I’m Back, Baby!

I’m Back, Baby!

Hi again!

As you probably can infer from the title, I am going to start blogging regularly again, my wife and I now are proud parents of a cute baby girl, and I am a fan of double entendres/puns.

The last year has been crazy, becoming a first-time parent and setting up a whole bunch of new initiatives at Shop It To Me,  some of which are now in our system, some we hope to launch soon, and some which will never see the light of day.   It has been a crazy-fun ride  and I hope to relay as many insights as I can in a nifty once-a-week format.

I’ll be writing about these experiences — starting and running Shop It To Me, a successful eCommerce company in the Internet-hot SOMA region of San Francisco, so expect posts on commerce, startups, product management, user-psychology, and being a dad.

Stay tuned!

Actual Value vs Perceived Value II

In a previous blog post, I chatted about the differences between the actual value people get from your service and the perceived value they have when they are considering using it.

In this post, I’ll talk about some steps to attract customers when your product’s Real Value is greater than it’s Perceived Value.

Let’s say you have a product that your current customers love but you are having a hard time getting new people to buy it. How do you get people over the hump and understand the real value?

Here are a few steps you can take:
1) Make it both free and easy for people to understand the actual value.
Some people try to have “videos” explaining the benefit, but the only real way to feel the benefit is to experience it. If you have a paid service, offer a free trial with enough time to use the service that you can get its full experience. DropBox’s Fremium model fits this perfectly. They give you 2GB free, which is enough for you to start feeling that it’s indispensable, but not enough that you won’t need to buy more after you’ve been hooked. The key is to offer enough time for someone to understand the service. A one month trial alone is usually not enough to get people hooked. If you can afford it, give them 3 or 6 months to start.

2) Make just trying your service super compelling.
When I was just launching Shop It To Me and pitching new users (and when I was single and needed a cocktail topic!), I would make a bet with people I met. Specifically, I bet them a drink of their choice that they would not unsubscribe after a month. If they unsubscribed, I would buy them a drink. If they did not unsubscribe, they owed me a drink. The strategy worked as from their perspective they could not lose: they either got a free drink or they discovered a free  service so valuable they would be willing to pay money to keep it.   I ended up a bunch of free drinks and new users and actually never had to pay.

3) Get a trusted authority to vouch for it.
If you want a quick jump in customers or user growth, get an authority to sing it’s praises. Sites like ShoeDazzle and BeachMint get celebrities to show why the site is trustworthy, and sites like Gilt spend millions in PR getting the highest magazine editors and famous stylists to say good things about them.

4) Social proof: Get their friends to sell it.
iPhones and iPads are selling not because everyone just loves the Apple logo. They are selling because a small set of avid Apple fans and technology early adopters seeded the market and evangelized it to everyone else. Most people who now own iPhones only did so because they had a friend who owned one and LOVED it. Word of mouth is probably the best way for any product with a low Perceived Value and high Actual Value to grow quickly. PR and ads will only get you started — if you can’t get people to tell their friends, your user growth will likely spike and then die down completely. But getting people to tell their friends about your site is a lot of work — often as much or more development and creative efforts as getting your site to appear in the top Goggle search results or optimizing advertising campaigns.

5) Sweeten the perceived value.
Try reshaping your messaging in a way that makes the perceived value better.   Whether you like them or hate them, Groupon and LivingSocial have done a very good job in their advertising emphasizing the Made To Stick elements in advertising. Look at any of their ads, and you understand almost at an emotional level. They have taken a very abstract concept –coupons on local venues near you — and made it very tangible and concrete, oferring “up to 90% off a burger in your area”.  The more concretely you can express the benefit, the better.

And three things not to do:

1) Invest in Search Engine Marketing or Optimization (SEO or SEM).
If your product is hard to explain and must be experienced, chances are someone is not trying to search for it. You may spend months optimizing your site for SEO or optimizing ads, but likely you will get only a little traffic and even less conversion.

2) Blast people in an unsolicited way.
Sending an unsolicited email or a blast email without context is as likely to get you results as sending an email trying to convince a staunch Republican why Obama is the best US president ever. People tend to commit and won’t easily change their minds so you’ll have to do more work than just a pure email blitz.

3) Prematurely invest in a huge PR blitz announcing your product.
A big PR launch is a great way to get an initial spike in traffic, but if people do not understand the value of your service, you’ll just see a spike in traffic and not necessarily new customers. You generally have only one shot to get the press’s attention. Use it wisely. Wait until you have resolved some of the steps above (like getting an authority or optimizing word of mouth) before making huge dips in your coffers for PR. Instead, first focus on smaller PR investments and smaller hits and use those hits as a way to experiment and tweak your messaging until you have figured out what works. That way, when you finally do get that full page New York Times article on your company, you’ll be able to fully maximize its potential.

Actual Value vs Perceived Value

Here’s the scenario: You’ve got an amazing paid or free product or service. Everyone who is using it loves it. You know your market is huge! And yet it’s the hardest thing in the world to get a new person to join or buy.

Don’t despair. This scenario is much more common than you think.

The problem is that the actual value people get from using a new product can be very different from the value they thought they would get — what I call its perceived value.

This happens all of the time for some of the most successful products. Almost anyone with an iPhone or Android will tell you that the phone has changed the way they live and they could not imagine living without it. Yet almost everyone except extreme Apple early adopters had hesitations when the first iPhone came out. Ask people who love the iPad and they’ll tell you that they had no real reason to buy it, but they can now not live without it. And it took years for people to realize that getting a Tivo would reduce the amount of time they spent watching TV, not increase it. In all these cases, the product had a huge actual value but a small perceived value.

Products can have a huge perceived value but little actual value as well. Think of all the kitchen appliances you own that you rarely use — the bread-makers, fancy steamers, food dehydrators, etc. If you have a smart phone — how many apps have you download thinking you would use but are now collecting electronic dust? In fact, the angel investment industry runs for the most part on perceived value; each year hundreds of companies get millions in funding based on the hypothesis of a problem they are trying to solve (perception) as opposed to really showing one exists.

Any entrepreneur, product manager, executive involved in launching a new product needs to be acutely aware of your product’s actual and perceived values and if/where there is a discrepancy — keeping in mind that the values could be different for different customers. If you don’t make the distinction, you may end up canceling a product that could be have been the next Facebook, or spending months or millions on a service that is never going to get off the ground.

How do you know if your product has a strong perceived or actual value? Try out the answers to these questions (1-3 address perceived value and 4-6 address actual value):

1) When you describe your service or product to your target audience, what percent are ready to buy / sign up on the spot?

2) When you describe your service or product to your target audience, how do they describe it? Is it “interesting”, “sounds cool”, or “OMG I need this now!”

3) Put up a sign-up page on your website or email people and ask them to buy or sign-up. What % sign up for it?

4) Of the people who are currently using your product and are not friends or family members, what percent would definitely tell friends about it? (You can also use a Net Promoter score here)

5) Of people using your product, what % of them are using it more frequently now than previously 3 months ago? (or 1 month ago if you just started)

6) If your service has ever stopped working, what % of your users complained?

For questions 1-3 , you’ll never get 100% of people ready to buy, but if out of 30+ people, 25+% either sign up or are jumping at the bit, you’ve likely got strong perceived value.

For questions 4-6 , if you get more than 30% to tell friends or use your product on a more frequent basis, you know you have a good foundation of actual value to build upon.

In another post, I’ll talk about tips for success (and things I did early on at Shop It To Me ) for when your product has actual value but little perceived value.

The Beginning….

We’re live!

After about a month of waiting, iamcharliegraham.com is now live. As some of you have requested, here are my rants and raves about entrepreneurship, Product Management, Shop It To Me, and eCommerce. Enjoy and please join in the conversation!

–Charlie