Zero to one: If you build it, will they come? - Deepstash
Zero to one: If you build it, will they come?

Zero to one: If you build it, will they come?

📚 Reading the chapter "If you build it, will they come?"

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People underrate the importance of sales

People underrate the importance of sales

Most people (especially engineers) underestimate the importance of sales because it's hard to accept that customers will not come just because they build cool stuff.

Engineers are biased to think that way. But it's only a delusion to think that distribution will flow magically without considering a proper distribution system.

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Engineers' view on sales

Engineers' view on sales

In engineering disciplines, a solution either works or fails. They add value by becoming experts at a technical skill that can be evaluated relatively easily.

Sales are the opposite: a campaign could be to change surface appearances without changing the underlying reality. Engineers see this as dishonest.

People overestimate the relative difficulty of engineering and science because the challenges of those fields are obvious. What engineers miss out on is that it takes hard work to make sales look easy.

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Sales are hidden in plain sight

Sales are hidden in plain sight

All salesman are actors: their priority is persuasion, not sincerity.

Sales work best when hidden. People in sales, marketing, or advertising have a job title that has nothing to do with those things.

And there is a reason for all of this: none of us wants to be reminded when we're being sold; the world is secretly driven by sales.

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Distribution is part of the product

Distribution is part of the product

The engineer's grail is a product great enough that it sells by itself. But anyone who says this either is delusional or is selling something (and thereby contradicting himself).

Think about distribution as something essential to the design of the product.

Good product + Bad distribution of the product = Bad business

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PETER THIEL

If you've invented something new but you haven't invented an effective way to sell it, you have a bad business--no matter how good the product

PETER THIEL

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Does distribution matter more than the product?

Superior sales and distribution by itself can create a monopoly. No matter how strong the product (even if it is the next best product in the world), it must be supported with a strong distribution plan.

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Distribution methods

Distribution methods

It can vary based on the product's target customers.

To have a viable business, the total net profit that the company earns from a customer (Customer Lifetime Value, CLV) should be bigger than the amount spent to acquire the customer (Customer Acquisition Cost, CAC).

It starts from consumer products (eg. Snapchat) where CAC is low, CLV is also low, but a big number of possible customers. And it ends with big and complex products (eg. SpaceX, Palantir) where the product is sold to big businesses or the government, CAC is high in order to offer as much credibility as possible.

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Marketing and advertising

Marketing and advertising

Work for low-priced products that have mass appeal but lack any method of viral marketing.

A laundry detergent company can't afford to pay salespeople to go door-to-door, but instead pays salespeople to talk to grocery chains since one deal might mean 100.000 bottles sold.

To reach its end user, this kind of company has to produce television commercials, print coupons and design its product boxes to attract attention.

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Viral marketing

Viral marketing

A product is viral if its core functionality encourages users to invite their friends to become users too. If every new user leads to more than one additional user, it will grow exponentially.

This ideal viral loop should be as quick and frictionless as possible.

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Find the perfect users (market segment)

At Paypal, they wanted to get the most valuable users first, which were the emigrants who wire money back home, but the transactions were infrequent - didn't work.

They needed a segment with a higher velocity of money - they found eBay 'PowerSellers' (the professional vendors who sold goods online through eBay's auction marketplace). Almost 20.000 users. Most had multiple auctions each day, they also bought as much as they sold.

Because eBay's solution to the payment was terrible, these merchants were extremely enthusiastic early adopters.

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CURATED BY

sabin

Building @deepstash

As an engineer, it was hard to not underestimate the importance of distribution. Most of the time when I was thinking about sales, my brain(thoughts) just decides to skip it.

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