What was going through my mind when tipping at IHOP.
On today’s episode Russell talks about going out to breakfast with his daughter for her birthday and how watching the server work so hard to make a small wage made Russell wonder why he didn’t work somewhere that he could make more money, and how that relates to being an entrepreneur. Here are a few interesting things in this episode:
So listen to Russell’s awesome advice on how to increase your ticket sales and make more profit for yourself.
What’s up everybody, this is Russell. Welcome to Marketing Secrets while I’m in my car. This is a flashback from a podcast earlier. I’m doing this right now because, first off, I hung out with Justin Williams last weekend and he yelled at me, “you used to do podcasts every single week, three or four times a week. But now that you’re not in your car, you’re not doing them very often.” I’m like, crap he’s right.
I’m driving to get my haircut today because it’s huge. I figured out how to mount this thing in my car so I can do it while driving, so nobody yells at me. That’s what actually happened, I was doing the podcast with the camera, when I did marketing in your car with my phone nobody ever yelled at me. But when they saw me on video I got yelled at by everybody, so I stopped doing it that way. But now that it’s mounted up I can drive and talk and not even pay attention to you guys. No yelling at me, alright. That’s the deal.
Alright, so with that said, today is a cool day for a couple of reasons. Number one, it’s my daughter’s ten year old birthday, which is insanely cool. So this morning, I’m actually flying out today, so this morning I had a chance to go and take her out to breakfast. Her breakfast of choice was IHop, and I was like, “Come on, we can take you to Waffle Me Up or any of these cool places.” and she was like, “No, I want IHop.” As we’re driving there I’m like, “There’s only two kinds of people that like IHop, Ellie.” And she’s like, “Who are they?” and I was like, “Grandma’s and little kids. Watch when we get there how many grandma’s are there.” So we got in there and we counted and there was 13 or 14 grandmas in there and then me and her. So I was like, that’s it. It was kind of funny.
Anyway, that was really fun, and then she had a birthday party. So I went and raced and got her a bike this morning and took it to the birthday party, and I’m actually heading to get my haircut because I’m flying out to Utah today, two cool things happening in Utah. Number one is the Harmon Brothers are making our viral video. They actually started filming it today, and to be completely honest, it’s kind of killing me. I wish I was there, I want to be watching it. But I couldn’t today, so I’m flying down there tomorrow to catch some behind the scenes footage and all that kind of stuff for our Funnel Hacker TV show. So I’ll be flying down there, it’s gonna be really cool.
And the second cool thing, is I’m actually going to a meeting with Timothy Ballard, who is the dude who runs Operation Underground Railroad, which is a charity or organization, I don’t know exactly what it is, but they help save kids who have been abducted and put into sex laboring. So we’re going to be helping build funnels and helping build that whole mission. It’s a passion project I’m really excited for. That’s what’s happening on this trip. So if you’re watching Funnel Hacker TV you’ll see the behind the scenes of that stuff. If not, go to funnelhacker.tv and go hang out with us over there too. There’s a lot of fun stuff happening.
Alright my message for you guys today, and this is something that I don’t know why more people don’t think about this, but it’s important. We went to IHop today, as you know. My daughter ordered the pancake with the fluffies and the sprinkles, there were sprinkles on it, and then bacon and an egg. Her cost is like $3 or something like that, then I go and order scrambled eggs, a side of bacon, a side of avocado, because that fits in my macros for all you healthy nerds. So our bill was like $12. And I look at the server and the server is running around, grabbing our stuff and his and grabbing waters and grabbing A1, because I love putting A1 on eggs, if you haven’t tried it, it’s insanely good. I did it one time because I had steak and eggs, and I put A1 on the steak and some of it spilled on the eggs and I ate it that way. I was like, this is an egg topping, not for steaks. So if you haven’t had A1 on your scrambled eggs yet, you should totally try it. It’s amazing.
Anyway, I digress. Where was I going with this whole thing? So the server is running around frantic, I get the bill at the end of it and I look at it, and it’s like $12.43 or something. As someone who tips, and I’m a good tipper, so I didn’t tip him that much, I left a lot more money than that. So if I were to say, we’ll give him 10% of that, means he earned $1.25. That’s what he made from me, for all his efforts. Or if I do 15% it’s like what $2, if I do 30% it’s $3. So that’s what most people do. Especially, the grandmas at IHop, they have their little calculators out and figuring out, “Okay, I owe him $1.13.” and give exactly the tip, but if you’re bad they’re going to give you 5%, if you’re okay you get 10, if you’re great you get 15. That’s how it works.
I’m looking at this, and the server was a young dude, and I’m like, “Man, he’s killing himself for this little thing.” And I was just in the office before I headed to get my haircut, which now I’m stuck in traffic and my haircuts in 3 minutes and if I miss it I’m going to go crazy. So I was talking to them, “Look, if that dude instead of getting a job at IHop where the average ticket is $12. If you’re doing the same work but got a job at a steakhouse or a sushi place where the average ticket is like $50-$100, he’d do the exact same amount of work and get way more money.” Because people tip off a percentage. So if my bill is $12, you’re getting 1.20, that’s 10%. If it’s $112, you’re getting $10, or whatever the math is, for the exact same amount of effort.
So the moral of the story is if you’re serving tables, go and sell more expensive stuff, because you are getting paid a percentage of the ticket price. So you gotta sell the most expensive thing. That’s why as a Mormon when I go and I go to restaurants and they always try to sell you alcohol because alcohol has a huge profit margin, it’s big ticket. And they can get you to buy a lot more stuff. So we never buy the alcohol and those other Mormons who are out there know, if you’re at a nice restaurant, and you don’t order alcohol, they don’t treat you as good, because they’re like, “Crap.”
So I always tell people when they ask me, “What do you want to drink?” I’m like, “Oh we don’t drink, but don’t worry, we tip really, really good.” Because I want them to know, I don’t want them to treat me like crap because I didn’t drink because my ticket price is going to be smaller. Good server’s understand that. I warn them ahead of time, I’m a really, really good tipper. I tip 30, 40, 50% sometimes 100%. I’m a really good tipper as long as you treat me good. If you treat me bad, I’m still a good tipper, but I’m a great tipper if you treat me good.
So kind of the thought, if you’re serving tables, you gotta be selling the highest ticket thing, and if I was serving tables again, which is the only job I had for real is serving tables, and I really liked it. It’s all about that, ticket price. If I were a server today, I would have people order dessert first because most of the time at the end of the meal you’re not hungry anymore. If you’re not hungry anymore you’re not going to buy dessert. So then my ticket price went down, so my tip just shrunk.
So I’d be going ahead of time like, “Look, a lot of people at the end of the meal are full, I’m going to give you a 10% discount if you order dessert first.” I would do that because it would increase the ticket price. Everyone wants dessert when you go in, but when you’re offered it, it’s hard to eat it because you’re so full.
Number two, think about Olive Garden. They started doing this a little while ago and it was brilliant. After you’re done eating they say, “Hey, what would you like to order for tomorrow?” And they had a second meal. So you’d order a second meal to take home and eat the next day. Now you just doubled your ticket price because you sold them two meals instead of one. IF I were serving tables today, the first thing I would be doing is offering dessert, take them their meal and at the end of the meal be like, “That was good, huh? I know you guys aren’t going to be coming back tomorrow, but if you want you can order off the menu right now and I’ll go package it up and you can have it tomorrow as well.” And I don’t know what percentage take it, but I know there’s a big percentage that take the second meal and now I just doubled my ticket price. And the tip will be based on the ticket price, not based on what they ate while they were sitting there.
So I’d be thinking, increased value, how can I increase my ticket? So that’s if I was serving tables again. Obviously I’m not serving tables, I’m serving entrepreneurs and a lot of them. But guess what I’m thinking, the same thing. It’s the same stuff. I know I get paid based on a percentage of what our growth is. As the entrepreneur in the company the way that I make my money, I do have a salary, because I think you legally have to do that, however that works, you can do all the W2’s and all that techie, nerdy tax stuff. But then the rest of my payment comes from a percentage of profit share. The more profit, the more I get to share. So I’m always thinking how can I increase my profit share? How can decrease costs? How can I increase the ticket value? How can I sell more expensive stuff? How can I sell more things?
And that’s what my mind said, because I know I get paid a certain percentage of what I get people to consume. So I need to get people to consume. Same way you do it if you’re at a restaurant. And what’s interesting is, a lot of time, speaking to you right now, most of us we undervalue what we do. We try to be the discount leader because that’s what we’re used to doing.
So a lot of times we put our own pricing values on other people. Like I wouldn’t may $1000 for this, so you won’t sell it for $1000. You don’t understand, that’s worth it for somebody else. So don’t try to discount your prices. So a lot of times that’s what we do, we try to discount our prices, lower ticket. We’re trying to go back to IHop and sell even though the money we make as entrepreneurs is based on the ticket price. So the bigger the ticket price, the bigger money you make. I’ve said this before and I’ll say it again, Dan Kennedy told me this.
“There’s no strategic advantage to being the second lowest price leader in your market.” So if you can’t be Walmart, there’s no strategic advantage of being like, “Walmart’s the cheapest, and we’re the second cheapest.” Because then you look like an idiot. There’s not strategic advantage whatsoever. But there is a huge strategic advantage of being like, “I am the most expensive guy in my market.” So if you can’t be the lowest, then be the most. Don’t be the dude’s in the middle. Because there’s no, it just doesn’t work that way.
So I want you guys to think about that. Because as entrepreneurs, you’re just like the server. You’re serving customers, serving audiences, and you get paid based on the ticket price of what people are spending. That’s why funnels are important. If I just sold people my free book and that was it, guess where I would be right now. I’d be broke. I did a Facebook Live yesterday showing 3 funnels we had inside of our book launch. Now, when all is said and done, when our book launch was over, we did over $3 million dollars in collected revenue. Obviously, that wasn’t net, that was collected gross.
What’s funny, I look at all these people who do these big product launches. $2, $3, $5,000 product launches, most of them are happing making a million to three million dollars. We did the same thing and we were giving away a free book. How? It’s because I’m just like the server. I offer dessert first and I had upsells and I offered a second meal. I did all these kind of things because I’m trying to increase the ticket price. Because that’s how I get fed as an entrepreneur. Plus it gives me the ability to serve that audience better.
The waiter that lets you order dessert ahead of time, so you still get it. The server who lets you order food and take it home, he’s serving you at a higher level. That’s why he gets paid more. He knows how to increase the ticket price, but he’s able to make the restaurant more revenue, but second off gives you a better experience. You get to have a great meal twice. Your wife doesn’t cook tomorrow, or whatever that might be. Maybe it’s you cooking, or whatever. But it all comes down to that.
That’s the moral of today’s story. I hope that helps some of you guys. I’m sure some of you guys are freaking out trying to be the cheapest possible person. And it doesn’t always work that way. Obviously you gotta look at what the market will bear, but like I said, it’s way better to be the most expensive than the cheapest.
So there you go. I’m here, I’m going to get my haircut. I’m only 4 minutes late, hopefully she didn’t cancel my appointment because I gotta get rid of this thing before I hop on a plane or I’m going to be super embarrassed. Thanks everybody for listening. If you would like to see the video version of this, go to marketingsecrets.com and you can watch the video there. Or if you’re watching the video version, go over to iTunes and subscribe to the podcast, we’re at 360 or 70 episodes now. So come hang out with us there. A lot of fun stuff happened and a lot of things you’ve missed that I want to make sure you get. With that said, thanks everybody, we’ll talk to you guys soon. Bye.