Retention, Referral and Raving Fans (R3) - Part 1
Retention, Referral and Raving Fans (R3) - Part 1
The Full R3 book can be downloaded here.
R3: Retention, Referrals, and Ravings Fans is an “accidental book”. I taught it about a dozen times as a live class. When I taught it, I taught it in the order it should be implemented: reverse order. Building from the back to the front is far more efficient. Naturally, many people struggled with building something backward.
My business partner at the time, Dan G, took all the recordings of the final live class and rearranged them in an easier-to-follow format and, eventually, the outline and base for a book - or in this case - newsletter articles.
This series will be sharing select concepts from the book.
The fastest way to experience, learn and implement R3 is ExperienceR3.com - it’s two emails and two texts sent over two days, You’ll experience is AND learn why it works simultaneously. I would do that and then circle back and read the rest.
I’d like to make a statement…
Nothing grows revenue like retention and referrals.
Keeping customers is far more profitable - since you’ve already paid the acquisition cost and they generally become a lower headache & time commitment over time. Referrals are a magic money multiplier.
One good referrer can bring you hundreds of new customers for free.
I’ve heard countless business owners say something ridiculous like “but…but… but… I’ve tried it already” and have since given up since reality did not meet their expectations.
Speaking of reality not meeting expectations, these are generally the same people who still believe they’re one funnel away.
I Hate The Concept Of Funnels…
I’m sure you’ve heard it - maybe even said it - before…
“You’re Only One Funnel Away”
A classic example of a belief that creates an expectation that reality will likely never meet.
Here’s why:
When you build a marketing funnel, you’re building it with the expectation that it will function like the physical construct of a funnel. The physical construct of a funnel works like this:
Put a substance in the top of the funnel
The substance comes out the bottom of the funnel
Simple.
The physical construct of the funnel works because…
The substance cannot get confused, distracted, scared, or overwhelmed in the process. It just does what physics dictates it’s supposed to do.
The substance does not have to change its own behavior, which means it does not have to change its beliefs to keep moving in the direction it’s going to move. It just does what physics dictates it’s supposed to do.
The substance does what we expect it to do because of the laws of physics.
The substance doesn’t end up getting funneled to the right place because we want it to, but because we understand the laws of physics - we know exactly what the substance is going to do - and built a tool to direct it.
Back to your marketing funnel.
Can the thing you’re putting at the top of your funnel get confused, distracted, scared, or overwhelmed? Yes, because they’re human.
Does the thing have to change its own behavior or beliefs to go where you want them to? Yes, or you wouldn’t need this funnel.
Do you already understand exactly what it’s going to do? No. Because it’s human.
The problem with the mental construct of a marketing or sales funnel is that it takes a few of these things for granted. For example, the nature of the substance matters; water doesn’t get confused. People do. Water will always behave the same way under the same circumstances, people won’t.
Why did we first build a physical funnel? Because the laws of physics told us exactly what we should expect the substance to do - be pulled down to the earth.
Why do we build marketing funnels? To get the people to do something completely different than what they would otherwise be doing.
It seems nonsensical to expect them to behave the same.
The main reason a funnel functions the way we expect it to is because of this little immutable thing called…
GRAVITY.
For the mental construct of the funnel to function as expected, you would need to mimic the power of gravity (which is a pull, not a push), remove as much uncertainty and confusion as possible, and get someone to change their behavior.
Behavior is largely belief-driven, so you’d have to remove the beliefs that are preventing people from moving through the process and replace them with beliefs that better serve them. The only way it would make any sense to expect the mental construct of a funnel to function anything like the physical one, it would have to have:
Gravity or a magnetic pull in the direction you want things to be funneled (try using a funnel sideways, it doesn’t work the same)
Clarity, certainty, and trust along the journey
The tools to remove and replace beliefs so the human can modify their behavior without dissonance. You can get people to change their behavior without changing their beliefs but buyer’s remorse tends to grow in lockstep with dissonance.
So…
Why Retention, Referrals, and Raving Fans?
Because there is no inherent, immutable, magnetic force pulling people into or through your system. You have to create it. (I understand if you feel otherwise, it’s totally normal. It is called: entitlement).
If you want reality to more closely meet your expectations, you can’t expect people to come into your world and funnel through your process the way you drew it up without actively creating a gravitational force and cultivating clarity, certainty, and trust.
R3 is the system to create a magnetic pull, provide clarity, instill trust, and get people to modify their behavior in a way that is beneficial to both themselves and your brand.
For a very long time.
And it takes work. That’s right. Scaling a business and building a brand is hard. It’s really hard. It takes effort. A lot of effort.
Many internet marketers will try and tell you otherwise…they’re lying to you. They’ll try and convince you that you can out-market or out-sell your way out of anything and everything. And they believe it. Most of them have to believe it because it’s the only thing they know - and they need you to believe so they can sell it to you.
If that’s you, turn back now. This is not the book for you. Not right now, anyway. If you’re not in a place where you’re willing or able to make any changes, just put this down and come back to it later. Otherwise, read on… either way, I get it.
…But I have to tell you to do that.
One of the underpinnings of R3 is a set of three questions, with a bonus fourth:
Why am I here?
Am I in the right place?
What should I do next?
And, once you’ve mastered those three…
…And then what happens?
If you answer all of those questions at every step in the journey, you build what’s called “Allegiance Capital”, and it’s one of the most powerful components of the R3 system. We’ll circle back to it later.
Let’s focus on you.
Why are you here?
Because you stumbled upon this book. I’m not sure how, but you probably own a business and would like to increase your profits. My guess is that whatever you’re doing now isn’t turning out like you expected.
Are you in the right place?
If you’re still reading after the introduction and the first section, yes. You’re in the right place.
What should you do next?
Read the introduction again. Time is limited, if you’re not in a place to make small changes, don’t spend it reading this - or any other - book.
If you are in a place to make a few tweaks that will increase your profits dramatically or want to kill some time while soaking in some new ideas…keep reading.
And then what happens?
After each section, you’ll think you have a good grasp of it. When you go to engage the field or implement, you’ll realize there are some holes in your understanding…and you’ll feel a little frustrated. Thats okay. That’s how this whole thing works.
As you implement it, you’ll likely run into a conflict your profit will be increasing, on average over time, but you won’t be getting the dopamine rush you hoped for because - as it turns out - the same person buying more often doesn’t feel as good as a new person buying something new does.
It’s way more profitable, it just doesn’t like up our dopamine-addicted monkey mind the same.
The monkey mind places a high value on “new”. If you let the monkey mind win, you’ll be stepping over dollars to pick up pennies and fixing toilets in the middle of the night. That’s what would happen to me, anyway.
Fixing Toilets in the Middle of Night
In 2016 my first business had been open for five years. In that time we had moved locations, knocked down walls, built a waitlist, and become the highest-priced facility in town. Our waitlist was growing, our prices were going up and we had run out of walls to knock down. We had capacity but I like things to be simple and the juice didn’t seem worth the squeeze.
One day I was talking to my friend Chris who was president of Centerstate Bank at the time. Since I ran most of my money-related ideas by him, I said:
“I’d really like to make more money. I think I’m gonna buy a rental home”
He asked:
“How much do you think you will make?”
“Probably an extra $400 a month”
…and I remember how good it felt to say that.. an extra $400 a month with this new endeavor. I would be winning!
Then he asked:
“How much is a new member worth to you right now?”
Me: “On average… $500-600 a month right now”
Chris: “Okay. How much effort would it be to get one?”
Me: “Well, none. I would just let someone in from the waitlist”
Chris: “How many could you realistically let in right now from the waitlist?”
Me: “Probably 8-10”
Chris: “Okay, so what sounds like a better use of time… letting 8 people in at $500 a month each - $4,000 a month in new income…or buying a house and answering phone calls in the middle of the night about broken toilets for an extra $400?”
It hit me right away.
It would take maybe two hours of work to add $4,000 a month and I’d feel like… probably nothing.
It would take a ton of work, money up front, learning a new skill, and taking on significant obligations (like broken toilets) to increase my income through a rental property.
And still, the latter seemed far more appealing because it was something new. My monkey mind would feel like it was winning. And for weeks, I let myself mistake “more appealing” for more profitable. It felt better… it felt sexier than doing more of the same.
Most business owners are stuck in the same trap, mistaking getting new clients in new ways for being more profitable than just keeping more of the ones they already have.
It’s the new trap.
You’re going to feel it. You’re going to be tempted by shiny, new, and different. And that’s okay. The monkey mind isn’t going anywhere, you can’t silence it - we simply need to recognize when it takes the wheel and overrides it.
Something stupid that feels good feels a lot better than something smart that doesn’t feel as good.
..and why would I tell you that?
More allegiance capital.
It’s also worth noting to what degree emotion can overpower logic. You’ll want to remember that later because I’m gonna tell you that your customer’s emotions need to be addressed far more than their logic..you’ll have an emotional reaction to it and try to fight it - with logic.
If you can recognize when it happens in yourself, you’ll have a deeper insight and understanding of what your clients and customers are dealing with.
You may be thinking “Thanks for the warning, but that’s not gonna happen to me”.
Maybe it won’t. In this case, no harm was done. But if it does, and you recognize it, you’ll probably think to yourself…
“Damnit. How the hell did he know I would feel this before I could even conceive of or believe it?”.
And once again… more allegiance capital.
The Pillars
The pillars of R3 are not “marketing” things, they are human things. This book will show you how to apply them to marketing, sales, retention, and referrals - but it’s important to understand that they work because your prospects and your customers are human.
Pillar 1: Allegiance:
(Clarity, Certainty, and Trust)
Allegiance Capital: building trust at lightening speed
The Rocky Road
Pillar 2: Gravity
(The magnetic pull)
Stealth Influence: getting people to adopt your ideas as their own
Turning innovation into information
Pillar 3: Reliability and Behavior
(Building the system to manage emotions)
THE HFM: The “Holy F*ck Moment”
Monkey and Bananas: What monkeys teach us about how to deal with humans
Two Plow Horses Is Better Than One: Strategic communication of important things
I recommend taking the time to understand these concepts outside of business. It will give you the ability to derive your own strategies, tactics, and tools and apply them to situations that are unique to you.
Remember the requirements of moving people through a system: 1)Gravity or a magnetic pull, 2) Clarity, certainty, and trust, and 3)A human to modify their current behavior.
Stealth Influence is the gravity.
Allegiance capital is clarity, certainty, and trust.
Combining stealth influence and allegiance capital leads to modified beliefs and behavior.
R3 is the the system that unifies and combines them all to improve your marketing, sales, and retention leading to raving fans and significantly more referrals.
And in case you’re still stuck on it… yes, it will make your funnel work better.
Pillar 1: Allegiance
Pillar 2: Gravity
Pillar 3: Reliability and Behavior
1. Reliability
**Take the time to understand the concepts above before moving on. The next steps require the above to be in place.***
It’s important to remember that most buying decisions are emotional ones, not logical ones. Many of the pillars and concepts of R3 are focused on understanding and managing emotions throughout the journey.
2. The HFM
If you’re working on stealth influence and allegiance capital and you’ve removed all unnecessary components of the system, you should be left with only what is required and it should be simple for the user to navigate.
Until that is done, just focus on that.
Once that is done, think about how to turn each step into something that makes the user say “Holy F*ck!” - a Holy F*ck Moment, or an HFM.
Confirmation page —> How can I make this an HFM?
Welcome email → how can I make this an HFM?
First welcome call → how can I make this an HFM?
Welcome packet in the mail → how can I make this an HFM?
It may not be obvious, and that’s okay. The important thing is that this is how you are thinking about your entire system. As time passes, you will start to find new, unique, and interesting ways to create HFM’s at steps that everyone else is ignoring.
Derek Siver's confirmation email from CD baby is a great example:
CD Baby exploded because of their confirmation email. To quote Derek:
It’s tempting to try to think all the big thoughts and come up with world-changing massive-action plans. But please know that it’s often the tiny details that really thrill people enough to make them tell all their friends about you.
Just take the stuff already in place and spruce it up a little. Little hinges swing big doors.
When creating these HFMs (or anything else in your business) you want to be thinking about monkeys and bananas.
Yes, monkeys. And bananas.
3. Monkeys and Bananas
There is another reason to keep everything as simple as possible at all times. We call it “Monkeys and Bananas”.
Imagine there are two groups of monkeys in different parts of the zoo. You give all the monkeys in Group 1 a banana. Then give all the monkeys in group 2 a banana.
All the monkeys are happy.
Now, If you give all the monkeys in Group 2 a second banana, they’re still happy.
Great, everyone is effin’ happy.
Now take away the second banana from Group 2, and what happens? The group two monkeys are pissed. They’re throwing a fit and flingin’ poo everywhere because you stole a banana from them.
Both groups started with 0 bananas.
Both groups now have 1 banana.
Group 1 is happy as can be with their free banana.
Group 2 is PISSED and causing a scene…even though they got a free banana.
The lesson?
Losing something is painful.
Taking something away from someone - even if you gave it to them for free -will cause them to completely misframe the entire situation.
Considering the long time horizon, it’s always best to start with the minimum effective dose. A tiny HFM is often better than a big one that isn’t sustainable. It’s more reliable, but it also decreases the probability that you ever have to take something away from them.
Think back to the CD baby above, it was a very small thing that made a big difference.
So as you’re building think about monkeys. and also bananas.
And also… Plow Horses?
4. Two Plow Horses Are Better Than One
There is a really simple way to turn every communication into an HFM communication.
Just in case you’re not a farmer: Plow horses are the horses that pull the plow. Two plow horses can plow a field better than one. That’s pretty obvious, right? So this concept we’re about to describe, and put directly into applicable terms for your business is just as simple. How you do this can make a world of difference in the short term and the long term.
There are six main ways we think of to communicate. You might have more, that’s fine. The more expansive the thinking the better.
Face To Face
Email
Snail Mail
Phone / Text Message (you could split this into two different things, phone call and text message)
Video (This could also fall into email or phone, depending on how you send the video)
Audio
Gifts
If you want a prospect or customer to take a certain action, combine and integrate these 6 communication methods properly to create an even stronger multiplicative effect.
When you send out a series of communications, trying to get one or more people to do something, it’s called a campaign.
You’ll learn about some campaigns in the book, each has a different goal. One may help get your prospects to buy from you. Another campaign might help get your current customers to refer, etc. It’s important to understand the purpose of a campaign so you know how and when to use it.
The campaign should include the communication methods above but, more importantly, work together. This is where most campaigns swing and miss miserably. When you swing and miss on a campaign, people stop paying attention, so you’ve also driven down the effectiveness of the next campaign.
Here’s how to use the two-plow horse concept:
First, determine the medium you want to do the heavy lifting. This will be where you show up best. We’re going to be using the other mediums to amplify this one.
Example: Video
Second, determine the other communication mediums. Choose the ones that make sense in this situation.
Example: email, text message,
Third, determine the proper or ideal sequencing. This would be the most likely path of consumption. It will inform the sequence in which to send.
Example: Text —> Email—> Video
Okay so let’s break this down..
If you show up best or do your best work on video, we want to get as many people as possible to the video related to this campaign, right? So a great campaign could be set up like this:
Film the video. Where it’s hosted doesn’t matter, for now. We will get to that in a bit.
Send an email linking to the video
Send a text letting them know about the email
This is what the prospect or client experiences:
Client/Prospect gets a text message.
This text should help let them know you sent them something via email and wanted to make sure they didn’t miss it. “Hey, just sent you an email with something important. Just wanted to make sure you got it. It’s from email@address.com with subject line: “subject line”
Keys:
Allegiance capital is baked in. We told them who it’s from and what the subject line is. This also helps them go find it and open it. This alone will skyrocket your open rates.
It was framed as being helpful. “Just letting you know it’s there and wanted to make sure you got it” comes from a place of wanting to serve them. If they aren’t interested, they won’t go into their email and that’s okay - at least we didn’t bombard them with something they don’t want in their SMS inbox.
The text is half expecting a response. “Just wanted to make sure you got it” Gives them a low-pressure, no-obligation opportunity to respond and let you know they got it. Or that they tried to find it and couldn’t find it. This means someone wants to hear from you, but for some reason, they aren’t getting your emails.
Here’s what we didn’t do: we didn’t send the video in the text message and the email. If you send me the same thing in SMS and Email, you’re training me to ignore one of them.
Most businesses integrate text messaging into their marketing and their email open rates tank, which hurts deliverability and tanks them further. We do the opposite, we use SMS to enhance email and our email open rates often sit between 50% and 80%.
Client/Prospect opens the email.
The email simply provides a compelling reason to watch the video. Again, allegiance capital is built in. Tell them what to do (click the link) and what will happen next (it’s a 7:23 YouTube video embedded on a page with resources and details attached).
Client/Prospect watches video.
Using email to link to the video and SMS to push the email, your video will likely get the most concentrated and least distracted views. You’ve also built allegiance capital along the way.
More importantly, you're improving your capacity to produce later by not tanking your email open rates.
Advanced Examples:
1.
Assume you’re using the campaign above. If you’re targeting YouTube videos, you’re also enhancing your ad strategy. If your main strategy is retargeting video viewers on Facebook, you can link them to a Facebook video to get them into that, specific audience.
2.
Create a video and embed it on a page —> Send a gift with a physical letter or note letting them know you have a special video for them at (URL). Get tracking notifications —> Once the gift is delivered send them a text to run to the mailbox
In other words, think about how to get everything to work together and in a way that the different things you are doing are befitting, not hurting each other.
Here’s a short case study showing the difference integrated campaigns make. You’ll see the setup, the open rates, and all that fun jazz.
We haven’t even gotten into R3 yet but you could probably just apply the above for years and make progress. And if you were to do so, you’d probably realize on your own what you’re about to learn in the following sections.
If you want a step-by-step experience - two steps over two days - check out ExperienceR3.com. It’s two emails and two texts sent over two days. You’ll be experiencing R3 while you’re learning it.
I recommend not moving on to Part Two until you have tried to implement something from Part One. If you’re ready to move forward, Part Two can be found here.
Live to Learn. Give to Earn.
Nic
PS. Speaking of referrals…we already have someone on the Leaderboard. It’s a safe bet that they’re going to get WAY more than expected. (That’s another R3 strategy, don’t tell them the best stuff until AFTER they take the step or reach the milestone)
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