Retention, Referral and Raving Fans (R3) - Part 4
Retention, Referral and Raving Fans (R3) - Part 4
Inversion, Cash Now Campaigns, and Buckets
“Invert, always Invert’
- Charlie Munger
Well Isn’t This Backward?
The great Charlie Munger always says “Invert, always invert”.
What does that mean? Inverting is different than “beginning with the end in mind”.
Imagine a maze. Beginning with the end in mind is starting the maze with the intent of finishing it. Inverting would be doing the maze backward, from the finish line to the start. Working backward, or inverting the process, gives you a way to chart a path with fewer “wrong choices”.
Have you heard someone refer to marketing or advertising as the “water faucet of leads”?
The water faucet of leads concept doesn’t hold a similar reason the concept of a marketing funnel doesn’t hold up.
When we imagine the customer journey we think of it from left to right. We draw it out from left to right and our brain will attempt to build and troubleshoot it from left to right.
Like the maze, the more efficient path is to invert it and troubleshoot it backward.
Remember that marketing, advertising, and sales all have a cost involved. Before paying to turn that water faucet on to fill your bucket, it would make sense to:
Check the bucket for holes
Make sure the water faucet or hose is actually going into the bucket
Check for kinks in the hose
Make sure the hose is attached to the faucet
THEN turn the water faucet on.
That’s working backward.
Contrast that with the “left to right” forward-thinking:
Turn the water faucet on
Attached the hose while water is running (waste created)
Work out the kinks in the hose (waste created)
Put the other end of the hose in the bucket (waste created)
Start plugging the holes in the bucket while water in running through them (difficult and waste created)
The “top-down” or “left-to-right” linear approach to business is not only wasteful, it’s far more difficult. As a small business owner, resources are limited. We aren’t Fortune 500 companies, so being intentional about how resources are being allocated is critical.
If you have customers right now, work backward.
Start with your raving fans and work right to left.
Again, this is like plugging the holes in the bucket before pushing harder on the water faucet. If we plug the holes in the bucket and work out the kinks in the hose, we get a far greater return on the front-end efforts.
The first step of the R3 methodology is to plug the leaky bucket from the bottom up (or from right to left). Your brain will likely fight this because it orients heavily toward “new sales”.
Arguments For Inverting:
The highest returns in the short term come from working backward.
The highest returns in the long term come from working backward.
The most sustainable returns come from working backward.
Whether you’re on a short-time preference or a long-time preference, working backward is the most efficient path.
Warren Buffet’s business partner, Charlie Munger, famously says:
“The best marketing is the work on your desk”
This is another version of inversion.
Take care of your best buyers. They are the best source of new business, and they will buy more themselves. They will refer more business to you. They will leave reviews. They will bring in their friends. They will shout from the top of the mountain top how awesome you are. They also hang out with your best prospects when they are out in the world living their lives.
Marketing is important. Advertising is useful. But never forget:
Your best buyers are the best source of new business.
To be clear, the “front-end” stuff shouldn’t be neglected.
If you work backward, the front end will be optimized when it’s the highest leverage thing to optimize. You turn the water faucet on higher after the kinks are worked out and the holes plugged- making it much more effective.
There are exceptions to this, kinda.
If you’re just starting your business, you shouldn’t be reading this book. But if you are… you would start at the front end because if the same as the back end, for now.
The bigger your business, the more important it is to implement back-to-front.
I prefer to work from higher return to lowest return because as returns diminish, there may be a point where the juice is not worth the squeeze.
THE COMPONENTS OF R3
Once again, if you stop reading right now and focus on everything you’ve been introduced to up to this point, it will likely have a profound impact. What follows is more tactical and the returns will likely be diminished. Remember: fundamental stuff always has higher returns and advanced stuff always has diminished returns. Diminished returns are still returns. You have to decide if the juice is worth the squeeze.
4 Main Stages:
These stages represent the largest psychological and emotional shift for the customer. The communication and delivery get adjusted accordingly.
6 Substages:
These are smaller psychological and emotional shifts within the four main stages.
If you understand the four main stages and how the psychology shifts, you’ll get most of the returns.
Ace Cards
These are built in the background as “need cash now” options and campaigns. They are to be deployed infrequently. The R3 system provides an opportunity to strategically bucket customers and deploy “cash now campaigns” in an integrated manner. The ace cards are part of R3 because knowing how to increase cash flow in a pinch without destroying goodwill is critical for retention and referrals. There are two components to the Ace Card strategy:
Bucketing
Cash Now Campaigns
Ace Cards
All of our companies have “ace cards” built in. Ace cards are ways to generate cash in a pinch without destroying goodwill. We’re going to show you how we build Ace cards to keep in our back pocket.
Think of an ace card as an “in case of emergency break glass” kind of thing; we want to make sure we always have a few, but want to use them as infrequently as possible. The purpose of the Ace Card is to get you out of a jam, use them too frequently, and they won’t be there when you need them.
There are two primary components to the Ace Cards:
Buckets
Get Cash Now Campaigns
Remember, the psychology changes at each stage. Our Cash Now campaign to a Raving Fan would be very different than a Cash Now campaign to a new buyer.
Buckets
Good Fit Now, Good Fit Later, Not A Good Fit
This is a pretty straightforward and highly effective way to know where the opportunity is in your business. It simply gives us an idea of who, in what stage, is a good fit to take the next step now, later or never.
Knowing, at all times, which prospects, or current customers are a “good fit” to tke the next step now, later, or “not” a good fit is simple, but also powerful.
If someone is running a company, and can’t tell me which of their customers, and which of their prospects are a good fit to take the next step right now (or a good fit to do it later), that’s exactly where the biggest cash windfall is sitting.
You can use a fancy CRM, Trello, a Google Sheet, or whatever. There are only three buckets to keep track of, tools should not be a limit.
Every prospect and customer sits in one of these buckets:
Bucket prospects and your current clients who can or should be deciding to buy again, continue buying from you, or upgrade.
Good Fit Now means that you have determined they should take the next step. They may not know it, but by giving them the Good Fit Now designation, it means that based on what you know, they would be extremely happy if they took the next step with you. There are at least four good fit now buckets:
Good Fit to become a customer
Good Fit to become an established customer
Good Fit to become a customer for Life
Good Fit to become a Raving Fan and referrer
Good Fit Later is similar to Good Fit Now, but for some reason, you aren’t certain that this is the best time for them or the best fit right now. They fit your ideal client avatar, but buying later would be a better choice or more realistic for them.
Good Fit Later to become a customer
Good Fit Later to become an established customer
Good Fit Later to become a customer for Life
Good Fit Later to become a Raving Fan and referrer
Not a Good Fit is obvious; they are not the kind of person you want in your company. Notice how this is sorted by what you know or think about them, not what they know or think.
Not a good fit to become a customer
Not a good fit to become an established customer
Not a good fit to become a customer for Life
Not a good fit to become a Raving Fan or Referrer
The buckets are important is because we’re going to run campaigns - organized, thoughtful communication - to each of these buckets. If someone is not a good fit to take the next step, we should not send them a campaign designed to take the next step.
Reminder: I work backward. The first place I would look to build these buckets is amongst the best clients that haven’t become raving fans yet. I would bucket them as:
Good fit to become a raving fan now
Good fit to become a raving fan later
Not a good fit to become a raving fan.
The rabbit hole of figuring out why some are good fits, some are good fits later and some are not good fits will take some time to go down. Doing so will improve everything about my business. In other words, you don’t have to build it all right now. You could address one stage per quarter and see a massive return on time.
The Primary “Cash Now” Campaigns: There are six main campaigns we run with nearly unlimited variations. To limit overwhelm, they’re included as a separate booklet.
The Silver Bullet Campaign is used to quickly identify the best fit. It doubles as a powerful sales tool. This is one of the most powerful campaigns because it builds trust and rapport quickly.
The Be Helpful Campaign goes to “Good Fit Now”. If someone is a good fit to move to the next stage, the Be Helpful Campaign will likely push them over the top to take the step.
The Second Chance Campaign gives prospects and customers a second chance to become a Good Fit. In my experience, 20-30% of people will change their behavior to become a better fit if they are given a second chance and told how.
The Stay-Focused Campaign is designed to keep momentum. It’s most effective when a prospect or client has taken a step already. This campaign encourages them to keep moving - put one foot in front of the other type of thing.
The Perspective Campaign is designed to create a paradigm shift. It’s best used at success or achievement milestones to connect at a deeper level beyond the initial goal.
The Continuance Campaign is sent to people currently engaged. This campaign is like letting your members peak inside the VIP room - it gives them a glimpse of the next level, creating an internal desire or pressure to become a VIP themselves.
R3 Campaign Principles and Set Up:
R3 is built on gravity, trust, and reliability. Our campaigns must be structured in a way to maintains those things throughout. The core principles are:
A campaign must be helpful
There must be a good reason why and it can’t be made up (like a goofy countdown timer)
The easiest way to incorporate both principles is to run all Cash Now campaigns on natural deadlines. Natural deadlines are pre-wired deadlines that people understand, which means they can quickly discern that you didn’t make it up to create scarcity.
There are four primary types of natural deadlines we use:
Industry Deadlines: Deadlines that are known and probably require action from people in your industry.
Tax season for accountants
New Year for Fitness professionals
Black Friday for Ecomm
Every major Holiday
Business Deadlines: Deadlines that inform action and exist because of a business decision you made.
Open enrollment for cohorts
Events
Launches
Personal Deadlines: Deadlines that are unique and personal to you.
Vacations
Birthdays
Anniversaries
Process Deadlines: Deadlines that are inherent in a process or because of usage.
12 weeks into a process
50,000 miles
If you make a list, you’ll end up with dozens if not hundreds of reasons to send a campaign. By doing this, we have created a reason why that makes sense to the people on the other end and we’re setting ourselves up to use one of the most powerful words in the world..” because”
“...because it’s almost Christmas”
“....because my birthday is tomorrow”
“....because the event is next week and we need a head count”
“...because you should get an oil change every 50,000 miles”
Recommendation: Robert Ciandini explains the power of “because” in his book “Influence”. I strongly recommend you grab a copy.
Natural deadlines create the “because” for us. No fancy copywriter is needed.
They also build a much stronger internal pressure by piggybacking on pre-wried ideas.
Your customers might think that you can let them in even if they miss the deadline you have given them. Whether that’s true or not, the customer thinks you can, so the deadline carries little weight to them.
However, if you invite that customer to your birthday party on Saturday, they already know they can’t show up on Sunday and get the same experience. It requires no explanation, the consequences of missing a natural deadline are already understood.
The power of this is highlighted in the R3 Campaign booklet.
Oh… and guess what!?
If you’ve made it this far, you have all the components of the R3 system.
I’ll show you how to pull it together, but we need to pause and zoom out right here because you have all the ingredients. If you work on everything above, you can reason your way to the strategies, tactics, and tools - and do it in unique and interesting ways. In fact, I recommend you put your own unique spin on all of this.
What follows is the implementation. To be honest, I would not implement it exactly the way it's written because each business is unique. The way I would actually implement is as follows:
Identity the biggest black hole or constraints
Plug the hole or remove the constraint
Repeat
However, I can’t do that in a book, so I did what I believe to be the second-best thing.
Cool?
Now, this is a gret time to take a break because I’m gonna change up the style on you, yet again.
Before forging forward, review Parts 1-4. There is plenty of stuff to implement, you can make progress with what you have - yes, without knowing more stuff.
If you need help…we will be working directly with Success Circle Members to implement this in their business. You can learn more about the success circle here.
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