Supported by Greenhaven Road Capital, finding value off the beaten path.
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Good marketing isn’t good email marketing or omnichannel marketing or PPC management. Those are just actions. Good marketing, as people like David Trott, remind us, focus on the customer.
With 30+ years of experience, that’s what Terry O’Reilly provides in his Under the Influence podcast and in his book, This I Know. In a line, good organizations understand their customers and communicate how they are different. This creates pricing power and everything works better in the right culture. Simple but not easy. Let’s see how.
What job is your customer hiring for?
We all hire for things that we don’t want to, can’t, or won’t do. Even employers hire their boss. At Going Deep 2.0 I ab libbed the introduction and reminded attendees that we don’t all have to be entrepreneurs. We’ve glorified this kind of business, but employees don’t have to take their work home with them in the same way. Employees hire their boss to manage payroll, develop strategy, and be on call.
People hire for jobs to be done all the time. In the book, O’Reilly gives the example of Coffee Crisp.
Coffee Crisp looked at the market and saw that people already ‘hired’ for the ‘job’ of treat. But in talking to customers, Coffee Crisp realized that ‘snack’ was a different job than ‘treat’. People treat-yo-self once a year. People snack daily.
Think of it as a grid that’s 7 spaces high by 24 spaces across. Those 168 boxes are all places for a job. It’s why even small English pubs compete with Netflix.
O’Reilly writes, “The first rule is: Know your audience. You have to have a deep understanding of who you are talking to in order to be relevant.”
This is why many products start with a founder scratching their own itch. Peter Rahal created a paleo protein bar, Ben Horowitz created a venture capital fund, Julie and Elizabeth created a fitness studio.
For outsiders, the beginning is really important. “Before a new business pitch, smart agencies list everything they know about a company or a product before they begin to do research. It’s the only time they can think like the general public.”
Rob Fitzpatrick calls this The Mom Test, a book Jerry Neuman has his students read. What Fitzpatrick wants founders to do is to ask questions so objective that even their mom could answer without bias. Do you like my app/thing/product? is the wrong question because people, especially moms, are too nice. Instead, What makes you buy/do X/Y/Z?
That’s a better question because it leads to the why, and the why to the job.
O’Reilly writes, “You also have to be Switzerland when doing research You have to be utterly neutral.”
And for on-going businesses, “Because pain-points are often hard for proprietors to spot, you need to check in with your customers frequently.” Once an organization figures out what job customers are hiring for they can see what niches are available.
O’Reilly kinda calls this Strategy but the word matters less than the meaning; what do customers remember. Which of these: O O O X O O O, stand out?
The invisible is harder to articulate than the visible.
Duke Economist Dan Ariely articulated this idea nicely in a podcast with Ted Seides. Ariely said, “The whole category of saving is invisible. Think about what you know about what your neighbors are saving. Nothing. What do you know about their spending?” To which Ted Said, “Something more.”
The same goes for product, service, and strategy.
O’Reilly writes, “The thing that bugs you most about them (your competitors) is probably their greatest strength.”
Or turn a weakness into a strength. Dave Trott gives this as an example.
Cellnet was 1/4 the size of Vodafone at the time. That seems like a disadvantage until you sell size as crowds and small as space.
Unique ideas work, but the “the better the work, the harder the sell.” Why? “The difficult thing about counterintuitive solutions is that they are often difficult to swallow and hard to present, and are usually shunned by almost everyone initially.”
Career risk influences decisions. Tom Goodwin articulated why, “For companies to really establish themselves around the potential of these new technologies they need to make significant changes, they need to rewire the foundations of their companies and most people at a certain level of seniority, with a mortgage on their house and worries about what school their kids are gonna go to next and how much that’s gonna cost, are not really prepared to undertake the risk and to do something that’s gonna take a long time to pay off.”
People don’t get fired for buying IBM – or making any other decision they could deem was logical in hindsight.
The opposite of ‘buying IBM’ is something weird, off-beat, and fragile. Sam Altman said that Y-Combinator doesn’t have co-working spaces for this very reason. Too many people can smother a quirky idea before it evolves then blooms.
When Steve Martin started out he worked at Disneyland, then for the Smother’s Brothers and then he tried to be a standup comedian. Martin had some performing chops from his time in California and he learned how to write while working in TV. But this phase of his life was the hardest. Luckily for him, he was alone.
“The lonely road with nobody watching was the place to dig up my boldest – or dumbest – ideas and put them on stage.” If Martin headed straight to New York City or Chicago he would have been smothered, his act was fragile. But he kept working.
The secret for Steve Martin wasn’t to be great, that was random. What mattered was to be consistently good. “What was hard was to be consistently good, night after night, no matter the abominable circumstances.”
That’s true for ideas too. O’Reilly writes, “An idea is a fragile thing. When it only exists as a notion – a flicker of potential – the slightest breeze from across the table can extinguish it. Presenting a new idea requires poise, persuasion and gust protection.”
That gust protection comes from a top-down leadership that supports this kind of decision making. Ken Kocienda praised Steve Jobs’ style of acting like an editor. Jobs issued assignments and declared his feedback. Good leaders hire well and then get out of the way. At Netflix, wrote, Patty McCord it meant hiring adults and treating people that way. David Ogilvy suggested “gentlemen with brains.”
If you can talk to your customers and find a way to be different the next step is going back to the customers and telling them about it.
Highlighted nicely by Marc Andreessen and Brian Koppelman is the idea of selling your idea. Andreessen said the day of building a better mousetrap and the world beating a path to your door is over. They won’t, “The world is busy.” Koppelman agreed, “It’s the responsibility of the artist to do things that gets the work in front of people.”
If you can’t communicate well, that’s okay. If you’re aware of it it’s good. That means hiring well. Rich Barton said that founders need to marry a marketer. Josh Wolfe said much the same. Jeff Jordan of a16z told a class of students at UCLA, “As an entrepreneur salesmanship is huge.”
But that doesn’t mean selling. The used-car salesman has a bad vibe because the used-car salesman skips everything we just mentioned. They fail to understand needs.
O’Reilly wrote, “In business, persuading people to buy your ideas is a fundamental necessity.” Good ideas are not enough. The Pauls said that analysts aren’t paid to analyze. They’re paid to analyze and sell and idea to their boss.
To communicate well, O’Reilly suggests a consistent theme to what you do. Keep it simple. Show, don’t tell. “If people feel, they believe.”
Good communication is about embodying an idea not a specific. Viewers often can’t recall the details of a specific advertisement but they can recall how it made them feel. And those feelz are a company’s brand.
These steps are crucial because they lead to the mother of all metrics.
In an a16z hallway conversation; Li Jin, D’Arcy Coolican, and Frank Chen, Chen calls pricing power the mother of all metrics.
As Warren Buffett put it, it’s the ability to raise prices.
Marketing, like Rapunzel, can turn straw into gold. Instead of a spinning wheel, all it takes is a good feeling.
“Apple makes us care because it disrupts entire industries to give us more user power. Nike makes us care because it encourages us to make an important decision…I’m willing to pay more for an Apple computer. All things being equal, I prefer Nike running shoes…There is nothing intellectual about any of those decisions. It’s pure emotion. Each of those companies and people provoke a feeling in me.”
What does it take to delight a customer? The wanted but unexpected.
A friend recently went to Disney World with her two children. When she got there she realized she’d bought the wrong annual pass – his first – for her son. Crap. Hoping for some “Disney Magic” she headed to guest services.
Technically she was wrong. In a world of numbers and rules, she should have paid $100 for her son to enter the park that day. But, as sometimes happens, with faith, trust, and pixie dust her wish was granted.
Patty McCord at Netflix thinks that these kinds of actions should be rewarded and communicated to all the stuff. Customer service, McCord wrote, should know about the LTV and CAC of each customer. My friend’s story will spread, reducing Disney’s CAC and increasing Disney’s LTV much more than $100.
O’Reilly agrees, “Customer service equals profit. When customer satisfaction soars, so do revenues.”
When Danny Meyer started his first restaurant in New York City he had more problems than patrons. But he had one great solution, ‘the medicine cabinet.’ If guests waited too long, got the wrong food, or were generally disappointed Meyer and his staff could offer them a drink. It wasn’t any drink, it was a dessert wine. These were popular in Europe but mostly unknown in the states.
So not only did they get a free glass of wine but something special that wasn’t on the menu. O’Reilly likes Meyers work too, noting that while Grammercy Tavern was ranked tenth for food and unranked for decor it was ranked third overall in Manhattan.
That’s kinda magical.
Rory Sutherland makes this point too, only in the opposite direction. It doesn’t matter how good the food is, if you sit by a bathroom that stinks it won’t be a good meal.
How much are you willing to pay for something nice? Something new? Something from a brand you love? That’s pricing power.
But that only lasts in the right environment.
This is the operating systems for an organization. It’s the attitude. Ben Horowitz said it’s what people do when you don’t tell them what to do. O’Reilly writes, “The Ritz-Carlton is a successful company because it knows exceeding customer expectations can’t just be a marketing campaign. It has to be an operating platform.”
He adds, “Nothing — repeat, nothing — is more important than your company culture.”
Culture should be a competitive advantage. The things one organization is willing, capable, or committed to doing that others can’t. Michael Porter tells the story about going to IKEA with his daughter. Porter hated the process but she loved it. His point was that organizations can’t be great at doing all things for all people.
In 2019 Disney will release a streaming service and while it will look like Netflix its development should not be. The Disney culture is different from the Netflix culture. Netflix has a spirit to move fast and test things, hiring adults they trust. Disney’s is more static, sometimes literally, as theme parks and merchandise circles their IP.
Who should we hire for this business and how do we let them do their best work?
Paul Lavoie named his agency Taxi, writes O’Reilly for “Lavoie’s belief that the number of people needed to service an account should be able to fit into a cab.” Jeff Bezos said the ideal number for a project is fed by two pizzas. Michael Mauboussin said the sweet spot for investing committees is 4-6. Agencies, Amazons, and investors then should fiind the sweet spot for work built around their advantage.
Simple, but not easy. Thanks for reading.