos, and she sent me an email and she goes, Perry, does this apply to churches? And I am like, I’d dig it if it does. Yes, you are a genius! Rebecca is really smart and I am not surprised you picked up on that that probably a tit for tat, if you’ve just adjusted a little bit it applies completely to churches and nonprofit organizations or monasteries or Buddhist temples or restaurants or you know, whatever.

James: Yeah, I wanted to ask you about the campaign that you have been running actually to promote the book itself which is where you’ve been giving away the book for a cent, tell us about that campaign and what result you’ve gotten, perhaps the strategy and mindset behind it.

Perry: Ok, so this is a total application of 80/20. So we have a campaign that is running called buy my 80/20 book for a penny plus shipping which means in Australia or UK it is $14 because it is $13.99 international shipping or in the US it is $6.99 shipping so it is either $7 or $14 right? And since it is $10 more if you buy it in Amazon or in a bookstore then it is like a really sweet deal. So we are almost literally taping dollar bills to these books. It costs us more money to ship this out than we make. Here’s how that is a very deliberate 80/20 strategy. We have boxes you can check like oh I want these too, and it takes you to a whole sales process, it factors different surveys and we ask people different questions and based on how they answer the questions we’ll present them with some other offers so we have upsells. Most people don’t buy any of the upsells, some people do. Would you like to guess what percentage don’t buy the upsells and just buy the book?

James: I’d have as a guess, maybe it’s 20%

Perry: Actually it is 80% that only buy the book. In fact, it’s 78.6% and that is exactly what 80/20 predicts is that only 20% of the people are going to give you the money, so 21.4% of the people take the upsells. Now we found that the people only buy the $7 don’t generally become good customers. However, the ones that take the upsells, do. So the upsells are racking the shotgun and the money that we collect from the upsells, cover the cost of the 80%. Unfortunately, we can’t sort them out before we ever advertise to them. But we start sorting them immediately after we advertise to them, and in fact, you’ll get a huge value from buying the book but you’ll also get a huge value by studying how you’re sold to, after you buy the book. And in fact, you’ll see this in the Amazon comments in the book reviews, and they’ll go – there are a few people and those are the bright ones and they’re like you should buy this book because it is great but you should also go through Perry’s sales funnels and see how he’s constantly racking the shotgun figuring out should I sell this to you or not? Should I sell this to you or not? And then you are only being presented with stuff that you are seriously interested in which is why I have a very high level of engagement from people who read my emails. And I have people on my email list for 10 years and they are like, I like being in Perry’s email list because I get stuff that I want.

James: Yeah, absolutely. I of course tested this this afternoon for our interview and the shotgun was certainly racked right away because in fact, before you even offer those upsells, you’ve got people already subscribed to your email list, that’s step one and the offer is made right? Where they can choose from the various options but it means that you are talking to the right person, not just trying to the masses, right?

Perry: Well, yes and that is totally the name of the game. And if you are Coca Cola or Blue Cross Insurance or Gyko or somebody like that, then you can sell the masses. But if you are any kind of a small business, you can’t sell the masses. You can’t even think about selling the masses. You’ve got a narrow, narrow, narrow, narrow – in fact you might need to do 80/20 three or four times and get down to some tiny percentage of the world before you even start. Very important!

James: Yeah, let’s get close to wrapping out there Perry but let’s kind of end on that topic. If we have to give our listeners, perhaps not an 80/20% but perhaps even a 4% to focus on, for those listening, perhaps the steps that the sales and marketing people listening in could walk away and test and perhaps take on in their own business, what would those few things be?

James: Well, one thing that you will find in the book is I explained how pricing is 80/20, and one of things that 80/20 says is that if you are selling to your customers properly, then it means that 20% of your customers will spend four times as much money as the 80% and 20% of those will spend four times as much money as much money as then that part. So you can have that small amount of people that will spend large amounts of money like there is an example in the book that I said, if you’ve got few thousand people coming in to a Starbucks and buying coffee for $3 or $5 you’re going to get a couple every week why don’t you spend $2000 on an espresso machine? You might only sell a couple of those every week even though you’ve got thousands of people but if you do the math, that espresso machine or that high dollar purchase ends up being a very important part of the economics of your business. In fact, it may be that and a couple other high end things are actually what generate all the profit in your business and that everything else is just keeping your lights on. And if you don’t know that, like if you open a coffee shop and you don’t know this, probably what you are going to experience is all the self-condemnation. I can’t run this thing and boy you know the customers steal some cream and I am dying here just shaving pennies to make this thing work and it is like, well there is like one or two things you need to change in your business and all of a sudden you’ve got breathing room and you’ve got profit and so it applies every which way so I would just challenge people like be a serious student of 80/20, understand that it is all around you and if you get to where you can recognize it, that is a profitable thing.

James: Yeah, so thanks Perry. I am sure the book is available, I know it can be gotten hold of in your website, so should we as a result of this send people off to PerryMarshall.com?

Perry: Yes, and in fact there is a direct link, if you go to Sell8020.com it will take you right to that book page and you can get your copy.

James: Absolutely! Cool, I absolutely recommend listeners head on over to that link which will also be in the show notes page for episode#52 of Traffic Jam so head on over there and we’ll make sure that the link to post to Perry’s 80/20 book and all of Perry’s social media profiles are included there. So all that remains is for me to thank you Perry. It’s been an absolute pleasure.

Perry: Hey James thank you so much for having me on your show. I know it means a lot to trust your audience with somebody so it means a lot to me. Thank you!

So there you go that was the ever so awesome Perry Marshall with his 80/20 rule for sales and marketing. Thank you for listening in to episode#52. Get ready for episode#53 coming real soon. We’ll be joined by Neville Medhora who’s the man behind AppSumo’s email marketing.

To get that episode as soon as it is released subscribe via iTunes and or Stitcher radio head on over to TrafficJamCast.com/iTunes and TrafficJamCast.com/Stitcher. For a direct link that come with all the bonuses for this episode, including downloadable MP3, full transcript of today’s show plus an 80/20 sales and marketing mind map, that will of course help you put the rule shared by Perry in to action, go to TrafficJamCast.com/52 where you can also join in for the discussion on today’s episode.

We end this week with a traffic jam chosen by Perry Marshall and it is called XYZ and it is from 1981 and it is by the band Rush. So enjoy the track and I will catch you back here for another episode real soon.