Episode #551 - Achieving Growth At Scale with Dennis Yu

Welcome to this edition of the million Dollar Mastermind podcast. This is where we pick the brains of high achievers from all walks of life and get their hard earned real world insights on ready. I'm your host, Larry Wydell.

Well, it's not only political skill if you have the powers that be the decision maker on your side. And then it's like facts. It's like facts, faith, feeling. We always tell people in making sales, it's like really in life you follow facts and the feelings will come. You put your faith. Are you going to put your faith in your feelings or the facts? And what you have figured out, and this is why you're in the poll position now, is that the numbers are the facts and you've got to analyze the facts and let the facts speak for what needs to be done. And that puts you in a situation where good feelings are going to come because the results are going to be there. Now implementing some of these big changes that you have any experiences that you can recall about, you've got the facts, you've got the data, you've got the approval of up there, but you've got to now implement. And there's going to be some people who are going to be like, what's going through with Twitter and Google and Facebook and all those. Now there's some upheaval and the people are left, it's going to be reorganized. You know, it's going to be shuffling the, shuffling the chairs on the deck of the ocean liner there. So how did you. Any lessons that you learned from that or any experiences where it really went well or it really went bad.

Which one would you like?

Yeah, both. Yeah.

I remember one night I was looking at our sales data on AA.com and I noticed that a lot of people were doing fair quotes. They want to know what's the price from LA to Miami round trip on December 18th. They want to look at a vacation for their wife. You know, maybe it's Christmas or something like that. But a lot of people were looking at the fares, but they weren't actually putting in their credit card to buy. And so this cost us a lot of money. In fact, we were losing a million dollars a month because every time someone did a fair quote that charged us a penny. You can imagine when the Internet opened up 25 plus years ago, people weren't really okay with putting in a credit card because I mean, nowadays, whatever, it's safe. But back then it was like a risky thing to put a credit card into some website. I mean, how do you know what's going to happen? It's on the Internet. Might not be safe. So we were racking up these bills of a million dollars a month and growing from all these people who wanted to check the price, but they didn't. You remember Larry, like people didn't know, like, well, maybe the price will go down. Maybe I'll check tomorrow, maybe I'll go to the travel agent, maybe the other airline will want to run a sale. But how do I really know that that's the best price? So they wouldn't actually buy the ticket then. So they'd come back every couple days and check the price. And that cost us a ton of money. But then I looked at this and I said of the people who actually purchased the tickets online, what was it about them versus the people who were just looking at the fare quotes? And I found that I did a look to book ratio chart, kind of like a grid on people who, who checked the price 1, 2, 3, 4, 5, 6x number of times. And then people who bought 1, 2, 3, 4,. 5, 6. So people who, who like are really good customers, they would, they would do 10 searches and they'd buy 10, which you know, be a line down here and there's people that would look 10 times and buy none. And any kind of combination, you know, they look five times and buy once. And I found that if, because I did a scatter plot, I found that people who once, they bought the first time so they could be looking, not by looking, not by looking, not by looking, then they buy. Then their next behavior, each time they look, they're more likely to buy each time. So I found if we could get them just to buy the first time, they'll continue to buy tickets on the website. And I could clearly prove that this was the case. So I said, well, you know, if they buy through the website, we're not paying the commission to the travel agent. We're also not paying the commission going to like an Expedia or Travelocity or like. And plus we control the relationship. And it's just a lot better to have it come through our site directly because we can personalize it and we can offer other things. So let's offer a first time booking bonus of 5,000 miles. So that was my idea. My idea. And I had to fight politically with the other vice presidents in marketing because they say no, we'd rather have it go to the call center, you know, because the people on the Internet, people like me, I had to turn my badge the other way. When I was in the airport, because I was villainized because the call center folks were trying to unionize, saying, this guy Dennis is trying to steal our jobs by having people go to the Internet instead of call. Now, of course, we buy tickets online now, but back then, you remember 25 years ago, you didn't, like, you went to a travel agent or you made a phone call, you didn't go buy a ticket on the Internet, Right. So this idea, there was a lot of channel fighting. So the people who ran the call center, they hated me, even though I made the argument this made a lot of sense. And we wanted to own the customer relationship. We could drive more incremental sales, all these kinds of things. And I found, I did some calculations. You know what the, what a mile is worth to the airline? No. Well, if you. So my mentor was the one who invented the loyalty program. So you probably have credit cards where you earn points and things like that, right?

Sure.

That was invented by my mentor. So that thing that we invented for the airline industry was also used for credit cards. Like all loyalty programs came from what my mentor created because he invented the original loyalty program.

Oh, thank you.

And so we found that Citibank, like Citi. Citibank would have the Citibank advantage. Visa and Citibank would buy at the rack rate, which is like the base price of 2 cents a mile. So consumers basically value miles at 2 cents. Our actual cost of a mile is a penny. But net of breakage, meaning the miles that don't get redeemed, the actual cost is about 0.3 cents. So a third of a penny. So if we're giving out 5,000 miles as a first time booking bonus, that's actually costing us only $17 to be able to provide that incentive. So I said, okay, here's the map. Because net of breakage. So we're not saying the rack rate at 2 cents, because if it's 2 cents, now all of a sudden that incentive looks like, you know, $100. And that's like, well, if the average ticket price is $350, why are we going to give $100 incentive? That math doesn't make any kind of sense. We could argue the lifetime value of the customer. Oh, if they buy the first time, they'll keep buying. And thus, you know, we pay $100 to acquire several thousand dollars of lifetime value. But I said for $17 to acquire a customer and keep them loyal to American Airlines. And then we know the follow on effect where they'll continue to book because they see it's a safe experience because, you know, we gave them some initial miles. Other executives wanted to argue. They said, well, I don't want to give them 5,000 miles at once. I want to give them 1,000 miles for each booking. And after five, they would. I said, no, no, no, no. The math clearly shows that if they book the first time, they'll continue to book. So let's not make this thing where they have to book five times, because most people travel twice a year for, like, Christmas and Mother's Day, or like, they travel twice a year. So you're not going to get them traveling five times. I mean, by the time they've gone to their fifth trip, grandma, it's already like three years later. Grandma's, you know, grandma doesn't travel. People like you and me maybe fly a little more often. So I said, we need to make it on the first time, and we need to implement this. So I got it through politically because I pulled the strings of the big boss. But then the implementation of the challenge was difficult because we had to get all the systems to talk to each other. So if people bought through the Internet, we had to then credit them the 5,000 miles. And that's more difficult than it sounds.

Yeah. I bet you figured it out. You. In terms of getting.

It was a huge success. It was such a success that because of what we did at American Airlines, Delta, Continental, United, all these other airlines copied it. Exactly. And so that made me so proud, because in the airline industry, which is basically the closest to perfect competition we have in any industry, if other people copy you, that's a sign that they're going along with your thing. Yeah.

That follows classic sales psychology in terms of if you get them to make a small yes or the first yes, all the other yeses are, you know, you get to the big yes by first getting the Tumblr to go yes.

Lots of little yeses.

Yeah, yeah.

That's what a loyalty program does. Right. I mean, once you've built up enough miles, you kind of are locked in. Right. You're locked into that credit card or locked in that airline.

But, you know, in terms of businesses, how could this relate to my business or whatever? Well, you know, in terms of, like, to go to a doctor, you know, the first time you go to a doctor or the first time you go to a health club, you know, you break the ice and get in, then you're more likely to make it a regular, semi regular type thing. But at first, I don't want to.

Go to The Doctor Hot. I don't want to go to the Doctor, but I do believe in like giving people lots of small positive experiences. Right. To build a relationship.

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Absolutely. And given that especially, a little extra encouragement the first time is something we can all, you know, growing our business. We're going to be adding new clients, new customers.

Yeah.

Expanding into new areas. And so, you know, this is, this is something for us to think about as we're growing our businesses and expanding. And you had times where you said you had times where implementing it didn't go well.

Yeah, that happens more often than not. Most people never really talk about that. So I'll give you an example. One of the ideas a friend and I had at Yahoo was because, you know, we like to eat a lot, was to create food.yahoo.com. now remember, Yahoo was a portal. So we had sports, shopping, travel, finance, small biz, horoscopes, mail, all these different properties within the overall Yahoo. So I wanted to create the food property because this is before Uber Eats and before Doordash or these other sorts of places. And I thought Yahoo would be a great place where we could list out all the restaurants and then each restaurant can upload their menu. You could have ordering. Now granted, this was 20 years ago. Okay. This is, this was not a thing today, like it's, there's all these other seamless web. Like there's all these guys that. Yelp. There's guys that do this. Twenty years ago, none of those guys existed. So what would you do, Larry, if you wanted to know what was on the menu at the Chinese restaurant down the street? You'd have to call them and good luck speaking to them. Or you'd have to get the flyer or you have to drive over there and get the menu. Like you wouldn't know what's on any of the menu. Remember 20 years ago, you didn't Know what's on any of the menus? I mean, there was. The Internet didn't have this today. It's there, you know, because you have all these review sites and social media. There's no social media back then. So I said, let's create a portal where all the restaurants could then register and they'd register for free. I mean, why wouldn't you want to register on the world's most popular website? And then you could upload your menu, keep it up to date, let people know what your hours are. Do you have any specials? Do you do catering? All these kinds of things. And I thought it was a great idea. I built a financial model on how many more people would come to Yahoo because of this. We did a little research and we found. So let's see, Larry, you've not. What time is it where you are? You're in Palm beach.

So it's almost 4.

Yeah, almost 4pm and let me ask you, have you decided what you're going to have for dinner tonight?

No, we. No, we haven't.

No, you haven't. But you're probably going to eat something in the next couple hours, right?

Exactly.

Okay. Now we found, guess what percent of the time within three hours of dinner people have not decided yet what they're going to eat? Yeah, 70%.

Is that right?

70% of the time, three hours prior to the meal, they haven't decided. So how do you decide? Well, because the wife's going to decide at some point because maybe you're driving back. I know it's like Covid days now, but maybe you're driving back from the office and along the way you drive by a restaurant, you see their sign, so you pull into there and you buy their thing. Or maybe a friend calls you up and says, hey, let's go to this one place to eat. You're like, yeah, sure, let's go to eat. But those decisions are made in the last hour. That's just how it is. Especially among guys. Like guys, you know, they wait for their wife or girlfriend to determine what's going on. So because. Because there's information gathering in that last hour prior to the meal that my argument was, that's a perfect opportunity for Yahoo to always be front of mind because people every day have to eat. So they're always going to come to Yahoo. They're going to see what the recommendations are. So you remember like Spotify or itunes or Netflix, if you watch this movie, you also like that. So if you like this restaurant, you might also like this front this is before Groupon. This is like this. This was our idea before any of those other guys made it popular. This just shows you, like, how ahead we were. But it died because the COO of Yahoo said, we're a software company and your business plan requires that we hire 200 customer service agents to process fax machines. Because back then, like even today, they're still using fax machines because they have to scan their menu and we'd, you know, like character recognition, upload, that kind of stuff. And there would be a certain level of support that we'd have to provide. So it made us look more like a services company than a software company. And Yahoo was trying to keep at a million dollars of revenue per employee to be able to keep that multiple on Wall Street. So if we added another 200 employees, we had to add another $200 million of immediate revenue, which our business plan couldn't justify. So the whole thing got killed. Yeah, can you believe that? That would have been a fantastic idea. I mean, it was before Yelp and Groupon and Seamless Web and any of those. Yahoo was. I know, I'm like reminiscing, but Yahoo was the portal back then and we could have pulled that off.

Yeah, I want to ask about Yahoo, but I, I don't want to put people on the spot, like who was running it at the time. But anyway, I have a guess. I have a guess. But anyway, go on, name people. Right? The thing is, right now you're living a life and you have for a long time where you're calling your own shots, you're doing what you want to do, and basically the sky's the limit, you get lots of positive feedback and what is the driver for you to keep you going at such a high speed? Because you're saying, I get this question too. So I'm throwing at you. You're just in Pakistan, you're in Miami, you're going now. Are all these. Yeah, they're all different business related type trips. And so what in the middle of the night when you can't sleep and you wake up and you say, why am I doing this? Or. Or Emma, you know, again with the COVID you know, you know, going through. I think everybody had these times during COVID you know, where you were quarantined and shut down like that. But do you. What, what do you say to yourself that keeps you fresh, let's say, and energized? Because I could say, what drags you down and there's 100 million things that could track you Down. But what is your go to thing in terms of coaching yourself? Because one of my principles is that you have to be your own best self coach. Because life, you know, when you're, you're running things, you're a high achiever, life moves very fast. You make a lot of decisions. They're not always, they don't always have the positive result, but sometimes they're static, sometimes there's sparks, but usually well intentioned. If you step over the line there and apology here and there and you can keep on going if you can keep your head screwed on right. So how do you keep your head screwed on right to stay on track, enjoying and taking advantage of the opportunities in front of you?

Well, I wish I could say that I was super well organized and my head's on track, but I have one simple rule. I make decisions based on who is a cool person to hang out with. Right. I surround myself with people who want to make an impact. Usually these are entrepreneurs who have already exited or done something amazing. And because they're in a position then where they can help other people. So my buddy Rihan Alawala, who is arguably one of the most famous people in Pakistan, he also retired 20 years ago and he wants to create a million jobs. He and I both have the same goal of creating a million jobs. We're a quarter of the way there, which is great. We have other people who believe that the education system's broken and thus we need to have built in on the job experience instead of just writing essays and taking exams. I was with my friend Dr. Karen Freeberg at the University of Louisville and she's the social media professor that teaches all the other social media professors all across the country. She's got the leading textbook and whatnot. And she started.

Her name is who?

Her name is Dr. Karen. Yeah, Dr. Karen Freeberg. Yeah. So Dr. Karen is starting student agencies at all these other universities where these students are getting course credit and they're working on local businesses at the same time following our model. So we have, we have training on how we create videos and how we get those videos into articles and post them into social media and put it on TikTok and Instagram and drive more phone calls to attorneys, drive more phone calls to the real estate agent, drive more phone calls to the chiropractor. So these kids are getting tons of experience. And we also have virtual assistants, basically international workers that are in the Philippines, that are in Pakistan, that are learning how to use different tools to edit videos, to build websites, to do all these other things that are in support of these businesses. So there's this whole ecosystem and I'm so lucky and fortunate to be able to surround myself with other people who have the same vision of changing the education system, of creating jobs and of helping entrepreneurs here. Like this room over here has hundreds of agencies and all of them are struggling to be able to fulfill because they can't hire enough qualified people or the people in America are too entitled and it's hard to get good talent. And they, you know, McDonald's is $22 an hour now in California. I mean, it's hard to make the economics work. So we're training up a lot of people at $3 an hour and $5 an hour who are fantastic, who are eager to work, who are talented and they're doing a fantastic job. And we've hired thousands of them, which is great. And it's great for the businesses here and it's great for our international friends.

And before I forget, let's say tell people the name of your book again so they can follow it up.

It's the definitive guide that TikTok ads and last I checked, it's the number one best selling book in social media on Amazon.

Fantastic. Congratulations.

It's not because of me, it's actually because my co author is Perry Marshall. So anything with his name on it will instantly go to number one.

Well, he might argue that you have a little bit to do with it.

Well, I wrote most of the book, but his name on it was actually what made it, you know, do well.

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