From 0 to 1: unlocking the secrets of business and the future

Chapter 19 Customers will not automatically come to the door (2)
In 2008, Box developed a cloud service for storing data safely and conveniently.But people don't know they need such a product -- because cloud computing hasn't caught on yet.That summer, Black was hired as Box's third salesperson to help improve the situation.Starting with a small group of customers with serious file-sharing issues, Box's reps connected with a growing number of users at each customer company. In 2009, Black sold a small Box account to the Stanford Sleep Clinic, where researchers needed a more convenient and secure way to store records of experimental data.Now Stanford University provides a Stanford Box account for every student and faculty member, and Stanford Hospital also uses the Box system.If Box had gone straight to the principal in the first place, based on an enterprise solution for the whole school, it would have gotten nothing.Complex sales would have made Box a forgotten startup failure; people sales would have made it a multibillion-dollar winner.

Sometimes the product itself is a sell. ZocDoc, a Founders Fund-backed company, helps people find and make appointments with doctors online.The company charges doctors several hundred dollars a month to join the company network.With an average transaction value in the thousands of dollars, ZocDoc needed a large number of salespeople, and the company created an in-house recruiting team to do just that.Sales to doctors not only bring in revenue, but more doctors make the product more valuable to customers (and more customers attract more doctors).More than 500 million people use the service every month, and if it continues to scale to include most practicing physicians, it will become a foundational utility for the U.S. healthcare industry.

sales blind spot
There is a blind spot between personal selling (which requires a salesperson) and traditional advertising (which does not require a salesperson).Suppose you develop a software that helps convenience store owners track inventory and manage orders, but such a product worth about $1000 does not have a complete sales channel to connect with small businesses with purchase intentions.Even if you have a clear value proposition, how do you get people to understand it?Ads are either too broad (there is no specific TV channel for convenience store owners) or too ineffective (an ad in Convenience Store News isn't enough to convince a convenience store owner to spend $1000 a year).The product requires personal sales, but judging by the product pricing, you probably don't have the money to send a salesperson to talk to every potential customer.That's why so many SMBs don't use it in the ways that larger corporations take for granted.It's not that small business owners are outdated, or that there are no good ways, but that there is an invisible bottleneck in sales.

Marketing and Advertising

Marketing and advertising are extremely effective for low-priced products that have broad appeal but lack a viral approach.Procter & Gamble (P&G) can't afford to pay a salesman to drive door-to-door laundry detergent (P&G hires a salesman to communicate with grocery chains and big box retailers because a single transaction with these customers means 10 bottles a gallon of laundry liquid sales).To reach end users, consumer product companies have had to run TV ads, print coupons in newspapers, and craft eye-catching packaging.

Advertising works for startups too, but only if the customer acquisition cost and customer lifetime value are not economical in any other promotion channel.Consider e-commerce start-up Warby Parker, which designs and sells stylish prescription eyewear online without signing up with an eyewear retailer to resell the product.Each pair of glasses starts at $100, so assuming each customer buys a few pairs of glasses in their lifetime, the company's customer lifetime value is only a few hundred dollars, and there is no need to send salespeople to negotiate every transaction, but on the other hand, A $100 physical product isn't going to go viral.That's why Warby Parker puts a great, affordable option in front of millions of customers with ad campaigns and unique TV spots.The company's official website bluntly says, "TV is a huge amplifier," and when you can only afford a few dozen dollars to win new customers, you need to try to find the biggest amplifier.

All entrepreneurs are envious of a high-impact ad campaign, but startups should resist the temptation to compete with larger companies in advertising and not get caught in an endless race to see whose ad is the most memorable or whose PR stunt is the best , which is a matter of experience.At PayPal, we hired James Doohan, who played Scotty on Star Trek, to be our official spokesperson.When we launched the first software for the Palm Pilot, we held a press conference where you could hear James say, "I've been teleporting people all my career, and this is the first time teleporting money." The event was such a flop that none of the few journalists present at the press conference responded.We are all technical elites, so we think that Scottie, the chief engineer, is more authoritative than Kirk, the captain in the play. (Like a salesman, Kirk is always showing off in weird places, waiting for an engineer to help him out of a mess he got into by mistake.) But we were wrong: Priceline.com Casting William Shatner (the actor who played Kirk) in the famous TV series commercials worked well.But by then Priceline was already the industry leader.Early-stage startups can't match the advertising budgets of big companies, and can't afford Captain Kirk.

Viral marketing
A product can only go viral if its core functionality encourages users to invite other friends to become users.This is why Facebook and PayPal have grown so quickly: every time someone shares or pays with a friend, they automatically invite more people to join.This is not only low cost but also fast.If each new user invites more than one more user, you can achieve an exponentially growing chain reaction.The ideal viral marketing loop should be as fast and frictionless as possible.A funny YouTube video or Internet meme can quickly rack up millions of views because of its extremely short cycle time: people see a kitten, feel warm, and send it to a friend within seconds.

At PayPal, our initial user base was 24 people, all PayPal employees.Attracting customers through advertising costs too much.However, by paying users to sign up directly, and then passing on the profits to users to invite partners to sign up, we have grown rapidly.This strategy cost $20 per customer to acquire, but resulted in a 7% increase per day, meaning users doubled every 10 days. After 4-5 months, we have tens of thousands of users.We built a best-in-class company on a real opportunity by offering money transfers for a small fee that ended up being far more than the cost of customer acquisition.

Whoever occupies the market segment with the prospect of viral marketing first can become the finalizer of the entire market.At PayPal we don't just add customers at will, we win the most valuable customers first.The most obvious market segment for the mail-to-pay system is the millions of immigrants who still use Western Union to send money home.Our product is simple and convenient, but the usage frequency of this group of users is too low.We needed smaller niche markets with faster cash flow - and we found it with eBay's "Power Sellers," the 2 specialist suppliers who sell goods online through eBay's auction marketplace.Most sellers close several deals per day and buy and sell in equal numbers, meaning there is a constant flow of payments.These sellers became extremely enthusiastic early adopters of our product because eBay's own solution to the payment problem was abysmal.Once PayPal occupies this market segment and becomes eBay's payment platform, PayPal will be invincible all over the world.

The Power Law of Sales
No matter what business you do, one of the above methods is the most effective, and that is the power law of product sales.This is counter-intuitive to most entrepreneurs, who always think that more sales tactics are better, but the hodgepodge approach-hire a few salesmen, place ads in magazines, and try to add some follow-up functions to the product , allowing it to go viral - doesn't work.Most companies don't have an effective sales channel, and the number one reason they fail isn't bad product, but bad sales.If you have an effective sales funnel, you can succeed.If you've tried multiple sales channels and none of them have worked, you're waiting to close.

Selling to someone other than the customer
Companies need to sell more than just products, you have to sell your company to employees and investors.There’s a “human resources” version of the lie that a good product doesn’t need to be sold: “Our company is great, and people are jumping in.” There’s also a fundraising version: “Our company is so good, investors are pouring in.” Crowd And scrambling to describe it vividly, unless there is an elaborate recruitment plan and deep sales, this will not happen.

Selling your company to the media is a necessary prerequisite for selling to other people.Out of instinct, technical elites do not trust the media and often make the mistake of ignoring the media.But just as you wouldn't expect people to buy a premium product on the basis of its outward merit alone without any promotional strategy, you wouldn't expect people to appreciate your company without a PR strategy.Even if you don't need media exposure to win customers because you have a viral marketing strategy, the media will help you attract investors and employees.Any potential employee worth hiring starts by learning about the company, and what he finds online about the company is critical to your company's success.

you are the salesperson
The tech elite wish sales could be ignored and exiled to other planets.We all think that we are the ones making the decisions and that sales are of no use to us, but that's not true.Everyone has a product to sell—whether it's an employee, a founder, or an investor.This is true even if your company is just you and your computer.Look around, if you don't see a salesperson, then you are.

(End of this chapter)