Lars Lofgren

Building Growth Teams

Two Mistakes I Made on the Engines of Growth

By 12 Comments

In The Lean Startup, Eric Ries describes 3 engines of growth:

  • The Sticky Engine
  • The Viral Engine
  • The Paid Engine

In a post of mine, I claimed that there’s really only 2 engines. Short and sweet summary:

There aren’t 3 engines of growth, there’s only 2: organic and paid. I lumped the word-of-mouth into the viral engine and explained how retention doesn’t drive growth which was the main focus of the sticky engine. This is because churn scales with your acquisition so if you only focus on retention, your growth will stall regardless of how low you get it. So there’s no reason to have a sticky engine of growth.

But I made two mistakes.

One was an outright error on my part. The other as an omission which adds a bit of nuance.

Eric Ries even responded to the post (which was awesome) with 4 tweets:

Error #1: Blending Word of Mouth and Viral Engines

Eric Ries clearly separates viral from word-of-mouth (organic) engines of growth. I incorrectly lumped them together. In the first paragraph of his section on viral engines of growth, Ries states:

“This is distinct from the simple word-of-mouth growth discussed above [the sticky engine of growth]. Instead, products that exhibit viral growth depend on person-to-person transmission as a necessary consequence of normal product use. Customers are not intentionally acting as evangelists; they are not necessarily trying to spread the word about the product. Growth happens automatically as a side effect of customers using the product.”

Page 212 of The Lean Startup if you’re curious.

Fair enough, viral and word-of-mouth engines aren’t the same. One depends on delighting customers to the point where they voluntarily tell others about you. Viral engines depend on making the product visible to others as each customer uses it.

Keeping viral and word-of-mouth engines separate makes a lot of sense.

That’ll teach me to build off of frameworks while skimming them instead of reading the entire chapter again.

My bad.

Error #2: Ommiting that the Sticky Engine Scales When Word-of-Mouth Exceeds Churn

Eric Ries focuses pretty heavily on getting retention as high as possible for the sticky engine of growth. Page 212 in the Lean Startup:

“[For an engagement business] its focus needs to be on improving customer retention. This goes against the standard intuition in that if a company lacks growth, it should invest more in sales and marketing.”

In my post, I showed that growth hits a ceiling no matter how low you get your churn. This is because churn will eventually match your current acquisition rate. Even if you lower churn, your growth looks like this:

10_Percent_Monthly_Churn_Reduced_to_7_Small

There’s one main exception to this.

When you get a word-of-mouth growth rate to exceed your churn rate, you’ll grow exponentially. Even though your churn grows each month, so does your word-of-mouth. Then you get a nice compounding growth rate that accelerates over time. Ries points this out on page 211:

“The rules that govern the sticky engine of growth are pretty simple: if the rate of new customer acquisition exceeds the churn rate, the product will grow.”

But this doesn’t change my primary point: churn is not the key to growth for the sticky engine. Accelerating word-of-mouth is the key instead of churn. Getting customers to keep using your product is one thing. Getting them to put their own reputation on the line by recommending you is another hurdle entirely. You’ll still hit low churn long before you see any substantial word-of-mouth.

Ries does bring up an example of a business that has 40% churn and 40% acquisition at the same time. And when your churn matches your acquisition, you stall. He focuses on lowering churn to get the sticky engine running. But I’m skeptical that the acquisition is coming from actual word-of-mouth. With churn that high, I’d expect the acquisition to be from conventional sales and marketing channels that don’t scale with churn. And if that’s the case, lowering churn is only the first step. You’ll hit a new ceiling since your acquisition won’t scale as easily as churn does.

If you have worked with a business that achieved high rates of growth from word-of-mouth but also had high rates of churn, I’d love to hear about it. Be sure to let me know in the comments.

Once again, churn is just one piece of the puzzle. You’ll still need to keep refining your product and improving your customer support long after you achieve low churn. Word-of-mouth requires delighting customers at an entirely different level than what it takes to keep them around. In other words, low churn is the first step to word-of-mouth growth. It grows your average customer value and extends your runway. But you’ll need to keep pushing in order to get your word-of-mouth high enough that it outpaces churn. Then, and only then, will you have a sticky growth engine.

If you focus on delighting customers to the point where you get a sizable amount of word-of-mouth growth, you’ll hit low churn along the way.

To recap, you have two options when your growth stalls:

  1. Find a way to accelerate your current acquisition with paid or viral engines (you’ll eventually hit another plateau unless you keep accelerating it)
  2. Focus on your product and customer support to increase word-of-mouth (and lower churn along the way).

Lowing your churn will make either strategy more viable. You’ll either start growing exponentially at a lower rate of word-of-mouth or you’ll lower the demands on your acquisition which makes it easier to outpace churn.

Sorry Eric Ries, There’s Only Two Engines of Growth

By 6 Comments

UPDATE: I actually made 2 errors with this post. I decided to correct them with a new post so you can see exactly what happened. See the mistakes I made in this post over here.

One of my all-time favorite books for startups is Eric Ries’ The Lean Startup.

In it, Eric Ries breaks down three engines of growth:

1. The Viral Engine of Growth – Word of mouth or viral invite system

2. The Paid Engine of Growth – Pay for each customer through ads or marketing systems

I’m mostly in agreement with Ries on these two. You’re either going to have to pay for your customers or you’ll need to grow from word-of-mouth/viral invite systems.

But the third system of growth really isn’t a system of growth:

3. The Sticky Engine of Growth – Keep customers engaged over the long term and reduce churn

This applies to two types of businesses, subscriptions and user engagement. Software-as-a-Service companies use subscriptions so the longer people stay subscribed, the more money they make. For consumer tech companies like Twitter, Instagram, or Facebook, they rely on user engagement so they can monetize their users with ads. In both cases, the business benefits as users keep using the product over the long term.

The strategy for this growth engine is pretty straightforward: reduce your churn to increase the value of your customers. You do this by keeping customers engaged and lowering the percentage that leave in any given month (your churn rate).

But Ries’ Sticky Engine of Growth doesn’t actually produce growth that scales.

You Can’t Get Hockey Stick Growth By Only Attacking Churn

Churn is not a path to growth. It simply raises your growth limit. It’s the ceiling that lets you keep playing. It buys you time and gives you more breathing room.

But if you want hockey-stick growth, you’ll need to build another engine of growth WHILE attacking your churn rate.

Here’s the problem: when you have a “sticky” business and need long-term customer engagement, churn puts your business into a constant rate of decay.

Churn nips at your heels, rots your customer base, and will deadweight your company if you’re not careful.

Let’s do a quick example.

Say you have a 10% churn rate for a SaaS app. Let’s also say that you’ve found a way to acquire 100 customers per month. Here’s what happens to your growth if you keep your acquisition constant:

10_Percent_Monthly_Churn_Small

Early on, the 10% churn doesn’t really matter. Your 100 new customers easily make up for it. But once you get to 1000 customers, you churn rate equals your acquisition rate. Within 2 years, your business has stalled.

In order to beat churn, you have to keep accelerating your growth. Even if you have 1-2% churn (the goal for SaaS companies), your growth will consistently slow down unless you build another engine to accelerate it. Churn doesn’t get you to the next level, it simply let’s you take another shot.

Now let’s say that we reduce the churn rate from 10% to 7.5% after 6 months. Here’s how your growth differs from the first example:

10_Percent_Monthly_Churn_Reduced_to_7_Small

See how you hit that next ceiling after an small spike? When people talk about growth from lower churn, it’s that initial spike since the growth rate now exceeds the churn rate. But it doesn’t take long for the new churn rate to catch up and stall the business again.

No matter how low you get your churn, you’ll hit a cap sooner or later. Your growth will keep slowing down as every month goes by. The only way to accelerate growth is to build one of the primary growth engines: organic or paid.

The reason that churn is so nasty is that it quickly scales to the size of your business. 10% churn with 100 customers means that 10 customers left this month. If you somehow manage to get to 100,000 customers without addressing your churn, you’ll now be losing 10,000 customers each month. It’s fairly consistent all the way up. But marketing, sales, and growth systems don’t scale so easily. Paying for 10,000 new customers each month is an entirely different game than 10 new customers. Even viral systems don’t scale forever, they’ll start to slow and churn will catch up in a hurry.

And don’t convince yourself that you can achieve some absorb churn rate like 0.1%. Top-tier SaaS businesses are in the 1-2% range, maybe as low as 0.75%. There are hard limits on how low you can go.

Considering that most VC’s are looking for at least 100% year-over-year revenue growth rates for SaaS (consumer tech has even more absurd growth benchmarks), you need to build a growth engine that doesn’t mess around.

I’ve spent 2 years understanding the growth model of a SaaS business at KISSmetrics. While churn is one of our top priorities, we wouldn’t get very far unless we committed to building an additional growth engine. That’s why we built out our marketing and sales teams.

Maybe you double-down on product and customer service to accelerate word-of-mouth. If you’re in consumer tech, a viral invite system might work if it adds to the core value of your product. Or maybe you build a paid engine with content marketing and ad buys. Either engine can work. But you need to remember that growth won’t come just from lower churn.

Why does this matter?

If you’re building a business that relies on keeping customers engaged over time, you cannot expect to grow your company from just a low churn rate.

Churn is absolutely CRITICAL to the success of your business. But it’s only one piece of the puzzle.

Look at any SaaS business that has IPO’d recently like Marketo or Box. They all have massive marketing/sales budgets. They’re even hemorrhaging cash to keep accelerating their growth rates.

That being said, I DO agree with Ries that the primary goal of a sticky business model is to focus on customer retention. No subscription or engagement business is going to get very far unless they control their churn. You’ll hit a ceiling that won’t budge until you do. Before you can think about growth, you need to get your churn to acceptable levels. Or all your customers will leave just as fast as you acquired them.

But once you have a low churn rate, growth isn’t going to magically appear. And a business looking for high rates of growth will need to acquire customers at scale. Raising engagement will increase the value of your current customers but it won’t necessarily bring you new customers. You’ll need to delight customers to the point that word-of-mouth and virality start working in your favor. Or you’ll need to start paying for customers.

Sticky Engines Don’t Acquire Customers, They Grow Customer Value

The primary benefit of sticky engines isn’t growth, it’s an increase in customer value.

Any subscription or engagement business attempts to spread customer payments out over a long period of time. For many SaaS businesses, the goal is to keep customers subscribed for 24-36 months. By spreading payments out, you’re able to increase the value of your average customer. This is one of the main reasons that tech companies have moved to subscription payments instead of up-front software licenses. And consumer tech companies can monetize long-term, active users a lot easier with ad revenue.

In fact, a well-executed upsell and churn reduction system can give you negative churn. This means the value of your current customers is increasing faster than the value lost from customers leaving. Your total customer count drops while your revenue increases slightly. Even if you don’t acquire any more customers, your revenue will still grow. At least in the short-term.

But this isn’t considered a primary growth engine. It’s mainly a strategy to mitigate the impact of churn so you get the full benefit of your real growth engine. The revenue growth from negative churn pales in comparison to any half-decent growth engine. Negative churn will only give you marginal gains.

Won’t Better Engagement Lead to More Word-of-Mouth and Virality?

Possibly.

Word-of-mouth growth requires a level of engagement well beyond what it takes just to keep customers engaged each month. Providing enough value to keep customers interested is one thing, providing enough for them to drag their friends into the product is something else altogether.

If you’re pursuing organic growth instead of paid, many of the tactics you employ will be very similar to the tactics that you’d use to reduce churn:

  • Improve value of product
  • Reduce friction across all customer touch-points
  • Focus on a single market
  • Provide fast and helpful customer service

But you’ll need to perfect these tactics and delight your customers at a level well beyond what it takes just to reduce your churn. At that point, you’re deliberately pursuing an organic engine of growth.

That being said, I’m a huge fan of Eric Ries’ book The Lean Startup. I definitely consider it one of the classics for startups. It’s a huge inspiration for my own work, I highly recommend it.

Growth Comes From One of Two Places (And Only Two)

By 2 Comments

At the end of the day, there’s only two ways to acquire new customers.

Social, advertising, blogging, affiliates, direct mail, word-of-mouth, user invites…

All these channels fit into one of two acquisition strategies. Both can work beautifully but you need to know what game you’re in. Each requires different team structures and different strategies. Unless you pick one deliberately and have the strategy to back it, you won’t get anywhere at all.

Here they are.

The Organic Growth Engine

This is the fabled word-of-mouth we all say we do a great job at. Honestly, only a few of us build companies that truly grow from word-of mouth.

A lot of companies that reach impressive growth off of this engine proudly proclaim that they have a marketing budget of $0.

And they should be proud, it’s not easy to accelerate growth purely from word-of-mouth.

So how do you build an organic growth engine?

Double down on product and service.

Your product can’t just be good, it needs to be amazing. And your customer service can’t just solve problems, they need to provide a legendary level of service. Think of Zappos. If you go down this road, the only thing that matters is how happy you make your customers. You’ll need to dedicate a significant amount of your resources to product and customer support. You’ll need process for how to improve your product methodically every single month. You’ll need to ruthlessly perfect every detail.

You won’t achieve break-out organic growth by accident. You need to build a first-class team and product.

I should correct myself. Every once in awhile, a product becomes a market hit for seemingly no reason. It’s not even a great product but for whatever reason, people go nuts over it. Flappy Bird is a great example. You can’t manufacture this type of success, it’s like hitting the lottery. It might happen but you definitely don’t want to depend on it. And most of us will never experience it.

What about those viral invite systems? Don’t they count as organic growth?

Viral social networks do fit in this category. They take a great product then optimize their network effects and invite systems to spread their product as fast as possible. WhatsApp, Snapchat, Facebook, and all the other social apps that have spread like wildfire. But even with these crazy success stories, they all start with a great product that people love.

But you can’t hack virality.

Especially with the popularity of growth hacking these days, every junior marketer thinks they can build a quick invite system and follow in the footsteps of LinkedIn, Skype, or Dropbox.

Bolting an invite system to a lack-luster app isn’t going to get you anywhere. Your product needs to be good enough that it will spread even without an optimized invite system. Build an amazing product that people already want to share. Then make it even easier for them to do so.

So viral marketing engines aren’t an acquisition strategy. They merely take what’s already happening (an organic growth engine through word-of-mouth) and accelerate it by making the word-of-mouth even easier.

Even “viral” marketing campaigns don’t drive organic growth. These are in the paid engine of growth. It’s just a cheaper way to get more eyeballs on your marketing campaign. But you still have to pay for the campaign in the first place. Either out-right or with labor by having your team work on it.

The organic growth engine sounds amazing right?

After all, you’re getting customers for free. What’s not to like?

Well there’s one major downside.

You’re not in control. Your growth is entirely as the mercy of how much your customers talk about you. For many business, there isn’t a straight-forward way accelerate your acquisition at a predictable pace. Consumer tech products can usually optimize invite systems and activation rates (the number of people that start using a core feature of the product). For B2B or other products that depend heavily on word-of-mouth, you can’t systemically optimize your acquisition. You’ll need to keep going back to your product, improving it, and hoping word-of-mouth accelerates.

The only way to accelerate growth predictably is to start building a second paid growth engine to acquire customers.

Keep these points in mind if you go down the organic growth road:

  • You won’t be able to predict or reliably accelerate growth from an organic growth engine.
  • Commit as many resources as you can to product and customer service.
  • Your entire team needs to be unbelievably annal with the smallest of details. The customer experiences needs to be perfected. Iterate endlessly on every piece customer touchpoint.
  • Viral growth engines harness organic growth that’s already happening. You can’t bolt an invite system to a sub-par product and expect any results.

The Paid Growth Engine

This includes everything you currently spend on sales and marketing.

Did you just hire an field sales rep to find and close $100,000 deals? Paid growth. Building a blog to attract traffic and free trials? Paid growth. Television, Facebook, or billboard ads? Paid again.

“Organic” or inbound online marketing isn’t really an organic engine. It’s just a paid engine that you don’t pay directly for. Instead of dropping cash on ads of some kind, you hire people to write content, build systems, and attract customers with their labor. Your marketing budget is now their salaries.

Paid engines may be easier to understand (just go buy customers!) but that doesn’t make them any easier to execute.

Many paid channels simply won’t work for your target market. For whatever reason, you market won’t respond in that channel.

And the worst part is that the good channels are different for every business/market. Affiliates might work beautifully for one business but a slight change in the market can turn them into a total flop.

Let’s look at an easy example.

Targeting teenagers? The hippest social network might be a great source of growth for you. Going after senior Fortune 500 executives in their 50’s? Forget the social nonsense, try business conferences, networking, and outbound sales.

Differences get a lot more subtle than this. Hosting companies typically do really well with affiliate programs. Freelancers constantly recommend hosting for their clients so if you give them a affiliate deal and make them look good with a reliable product, it’s a great source of growth. Take the exact same affiliate program , apply it to some other SaaS app, and it completely fails.

Even worse, there’s always a learning curve with each channel.

The first time you jump into a new channel, you’re not going to do well. You not only need to learn the fundamentals of that channel, you also need to learn how your market responds to it.

This takes time and money to work through.

The only way to hack this learning curve is to find someone with experience in the channel AND your market. You can’t just get by with experience in a particular channel since that channel may not work out for you. But if you can only choose one (market or channel), find someone with experience in your market. Find the channel experts after you’ve already validated the channel and know it’ll produce profitable customers consistently.

You need to run through as many channels as you can. Test each of them thoroughly enough to make sure that any failures are the result of a poor channel and not poor execution.

With deep pockets, this isn’t a big deal. Minimize your bets so you can repeatedly test different combos until you find one that produces plenty of customers. Once you’ve got one channel going, build out dedicated sales and marketing teams to optimize and scale your paid engine.

But for startups with a limited run-way, getting through the learning curve on each channel can really suck. If you don’t move fast enough, you won’t find the winning channel before you’re out of cash. Remember that the best way to hack this process is to find someone with experience in your target market. They’ll be able to get you headed in the right direction.

Once you do find a great channel to grow from, it’s not all gumdrops and roses. Every channel has diminishing returns. You can only acquire so much traffic, buy so many ads, or run so many campaigns at a given time. Deeper pockets don’t solve this problem. Each channel has a cap on growth no matter how much cash you have at the ready.

So as soon as you find a great channel to build from, start experimenting with others to keep you growing after you hit the cap on the first.

Keep these points in mind if you go down the paid engine road:

  • It’s a margin game, make sure you can afford what you’re buying customers at.
  • Every channel works differently for each market. Just because a channel works in one market doesn’t mean it will work in yours.
  • Be wary of the learning curve in each channel. Make sure poor channel performance is from a bad fit with your market instead of poor execution.
  • To short-cut the learning curve, find someone with experience in your target market (experience with a particular channel isn’t good enough).
  • Great channels only get you so far, you’ll hit diminishing returns sooner or later. Find new channels of growth before you need them.

Building Both Growth Engines

You can build both engines. But you can’t excel at both.

This comes down to priorities. Pure and simple.

You won’t be able to build a world-class paid acquisition team while building a world-class product. Not only will you push your team in too many directions which prevents world-class execution, you’ll face plenty of decisions that force you to make trade-offs between each.

How hard do you push your sales and conversions? Do you use every spammy tactic out there to drive conversions at all costs and minimize your cost per acquisition? Or do you take it easy and focus on product? You’ll need to draw the line somewhere. You won’t be able to position yourself as the “amazing company that bends over backwards to delight customers” while spamming them upsell offers.

Think of it as a continuum. At one end of the spectrum, you have a 100% paid engine business. Your product might suck or it’s just average. But you’re able to achieve great growth rates because your have your marketing/sales machine DIALED. You’re squeezing every penny out of your acquisition process. Plenty of companies go this route.

Or you could build a 100% organic engine and focus entirely on the quality of your product. You won’t even have a marketing team. And if you dominate your industry, you’ll be able to brag about how you had a $0 marketing budget the whole time.

Either option can work well but you won’t be able to do both at the same time.

You can also blend them, maybe 70% organic and 30% paid. Build a great product that’s a clear priority for your team but you also do a few core marketing projects exceptionally well. You’re not building a paid engine at all costs, it’s there to support and accelerate an already thriving organic engine.

Apple is a blend. Obviously, the vast majority of their resources go into their products. But they also do a great job at a few key marketing tasks. Not only do their product announcements capture the attention of the entire tech industry, they’ve run great television ads like Get a Mac (I’m a Mac), Think Different (Crazy Ones), or even their newer Intention ad. They’ve made their organic growth engine the priority while spending at least a little time doing an excellent job at a few key channels.

Whichever route you decide to go, make sure to make it clear which one is your priority. When it comes time to make sacrifices, which engine gets the goods? Are you going to double down on product or hire that ace growth hacker that will drive conversions at all costs?

The Growth Blend that I Recommend

When you first get traction for your business or are trying to accelerate an established business, make sure that you have some organic growth. This doesn’t need to be industry-shattering growth but you should still see a bit of growth if you take your foot off the marketing peddle. This way you know that you have a solid product and that people want to talk about it.

Marketing gets so much easier when you build from a foundation of a great product. If your product sucks, it’s still possible to grow but your margin of error is razor thin. So start with a great product as your foundation.

Then build out marketing/sales teams to test channels, find the one’s that’ll scale, and optimize your acquisition strategy.

This would break down to a 80/20% blend. Product is the priority with marketing accelerating growth at a few key leverage points.

This is the most consistent path to growth that I’ve seen. Start by building a great product then build a focused machine to funnel customers into it as fast as you can. It’s also more fun since you’re growing a product people love, helping people solve problems, and don’t need to resort to spammy strategies.

This isn’t the only path. Pick the one that fits the vision of your company the best.

The Most Reliable Growth Hack for SaaS

By 6 Comments

Growing a business requires countless small-wins that add up to some very big victories.

But there is one change that REALLY moves that needle.

It doesn’t just move the needle, it crushes it.

And what might that one little change be?

Your price.

Double it.

That’s right, double your price.

You see, we have a nasty habit of undervaluing our services. This is especially true for first-time SaaS entrepreneurs. Most of us are down-right SCARED to price our product. Who am I to ask for so much? And if I ask for less, I’ll get more customers!

So you end up pricing your product at $10/month.

Wrong, wrong, wrong, so completely and utterly wrong.

If you haven’t tested different prices yet, the odds are incredibly high that you’ve under-priced your services. This isn’t just hurting you, it’s also hurting your customers.

You’re doing your customers a disservice if you don’t charge them enough. Yup, you’re hurting your customers. Why? Two reasons.

1) Reason Numero Uno

With lower margins, you’ll have less cash to invest back into the business. This means a worse product, worse service, and customers that don’t receive as many benefits from you as they could. There is absolutely nothing wrong with charging more especially if you pile that extra cash back into the business.

2) Reason Numero Dos

Different prices give you different customers. In general, the lower your price, the more demanding the customer.

Their are people out there that genuinely want to pay you what you’re worth. They have real problems and need real solutions. You want these customers, you love these customers. And they love you.

But you’ve also got a bunch of customers that will never appreciate what your product does for them. They complain, submit back-to-back support tickets all week long, and demoralize your team because they’ll never be happy. When you lower your price, you attract a LOT more of these customers. Which prevents your team from focusing on the customers that are actually a perfect fit for your business. This leaves everyone disappointed.

I know it’s scary. But here’s what you get when you double your price:

  • The single biggest increase in revenue you’ll ever see form one change.
  • Better customers.
  • More cash to invest in the business.

If these benefits don’t tickle your fancy, I don’t know what will.

Won’t you get fewer customers?

In most cases, your conversion rates won’t drop at all. And if they do, it’s by a marginal amount. The increase in revenue will more than make up for it.

What if it doesn’t go well and conversions plummet?

Then just reverse the change.

Don’t take my word for it though. Test the new price for a month and see how your signups and conversion rates change. It’s pretty easy to reverse the price change if things don’t turn out to be so rosy. Any customers you acquired that month would be more than happy to get moved to your old, cheaper plans.

When won’t this work?

If you’ve already raised your price a couple of times, you’ll want to be more careful. You’ll be much closer to your market sweet-spot and it won’t take much to push your prices too high.

This also depends on your company strategy. Your long-term vision might be to provide a great SaaS product for small businesses like Constant Contact and Intuit have. In this case, another jump might price yourself out of the market. So be careful.

But if you want to move up-market and go after bigger fish, raise your prices as high as you think your product can currently justify. Then raise them again when you improve your product. Race to the top my friend.

It’s also not a sure-win if you have lots of experience with pricing and/or your market. You’ll get a lot closer to the ideal price on day one.

Won’t people notice the new price and complain?

Nope. No one will notice.

As long as you grandfather all your old customers in and keep their subscription fees the same, not a single person will care. If someone does happen to notice, simply give them the lower price and call it a day.

Go double your price.

The potential rewards are huge and there’s very little risk. This is one of the few bets you can make that have a ton of upside with very little downside.

Solving Some Problems KILLS Your Business

By Leave a Comment

Like naive, overly ambitious college students…

My buddy and I were brainstorming businesses we’d like to start.

With a ready supply of beer, we starting plotting which companies would get us started on the path to world domination.

Before long, we finally come up with an idea that we just LOVED.

A bit of context: this was right around the time that gamification was all the rage. Everyone was talking about how to incorporate game mechanics into their own product, hack user behavior, and make just about anything highly addictive.

So we figured we build an entire product around gamification.

Our Glorious Business Idea

Here’s the idea: Manpoints.

That’s right. We were going to build a platform where you could track your man points. As you completed manly achievements, you’d acquire man points for your profile. It would include things like:

  • Deadlifting 400lbs
  • Building your own furniture
  • Changing your own oil

There would be hundreds of these achievements. Users would track their points, compare their “manliness” to friends, etc. All the typical social media hoopla.

What was the business model? Psssh, we didn’t have one. Let’s just build something and figure out the revenue part later. Twitter did it, so can we!

The idea is ridiculous.

But that’s not the point. Your first business ideas are always ridiculous.

The main lesson is where I decided to focus my energy.

Getting Distracted by the Wrong Problem

Once we had the idea, we started brainstorming ideas for the product. Which kind of feats would reward points, how leaderboards would work, etc. I even built a mind map of all the different achievements. Most of this time was a complete waste, I realize that now. But it got even worse.

Somewhere along the line, I got CRAZY worried about what would happen when people started cheating. It would completely ruin the product!

We didn’t even have a single user at this point and I’m spending countless hours trying to figure out how to keep people from cheating.

There’s nothing for them to even cheat yet. That didn’t stop me.

I started researching how other companies had dealt with cheating. I even found an interview with Dennis Crowley, the CEO of Foursquare, on how they handled it.

How could we confirm user achievements? Could we use algorithms to locate abnormal user behavior and locate cheaters?

What a complete waste of time.

Not only do we have a ridiculous idea. I’m losing sleep over a hypothetical problem for a non-existent product.

World domination here we come!

You see, instead of trying to figure out whether there was a market for this idea, I got wrapped up in the wrong problem.

Don’t Just Solve Problems, Solve the Right Problem

For a new business, it’s life or death. You have an incredibly short window to validate your idea and gain traction. Otherwise, you won’t have the energy and resources to survive.

Your business will always have more problems than it can ever hope to solve. Competitors are right behind you, the 800lb industry gorilla starts going after your niche, product improvements take much longer than they ever should, and everyone seems to be giving you contradicting feedback.

Even for an established business, focusing on the wrong problem leads to stagnation and eventually failure as your market leaves you behind.

To get to the next level, you need to be able to cut through the noise and focus on the most critical problem for the stage that your business is in.

More importantly, it requires that you allow other problems to persist.

They’ll stare you in the face, bugging and nagging you every day. You have to let them go.

Because if you don’t carve out enough time for your team to focus on THE critical problem of the moment, you won’t live long enough to fix anything else.

Take my Manpoints idea. Did we ever get a single user? Nope. Did we ever build an initial prototype? Nope. Did we even get feedback from a single person it? Nope.

I got dragged into an irrelevant problem and we never even got around to validating the idea. Who knows, it might actually work. But I don’t know whether or not people would have liked it because I spent time on the wrong problem.

And here’s the bad news.

It never gets easier. In many ways, it gets harder. Each new stage brings a deeper level of complexity, more moving pieces, and the constraints that previous decisions have forced upon you.

So enjoy the problem you have now. Focus on the right one. And look forward to the increased challenge of problems to come.

It’s easy to list out problems that need to be solved. The art is knowing which one requires your undivided attention at this point in time.

The 17 Copywriting Axioms of Joseph Sugarman

By 11 Comments

Who is Joseph Sugarman?

Well, he’s considered one of the best copywriters of all time. He’s up there with David Ogilvy, Eugene Schwartz, and John Caples. He’s the real deal.

And he happened to write a book on copywriting that has become a classic. It’s easily one of the top 5 books on copywriting.

In Advertising Secrets of the Written Word, he breaks down his approach to copy so that you can replicate it. Within the book, he includes 17 axioms of copywriting. To write copy as persuasive as Sugarman’s, this is where you want to start.

I’ve gone ahead and copied each of his axioms here.

So if you want to write better copy that gets you more customers, I’d staple these to the wall behind your desk:

1. Copywriting is a mental process the successful execution of which reflects the sum total of all your experiences, your specific knowledge and your ability to mentally process that information and transfer it onto a sheet of paper for the purpose of selling a product or service.

This is Sugarman’s definition of copywriting. Basically, it’s the process of putting your knowledge and experience in writing in order to sell a product or service.

2. All the elements in an advertisement are primarily designed to do one thing and one thing only: get you to read the first sentence of the copy.

Your entire ad is designed to do one thing: get people to read the first sentence. This is why people include giant, bold headlines. If you can’t get people to start reading your ad, you’ll never persuade them to buy from you. Never design an ad that distracts people from reading the first sentence.

3. The sole purpose of the first sentence in an advertisement is to get you to read the second sentence of the copy.

There’s a lot of formulas out there on how to write headlines and start your copy. But at the end of the day, all it really needs to do is to get people to keep reading. Grab people’s attention with the first sentence and set the stage so that they’ll want to keep reading.

4. Your ad layout and the first few paragraphs of your ad must create the buying environment most conducive to the sale of your product or service.

As you get people to start reading your copy, the next goal is to create what Sugarman calls a “buying environment.” This includes the copy, the layout, design, everything in your ad. The rest of these axioms will help you create that buying environment.

5. Get the reader to say yes and harmonize with your accurate and truthful statements while reading the copy.

As people read your copy, they should say yes to each of your statements. All of your claims should resonate deeply with them. The goal is to write from their point of view so that they get the feeling that you know exactly what they’re going through. This is only possible when you put in the time to deeply understand your customers. The easiest way to do this is by talking to them in person and asking them about their problems.

6. Your readers should be so compelled to read your copy that they cannot stop reading until they read all of it as if sliding down a slippery slope.

Your copy needs to be so compelling that people can’t stop reading. Do this by leading with a personal story, give hints about what’s coming later, or not completing answering a question. Give people a reason to want to keep reading.

7. When trying to solve problems, don’t assume constraints that aren’t really there.

When writing copy, none of us know what will truly work. The only way to find the best solution is to try different approaches. So experiment with your copy and make sure you can measure it to see which versions work the best.

8. Keep the copy interesting and the reader interested through the power of curiosity.

By building curiosity in your copy, you’ll easily get people to keep reading. Sugarman relies heavily on curiosity to keep people reading and it can be a very powerful tool. But make sure you’re using curiosity to attract the right kind of customers for your business. Using massive amounts of curiosity will get you plenty of attention but it won’t do you any good if it doesn’t produce valuable customers.

9. Never sell a product or service, sell a concept.

The benefit of the product is far more important than the product itself. So pay close attention to your positioning and unique selling proposition.

10. The incubation process is the power of your subconscious mind to use all your knowledge and experience to solve a specific problem, and its efficiency is dictated by time, creative orientation, environment and ego.

After you’ve put together all of your notes and done your customer research, take a break. This will give your subconscious time to work through the problem and come up with the best approach for your copy. When you’re ready to start writing, let the copy pour out of you. Don’t worry about grammar or anything else. Your job is to get everything that’s in your head on paper. Editing comes later.

11. Copy should be long enough to cause the reader to take the action that you request.

If you need long copy in order to sell effectively, use long copy. Some products don’t need long copy like a bottle of Coca-Cola. All people need to know is where they can get it, that it’s cold, and the price. But other products will need to take people through an entire sales process before anyone will be willing to buy. Use as much copy as you need in order to make the sale.

12. Every communication should be a personal one, from the writer to the recipient, regardless of the medium used.

Your copy should be in the first-person. We don’t connect with amorphous “brands.” We connect with people. Make your copy personal so that readers feel like it was written directly to them from someone else.

13. The ideas presented in your copy should flow in a logical fashion, anticipating your prospect’s questions and answering them as if the questions were asked face-to-face.

Each new claim should logically flow from the previous one. If you jump around between all sorts of different ideas, people will get confused and feel like you’re trying to trick them. Keep it simple by moving people from one step to the next.

14. In the editing process, you refine your copy to express what you want to express with the fewest words.

The most important role of editing is to remove unnecessary words. This makes your copy more persuasive and easier to read. A lot of people skip this step and end up with rambling copy that doesn’t get great results. The best copy has been edited and refined countless times.

15. The more the mind must work to reach the conclusion successfully, the more positive, enjoyable or stimulating the experience.

You can’t just grab people’s attention, throw out some basic copy, and hope for the best. You need to engage people and get them to form their conclusions with you. If copy is too obvious, people will feel dumb or bored. Then you lose them. Build some intrigue into your copy.

16. Selling a cure is a lot easier than selling a preventative, unless the preventative is perceived as a cure or curative aspects of the preventative are emphasized.

People don’t care about prevention. They’re not willing to spend money to prevent a problem they don’t have yet. Cures on the other hand sell VERY well. Even if you have a preventative service or product, you want to position it as a cure instead of a prevention.

17. Telling a story can effectively sell your product, create the environment or get the reader well into your copy as you create an emotional bonding with your prospect.

People love stories. It’s the single best way to communicate a message and persuade people. Whenever you get stuck and don’t know what to do with your copy, start with a story.

There you have it.

The 17 copywriting axioms of Joseph Sugarman.

If you want to dive into all this and get better at copywriting (one of the most important skills in business), I highly recommend picking up Sugarman’s book.

The hardback version of Advertising Secrets of the Written Word can be pretty hard to get your hands on (copies usually sell between $50 and $300). But the publisher just released a Kindle version for $10.