Cold Outbound Sales Magic Ep 439



In this podcast episode, the host discusses strategies for customer acquisition and marketing efficiency, using a case study of energy drink promotion to illustrate the importance of understanding cost per acquisition (CPA) and lifetime value (LTV) of a customer. The host emphasizes the need for businesses to aim for a minimum three-to-one LTV-to-CPA ratio for profitable growth, sharing personal benchmarks and the belief that higher ratios are achievable with the right mindset. The episode also covers tactics for cash-flowing acquisitions, such as leveraging credit for customer acquisition costs, and the host's goal of removing cash as a growth barrier in business. The conversation concludes with advice on maximizing net free cash within the first 30 days of customer acquisition to sustainably scale a business.

Summary Notes

Cash Flow and Customer Acquisition

  • The goal is to recover the cost of customer acquisition within the first 30 days.
  • Achieving a quick return on investment is crucial for the financial health of the business.

"We want to be able to, ideally, cash flow the acquisition, which means that in the first 30 days of the customer, we want to be able to make back the cash that it cost us to acquire them."

This quote highlights the importance of efficient customer acquisition strategies that allow a business to recoup its investment quickly.

Business as a Game

  • The podcast aims to share lessons learned in building a successful business portfolio.
  • The analogy of business as a game suggests a strategic and competitive approach.

"The wealthiest people in the world see business as a game. This podcast, the game is my attempt at documenting the lessons I've learned on my way to building into a billion dollar portfolio."

This quote sets the tone for the podcast, indicating that the content will focus on strategic business growth and sharing valuable experiences.

Growth and Partnership Goals

  • The speakers express a desire for listeners to use the shared lessons to grow their businesses.
  • There is an open invitation to partner with the speakers' business once certain milestones are reached.

"Lessons to grow your business and maybe someday soon, partner with us to get to $100 million and beyond."

This quote emphasizes the podcast's goal of not only educating listeners but also potentially forming strategic partnerships.

Six Ways to Get Customers

  • There are four core methods for customer outreach: one-on-one, public announcements, private outreach to strangers, and public outreach to strangers.
  • Referrals and affiliates are additional methods that leverage the core four.
  • Affiliates are particularly valuable as they can reach more customers than individual outreach efforts.

"There are six ways to get customers. The first four ways are the core four ways... From those four ways, you can leverage the other two ways, which is referrals and affiliates."

This quote outlines the various strategies a business can employ to attract customers and emphasizes the foundational role of the core four methods.

Cold Outbound Strategy

  • Cold outbound is one of the more costly customer acquisition strategies.
  • It is commonly used by B2B businesses with higher ticket items that can justify the expense.
  • The strategy involves directly reaching out to potential customers who are not yet familiar with the product or service.

"Now, when you let a stranger one on one know about the stuff that you sell, that's called cold outbound."

This quote defines cold outbound as a direct marketing approach targeting individuals who have not previously interacted with the business.

Breaking Beliefs in Marketing

  • The speaker's belief that cold outbound is not suitable for direct-to-consumer businesses was challenged.
  • The belief was that cold outbound is mainly used to acquire affiliates, who then acquire customers.
  • Affiliates are deemed more valuable than individual customers due to their broader reach.

"And I had this belief broken for me because as a consumer or direct to consumer business, physical products, maybe smaller ticket, higher volume business, most times anyone would use cold outbound would be to get affiliates. And then those affiliates get customers."

This quote reveals a shift in perspective regarding the effectiveness of cold outbound marketing for different types of businesses.

Real-World Example of Marketing ROI

  • The speaker recounts a personal experience with a marketing tactic used by a beverage company.
  • Two individuals were observed distributing free energy drinks along a boardwalk.
  • The speaker engaged with them to understand the financial return on investment of this marketing activity.

"So I go up to the girls because they're like, hey, do you want a thing? I was like, actually, not really, but let's talk. And so I asked them, how many cans do you guys give out a day?"

This quote demonstrates the speaker's curiosity about the effectiveness of the marketing strategy employed by the beverage company and sets the stage for a deeper analysis of its ROI.

Consumer Product Shipping Costs

  • The most significant expense for consumer products, especially low-cost items, is shipping, not the production.
  • The actual production cost of a soda can is minimal compared to the shipping cost to distribute it to retail locations.

"The biggest cost for a consumer product, especially the lower ticket one, is the shipping."

This quote highlights the importance of shipping costs in the overall expense structure of consumer products, particularly inexpensive items.

Marketing Strategy and Distribution

  • Companies can ship large quantities, such as pallets, to a single location to save on shipping costs.
  • Marketing teams, often comprised of pairs of individuals who can draw attention, distribute the product directly to consumers.
  • The distribution strategy involves giving away free samples, in this case, 1000 cans, to potential customers.

"So when they give 1000, they can ship a pallet all at once to one location, or pallets all at once to one location."

This quote explains the logistical efficiency of shipping products in bulk to a single location for marketing purposes.

Cost Analysis of Product Sampling

  • The cost of giving away 1000 cans at $0.25 each is $250.
  • Assuming labor costs are also $250, the total daily cost for a two-person team is $500.
  • The cost per can when handed out is $0.50, considering both product and labor expenses.

"So if we're giving out 1000 cans and it costs $500, then it costs fifty cents to deliver a can to a potential customer."

This quote breaks down the cost of product sampling, illustrating the expense involved in delivering a free sample to a customer.

Lifetime Value (LTV) and Consumer Conversion

  • Having a high-quality product is crucial for ensuring a percentage of those who try it for free will become repeat customers.
  • The example provided demonstrates a consumable product with a high repeat purchase rate of 63%.
  • A conservative estimate of a 4% conversion rate from free sample to consistent buyer is used for calculation.

"And let's just say four out of 100. So 4%. All right, one out of 25 people who get a can for free are willing to then consistently buy cans."

This quote indicates the importance of product quality in converting free sample recipients into regular customers and provides a conservative estimate for conversion rates.

Revenue and Profit Margins

  • A case of the product costs $30 for 12 cans, with a monthly consumption estimate of $75 for a regular user.
  • Shipping costs for a heavy item like a 12-pack of cans are significant but manageable.
  • An analysis of shipping costs, production costs, and sales price reveals a substantial profit margin.

"Now, remember, our cost per can is shipping of a really expensive, really expensive, because it's heavy. Twelve cans might be somewhere like $5 ish, direct to the consumer."

This quote underlines the significance of shipping costs in the overall cost of getting the product to the consumer, which is a key factor in pricing and profit calculations.

Calculating Customer Lifetime Value (LTV)

  • The LTV of a customer is calculated based on the average duration a customer continues to purchase the product, in this example, five months.
  • With an LTV of $335 per customer and a 4% conversion rate from the free sample campaign, the potential revenue from 1000 samples is calculated.

"All right, so let's say that's the LTV of a customer lifetime."

This quote introduces the concept of customer lifetime value, which is a critical metric for understanding the long-term profitability of marketing strategies that involve free samples.

Understanding Lifetime Value (LTV) and Cost of Acquiring a Customer (CAC)

  • Discusses the importance of LTV and CAC in business marketing strategies.
  • Illustrates the concept of LTV with an example of a customer's value being $335 and the implications of acquiring such customers.
  • Explains the necessity of benchmarks for measuring the efficiency of marketing efforts.
  • Stresses on the need for a minimum three to one LTV to CAC ratio to ensure profitability.
  • Advocates for aiming higher than the standard benchmarks to maximize profit.

en become $335 of LTV. 40 times $335 is $12,000 roughly, right? They spent 500 for that. Does that make sense?

This quote illustrates the calculation of lifetime value (LTV) of a customer, showing that a customer's value can amount to a significant total over time compared to the acquisition cost.

So the question is, at what point does it make sense to do this?

The speaker is questioning the efficiency and practicality of marketing investments relative to the LTV and CAC, encouraging a strategic approach to marketing expenditures.

Marketing always works. It's just a matter of how efficient is it?

This quote emphasizes that marketing is effective, but its success is measured by the efficiency and return on investment, not just by its ability to attract customers.

I like to have a minimum of a three to one LTV two CAC ratio.

The speaker introduces a benchmark ratio for LTV to CAC, suggesting that for every dollar spent on customer acquisition, three dollars should be earned in gross profit from that customer to ensure profitable growth.

And so they've done a lot of research on this. And so three to one is kind of the minimum LTV to CAC ratio that is required for profitable growth.

The speaker references research to back up the claim that a three to one ratio of LTV to CAC is the minimum standard for a business to grow profitably.

Setting Higher Profit Standards

  • Encourages setting high standards for profit margins beyond the accepted benchmarks.
  • Shares personal preference for aiming for a ten to one LTV to CAC ratio.
  • Believes that achieving higher ratios is a matter of belief and setting high standards.
  • Presents the speaker's own advertising return as an example of surpassing standard benchmarks.

Now, me personally, I tend to shoot really high. I like to have ten or more because I like having lots of profit and I want to make lots of money while I grow.

The speaker shares a personal strategy of setting ambitious targets for LTV to CAC ratio to maximize profit, which goes beyond the standard benchmarks.

And I genuinely believe it's a belief thing where if you believe it's possible, it is.

This quote suggests that a strong belief in the possibility of achieving high LTV to CAC ratios can make it a reality, highlighting the power of mindset in business success.

In the book, I talk about how my lifetime return on advertising is 36 to one right now.

The speaker provides evidence of their own success in achieving a high return on advertising spend, which supports the argument for setting high profit standards.

The Effectiveness of Cold Outbound Marketing

  • Asserts that cold outbound marketing is an effective strategy for all types of businesses.
  • Suggests various methods of cold outreach, including door-to-door sales and cold calling.

And so I want to use this example to show you that cold outbound specifically works for any type of business.

The speaker advocates for the effectiveness of cold outbound marketing strategies, asserting their applicability across different business models.

You can use it for a direct to consumer business. It can be knocking on doors, it can be handing out cans. It can be cold calling, cold

This quote lists examples of cold outbound methods, illustrating the versatility of this marketing approach for reaching customers directly.

Cold Outbound Strategy

  • Cold outbound involves directly reaching out to potential customers to inform them about products.
  • It is a one-on-one communication method that can take various forms such as email, direct mailing, or cold messaging.
  • The effectiveness of cold outbound can be measured through careful calculation and understanding of costs and returns.

email, cold message. It can be direct mailing people. It doesn't matter. Whatever it is, it's cold outbound. You're letting people know one on one about the stuff that you sell.

This quote emphasizes the various methods of cold outbound communication and the personalized nature of the outreach.

Cost and Purchase Calculations

  • Detailed calculations are necessary to understand the cost of purchasing inventory.
  • Speaker A explains the math behind buying a month's worth of product (three cases for 30 cans).
  • The cost calculation is crucial for determining the financial viability of the business model.

it would cost $75 if we were able to buy two and a half cases, which we can't. So we have to buy three cases to get our month's worth of twelve cans because twelve plus twelve is 24, plus another half case gets us to 30 for the month.

This quote breaks down the speaker's process of calculating the necessary purchase quantity and the associated costs for a month's supply.

Lifetime Value (LTV) of a Customer

  • The concept of Lifetime Value (LTV) is central to understanding the long-term profitability of acquiring a new customer.
  • Speaker A emphasizes the importance of knowing the cost to acquire a new customer and the revenue they generate over time.
  • LTV is a critical metric for assessing the financial health and growth potential of a business.

And it's more important to think about just what the math is just to get to the LTV, because that's the only number we really care about.

This quote highlights the significance of LTV as the key financial metric in evaluating customer acquisition and long-term business success.

Cash Flow and Customer Acquisition

  • The goal is to achieve positive cash flow from a new customer within the first 30 days.
  • If the initial acquisition cost can be recouped quickly, it allows for growth even with limited capital.
  • Speaker A discusses using a credit card to fund customer acquisition, which can then be paid off with the customer's initial transactions.

So if it cost me $100 to get a new customer on my business, I want to create in excess of $100 of net free cash flow back to me to cover the expense.

This quote explains the desired outcome of acquiring a customer: generating enough cash flow to cover the initial acquisition cost.

Business Growth and Overcoming Bottlenecks

  • Solving the cash constraint allows a business to focus on other areas of growth.
  • Identifying and addressing new barriers is an ongoing process for expanding businesses.
  • Speaker A describes a strategy where once cash flow is managed, other growth barriers can be tackled systematically.

And so if you literally just figure out that part of the equation, acquisition is no longer the bottleneck in your business, and it will be something else further down the pipe.

This quote suggests that once the issue of cash flow is resolved, other challenges will arise, and these need to be identified and addressed to continue growing.

The Concept of 30 Day Cash

  • The '30 day cash' metric measures the net free cash generated by a customer in the first 30 days.
  • It is used to determine if the business can pay off the credit card used for customer acquisition.
  • Speaker A explains the importance of adjusting pricing or offers to ensure this metric is met for sustainable growth.

The metric I use there is called 30 day cash, which is how much net free cash does a customer spit off in the first 30 days so that I can pay off a credit card to acquire the customer.

This quote introduces the '30 day cash' metric as a tool for ensuring that customer acquisition can be financed through the revenue they generate shortly after joining.

Sign-off and Channel Engagement

  • Speaker A concludes with encouragement and a promise to provide further teaching to the audience.
  • The sign-off includes a friendly farewell and an acknowledgment of the community, "Mozzie Nation."

keeping awesome Mozzie Nation, lots of love and I'll teach you guys.

This quote serves as a positive and community-focused conclusion to the discussion, reinforcing the speaker's connection with the audience.

What others are sharing

Go To Library

Want to Deciphr in private?
- It's completely free

Deciphr Now
Footer background
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon

© 2024 Deciphr

Terms and ConditionsPrivacy Policy