Marketing & Tech Insider Webinar: Product Launches, Machine Learning and the Dollar Shave Club

By — Category: Business Technology, Webinar

Howdy! On August 2nd, 2016, our CEO Mike Cline and I hosted a webinar on three big topics: Product Launches, Machine Learning and the recent $1B acquisition of the Dollar Shave Club by Unilever. Watch the 55-min webinar below. I’ve also had it transcribed if you’re more of a reader than a watcher.

In this episode, we cover:

11:40 – How to know when it’s the right time to use a Product Launch inside your business
14:54 – The surprising reverse bell curve of buying behavior
20:02 – Weird industries that are using Product Launches
28:07 – Why Artificial Intelligence matters to your business
41:30 – How the Dollar Shave Club used marketing innovation instead of raw product innovation, selling 5 years after starting for $1B

Casey:All right. It looks like you started the recording.

Mike:Yeah.

Casey:It started on my side as well. Interesting.

Mike:Cool.

Casey:All right. Counting down. In 3, 2. All right. We’re starting now.

All right, everybody. Welcome to the Marketing and Tech Insider. This is Casey Stanton and I’m here with Mike Cline. It is August 2nd, 2016 on a Tuesday and we’re here to talk about product launches, machine learning, and the 1 billion dollar acquisition of the Dollar Shave Club that just happened recently by Unilever.

Before we get into the topics today, I want to do a quick introduction. I’ve got Mike Cline on the line. Mike is a mechanic turned bad programmer turned future-focused CEO. I met Mike in a bar in Ann Arbor, Michigan. We were both drinking pitchers of PBR and it quickly became evident that we were destined to be good friends. Mike has this company Tech Guys Who Get Marketing and Tech Guys is an implementation company. They do high level implementation with developers, they do it with designers, and they do it with marketers. Mike in an Indiana native and for the past 8 years, Mike has been solving bigger and bigger problems with technology, custom solutions, and a lot of elbow grease. He’s into really cool stuff like business-related growing CRMs and growing businesses, but he’s also into wacky things like building art projects in the middle of the ocean or art cars at his house in Eden, Utah. Hey Mike.

Mike:Thank you for the intro, Casey.

Casey:I’m curious. What have you been working on in the last few weeks or months that you’re excited about in the garage? Anything at your house?

Mike:In the garage? The garage is in the art projects. We have another art car that we did this year for Burning Man actually, a new one this year with a friend. That’s been occupying my time. It’s a giant stick of butter with a amusement park teacup ride built on top of it that you can ride in and a coffee bar built into it. It was a fun mechanical elbow grease kind of project.

Casey:Awesome. You’ve been working on that for what? Over a year, right? The first edition.

Mike:We did the build last year. It was a 17 day build cycle and then it came back for some upgrades. We made it extra pretty this year.

Casey:More butter. On the other side is me. I’m Casey Stanton and I’m a former marketing professor at Tulane University in New Orleans, Louisiana. I taught there for a few years. Just left my post over this past fall and now I’m traveling and currently living on the road for the next 2 years is the plan. I’m a Direct Response CMO and my background is really rooted in direct response marketing. If you’re not familiar with direct response marketing, it is the kind of marketing that you use when you want to make money. It’s the kind of marketing that gets a result. It’s the kind of marketing that you say, “I put a dollar in the funnel here. When it comes out the other side, how much did it make me?” All other marketing to me doesn’t really matter. It’s all about what you put in, what comes out the other side and if it’s valuable enough.

For the past 5 years, I’ve been helping Inc. 5000 businesses double their revenue with strategic marketing processes coupled with smart technology. I came into the equation with Mike. Mike was a tech guy who got marketing and I was a marketer who didn’t really get tech. Through that, I started to learn technology through Mike. We’re here to have the webinar all about product launches, machine learning, and the 1 billion dollar acquisition of the Dollar Shave Club.

Let’s get started with the topic today which is product launches. If you’re not familiar, a product launch is the notion, and really Jeff Walker made this popular in the modern internet marketing world, where you have a list of people, you have a mailing list, and you promote to them and tease them over the course of time and you build up excitement and at a specific time, you open the doors and sell the product, and then typically close the doors and let people finish purchasing their product. Or they purchase the product at the end and then they can’t find any more. That’s very similar to what Apple’s always done with the iPhone. The iPhone came out on a specific date at a specific time and you got lines of people lining up. That is a cool way to manipulate the buying behavior of people, to let them buy only in a short window.

Another example of it is the PlayStation. When the PlayStation 3 came out, I was actually privy to this when I was in college at Michigan State, the girl I was dating and I went over to the bad side of Lansing which is kind of like the dangerous side of Lansing and we stood in line for 48 hours to get the PlayStation 3 and it was crazy. People were lining up to get this PlayStation and then Best Buy opened the next day and said, “Only the first 60 people can claim it because it’s 1 per person and we only have 60 units.” I was close enough to the front of the line to get the best unit that was available. The next day when we were set to go and purchase the PlayStation, I actually sold my spot in line for 1,400 dollars. I thought that was so neat that Sony created this desire to have a PlayStation and it was such a big deal that people came out of the woodwork to stand in line for 2 days camping out in order to buy this device. They were selling on eBay for thousands of dollars at the beginning and then after it got released, that price dramatically dropped.

That’s a product launch. The reason we want to talk about it is those product launches are now accessible to entrepreneurs and business owners when you launch a new product, when you launch a new service within your organization. It’s also available at Kickstarter when you look at Kickstarter and how that campaign runs.

Mike, what do you think is the most important thing people should know about product launches?

Mike:There we go. Sorry, my mic didn’t want to unmute. I’m gonna bring it back to your Apple comment there. If any of you have followed Apple, the success of a launch model close window selling, the mystery of the pre-sale, they have done an amazing job. They’ve built the backbone of that company on this notion. It’s made this product, the elusive, sought after product in the marketplace around the world, which is absolutely fascinating because, in all reality, does this do that much more than it’s Android counterpart? Does it have a better operating system? Is it easier to use? We could make arguments on both sides and there’s a lot of other arguments to be made on the other side from the cost savings with the other devices, but they masterfully pulled off multiple, year after year product launches and they have their formula down because they’ve understood their audience.

The key thing to start with is understanding the buying behavior of your own audience. Casey mentioned the product launch formula model that Jeff Walker put forth in the online marketing space which is a lot of what we have utilized that along with many others in that space. We’ve used bits and pieces of those tactics to put together the right strategy, but really coming back to how does your customer base buy. How would a launch work for them? Is the mystery of the pre-sale important? Is pre-sale content important? In a traditional product launch formula, an online version, it’s content-based. You have multiple pieces of content dripped out over a specific number of days with very specific calls to action and even the content is very specifically curated to the emotional experience of the individual where they’re at. You’re starting with the pain of the issue itself, and then you’re exploring it, you’re opening it up, then you’re talking about the case studies of what it feels like to have solved it, and then you’re getting into the solution.

Over the course of a week and a half, 2 weeks, 3 different pieces of video content, it can be mixed live, it can be prerecorded. Calls to action can be things like “Leave comments below,” so when you do do the next video, which we’ll say the next one’s live, you’re incorporating all of those answers to those questions. At the end of the day it’s about bonding. Product launches like Apple did and like we’re talking about here, they’re marketing tactics to build deeper relationships faster with individuals.

Casey:If you think about the cost of the typical product sold in a product launch, it’s not a 20 dollar product, right? When Tesla announced the Model 3, that was a product launch.

Mike:That launch, beautiful. Do you know what the numbers were, Casey? I don’t have it up in front of me.

Casey:I think it was over a billion dollars. Shoot. It was a ton of money in pre orders. I don’t know.

Mike:We should probably look this up. Tesla Model 3 pre orders. Pre order numbers. What does it say?

Casey:This is, what, late March?

Mike:May. Sorry. Here we go.

Casey:Late May.

Mike:Yep. The claim was 400,000 and the number is down to 373,000. Imagine if Ford thought to do something like that, or Chrysler, or any of these others. There’s a lot of factors here, right? Could you immediately replicate what Elon’s doing with Tesla into some of the other fledgling and even dying automotive giants? I don’t know all the details to say yes or no, but I’ll tell you this kind of stuff is ahead of the curve and it’s impressive. When you pre-sell stuff, you’re letting the market dictate if the thing should exist. Back in the day, there was something called dry testing in marketing which was you selling something before it existed. There are some interesting laws around this because in marketing you would send out all your mailers in a direct response, direct mail perspective. Didn’t get enough responses? We just refund the money, say we’re not gonna make it.

Interesting laws, some say you can and can’t and then Kickstarter comes out. Kickstarter is the entire concept is dry testing. It’s a dry testing platform with the average Joe. I’m getting a little off topic here, but with title 3 of the SEC crowd-funding laws, you can now offer equity to the public up to a certain amount of cash that you collect in order to dry test a product or business. Mind-blowing. Great. I’m gonna raise up to a million dollars, I’m gonna give away this much of the company, I’m gonna throw it out there, spend a little bit of money in marketing, only marketing before I’ve built anything, and see if it sticks. Not that I have a prototype or at least know what the hell I’m gonna do or how to build the thing and do the numbers work. We got people selling all sorts of weird stuff on Kickstarter these days, but conceptually it’s a huge opportunity that anybody can take advantage of.

Casey:Absolutely. What I think is also really interesting here is in traditional product launches, it operates in a reverse bell curve. What that means is when people buy, they all buy at the beginning or they all buy at the end and no one really buys in the middle. The benefit of having a product launch is having that ending buy behavior because if you only got 30% of your buyers to buy up front and the last 40% are gonna buy at the end, if you don’t have that time bound endpoint people just don’t have the urgency to buy and a lot of people need urgency. I need urgency for a lot of things. Countdown timers work phenomenally well for me. Maybe if you’ve seen at Amazon they do [inaudible 00:12:30] every single day with a deal of the day or even last month’s Amazon Prime day which was in and of itself kind of a product launch in that it was a set amount of time that they made products available. They had a set amount of products that were available so some of them sold out and when they sold out, you started to look at other things. Really an impressive model.

I think reverse bell curve is important to know. I’m gonna say this which is a no brainer, but make damn sure you’re calendar dates for your product launch don’t fall on holidays. Seriously, we’ve got some war stories there of people who did that incorrectly and they ended up hurting themselves. Game it out for the individual so figure out what the individual gets out of it. What you’re doing is you’re walking the individual through a relationship cycle to buy potentially a high end product, a 2,000 dollar product, or a 35,000 car is what Tesla’s offering. [crosstalk 00:13:31] Game it out.

Mike:By the way, [crosstalk 00:13:32] those numbers too. I pulled this up here so it was 1,000 dollars down. 373,000 orders. 373 million dollars.

Casey:Wow.

Mike:That’s a capital injection on a pre launch. That is ridiculously impressive. Like you said, the urgency there, having the right kind of framing of the urgency is really important. The pre-launch sequence is what gets you that reverse bell curve as well. There’s the massive anticipation because of the content that was released or the concepts or maybe there was some giant publicity stunt that was done in support of some thing. Apple’s done a few of these. Apple’s a good model to follow, even going back looking at some of the old commercials. Look at those launch dates and just study them. They pulled it off almost better than anyone else. In a lot of the digital space where we tend to operate in terms of the clients that we serve, having a closed date for this offering and truly making this offering no longer available period is very, very important. What that also does is it lets you condense the experience of the one product or whatever you’re selling here into a finite package that you can then evaluate.

This one’s a good discussion that we did.

Casey:I just want to briefly mention this. This is a Kickstarter that Mike brought to the Tech Guys team and we raised 1.5 million dollars for the Arkyd Kickstarter. If we take it over to this open analytic platform called Kicktrack and we look at the analytics of the Kickstarter and we look at the daily data of it, you’ll see that it really does follow that reverse bell curve. Everyone bought the first, second, third, fourth day and really the last 2 days. We also had a big bump here and we had a day right here where we actually lost money on it. Had the campaign been longer than the 33 days that it was, if it was a 60 day campaign, I’d be afraid that we were gonna get more of this and less of this at the end.

Mike:We did this campaign, how many years ago did we do this thing now? 2? What does the date say on that thing?

Casey:It just has the month. 2 years ago? 2 and a half?

Mike:We’ll have to look at it, but this was a really fun one to do. We did this in conjunction with Planetary Resources which is the asteroid mining company. If you guys aren’t familiar with Eric Anderson and Peter Diamandis’ company Planetary Resources, look out. It’s very much legit and the first trillionaires are going to be those that mine resources in space. Hands down. I’ve studied this pretty extensively now and it blows my mind. Anyways, the whole point of this thing was to get the public more engaged. They didn’t necessarily need the million and a half dollars here. They have all sort of capital from different rounds of funding from a variety of billionaires that are backing the company, but the goal was get the public involved. Unfortunately with that campaign actually, a variety of things occurred in terms of small setbacks around providing the pledges themselves there. We actually ended up refunding that Kickstarter. Refunding a 1.5 million dollar successful Kickstarter. That was a little sad for us for having put a lot of time and energy into it, but it’s what made sense at the time. Like I said, if you follow what Planetary’s doing, it’s pretty darn spectacular.

Casey:Very cool. With product launches, a couple other things. Have a team for backup in case it blows up. This is an interesting one. Also have a backup payment processor. With any product launch, not necessarily Kickstarter because they really do take care of this stuff in house, but if you’re doing your own product launch in your own company and you’re sending a series of emails out to your customers, you have to have that backup technology in case something breaks. Such a big deal. A relationship that you can plug in right there with a payment processor.

Mike:If you’re going for scale I would say. If you’ve never done a product launch before and you’re putting this stuff in place to rally around selling a new product, a lot of times people are like, “Ah, I’ve got a new product. Let’s just send an email.” No. No. Architect is. Architect the experience of how this thing should be digested. If you’re doing your first one and it’s kind of small and you don’t have a bunch of data and you’re not going out to affiliates, you’re not buying a ton of new media, any of that, you don’t have to go way over the top with your backup stuff. If you’re going for a big launch, definitely. Technology backups, financial system backups. We’ve seen some pretty interesting messy stuff over the years where even the backups failed and we needed a backup to the backup and we’re scrambling for stuff just because of the scale when you get literally tens to hundreds of thousands of people feverish about something in a very short window of time.

Casey:I would also add to that that the technology that you think should work well might not be tested at this scale. We had an affiliate platform that we ran on a launch. I remember sitting with Tom, our lead designer, and Tom and I were trying to figure out what was going on with the affiliate information not updating. He had to go and manually run a Cron job himself or something like that. It was some really technical thing that he had to do because the technology, although the top of the industry at the time, wasn’t all that effective. The developers were in Romania and they were always on a separate time zone. A lot of fun there.

Here’s one thing that I got from Perry Marshall who said in a product launch, or whenever you sell something like this, “If you’re worried about piracy, offer one thing that can’t be pirated.” Make that a phone call, make it an event, make it something that people can’t steal. We’ve seen our clients give away free tickets to an event for anyone who purchases and then people can go to that event and be able to maximize their use of the product. I also have seen a lot of success with live casts. During a sale cycle, you have a 7 day, 10 day sale cycle, have a live case towards the end of it to really push that reverse bell curve just to top out.

Currently I’m doing that with one of our clients at Engaged Officers. He’s in the fitness world and he’s launching a program and he opens and closes the doors to it. For let’s say 6 weeks, the program runs, people are inside the program, it’s a workout program. At the end of the 6 weeks, registration opens back up and then they have another round of people that come in. It’s always bringing new people in every 6 weeks and then people are going through the program. It’s in a constant product launch cycle and we’re adding a live cast this time to see if we can increase the conversion rate of the people that are on the fence towards the end. That’s as easy as a go to webinar. As far as length is concerned, they need to be as long as they need to be to answer all of the objections. I really believe in marketing and in sales the best way to win a sale is to understand the objections the person has and then just overcome them one by one systematically. With that in mind, that’s what the live casts can do.

Finally, the last thing that I want to touch base on for the product launches is the demonetization of information. We talked about this last webinar which is Peter’s 6 D’s of exponential growth. One thing that happens is demonetization. We see things across the board demonetizing. When Jeff Walker could launch a product for 2,000 dollars a few years ago, now he can’t launch the same product [inaudible 00:21:30] launching it an a demonetized form like a book. We’re just seeing more information come out and this kind of touches on that fall of the info products that we chatted about last week.

Is there any product launches you want to wrap with?

Mike:Just saying if you’ve never done one in your own company to release a new product, definitely understand this tool. It’s a tactical and strategic tool that can really make a big impact on your business when it’s done correctly in pretty much any niche. I think we’d be hard pressed to find a niche in which we couldn’t actually put together an appropriate launch strategy that could have a decent impact for people.

Casey:We have a client who teaches Catholic theology and he uses a product launch [crosstalk 00:22:18]  [inaudible 00:22:18].

Mike:That’s great. [crosstalk 00:22:19]

Casey:Talk about a wacky [inaudible 00:22:21].

Mike:It’s a cool thing we were talking about this morning actually, just going over all the different projects that we’ve worked on over the years. Everything from Catholic theology to things into space, multiple projects related to space which is my passion. I’ve been a driver on those particular opportunities. Information is becoming demonetized though. I think that’s the last thing that I would say here is that I’ve watched this trend occur really … I know in my bio it said, “8 years we’ve been operating under this brand Tech Guys Who Get Marketing.” I started in business in 2003 and I got my hands dirty with the internet marketing, online marketing space in ’04, ’05. The number of people that were cropping up who were teaching the little bits of information as technology shifted, as pay per click advertising came online, as then CPM impression-based advertising inside of AdWords became available. As AdWords added on radio and print and TV all in one interface. I got to see through all of that phase and that transition and a lot of people started selling that information of, “Here’s how you do this.”

There’s an adage that is, “Those who know, do and those who don’t, teach.” I love teachers. Mad respect for anybody who goes into the profession of teaching. When it comes to marketing marketing or selling sales, it’s one of these areas where the snake can eat it’s own tail. Not that they’re snakes. That didn’t come out right. It’s where you can drink your own Kool-Aid accidentally and go down a [inaudible 00:24:09] because what worked 3 years ago doesn’t necessarily work if you’re trying to sell dog clothes online today. It works great if you’re selling marketing still, but it doesn’t work in the real world. It doesn’t work in cross markets, to say that a little better way.

That’s an area to be very cognizant of as you test. Everything is a test. All aspects of this are a test.

Casey:Also, as you consider going back and getting an MBA or if you have kids that wanted to get into marketing. I guess [inaudible 00:24:43] was at a school where the professors were teaching product placement on a shelf and how kids look at things that are at their level and adults look at things at their level. That’s the level of marketing their teaching. That’s not really effective. Not anymore.

Mike:Hang on. Let me go on a little rant for that. The basics of brand marketing do have a lot of value even in the direct response world. If you’re not storytelling, if you’re not taking people on an experiential ride with your product or service, you’re missing out. You could do branding along with your direct response, but direct response has to be at the core of it. You have to be quantifying all of your efforts and all of your adspense. I totally agree with that, but as we stepped into virtual reality and augmented reality spaces, what is advertising and marketing going to look like in those places. Product placement inside of Grand Theft Auto? Sure. That’s on a counsel, but what about full virtual spaces that we interact with?

The opportunity for a new wave of communicating which really if we get down to the root of it, what is the true purpose of marketing and sales? It’s to connect with an individual, understand their needs, and from an empathic place of care, love, and support, provide them with the solution if you’re capable and if not, direct them to the right place. Direct them to the next resource that can solve that. We have all of these tactical methods and all of these psychological methods that are involved in marketing and sales right now that I think we’re going to continue to see that veneer lowered and it’s going to become more and more personal because that’s the true point of business. It’s service to other. That’s what we’re here for. That’s why we’re on this webinar with you guys. It’s, “How can we help you? How can we show up in the world and serve you for whatever your big vision is, whatever your opus is that you’re intending to sing and share with the world? So long as we ethically agree with it.”

Casey:There’s been some fun ethical ones that we’ve had weird conversations with some things that were built on lies and shams that we had to turn away.

Mike:Interesting.

Casey:Those are fun calls. I want to talk about something that I know nothing about which is machine learning. I’m really the wrong guy to chat about this. Define on a high level, Mike, what is machine learning and then tell me why I should care about it.

Mike:Why you should care about it. Let me start with why you should care about it and then we’ll explain it in just a little bit. He who owns the best AI wins. He who owns the best algorithm wins. That is the world that we’re moving into. If we look at the exponential curves that Diamandis talks about and Kurzweil talks about, around 2040 is when we can expect general AI to become a reality at which point all bets are off. I have no advice beyond 2040 for any of you. All of this ends.

Casey:That’s 24 years, so if you’re having kids now we’re talking about just a few years after they can legally drink.

Mike:Correct, although that might change [crosstalk 00:28:02].

Casey:[inaudible 00:28:02] [crosstalk 00:28:02]

Mike:He who has the best AI wins or the best algorithm wins is what it boils down to. Before I even describe, we’ll just say an algorithm, it’s a piece of software, a piece of code that looks at a bunch of data and it gives you an answer or a result. Where would this be effective? The reason he who has the best AI wins is because it’s efficient. It’s more efficient than the current processes. What is the efficiency that we take in one of the companies for mailing millions of pieces of mail per year?

We try to sort the data this way and we only want people that are like this and like this but nonetheless, standard direct response sales conversion rates 1% or under. If you really got a perfect market message match, maybe you’re up to 2%, 3%. That’s insane. That’s insane to think that we are still trying to optimize and we’re spamming 97% of all of the people or more. 97% to 99% of the people don’t take us up on the offer. We don’t have to say it’s all spam because some of these people are probably interested but non-buyers, but a large portion of it it wasn’t what they wanted. It cost us money, we wasted money, so what if we could build an algorithm, a piece of computer software that could look at all the people we were going to mail and it looked up those addresses and it used all the data points that it knows about that person? What if we then integrated or cross matched a physical address to a Facebook profile, to a phone number, to an email address, to credit report buying? All of this stuff is doable right now.

If anybody has any notion of privacy, it’s gone right away. It’s been gone for quite a long time now. It’s now getting to the point where you can have access to this data and aggregate it for your own business purposes. We’re talking about building an algorithm that can crunch through all of that and it can return a result that says, “Instead of mailing those million pieces of mail, Mike, why don’t you mail these 10,000,” and 8,000 of them were buyers. Wow. We just saved a tremendous amount of money and we just increased the exclusivity. It just radically reshapes the business.

Casey:You have more money to spend on the people who are going to buy to give them a better experience, too.

Mike:Yes. It raises the bar of the experience that one is capable of delivering in a capitalistic environment. Hands down. That’s where all that saved cash needs to go immediately, not on the new mega yacht. It needs to go back into the experience and make that the world class experience. As these AIs come online or these algorithms come online, they’re not true AIs yet, but they’re algorithms that are built via a variety of different methods and there’s a lot of different methods that actually can get used. Artificial neural networks is the key one. I’ll say it again. Artificial neural networks is one of the key ones that takes a massive amount of data in order for it to come up with good solutions, but when it does it can be extremely effective. That’s really, when we say machine learning we’re talking about building algorithms of different types in order to further optimize specific business problems. In the marketing space, there’s a big one there.

Think of UPS or FedEx. What about an algorithm that did route optimization. They’ve built them. How good are they? How much better could they be? Netflix recommendation algorithm. They did a contest on that one to try to get the best algorithm written. This stuff is in its infancy right now. It is just getting fired up and it’s an area where if there’s any aspect of your business that could be optimized or the competition is going to be optimizing with machine learning or algorithms, you need to keep an eye on it. Good resources.

Casey:Tell me this, though, with that in mind. I’m not techie enough to get machine learning. How would I apply it to my business? How would I know what to do with it?

Mike:If you can identify the problem, identify the first area that you think it could apply, go check out experfy.com, and post that as something you want to explore. Post it as a job up there. Experfy is like the Upwork. They’re like Upwork if you guys are familiar with that which is where you can basically go find a contractor anywhere on the planet with the skills you need, that’s Upwork. Experfy is the same concept only it’s specific to data scientists that do machine learning work in a variety of different industries. I’ve actually worked with a couple of different people off Experfy, we’ve done a few projects, and I’ve had some good initial results. The algorithm we got there we couldn’t put it in production. It wasn’t quite where it needed to be yet, but I’ve actually been hammering away on one of our other companies for a year and a half now on exploring how we could build algorithms in order to improve and make the business more efficient in different areas.

Casey:When that happens, you think you’ll have a marginal increase in efficiency or you think it’ll break through?

Mike:It’ll be ridiculous. Just the conversation I had last week on somebody who does some of the optimization specifically that we are looking for, the improvements that they could talk about in a general sense because they work inside big corporation with big, big dollars to be working on this, it says it’ll give us a unfair advantage in the marketplace to where we will be that person who has the best AI at that time and we will win. That’s the whole reason we’re going down that route with that company.

Casey:That becomes intellectual property that you can then, if you choose to exit the business it’s worth … I don’t even know what the multiplier would be on that thing.

Mike:Nor does anybody else because it’s brand new stuff, but we know what the evaluations of Google’s search algorithm is worth. It’s untold and I think the multipliers that we have started to see happen, we’ll get to that at the end when we talk about the billion dollars Dollar Shave Club which is freaking awesome, the multipliers keep going up. They’re going up at odd rates in a variety of ways. LinkedIn’s massive acquisition as well. I think some of these early stage companies that develop really intelligent simple algorithms are going to be worth the greatest multiplier of any businesses we’ve ever seen. They’re going to come out of AI in the next, we’ll call it 5 to 10 years.

Casey:What an exciting time to be alive. This is the next thing. This was the internet pre-internet. That’s where we are in this.

Mike:It is. It is exactly that, Casey. We thought the internet was a thing that revolutionized it. It’s when the computers are as intelligent as us and the singularity is near and all of the notion that maybe they’re going to take over and maybe we’re not useful after that. There’s all sorts of interesting arguments around it, but we know it’s coming. I don’t think there’s any force that can stop it short of a meteor setting us back into the stone age.

Casey:Right. If I was a CEO of a business that did a lot of mailing or had a lot of customers or had an issue with retention and we were playing with big numbers here, big like thousands or millions of subscribers or whatever it happens to be, I go to Experfy and I say, “Hey. I want to do something with this data.” Really, what am I asking for? Do I have to set a directive? I want to use machine learning to increase my retention rate. Do I want to do it to decrease my cost of acquisition? How would you state that?

Mike:I would state the areas in which you want to explore machine learning to solve a particular business problem. I’m wanting to optimize something. That’s really where it comes down to. It’s like, “What are you looking to optimize? Cool. I’m looking to optimize this sales or marketing process or I’m looking to optimize this production line process.” Production line stuff, like I made the mention of UPS, there’s a whole massive amount of savings that can happen in that realm. The airline industries. You betcha, there is some very intelligent code written to help optimize those industries that have thin margins or they’re cutthroat or they’re difficult to compete in. Those are the ones that you’re going to see some new players in the game and they’re just going to wipe out the old guard. You’ll see more Ubers, more complete disruptions of industries happening.

Casey:Cool. With that in mind, let’s go over to the facial hair disruptor, The Dollar Shave Club. The Dollar Shave Club was this-

Mike:I only had one more thing. I mentioned Experfy with machine learning. However, if you haven’t heard of IBM Watson or studied Watson or seen anything around it, look it up. Make a note of it. IBM has built a artificial intelligence machine learning structure as we’ll call it. In fact, probably ought to pull up their tagline and see what they actually call Watson these days. Anyways, they built this computer system, back in the day they built one that could actually beat the world champion of chess and that was a whole big thing that occurred in the last 90’s and the computer won. They continued to press forward and they have now built Watson which was able to beat the best Jeopardy players on the planet. I think it was the highest dollar winning player and the longest winning streak player versus the computer and Watson won.

Recently, there was actually a computer that beat the world’s best Go player. If you’re familiar with Go, it’s a very complex game that relies on a lot of intuition, the total number of moves, etc. A whole bunch of neat brain science on how you [inaudible 00:38:45] How is somebody good at that game? Total rabbit hole, hour long discussion that we could go into, neuroscience that I love. Watson is another starting place as well and it’s an open, accessible platform. You can get to it, you can have your team start coding on it, we could dive into a moonshot project idea that you had, tinker around with it as well. We actually submitted for the early access contest a few years back. While we didn’t win, it was neat that 3 of the winners had the same idea we did which was pretty cool.

Casey:Watson is, as it describes itself, a technology platform that uses natural language processing and machine learning to reveal insights from large amounts of unstructured data.

Mike:That’s well said, technically. Did that make sense to everybody? Technically it makes sense, but it can be really hard to wrap your head around. That’s part of this brave new world that we’re in.

Casey:Next up on the list is for us to chat about the 1 billion dollar acquisition of the Dollar Shave Club. For those not familiar, the Dollar Shave Club is a website devoted to a subscription service for getting your razor delivered to your house. Here is the website on the screen and [crosstalk 00:40:20] they’re delivering your razor to you.

Mike:[inaudible 00:40:21] [crosstalk 00:40:23] There you go.

Casey:If we look over at their products we can see really it’s a simple enough website maybe with a bit of a load issue right now. They started off selling just razor blades and sticks or handles, then they added later on shaving cream and soap and some other products One Wipe Charlies. What I think is so spectacular here is that Dorco is the company that the Dollar Shave Club got their products from. Dorco is a mass razor maker and this is the Dollar Shave Club razor. Dollar Shave Club just put it in their own package. They didn’t even stick a stamp on the actual razor. If you come over to the Dollar Shave Club you’ll see that this one right here is in fact the Dorco razor.

The Dollar Shave Club, what I think is so phenomenal here, is they were able to build a business that took a product that already existed and they out-marketed everybody else and they created a subscription service and it’s cheap. The prices are between a dollar a month and 9 dollars a month depending on how many blades you want. Probably the most common is the 4 blades for 6 dollars a month. They said enough for you to have a fresh, sharp shave every time you shave and the blades always come in the mail.

What do you think about it, Mike?

Mike:I think my button on my mic might have a problem. I am absolutely fascinated with this company. It’s 5 years old and what they did was they basically did marketing innovation. They didn’t do raw product innovation at all. What they did is they looked at the marketplace and said, “What is a consumable that the world needs that’s not positioned appropriately?” I’m reminded … Putting people on continuity for razors is kind of a no brainer when you think about how long somebody buys that product. Why wouldn’t it just show up at the routine that I need it as a man shaving my face or a woman shaving her legs or you shaving your whole body. It’s [crosstalk 00:42:55] [inaudible 00:42:57]

Casey:[inaudible 00:42:55] [crosstalk 00:42:59] I have that neanderthal gene. After I did the 23andMe gene mapping, they said I was pretty much a neanderthal.

Mike:That explains it.

Casey:I realized when I scuffed my hands on the ground when I walked.

Mike:To me, this is marketing innovation at it’s finest. It’s marketing and marketplace innovation at it’s finest, not raw product innovation. I personally am a raw product innovation person more on a solution mechanical side, or we’ll call it mechanic-like side. I like to fix and enhance. You and I, Casey, have taken a bunch of the personality profiling tools from SrengthsFinder to Kolbe, you name it. As I’ve whittled down my own skillset, I get how I operate. This kind of a business is just fascinating to me because I probably would lose interest after we built the initial marketing campaigns and had some success because there’s no innovation the side I love, but these guys followed it on through, they raised a bunch of capital.

Casey:160 million dollars in VC funding, they took on.

Mike:Yeah. 160.

Casey:It took them 5 years to grow and 2 or 3 weeks ago, they exited and sold to Unilever for a billion dollars. That’s phenomenal.

Mike:It’s impressive. You think about them compared to Gillette. Proctor and Gamble bought Gillette in ’05 for about 57 billion. Still a pretty big spread, but look at the disruption and the total number of users. What is the raw impact here when you have the direct to consumer data? How do you communicate with them? What’s the cross sell product opportunity? There’s no good reason to keep driving to the store as frequently as we did in the 80’s. We have Amazon, we have stuff that ships to the house, and catalogs kind of had their time. They came and they went a bit, and now they’re back. I’m going to circle back to the virtual reality and augmented reality. I think direct consumer relationships are the only kind that are going to matter as we go into this brave new world of virtual and augmented reality. It’s going to be so critically important to [inaudible 00:45:24].

Casey:I think that’s spot on. One thing that the Dollar Shave Club did very well that I think everyone can take away is it’s a fun website and it’s culture-y. I don’t know what the right word is for it, but when you’re on it, it’s fun. If you have a beard, it’s still fun. I ordered the razors for a while and I don’t have much to shave, just my neck and my cheeks so I wasn’t going through the razors very often. What happened was my bank sent me a new credit card and I didn’t update that new card information in Dollar Shave Club. I received in the mail a note that said, “We had a problem billing your order and we haven’t seen you order in a while. We hope you’re all right and maybe you’re growing a sick ass beard. If you are, send us a photo and if not and you want to get back on the club, here’s a code for 10% off.” It was funny. I read it and I was like, “That’s the way to get me back engaged,” so then I went and I bought some more. They really get that customer lifetime value. They got that figured out.

They also figured out how to increase the average transaction size. It didn’t take me very long to try out a couple of their different products. They throw a sample of the shaving cream. I got to try the shaving cream and I was like, “Actually, that’s a lot better than the crap that I’ve been using,” so then I ordered that. The threw me that free sample them knowing that if they got me on that, that would be an extra 2 or 3 dollars in profit a month. They’re playing with small margins. Even when they go direct to Dorco to buy these razors, you’re not saving a ton of money. Their margins are small, but then they can expand it. They have all that data, they can do more with it.

I think we’re also, Mike, in the world of … People think that you can sell products for the margins you used to be able to sell them for. What’s the importance of the data on the Dollar Shave Club? Their assets aren’t worth a billion dollars, right? Their website, is it worth a billion?

Mike:The customers are. One, I don’t know how that business got evaluated for it’s exit. What was the actual multiplier, etc. etc.? I don’t even know if all that’s public. It might be, but there’s a whole lot of ways to slice and dice that. When you have the captive audience that needs to shave their face or their legs, that whole toiletry niche itself becomes open to you. It’s just fascinating to see how fast this stuff can be built and a lot of it is because people want change. Businesses are here to serve people. If we’re not serving them well enough, we should be disrupted by the competition. I think with copyright law and patent law and the goofy stuff we saw in the cab industry fighting Uber, old businesses try to become entrenched and they don’t innovate. We are being forced to innovate at a very, very fast pace right now that can be extremely disruptive to a lot of people. It can be disruptive to you on this call here.

Casey:Disruptive to me, too. I don’t know what’s going to happen in 2 years. We feel like we’re on the cutting edge of some of this stuff, but we don’t really know what’s going to happen and we just need to continue to push forward like this.

Mike:I had a note here. What did I write down about this?

Casey:You said it means that the riches will be split among the select few who have the education and skills to be at the heart of the new decentralized company.

Mike:Decentralized economy. If that connected with anybody there, I was just trying to wrap the story ahead in my head when I put these notes together. The world is shifting and some of you may have noticed this or felt this, but the dynamic of a employee/employer relationship isn’t what it used to be in the 90’s or the 80’s or the 70’s because the individual was becoming empowered. I’ve really embraced this concept that everyone is an entrepreneur for a long time. It’s something I’ve held close to my heart because before I had my eyes opened, I was punching a clock and going down that path and that’s what I knew and understood. The reality is is that we can all write our own paychecks. We can define our own futures. We just have to step into it and not be afraid to explore this stuff that can seem scary, outside, our comfort zones, etc. There is a method to all of this madness and we’ve talked here for about 50 minutes through some of this stuff, just our 3 topics for this month. Are we going to do these more than monthly? Are we going to start doing these every other week?

Casey:We’ll see. I enjoy them.

Mike:I enjoy them too. I love sitting here bantering with you too, Casey, and just exploring these topics because you and I can talk about this stuff for hours on end and come up with new business ideas ourselves. We’re high quick starts. We want to start something new every day.

Casey:We just can’t finish them.

Mike:That’s why there are people that do that part.

Casey:I think Leslie’s on the team. She’s my follow through.

Mike:Is she listening?

Casey:It reminds me of what just happened with Tesla with their grand plan part 2. I think Elon stated his first grand plan 10 years ago and made good on it all which was, “We’re going to build really expensive electronic sports cars.” because it has to be a sports car if anyone’s going to spend a hundred grand on it. No one’s going to spend a hundred grand on a electric Honda Civic and then work his way down to an affordable car. What he’s stated now is, and I encourage you to read it, it’s in the latest Tech Guys blog post, there’s a link there to it. In the grand plan part 2, Elon Musk states that he wants these cars to work for you. He doesn’t want to reduce the cost of the car, he wants to make the car an Uber for you. He wants to disrupt Uber by offering a Tesla owner, like I’ll be in 18 months, be able to take my phone out and say, “All right. I’m not using my car today. Boom. Let’s have it work for me,” and then it’s on call. It’s a self-driving car that goes and picks someone up and takes them around and then comes back and gets a charge and it’s making me money to either pay my bank note on it or to let me profit on it. Talk about a crazy, crazy idea.

Mike:I love it. I absolutely love it. It is the quintessential concept of a decentralized economy. Elon is a big visionary who’s aligned right. He’s crazy and out there, but he’s got some of these key fundamentals and he’s riding the wave of where we’re going.

Casey:He also talked about buses. The problem with buses was essentially that they’re too big and they have to go to bus stops. Why not build smaller buses and have a fleet of them and your bus driver becomes a fleet manager and those fleets are going and they’re not using a rail like in New Orleans. They could just drive on the streets and they would take you to your house because they’re smaller, they’re more flexible, they get you to your door, and they keep going, and they’re mapping out the best path to do all these things. It’s electric so they don’t make a sound, there’s no emissions. How exciting is that?

Mike:The future is here.

Casey:Super wonderful. Last thing. Order of business here is we are doing a marketing and tech audit for anyone that’s on the call, anyone who watches this recording. If you engagedofficers.com/audit you can sign up. What we do is Bill, my business partner on the Engaged Officers side, and I will dive into your business for 90 minutes and we’ll unpack all of the roadblocks that you have for marketing and technology and lay out a game plan for you to overcome them. We’re going to help you figure out what’s stopping you from getting towards your 90 day goal or getting you to your 2 year goal and we’re going to tell you the exact steps that need to happen. That’s what we’re offering in the marketing and tech audit. We charge 5,000 dollars for the audit, but we only get paid if you’re thrilled.

How that works is you go here, you fill out the information, and then Leslie from our team or myself will get in touch with you and if it feels like a good fit, we’ll have the call. At the beginning of the call, we’ll ask for your credit card information. We’ll do the 90 minutes with you and at the end of that call, we’ll say, “Was it worth it? Are you happy?” If you say, “Yes. It was great. Yes. It was worth more than 5,000 dollars,” then you’ll approve that we bill you. If you say, “Actually, no that didn’t work or it didn’t really hit the spots I wanted it to,” then we say, “That’s cool. No harm and we can depart as friends and you won’t be billed. We’ll just trash that credit card information.” That’s what we’re offering at the website engagedofficers.com/audit.

Engaged Officers is a partner with Tech Guys. Tech Guys is an implementation team. They are designers and marketers. They’re programmers, they’re developers, they’re like the whole infantry that you want to get something done, they’re the team to do it. Engaged Officers is the ongoing monthly check in to make sure that your business is on track to hit the goals that you want it to. We’re looking and saying, “The technology here isn’t the right technology. Let’s bring in a new technology.” We can use your team to do that or we can hire an outside vendor like Tech Guys and then Tech Guys can come in and do that. Tech Guys and Engaged Officers work in unison. The hope here is that the marketing and tech audit is something that’s highly valuable to you.

If anyone has any questions or comments, we would love to get them from you from email. Shoot us an email. You can hit me casey@engagedofficers.com. If you have any ideas for other topics that you want us to cover on one of these webinars, feel free to shoot me an email there as well. I think that wraps it.

Anything else from you, Mike?

Mike:That’s a wrap.

Casey:Cool. All right, y’all. Thank you for joining us and we’ll see you next month. All right. So long.