In the past, I have written about the importance of storytelling. Companies often tell the same stories over and over to signal what is important to the company and why it exists. But I want to provide one bit of caution around something I call the “Golden Story”.
I have worked for a number of high-growth software companies – most of them private companies that were working against the odds every day, trying to secure more customers and new financing. One of the things we would be desperate for was some external validation that our product/market fit was on point. “Product/Market Fit” means that there was a 1) demonstrably large market with a particular problem, 2) that market was providing indicators that it was willing to spend money to address that problem, and 3) participants in the market had selected our product and used it to successfully address the problem.
Since a lot is riding on a young company proving product/market fit, we treated any story that validated our product like gold – and inevitably, we would hear such a story. Perhaps a customer had a great outcome when they used our software exactly as designed, or maybe a major customer had licensed our technology at a high price. It’s natural to love stories like these and to re-tell them.
But in retrospect, sometimes these stories can be false signals, and false signals can lead to bad events. Here are some indicators that the Golden Story you’re telling is a false signal in disguise:
- The recurrence of the story is limited. You keep telling the same story over and over. It is rarely supplanted by new versions.
- The sample size is minuscule. It’s one company out of a thousand. It’s one user out of a million. You make it seem bigger.
- You’re overly elated. It quiets your doubts, but if you’re honest, you’re pretty surprised.
When I need some fresh air and a mental break I like to go out on a walk and listen to a podcast (note: I will pull together my favorite podcasts for a future post). I find podcasts to be an excellent way to listen to engaging information on my schedule. Since I spend a lot less time in a car than most people (my commute to work involves walking down some stairs to my home office) I don’t listen to podcasts in the car as many people do. But for me, listening to great content while moving my body is relaxing and engaging at the same time.
On a recent walk I was listening to this episode of Tim Ferriss’s podcast. It was a short recording where Seth Godin answers a number of questions and basically holds forth for thirty minutes or so on a range of topics.
One of the questions Seth addresses is the creation of a “personal brand”. Seth emphasizes that good brands deliver what the customer needs and does so consistently.
Story setup: Seth got started in 1986 selling books to book publishers. According to Seth, in 1986 “book publishers needed more books than they had”. Seth and a team of people created books that Seth tried to sell to the book publishers – who rejected him “again and again and again and again” until he crafted his message “in a way they could hear me”.
Here’s Seth (bold text is for my emphasis):
It takes a village to raise a child, as they say. But the same might be said about pricing – although I admit that the phrase “it takes a village to establish a price” is a bit less lyrical than the child-raising version. Nevertheless, pricing is a community event, which flies in the face of how many companies approach their pricing strategy.
In general, there are two broad approaches to pricing: cost based or value based. Cost based is the process of counting up your costs, adding some margin, and, voilà!, there’s your price. Value based, on the other hand, looks at the value the buyer gets from your service and from there designates some percentage of the value the buyer is gaining.
It’s common in pricing discussions to champion the value-based approach. It seems fair and usually yields a better return to sellers.
But pricing doesn’t exist in a vacuum. It exists in markets that have these annoying entities called “competitors”. I think this is an area where all of the academic treatises on price theory have their tables and graphs punctured. A common joke is that business would be a lot simpler if it wasn’t for those darn customers. Similarly, pricing would be a lot easier if it wasn’t for those darn competitors.
It’s pretty rare for a salesperson to be sold to, but often when I’m on the receiving end of a pitch I “re-learn” something that I may have forgotten. If you are a human – and this blog is exclusively created for humans only! – then there are likely a lot of things you “know” but have sort of forgotten. Maybe you’ve gotten lazy. Who knows why we’re like this? Why do NFL players demonstrate sloppy tackling during a Sunday game? They’re professional football players, for crying out loud! It must be part of the human condition. But let’s get back to the pitch.
I was on the phone with a SaaS company recently that was pitching a big upgrade for our company. The associated cost was high enough that I wanted to spend time finding out what we’d “get” in the upgrade. The call was frustrating for all of us, and the main reason was that they were focusing on the “what”, and I was interested in the “why”.
The more they gave me a list of features the upgrade would include, the more I struggled to understand why there was an underlying ROI or business benefit for me. And the more I probed, the more exasperated they seemed to become, like I was a slow learner – which may very well be true, but if as the buyer I don’t “get it”, then they don’t get a sale.
There’s an old sales adage that “features tell, and benefits sell”. All companies operate basically the same way: you design something for a market, you build it, you sell it, you service people who bought it, you get insights from your target market, and your loop those learnings into your design. Aside from corporate functions like HR or finance, pretty much every job supports one of those activities.