The $100K Mistake: Ignoring Retention & Referrals

Most businesses are doing this wrong.

Most businesses are doing their upgrades and their upsells and retention wrong.

How so?

Most businesses don't know they view it like this, but this is how they view it. They go, I've got to go out there and I've got to do all this effort to get a sale. And then they get the sale.

Then they ignore them.

And then that's it. Goodbye. Right? And if we took, let's just say, 100 customers over the course of a year, the ultimate test of a business is how many of those people, first off, came back. Second is how many people referred, and third is how many people retained. So if I ran a massage spa and I had 100 people over the course of a year come in, that's one every 3 days, how many of those people came back? Bought more stuff and brought a friend, right? So this is often called the leaky bucket of marketing, because I can do a whole bunch of stuff to get 100 people in. They got a phone call saying we're going out of business. Nobody came back. I go, well, whose fucking job is that? Right? So if I had to give somebody a tombstone, the Ten Commandments of business, right? All ten would be. Retain, referral, and upgrading. If you figure that out, it's very, very difficult to stop the car 'cause it's automatically running. To do that effectively, let's talk about retaining people. So out of 100 people over the course of a year for massages, what is generally expected by a buyer? How many times should I be getting a massage every year? As the buyer, not the business, but as the buyer.

Well, I happen to be going to stretch people.

Yep.

And what they do every time I'm there, you know, you need to do this, you need to exercise like this. All right, you need to— whether it's here or somewhere else, it's going to take a while to fix this. And what you realize is in sales, as you're saying, a lot of people just go in and they make the sale and they disappear. In our operation, What I see is when it comes time for renewal, salespeople are running out and going crazy. I say, if you'd start that at the beginning.

Right.

All right.

So when you get your stretches, what is the implication in your mind about how often I should be going?

Oh, well, I know once a week's not enough. Twice a week.

Yeah.

Yeah, 2 to 3 times. I don't think I could do 3, but 2 times for sure.

So out of 52 weeks in a year, You have this expectation inside of you. I need to get my stretching done 100 times.

Yes.

Okay. As the business, that is called retention. If I can get you to do all 100, it's 100%. If you do 90, 90%, 50, 50%, et cetera. Right? So what should the business be doing, saying, communicating, marketing, sales, Text message, phone calls, specials.

Yes.

Right? Even the ads that they run for you called retargeting and follow-up, even the YouTube videos and interviews they do with their clients. Right? What is the retention conversation? It goes beyond just you should be doing this a lot.

So a couple of weeks ago, the young man who was doing stretching said to me, we have some people who've been with us for years. Okay.

Great start.

Are you ready?

That's what we're talking about. They're already prompting you for 3 years.

Okay. Ready for this? I'm in there the other day and a guy comes in. I realized he was just very friendly, walked right in, put his stuff down. He says, the guy's been with us for 3 years.

There you go.

So they told me about it, then showed me.

Right.

It was like, oh, huh.

Yeah.

And all of a sudden it went from, why do you do it? Well, there's somebody else that looks like me, right? That's in the neighborhood that's going.

So did they give you a 3-year stretching plan?

Not yet, but he did say, if you write a Google review for us—

We're getting there.

All right.

Okay. Don't spoil that yet. We're getting there. Right. But did they give you a 3-year stretching plan?

No.

Okay. Did they tell you what will happen to your body Q1, Q2, Q3, Q4?

No. He told me what would happen next week if I didn't come back.

Okay.

All right. And it's true.

He's right. Yes. Maybe there's room for like, A, in Q1, here's the feelings you're going to have when your body is stretched. In Q2, your shoulders and your back. Q3, Q4. We're already prompting for a year-long conversation, right? Are they doing things such as giving you educational marketing materials?

Nope.

Right?

Nope.

Do they have a map of your body of the areas they worked on? Think color by numbers. When you come back next month, we're working on your arms.

You know what would really work for them? If there was a A body, not a real body, but a—

A muscle skeleton thing.

Yes. You know that pain you're having over there? That's where it's coming from. Right. That right there would, number one, diminish my pain. Oh, that's where it's from.

Yep.

So when we do that, and you know, what a great place to do it where you're laying there for half an hour.

Correct.

You have it right on the wall. Here you go.

So in terms of marketing, YouTube, Instagram Reels, that type of thing, Think about it like this. You know, everybody's got this tech neck where they're leaning forward all the time, right? Do you know what that's from?

No.

Everyone thinks it's from these muscles being stretched too much or keyboards.

What is it?

It's not from that at all.

What is it?

It's very interesting, right? So people think that if they do this, they're fixing it. It's incorrect. This is super temporary. The reason why you hunch over is because your rib cage is too tight from your pecs.

Oh, pulling your arms forward.

Correct. And when your arms are pulled forward and chest is pulled forward, you do this. This is the result. It has nothing to do with these muscles. None. And if we do this, we're not stretching our rib cage at all. If they wanted to keep you for Q4, Q3, Q2. They should be saying things, by the way, in September we're going to be fixing that and has nothing to do with the front of your neck. It has everything to do with these muscles right here. So I'm going to go to your plan in September. We're going to fix that forever. So it's those stories and communications that keep clients and customers retained, aka coming back 100%.

So now that you're mentioning it, While he's there, while we're there for 30 minutes, there's almost no conversation. It may be driven by me, right? But it's like, huh.

It's actually driven by me. I don't talk to them.

Yeah. Right. That, yeah, you're right. There can certainly be other stuff to encourage me to continue on. Right. The most they got was, it's going to take a little while. Right. Of course, there's part of my brain's going, yeah.

That doesn't sound like a retainer.

Right.

That doesn't sound like I'm coming back. That is the curse of the chiropractor. It's going to take a long time. Well, I guess you're not good at your job. That is fundamentally a different communication than saying, next month we're working on blank.

Mike, the map of the skeleton would fix that.

Immediately.

Yeah, it would go, oh, yeah, yeah, yeah, yeah. And I might even say, you know, I got this little thing here.

You would show more problems. And what's even more fun is if it does take a long time, So they would be able to like flip up the muscle, turn over, pull it apart and go, actually it's not your gluteus. That's not why you have sciatica pain. Do you see this muscle right here? That's what we gotta work on. And to do that, we gotta spend 2 weeks working on the first muscle. That's retainer, right? So that's pillar number 1, fucking retainer. Everybody hates this conversation by the way, 'cause they all know it sucks. There is the, Over the course of a year, what does the customer genuinely expect to come for and how many times over the course of a year? It's not 100 times, but as a ballpark, it's an easy percentage, right? So, that's retainer. What's the next one?

I don't know.

Referrals.

Oh.

How many times you bring in your friends and family? Did they give you a card that said, I'm giving you this because I know your son Also has the same neck you do. He also has the same problem. You come in Thursday at 2:00 PM. It's on us. Have they done that?

No.

Nope. Not at all. Right? Have they ever given you sole inserts that cost $15, but they're coming in next week?

There was a chiropractor I went to, and actually, that's one of the things they did.

Yeah, you got to come back to get it.

Yeah.

Yeah.

It was great, actually. And he also said back then, change your shoes.

Yep.

Here are the soles. What size is it? And right. I was like, and then next week when you come back after your soles, tell me how it's working.

How many times has he said, hey, just so you know, Mother's Day is coming up, a.k.a., it's your wife's Mother's Day. Here is the excuse you're going to say to get out and come do stretching. It's funny as fuck, right? You're not going to do it, but that's how you get people to come back. How many times has he said, hey, we're super psyched to have you. You've completed 38 out of 100. When you hit 50, you bring the whole fucking family for 4.

I'm going there tomorrow, and I'm going to ask him, listen, do you have a skeleton I can look at? It would ease my pain.

Right.

No question. It's like, that's what—

No, it would ease the opening of your wallet.

Yes. Well, that too.

Right. So pillar number 1 is retainer. Pillar number 2 is referrals. I'm not talking about Google reviews at all.

Right.

I'm talking about when I go in and get my haircut, does the guy give me a card and say, the next time your blank event is happening, You call me, I'll have you in the same day.

I don't know if that's ever happened.

Right. So when you have a big event, are you going to the same guy or different guy?

Good question.

It's going to a different guy, right? It's the same with women. It's the same with men. When we have an event, when we have something special, we don't go to the same person who already fucking knows us because they never told us to. Right? There's a whole slew of strategies just that pillar. What's the third one? Upgrades.

Okay.

How do you come in more frequently? How do you bring in your friends? And how do you get them to buy more stuff?

One of the things I was looking for, I was getting a pedicure yesterday and the lady hands me a menu. It was quarter to 7 last night. I'm the only one in the place. Hand me a menu. And the first time I didn't know what to do. And so I'm looking at it and I said, you know what? I'm here. I could just get the plain one or the third one. All right. They do a 5-minute massage on your legs. I go, that's the one. And, you know, I would have gone up to the next one or the one after that if there would have been some assistance on her part. There was a language issue.

Yep.

But I went from It was a 50% increase.

Yeah, really quick.

Yes, in an instant, just by showing that here are some options for you. I didn't even make it down to here because of the time. And they didn't pressure me. The store was closed. They just had one girl up front. It was perfect. And I go there because it's easy parking. Easy parking. And I know when to go. I don't have to wait. I don't have to be there with all these other people. And so what I realized, that was the upgrade right there.

Can I give you a very easy way of increasing your upgrade take rates by 50%?

Yes, I'm listening.

Yep. So when most people give you a menu, the menu is too big, just like you mentioned. Didn't even get through half of it. Not a great feeling. And when you go to a restaurant and then they have 1,000 things, it actually provides a lot of confusion and pause and makes you buy the safe stuff, aka the cheaper stuff.

You know, it's interesting. I went to chat this morning, asked to do some things, and it kept asking more questions. I kept saying yes, yes, yes. So I wound up with 16 variables of the original thing.

Yep. Too many. Most people cap out at like 3 or 4 options.

And you know what? I said, I need you to take this. I only want an 8-second thing. No, a 10-second item and a 12-second. I want 2 of each of those. That was it.

So when you present somebody with too many options, Do they go, thank you for all these things? Or do they go, this is too fucking much?

Yeah.

When do they stop accepting options?

I don't know, when their cup runneth over.

It's like 3 or 4 questions and they go, what the fuck is all this? Right? What you do is you split them. Is this your first time with us? Great. Thanks for being a first-time customer. Here's a great menu for you. You've been here before? Fantastic. Have you chosen everything from here? Because once you complete this, we've got another returning customer option. Different menu. Like the dessert menu only has 3 things. Everyone loves ordering dessert, right? So if they wanted to increase your increase, they don't present a massive restaurant menu that has all your pedicure manicures on a, what is it? Leather-bound, plastic-covered sheet. That's what I'm talking about, right? You know what I'm talking about?

Yeah, yeah, absolutely.

But the really good restaurants, Small menu, textured, tiny, easy to agree to. 3 to 5 things.

This is me when I go to these places.

Like, what the fuck? Right?

Or when you go to these charity events, it's like chicken, fish, and meat.

And that's the most expensive table or plate you've ever bought?

Yes. Oh, yes. Oh, yes. Oh, yes. I'm looking, I go,

Fine, fish. I don't fuck— it's $400.

And I was telling the guy, the waiter, I go, yeah, this guy will be here soon. Just put the plate over there.

Just get 2. He's coming by.

Okay. And later he comes up, he goes, I saw what you did.

Thank you. Yeah. So in conclusion, right, when you think of that stretching facility or that massage spa or that manicure pedicure place, the 3 pillars are Retention, AKA out of 100 times they come back, how many times did they come back? What can I do to move that number? B, referral. How many times did they bring somebody else and what can I do to improve that number? And C, upgrades. How many times did they buy more stuff and what can I do to improve the number? This is the 3 pillars of great fucking business anywhere on the goddamn planet. And if you suck at those 3 things, Guess what your marketing does? Adds to your suckiness.

So, what are they again?

The first one is retainer.

OK.

Can you retain a client? Out of 100 possible visits, how many do they take? It's not ever 100, but as math goes, it's easy. The second is referrals. How many times did these people bring in someone else? And third, upgrade. How many times they buy extra stuff? This is a test that is very difficult to admit to taking. It's tough. It's like admitting you're an alcoholic because you know that these are problems and you don't want to fucking admit it. Because if you do, you got to deal with it. You got to deal with the fact that your clients should be coming back every 2 weeks but never do. And they don't come back because you hired some idiot at the front and never trained them. So now you got to train them to do this. You're unveiling more problems. Retainers, and then followed by referrals. When do you wanna come back? Sounds like exhausting of a conversation. Did you bring anybody? Oh my God. Fuck. I don't wanna ask that shit. I'm tired. Guess what? You're tired because you don't have enough people coming back and upgrading so you can't hire people to do the job. And then third is upgrades because you are not incentivizing your staff Letting them make extra money from those upgrades. So guess what? All the people that are great to work with go somewhere else. So if you set up a business without these foundations, you are setting up a business under the sea level and you're always having to work really, really hard to keep your head above water. But if you set up these, these 3 foundations, which is easier than ever before because of all this AI stuff, You can have 3 sheets and dictate the entirety of your retainer strategy, the entirety of your referral strategy, and the entirety of your upgrade strategy. And when I get a client at $1,500 a month, I have this expectation that by month 4 they're spending $5,000 a month because I have the retainer strategy, the referral strategy, And the upgrade strategy. We had a tax business come in, $1,500 a month. By the next week it was $2,000, next week $3,000, and now they're at $5,000.

Versus trying to get the guy for $5,000 upfront and he's not ready for that yet.

Not ready for that. And there's a guy like me advertising $1,500 a month. So when he is ready, he's coming to me knowing when I get him in the door, they're going to love it so much. I've got these 3 documents that dictate our conversation. Then they buy more stuff. That's why Walmart has sales, 'cause they come in, they've outlined their store across those 3 pillars. That's why Target can have sales. That's why Amazon can have sales. That's why Alibaba has sales. That's why Apple has the super cheap iPod or AirPods, 'cause they come and they buy more stuff. So if you want good Business 101, The retainer document, the referral document, the upgrade document. You don't know what they look like, but you're seeing them in your head, right?

Yeah.

You've seen the 10 Commandments right in front of you, right? And what is on them? You have no fucking clue. But where would you go to find it out? You can use your AI assistant.

Yes. And I think, by the way, you have it right. Your assistant, your educated assistant can help you with that. By the way, as you're talking, I'm already thinking, okay, on Monday I'm going to go back to the salespeople. Time for renewals. What do we need to do to get old customers back in?

All right, so let's talk about how to communicate that information. Let's say I'm sitting across from a client who says, Jeff, I like the cut of your jib. Here's a $100 grand check. Let's do this strategy together. So we got the 3 documents, right? That's the book. Now you got to convert. You got to proselytize. And chances are it's going to be you. Talking to your customers, or you talking to your team, talking to your customers. When you have somebody do what's called a context switch, their brain capacity will drop by 90%. It's like switching hats. You know that entrepreneurial curse of wearing multiple hats? I gotta do the interview and then I gotta do production and then I gotta do the video editing. Turns out you suck at all of it. You're just addicted to stress. That's called context switching or changing hats. So if you're asking a salesperson to do strategy, do you think they're gonna be good at both?

No.

No, they're gonna suck ass, right? So what you have to do is you have to communicate a very simple sales script, checkbox milestones, worksheet, that kind of thing. So when you go to your assistant, and you create your retainer document, expectation or standard or realistic belief of how many times somebody comes back and advertises, how do I gauge that success? I go back to my last 10 clients and I say, out of the last 10, how many orders did they do over 12 years? Check these boxes. Client number 1, checkbox, checkbox, January, February, March, April, May. Cool. That's how you communicate to somebody while making sure they keep their hat on and avoid context switching. So that is like the retainer conversation. And then you can have 10 strategies or 10 phrases or 10 scripts and say, if you think they're going to stick around, say this. If you think they're gonna drop off, say this. If they have dropped off and you want 'em back, say this. There is your Bible. Same thing with your referral. Out of 12 months, client A, how many times have they referred us business? If they have, say this. If they have not, say this. And here's how to get them back in the game. Upgrades. So if you want to communicate this to your team or your staff or to yourself without having to avoid context switching, you keep strategy In the strategy. And then you have to translate that into a script and action for salespeople. So that means, again, you have your strategy document, right? And then you put another piece of paper on top and say, this is the action plan. Client number 1, client number 2, all through 10 across 12 months, check the boxes. Some people will get all aces. Some people will play with the numbers. That's cool, man. That's part of the game, but it's the start. And then what'll happen is in a month from now, you'll give people a bonus. Hey everyone, thanks for finishing your worksheets. I think this is cool. By the way, I have a stack of $100,000. I'm giving this out based upon the worksheets. See you in 10 minutes. So you have the worksheets and you confirm with accounting the trueness of your accuracy of the blah, blah, blah. And you plus or minus, and then you can say, hey, it looks like these are the 10 people, or you say salesperson number 1, looks like you kept 10 people for 12 months, 100% retainer. Amazing. If you want your share of this $100 grand, you have to spend the next 15 minutes communicating how you did it. Next time, upgrade. Next time, referral. That's how you build that ecosystem, right? So what'll happen is you've created the strategy, you made it very easy for a salesperson to execute, and then create a feedback system. And now it worked. They talked about how it worked. You go back and you change your 10 Commandments or the sheet, and you update it each time there's a cycle. That's how you make this shit run, like against your will. Like you stop working and it works better type work.

All right.

No, what are you doing? It's only 12:17. We've only done this for an hour and 20 minutes.

Say that again.

It's been an hour and 20 minutes. No, how long has this been? And you're switching to my face every now and then, right? Yes, sir. Okay, cool. It's only been an hour.

Okay.

It took us 45 minutes to warm up.

Okay.

My Ozempic arrives today.

That's good.

Yeah.

All right.