EP 003: Reverse Engineering Profitable Sales Funnels

Episode Summary:

In this episode, 16 year marketer, Gauher Chaudhry reveals his secrets and how he reverse engineers winning sales funnels out of the gate.  Plus he reveals his successful funnel formula in the supplements niche that generates  $171.00 per customer.

Episode Links:






Episode Transcript:

Mark Thompson:  Welcome to today’s episode. I am joined here by Gauher Chaudhry, he is a online marketer who’s been doing this for over 16 years. He’s the creator of the Pay Per Click Formula, Pay Per View Formula and Media Buying Sumo programs. He also runs a profitable health and supplement company and he’s known as one of the top authorities in paid traffic generation and creating sales funnel. Welcome and thank you for joining me.

Gauher Chaudhry:  Awesome, thanks for having me Mark I appreciate this.

Mark Thompson:   No problem. Let’s dive right into it. You’ve been creating sales funnels and have been driving traffic to those funnels for over a decade. You probably have a wealth of knowledge when it comes to creating the right types of sales funnels, but for people who don’t really know about what a sales funnel is, can we break it down? What are the core components of building out a profitable sales funnel?

Gauher Chaudhry:   Sure. Mark essentially the sales funnel is just a process that you put a lead or you put a customer through. Over the course of doing this now for about 16 to 17 years, we’ve created a wide variety of different funnels. Anything from first time sales funnel where you’re trying to sell something right out of the gate, to lead generation where you’re looking to grab a name and email, maybe even a phone number, before you push them through the funnel. Even with CPA offers, they all have their own type of funnels where we were driving traffic to CPA offers. I’m sure you’ve seen them Mark, these email submit offers where these companies are paying you as much as $4 to $5 just for an email address and you scratch your head wondering, “How do these companies make money paying your for an email address?”

It’s really kind of cool if you go through their entire funnel, you’ll realize that it’s a co-registration path. For those who are listening who don’t know what a co-registration path is, basically after you give your email address in some of these funnels, it’s basically sold off or sent to a variety of different companies, and as they put you through the process they look to grab more information such as your phone, mailing address, which once again they sell off. Before you know it by the time you’ve completed the entire funnel, the $4 they’ve paid somebody to drive that email address they’ve actually monetized it for maybe 8. That’s how that particular funnel works.

But kind of going back to your traditional sales funnel Mark, it’s the front end offer is simply a sales offer that’s made, and then you have your upsell offers which are offers that are made after the first purchase, and then downsell offers for those who don’t choose to purchase the upsell offers. Depending on the funnel, in the [IM 00:02:38] world I’m sure you’ve seen it Mark where people buy a cheap front end product but then they’re hit with maybe ten upsells before they’re put through the entire funnel. It all comes down to your market, what your selling and what kind of works for you as far as getting the most value out of that particular funnel. Does that make sense?

Mark Thompson:   Yeah it does. You see this all the time, people that have a product for say $7, or $17 one time, and they may even be giving away 100% of their commission to the affiliate and you wonder, “Hey, how is that vendor even making a profit.” I’m assuming that it’s all done through one time offers and through their back end of their sales funnel, right?

Gauher Chaudhry:   For sure. If you look at Eben Pagan’s Double Your Dating empire, he actually built that by giving 200% commission on the front end to affiliates. He was taking up a loss, but like you said Mark, if you have a well oiled sales funnel you’re able to afford to pay affiliate a [$200,000 00:03:44] ROI. The same thing with Ryan Deiss and Digital Marketer, their whole survival [inaudible 00:03:50] life business. I’m sure that credit card knife offer, where for shipping and handling, I think it’s 2.95, you get a plastic credit card that turns into a plastic survival knife. They probably outsource or source from China for about 30 cents, but they were paying affiliates at one point an $11 flat CPA guaranteed payout.

Once again you look at something like that and you say, “People are only paying $2.95 shipping and handling and they’re paying out their affiliates $11 to $12.” As marketers such as me and you, the first thing that we do is we do through the entire funnel to figure out, “How can they afford to do that?” When you go through the funnel then you see the brilliance at play, what they’ve tested, what they’re currently testing. Basically when you map out their sales funnel, you’re able to see how they’re able to recoup not only the CPA payout that they do, but how they’re able to build their customer base and put them into a recurring membership site [finally 00:04:51] close to the end of the funnel, and build that value over time.

Mark Thompson:   Yeah. My next question is, and it’s kind of a two part question, the first part is, do you go out and reverse engineer other similar funnel to yours before you go and actually create it? The second part is once you’ve actually created the funnel, are you going and doing some small paid, or even internal, traffic to those funnels to ensure that, “Hey if I’m going to go and pay out affiliates X number of dollars, or I’m going to spend all this time maybe doing a scale, a big launch or scaling out this paid traffic,” are you doing small test segments first and then tweaking as you go along?

Gauher Chaudhry:    You know that’s a great question Mark and I’m glad you asked that. For those of you who are listening, if you want to waste months and waste money, then recreate your funnel by scratch. But if you want to get a head start, and exactly what you said Mark is, we do that. We reverse engineer what all of our competitors do. I know that you know that I’m involved in a health and wellness company. It’s a business Mark that none of us, me and partners, had any knowledge of. We had never been in it.

But what we ended up doing was exactly what you said, we ended up reverse engineering some of our most successful competitors by going through their entire sales funnels. When I say going through their entire funnels, we took it up a notch. We took how their video sales [letters 00:06:17] and we had them all transcribed, because when you read copy versus watch copy you get a different effect. You can see the points that make that video sales that are so successful. We did the same thing with all of their video sales that are for their upsells and down sells. We studied their entire funnel, including all their back end emails to see what they were promoting, even as affiliates, because that gave us a huge, huge head start.

Like I said, if you want to waste months and money then you can recreate the wheel and do it from scratch but if you want to basically set a process where you can, quite realistically, make money right out of the gate, then there hasn’t been a month that we’ve ever lost money Mark because we looked at what our competitors have done, because they’ve done all the keyword research, they’ve done all the testing, they’ve optimized the funnel. We simply replicated that for our own products or service. Right out of the gate we were making money.

Now you mentioned, when it comes to paying out affiliates do we simply pay them out or do we test that first? The key here is that, and everybody should be doing this and it doesn’t matter what sales funnel you, you’ve got to find out what the customer value is of somebody going through your entire sales funnel, because that’s going to dictate how much you can pay somebody as far as whether you’re paying them as an affiliate CPA commission, whether you’re paying them a percent of sales. Now obviously if you’re paying a percent of sales, that’s more of a guarantee type income because you’re only going to win if they make sales for you, but if you want to entice affiliates, like we said Mark, Eban he grew his 80 million dating empire by simply paying at a 200% commission front end [inaudible 00:08:06] commission on any sale that was made.

When you know your numbers, you’re able to do that, you’re able to make those decisions because not only are you competing, selling your product against your competitors, but you’re also competing against your competitors as far as the affiliate that you’re running and attracting the right affiliates and getting them to promote for you. Because you know and I know Mark, you’ve been doing this long enough to know that the guys who are in the top position in click banks selling their digital product, it’s all affiliate driven. If you’ve got the highest converting sales [letter 00:08:34] you’ve got the highest gravity, that’s what’s going to have affiliates coming and promoting your offer because this day and age the affiliate attention span is very, very small.

The first thing that they’re going to do is they’re going to go over where the money is, there’s no loyalty. If you’ve got the highest paying affiliate program, yeah you’ve got to go out there and you’ve got to test. You’ve got to test your funnel to figure out what you can pay out your affiliates to outdo your competitors. Does that make sense?

Mark Thompson:  Yeah, it does. It leads me to my next question which is, what’s the breakdown of traffic in terms of your sales funnels when it comes to paid versus affiliate versus organic traffic? Can you talk about that a little bit?

Gauher Chaudhry:  For the health and wellness business I would probably say about 90% of it is all paid traffic. We’re talking Google, Facebook, Bing and media buying. One of the things that I wish we could do is to sit and create a more structured affiliate program but the problem is generally when you’re doing media buying Mark, conversions are fairly low. You’ve got to buy a lot of media because when you’re going out there and doing media buy, basically your ads are there for click bait. You can’t run a banner that’s very detailed or very specific because then you end up with a horrible click-through rate.

It’s a balancing act between getting a good click-through rate to get more visibility, and making sure that whatever click bait you’re using on the banner, and you’ve seen some of these banners like, “3 veggies to lose belly fat,” it’s very vague but you bait the person into clicking on the banner and then it’s just a matter of putting them through the educational process and hoping that if you can convert at 1% or 2% on cold traffic then you’re doing very well. For us, it’s all paid traffic at this point because it’s very hard to attract affiliates when you only have a 1% conversion rate.

Mark Thompson:  Okay, so let’s talk about that a little bit more. You’re driving 90% of your traffic from a paid source, and you’re driving them to a lead gen page, right?

Gauher Chaudhry:  No, we’re going direct for the sales.

Mark Thompson:   You are? Okay.

Gauher Chaudhry:   Yes.

Mark Thompson:   Now what made you choose directed sale instead of building your list and building that relationship and then getting them to the sale?

Gauher Chaudhry:  I think we looked at, once again Mark, what our competitors were doing.

Mark Thompson:  Okay.

Gauher Chaudhry:  None of them, very few of them were doing lead gen first. The only big companies that I know that were doing lead gen where all affiliate based or affiliate backed companies where affiliates only made money when the company made money, there was essentially no risk. But we’re buying traffic, and we looked at all our competitors who were buying traffic and none of them were doing lead gen upfront because you’ve got to recoup that cost, otherwise you’re going to go broke pretty fast.

Mark Thompson:   That’s interesting, okay. If you wouldn’t mind telling me, the front end offer, how much is that price?

Gauher Chaudhry:  There’s basically 3 options, $67, $179 for 3 bottles and $327 for 6 bottles.

Mark Thompson:  Okay, and those are supplements?

Gauher Chaudhry:  Yes.

Mark Thompson:  Okay. When someone purchases, what’s the back end sales funnel like?

Gauher Chaudhry:  The first thing they’ll generally see is an upsell for bottles, at a even more reduced cost. You think it’s counter intuitive but once again this is what our competitors were doing, and I couldn’t believe it. When one of my partners told me, “We’ve got to test [inaudible 00:12:12].” I said, “You’ve got to be kidding me? Who’s going to buy 6 more bottles of the same thing?” Lo and behold as soon as we implemented it a lot of people took the back end and it kind of skyrocketed the average customer transaction value, so we did that.

Mark Thompson:  [crosstalk 00:12:24]

Gauher Chaudhry:   Yeah. Then after that kind of upsell then we started selling supplements that were related. Very kind of general supplements, kind of like fish oil or omega, which is pretty much broad base, a lot of people take that kind of supplement, and a variety of different colon cleanse, a variety of different things, that just tested which one generated the higher conversation rate and added the higher to the average transaction value. That’s essentially what we did.

Mark Thompson:  That’s interesting. On the main sales page you have 1 bottle that they can purchase, or multiple bottles, and then you found that if they purchase the 1 bottle that they still may buy the second bottle after they’ve made that initial offer.

Gauher Chaudhry:  It’s not something that I would ever have guessed. Like I said it’s not something I ever would have tested because you don’t think that they do it, but some people just do. It’s enough that it makes it wow, for you to sit there and say, “Wow, that really is something that we’re going to keep there as our first upsell.”

Mark Thompson:   What percentage are repeat buyers?

Gauher Chaudhry:   Percentage of repeat buyers? In the supplement business there’s generally no loyalty. We probably have a 25% to 30% repeat buyer purchasing, but every day because we’re doing mass spends, we’re talking mid 5 figures, we’re bringing in hundreds and hundreds of new customers and thousands and thousands of new leads. We’re able to continually recycle all of that into a recurring and into a email back end.

Mark Thompson:   Okay. Your recurring is just saying, “Hey every month we’ll ship you a new bottle.”

Gauher Chaudhry:  Exactly.

Mark Thompson:   Okay. Are you retargeting these existing customers, or even just people visiting the site?

Gauher Chaudhry:   Yeah. This is something that’s really interesting Mark, when you’re going out there, and this goes back to what I was talking about Mark, when you’re doing click bait it’s not very specifically targeted people, you know what I mean? Because you basically used a curiosity hook to bait them, so any time you retarget them it still doesn’t convert as well. What we found was, we’re targeting the people who actually hit the checkout page, and retargeting people who actually become customers was almost 10 to 20 times more effective than wasting a lot of money retargeting people that we initially click baited in the first place.

Because now you’ve qualified them, that click bait type customer, because they’ve gone to the checkout page, or even at a certain point we’ll try to retarget people who have gone passed maybe 15 minutes into the video sales letter because now you know at some point you engaged them. But to be honest with you Mark, and this might stun you, we lose about97% of our visitors in the first I would say 45 seconds.

Mark Thompson:   Wow.

Gauher Chaudhry:   Yeah.

Mark Thompson:   That’s crazy.

Gauher Chaudhry:    Yeah, but we’re still able to make it an incredibly profitable venture. That tells you how cut throat the business is and how much media you have to buy in order to make an impact in the health and wellness business.

Mark Thompson:   Yeah, that’s interesting. What’s the average customer worth to you then?

Gauher Chaudhry:   It depends on our funnel but generally our biggest funnel we’ve got it to about $171. One of the things that really helped, and once again this is the benefit of tapping into your competitors and asking them questions because we have masterminds and a lot of people are giving, very sharing. Somebody suggested what is called an order bump, that’s even before the sale is even done. That’s right on the order page. Obviously there’s a little bit of tech involved as far as getting an order bump put on the order page as soon as they check it, but basically by adding a $20 order bump Mark, and it was for our supplements and it was all digital, eBooks that were related to the ultimate outcome of the supplement.

We put that on the order page and that increased the average transaction value by $10, by simply doing that. You might think moving from 161 to 171, no big deal, but when it comes to going out there and being able to buy more media because of that $10 average bump, it’s had a big impact.

Mark Thompson:   Interesting yeah. I want to talk more about what you’re just talking about, the different testing and ways that you’re increasing the average customer value. But before I do, tell me about how much it costs to acquire that new customer from your paid ads?

Gauher Chaudhry:  With the health and wellness and supplements Mark there’s always a hard cost. You have the cost of the supplement, you have the cost of shipping, then obviously we have an office so we have fixed overhead. We’ve got to cover all of that, including the ad spend. It’s not like we can go out there and spend $171 to make $171 sale, I’d love to do that all day. For people who are going there, you’re going out there and you’re buying traffic, ideally what you want to do is you want to break even on the front end, and then build an elaborate back end to build upon that and actually make a profit. For $171 Mark basically we ballpark in our mind that we’ve got to cover about 30% to 35% in costs. If we can go out there and get a new customer out of $100 to $105, then we’re close to breaking even or making just a little bit of profit on the front end.

Mark Thompson:   Yeah. I guess that’s the beauty of paid ads, once you find a winning formula it’s a matter scaling that up and finding new sources of traffic and obviously trying to find it to be as targeted as possible, right?

Gauher Chaudhry:  That’s the beauty of paid traffic Mark, it’s controllable, it’s predictable, it’s consistent and most of all compared to search traffic it’s scalable. You can’t scale with SEO, but with paid traffic the sky is the limit.

Mark Thompson:  Okay. When you first launched your supplement brand, what types of things were you doing to help increasing conversions? Did you test free shipping versus no free shipping? Price points? Designs? Call to actions? What kind of things were you testing?

Gauher Chaudhry:  A lot of the things we didn’t need to test Mark, this goes back to, for those of you who are listening to this podcast the biggest take away that I can give you right now is, don’t recreate the wheel, reverse engineer what your competitors are doing. Mark we had a huge head start because we basically looked at what our competitors were doing. One of the things we noticed our competitors doing were these doctor certified seals. These trust guard seals on the checkout page. Simply implementing these things helped us get a good conversion out of the gate, but some of the things that we did add as we went along Mark was, one of the biggest impacts that we had because we buy most our traffic from Google, and I don’t know if you advertise on Google but you know they don’t know allow exit pops.

Mark Thompson:   Right.

Gauher Chaudhry:  Or anything like that. But in our discussions with Google one of the things that they did let us, revealed to us, was that you can actually do a opt-in overlay over your video. Meaning that you can, as long as it’s not an obtrusive popup you can actually do like an overlay over your video. I think, I’m fairly certain, I’m not sure, just quote me on this, does Press Play have that feature?

Mark Thompson:   Yeah, I believe you guys are using it for that exact function.

Gauher Chaudhry:   Exactly. Yeah, we’re using Press Play for other funnels and that exact function. That is huge because now one of the things that we did Mark is just before we reveal a major moment in our video, we then popup an overlay asking for the opt-in. The hook is simply, it can be a survey. One of the things that work really well for us was, “Hey listen, are you short on time? Get a complete transcript of this entire VSL.” The day we launched that Mark is the day, the first time, we ever did 4,000 email leads in one day, just by putting that overlay. Of course GetResponse freaked out and shut us down so we had to switch hosts to a more reliable one but that’s the idea here, is that you want to be doing everything you possibly can to build your audience.

It goes back to kind of what you were saying Mark as far as retargeting, trying to grab the email, whatever you can as far as being able to build that audience and tribe so you remarket to them. But other things that we tested Mark were headlines, the length of the sales letters. Like I said because the bounce rate was within the first 45 seconds Mark, which is pretty atrocious, we tested the first 45 second of the video with different intros to the video to see if you get a stick rate longer, or passed 45 seconds because when you’re losing 98% of your people if you can just get that down to even 96, then you’ve doubled the number of people who have gone further in that funnel. A lot of different things.

Mark Thompson:   What about 1 click upsells, are you doing that in your funnel?

Gauher Chaudhry:   We have the order bump and the entire funnel is 1 click upsell. They don’t have to reenter their credit card again. But one of the things that we did switch in the last 6 months Mark was that we were doing at one point 3 upsells. We changed that to 3 upsells and 3 downsells now. Meaning that if they didn’t take the first upsell then we would downsell them on the first upsell with few bottles. If they didn’t take the second upsell we would downsell them onto the second upsell with few bottles. We did that for 3 different supplements on the upsell path, and that was able to increase the average transaction value by another $10. Another thing we implemented was on the checkout page. I don’t know if you’ve heard of the company upsellit.com?

Mark Thompson:   I haven’t.

Gauher Chaudhry:   Basically on the checkout page they have the ability to trigger a popup when they notice that the prospect is not going to order and they’re going to leave before they order. At that point it’s basically a simulated live chat and they offer a 20% discount. We were able to save 8% of our sells by implementing that on the checkout page.

Mark Thompson:   Very cool. You are actually capturing the credit card after they’ve gone through the entire funnel or are you capturing after the initial sale and then leading into the back end?

Gauher Chaudhry:  We capture the credit card information on the initial sales so that way when we’re going all of the upsells it’s simply a one click up so they don’t have to enter any more credit card numbers. But we don’t finalize the entire transaction until they have completed all of the upsells.

Mark Thompson:  I see, okay. You’re grabbing their credit card information, they go through the process and then click purchase with everything that they’ve added into, almost it’s a shopping cart basically.

Gauher Chaudhry:  Exactly.

Mark Thompson:  Okay. What do you guys use for processing your orders? Just curious.

Gauher Chaudhry:   We use [UltraCart 00:23:14] as our shopping cart, but then we have a variety of different merchant gateways because when you’re in the health and wellness you’re always rotating merchants on the back end. We’re rotating maybe about 5 merchants on the back end.

Mark Thompson:  What’s the reasoning for that? It’s just the industry that you’re in?

Gauher Chaudhry:  Number 1 the industry that you’re in because you never know when one merchant might come down and all of a sudden say, “No, we’re cutting down and cracking on health and wellness companies. We don’t want to sell to them anymore,” or with one merchant for whatever reason. Maybe you’re charge back rate is abnormally higher. If you stick with one merchant rate and they come back and say, “Your charge back rate is too high, we’re going to close your account,” that’s a huge problem.

But the biggest reason Mark was that when we were a brand new business, when we got these merchant accounts they kept us at maybe a quarter of a million dollars per month, and in some cases that’s not enough. You have to have multiple merchants so that if you cap out [inaudible 00:24:09] one, at least you have other merchants that you can still continue to process through.

Mark Thompson:  It’s a terrible problem to have, right?

Gauher Chaudhry:  Yeah. Yeah.

Mark Thompson:   Yeah. Okay, that makes sense. Talk to me about some of the tools that you use for monitoring your sales and conversions.

Gauher Chaudhry:   Obviously one of the tools that we use is a split testing tool. I’m sure a lot of your readers have heard of Visual Website Optimizer because that’s the tool that we use to split test our landing pages, split test our checkout pages. But believe it or not a lot of our analysis and a lot of our number crunching is actually done in spreadsheets. We’re able to download data from our shopping cart, put it into a spreadsheet, then be able to look at the numbers in the spreadsheet, such as the average transaction value and all of these numbers. Because that’s going to dictate how much we spend on the front end. Now obviously when it comes to buying paid traffic we use tools like, I’m not sure if you’ve heard of Volume, it’s a tracking tool.

Mark Thompson:  I have not.

Gauher Chaudhry:   Yeah. It’s similar to Tracking202, similar to all these tracking tools that are out there.

Mark Thompson:   Okay.

Gauher Chaudhry:    We use that because it’s basically a cloud based tracking service to monitor all of our paid traffic, because there’s days where we’re driving 200 to 300 thousands clicks, so number one … This is a problem that we ran into Mark once again, and this is part of the learning curve is that, if you’re [inaudible 00:25:29] a tracking script on your own server and you’re running over 100,000 clicks, you’re going to destroy your server. If your server is bogged down it’s going to serve any pages, and when you’re driving traffic to your sales pages that are on a server that is bogged down, then you’re just wasting money.

One of the things we did was move our tracking to a totally different dedicated server, but even then we were crashing that, so then eventually we just scraped self hosting our tracking and went to Volume. Since then because it’s cloud based and they’ve got servers all over on different continents we haven’t had an issue now.

Mark Thompson:  Another terrible problem to have, right.

Gauher Chaudhry:  Another terrible problem to have, yeah. Leave it to the experts. I know everybody wants to penny pinch a little bit but leave it to the experts to do everything, because Volume, they provide us with a granular detail Mark, I’ll give you an example. We could not figure out why we converted so well on an Apple iOS but only half on an Android device. Doesn’t make sense, right? They’re both mobile devices. One of the things we found was that one the iOS device when people were clicking on our videos it was automatically going full screen, but when they clicked on our VSL on an Android it does not automatically go full screen.

Mark Thompson:   Interesting.

Gauher Chaudhry:  Big difference. Big difference [inaudible 00:26:49] little small things, if you don’t have that granular data Mark, you’ll never know.

Mark Thompson:   Yeah. We actually use something internally called BrowserStack which is a really nice tool for testing all the different browsers as well as all the mobile devices for each of our app. That could be another nice little app to use.

Gauher Chaudhry:  Yeah. There’s also Cross Browser Testing, where you can [test it 00:27:08] once again on different mobile devices to see how your page looks on mobile devices. These are the things that everybody who’s listening to this, you might not think about it but you’ve got to be doing that. Especially now that everything Mark is pretty much going mobile with 60% to 65% of all traffic driven from tablets and mobile devices now.

Mark Thompson:  Yeah. Obviously only as you start to grow and you start to generate more revenue, that’s revenue lost if you’re not catching these things.

Gauher Chaudhry:  Yeah. Believe me, there’s a lot of things that I look back at and I think to myself how much we’ve actually lost because, once again, we didn’t know or weren’t testing certain things. We’ve been driving traffic for years now and we didn’t realize this Android, iOS issue until just a few months ago.

Mark Thompson:   Awesome. This has been an awesome discussion. I appreciate you coming on. For people that want to learn more about you or your business, what’s the best place to check that out?

Gauher Chaudhry:   Basically the place to go is just to my personal domain, that’s gauherchaudhry.com, G-A-U-H-E-R C-H-A-U-D-H-R-Y dot com. You see how easy I’ve made it for everybody Mark?

Mark Thompson:   We’ll make sure that have a link in the show notes below so you can go ahead and check that out. Thank you Gauher for coming on this podcast. I’m sure we’ll talk to you soon.

Gauher Chaudhry:   Awesome, thanks for having me Mark.

Mark Thompson:  Thank you.