From Poker to Marketing
On this week’s episode of MYOMB Tim is joined by co-founder of Vulpine Interactive, Derric Haynie. Before starting a business Derric had an interesting history as a high stakes poker player. He touches on how some of these skill sets transferred into marketing. On top of this they touch on some of the nuances of SM marketing – such as paid vs organic, long term vs short term ROI, and also important metrics to look at. They also delve into the starting a business with your significant other and maximizing FB ads among other things. Some of the real world stories they touch on include website retargeting and which industries work best for SM.
Automated Voice: Unto to the creative world Mind Your Own Marketing Business. Explore a variety of trends in the creative landscape, getting insider knowledge and advice from the industry’s best. We’re proud to present Mind Your Own Marketing Business, host Tim Barsness.
Tim: Thanks for joining us on Mind Your Own Marketing Business; I’m Tim Barsness, founder of Web and mobile development team fjorge. Today on our show, we’ll be talking with Derric Haynie about his social media marketing agency, Vulpine Interactive. Welcome to the show Derric.
Derric Haynie: Hello, thank you for having me.
Tim: We’re glad you could be here. Derric, can you tell us a little bit about Vulpine Interactive?
Derric: Vulpine Interactive is a social media marketing agency, whatever that means. Actually, don’t think that there is such a thing, but it’s a marketing agency, and social media is definitely our focal point. It’s essentially that helps as a starting point for conversations with people, but we do tend to do more in email influence and marketing and a few other things; but basically social media marketing agency is how we describe it.
Tim: Got it, and you’re the founder of the company?
Derric: Yes, I co-founded it with my wife actually.
Tim: Oh, very cool. Tell me a little bit about how you and your wife came to found Vulpine Interactive, what about your background or your story made you decide to start an agency?
Derric: Yes, it starts a long time ago. First, in college I took one marketing class. I was a business management economics major and I love marketing, but I was also before I graduated college making six figures playing high stakes poker. It was 2008, the Great Recession and all my friends couldn’t get jobs. There was no way I was going to do anything else but play poker. I played high stakes poker for 10 years and made a good amount of money, spent it about as fast as I made it, but it was a good experience. There was a lot of interesting challenges, ways that you separate your emotions from logic, as well as experience, what we call, the variance train.
Ultimately, I always knew I was going to get back into business throughout the whole 10 years if I wasn’t reading the poker book, I was reading a business book. For a while, I thought it might be day trading or investing, but it ultimately landed me on creating a tech company which was around the card game for poker, and then I had to learn how to market that tech company; and that led me down the path of digital marketing. At which point I realized the tech company was never going to make any money, I needed a creative partner. My wife is an artist and has like a degree in graphic design, and so we came together to form the agency and started working at that time on local small business kind of stuff.
Tim: Got it. What made you want to leave the poker industry?
Derric: In poker, you have– It’s a shrinking ceiling for the industry, meaning that everyone is getting better and you’re going to make less money, you’re over[unintelligible 00: 03:01]. You’re never really going to increase once you kind of hit your own ceiling, and I definitely had hit my own ceiling. I was very good, but I was just below world class and I was never going to break it. I was never going to break that because I just wasn’t smart enough. Unless I could find a better situation like moving to a different city, or country, or playing online, or in a group of people where no other professional was playing,
I was never really going to make more money per hour. In fact, over time we saw money per hour going down because everyone else was getting a little bit better, a little bit better, a little bit better, so they’re all catching up to me. In poker, you play around a table of eight of your opponents and your goal is to outsmart them, to take money from them, and it’s a negative sum game because the house takes a rake. In business, you get to work around the table with a bunch of other people where you can make money in a positive sum game and help each other out at the same time. The ceiling is a lot higher and really business is way easier than poker, even though I’m really surprised the stress level is about the same or more.
Tim: That’s funny, it’s also surprising to me that you say that business is way easier than poker, I think that’s interesting. I’m curious that ceiling that you saw in poker, is that because the game’s not growing anymore?
Derric: Yes, essentially, at some point, in order for the game to continue growing, you need new money to come in, or a lot of my money was made off of wealthy people, a lot of business owners, a lot of moguls, millionaires, and billionaires. I played with a lot of like professional sports players NBA, NFL kind of guys, and that’s always great. I played with a Saudi prince once that was crazy, that was maybe it was Saudi, it was the Middle East Prince I’m actually not sure, but those are like very rare days. These guys don’t really play poker day in and day out, and they’re not just going to spew hundreds of thousands, millions of dollars.
Even when they do, you only get a piece of that, so essentially, my job was to be an entertainment for wealthy business owners and moguls, and that’s not really where I see myself in life and I think I can do a lot more. In fact, one of them ex-partner at Goldman Sachs said to me, “Derric, you would be so much better off in the business world.” I took that to heart and I still keep in touch with him, and he’s run multiple businesses himself. Yes, that kind of set me on the path.
Tim: Interesting, you mentioned that you always need new people coming into the game in order to really make money. I had an experience on a cruise ship where I was sitting at a table and people would come up, put money down all in and then lose and walk away, and that was a source of new money. I kind of thought at one point that I could live on a cruise ship and pay for every cruise just playing poker with people walking up and throwing down money.
Derric: Yes, the size of the cruise ship is very small. Eventually, everyone in the cruise ship will have lost money and they probably won’t come back the next day.
Tim: Yes, but they turn over every week.
Derric: Yes, that’s true. You have seven days —
Tim: Exactly, that was my thought. I never did it, but I thought it would be an interesting thing.
Derric: The cruise ship rake is insane. They take a large percentage of what you’re going to make.
Tim: Right, but nobody stays at the table very long. Tell me a little bit then– you said you always loved marketing, what is it about marketing that you’re so passionate about?
Derric: For me, marketing and poker are actually very synonymous, like it’s basically a mix of psychology, human psychology, user psychology, that kind of thing mixed with logic and analytics. Very, very deep decision tree analysis is required and we need to understand– I mean, just thinking about something like the buyer’s journey. Each decision point in the buyer’s journey as they work down towards their purchase decision and then how can we influence that, let’s say, with marketing collateral. This is exactly the same way you might play a hand of poker and look for an optimal decision tree path in order to play a hand the right way to get maximize your expected value or your opportunity.
Tim: Got it, interesting. You’re always, I mean, in the marketing world, optimizing expected value or return on investment when you make decisions.
Derric: You have to balance that with variance and then, unfortunately, with my job, you have to balance that with client expectations and client–Unfortunately, agencies are beholden to basically monthly results I would say. You actually have to show immediate results or something towards that in order for a client to be happy. People don’t operate the same way that a poker player would. I could lose money for six months on end. Sure, I’m not happy about it, but if I know that I’m at the top of my game and I’m playing really well, I’m not going to change.
I’m not going to change my strategy just based of a whim because I know it’s still the best strategy. I just have to sort out other variables. That’s the only caveat to it, but hopefully optimizing for maximum long-term and short-term expected value and balancing those client expectations.
Tim: I think that the short-term perspective is a little bit unfortunate. I’m curious, in your experience, how much leeway do you have before results are expected?
Derric: For me, I definitely find that clients are expecting results within one month, but we force three month contracts, because it does take a while to really get settled in with the client and show some sort of ROI. There is typically some sort of trackable ROI from what we do, but social media operates kind of weird in that there’s two different components paid which should have– It’s not always a direct response paid can influence short and long-term kind of ROI. It’s important to recognize what you’re kind of going for. Typically, and paid though, you’re aiming for a shorter term ROI and you know there will be a longer term ROI somewhere after that.
You might put 75% of that into short-term and 25% in the long-term, whereas organic, it’s actually the exact opposite. When you’re investing in organic, you’re investing in a long-term branded relationship with a growing audience. When you start at a thousand users or followers and you’re sending out one Facebook message or post or one tweet, this is not having a big impact because it’s a small audience and it’s just starting. People aren’t used to seeing content from you yet perhaps or something like that. Over time, they might see hundreds and hundreds of messages from you over the course a year or two years, or five years, or something like that. That really builds that brand loyalty and affinity, and also as you go about going forward with that time, you’re not marketing to a thousand people anymore, you’re making it to ten thousand, and a hundred thousand. The growth of that organic following brings long-term ROI, which most businesses don’t even have the patience for, to be honest.
Whereas paid is bringing short -term ROI, but it actually comes at a fairly steep cost. In order to make paid work, you really do have to know a lot of numbers in your business, and you have to make sure that a dollar in is pretty quickly getting you more than a dollar out, otherwise, you’re not going to want to sync costs into paid. It’s all an investment, everything, but of course, not all investments pan out. That’s how I think about it.
Tim: That makes sense. Do you find that most companies you start working with on the paid side have those metrics that you need in order to show that they’re getting more than a dollar when they put a dollar in?
Derric: Never. [laughs] Out of basically, the couple of dozen of companies we’ve worked with, I’ve never been satisfied with the numbers that a client had ready for me. We’ve always had to spend a lot of our time going in and getting those numbers, making estimates about them. The main numbers, I think there’s four big ones. Let’s see if I can remember them.
Cost of customer acquisition. What is your current cost of customer acquisition, what is your goal for cost of customer acquisition? What that means is basically, are you willing to spend $10 to get a new customer, or a hundred, or a thousand, right? It’s different for every business based on the price point, actually, based on these other factors.
Lifetime value, what is the lifetime value of a customer revenue wise? If I buy a customer for $10, they make me $100 in revenue. Now we know dollars in, dollars out. Lifetime value also should probably have some sort of factor along, how long is that lifetime, like is it a month lifetime, is it a single purchase, is it a year of purchases? Obviously, a SAS might have a churn rate and some other things associated with it.
The other thing is margin, so of that $100 in revenue, what margin do we actually make on it? Typically, I might think gross margin, but you could even get into the nitty gritty and calculate it out a little bit better. Of course, that includes the cost of product, and a few other things. Once you know that it cost $60 to produce the product, and the revenue from it is a hundred, you know that you have a margin of $40. If you’re just selling that product one time, you know that you cannot acquire a customer for more than $40 because you will lose money on the transaction.
However, that’s where lifetime value really gets tricky because if that person ever refers anyone, or buys from you again, then it’s worth acquiring them even if you break even, or lose money, you just have to be patient about waiting for that investment to come back to you.
Tim: Can you afford that?
Derric: Yes, exactly, and then it becomes a cash flow problem. You have to really understand, how much cash can I invest into this, what does my overall budget look like for maybe 2018 or something like that? What amount of money can I put aside month over month, knowing that it will come back to me in a two month, three month time frame? You can actually start to map this out with financial projections, and once you’ve done an initial test in like Facebook ads or something like that.
Tim: Can you give me an example of a company where it might make sense to take a loss on margin minus customer acquisition cost, so that they could get a referral?
Derric: Definitely, I think that might be the fourth metric there is the referral rate. Understanding that word of mouth is still the biggest channel, really what my business tries to do is amplify word of mouth using social. That’s like a big part of what we say that we can do. Getting more user generated content. Getting people to sit down at the dinner table and talk about your product or service because they love you. Those are the unseen benefits of, well first, having an awesome product, and then having that deeper relationship with your customer or client.
Wait, what was the question again, referral right? We can definitely lose money up front if we know that a referral is coming. Especially, if we know that referral is coming within one day. If you might think about apps and app downloads, I think that’s the one where your viral coefficient, your referral rate is tracked on a daily basis. In SAS, monthly recurring subscription it’s going to be tracked on a monthly basis.
In each case, if you have a K, a viral coefficient of one or higher, then you can expect that if I acquire one customer, I will get an additional one customer. You can definitely lose money on the first customer, and you can [unintelligible 00: 14:57] it out on average. You expect to get one new customer from each one that you pay for yourself.
Tim: Sure, so in that example, it would be something social or something where you might be calling on your friends once you join something to have them join.
Derric: That’s definitely something I recommend for businesses, but it could even be simpler than that. The big company like Coca-Cola, they’re in every market, all they do is brand awareness. Obviously, if you’re buying one can of Coca-Cola, the ads would not pay for themselves. They’re trying to build that lifetime affinity. They know that by having one more person using Coca-Cola, they’re probably going to get that person to show that to other people.
They are not even talking about it. When you have Coke in your fridge instead of Pepsi, and somebody comes over to your house, and they ask for a Pepsi, you give them a Coca-Cola. You’re not actually even touting the brand, you’re not saying, “I can’t believe you drink Pepsi, you should only drink Coca-Cola”. By the simple act of using it in any sort of public way, you’ve become an advocate. In the minor part of that, that advocacy has a deep effect on other people because we have peer pressure, we all want to fit in, and we also are all taking our preferences and our choices based off of what we see of those around us.
Tim: Absolutely, and I like how you call people who consume Coca-Cola users. I want to change gears a little bit here. You founded a company with your wife. What’s her name?
Derric: Shana Haynie.
Tim: Shana. Tell me about your experience founding, a company with your significant other.
Derric: Well, it didn’t start very well. [laughs] In the beginning, she was significantly far behind me, let’s just say in marketing knowledge and all that stuff. I was very much the boss. I was the employer and she was kind of like the employee. Even though we had co-founded it together, it was working that way because I had a whole bunch of more business sense, marketing sense and experience than she did. Really, I think she’s power leveled far beyond that, and now–
When it started to click for us was, I left the company for about six months to take internal head of growth role at another company, and she took over everything. When she did that, she realized all the problems and pain that I had, and she grew really fast from it while getting advice from me because we were sitting next to each other working from home. From there, when I came back, we had a clear separation of our roles and our job duties, and she had extremely phenomenal experience and knowledge in what she needed to do, and execute on. It wasn’t until we actually divided and conquered that we stopped butting heads.
Tim: I had a similar situation where I left the company for a brief period of time, I’ll be very brief, and I feel like the team grew a lot while I was gone. Maybe I as a leader, I’m not delegating as well as I probably should.
Derric: Yes, , I totally feel you on that, and it’s really tough to do. We do have to get out of their way, but we also have to guide them, and for me, I just worry because I see mistakes, and I want to correct them. It’s not necessarily micromanaging, but it’s being picky. I know that I run better ads than anyone else in my company, better targeting, and strip strategy, and so getting out of the way it’s tough.
Tim: Yes, totally. I’m curious, if I want to get started with Facebook ads, what’s the easiest way to get in the game?
Derric: If you know nothing, you shouldn’t do it on your own. Dabbling is going to have very poor results. It’s kind of dabbling in poker. If you’d never played a single hand before, you’re going to dabble. You’re like, “Well, I understand that I can, you know, I put money in–” It’s really tough to make it work, especially because what Facebook doesn’t tell you is that 90% of the work happens outside of Facebook ads platform.
It happens with knowing your numbers, it happens with maybe things on your website or page, or email marketing, all the things that need to be in place prior to executing Facebook ads, so that you can prove that return on ads spend or that ROI, tracking is a huge part of it as well. None of my clients have ever had proper tracking installed to see clearly those conversion moments coming directly from Facebook ads.
Let’s say, you have all those things though, then I guess I would say, the best thing to probably start with, the easiest one is, some sort of direct response email acquisition strategy. Maybe you’re not asking straight for the purchase, but you’re asking people to either give their email from a lead ad, or we’re really fond of right now, Messenger ads and using a chatbot instead of actually asking for the email, or sending them to the homepage or the site or some sort of squeeze page so that we can capture email addresses, and then that will begin the marketing process of moving them down the rest of the funnel. That’s the–.
Tim: Tell me more about the messenger ads.
Derric: Yes. We love chatbots. One of our mantras before Facebook chatbots, I think they’re a huge thing now, but they’re still in the early adoptive stage, but we used to say we do one to one marketing at scale, and that’s what chatbots really are able to accomplish for us. It’s a lot like email, in that you have kind of a list, you can segment users based on actions and you can send them content, really as often as you want. The beauty is that they come through Messenger instead of email and we already know about the promotions tab in email, less and less emails are being seen, opened, and clicked on. It’s tough to get through on all the noise in email, but in Messenger, we have 85% open rates, 40% click through rates. People are loving it, and they talk back to you, because it’s Messenger. It’s not email where typically you feel you’re just being broadcast to. Messenger, we actually open up conversations all the time.
For Messenger ads, there is an ad option in Facebook called send message and another option is to actually have people comment below. When someone comments below a post, you can actually send them a message, and if they respond to that message, they will opt into your messenger bot, and then they’ll be allowed to mark it to later. In this way you can grow a very solid list. I think it’s very important that you’re upfront with people, you ask them to join, they know how to unsubscribe, all those things are really, really important. You can from there send them content.
You’ve got a new video that you’re going to release to Facebook. Give a sneak peek to your messenger list the day before and maybe it’s 10 seconds. Then the next day, you actually send them to the Facebook post asking them to comment below or tag a friend. We see this get deeper engagement on the post; and because, you sent them from Messenger to the Facebook post, it’s a very congruent feel, because Messenger is part of Facebook, whereas sending them from email to Facebook, it’s not as easy. Then when they get to that Facebook post, this is actually a cool thing that happens is, we kind of game the Facebook algorithm, because to Facebook it looks like a user has volunteered to look at this post and then comment below it. It’s going to shoot your relevancy score up, and you’re going to be seen organically by more and more people. Messenger ads leads to Messenger engagement, which leads to on-page Facebook engagement, which leads to a continuous growth cycle.
Tim: Are you seeing anybody doing that with B to B?
Derric: Derek Halpern would probably be the only one that I can think of right now. It is tougher in B to B, but it’s definitely doable. We’re working on that for, it’s kind of a B to B company, it’s called Growth Marketing Conference. It’s an events company. It feels like it’s a mix between B to B and B to C sometimes, because it is a lot of end users, but technically those people are often in marketing departments in companies.
Tim: Got it. Let’s move into a couple of new stories here. I guess both are from your blog, the first one is titled, What is website retargeting and how can it make you money? Can you give us a summary?
Derric: Yes, absolutely. If you have a website and it is providing some sort of result for you right now, even if that’s one lead a month or whatever, one sale a month, if you’re not doing website retargeting, you’re definitely missing out. Basically, anybody with a working website should be retargeting. If you think about it, what retargeting is sending an ad to people that have visited your site. People that have visited your site, 99% of them, you don’t have their email address or contact info, but they went to your site one way or the other through organic search, direct, social, whatever it was. They’re just starting to get to know your brand.
They’re literally the closest people you have to being a prospective lead essentially. Prospective customer or lead, they’re the closest to conversion that you have in your whole funnel or business, however you want to think about it. If you’re not sending a retargeting ad to the people that are closest to you, yet you’re trying some sort of marketing activity, like you’re doing TV commercial, whatever it is, you’re doing an email campaign. You’re doing those things, but you’re not sending an ad to the people that are closest to conversion, it doesn’t make any sense. Always start with that retargeting at the bottom of the funnel and work your way back out. It prints money every time.
Tim: Got it, very cool. I’m all for that. Our second article of the day, from Shana, also from your blog is titled, What industries are good for social media? Derric, what industries are good for social media?
Derric: Yes, and I think that this comes down to that viral coefficient, the K. How likely is somebody to want to refer business to you? Something interesting, I was talking to somebody who runs a wig company the other day, originally I was like, “Oh, this is in fashion, people love wigs, it’s so much to talk about.” When you look at it, a lot of people don’t want to tell anybody that they’re wearing a wig, right? The people that really need them and are wearing them not just for a fashion or a cool look, they’re not really talking about them, and so there’s actually a lower viral coefficient, same thing with my tech company, which was an educational tool for a card game. No one wants to brag to the world that they’re better at the card game than you, because they actually make their money by being better. They don’t want to discourage–
Tim: They don’t want to teach you how.
Derric: Yes, so even though there are people that talk about it and they chime in, those companies have lower viral coefficients than others. High viral coefficient is like a company in beauty or fashion. We have a company that’s a subscription box and one of the highest K viral coefficients I know. They have these sneak peeks and women, because it’s beauty products, they lose their minds when these sneak peeks come out. They just go nuts. They share it, they comment, they’re liking it they’re loving it. They’re like, “I can’t wait to get my hands on this”. They just want to share it with their friends in the world, right? The referral rate and the word of mouth is just naturally really high.
You know that just by putting $1 into organic Facebook or any social media or [unintelligible 00:26:50], that you’re going to see it spread a long ways. Whereas in B to B enterprise sales, and it’s completely doable in B to B enterprise, but your viral coefficient is typically lower because your product is probably less sexy. You probably don’t have a cool marketing video or collateral. It’s probably kind of boring. That being said, of course you’re going to make $100,000, $200,000 when you close a deal, so it’s not like Facebook ads doesn’t work for you. You can understand why social media doesn’t grow really fast. You’re not going to get 100,000 followers for these pages. You only need 10 followers that will do a million dollars in business with you. You don’t need to grow those large audiences.
Tim: Yes, totally. We’re out of time, so that is it for today on Mind Your Own Marketing Business. Thanks for being on the show today Derric.
Derric: Thank you so much. I have so much more I want to say but we got to go, so I get it.
Tim: You bet it. I’d love to do it again some time. You can find Derric online at vulpineinteractive.agency. Also on social media with the link derric.link, that’s D-E-R-R-I-C.link. You’ll find his Facebook, Twitter, LinkedIn, and Quora there. You can also email him at derric, that’s D-E-R-R-I-C, again,@vulpineinteractive.agency. Thank you to our listeners for joining us. You can download episodes of the program by going to fjorgedigital.com/mind-your-own-marketing-business or subscribing to the show on iTunes, Stitcher, SoundCloud, and iHeartRadio.
[00:28:26] [END OF AUDIO]