2x billion-dollar founder: The unexpected way to win customers | Jason Cohen

When a product published the negative reviews and made them just as visible as the positive reviews, sales went up and returns went down. Now, with physical products, returns are devastating.

If the answer is yes, then it's like, "Well, then it's on you." If the answer is no, that doesn't prove the niche doesn't exist, because maybe the whole point is it's untapped and you're ready to tap it.

I appreciate it. And I don't know if people do have long attention spans. The people that read my stuff do, and that's not most people. So maybe it'd be way more popular if I would just stop writing full sentences and things like that. I also like the word "unbeknownst" because "beknownst"—

Yeah. I love words like that where the opposite isn't really a word somehow.

Like you can be uncouth, but you can't be couth.

"That guy, he's couth." That's not—

Strategy. Yeah.

Well, I like the idea of ending on something personal. So much of the book is very tactical: finding your customer, analyzing profit and pricing. Of course, this is all very important and mostly what we want to do, but I thought ending on a personal note would be powerful. You know, it's so funny. Early people who read the book sometimes said this should be the first chapter: it should start with you and who are you and how does it set your direction, and then move on. Maybe they're right, but it was also nice to bookend. So who knows? Typically when you hear about strategic development, you start with things like what's in the market, what are people doing, who are the existing competitors, how's the industry moving. Obviously all that has to be part of strategy because it's true and you have to live in the world and somehow fit in there.

Very little is about yourself and how you fit in, how to leverage your own strengths and bypass your weaknesses or make them irrelevant, so that the strategy is not just a good strategy for a company, but right for you so that you're the correct person to run this. You do hear this sometimes. It's not like I'm the first one to say that, obviously. It's almost like the Art of War stuff, right? Attack where you're strong and they're weak. It's exactly that, but applied to you, right?

Or vice versa: if you're really a bootstrapper and that's what you are at heart, and it's like, no, you should go raise money. So the fact of strategy is all these things are true simultaneously, and one of the reasons it's hard is that you're having to synthesize all these different things at once and come up with one set of what is important, what major decisions am I making so that I can win. That's what strategy is, right? So it does have to match your strengths and weaknesses, otherwise it's not good for you. It does have to match what customers want to buy, obviously, or else you have a project on GitHub and not a company, and so forth. There's very rarely an actual solution to all the equations. Instead it's: well, what space am I going to be in that's close enough, and I'll figure it out. Part of the challenge is there's all these competing things that you have to solve for. So you could start anywhere and grow anywhere else. You could start at the market and grow towards yourself. You could start at who you are and what would make sense for you, and grow into who would love me for who I already am.

And so the suggestion in that last chapter is maybe that last way is right: who am I, where am I strong, and who already loves that? Because why shouldn't that be my initial best customer? I could grow and change from there—both myself and my team and my product—but shouldn't I start at a place where they already love me for that? The other thing is it's pretty easy to say, "Well, I'm good at this, and so the product should do that." But the weaknesses is where I think people get tripped up. One common thing is to think you need to alleviate all of your weaknesses, which of course you can't do and you don't need to do. It's easy to see companies where they were weak at many, many things, and yet they succeeded anyway. So often it's that you're so strong at something, maybe just one or two things, that it overwhelmed the fact that you were so terrible at everything else. And so fixing some of those other things is not really the job. The job is to find those one or two critical things where you're going to win despite that other stuff. If you can find that within yourself so that it's more natural, so that you're naturally better at it, so that you have motivation and energy for it even when it's hard, and because you're leaning into that, nothing's guaranteed, but now you're setting yourself up at least for some of those variables falling in your direction. You still have all the other problems, but at least these are falling your way.

Let me make it even stronger: they will love you because of your weaknesses.

Well, an example is good because otherwise it's just a stupid platitude that you put on Twitter and ignore. You go, "That sounds great," and then who cares? But let me make it concrete. I'm into tech pouches and dopp kits and all this stuff. I just like it.

So I have a bunch of these, and sometimes I buy them on Etsy because it's really nice having a handmade thing, and there's kind of a story behind it. When you buy it on Etsy, there's weaknesses there. It was handmade, so guess what? There's a loose thread out here that's maybe unraveling slightly, and the zipper over here isn't perfectly straight, and that's because it's handmade.

Now, these are weaknesses. If I went to a store and bought this and it was unraveling, I would return it. That's a quality defect. But with Etsy, that same weakness, that same defect—it's objectively a defect—I'm like, yeah, that's because it's handmade. That is evidence of the thing I actually wanted, which is that I'm supporting an artisan, a craftsperson. That's what I wanted to do. So not only is it not a weakness, it's positive evidence that I'm doing the thing I wanted to do. The value that I took out of the product, part of which is it's a unique product because someone made this by hand—so it's unique and handmade—that's the strengths that I'm leaning into, and that weakness is evidence that the strengths are real.

If it was perfectly made, how would I know it wasn't made in China, really? And so that's a specific example where a so-called weakness—or let's say in some contexts it's absolutely a weakness or a defect, but in other contexts it's at least neutral, if not a strength. I would say a lot of even entertainers, let's say on YouTube, maybe their production value is low, or their things are too long, or there's various things where you could say that's bad in some objective way, and yet that's part of who they are and why we like looking at them. There's a lot of realms where that's true. We don't have to take it too far and say every weakness has to be a strength. Let's not get carried away.

Sometimes those weaknesses are evidences of that.

Yeah, and a lot of people didn't. You said at the top of the call you love my articles and they're long. For a lot of people, it's a dealbreaker; they're not going to read it. I have had many people say that I should have ten times the number of followers on things like Twitter because it's so good. It's like, yep, but a lot of people don't want to read something in-depth and thoughtful. So for them, the length is a weakness. But for people who love it, they're like, "Thank God. It's like you and Paul Graham, and that's all I got." So it's a strength. That's it: who loves you for you?

The reason I'm hesitating is at SmartBear, I don't think it came out of alignment. At WP Engine, what happened is we grew so much that we were able to address more and more of the market. But when I say able, I mean things like we're investing multiple marketing teams, multiple sales teams, new account management teams, multiple support teams, multiple product engineering teams, all on this new segment. Now, when you put that much attention and investment, this is no longer, "You're not focused, you should focus." If you're investing tens of millions of dollars to intentionally do something for a reason, then sure. If it was just me by myself, that wouldn't be in alignment with me. But when you're doing it like that, that is the correct way to expand your market, expand the segmentation, because it's so intentional and backed by people that do know how to do that. That's totally different, so it wasn't a problem because it was so intentional.

I will say that right now I'm struggling—well, I guess I'm struggling with it. My blog is almost 20 years old, so I just don't worry about it. But I have this podcast, or a show—it is also a podcast—called Smart Bear Live. It's a unique format where there's several founders in a room and we pick up one founder's company and problem, and we workshop it for like two hours. There's almost no production, almost no editing. You're just a fly on the wall as real founders actually struggle with real puzzles, and it's like two hours long. Now, there's people that say, "Oh my god, that content is completely unique. I can't see it anywhere else. It triggers all these questions in my own mind as I watch you ask them questions and make them uncomfortable. I do that to myself, and I just relate to that other person so much emotionally and feel so connected, and I can't believe how vulnerable they're being." And so for some people, this is just the best thing. They've said, "This is my favorite podcast," or, "This is what I've been waiting for for so long." But I get just as many people saying: "Two hours? I'm not going to watch anything that's two hours. There's a lot of just pausing while someone's thinking. Can you just cut that out? Can you make like a 10 or 15-minute highlight reel with insight after insight?" My struggle is I agree that two hours is a long time; most people don't want to watch it. I agree. On the other hand, if you got a 15-minute summary, you won't identify with that customer and that value will go away. And the insights, if you compress them, are not that interesting. They're going to say things like, "Have you considered raising your price? Are you focused on the right market segment? Hey, who's your best customer?" I mean, no kidding. Duh. We all know those things. Those are again Twitter platitudes and titles of books, probably. That's not interesting at all. It's applying it that's interesting. So I'm struggling again, even though I know the answer is I should just do this unique show and not worry about it, not even think about it. And yet I still am like: is there another format that'd be shorter that I could do or cut it up into? Could it be like This American Life where there's really good narration with snippets? Here I am wasting all this time thinking about this when I probably shouldn't. I struggle with this right now because you want everyone to be satisfied, you want everyone to listen, you want to maximize viewers and all that, as opposed to realizing that what you need to do is be a few people's favorite podcast, favorite product, favorite whatever. Because if you're a few people's favorite in the world, then there's a hundred times as many who like it a lot and will still buy it or whatever they'll do, and then a bunch of other people that won't like it, right? Because you're doing something. We all know if you do something, somebody won't like it. In the face of that, you have to have that bravery. But the way that you have the bravery is: if there's no one saying it's their favorite, then maybe it's just not that good.

If some people are saying it's their favorite of all time, that's the thing telling you, "Okay, I've got something." And that's the center of a bullseye. There's other rings of the bullseye which I'll also get. And now they're not even haters; they're just people with other suggestions that are very reasonable. But I know to ignore them because some people said it was their favorite.

Yeah.

Going out to raise money.

So of course you're going to pick whatever it is you wish to do, however you want to build your life. It's part of why we do startups: we can try to create a life that we want. We rarely succeed in whatever that is, but that's the idea. And so you could take that either way, which is interesting.

Exactly. And just to be clear for that, I also have articles online about that. Both the articles and the skills are open and free. You don't even have to put in an email or anything of that nature; they're just there. Just for people worried that they have to buy a book or put in an email address to get all this, just get it.

The whole "if I build it, it could work for anyone," I would put dot-dot-dot, "but it won't." Maybe eventually. The reason it's Carol is that's simply the name of the person I put on the ICP when I first started writing this. The idea of Carol was more than a decade, possibly 15 years ago, so the word ICP hadn't been invented yet. In fact, Lean Startup itself might not have been invented yet, now that I'm thinking of it, because that was 2011. Anyway, this was just my way of saying what we now say ICP. I was like: imagine Carol, she's your perfect customer. I would define that she already loves you, she's already searching for what you have, keywords are in your ad, she's like, "That's me," and then she goes. I described what "perfect customer" means. Then the idea being, of course, that you sell to Carol because everyone else will come along. But it's not obvious why everyone else comes along. That's insight number one. Because of course you think, "Well, if I have this hyper-specific persona—or not even persona, but segment, because I don't believe in personas either, by the way—then the problem is I'm going to say 'the best software for Norwegian dentists' or whatever, and you're worried that anyone who doesn't qualify as that perfect Carol will just bounce off the homepage and leave." That's what you're worried about. What actually happens is you get maybe a thousand times more sales than there are Carols. The reason is that you were so clear and specific about what you are, who cares, what's valuable about that, why the price makes sense, and so forth, that it was clear in people's minds and they could choose you. The way I describe it in the first half of that chapter is their product has strengths and weaknesses, just like we just said you do personally. Carol, definitionally, sees all those strengths as strengths, and all the weaknesses she doesn't care about, or even sees those as okay, just like we just said. That's Carol—the one who's perfectly aligned. None of us are Carols for very many products that we buy. We pick up a thing, like a little pouch in my case, and I'm like, "Well, I really like the colors. The size is a little bit too big. I like the zipper, though." It's a trade-off. It's a decision. And so if you've been very clear about for whom is this the perfect thing, then even if I'm not perfect, I can still make the decision that this is the best choice for me. The clarity makes it easy for me to make that choice. When other products claim everything, I'm not comfortable buying that because I know it's full of BS, but I don't know how it's full of BS, so I don't know what decision I'm making. There's really interesting data on this—data, not just me doing theory. This is not in the book. Bazaarvoice is a company in Austin that powers user reviews on websites like Walmart.com, Best Buy, that kind of stuff—millions and millions of user reviews. They found this incredible data: when a product published the negative reviews and made them just as visible as the positive reviews, sales went up and returns went down. Now, with physical products, returns are devastating.

Because let's say you make a 10% profit margin on a product, which is actually kind of a lot for a lot of physical goods. If you only make 10% profit margin on a product, one return—often you don't get it back or it's damaged—very often you've just lost all the cost and gain. You now need to sell 10 more because of the 10% profit margin—10 more to make up for that one freaking return before you're just getting back to zero. So returns are devastating. The fact that sales went up and returns went down means it's insanely lucrative to publish the negative reviews. But why? Because when the buyer can see, "This is actually what's good, and this is actually what's not good," they can now make a decision about whether this is a trade-off they want to make. A lot of people will say, "Oh, that negative, I don't even care about that," or, "I'm willing to do that for the price," or whatever they think.

And so they buy it, and then they don't return it because they already knew. When they get it and it has the problem, they knew that, so they don't return it. So when you state the negatives, you actually get more sales with fewer returns. That's just another way of showing: when you speak to Carol and you say exactly what that is and you think you're turning people off, what you're actually doing is making it easier for everyone to make the choice to buy it. Some people won't buy it, but those weren't your target customers anyway. They were going to churn anyway. It's better that they not incur more marketing and sales costs and then yak your ear off in tech support and churn anyway. That's worse. It's good if they never signed up in the first place.

At a high level, you don't know, because so many things have to go right for the person to buy and stay. Whatever you're doing to get attention has to be working and getting the right people—not just getting views, but getting views of the right people. Your positioning of the product on the homepage and otherwise has to resonate and make sense. It has to be usable to go through the website. The pricing has to be such that they accept it, think it makes sense, and have the budget for it. When they actually onboard, that somehow works. And the product has to actually do what you promised, because often what happens is you promised what they wanted, and then they got in and it doesn't do that, so they churn. So many different things have to go right, so it's very hard to say, "Is the problem that I targeted the wrong niche?" because you did a lot of things. On the one hand, I hate to say it depends or nobody knows, but that's why it's a complex multi-factor question of what is going on here, and why there isn't going to be a simple answer, even though that's not the answer you want. What I would say is there's a couple of heuristics, not rules. You could say things like: is anyone else being successful in this niche? If the answer is yes, then it's like, well, then it's on you; it's not the niche. If other people are successful, it's you. If the answer is no, that doesn't prove the niche doesn't exist, because maybe the whole point is it's untapped and you're ready to tap it. So it doesn't prove that; it just means I could explore more by having customer conversations and so on to see what's going on here. I just listed a whole bunch of things that could go wrong. Sometimes there's metrics to help, like conversion metrics and so on. But even then, not necessarily, because I might have great conversion metrics on my ads, but then poor conversion to buy because I targeted the wrong people with the ads or the wrong people clicked.

Again, it's very hard to say what's causing it. One question I would ask is: how have you interviewed potential customers to understand the customer and the niche in the market, and how systematic and directed was that? If the answer is, "I didn't," or, "I built it for myself," or, "I just looked at what people said on Reddit and TrustRadius," or, "I just had conversations; I just talked to them," then I know that this person is not actually serious about finding out the truth, because they're avoiding doing what's needed to try to find out the truth. Now, of course, I'm the first to admit the best thing is to try to sell the product and talk to people who buy—that's better than just talking about it. But if you haven't even tried to talk about it first, then you're not investigating. As you know, I have articles, it's in the book, and there's skills on how to systematically interview customers to learn things like: what do you actually pinpoint on, how do you actually buy things, what causes you to go buy something, how do you think about price and budget, is the budget already allocated, what do you do today, what words are they using to describe it? Because you may hit on the right concept, but if you use this word and they use that word, then your keywords are wrong and the message on the homepage doesn't resonate, even though you're saying the same thing. A really funny example of that—again, not in the book—is Discord. When Discord was getting started, the idea was gamers would set up chat servers by literally getting a server, like a VPS, because they would set up Minecraft on the server and then also run some sort of chat software. Discord was saying, "We're like a managed game chat engine, Minecraft engine." That was their original idea. That was their language because that's what people were doing; that was the pain point. But they were describing the product, which is this game server or whatever, and no one was buying it. Then they looked at what people actually say when they set up one of these chat things: they say "set up a server." So they said, "Okay, fine, $5-a-month servers," even though it's chat.

And then it exploded because that's the word they used. "Server" is not even the right word, but that's what people were using. So that's another thing you can get out of customer conversations: what words are they using so that I can use those same words to resonate? That's what I would do: I would have these structured calls with these goals. You need some way of converting those goals into actual questions. That's what those systems I have do, and that's what I used to validate WP Engine and invalidate other companies besides that, and continue to use inside of WP Engine for other product iterations that we did. So I definitely have put my money where my mouth is on that particular framework. But you can use any framework; you don't have to use mine. Here I am pushing all my frameworks, because what else am I going to do, right? But the truth is I feel like most frameworks work for like 15% of companies. I don't have any data on that, that's just my intuition.

Because they have to match your personality, the culture of the company, and what other people want to do at this time. If you just try to enforce OKRs, they almost always fail, even though there's nothing wrong with OKRs per se.

Right. So I feel like all frameworks are like that: they have to fit you. All I can do is show frameworks that happen to fit me that happen to work at least once. It's an exercise to the listener to decide if they work for them.

So my nuanced view of this is some frameworks I just think are wrong. And so if you use them, it is worse than doing nothing because you're wasting a lot of time quote-unquote "doing the framework" and maybe even getting, at best, random results that you could have gotten by with a dart, but maybe even worse results because it's a decision-making process that I think isn't correct.

So what I would say is I kind of think of frameworks as like there's a category I just think aren't right, aren't the right way to think about that puzzle. And then there's a whole bunch that I think are fine. And within there, I would say just what you said: just pick one that you think works with you, that you'd be excited by, because that makes it much more likely to succeed. And then the last thing I would say about it is do not think of the framework as, "This is going to come off the shelf and be perfect." Think of it as clothes off the rack. It's like, "Oh, this is a shirt. This is in the form of a shirt," which is good because I wasn't wearing a shirt before, but it's going to need to be tailored to me. So if I expect it to just fit, then I'm going to be unhappy with it. But if I expect that like, "Oh, it's a shirt, but dot dot dot, and I'm going to have to adjust it, and maybe it's 50 to 70% right," and it gets me going—it gets me a shirt at least, so I'm not sewing from scratch, for God's sake. That sounds horrible. I'm definitely not going to make a good shirt that way. So it's getting me into the game, and now I'm going to need to tailor it as I go. Then that to me is the best opportunity for success there.

That's right. And yeah, I think in many cases the concept of the split test falls into the wrong framework, you know, likely won't work for what they're trying to do.

Well, the fundamental idea is that there are attributes which make them the perfect customer, which you need to find. It's just unlikely things like age and geography is among them. It's possible if the software is back-office software for dentists in Norway, then okay, Norway is one of them, right? Or dentist as an industry is one of them because you built it for that, so that makes sense. You didn't just apply the demographics because they exist. So as an example, especially in entertainment, they tend to say, "We're targeting men 20 to 30 years old," that kind of stuff, and I always think that's crap. Right now, we're rewatching The Wire with our daughter.