• Author: Josh Kaufman
  • Full Title: The Personal MBA
  • Tags: #Inbox #books

Highlights

  • Large companies move slowly. (Location 472)
  • Climbing the corporate ladder is an obstacle to doing great work. (Location 474)
  • Frustration leads to burnout. (Location 476)
  • Whoever best describes the problem is the one most likely to solve it. —DAN ROAM, AUTHOR OF THE BACK OF THE NAPKIN (Location 508)
  • Here’s how I define a business: Every successful business (1) creates or provides something of value that (2) other people want or need (3) at a price they’re willing to pay, in a way that (4) satisfies the purchaser’s needs and expectations and (5) provides the business sufficient revenue to make it worthwhile for the owners to continue operation. Take away any of these things—value creation, customer demand, transactions, value delivery, or profit sufficiency—and you have something other than a business. (Location 597)
  • Many business resources (and all business schools) conflate management and leadership skills with business skills; they’re not the same thing. (Location 928)
  • great books on finance and accounting already exist. If you’re interested in exploring these topics in more detail after completing chapter 5, I recommend the following books:   Financial Intelligence for Entrepreneurs by Karen Berman and Joe Knight   Simple Numbers, Straight Talk, Big Profits! by Greg Crabtree   Accounting Made Simple by Mike Piper   How to Read a Financial Report by John A. Tracy (Location 938)

How to Use This Book

  • Periodically skim through this book until you find a section that grabs your attention, then commit to applying that concept to your work for a few days. You’ll begin to notice significant differences in the quality of your work, as well as in your ability to “think like a businessperson.” (Location 962)
  • I also recommend setting a reminder in your calendar to review this book or your notes every few months to reinforce your understanding and spark new ideas. (Location 969)

1 VALUE CREATION

  • Make something people want… There’s nothing more valuable than an unmet need that is just becoming fixable. If you find something broken that you can fix for a lot of people, you’ve found a gold mine. —PAUL GRAHAM, FOUNDER OF Y COMBINATOR, VENTURE CAPITALIST, AND ESSAYIST AT PAULGRAHAM.COM (Location 980)
  • A business is a repeatable process that makes money. Everything else is a hobby. —PAUL FREET, SERIAL ENTREPRENEUR AND COMMERCIALIZATION EXPERT (Location 993)
  • At the core, every business is fundamentally a collection of five Interdependent (discussed later) processes, each of which flows into the next: 1. Value Creation. Discovering what people need or want, then creating it. 2. Marketing. Attracting attention and building demand for what you’ve created. 3. Sales. Turning prospective customers into paying customers. 4. Value Delivery. Giving your customers what you’ve promised and ensuring that they’re satisfied. 5. Finance. Bringing in enough money to keep going and make your effort worthwhile. (Location 1006)
  • The Five Parts of Every Business are the basis of every good business idea and business plan. If you can clearly define each of these five processes for any business, you’ll have a complete understanding of how it works. If you’re thinking about starting a new business, defining what these processes might look like is the best place to start. If you can’t describe or diagram your business idea in terms of these core processes, you don’t understand it well enough to make it work. (Location 1017)
  • As Michael Masterson suggests in Ready, Fire, Aim, don’t expect skills that aren’t related to the Five Parts of Every Business to be economically rewarded. Find a way to use them to create Economic Value, and you’ll inevitably find a way to get paid. Any skill or knowledge that helps you create value, market, sell, deliver value, or manage finances is Economically Valuable—accordingly, these are the topics we’ll discuss in this book. (Location 1032)
  • Books like The New Business Road Test by John Mullins can help you identify promising markets from the outset, increasing the probability that your new venture will be a success. (Location 1057)
  • In practice, I prefer Clayton Alderfer’s version of Maslow’s hierarchy, which he called “ERG theory”: people seek existence, relatedness, and growth, in that order. When people have what they need to survive, they move on to making friends and finding mates. When they’re satisfied with their relationships, they focus on doing things they enjoy and improving their skills in things that interest them. First existence, then relatedness, then growth. (Location 1071)
  • According to Harvard Business School professors Paul Lawrence and Nitin Nohria, the authors of Driven: How Human Nature Shapes Our Choices, all human beings have four Core Human Drives that have a profound influence on our decisions and actions: 1. The Drive to Acquire. The desire to obtain or collect physical objects, as well as immaterial qualities like status, power, and influence. Businesses built on the drive to acquire include retailers, investment brokerages, and political consulting companies. Companies that promise to make us wealthy, famous, influential, or powerful connect to this drive. 2. The Drive to Bond. The desire to feel valued and loved by forming relationships with others, either platonic or romantic. Businesses built on the drive to bond include restaurants, conferences, and dating services. Companies that promise to make us attractive, well liked, or highly regarded connect to this drive. 3. The Drive to Learn. The desire to satisfy our curiosity. Businesses built on the drive to learn include academic programs, book publishers, and training workshops. Companies that promise to make us more knowledgeable or competent connect to this drive. 4. The Drive to Defend. The desire to protect ourselves, our loved ones, and our property. Businesses built on the drive to defend include home alarm systems, insurance products, martial arts training, and legal services. Companies that promise to keep us safe, eliminate a problem, or prevent bad things from happening connect to this drive. There’s a fifth core drive that Lawrence and Nohria missed: 5. The Drive to Feel. The desire for new sensory stimulus, intense emotional experiences, pleasure, excitement, entertainment, and anticipation. Businesses built on the drive to feel include restaurants, movies, games, concerts, and sporting events. Offers that promise to give us pleasure, thrill us, or give us something to look forward to connect with this drive. (Location 1076)
    • Note: I think also a sixth: the drive to create
  • Whenever a group of people have an unmet need in one or more of these areas, a market will form to satisfy that need. As a result, the more drives your offer connects with, the more attractive it will be to your potential market. (Location 1095)
  • At the core, all successful businesses sell some combination of money, status, power, love, knowledge, protection, pleasure, and excitement. The more clearly you articulate how your product satisfies one or more of these drives, the more attractive your offer will become. (Location 1097)

Ten Ways to Evaluate a Market

  • The Ten Ways to Evaluate a Market provide a back-of-the-napkin method you can use to identify the attractiveness of any potential market. Rate each of the ten factors below on a scale of 0 to 10, where 0 is extremely unattractive and 10 is extremely attractive. When in doubt, be conservative in your estimate: (Location 1131)
    1. Urgency—How badly do people want or need this right now? (Renting an old movie is typically low urgency; seeing the first showing of a new movie on opening night is high urgency, since it only happens once.) (Location 1134)
    1. Market Size—How many people are actively purchasing things like this? (The market for underwater basket weaving courses is very small; the… (Location 1136)
    1. Pricing Potential—What is the highest price a typical purchaser would be willing to spend for a solution? (Lollipops sell for $0.05;… (Location 1138)
    1. Cost of Customer Acquisition—How easy is it to acquire a new customer? On average, how much will it cost to generate a sale, in both money and effort? (Restaurants built on high-traffic interstate highways spend little to bring in new customers.… (Location 1140)
    1. Cost of Value Delivery—How much would it cost to create and deliver the value offered, both in money and effort? (Delivering files via the Internet is almost free; inventing a… (Location 1143)
    1. Uniqueness of Offer—How unique is your offer versus competing offerings in the market, and how easy is it for potential competitors to copy you? (There are many hair salons, but very… (Location 1146)
    1. Speed to Market—How quickly can you create something to sell? (You can offer to mow a neighbor’s lawn in minutes;… (Location 1148)
    1. Up-Front Investment—How much will you have to invest before you’re ready to sell? (To be a housekeeper, all you need is a set of inexpensive cleaning products. To mine for gold, you need… (Location 1150)
    1. Upsell Potential—Are there related secondary offers that you could also present to purchasing customers? (Customers who purchase razors need shaving cream and extra blades as well; buy a… (Location 1153)
    1. Evergreen Potential—Once the initial offer has been created, how much additional work will you have to put into it in order to continue selling? (Business consulting requires ongoing work to get paid; a book… (Location 1155)
  • When you’re done with your assessment, add up the score. If the score is 50 or below, move on to another idea—there are better places to invest your energy and resources. If the score is 75 or above, you have a very promising idea—full speed ahead. Anything between 50 and 75 has the potential to pay the bills, but won’t be… (Location 1158)

The Hidden Benefits of…

  • The competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time. —HENRY FORD, FOUNDER OF THE… (Location 1164)
  • When any two markets are equally attractive in other respects, you’re better off choosing to enter the one with competition. Here’s why: it means you know from the start there’s a market of paying… (Location 1170)
  • The best way to observe what your potential competitors are doing is to become a customer. Buy as much as you can of what they offer. Observing your competition from the inside can teach you an enormous amount about the market: what value the competitor provides, how they attract attention, what they charge, how they close sales, how they make customers happy, how they deal with issues, and what needs they aren’t yet serving. As a paying customer, you get to observe what works and what doesn’t before… (Location 1175)

The Mercenary…

  • The trick is to find an attractive market that interests you enough to keep you improving your offering every single day. Finding that market is mostly a matter of patience and active exploration. (Location 1190)
  • don’t ignore “boring” businesses until you investigate them; if you can find some aspect of the work that interests you and keeps you engaged, mundane markets can be quite attractive. “Dirty” businesses like plumbing and garbage collection certainly aren’t sexy, but they can be quite lucrative because there’s a significant ongoing need combined with relatively few people willing to step up and meet the demand. If you find a way to make a necessary but dull market interesting enough to pursue, you may have discovered a hidden vein of gold waiting to be mined. (Location 1192)
  • I’m a huge advocate of pursuing side projects as long as you don’t count on them to reliably produce income. Once you have your financial bases covered, crusade all you want. (Location 1207)

Twelve Standard Forms of Value

  • Value is not intrinsic; it is not in things. It is within us; it is the way in which man reacts to the conditions of his environment. —LUDWIG VON MISES, AUSTRIAN ECONOMIST (Location 1215)
  • Economic Value usually takes on one of twelve standard forms: (Location 1218)
    1. Product. Create a single tangible item or entity, then sell and deliver it for more than what it cost to make. (Location 1220)
    1. Service. Provide help or assistance, then charge a fee for the benefits rendered. (Location 1221)
    1. Shared Resource. Create a durable asset that can be used by many people, then charge for access. 4. Subscription. Offer a benefit on an ongoing basis, and charge a recurring fee. 5. Resale. Acquire an asset from a wholesaler, then sell that asset to a retail buyer at a higher price. 6. Lease. Acquire an asset, then allow another person to use that asset for a predefined amount of time in exchange for a fee. 7. Agency. Market and sell an asset or service you don’t own on behalf of a third party, then collect a percentage of the transaction price as a fee. 8. Audience Aggregation. Get the attention of a group of people with certain characteristics, then sell access in the form of advertising to another business looking to reach that audience. 9. Loan. Lend a certain amount of money, then collect payments over a predefined period of time equal to the original loan plus a predefined interest rate. 10. Option. Offer the ability to take a predefined action for a fixed period of time in exchange for a fee. 11. Insurance. Take on the risk of some specific bad thing happening to the policy holder in exchange for a predefined series of payments, then pay out claims only when the bad thing actually happens. 12. Capital. Purchase an ownership stake in a business, then collect a corresponding portion of the profit as a one-time payout or ongoing dividend. (Location 1223)
  • Leasing benefits the customer by allowing the use of an asset for less than the outright purchase price. You may not be able to afford to spend tens of thousands of dollars to purchase a luxury car or a speedboat, but for a few hundred dollars a month, you can certainly lease or rent one. The same principle applies to housing: leasing makes it possible to live in an expensive building for much less than it would cost to purchase or build it yourself. After your lease is up, the asset can be leased by the owner to someone else. (Location 1357)
  • To successfully provide value via Leases, you must ensure that the revenue from the Lease covers the purchase price of the asset before it wears out or is lost. (Location 1361)
  • So long as there’s a jingle in your head, television isn’t free. —JASON LOVE, MARKETING EXECUTIVE (Location 1389)

Form of Value #10: Option

  • Most people think of Options as financial securities, but they’re all around us: movie or concert tickets, coupons, retainers, and licensing rights are all examples of Options. (Location 1438)
  • In order to provide value via Options, you must: 1. Identify some action people might want to take in the future. 2. Offer potential buyers the right to take that action before a specified deadline. 3. Convince potential buyers that the Option is worth the asking price. 4. Enforce the specified deadline on taking action. (Location 1440)
  • Options are often an overlooked form of value—flexibility is one of the Three Universal Currencies (discussed later). Find a way to give people more flexibility, and you may discover a viable business model. (Location 1454)

Form of Value #12: Capital

  • Capital is that part of wealth which is devoted to obtaining further wealth. —ALFRED MARSHALL, ECONOMIST AND AUTHOR OF (Location 1484)

Hassle Premium

  • People are almost always willing to pay for things that they believe are too much of a pain to take care of themselves. Where there’s a hassle, there’s a business opportunity. (Location 1509)
  • Hassles come in many forms. The project or task in question may:   Take too much time to complete.   Require too much effort to ensure a good result.   Distract from other, more important priorities.   Involve too much confusion, uncertainty, or complexity.   Require costly or intimidating prior experience.   Require specialized resources or equipment that’s difficult to obtain. (Location 1511)
  • To benefit from the Hassle Premium, you need to understand how much of a hassle the task is to the prospect. The greater the hassle, the higher the potential Hassle Premium. (Location 1525)
  • If you’re looking for a new business idea, start looking for hassles. Where there’s hassle, there’s opportunity. The more hassle you eliminate for your customers, the more you’ll collect in revenue. (Location 1526)
    • Note: This is my basic premise for ColorBliss. I think there are probably many more use cases like this.

Perceived Value

Bundling and Unbundling

  • Bundling allows you to repurpose value that you have already created to create even more value. (Location 1569)
  • Bundling occurs when you combine multiple smaller offers into a single large offer. (Location 1570)
  • Bundling and Unbundling can help you create value for different types of customers without requiring the creation of something new. By combining offers and forms in various configurations, you can offer your customers exactly what they want. (Location 1579)
  • Unless you work in an industry with unusually aggressive, competent, and well-funded competitors, you really don’t have to worry about other people “stealing” your idea. Ideas are cheap—what counts is the ability to translate an idea into reality, which is much more difficult than recognizing a good idea. (Location 1591)

The Iteration Cycle

  • Iteration has six major steps, which I call the WIGWAM method: 1. Watch—What’s happening? What’s working and what’s not? 2. Ideate—What could you improve? What are your options? 3. Guess—Based on what you’ve learned so far, which of your ideas do you think will make the biggest impact? 4. Which?—Decide which change to make. 5. Act—Actually make the change. 6. Measure—What happened? Was the change positive or negative? Should you keep the change, or go back to how things were before this iteration? (Location 1619)

Iteration Velocity

  • When creating a new offering, your primary goal should be to work your way through each Iteration Cycle as quickly as possible. (Location 1638)
  • Iteration may take some additional effort up front, but after you’ve gone through a few cycles, you’ll have a deeper understanding of the market, direct knowledge of what people actually want enough to pay for, and a clear understanding of whether or not you have a viable offer to give them. (Location 1647)
  • Things that are quick, reliable, easy, and flexible are convenient. Things that offer quality, status, aesthetic appeal, or emotional impact are high-fidelity. Almost every improvement you make to an offer can be thought of in terms of improving either convenience or fidelity. It’s incredibly difficult to optimize for both fidelity and convenience at the same time, so the most successful offerings try to provide the most convenience or fidelity among all competing offerings. (Location 1752)

Relative Importance Testing

  • As a rule, people never accept Trade-offs unless they’re forced to make a Decision. If the perfect option existed, they’d buy it. Since there’s no such thing as the perfect offering, people are happy to settle for the Next Best Alternative (discussed later). (Location 1777)
  • Relative Importance Testing—a set of analysis techniques pioneered by statistician Jordan Louviere in the 1980s 3—gives you a way to determine what people actually want by asking them a series of simple questions designed to simulate real-life Trade-offs. Here’s how it works. (Location 1783)
  • After this set is shown, the participant is asked the following questions: 1. Which of these items is most important? 2. Which of these items is least important? (Location 1791)
  • Random question sets containing four or five criteria are provided until there are no more possible combinations or the participant’s attention wanders, which will typically occur around the five- to ten-minute mark. (Location 1800)

Critical Assumptions

  • Critical Assumptions are facts or characteristics that must be true in the real world for your business or offering to be successful. Every new business or offering has a set of Critical Assumptions, and if any Critical Assumptions turns out to be false, the business idea will be vastly less promising than it appears. (Location 1825)

Shadow Testing

  • Shadow Testing is the process of selling an offering before it actually exists. (Location 1852)

Minimum Viable Offer

  • In order to conduct a Shadow Test, you need something to sell. Fortunately, you don’t have to create the entire offer before you start selling. A Minimum Viable Offer is an offer that promises and/or provides the smallest number of benefits necessary to produce an actual sale. A Minimum Viable Offer is essentially a Prototype that’s been developed to the point that someone will actually pull out their wallet and commit to making a purchase. (Location 1872)
  • http://book.personalmba.com/minimum-viable-offer/ (Location 1900)

Incremental Augmentation

Field Testing

  • Any engineer that doesn’t need to wash his hands at least three times a day is a failure. —SHOICHIRO TOYODA, FORMER CHAIRMAN OF THE TOYOTA MOTOR CORPORATION (Location 1924)
  • Using what you make every day is the best way to improve the quality of what you’re offering. (Location 1950)

2 MARKETING

  • Marketing is not the same thing as selling. While “direct marketing” strategies often try to minimize the time between attracting attention and asking for the sale, Marketing and selling are two different things. Marketing is about getting noticed; Sales, which we’ll discuss in chapter 3, is about closing the deal. (Location 1964)

Attention

Receptivity

  • Receptivity has two primary components: what and when. People tend to be receptive only to certain categories of things at certain times. (Location 2003)
  • If the form of your message suggests that it was created just for them, you’re far more likely to get your prospect’s attention. (Location 2007)

Remarkability

  • Advertising is the tax you pay for being unremarkable. —ROBERT STEPHENS, FOUNDER OF GEEK SQUAD (Location 2016)
  • If you design your offer to be Remarkable—unique enough to pique your prospect’s curiosity—it’ll be significantly easier to attract attention. (Location 2036)

Probable Purchaser

  • Fortunately, you don’t have to appeal to everyone in order to succeed. You just have to attract enough Attention to close enough sales to produce enough profit to keep going. To do that, it’s best to focus on attracting the attention of the people who will actually care about what you’re doing. (Location 2046)
  • Your Probable Purchaser is the type of person who is perfectly suited to what you’re offering. (Location 2053)

Preoccupation

  • Depending on the prospect’s environment or emotional state, the threshold of interest you need to generate may be low. If the prospect is bored, restless, or looking for entertainment or distraction, it’ll be easier to attract their Attention. (Location 2074)

End Result

  • Marketing is most effective when it focuses on the desired End Result, which is usually a distinctive experience or emotion related to a Core Human Drive. The actual function of the purchase is important, but the End Result is what the prospect is most interested in hearing about. (Location 2089)
  • It’s often far more comfortable to focus on the features: you know what your offer does. Even so, it’s far more effective to focus on the benefits: what your offer will provide to customers. The End Result is what matters most. By focusing on the End Result, you’re homing in on what will cause your prospect to conclude, “This is for me.” (Location 2091)

Qualification

  • The product that will not sell without advertising will not sell profitably with advertising. —ALBERT LASKER, FORMER CEO OF LORD & THOMAS AND PIONEER OF MODERN ADVERTISING (Location 2097)
  • Qualification is the process of determining whether or not a prospect is a good customer before they purchase from you. (Location 2101)

Point of Market Entry

  • Attracting your Probable Purchaser’s Attention immediately after they’ve reached the Point of Market Entry is hugely valuable. (Location 2141)
  • If you can get a prospective customer’s attention as soon as they become interested in what you’re offering, you become the standard by which competing offers are evaluated. That’s a remarkably powerful position that increases the likelihood the prospect will ultimately purchase from you. (Location 2146)
  • Discovering where Probable Purchasers start looking for information after crossing the interest threshold is extremely valuable. (Location 2148)
  • Today, newly minted moms and dads hit the Web first, which is why organic and paid search engine marketing is often so valuable. By optimizing for key words your prospective customers are likely to search for, you can ensure that they find you first. (Location 2150)

Addressability

  • Addressability is a measure of how easy it is to get in touch with people who might want what you’re offering. A highly Addressable audience can be reached quickly and easily. A non-Addressable audience can only be reached with extreme hardship, or isn’t Receptive and doesn’t want to be reached at all. (Location 2160)
  • Sensitive or embarrassing topics tend to have low Addressability, even if there’s a huge need. (Location 2166)

Desire

  • Here’s the reality: it’s almost impossible to make someone want something they don’t already desire. (Location 2189)
  • The essence of effective marketing is discovering what people already want, then presenting your offer in a way that intersects with that preexisting Desire. The best marketing is similar to Education-Based Selling (discussed later): it shows the prospect how the offer will help them achieve what they desire. Your job as a marketer isn’t to convince people to want what you’re offering: it’s to help your prospects convince themselves that what you’re offering will help them get what they really want. (Location 2193)

Visualization

  • You’ve stopped comparing and started wanting. Once you start wanting, you’ll probably buy—it’s only a matter of time. (Location 2213)
  • The most effective way to get people to want something is to encourage them to Visualize what their life would be like once they’ve accepted your offer. (Location 2219)

Framing

  • Framing is the act of emphasizing the details that are critically important while de-emphasizing things that aren’t, by either minimizing certain facts or leaving them out entirely. Proper use of Framing can help you present your offer persuasively while honoring your customer’s time and attention. (Location 2241)

Free

  • If you want to attract Attention quickly, give something valuable away for Free. (Location 2261)
  • For best results, focus on giving away real Free value that is likely to attract real paying customers. (Location 2278)

Permission

  • The best way to get Permission is to ask for it. Whenever you provide value to people, ask them if it’s okay to continue to give them more value in the future. Over time, your list of prospective customers will grow, and the larger it grows, the higher the likelihood you’ll start landing more sales. (Location 2304)

Hook

  • A Hook is a single phrase or sentence that describes an offer’s primary benefit. Sometimes the Hook is a title, and sometimes it’s a short tagline. Regardless, it conveys the reason someone would want what you’re selling. (Location 2318)
  • A classic example of a Hook in the publishing world is the title of Timothy Ferriss’s book, The 4-Hour Workweek. This short title implies several intriguing benefits: (1) four hours is a lot less than most people work, and most people would like to work less; (2) you can potentially earn as much in four hours a week as in forty-plus hours a week; (3) if you’re not working so much, you could do other cool things with your time. (Location 2320)
  • Apple used a Hook for the launch of the iPod: “1,000 songs in your pocket.” (Location 2325)
  • When creating a Hook, focus on the primary benefit or value your offer provides. Emphasize what’s uniquely valuable about your offer and why the prospect should care. Brainstorm a list of words and phrases related to your primary benefit, then experiment with different ways to connect them in a short phrase. Crafting a Hook is a creative exercise—the more potential options you generate, the more quickly you’ll find one that works. (Location 2330)
  • Once you’ve created your Hook, use it! Place it on your Web site, your advertising, your business cards—make it one of the first things potential customers see. The Hook grabs Attention, and the remainder of your marketing and sales activities close the deal. (Location 2334)

Call-To-Action (CTA)

  • The most effective marketing messages give the recipient or prospect a single, very clear, very short action to take next. (Location 2344)
  • Think about a roadside billboard that says something like “Tony’s Hamburgers are the best.” What will people who see that message do? Nothing, probably. In all likelihood, the billboard is a waste of time and money. Give them a Call-To-Action such as “Take exit 25 and turn right for the best burgers in town,” and soon Tony will be serving more hamburgers to hungry travelers. (Location 2345)
  • A Call-To-Action directs your prospects to take a single, simple, obvious action. Visit a Web site. Enter an e-mail address. Call a phone number. Mail a self-addressed stamped envelope. Click a button. Purchase a product. Tell a friend. The key to presenting an effective Call-To-Action is to be as clear, simple, and obvious as you possibly can. The more clearly you present your proposal, the higher the probability your prospect will actually do what you suggest. If you’re encouraging someone to enter their e-mail address to sign up for a newsletter, say that verbatim multiple times, and make it immediately clear WHERE the e-mail address field is, WHY they should fill it out, WHAT to click once they’ve entered their e-mail, and WHAT they can expect to happen when they do. If you think you’re being too obvious, you’re doing it right. The best Calls-To-Action ask directly either for the sale or for Permission to follow up. Making direct sales is optimal, since it makes it easy to figure out whether or not your marketing activities are cost-effective. Asking for Permission is the next best thing, since it allows you to follow up with your prospects over time, dramatically decreasing your marketing costs and increasing the probability of an eventual sale. (Location 2348)

Narrative

  • Most compelling Narratives around the world follow a common format. (Location 2365)
  • The Hero’s Journey begins by introducing the Hero: a normal person who is experiencing the trials and tribulations of everyday life. The Hero then receives a “call to adventure”: a challenge, quest, or responsibility that requires them to rise above their normal existence and hone their skills and abilities in order to prevail. When the Hero accepts the call, they depart their normal experience and enter into a world of uncertainty and adventure. A series of remarkable experiences initiates them into the new world, and the Hero undergoes many trials and learns many secrets in the pursuit of ultimate success. After persevering in the face of adversity and vanquishing the foe, the Hero receives a mighty gift or power, then returns to the normal world to share this knowledge, wisdom, or treasure with the people. In return, the Hero receives the respect and admiration of all. Your customers want to be Heroes. They want to be respected and admired by all, to be powerful, successful, and determined in the face of adversity. They want to be inspired by the trials and tribulations of other people who have come before and vanquished the foe. Telling a story about people who have already walked the path your prospects are considering is a powerful way to make them interested in proceeding. (Location 2368)
  • Testimonials, case studies, and other stories are extremely effective in encouraging your prospects to accept your “call to adventure.” (Location 2378)
  • Tell your prospective customers the stories they’re interested in hearing, and you’ll inevitably grab their Attention. (Location 2381)

Controversy

  • Controversy means publicly taking a position that not everyone will agree with, approve of, or support. Used constructively, Controversy can be an effective way to attract Attention: people start talking, engaging, and paying Attention to your position, which is a very good thing. (Location 2386)
  • In an effort to be unobjectionable, it’s easy to water down your opinions to the point where they offend no one. If your position is agreeable to everyone, it becomes so boring that no one will pay Attention to you. (Location 2401)
  • That’s not to say all Controversy is good Controversy: there’s a fine line between being constructively controversial and creating a soap opera. Controversy with a purpose is valuable; Controversy for the sake of Controversy, or Controversy that belittles and demeans, is not. Controversy won’t help you if you lose sight of the purpose behind your actions. (Location 2405)

Reputation

  • when business professionals say they want to “enhance their brand” or “build brand equity,” they almost always mean “improve their reputation.” (Location 2416)
  • Building a strong Reputation is hugely valuable: people are often willing to pay a premium for a good Reputation. One of the reasons well-known consumer brands like Tide and Crest can continue to charge premium prices in near-commodity categories is the strength of their Reputation. Potential customers want to feel certain that the purchase they’re considering will benefit them, that others will think highly of their decision, and that they won’t be wasting their money. (Location 2420)
  • When you build a great Reputation, your customers will continue to do business with you and will refer you to others because they think highly of you (and because referring friends to good products and services is a way to build their own Reputations). Building your Reputation takes time and effort, but it’s the most effective kind of marketing there is. (Location 2429)

3 SALES

  • People don’t like to be sold, but they love to buy. —JEFFREY GITOMER, AUTHOR OF THE SALES BIBLE AND THE LITTLE RED BOOK OF SELLING (Location 2435)

Transaction

Trust

  • The secret of life is honesty and fair dealing. If you can fake that, you’ve got it made. —GROUCHO MARX (Location 2462)
  • The easier it is to demonstrate your trustworthiness and verify that the other party is trustworthy, the greater the chance of a successful Transaction. (Location 2480)

Common Ground

  • A compromise is the art of dividing a cake in such a way that everyone believes he has the biggest piece. —LUDWIG ERHARD, POLITICIAN AND FORMER CHANCELLOR OF WEST GERMANY (Location 2483)

Pricing Uncertainty Principle

  • One of the most fascinating parts of Sales is what I call the Pricing Uncertainty Principle: all prices are arbitrary and malleable. Pricing is always an executive decision. If you want to try to sell a small rock for $350 million, you can. If you want to quadruple that price or reduce it to $0.10 an hour later, there’s absolutely nothing stopping you. (Location 2509)

Four Pricing Methods

  • There are four ways to support a price on something of value: (1) replacement cost, (2) market comparison, (3) discounted cash flow/net present value, and (4) value comparison. These Four Pricing Methods will help you estimate just how much something is potentially worth to your customers. (Location 2534)
  • The Replacement Cost method supports a price by answering the question “How much would it cost to replace?” In the case of the house, the question becomes “What would it cost to create or construct a house just like this one?” (Location 2536)
  • Applied to most offers, Replacement Cost is typically a “cost-plus” calculation: figure out how much it costs to create, add your desired markup, and set your price appropriately. (Location 2542)
  • The Market Comparison method supports a price by answering the question “How much are other things like this selling for?” In the case of the house, this question becomes “How much have houses like this, in this general area, sold for recently?” (Location 2544)
  • The Discounted Cash Flow (DCF) / Net Present Value (NPV) method supports a price by answering the question “How much is it worth if it can bring in money over time?” In the case of your house, the question becomes “How much would this house bring in each month if you rented it for a period of time, and how much is that series of cash flows worth as a lump sum today?” (Location 2550)
  • Rent payments come in every month, which is quite handy: you can use the DCF/NPV formulas 2 to calculate what that series of payments over a certain period of time would be worth if you received it in one lump sum. By calculating the NPV of the house assuming you could rent it for $2,000 a month for a period of ten years with 95 percent occupancy and you could earn 7 percent interest on your money by choosing the Next Best Alternative, you’ll have a supportable estimate of what the house is worth. (Location 2553)
  • DCF/NPV is only used for pricing things that can produce an ongoing cash flow, which makes it a very common way to price businesses when they’re sold or acquired—the more profit the business generates each month, the more valuable the business is to the purchaser. (Location 2558)
  • The Value Comparison method supports a price by answering the question “Who is this particularly valuable to?” In the case of the house, this question becomes “What features of this house would make it valuable to certain types of people?” (Location 2560)
  • Value Comparison is typically the optimal way to price your offer, since the value of an offer to a specific group can be quite high, resulting in a much better price. Use the other methods as a baseline, but focus on discovering how much your offer is worth to the party you hope to sell it to, then set your price appropriately. (Location 2569)

Price Transition Shock

  • Most people who are new to business assume that the best way to increase sales is to reduce prices. That’s not necessarily true. Often, raising your prices is an effective way to attract more customers. (Location 2578)
  • As you test different pricing strategies, you’ll notice certain thresholds where you stop appealing to certain types of customers and start appealing to customers with very different characteristics. This Price Transition Shock can completely change the experience of operating your business, and you shouldn’t take it lightly. (Location 2588)
  • There are two major considerations when setting your prices with Price Transition Shock in mind: (1) potential profitability and (2) ideal customer characteristics. The best strategy is to set your prices to appeal to the prospects that will ensure you work with your most desirable customers in a way that results in the highest profits. (Location 2591)