ProfitXL: Selling A System

Published June 5-10, 2023

Overview

I wrote previously about ProfitXL: Supersize Profits with the SHUVAM Framework: “ProfitXL is built around five themes: the need for one-way push channels to become two-way conversational pathways thus bridging the chasm between acquisition and conversion, the transition from point solutions on the brand’s properties (website and app) to a unified martech stack, the identification of Best customers and creating differentiated experiences for them, getting close to zero CAC (customer acquisition cost) for new customers, and measuring growth based not on paid marketing spends but on repeat purchases from existing customers and revenues from referrals. This is ProfitXL’s SHUVAM framework: Story, Hotlines, Unistack, Velvet Rope Marketing (VRM), Acquisition (done right), and a new set of Metrics to measure progress. SHUVAM is the path for exponential forever profitable growth. If followed rigorously, it can help a brand create the ultimate endgame and moat in a business – a profits monopoly (“profipoly”). The ProfitXL mindset and SHUVAM strategy will help marketers increase revenues, reduce spends and improve shopper experiences.”

Since then, I have been thinking about how to get wider adoption for the idea. While ProfitXL will help Netcore sell its products, there is a bigger agenda: to lead an industry-wide movement away from wasteful overspending on new customers (“AdWaste”) and shift focus to building deeper and profitable relationships with existing customers. There is thus an opportunity to position ProfitXL as a system, defined as “a set of ideas or rules for organizing something; a particular way of doing something.” Many of the actionables listed in ProfitXL’s SHUVAM framework are not being implemented by marketers for their brands. This is what needs to change – not just at the level of a single brand, but as an industry. Eliminating the “profit killers” in marketing is about instilling good habits in the marketing strategy which can lead not just to profitable growth, but also make it enduring, and eventually help the brand to creating a profipoly.

This essay is about the idea of how to sell ProfitXL as a system for marketers to adopt and make part of their day-to-day operations. ProfitXL is more than a single point solution or even a stack (multiple interconnected solutions); it is a bigger idea that the marketing industry has forgotten – how to ensure existing customers come back for more and bring their friends. ProfitXL is about creating a disciplined process which can deliver 25% year-on-year growth for long periods of time and at the same time cut marketing spending by 50%, leading to a dramatic improvement in profitability as the table below shows.

This is just in the first year. Imagine the power of growing revenue and profits growth over multiple years. ProfitXL is the system which can help any consumer-facing brand build a compounding machine, the secret of an enduring, great company. My challenge: how do I persuade marketers to adopt the ProfitXL system?

Goals and Systems

When I started thinking about ProfitXL as a system, I was reminded of the difference between goals and systems, as outlined in Scott Adams’ book “How to Fail at Almost Everything and Still Win Big.” He writes: “A goal is a specific objective that you either achieve or don’t sometime in the future. A system is something you do on a regular basis that increases your odds of happiness in the long run. If you do something every day, it’s a system. If you’re waiting to achieve it someday in the future, it’s a goal… Goals are for losers and systems are for winners. People who seem to have good luck are often the people who have a system that allows luck to find them.”

James Clear adds: “The purpose of setting goals is to win the game. The purpose of building systems is to continue playing the game. True long-term thinking is goal-less thinking. It’s not about any single accomplishment. It is about the cycle of endless refinement and continuous improvement. Ultimately, it is your commitment to the process that will determine your progress. Goals can provide direction and even push you forward in the short-term, but eventually a well-designed system will always win. Having a system is what matters. Committing to the process is what makes the difference.”

Kurtis Pykes writes: “Systems eliminate the guesswork about what you must do to achieve what you want. Goals without systems create chaos in your life… Unlike goals, systems emphasize process…Systems treat the cause of a problem, and the symptoms (outcomes) change as a by-product… The secret to building an effective system is incorporating small, consistent wins into your life.”

Darius Foroux writes: “Goal = Event in the future. System = Recurring process… Instead of focusing on the destination, focus on the process.”

Chat GPT: “A goal is an outcome or a desired state that someone wants to achieve. It is typically a specific, measurable, achievable, relevant, and time-bound (SMART) objective that a person or an organization sets for themselves. For instance, a company may set a goal to increase their sales revenue by 20% in the next quarter. On the other hand, a system refers to a set of interconnected components that work together to achieve a specific purpose or function. It is a collection of processes, tools, and resources that are designed to work together to achieve a goal or a set of goals. For example, an organization may have a system in place for managing their customer relationships, which includes a database of customer information, a customer service team, and a set of protocols for handling customer inquiries and complaints. In summary, a goal is the desired outcome or objective, while a system is the collection of resources and processes that are designed to achieve that goal. Goals and systems are often interrelated, as a well-designed system can help to facilitate the achievement of a goal, while a clearly defined goal can provide the focus and direction needed to design an effective system.”

Switch Pitch

Many years ago, I attended a course on how to improve personal productivity and plan better. It was offered by the company selling the FranklinPlanner. For those who have never seen or used it, it looks like this:

Here is Wikipedia on the FranklinPlanner: “The Franklin Planner is a paper-based time management system created by Hyrum W. Smith first sold in 1984 by Franklin International Institute, Inc. The planner itself is the paper component of the time management system developed by Smith. The planner pages are drilled, loose-leaf style pages in different sizes and formats. Formats have been updated through the years, but most planners contain areas for an appointment schedule, prioritized daily tasks, and notes. A key section at the rear of the planner contains addresses. Other inserts include ledger sheets for tracking finances or vehicle mileage, exercise logs, and other individualized reference materials. Smith named his planning system after Benjamin Franklin (1706–1790) who kept a small private book.”

The day-long course was about creating a personal productivity and time management system: how to prioritise tasks and make sure things get done daily. The course did not mandate the use of the planner, but the pitch was obvious: Productivity and Planning = FranklinPlanner. I bought into the philosophy and adopted the FranklinPlanner. (I used it for many years, before moving to the simplicity and infinite space offered by my spiral notebooks.)

I mention the story about the FranklinPlanner because the ProfitXL challenge is similar: I need to get marketers to buy into the philosophy (existing customers matter more than new customers) first. Only then can I pitch the ProfitXL system. To buy into the philosophy, I have to persuade them about the problem: the low/no profit of the business is because of overspending on new customer acquisition, much of which is wasted.

The key takeaway: I have to sell the idea before I sell the product. I have to persuade marketers that they have to shift their mindset from trying to optimise their adtech (new customer acquisition) spending and instead focus on martech (retention and development of existing customers). By focusing on selling the solutions, the competition is with every other company offering some variation of customer engagement, retention and personalisation. But if the frame of reference can be changed to solving the problem of low or no profits, there is an opportunity to stand apart from the competitors. In other words, to achieve the goals for Netcore’s products, I need to sell a system that offers a completely new way of solving the problem. The FranklinPlanner course did just that – it first put into focus the problem of low productivity and wasted time, and then offered a solution. I would thus need to position ProfitXL as a system for marketing (and business) success, a path to building an enduring, great brand – none of which can be done without sustainable profitability.

Selling the Problem

The first step towards selling a system is to sell the problem. In the ProfitXL case, the problem is that brand profits are being hurt by the twin problems of low revenue growth and high marketing spending on new customer acquisition. The challenge is that in most B2C/D2C businesses, profitability is not the responsibility of the marketer. The marketer’s focus is to grow revenues. This can be done in two ways: get more from existing customers (a hard problem) or to get new customers (an easy problem, thanks to the digital advertising platforms). No prizes for guessing what really happens in brands! This channelling of funds to auctions for customers has perhaps been the single biggest transfer of profits in history – from brands to Big Adtech. Marketers do not want to see their budgets slashed so they do not admit that half of the spending is actually being wasted – and unlike in traditional media, with digital it is possible to track this waste. CEOs and CFOs do not focus on the spending as much because of the belief that reducing spending will hurt topline growth which would be extremely harmful for their careers! So, we have the perfect happy cycle of spend-to-grow for everyone (except investors and shareholders). Low profits? Blame it on rising CAC (customer acquisition cost).

There was no escape route for brands and marketers – until now. A number of innovations can drive more revenues from existing customers along with a reduction in AdWaste. The problem is: who will bell the cat? Marketers will see this as much more grunt work as compared to calling an agency and giving them a budget for new acquisition. CFOs do not understand the world of marketing so they tend to stay away. CEOs worry about managing the Board and overall business growth. With investors hungry for growth, it is much easier to keep the spending train running rather than experiment with new ideas. The question then becomes: how to break this cycle? My hope is that the funding winter and the consumption slowdown will make businesses re-evaluate their spending priorities, thus creating an opening for new ideas.

ProfitXL is one such idea. It is centred around the belief that businesses can build a profits machine leading to a profipoly if they take good care of their existing customers. This means systematically weeding out everything that creates a broken customer experience. Each friction is a profit killer. ProfitXL is the system which eliminates all such pain points, thus converting the broken experiences into beautiful experiences. It is this idea that needs to be sold to CMOs, CFOs and CEOs; it is that ray of hope that it is indeed possible to build a profits machine which can fund continuous product innovation to create a moat and monopoly.

Show, Don’t Tell

Let’s say you are the marketer of an ecommerce brand. You have two options.

Option 1

Keep spending 85-90% of your marketing budget on new customer acquisition (with half of it being wasted on wrong acquisition and reacquisition and CAC rising 40-50% year-over-year)
Not fix the broken customer experience on your website/app arising out of poor catalog data and silo-ed interaction data resulting in sub-optimal relevance and omnichannel personalization
Not create differentiated and delightful experiences for your correctly identified 20% Best customers who account for 60% of revenue and 200% of profits
Continue to be over-reliant on web/app for conversion, accept attention recession on push channels, and miss out on new super-effective funnels
Live with less happy customers, hyper-competition, and lower or no profits

Option 2

Do the opposite of Option 1 choices, thus transforming broken customer moments into beautiful experiences, and creating the ultimate business moat by maximising industry profits (what I term as ProfitXL).

What do you choose?

The answer is of course obvious. The challenge is how to bring this to life? Because for ProfitXL to work, it is not just adopting a single point solution, but instead buying into a system which inverts the funnel by making the Best customers as the priority and ensuring that paid new customer acquisition is the last resort.

This is the conundrum I have been working on for the past few months. My natural approach is to show the power of the products we build, rather than present the problem first. For ProfitXL to succeed, I will have to make the problem visible and then talk about the system which leads to the solutions. In fact, more than talk, I realised I have to “show”.

As I was pondering about this, my mind went to the Broadway shows I have seen. No written description can do justice to the experience of being there in person and watching the live action take place on the stage. The constraints of space are blown away by the ingenuity of the show creators. For a couple of hours that a typical play lasts, the audience is transported into a different world of action, dialogue and music – happening right in front. “Hamilton” transported me back to the America of the late 1700s, while “Some Like It Hot” took me back in time a hundred years to the Prohibition Era.

The question that I started to think about: could I create a (virtual) Broadway-like show to persuade decision-makers about the power of the ProfitXL system, and thus create a “landing idea” before the product-centric “land-and-expand” approach kicks in? I decided to ask ChatGPT.

ChatGPT does The ProfitXL Show

Here is how ChatGPT suggested I do a Broadway-like show for the ProfitXL system.

Theme and Setting: The show’s theme should focus on the struggles of traditional marketing and the potential benefits of ProfitXL. The setting could be a modern marketing agency, with a cast of characters including marketers, executives, and customers.
Story and Plot: The story could follow the journey of the agency as they transition from traditional marketing to ProfitXL. The plot could involve the struggles and challenges they face along the way, such as convincing skeptical executives, overcoming AdWaste, and identifying and rewarding Best Customers.
Characters and Casting: The cast should be diverse, including actors who can play marketers, executives, and customers of various ages, genders, and ethnicities. You could also consider casting professional dancers and singers to perform musical numbers throughout the show.
Musical Numbers: The show could include musical numbers that highlight the benefits of ProfitXL, such as “From Acquisition to Profit”, “Flip the Funnel”, and “Velvet Rope Marketing”. The musical numbers could be choreographed with high-energy dance routines and catchy lyrics to engage the audience.
Visuals and Effects: The show could incorporate high-tech visuals and special effects to bring the story to life, such as LED screens, holographic projections, and interactive elements. The visual effects could be used to showcase the agency’s journey towards ProfitXL, from AdWaste to frictionless omnichannel personalization.
Key Takeaways: The show should end with a powerful message that summarizes the benefits of ProfitXL and encourages the audience to take action. You could also provide resources or materials for further learning, such as a guidebook or online course.

Not bad, huh?!

I then asked ChatGPT to tell the story from the point of view of a B2C/D2C brand with the characters being the CMO, CFO and CEO, and show how the team transitions from the wasteful ad spending to adopting the ProfitXL system. Here is the output.

Act 1:

The story begins with the CMO, CFO, and CEO of a B2C/D2C brand gathered in the CEO’s office, discussing the state of the company’s marketing. They’re all frustrated with the amount of money they’re spending on advertising, yet they’re not seeing the desired results. The CMO explains that they’re acquiring new customers, but they’re not retaining them, and the CFO expresses concern about the rising cost of customer acquisition.

Suddenly, the CFO suggests a new approach to marketing, inspired by a recent conference he attended. He introduces the concept of ProfitXL, which focuses on shifting away from acquisition-centric marketing to profit-centric marketing, with a strong emphasis on existing customers and frictionless personalization. The CMO is intrigued, and the CEO agrees to explore the idea further.

Act 2:

The team begins to dive deeper into the ProfitXL system, meeting with consultants and experts to learn more about the approach. They start to see how it could help them solve their biggest marketing challenges, such as reducing AdWaste and increasing customer retention.

As they begin to implement ProfitXL, they face some challenges, such as retraining their marketing team and rethinking their budget allocation. However, as they start to see the benefits of the system, they become increasingly enthusiastic.

The CMO focuses on nurturing existing customers and identifying their Best Customers, while the CFO tracks the metrics that matter, such as AdWaste and Earned Growth. The CEO realizes that the ProfitXL system aligns with the company’s values of sustainability and long-term growth.

Act 3:

The team begins to see tangible results from their adoption of ProfitXL. They’re able to reduce their AdWaste by identifying and rewarding their Best Customers, and their customer retention rates begin to increase. They’re also able to reinvest the money they saved from reducing AdWaste into frictionless personalization and other initiatives that drive profit.

The CMO, CFO, and CEO are thrilled with the success of their new marketing approach. They realize that the ProfitXL system not only helps them drive profit, but it also aligns with their values and strengthens their relationships with customers.

The show ends with the team reflecting on their journey towards adopting the ProfitXL system, and the audience is left with a clear message: by focusing on existing customers and shifting away from AdWaste, brands can achieve sustainable, long-term growth.

[Rajesh] I then asked for dialog for each of the three acts.

Dialogue for Act 1

The CMO, CFO, and CEO of a B2C/D2C brand are gathered in the CEO’s office.

CEO: “Alright team, let’s talk about our marketing. I know we’re spending a lot of money on advertising, but are we seeing the results we want?”

CFO: “Actually, I have some concerns about the rising cost of customer acquisition. It’s eating up a lot of our budget, and we’re not seeing the returns we want.”

CMO: “I hear you, but we’re acquiring new customers. The problem is we’re not retaining them. Our customer lifetime value is low, and we’re not getting the repeat business we need.”

CFO: “I actually went to a marketing conference last week, and I heard about a new approach that could help us. It’s called ProfitXL, and it’s all about shifting from acquisition-centric marketing to profit-centric marketing.”

CEO: “What does that mean exactly?”

CFO: “It means focusing on our existing customers, identifying our Best Customers, and using frictionless personalization to drive profit. It’s a new way of thinking about marketing, and it could be just what we need to solve our challenges.”

CMO: “I’m intrigued. I think we should explore this idea further. What do you think, CEO?”

CEO: “I agree. Let’s set up a meeting with some consultants and see if this approach could work for us.”

Dialogue for Act 2

The team is meeting with consultants to learn more about the ProfitXL system.

Consultant: “So, to implement ProfitXL, you need to shift your focus away from acquisition and towards retention. You need to identify your Best Customers and provide them with a differentiated experience. You also need to use frictionless personalization to make it easier for customers to interact with your brand.”

CMO: “That makes sense. But what about AdWaste? How do we reduce that?”

Consultant: “AdWaste is a major problem in traditional marketing, and ProfitXL offers a solution. By focusing on your Best Customers, you can reduce your ad spend on less profitable customers. You can also use earned growth, such as referrals and organic acquisition, to drive new business.”

CFO: “That’s interesting. But how do we track our progress with this system?”

Consultant: “You need to focus on metrics that matter, such as AdWaste, Martech Spend Ratio, and Earned Growth. By tracking these metrics, you can ensure that you’re allocating your budget effectively and driving profitable growth.”

CEO: “I like what I’m hearing. It aligns with our values of sustainability and long-term growth. Let’s explore this further and see how we can implement it within our company.”

The team begins to implement the ProfitXL system, but they face some challenges along the way, such as retraining their marketing team and rethinking their budget allocation.

CMO: “This is a big change for our team, and it’s going to take some time to get used to.”

CFO: “I know, but I believe in this approach. We can’t keep spending money on advertising that isn’t working.”

CEO: “I agree. Let’s focus on our existing customers and provide them with a great experience. That’s how we’ll drive profitable, sustainable growth.”

Dialogue for Act 3

Sure, here’s a potential dialogue for Act 3:

The team begins to see tangible results from their adoption of ProfitXL.

CMO: “I can’t believe how much our Best Customers are responding to the new approach. We’re seeing a huge increase in retention rates.”

CFO: “And we’ve reduced our AdWaste by 50%. That’s a huge savings for us.”

CEO: “I’m thrilled with the success we’re seeing. It’s not just about driving profit, it’s about building strong relationships with our customers and providing them with an experience they’ll remember.”

The team continues to implement the ProfitXL system, focusing on identifying and rewarding their Best Customers and providing frictionless personalization.

CMO: “Our customers are becoming our best advocates. They’re referring their friends and family to us, and we’re seeing earned growth like never before.”

CFO: “And we’re allocating more of our budget to our existing customers, which is driving even more profit for us.”

CEO: “I’m proud of what we’ve accomplished. We’ve transitioned from a wasteful approach to marketing to a sustainable, profitable one. We’ve built a strong foundation for the future of our company.”

[Rajesh] All I can say is: Stay tuned!

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