What if you decided to provide something tremendously fantastic for your customers, even though it meant great expense and hardship?
This one thing would be incontrovertible — you’d refuse to compromise on that one thing, even if it seems impossible to work out how to do it profitably.
It’s easy to identify companies who became wildly successful with this technique. Of course this is Survivor Bias at it’s finest; these examples don’t prove this is a great strategy, they just illustrate that it can work:
- Zappos decided to sell shoes over the Internet, even though it meant eating shipping costs as customers tried shoe after shoe, constantly returning merchandise on the basis of fit or look. The convenience of online shoe shopping is a game-changer — to the tune of billions of dollars of revenue — but how could they make up the costs?
- NetFlix decided to rent out DVDs by mail for a flat monthly rate despite massive postage and logistic costs, loss from damaged disks, and people duplicating 30 disks a month for $29.95. Customers gleefully avoid the Blockbuster none-of-these-look-good-just-pick-one-already-zombie-walk — and NetFlix just put Blockbuster out of business — but is this a workable business model?
What’s the upside of sticking to “fantastic” even when it doesn’t seem sustainable?
- Word-of-mouth by definition. Since I defined the Something Awesome as being holy-crap-you-have-to-be-kidding-me good, word-of-mouth “advertising” is automatic. You don’t even need your own Twitter account and Facebook page and WordPress blog because your customers will spread the love for you. If word-of-mouth can replace 90% of your advertising/marketing budget, maybe you can use that money to address the challenges of extra expenses.
- Easy to get free press. For the same reason that customers want to tell their friends, the press will find your story worth retelling.
- Naysayers stifle competition. When everyone else thinks it’s impossible, they’re welcome to sit on the sidelines and watch you kick ass, just as Blockbuster watched NetFlix steal customers by the millions. Every time an MBA says “no” while a customer says “yes,” you’re increasing your lead.
- “I can’t believe they can afford do it!” That’s what most people say about NetFlix and Zappos. Of course if that turns out to be true it means a bankrupted business, but if you pull it off… isn’t that one of the highest compliments a customer could ever pay a company? It has the ring of loyalty and delight. I’d rather that testimonial than “It’s a great ROI.” Snore.
- Easy to attract passionate employees. Everyone wants to work for a company doing something genuinely wonderful for the world, and stellar people have their pick of where to work. An amazing concept means you can attract the best talent who are emotionally committed to making the company succeed.
- Fun. In the emotional turmoil of a startup it’s easy to forget that you’re supposed to be having fun now and then. Blowing people’s minds by doing something awesome is a blast.
Sounds like a slam-dunk, so what’s the downside?
A swift death, of course. Since you’re riding on the edge of impossible, it’s quite likely you’ll end up running a charity instead of a business. If expenses are unsustainable, if you can’t innovate around the obstacles, then you run out of money. Simple.
Of course most startups terminate this way anyway don’t they? Turning a profit at a growing company is nearly impossible regardless of business model. Since it’s already difficult, why not at least give yourself an edge in having the Fantastic Thing?
At least those internal hardships — logistics, expenses, processes — are all under your control, which means you have a decent shot at addressing them. Think of all the difficulties you don’t control — competition, changing markets, new technology, fads — all of which have equally significant influence over the fate of your business. Given that, at least this challenge is something you can understand and manipulate!
And if you fail, why not at least have failed at something worthwhile?
Looking back, I wish I had done this more, and I pledge to do it in future. In fact, at WPEngine we’ve built this idea into our culture. What we’re doing today:
Ridiculously generous customer service. We do things for free that our competitors charge $150/hour to do, such as harden our customer’s blogs against hackers, implement methods to speed up their page-load times by many seconds, replace plugins with better ones, help debug custom code, and educate our customers on better ways to use WordPress.
Instead of nickel-and-diming customers, we earn their loyalty by genuinely improving their blog, not just supplying bandwidth and a CPU. Our customers are happy paying a little more per month than our competitors because in their first month hosting with us they’ve already gotten more from their dollar than they ever did with another hosting company.
And then here’s something we aspire to, which other companies in our space like Automattic and WooThemes have already engrained in their cultures:
Contribute everything back to open source. Traditional businesses drenched in outdated notions of the value of intellectual property would be horrified to learn that a company would give away their software for free. We should build our own WordPress plugins and make them open-source and free. We should find and fix bugs in WordPress plugins that we didn’t write and contribute those back to the original authors and the community at large. The IP attorneys would say that we’re bleeding assets, but what we’re actually doing is earning the respect, attention, and sometimes even love from the entire WordPress community. We’re earning it — not buying it — because we’re true contributors, not leaches.
I hope this is sustainable, but is it? After all, quality technical support requires an army of quality technical people, and those don’t come cheap. But already we’re seeing the side-effects of some of those benefits above. In our recent hiring spree we found terrific folks willing to work with us at less than market rates because they believe in what we’re doing and what we’re trying to be.
Even if it’s not sustainable, it’s still easier to pivot. For example, if we’re able to deliver amazing service and it turns out to be too expensive in human costs, we can pivot the target market and charge more. Yes we’ll lose some customers on the low end, but our larger customers have already told us they’d pay more. I’d rather have fewer customers who love us to death than more customers who constantly argue about price and view us as a fungible vendor.
We’ll see. But I’ll tell you this: Even if we fail — and with our current growth rate failure doesn’t seem likely — I’ll be proud of everything we did.
And that counts too.
Let’s continue the discussion in the comments. What are other techniques or examples? Am I discounting the downsides?