The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future - Chris Guillebeau (2012)
Part II. TAKING IT TO THE STREETS
Chapter 7. An Offer You Can’t Refuse
THE STEP-BY-STEP GUIDE TO
CREATING A KILLER OFFER.
“I have nothing to offer but blood, toil, tears, and sweat.”
Scott McMurren sat in his office at a TV station in Anchorage, Alaska, looking out at Mount McKinley. The day job was in media sales, where he knocked on doors around town, recruiting advertisers for the station. He also hosted a travel show, something he enjoyed but didn’t expect to lead to a full-time gig. Gary Blakely, a buddy of Scott’s, had been pestering him for a while about a business idea, but Scott wasn’t into it. When two years of Gary’s hammering merged with Scott’s fatigue from doing the same thing every day, he finally gave in and said, “OK, let’s give it a try.”
The idea was to create coupon books for independent travelers coming to Alaska. Every year, more than a million visitors show up on the state’s doorstep, eager to see Denali National Park and other attractions. Some tourists arrive on cruise ships or guided tours, but many more put together their own trip. As is often the case, the consumer problem and the business opportunity are related: Alaska is a nice place during the summer, but costs are always high. Almost everything in the state is more expensive than the rest of the U.S. to start with, and some travel companies charge even higher prices to visitors. (A common joke is “Welcome to Alaska … please hand over your wallet.”) The coupon book would be an antidote to high prices, but it would have to provide real value instead of offering the typical, minor discounts available elsewhere.
That’s where Scott came in. Since he already had the state contacts through his day job in media sales, all he had to do was get them to commit to a discounted offer, typically a two-for-one deal in which the second night or second person was free. A natural salesman, Scott positioned every deal to grow into another one. When he encountered resistance from a vendor who was reluctant to discount, Scott pointed out that other companies were going along without objection. The implied message was, “Everyone else is doing this. You don’t want to be left out.”
Once they had proved the benefit to the vendors, the next step was to prove it to the people who would buy the coupon books. You might think Scott and Gary would price the books low to sell as many as possible (comparable products in other places sold for $20 to $25, usually supported by advertising or kickbacks from the vendors), but they had a better idea: price the books at $99.95 and make the value proposition extremely clear. The books contained deals for helicopter flights and tours that cost as much as several hundred dollars, as well as hotels that retailed at more than $100 a night. Why wouldn’t people pay $99.95 for a product like that?
It was the ultimate follow-your-passion business, combined with a perfect transfer of skills from a job to a microbusiness. Scott had the insider knowledge about the local travel industry, along with a way to leverage the deals to ensure they were all high value. Gary was the production guy, handling everything associated with getting the product together in addition to all the Internet work and the banking. For fifteen years and counting, the TourSaver coupon books have been their primary business and source of income.
Why is the TourSaver offer so compelling? Because it delivers immediate benefits superior to its cost, with an attractive pitch: “Buy this coupon book, use it once, get your money back. Then you have more than a hundred other uses as a bonus.” Scott frames it like this: “Just do the math! Using a single one of the 130+ coupons in the book will save you more than the cost of the book itself.”
Another way to think of it is like this: Scott and Gary created an offer you can’t refuse. If you were traveling to Alaska and planned to enjoy some kind of sight-seeing opportunity, there’s almost no reason why you wouldn’t want one of their books.
The Orange and the Donut
A few years ago, I ran my first marathon in Seattle. I’d love to tell you I ran strong to the finish, but by mile 18 I was wiped out, focusing entirely on putting one foot in front of the other. As I trudged along in the final hour, I spotted a volunteer handing out fresh orange slices on the side of the road ahead of me. Tired as I was, I made sure to change my position, slow down, and gratefully accept the gift. The piece of fresh orange was an offer I couldn’t refuse—even though it was free, I would have gladly paid for it if I had the money and was in the right frame of mind to make a transaction.
Two miles ahead, I saw another volunteer handing out a different gift: halves of Krispy Kreme donuts. Unfortunately, this offer did not excite me (or any other runners I saw) at all. I’m no puritan and have eaten more than my share of donuts over the years, but three hours into the longest race of my life was bad timing for a sugar rush. The offer was unattractive and a poor fit for the context.* A compelling offer is like a slice of orange at mile 18. It’s a marriage proposal from the guy or girl you’ve been waiting for your whole life. An offer you can’t refuse is like the $20,000 Bonderman Fellowship offered every year to graduating seniors at the University of Washington. The fellowship has very strict rules: Take our money in cash and travel the world on your own; don’t come back for eight months. Oh, and once in a while send us a quick note so we can tell your parents you’re alive. If you guessed that hundreds of students compete for the fellowship every year, you’d be right.
How can you construct an offer that your prospects won’t refuse? Remember, first you need to sell what people want to buy—give them the fish. Then make sure you’re marketing to the right people at the right time. Sometimes you can have the right crowd at the wrong time; marathon runners are happy to eat donuts after the race, but not at mile 18. Then you take your product or service and craft it into a compelling pitch … an offer they can’t refuse.
Here’s how you do it.
1. Understand that what we want and what we say we want are not always the same thing.
The next time you get on a crowded plane and head to your cramped middle seat in the back, with a screaming infant seated behind you at no extra charge, remember this principle. For years travelers have been complaining about crowded planes and cramped seats, and for years airlines have been ignoring them. Every once in a while, an airline creates a campaign to respond to the concern: “We’re giving more legroom in coach!”
It sounds great, but a few months later they inevitably reverse course and remove the extra inches of space. Why? Because despite what they say, most travelers don’t value the extra legroom enough to pay for it; instead, they value the lowest-priced flights above any other concerns. Airlines have figured this out, so they give people what they want—not what they say they want. A good offer has to be what people actually want and are willing to pay for.
2. Most of us like to buy, but we don’t usually like to be sold.
An offer you can’t refuse may apply subtle pressure, but nobody likes a hard sell. Instead, compelling offers often create an illusion that a purchase is an invitation, not a pitch. Social shopping services such as Groupon (see Chapter 8) and Living Social have been successful in recruiting their customers to do most of their marketing for them. Indeed, the biggest complaint about these businesses is often that they sell out of deals too quickly, also known as “They won’t let me give them my money!”
As you might imagine, the path of least resistance is a good place to stand. Visitors to Alaska quickly understand why a $100 coupon book is worth much more than $100. Marathon runners do not need to be sold on the benefits of fresh oranges after three hours of running. Adventurous college students will grasp the value of a $20,000 “go travel somewhere and do what you want” fellowship without much explaining.
Offer Construction Project
MAGIC FORMULA: THE RIGHT AUDIENCE,
THE RIGHT PROMISE, THE RIGHT TIME =
OFFER YOU CAN’T REFUSE
What are you selling? ______
How much does it cost? ______
Who will take immediate action on this offer? ______
The primary benefit is ______
An important secondary benefit is ______
What are the main objections to the offer?
How will you counter these objections?
Why should someone buy this now?
What can I add to make this offer even more compelling?
3. Provide a nudge.
The very best offers create a “You must have this right now!” feeling among consumers, but many other offers can succeed by creating a less immediate sense of urgency. Providing a gentle nudge to encourage immediate action separates a decent offer from a high-performing one. Let’s look at a few examples.
EXAMPLE 1: THE YOGA STUDIO
Jonathan Fields, a hedge fund lawyer turned fitness entrepreneur, owned a Manhattan yoga studio that sought to be at the top of the market. A single class cost $18, and membership cost $119 a month. Toward the end of summer, the studio saw a significant drop-off in business, but when October rolled around, people got back to their routine and started coming in more often.
Jonathan wanted to find a way to inspire people to come back earlier than expected and get as much commitment from them as possible. He had an idea for an offer they couldn’t refuse: Starting September 1, first-time members could get unlimited classes through the end of the year for $180. This was essentially four months of yoga for the price of 45 days, or 62 percent off the normal price. Two additional factors were added to make it even more interesting: First, the sooner a new member signed up, the more classes he or she could attend, thus creating instant urgency. Second, the offer could be withdrawn at any time; if someone came in on September 3 and wasn’t sure about committing to the rest of the year, the staff made sure to let that person know that the offer might not be available later in the week.
Thanks to New Year’s resolutions, most fitness centers take in the bulk of their new members in January. Jonathan’s strategy helped his business gain a big increase in September, traditionally a difficult month. Also, September was close enough to January that by the time the new year rolled around, many of the members were committed enough to transfer to a monthly plan—at the regular price.
EXAMPLE 2: THE INEFFICIENT BUSINESS MODEL
(MARKET INEFFICIENCY = BUSINESS OPPORTUNITY)
Whenever something is more complicated than it should be or any time you spot an inefficiency in the market, you can also find a good business idea. Priceline.com took advantage of hotel inefficiencies by creating a system that allowed consumers to book rooms at name-brand hotels for much less than the retail rates. Then other companies took advantage of Priceline’s lack of transparency by creating a business model that allows travelers to know which hotels Priceline works with. Each of these models includes a compelling offer:
Priceline’s compelling offer: Save 40 percent or more on name-brand hotels, guaranteed.
Third-party compelling offer: Learn exactly which hotel you’ll get with Priceline … and save even more when you know exactly how much to bid.
You can also derive a powerful business model from traditional systems that lack transparency. If you want to make a traditional real estate agent mad, ask the agent about Redfin, the Seattle-based service that splits commissions with home buyers. I learned this lesson when one agent told me that Redfin “should be illegal” and that I was doing a disservice to hardworking people by endorsing it. Why are (some) agents so testy, and why should it be illegal to save consumers money? Oh, because the money is coming from the pockets of real estate agents, who are used to receiving full, hefty commissions regardless of the amount of work they perform. Redfin has succeeded by challenging gatekeepers and addressing a huge inefficiency in the marketplace.
Speaking of home owners, the DirectBuy franchise was started in order to offer “ordinary people” (i.e., non-contractors) access to retailer pricing on appliances and home electronics. To get around the concerns of retailers and manufacturers, DirectBuy structured its business model on charging a flat fee for consumers to join. The compelling offer is: Invest in our membership, and you’ll save thousands on home remodeling.†
EXAMPLE 3: THE GRAPHIC FACILITATOR
I’ll invite you to meet Brandy Agerbeck in these pages, but you can “meet” her first by examining the mindmap she made for us below.‡
Brandy runs a business of one, with the philosophy “never have a boss, never be a boss.” Creating graphical representations of ideas—usually those expressed in meetings, retreats, or conferences—is Brandy’s full-time work. Over the last fifteen years, she’s worked with hundreds of clients at all kinds of events. It’s a beautiful business model from a talented artist, but it also raises a question: How do you nudge or win over executives who don’t get it at first?
From countless interactions about the valuable service she provides, here’s what Brandy learned. She starts every initial conversation by saying, “I have a fantastic, strange job.” This creates curiosity and also serves to make the other person not feel bad if he or she is unfamiliar with the world of graphic facilitation. Next, Brandy learned that her target market may be the executives or meeting leaders she serves, but they aren’t necessarily the ones who hire her. “I am most often hired by facilitators, acting as their visual silent partners,” she says. “They can focus entirely on their client knowing their process, and progress is documented.”
Perceived Value and the Expensive Starbucks Run
After nearing the end of a five-hour drive from Boise to Salt Lake City, I stopped off at a Starbucks about twenty minutes away from the bookstore I was speaking at that evening. On the way inside, I grabbed something from the trunk and left the keys inside. Nice move, Chris. It was even worse because I didn’t realize my mistake until I had finished my latte and email session an hour later, shortly before I was due to arrive at the bookstore.
I was mad at myself for being so stupid, but I had to think quickly. Using a combination of technology (iPod touch, MiFi, cell phone), I located the number of a local locksmith and quickly rang him up. “Uh, can you please come as soon as possible?” He agreed to be as fast as he could.
Much to my surprise, the locksmith pulled up in a van just three minutes later. Impressive, right? Then he got out his tools and approached the passenger door. In less than ten seconds, he had the door open, allowing me to retrieve my keys from the trunk and get on with my life. “How much do I owe you?” I asked. Perhaps it’s because I don’t own a car and the last time I paid a locksmith was ten years ago, or maybe I’m just cheap, but for whatever reason I expected him to ask for something like $20. Instead, he said, “That will be $50, please.”
I hadn’t discussed the price with him before he came out and was in no position to negotiate, so I gave him the cash and thanked him. But something was unsettling about the transaction, and I tried to figure out what it was. I was mad at myself for locking my keys in the car—it was obviously no one’s fault but my own—but I also felt that $50 was too much to pay for such a brief service.
As I drove away, I realized that I secretly wanted him to take longer in getting to me, even though that would have delayed me further. I wanted him to struggle with unlocking my car as part of a major effort, even though that made no sense whatsoever. The locksmith met my need and provided a quick, comprehensive solution to my problem. I was unhappy about our exchange for no good reason.
Mulling it over, I realized that the way we make purchasing decisions isn’t always rational. I thought back to something that had happened in the early days of my business. I had produced a twenty-five-page report on booking discount airfare and sold it for $25. Many people bought it, but others complained: Twenty-five pages for $25? That’s too expensive.
I knew I couldn’t please everyone, but I didn’t understand this specific objection. The point of the report was to help people save money on plane tickets, and many readers reported saving $300 or more after one quick read. “What does the length of the report have to do with the price?” I remember thinking about that one complaint. “If I gave you a treasure map, would you complain that it was only one page long?” It turned out the joke was on me. All of us place a subjective value on goods or services that may not relate to what they “should” be.
Just as what we want and what we say we want aren’t always the same thing, the way we place a value on something isn’t always rational. You must learn to think about value the way your customers do, not necessarily the way you would like them to.
Compelling Offer Tool Kit:
FAQ, Guarantee, and Overdelivery
As you continue to work on your offer, three tools will assist you in making it more compelling: the FAQ page (or wherever you provide the answers to common questions), an incredible guarantee, and giving your customers more than they expect. Let’s look at each of them in detail.
1. Frequently Asked Questions, AKA “What I Want You to Know”
You might think that a frequently asked questions (FAQ) page is designed merely to answer questions. Surprise! It’s not … or at least, that’s not its only function. A well-designed FAQ page also has another, extremely important purpose. You could call it “operation objection busting”: The additional purpose of a FAQ is to provide reassurance to potential buyers and overcome objections. Your mission, should you choose to accept it, is to identify the main objections your buyers will have when considering your offer and carefully respond to them in advance.
Wondering what the objections to your offer will be? They fall into two categories: general and specific. The specific objections relate to an individual product or service, so it’s hard to predict what they might be without looking at a particular offer. General objections, however, come up with almost any purchase, so that’s what we’ll look at here. These objections usually relate to very basic human desires, needs, concerns, and fears. Here are a few common ones:
✵ How do I know this really works?
✵ I don’t know if this is a good investment (and/or I’m not sure I have the money to spare).
✵ I’m not sure I can trust you with my money.
✵ What do other people think about this offer?
✵ I wonder if I can find this information/get this product or service without paying.
✵ I worry about sharing my information online (or another privacy concern).
The core concern for each of these objections relates to trust and authority. You must create consumer confidence in order to overcome the objections. As you craft the offer, think about the objections … and then flip them around in your favor. You want to send messages like these:
✵ This really works because …
✵ This is a great investment because …
✵ You can trust us with your money because … (alternatively, You don’t have to trust us with your money, because we work with an established, trusted third party …)
✵ Other people think this is great, and here’s what they say …
✵ You have to pay to get this product or service (alternatively, The free versions aren’t as good, it takes a lot of work to get it on your own, etc.)
✵ Your information and privacy are 100 percent secure because …
See how it works? The point is not to be defensive (you want to avoid that) but rather to be proactive in responding to concerns. One model you can use when describing your offer is outlined below in what we’ll call a “rough awesome format.” It works like this:
Point 1: This thing is so awesome! [primary benefit]
Point 2: Seriously, it’s really awesome. [secondary benefit]
Point 3: By the way, you don’t need to worry about anything. [response to concerns]
Point 4: See, it’s really awesome. What are you waiting for? [take action]
In the rough awesome format, point 1 is the main benefit, point 2 is a reinforcement of the main benefit or an important side benefit, point 3 is where you deal with the objections, and point 4 is where you bring it all together and nudge buyers toward a call to action. You won’t always get it right at first—sometimes you’ll discover additional objections as you go through the initial sales process with real-time customers—but dealing with the most important objections from the beginning will help you get off to a much better start than the wait-and-see approach.
2. The Incredible Guarantee, AKA “Don’t Be Afraid”
Regardless of what you’re selling, the overriding concern of many potential customers is, “What if I don’t like it? Can I get my money back?” A common and highly effective way to combat this concern is to offer a satisfaction guarantee. A word of advice: Do not make your guarantee complicated, confusing, or boring. You don’t want your customer to overthink it! Keep it simple and easy.
Further, if there is any way you can tie the promised results of your offer to the guarantee, do so. Nev Lapwood, who runs a snowboarding instruction program you’ll read about in Chapter 11, offers a 120 percent guarantee. If the program doesn’t rock your world, you’ll get 100 percent of your money back, plus 20 percent for your trouble.§ When I developed the Travel Hacking Cartel, I promised that members who applied the program’s strategies would earn at least 100,000 frequent flyer miles a year, enough for four free plane tickets.
Not every business will be able to offer an incredible guarantee, especially if there are substantial up-front costs for delivery. Alternatively, you can also make the deliberate choice not to guarantee your product or service and then make a big deal about that fact. The lack of a guarantee can then act as a filtering process, gently steering away customers who weren’t a good fit, while reinforcing the purchase for those who are.
Generally, you should offer an incredible guarantee or no guarantee at all. A weak guarantee, or one that is unclear, can work against your credibility instead of helping it.
3. Overdelivering, AKA “Wow, Look at All This Extra Stuff I Didn’t Expect”
Immediately after buying something, we often experience a pang of anxiety: Was this a good purchase? Did I waste my money? You’ll want to get out in front of this feeling by making people feel good about the action they just took. The easiest and most critical way to reinforce their decision is by giving them quick access to what they paid for. But to go further, you’ll want to overdeliver: give them more than they expected. You can do this by upgrading their purchase unexpectedly by sending a handwritten thank-you card in the mail or in whatever way makes the most sense for your business.
The point is that the small things count.
Like the orange slice at mile 18 of the marathon, an offer you can’t refuse comes along at just the right time. As you follow your blueprint to freedom, think carefully about how you can create a similarly compelling offer.
The next step is to take the offer out into the world. Ready?
As much as possible, connect your offer to the direct benefits customers will receive. Like the Alaska coupon books, a compelling offer pays for itself by making a clear value proposition.
What people want and what they say they want are not always the same thing; your job is to figure out the difference.
When developing an offer, think carefully about the objections and then respond to them in advance.
Provide a nudge to customers by getting them to make a decision. The difference between a good offer and a great offer is urgency (also known as timeliness): Why should people act now?
Offer reassurance and acknowledgment immediately after someone buys something or hires you. Then find a small but meaningful way to go above and beyond their expectations.
*Ironically, there were no donuts available after the 26.2-mile race, something many runners would have been thrilled to see. Keep this in mind if you are ever in charge of providing donuts for marathoners.
†Unfortunately, the fee to join DirectBuy is thousands of dollars, and it’s not always clear how much money the average home owner will save with the service. But as with Priceline, perhaps this creates an opportunity for another third-party business to provide the information.
‡To watch a short video on how Brandy creates her great work, check out YouTube.com/loosetoothdotcom.
§I asked Nev if he’s had issues with customers abusing this policy. His response: Nope, no problems at all. Nev credits Tim Ferriss, author of The Four-Hour Workweek, with giving him this idea.