How To Think With Dan Henry How Jeff Lerner made $25 Million with his Affiliate Program
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How would you like to learn how to build your own successful affiliate program for your product from someone that’s made $25 million doing that very thing?
Well, you’re in luck! That is exactly what my good friend Jeff Lerner and I are going to sit down and discuss today!
Jeff has gone from a broke jazz musician to earning over $50 million in online sales (50% of that in affiliate earnings alone) over the course of the last 10 years.
Jeff is going to share with me his perspective on building assets that create a generational legacy, rather than the trendy come-and-go “get rich quick” schemes.
In this episode, Jeff and I are going to cover:
- The four types of affiliates, who you want to work with and who you want to avoid
- The best software solutions for your affiliate program and even a few you should avoid
- And how to know if an affiliate program can function as a form of organic traffic for your business
To learn more from Jeff, visit his website: jefflernerofficial.com
If you got value from what you heard here, please be sure to subscribe and rate this podcast! Bonus points for you if you write a review! ;)
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— TRANSCRIPT —
Dan Henry (00:00):
How would you like to learn how to build your own successful affiliate program for your product from someone that's made 25 million doing that very thing. That's what we're gonna talk about in today's episode.
Dan Henry (00:33):
All right, everybody, we have a very special guest today, a good friend of mine Mr. Jeff Lerner who has been in this game for quite a bit of time. He's done over 50 million total in online sales in about a decade. He used to be a broke jazz musician and built his way up to the powerhouse that he is today. But, what we're specifically going to talk about is how 25 million of that came from his very own affiliate program to promote his products. We're gonna do something kind of special today. I'm going to intro him and then we're going to pose a question. How would you build it or how would you do it. I'm going to give him a theoretical task per se and he's going to tell us how he would build an affiliate program around it. So I think this is gonna be a really great episode. Jeff, how are you doing man?
Jeff (01:33):
I'm ecstatic, Dan, grateful to be here on your show and getting some of your highly valued time.
Dan Henry (01:41):
Well, I appreciate you being generous with your time as well because I know you've got money to make and a company to run. We were actually talking about that you know before we started recording, we've both done pretty well in this industry but we have very different business models. You know you have that big team and the big goals of building a huge company and I'm chilling here with my little 10 person team trying to suck up all the profit and just relax on my boat but, that's so cool man is there are so many different ways to do it. So before we jump into the how you would build it, just real quick give a little bit of background on where you came from and what that journey looked like just so that we have some context of who we're talking to for any of my audience who may not have heard of you yet.
Jeff (02:40):
I'd love to and I appreciate the opportunity to share and get to know a new audience. I've been a part of your audience for a while now, Dan, so it's nice to get to I guess address myself and others out there. So yeah I guess I'm forty-one years old which makes me probably in a little bit of the maybe the upper half of the digital marketing echelon out there, walking around it like big DM events I feel like a little bit of the old guard sometimes. I think that gives me a perspective. Actually I should say that I've seen a lot of things come and go. As time has evolved I've really anchored myself to just I just want to build assets. I mean that is something you and I are totally aligned with.
Jeff (03:26):
I want to build assets that create a generational legacy and can power my life and the life of future generations. I'm so over this flash in the pan, how to make a quick buck online nonsense that unfortunately kind of pervades the space. I think that's for both of us one of the secrets to our success is the willingness to delay gratification and do long term thinking. So when I started in 2008 I mean there I'm dating myself. I was a broke jazz musician. I was a total of four hundred ninety-five thousand dollars in debt. I had spent most of my 20s trying to start businesses. This sounds kind of funny trying to start marriages.
Dan Henry (04:07):
That's way harder than a business.
Jeff (04:10):
Oh yeah. Well, I failed at all of them. I failed at seven businesses and two marriages in my 20s. It was a hard time being what's what. I don't know which one's worse being a struggling musician or a struggling entrepreneur but I tried to do both at the same time.
Dan Henry (04:25):
Well, at least one can play the guitar.
Jeff (04:26):
Yeah, and I know you know. I mean you're a musician yourself and you know the challenges, in fact, we had a great conversation where you were like you know the one thing that does translate is musicians are very very clear on how hard it is to master something that's technical and difficult. So we do apply that to our entrepreneurial endeavors and it's one of the reasons I think we've both succeeded is we just we'll just work, we don't mind spending 10 hours locked in a six by eight room just learning skills because that's what we had to do to learn our instruments. I applied that right out of the gate in 2008. I had tried, I'll spare you the saga of all the businesses that failed but the final one was a set of franchise restaurants I had two franchise restaurants they never should have given me the bank loans in the first place but it was 2006.
Jeff (05:12):
The banks were crazy, they would loan money to anyone with a pulse and occasionally even people who didn't have a pulse. There were literally people getting loans in the names of dead people at that time, they just didn't verify anything. So I ended up getting way in over my head, and opened these two franchise restaurants right into the mouth of the Great Recession. The world was collapsing and the mortgage bubble was bursting. I was doing commercial lunch deliveries and all those companies slashed all their budgets and, I was like I said four hundred ninety-five thousand dollars in debt by the fall of 2008 about three hundred and thirty of that was actually to the U.S. government because they were small business administration federally guaranteed loans. A lot of people don't realize when you default on an SBA loan it's essentially the same as defaulting on your taxes like your creditor is the U.S. Treasury.
Jeff (06:06):
So there's nowhere to hide like I would have to leave the country and they probably go get me. I mean there was nowhere I was gonna go to get out of paying most of that money and the rest of it, the balance of it was mostly to these big real estate investment trusts that have mean, aggressive lawyers that will chase me to the ends of the earth too. So I had two choices at 28 years old, it was declared bankruptcy but even then you can't bankrupt out a U.S. Treasury debt or...
Dan Henry (06:36):
When you owe the government money that's it, man. Trust me I know I had a two hundred fifty thousand dollar bill from the IRS and you can get away from Verizon and Bank of America, but you can't get away from them.
Jeff (06:47):
Exactly. So that was the best thing that ever happened to me though because I think a lot of people go online and they're like Man if I could just pay for it make an extra five, and I'm not demeaning this perspective but, like if I could just make an extra five hundred dollars a month I could cover my apartment or my cell phone bill and that would. For me, I had to make 40 grand a month, basically, I had to make an extra half a million dollars and I figured I had about two years because in 2008 the banks were kind of gridlocked because of all the defaults. They were having to foreclose on houses and I could just see that I had a little bit of time but not all the time in the world. So I had to make half a million dollars extra money in two years as a jazz musician. The only way to do it was a total go big or go home situation, right? So I went headlong into affiliate marketing at first, threw myself into it and figured out pretty quickly I was going to need to sell high ticket products if I was going to accumulate those kinds of commissions, and found a really good program.
Dan Henry (07:41):
Amazing how everybody at our level always comes to the conclusion that you got to sell high-ticket.
Jeff (07:51):
You've got to sell high-ticket and if you want it done right you gotta do it yourself. This means even though affiliate marketing is usually presented as a lifestyle business, for me I recognize very quickly I was gonna have to get on the phone and close some sales myself. I know that you're no stranger to that, right?
Dan Henry (08:02):
Yeah absolutely. Absolutely get your hands dirty and so I just closed a fifty-five thousand dollar sale today and I don't get on the phones much but I will for that.
Jeff (08:14):
I don't doubt it. I still do a one to one interview in our company for our highest ticket program. I'll get on and qualify a person and sometimes I'll say no. I'll say listen I just don't think you're a good fit and, that's you know saying no to someone who wants to spend sixty thousand dollars it takes a certain amount of discipline. I just, anything I could do to get my hands dirty, learn the knowledge, develop the skills, and make the money I did. I was desperate and hungry and aggressive and, in 18 months I paid off four hundred ninety-five thousand dollars, and that kind of kickstarted a career that's now twelve years in the making.
Jeff (08:50):
I've been an eight-figure affiliate marketer as an affiliate, not as an affiliate owner.
Dan Henry (08:55):
Right just as an affiliate and I imagine that experience taught you a lot when you went to create your own affiliate program right?
Jeff (09:01):
Oh my gosh, yeah. Lead Generation, optimization, conversions. You know, the nice thing about being an affiliate marketer is you become super myopic about getting the return on your own investment, right?
Dan Henry (09:14):
Right. Because you generally only get half.
Jeff (09:17):
Yeah yeah. Exactly you're having you make, you're having to achieve ROAS without getting to collect all the money.
Dan Henry (09:23):
For anybody that's wondering what ROAS is, its return on ad spend. So yeah let's say I have a hundred-dollar product and I spend you know 20 dollars on a Facebook ad or whatever it is. If it's my product well that's a profit of $80. But if it's an affiliate product and I'm getting half, now it's a profit of $30. So you really have to be tight and you really have to be dialed in to make a good amount of money at it like that. So let me ask you, in doing that it obviously taught you a lot about being an affiliate and growing your own affiliate program. What was the reason why you decided to create your own affiliate program and how would you compare that to paid media?
Jeff (10:11):
Yeah. So for context, I did affiliate marketing for five years from 2008 to 2012. From 2013 to 2018 and this is an important part of the story, I ran a digital agency. I started my own agency. I know you've been in the agency business, started selling my know-how to businesses. That was actually my first experience of "growing a real company" right? As an affiliate marketer it's a lifestyle business, right? You work when you want, you can expand or contract staff as needed. It's all V.A. You're not having to pay payroll taxes and be on the hook for workforce services and unemployment and carry workers comp insurance and all this traditional business stuff. In 2013 when I made the switch to running an agency it was like OK if I'm going to scale this I'm going to have to build a real business.
Jeff (11:03):
I got an office, I had 5000 square feet at one point we had over 50 employees and we scaled that pretty big. I learned a whole different set of skills. What I lost in doing that as B2B is I lost touch with empowering, for lack of a better way to say it, empowering the little guy or essentially empowering who I was when I started, right? When I started I was the little guy, I was desperate and hungry, and like hey is there a way I can change my quality of life. I missed connecting with the old version of me and all the other people like that. So 2018 I wanted to kind of step back into the world of being and empowering the little guy, the upstart, the entrepreneur that I think is the fabric of the American dream which is like anybody can do it.
Jeff (11:55):
But I had all these skills that I had developed from growing a real, again forgive the term but, a real business, a real company. So I looked at it and said OK, the way to get back into working with and empowering again, maybe forgive the term, the little guy, is to actually create my own set of products that have my own affiliate program. That was a whole new education that I want to talk about in this conversation because I've learned from being on both sides of affiliate marketing that not all affiliate marketing is created equal and, not all affiliates are created equal. So anyway I'll expand more on that but, I think your question I wanna make sure I'm very specific in value-based for answering your specific question which was what would I do now to grow an affiliate program?
Dan Henry (12:47):
Well, I'm going to ask you a very specific question on how you would sell specific products in an affiliate program. Before we do that I just wanted to get your basic take on how you would compare running your own affiliate program for your product to paid media, What would you say the biggest pros and cons are?
Jeff (13:13):
Okay. Great question. So I mean the difference is obvious when you're spending your own money, you're spending your own money, right? You have a level of sensitivity to the result that is very in the moment. You're not going to go three days without checking your numbers when you're dropping your own five, ten, twenty thousand dollars a day, right? Whereas and this is the issue, so for anybody who's an affiliate out there scanning opportunities in the market, knowing what I know now I would never want to join an affiliate program that wasn't administered by someone or some business that had at some point had to be in the shoes of an affiliate, right? Because the problem with a lot of affiliate programs is they're administered by people that have never been affiliated and, because they're not spending their own money to prove out the funnels and optimize the funnels and refine the offers, they kind of don't care. The dynamic is this, where you can have affiliates that are losing money and you're still making money because you're not spending anything on ads and you're just kind of keeping what they're losing. Eventually, you figure out there's enough of a turnstile out there of people that want to be affiliates, that they'll power my company even though it's not a particularly great affiliate program.
Dan Henry (14:40):
Well let me ask you this because there are two ways, in my opinion, there are two ways to really approach an affiliate program from a high level. Number one is the traditional affiliate program where you find affiliates or influencers or people who are experienced affiliates and you try to get them to promote. That's the one I kind of hate honestly. Then there's the other one where instead of doing that you simply ask your customers and you educate your customers on how to spread the word. You keep it very customer-focused and not you know old school affiliate focused. If I ever did do another affiliate program that's the road I would want to take. I would want to show my existing customers how to make some money with the proven products that I have, as you said, spent millions of dollars on refining. What is your take on the difference between those two high-level strategies in terms of number one, going after seasoned affiliates trying to get them to promote versus really just educating and empowering your customers, not necessarily professional affiliates?
Jeff (15:49):
Yeah yeah, I get it. So. So actually I'm going to complicate the question if you will allow it. I've broken the affiliate marketing world. Again this is this too is an oversimplification but it's because sometimes you have to oversimplify for purposes of discussion. I've broken the affiliate world into four categories. There are newbie affiliate marketers who are looking for a quick buck and that's a huge group out there. Then there are newbie affiliate marketers who're new but they're actually willing to do the work and they want to build assets and they're taking a long-term view and they're willing to do it the right way. That's an important distinction which I'll explain. Then there are affiliate marketers who are only concerned with what we call EPC - Earnings Per Click, which means they have a big list and all they care about is how much money they can make from the list. They're willing to do whatever it takes to maximize that number even bending ethical lines or putting the offer at risk so to speak. Then there are experienced affiliates who also have a conscience and do good business over time. So it's four categories. You have newbies that want a quick buck, newbies that have their head in the right place, experienced affiliates that want the most money possible and don't care what it takes and, experience affiliates that also have their head in the right place and want to do things the right way.
Jeff (17:15):
Obviously, I'm only and, I think any affiliate owner should only be interested in working with experienced affiliates who also aren't excessively greedy. Meaning they're willing to compromise your offer and put it at risk just to squeeze out a few extra bucks. Or newbies who have their heads in the right place, newbies who have their heads in the right place are usually, to your point, going to grow out of your customer base. There are some experienced affiliates out there and it's worth finding them, who will come in and they're usually people that are really good affiliate marketers. But they've been fatigued by seeing offers disappear and seeing companies implode, usually because of the behavior of affiliates. Let's say for you, you have a course that teaches people how to start a digital agency right?
Dan Henry (18:16):
No, I haven't sold that in years. So we sell my book and there are some ups sales after the book and then we have a program called Digital Millionaire Coaching where we, my team works with you personally to build your, it could be any digital product business. It could be online courses, coaching, consulting, masterminds, and then we have my Elite Mastermind which is where you get direct access to me, meet with me every year several times in my office. Let me ask you this, I did have an affiliate program a long time ago and I talked to Dave Woodward. We did a podcast episode with Dave Woodward about this and here's the problem I ran into. Let me just kind of tell you my theory on this.
Dan Henry (18:55):
What was happening was we were letting people promote the products and I was spending hundreds of thousands of dollars a month on Facebook ads, as well as paying for 50 percent or whatever it was to affiliates. Well, when we went back over the course of about a year and, by the way, that was such a nightmare because literally, we had so many support tickets. You know somebody would make an affiliate sale and within five minutes they're emailing my staff saying "When will I get my commission?" And my staff over here like "What? Go away. just go away, you'll get it when you get it. Stop emailing". It was just so much it was just ridiculous and then we'd have affiliates fighting over things and I'm just like I don't want to do this. So already I had a bad taste in my mouth.
Dan Henry (19:43):
Then I go and I do an audit and I find out that over the past year 90 percent of the affiliate sales that we paid out on actually first came from a Facebook ad and I really looked at the situation and I took a strong and, I knew that maybe this would you know deter future affiliates but I shut the program down. I completely shut it down. I said "Listen guys sorry I'm not doing anymore. I did not get into this business to get 500 emails a day asking when you're gonna get a commission that you generated five minutes ago. I'm just not going to do it." As well I was giving half of my revenue to people who, in theory, I thought I'm going to make these sales anyway because they're going to get my funnel, they came from Facebook ads. I found that a lot of people were just sharing links, "Oh, use my link, use my link" and I'm thinking that's not why I made this program, I made this program so you bring in new customers.
Dan Henry (20:47):
So then I shut it down and, immediately over the next month, the second month, third month, fourth month, our sales did not dip at all but our profit doubled. Ever since then I haven't run an affiliate program. So I asked Dave Woodward because he built the affiliate program over at ClickFunnels, I said "Tell me about this. Like what is your take on this." He said for somebody like me it makes total sense. But obviously a company like ClickFunnels with hundreds of employees and all that, they have a much longer-term strategy. But for me, I'm about the profit you know? So here was the theory that I posed, and this is actually why I brought you on this episode today is.
Dan Henry (21:38):
I said to Dave OK let's say I wasn't going to run Facebook traffic right? Let's say I just wasn't going to do that. I was only going to generate sales through affiliates. At that point, I would think it would make sense because then I'm paying affiliates on new sales and they're going out, they're not just piggybacking my Facebook ads. So my question to you is because look I like to own my traffic. I don't like to be tied. Even though we've made millions for Facebook ads you're talking about a company that the more you spend the more they charge you and you get no support, right? I've spent millions of dollars on Facebook ads and for most companies, you would get dinner. You'd have dinner with somebody at the company, I can't even call anybody, I can't even email anybody. It's ridiculous. So to me, I want to start owning my traffic. So here's my question to you. Let's say that I wanted to promote this book Digital Millionaire Secrets. It has about a $50 to $55 AOV it's really good. For anybody listening that's Average Order Value because we do have some upsells after this. So basically the average customer that buys a book, the average what we make is about $50, $55. So let's say that I got a letter from Mark Zuckerberg. It says Dan I don't like you, you suck you're never advertising on Facebook again ever. Then I get a letter from Google and they say Dan you're ugly, we don't like you, you're never going to advertise on Google. Basically, let's just say that I completely get banned from all forms of paid advertising and my only choice left was organic marketing and I wanted to do an affiliate program. I wanted to basically say to everybody who bought this book not necessarily affiliates like professional affiliates, but just people who really love my book if I were to say guys I'm going to show you how to make some extra money promoting my book something that already works. All you gotta do is you don't recommend people the book and you're going to get paid half of all the upsells. My question to you Jeff, is if that actually happened to me and, thankfully it hasn't but if it did how would you do it? If you were me, with what you know of course. How would you build out a program to allow my customers to promote this book and you know replace paid traffic?
Jeff (24:07):
I am so excited to answer that question. First, can I add a little bit of color to everything you said in asking the question? So first of all I think it's because as an affiliate, for me as an affiliate program operator and you as a potential Affiliate Program operator I feel like this conversation is kind of like our platform to address our current or potential affiliates and be like listen, please don't be knuckleheads. Don't send support tickets five minutes after you make a sale asking when you're going to get paid when I can see that you haven't even logged in and set up and connected your bank account. You couldn't even get paid even if we were trying to release your commissions. It's funny when you when I knew we were going to have this conversation I made notes on my board about those four types of affiliates and the first one I wrote down was newbies who clutter up your support with excessive tickets.
Jeff (25:00):
I literally wrote that and then you just described it. As affiliate marketers, I think everybody needs to have a perspective on realizing the role you play in the ecosystem and the role you don't. Whatever company you're an affiliate for, it's a real business and it has a lot more going on than just running traffic and getting paid. So you've got to develop that sophisticated long-term relationship and you can even look at all the changes ClickFunnels has made in their affiliate program lately. I'm sure some affiliates are grumbling about why they are changing all this stuff but you gotta understand what it's like to support. Dan, you just did a great job of describing it but to support that many affiliates but, you also have to understand the economics at play. So like for ClickFunnels they have a $97 a month product but they're a SAS company.
Jeff (25:49):
So what they're actually building for is a backend valuation where it probably cost them more than ninety-seven dollars to acquire a new customer through paid ads, but that ninety-seven dollars per customer probably gets valued at 20 months on the backend. So it probably adds two thousand dollars to their valuation every time they do. So from a cash flow perspective, they could spend five hundred dollars to acquire that customer and as long as they had the credit to fund it, in the long run, it would be a good trade. In the short run, it might drain all their cash. So they have to rely on affiliates for that reason. Someone like you, you have a 55 dollar upfront AOV. You probably have a five hundred or a thousand dollar LTV, Lifetime Value. So you don't have to rely on affiliates. I realized at a certain point neither did I and, I actually did the same thing just you know I scuttled my affiliate program. It pissed a lot of people off. There were memes of Jeff Lerner with devil horns because "He robbed us"
Dan Henry (26:53):
You know what though? Screw that, screw that because you know what to me I was getting robbed. Dude, I'm sorry but, if I sign you up to my affiliate program and I say promote my product you have to be a complete idiot not to understand that the purpose is to get new customers. You don't go on my Facebook ads, you don't go in my group, you don't go on my comments and message people and say "Hey are you going to sign up for Dan's program? If so, use my link." You don't do that. If you do that, I don't suck, you suck. OK. That was ninety-nine percent of affiliates and I just said you know screw it. That's the thing is I know guys like you, guys like Russell, guys like Gary V they want to build these huge companies.
Dan Henry (27:39):
When you build huge companies you do come under a lot of scrutinies. I have a small team of 10. I sit around chilling, listening to music most of the time. I work maybe five hours a day. I take multiple six figures a month profit and I try to enjoy my life. I don't try to build the next Facebook or the next big thing and that's just my personal lifestyle. So for me when I say you know what guys we're done here like I'm just not dealing with it. That is one good thing about being as big of a small guy as possible is that you can say it and that's it. That's the thing is, I'm considering an affiliate program for this book so that I give my readers and the people that follow me and my fans a chance to make some money but I'm not going to give them free money. I'm certainly not going to answer stupid questions about where's my commission five minutes after this and that. I'm just not going to do it and I'm just upfront about that. So I totally feel you.
Jeff (28:42):
It makes perfect sense. So you know the nice thing and why I do think I'm probably a good guest to have on to address this question is because you know I scuttled the affiliate program and then I reinvented my company. Relaunched with a modified offer that's a better offer and, then eventually reintroduced the affiliate program in a way that has been very effective. It only attracted the right people, and this is key, it's repelled the wrong people. So they don't come in and create those problems so I will tell you there is hope there is a way to do it that can be really...
Dan Henry (29:20):
Full disclosure half the reason, well no I'm not going to lie. 90 percent of the reason I had you come on this podcast was so I could potentially take your advice and actually implemented this.
Jeff (29:30):
Imitation is the highest form of flattery. Good artists borrow, great artists steal. It's all the entrepreneurial way.
Dan Henry (29:37):
Well, I always say that the best way to get free consulting calls with high-level entrepreneurs is to interview them on a podcast.
Jeff (29:44):
Amen. I started my own podcast for that very reason. I had John Benson teaching me copywriting last month. It was amazing. These are people that would be like ten thousand dollars an hour.
Dan Henry (29:55):
Exactly. But if you've got a podcast it's free.
Jeff (29:59):
Exactly. So yeah I mean here's the thing we reintroduced it. It's a lot harder to change the culture of an affiliate program than to just start it the right way. I ended up shutting mine off because I was fighting the battle of trying to change the culture from exactly what you described. So now you know, first of all, we have an application you have to apply to be an affiliate. You have to be approved to be an affiliate or you have to be a customer to be an affiliate.
Dan Henry (30:30):
Oh, I would put that number one you absolutely have to be, I wouldn't let somebody promote my book that hasn't bought my book for sure.
Jeff (30:36):
I will tell you this and maybe I shouldn't because it's not a huge number of people and a lot of them are currently with Entra. There are some really established affiliate marketers out there who are also ethical and won't blow your company up. They do exist but you got to go network and find them and usually like to become friends with them. Because those people are looking for a place to call home that isn't going to blow up and isn't just greedy and you know doing things the wrong way. Again you usually have to find them, befriend them, build trust with them, and then they can come on and do great things for your business. I have individual affiliates that drive seven-figure plus per year in sales but I can trust that they're not out there making false promises. You know you have a book called Digital Millionaire Secrets if somebody goes out and creates a little bridge page that's like "Hey put in your email here my buddy Dan's going to teach you his formula to guarantee to become a millionaire in six months." They're going to blow your offer up, you're the one that is going to get shut down because of that. Right. I don't think a lot of affiliates recognize how much harm they do to the offer owners when they overstep trying to get that extra dollar.
Dan Henry (31:49):
To be fair, I do have people that read my book, joined my program and did make me crazy, but I do have people who hit a million dollars in six months but that's not everybody not by a long shot.
Jeff (31:59):
You have to just use common sense like you can't guarantee an outcome when the person implementing the process is at least in part responsible for the outcome, right? I couldn't guarantee somebody is going to lose 50 pounds if they sign up at my gym because they still got to come in and do the work.
Dan Henry (32:15):
Exactly. Do you know how many people say Well Dan you know I'm almost through your book I've been reading it and haven't read the whole thing, and then you'll get people that have read the book and then and I'll say something like well, hey, have you implemented it? It's like well no, not yet. What do you mean not yet? What are you waiting for? So you can't guarantee that because you just can't control what people going to do but again I think a lot of that comes into, like you said, approving the right people to promote and giving them perhaps an education that says listen you can promote my book but do not say this, do not say this type of stuff.
Jeff (32:58):
Yeah. I mean the most draconian way to do it is to make them submit all their materials for approval before they're allowed to promote anything. I personally haven't gone that far, I haven't had to. I don't have a little bit of a trust that has worked so far. I will tell you one of the very key things as an affiliate program owner and manager, aside from creating the right culture and defining the right standards and making people realize it's a privilege to promote your offer and, that you will boot them out at the sign of impropriety. As to your point, you have to be very tight on tracking. This is where I got really frustrated with a lot of the programs out there like Post Affiliate Pro and Top Affiliate and even Pay Kickstart, which is one of the better ones.
Jeff (33:49):
They don't have really really good reporting from setting something as the first touch versus last touch. Creating timed cookies like.
Dan Henry (33:59):
Well, also there's the accounting aspect. There's when you're CPA comes knocking and says, OK who do I got to pay out, where are their 1099's, all that. Let me ask you this. What do you think about Entreeport for that and do you have a preferred platform?
Jeff (34:19):
I mean full disclosure we built our own because the level that we were trying to go to we just knew we were going to break any off the shelf solution we tried to implement. We're also trying to do things. I mean we are trying to go to that nine-figure per year billion-dollar valuation type of level. So my problems aren't everybody's problems. Let me say that up front, you don't have to create your own software to do an affiliate program. Entraport is great. I tried loving Infusionsoft as long as I could but I can't do it anymore.
Dan Henry (34:52):
No, no, gosh. You would have to be an absolute masochist to use Infusionsoft in my opinion. I don't mind saying that.
Jeff (35:00):
Yeah, I don't mind agreeing with you and, I have friends that work in management at Infusionsoft and I'll look you in the eye and tell you...
Dan Henry (35:13):
Yeah, if you're just really kinky you just like self-harm and self pain then use Infusionsoft, right?
Jeff (35:13):
If your idea of a good Friday night involves somebody with a whip and hot candle wax then you might consider Infusionsoft.
Dan Henry (35:19):
Yeah. So I'm just thinking like Chuck Rhoades from Billions, he would use Infusionsoft. I'm going to get so much heat for just raking Infusionsoft over the coals, or confusion soft I'll take a page out of Russel's book.
Jeff (35:37):
I mean for managing affiliates it's a debacle. The thing is I don't think Infusionsoft wants that business. They got the money from Goldman and they said we're going into small business B2B retail marketing. I think they wish that all of us internet marketers would just go away.
Dan Henry (35:53):
Oh well, you mean like the people that know better?
Jeff (35:56):
Oh totally. The people that built them, they don't want them anymore. But Entraport is great.
Dan Henry (36:07):
For affiliate management? I know it makes great pages, I know it's got really great e-mail stuff going on. Let's say I want to go okay. Who made what? Who gave me a 1099. How can I send a report to my CPA with all the addresses and everywhere they need to send the 1099 and what they made. Is it good for that? That's the part nobody talks about.
Jeff (36:28):
On the financial controls and compliance side. I have found that it's better to manage that through your payment provider than through your CRM. Let me explain what I mean. So we use Ipayout you cannot physically get paid from I payout unless you've submitted your tax documentation.
Dan Henry (36:50):
Is that a platform or is that like a service?
Jeff (36:54):
It's a managed service. I mean I would say yes to both but it's a multinational payments processor. Somebody comes into our system and I mean this is this right here for somebody that wants to do it. Ipayout's legit. They can send money. You know Paypal even doesn't pay out in every country. If you have an affiliate in Pakistan they can't get paid through PayPal but they can through Ipayout but nobody gets paid through a payout unless they've submitted either if their U.S. base they have to submit their U.S. W9 I guess it is.
Jeff (37:45):
They generate an issue that is 1099s. They do it for international people too. There's a different form that international affiliates have to submit that essentially absolves you from U.S. tax liability. So I would manage that through the payments processor, not through the CRM.
Dan Henry (38:01):
OK. That's head spinning right now. I'll have to look into that
Jeff (38:03):
Literally Dan that's a million-dollar piece of advice if we just ended the podcast now I just gave you some gold.
Dan Henry (38:09):
That's far more efficient I would imagine and cost-effective than having your staff do it.
Jeff (38:15):
Yeah. You're not chasing them after the fact going "Yo yo we paid you we need your tax form" it's like, "Hey we got money for if you want to get paid this is what you have to do.
Dan Henry (38:25):
Oh, I don't pay people until they... This is how I used to do it. I say "You can make as much money as you want but if you don't submit your tax stuff I'm not paying you. And if we hit the deadline and you haven't guessed what I get all your commissions because I'm just not playing" I'm not playing that game.
Jeff (38:36):
That's the other nice thing about Ipayout is over time you accumulate breakage because affiliates, God bless affiliates, I love you, I am you, you power the internet. But, you're also such nincompoops sometimes about running your business the right way. We have affiliates that'll go a year. They'll have five or ten thousand dollars in commissions in their Ipayout account which is like an escrow account and they never claim it. After a certain amount of time we just call it back. So you actually will get a break doing it this way.
Dan Henry (39:10):
OK. And would that connect to something like an Active Campaign and Entraport?
Jeff (39:15):
Oh totally. I mean for the record we use three different email providers. So this another hard one lesson is we have an email provider for our list for our non-buyers' list. We have an email provider for our tripwire buyers list who didn't graduate into any of our higher-level products and we have a different email provider for our higher-end buyers so that we have totally different mail service servers, totally different mailing domains. We use Active Campaign, Entraport, and Sendly.
Dan Henry (39:50):
I prefer these days to only have customers, meaning I don't like to run a ton of free stuff like I mainly promote the book.
Jeff (39:58):
Listen, Dan, we make a crapload of money monetizing our lists and I know it's a little extra work but it's also the easiest money you'll ever make because you don't have to support it.
Dan Henry (40:08):
Yeah. Well, the majority of my list bought my book so it's like seven bucks for the book but it's $10 now because we do two-day shipping. But it's still buyers, there are still people that bother to take five minutes to put in their credit card info. We still do run my webinars and stuff like that and I guess there are quite a bit of people who haven't made a purchase yet. Let me ask you this, in terms of Entraport is that the one? I understand you have your own affiliate, and I get it, man I must have broken Everwebinar probably 10 times, right? That's why I actually built my own stack for my webinar. If somebody wasn't going to go to the trouble of building their own platform and they wanted to use an affiliate platform, which one would you recommend?
Jeff (41:06):
I think Entraport is good. ClickFunnels in the Internet marketing space, there's a lot of what ClickFunnels does reverberates through the space. Click Funnels used to have a two-tier affiliate program. So there's a lot of people that want to have two tiers and they maybe even still do to some nuance I don't really understand. So there are a lot of people that want to have two-tier affiliate programs but you introduce a whole other order of magnitude of complexity from a tracking standpoint trying to implement two-tier. So my first piece of advice is don't. Just do a single level affiliate program right. Frankly, the behavior that multiple tiers drive from people ends up becoming more recruiting and MLM than actual value-driven. So that's my first piece of advice. Because as long as you're talking single-tier affiliate programs I think that the platforms on the market that do well enough for most people are Entraport, Pay Kick Start and, then if you're going to be working with sophisticated affiliates who are going to hold your feet to the fire around tracking, cookies, and reporting then something like Cake.
Dan Henry (42:23):
Yeah. Actually, I was talking to Russell Brunson earlier this morning and he mentioned Cake. What is that exactly?
Jeff (42:30):
Cake is just a really good sophisticated CRM affiliate tracking, CRM/Affiliate tracking, I would call it almost a revenue optimization tool they just give you so much granular data that sophisticated affiliates are going to sometimes want to see.
Dan Henry (42:52):
Yeah. My goal is to keep it simple and just.
Jeff (42:56):
You can probably do Pay Kickstart or Entraport from what you're describing.
Dan Henry (42:59):
All right, cool. off to look into that. Let me ask you this in terms of strategy let's say I were to say, "Alright guys here's my book. You've read my book. Yay and sign up here to get a link where you know you can recommend this book literally all you have to do is recommend this book like you normally would and you'll make some money." How would you approach that and what would you do? Or do you think that simply having customers recommend the book isn't enough and that you would absolutely need pro affiliates to come in to drive even close to the same amount you could drive with paid traffic?
Jeff (43:51):
I'm sorry Dan I'm going to ask you to repeat the question. I just realized I'm two minutes late for something and I'm going to buy myself about 10 minutes.
Dan Henry (43:57):
Oh, no worries no. Yeah. I just realized that we had a coaching call and I had to tell my team to use a different zoom account. I want to be respectful of your time. So this would be a good question to end on.
Jeff (44:15):
Yeah, So I ask the question again and I'll nail it and then we can break.
Dan Henry (44:19):
Yeah. So basically let's say that I went to my list of people that bought my book Digital Millionaire Secrets. I said "All right guys you know you're going to recommend the book. I'm going to give you some you know here's how to sign up. I'll give you some videos on how to recommend the book. And when you recommend the book you're gonna get half of whatever they buy." So if I say that right could I do that with existing customers and replace them? What I would be doing with Facebook traffic or would I have to you know simply having my customers recommended if I did a good enough job educating them or would I have to move to get in some big affiliates to fill that gap.
Jeff (45:04):
I think you'd be very unlikely to replace the volume that you can run with paid traffic from inexperienced affiliates.
Dan Henry (45:13):
Even if we went to just customers referring to each other or started referring to the book, contests giveaways all that. You know, because if you think about it in theory right. Like, let's say you really want to scale traffic and you have a $50 AOV and you know as well as I do when you push let's say it costs you $50 to sell for $50. When you push now all of a sudden it's costing you $60, $70, $80 to make the same amount because you're pushing and you're really trying to scale the cost up. So with an affiliate program if you have $50 AOV and you're giving away $25 you know what your cost per sale is all the time. So you know what your cost basis is. But the question is how do you get the volume. What would be your biggest answer to that?
Jeff (46:06):
You have to I would probably really look at the payout. One of the ways you can get pretty quick feedback on this is you could list your offer inside of a click bank type of platform because you're very quickly going to find out if your payout is competitive enough to attract affiliates because the reality is on a $50 AOV what it costs to generate a book buyer twenty-five dollars may not be enough. Rather than waiting for your customers to tell you that you could get some pretty quick feedback inside of a platform where you have comparables.
Dan Henry (46:39):
I mean if I can get the volume I'll pay frickin 80 90 percent. I don't care.
Jeff (46:44):
Well, that's the thing is I think you might end up having to give all of it away upfront because even if you're no longer subject to the economics of paid traffic now you've pushed that over to your affiliates. They're subject to the economics of paid traffic. So you've still got to give them an offer where they're trying to generate a book buyer, can they do that profitably when it pays them twenty-five dollars? That's a big unknown for me.
Dan Henry (47:14):
I was talking to Russell earlier and he said that still, the majority of their traffic, especially on the books and stuff comes from affiliates. You know as well as I do the ClickFunnels community for the most part really isn't big affiliates it's just people that did ClickFunnels and talk about it a lot. I would not say they are pro affiliates.
Jeff (47:38):
It comes down to critical mass too. I mean you know Clickfunnels they're big enough and they have a very established customer base. If every one of their customers refers an average of one person that's two hundred thousand book sales. You know if somebody with a 10,000 person audience has that same algorithm then that's ten thousand book sales but then it's not enough for them to sustain and grow you know and some people only have one thousand-person audience. I can say I'm a pretty big player. I'm not nearly obviously as big as Russell. For me, I couldn't replace my paid traffic customer acquisition with my customer base as affiliates unless I got really aggressive on the payouts and really aggressive on the training side. Probably to the point where I said “Look, you're your primary new business angle is going to be to promote my affiliate program and here's some really aggressive training on how to do it.”
Jeff (48:41):
We have a $39 course with an $80 AOV. I would probably have to pay, my guess is a hundred bucks per sale. Like a loss leader, I'd be paying out one hundred and 120 percent per sale just to know I was giving them enough commission to be able to go run paid traffic because if you can't run paid traffic and there's not enough money in your affiliate program for them to run paid traffic, then nobody's running paid traffic and you're totally reliant on organic word of mouth. It's a lot slower way to grow. If you can load commissions in your affiliate program that your affiliates can go run paid traffic and you force them to use their own, this is another nuance I'm meant to mention one of the reasons we built our own system. You have to force your affiliates to use their own domains. You can't have them running traffic to your domain with just a little extra variable to track it to them or else eventually your domain will get burnt up.
Dan Henry (49:44):
Yeah. Well, I also don't want to distract my readers from building their own business because that wouldn't be good for them. I would be like "Hey your business is your focus, but here's how you make some extra money promoting my book." So one thing I'm glad we had this conversation because I definitely think that it's probably not for me at this time or if I was gonna do it I would do a 30-day test be like, "Hey guys we're opening up an experiment, an affiliate program for 30 days. Here's a prize you know the top affiliate gets this thing and then the affiliate program shuts down." It's a 30-day window, and then we run it as an experiment cause the last thing I want to do is get into a position where I'm running pay traffic and then I have affiliates who are just going and doing the same thing they did last time because at this point I could track if they clicked first on a Facebook and I could just deny the payout.
Dan Henry (50:37):
Now you're talking so much of a pain in the butt technically and all that so. Well, this was good stuff man. I appreciate it and I hope that the people listening got some golden nuggets in here. Are you active on Instagram or how can people follow you and check you out?
Jeff (50:55):
I am. I actually made my 1000 Instagram post two days ago. Just check out Jeff Lerner Official. Also, I have a YouTube channel that has about 400 free training videos. A lot of good value there, Jeff Lerner Official on YouTube as well.
Dan Henry (51:14):
Sweet. All right man. Awesome. Hey thank you so much for coming on today and I really appreciate it, brother.
Jeff (51:21):
Yeah, it's been wonderful. Thanks for having me, Dan.
Dan Henry (51:23):
Alright guys I hope you enjoyed this episode and I will see you in the next one.