The Transcript

What Online Entrepreneurs Need to Know about Affiliate Marketing

Voiceover: Rainmaker FM.

You’re listening to The Digital Entrepreneur, the show for folks who want to discover smarter ways to create and sell profitable digital goods and services. This podcast is a production of Digital Commerce Institute, the place to be for digital entrepreneurs. For more information go to Rainmaker.FM/DigitalCommerce, that’s Rainmaker.FM/DigitalCommerce.

Sean Jackson: Welcome to The Digital Entrepreneur everyone. I am your host, Sean Jackson, and I’m joined as always by the diligent Jessica Frick. Jessica, how the frick are you today?

Jessica Frick: I am diligent, Sean. How the Jackson are you?

Sean Jackson: I am well. I am well as always.

Jessica Frick: You sound so much better, Sean. You haven’t been feeling well. You sound great.

Sean Jackson: You know, again, as I’ve always said, it’s for the audience. I feel like absolute pounded poo poo but I am going to make my way through it.

Jessica Frick: It’s that show biz flare. You got it.

Which is More Important: the Quantity of Leads or the Quality of the Process

Sean Jackson: There you go. So we left everyone hanging last week with the question of, “What matters more? The quantity of leads or the process of converting leads?” I’m going to go ahead and take the quantity argument because I want you to go in depth on the process side. Okay? Here is my argument for quantity of leads matters more than the process for converting them. Okay?

Jessica Frick: Okay.

Sean Jackson: If you don’t have leads, who cares what your process is? So you need to get them.

Jessica Frick: Well, that’s a good point.

Sean Jackson: You want a ton of them because being a small business, there will naturally be what I call spillage, right? There will just be people that are coming in who are, you’re just not going to be able to get to. Something is going to break in the system, and if you had a bigger team, if you had a bigger organization, then you can take care of spillage. But at the end of the day, being small, you can’t deal with it, so you might as well get as many as possible so that the few that don’t spill out, you can convert them. That would be one argument. What say you?

Jessica Frick: Well, the argument that I have would be the better argument, but you know, we are a customer-first company, and we always think about that customer perspective, and unless you have processes to treat them right, not only are they going to bail, but they’re going to tell their friends to not talk to you. They’re not taking their ball. They’re taking their ball and all of their friends with them.

Sean Jackson: Ah.

Jessica Frick: Acquisition is hard, but activation and retention, that requires process. And not only that, but if you don’t have process, your team is going to burn out fast. If you don’t have a team, what difference does it make if you have a million leads? You can’t do anything with them.

Sean Jackson: Yeah, very good point.

Jessica Frick: So process is more important, because the amount of leads that you have can be adjusted, but if you can’t activate and retain them, it doesn’t really matter.

Sean Jackson: Well, see. That is a good argument, and I will counter with this. I think that when you have a process, then you’re going to want to fill that pipeline up as much as possible, right? Now, it may not be a perfect process. It may be something that is good enough to get you to some sort of revenue for the business enterprise.

At that point, once you have a process, then of course, stacking as many leads into that pipeline then become paramount. If we find the middle ground, which I don’t always like to do, but if we found the middle ground, I would say that you have to have a process, but then once you have that process, then you want to stack up the quantity. What say you?

Jessica Frick: I think that sounds reasonable.

Sean Jackson: Okay.

Jessica Frick: I think it has to happen in that order. I think you need to have some leads, then work out your processes, then you get more leads and you tweak your processes, and you’re just always growing and changing with the demand.

Sean Jackson: Yeah, and I think that’s a part of it. I think really where the end output of this discussion is, is that it is a constant feedback loop, right? You have to have somebody who wants to buy what you’ve got to begin with and you’re going to have to put a process in. I would say start with the process first, right? I’m giving my honest opinion on this. I’d say have a process, get some leads into it, and then continually refine both the acquisition and quantity of leads and the process that goes with it so that spillage, which is natural, can be addressed through the continuous feedback loop and continuously addressing what is occurring in your little ecosystem.

I will say this. One of the things, it’s always hard to take a side of an argument is that if you are only closing 1% of the leads that you get in, then you could double the size of your business by just improving the process in closing 2%, right? But, if you’ve only got five people. You know what I’m saying?

I think the end output for our audience is very simple. It is a continuous feedback loop. It is a continuous process of putting a process in, filling the pipeline, refining the process, refining the pipeline, and that’s the back and forth. Because literally your business can grow not because you got a hundred million people coming in. It could grow because you’re just taking ten thousand and converting more of them in the process that you have. Would you say that’s a logical statement?

Jessica Frick: That sounds logical to me.

Sean Jackson: Good, and the nice thing about today’s show is that we actually have some experts as our guests who came up with this idea of “growth hacking.” In fact, they’re called the Growth Hackers. I’m going to let Jess really take the lead on this because she really is the process gal, and we’re going to interview the founders of Growth Hackers and the authors of the new book, Hacking Growth.

We are joined today by two, I would say, extraordinary individuals. Jess, wouldn’t you say that?

Jessica Frick: Absolutely.

Sean Jackson: We have with us Sean Ellis, who is the founder and CEO of Growth Hackers, which is convenient, given the fact that he coined the term “growth hacker” back in 2010. But prior to being with Growth Hackers, he was the founder and CEO of Qualaroo with customers such as Uber, Starbucks, Spotify, and Intuit. And he also laid the foundation as the first marketing executive to help grow five different companies including UpRoar, LogMeIn, Lookout, EventBrite, and DropBox to more than one billion in valuation.

Our second guest, who happens to be the coauthor of their book is Morgan Brown. Morgan is a startup marketing veteran with more than 15 years helping early stage companies find traction and growth. He took his first job at a startup in 1999, and then worked for a marketing agency, and then he moved to the startup world again to grow venture-backed startups such as TurnHere and ScoreBig. Morgan also writes regularly at MorganBrown.co. So with that introduction, gentlemen, welcome to the show, and Jess, I’m going to turn it over to you and let you run this interview.

Jessica Frick: I would love to, Sean. So Morgan, Sean, thank you so much for joining us.

Sean Ellis: Thank you Jessica.

Morgan Brown: Yeah, thanks for having us.

The Right Mindset You Must Have to Create a Growth Hacking Culture

Jessica Frick: As I’ve told you both, I’m very excited to read your new book when it comes out, and so since we’re talking about business growth on this week’s episode, I figured you guys would be perfect men to ask these questions. My first question: At a philosophical level, what is the mindset you need to be successful with growth hacking?

Sean Ellis: I’m happy to take that one. I think you have to have this recognition that everything you’re doing, there’s a better way to do it, and the only way to figure out the better way to do it is through testing. And that that testing should really be directed toward delivering more value to users, and when you do that, growth seems to be an outcome of that. That just continuous improvement mindset would probably be what I would latch onto the most. Anything you would add to that Morgan?

Morgan Brown: No, I completely agree. I think just the understanding that there’s always a better way to do things and that you can constantly improve is really at the heart of growth hacking, and I think the only other thing that I would add is that as people, we tend to underestimate how fast things are changing out in the world and how fast people’s behaviors are changing, the competition coming and going. You have to pair that constant improvement mindset with an urgency to move as quickly as possible and not be caught off guard with how fast things are actually moving, so I would add an urgency to that constant improvement.

Jessica Frick: That makes a lot of sense. I would imagine it’s very easy to get stuck. Now, you guys talk a lot about big businesses and rapid, successful growth. How can a solo entrepreneur use growth hacking, given the huge demands on their time already?

Sean Ellis: Well, we talk about big businesses. Most of the businesses that I worked with were tiny businesses when I started working with them. DropBox for example was less than 10 employees and I know that’s still not a solo entrepreneur, but I think for a solo entrepreneur, you want to be able to think holistically about the customer experience and not just gravitate toward, “I need more customers,” but instead think, “How do I get someone from consideration of my product to actually coming in and experiencing it?”

Really thinking about that full journey from there and just an understanding that there’s a lot of levers that can be flipped. And especially for a solo entrepreneur who doesn’t have a lot of time and, potentially, resources, making sure that the focus is on the area where you’re going to have the biggest impact is really important. And sometimes the biggest impact is not going out and spending a lot more money or figuring out how to get a lot more customers potentially interested, but figuring out how to convert and retain the customers that are already coming to you, for example.

How Understanding Leverage can Rapidly Accelerate Growth

Jessica Frick: That makes a lot of sense. That brings me to my next question perfectly. You talk about leverage being an important part of growth hacking. What does that really mean to you?

Morgan Brown: Kind of to Sean’s point, is that there’s so many things that you can do to try to grow your business and what I always try to think about when I’m working on my own business or working with the companies that I work with is, If I make a difference in what I’m doing right now, will it make a difference to the outcome of the business?

I think that’s the essential idea of leverage, is finding the one or two things that you can do and change and improve on that will create outsized results. As a solo entrepreneur, as a business owner, there’s a million things you could focus on at any one time, but you only have so much time and so much money to really … you can’t do it all. In growth hacking, really one of the first steps is identifying where you have the most leverage, where if you’re able to improve that one or two things, it will create dramatically better results and kind of outsized gains as a result of that.

Sean Ellis: I could give a quick example from LogMeIn about just the power of leverage. Sometimes-

Jessica Frick: Oh, that’d be awesome.

Sean Ellis: Sometimes it’s a little abstract without a specific example there, so at LogMeIn, we tried to grow the business initially, and I approached that as most marketers do initially where I just went out and started buying ads and could actually work on landing pages a little bit, but what I found was we quickly hit a wall at about $10,000 a month and how much we could spend to acquire users and get a positive return on investment.

What I was looking at, though, was optimizing to get people to sign up for the product, but basically, the majority of the people who signed up never actually used the product. So if they didn’t use it, then they weren’t going to pay us anything. They weren’t going to tell their friends. They weren’t going to stick around.

It was really beyond my control to do most of the things. After they registered, all of the things that needed to be done were beyond my control, so I brought the data to our CEO. We were still small enough where it wasn’t that hard to get the company to turn on a dime and realize that this activation area was where our leverage opportunity was.

The signup-to-usage was a goal that we put as an overall team where we all focused our energy on improving that. It took a few months of experimentation there, but we were able to get about a thousand percent increase in the number of people who signed up and actually used the product. Once we had done that, we went back to the same channels that previously scaled to $10,000 a month, and now we could spend over $1,000,000 a month on those channels.

Jessica Frick: Whoa.

Sean Ellis: Yeah, the money was paid back every three months so we got a fast return on that investment, so it just shows that power of leverage, where a lot of people are thinking about growth hacking, It’s this really creative trickery,” but ultimately we were fixing something that was kind of confusing in the onboarding path of a new user and then with no new creativity, we were much more effective on our customer acquisition. That’s really this idea of leverage, is just finding what’s that “choke point” that’s really preventing your...