Cloning Customers

I keep discovering little secrets that have been out there for all of us to see.

But by the time I see it and then figure out what was actually going on, it’s too late.

Like 40-something years too late, sometimes.

Maybe I’m wrong, so let me tell you a story that may be familiar to you.

What Bill Gates Did

Bill Gates is in the Top 5 wealthiest people in the world, but do you know how it all started?

You probably think you do, but you don’t know the layers of genius that set it all in motion.

The simplest version of the story is that Bill Gates licensed Microsoft’s MS-DOS operating system to IBM for use on the personal computers they were selling.

It’s so plausible that that version of the story alone would make Gates very rich.

But obviously, there’s more.

Join My Newsletter

Learn How To Build A Digital Asset Portfolio

FREE

Each Week I Share The Latest Digital Builder Tips, Techniques, and Stories:

• Learn Rare Big Ideas
• See Applied Builder Models
• Expand Your Network of Builders (like you).

Subscribe for FREE

Controlling Someone Else’s Asset

Microsoft and Bill Gates did not actually write the MS-DOS code—they got an option to buy something called 86-DOS.

Well, kinda sorta.

I’m leaving a few details out, but suffice it to say they were in control of an operating system written by Seattle Computer Products or more specifically, Gary Kildall.

Ever heard of either of them?

Me either.

The option enabled Gates and Microsoft to eventually buy the operating system, 86-DOS (eventually MS-DOS) for $75,000.

This is the asset that bootstrapped Gates’ fortune; an asset he did not create but eventually bought for $75,000.

You and I can scrape together $75,000, right? Why aren’t we rich?

Read on.

Deal Alchemy

What Gates did have was Microsoft and 5 years of progress and a reputation for building BASIC interpreters for early personal computers.

Which earned him a seat at the table for an interesting conversation.

Of course, Gates had his opportunity goggles on.

Because you read last week’s newsletter, you’ve got your own set, right? If not, you’ll soon know the opportunity cost of waiting. But I digress.

Here’s how it played out:

IBM needed an operating system for their new personal computer and went looking to Microsoft.

Microsoft didn’t have the operating system, but they knew someone who did.

Microsoft became a “producer” by working with Seattle Computer Products and Gary Kildall to produce the product that IBM needed.

This is perfect deal alchemy so far, but the true genius lies in the rest of the story.

It’s About the Customer, Stupid

It’s not commonly understood, but the real value of a business is in its customer list. Just read any Dan Kennedy book in the last 20 years and you’ll get more supporting arguments for this belief.

But this story is 43 years old, but somehow Bill Gates knew that that was important.

When Microsoft did the deal with IBM to license MS-DOS, Gates had two key terms:

• Microsoft had the right to sell upgrades of MS-DOS to end users (customers)
• Microsoft had the right to license MS-DOS to other computer manufacturers.

Many people saw this play out back in 1980 and still didn’t get it, so let me dissect it for you. After all, genius is not found at the surface level.

Ya ready?

How much did Microsoft spend to acquire customers? Zero. Microsoft did no advertising and sold no products. Because the operating system was integrated into the personal computer, IBM’s customers became Microsoft’s customers.

Because Microsoft negotiated the right to sell upgrades, they were able to get computer-buying customers to register for those upgrades. And upgrades were popular and bought eagerly back then.

That’s a sale for Microsoft every time IBM sold a computer and then many times thereafter when there was an upgrade.

And then for every computer manufacturer, the same deal and terms applied.

Realize the effort and cost Microsoft avoided by riding the transaction stream of all those computer manufacturers.

So Gates used $75,000 to buy an asset he didn’t create and licensed it to customers he didn’t attract to eventually become a billionaire. And he put this all in motion at the age of 25.

What about us?

Let’s start with exploring this transaction stream I mentioned just now.

Going With the Flow

I talked about this general concept a few weeks ago in Tapping Into Flow, but there’s a book I recently found called Integration Marketing which lays a lot of this out in different words.

The book is from the 2009 era!

Let’s start with this quote from the book which capsulizes the idea of Integration Marketing:

The integration of a “Unit of Marketing Value” (a brand message, an offer, a sale, a store – anything that adds marketing impact to your business) into an existing “Integration Point” (inside a “Traffic Stream” or “Transaction Stream”).

And now let’s work through the lingo:

Integration Marketing. The integration of one marketing process into another.

Integration Marketing Deals. An agreement between two or more parties that uses Integration Marketing tactics.

Integration Marketing Partners. Those with whom you do Integration Marketing Deals.

Unit of Marketing Value (UMV). The thing you integrate is any of an offer (for a sale or a freebie, something that serves as a lead-in), a branding message, a new marketing process, a sale, and so on. It must be something that provides a specific marketing benefit to the Integrator (defined below) and also to the owner of the Integration Point (defined below).

Integrator. The party in an Integration Marketing Deal who provides the Unit of Marketing Value.

Traffic Stream. A Traffic Stream is any place where people are gathering, be it in a store, at a particular physical location, or even in a virtual locale, like a website or a blog. In previous newsletters, we’ve called this a parade.

Transaction Stream. The point at which exchanges or transactions regularly occur between a merchant and their customers. It is important to note that a Transaction Stream only becomes visible once a transaction is taking place. A transaction doesn’t have to be an exchange of money, it could also be an exchange of an email address.

Integration Point. The point inside a Traffic Stream or a Transaction Stream at which you can insert a Unit of Marketing Value.

That’s a lot coming at you, but it’s important to know the ingredients so you can spot them in the wild. Or more importantly, do this deal alchemy yourself!

Channeling Bill Gates

Let’s make this real for you and me by doing some hypothetical deal alchemy; in our new parlance, create an Integration Marketing Deal.

You and I are the Integrators.

Together, we’ve spotted a creator that has one product that solves part of a problem. And we also like their Transaction Stream potential; they appear to be selling enough to attract our interest and investment.

But because they only have one product, their Traffic Stream ends at the point of sale of that one product.

But you and I know of a complementary advanced course and even a supporting software-as-a-service tool that would comprehensively solve the buyer’s problem.

We explore bundling these complementary products and services to create an upsell (Integration Point) for our original product creator, our potential Integration Marketing Partner. Our bundle represents our Unit of Marketing Value (UMV) to integrate and enrich the Transaction Stream.

You and I tap into their Transaction Stream (their flow) and get a share of the integrated pie revenue. Once the integration is put in place, it’s a revenue tap for us for as long as the product bundle solves the problem.

You and I, as the bundle creators, will get access to the customer data; their customers now become our customers too. And this enables us to market to those customers in the future—this is huge!

Our partner gets a revenue share far greater than their original product could produce. And the potential for more customers and the ability to market to that larger pool.

All of us win.

Be a Producer

To wrap all this up, I want to emphasize that there are creators and influencers.

Traffic streams, transaction streams, and products are all being created.

But you can be a producer by looking for ways to create integrations, add value, and create new revenue streams for yourself and your partners.

Build it once, let it flow, rinse, and repeat.

Ask yourself, how many of these deals would it take to change your financial situation?

Opportunity goggles.

Deal alchemy.

Integrate.

Produce.

Profit.

Freedom.

— Bill

P.S. If you liked this newsletter, please consider leaving me a testimonial to help me spread the word.