Deceit infests business: salesmen deceive, PR spins, tech support deflects, marketers mislead, strategists out-wit, founders preen. Entrepreneurs mislead to seem big and stable; multi-nationals mislead to seem relateable and human. It’s the game. But what happens when you don’t play along? I’ve found something surprising after 12 years of building four companies from scratch: That honesty is more profitable than deceit. Not because it’s ethical (though it is), but because it’s more effective. Turns out that doing the right thing is just good business.
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Jason is the founder of Smart Bear Software and author of Best Kept Secrets of Peer Code Review. He blogs weekly on startups and marketing from a geek’s point of view at http://blog.asmartbear.com/jason-cohen.
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Transcript
I was, uh, I was talking to Mark last night and complaining that I had to go after Clayton, like this is going to be a hard act to follow.
And last year I had to anchor the first day, which is also hard because it was kicked off by Seth Godin and then there was Eric Ries, and a huge day like this. I mean, weâre only an hour and a half in to this whole day. I imagine a lot of people are already starting to get fatigued with ideas, right? Also, I was the last thing preventing people from drinking beer, which was going to be provided for FREE, so that was harsh.
So I was kind of complaining, then I realized that there is no good slot- when is the good slot to speak? After lunch when people are tired, thereâs always a presenter before and after both, so thereâs just no good slot to speak, I think. Why not me?
So Iâm going to talk about honesty, because I think not many people do.
And I want to start with Smuckerâs. This is Smuckerâs âSimply 100% Fruitâ line. And this is strawberry as you can see. Any guesses at to how much of this can, what percent of this can, is strawberries? Yeah, itâs 30! Thatâs right, whoever said that. 30% of this is actually strawberries. And the rest is stuff like apple juice, lemon juice, pectin, and then because that stuff doesnât taste like strawberries they have to add ânatural flavors,â right? And when a consumer advocacy group challenged them on this, they said, âWell, you see where it says spreadable fruit there? Well, it has to be at least half preserves or it wonât be spreadable.â Like thatâs some kind of explanation for this.
Anybody here surprised, like shocked or dismayed at this? Like, â[gasp] I cannot believe it!â Nobody. And youâre not surprised because I think lying is normal and expected in business. Itâs expected in sales calls, marketing, packaging, your product page, âAbout Us,â negotiations, deal-making, kind of everything, I think. Itâs expected, and accepted, that you lie. And what I want to talk about for the next hour is not whether thatâs ethical, I donât care. I want to talk about, does it make you more money? When does honesty, or lack of honesty, make you more money?
What do all these countries have in common?
[Sign: Republic of Cuba, Peopleâs Republic of China, Lao Peopleâs Democratic Republic, Democratic Peopleâs Republic of Korea] [laughter] NONE of them are republic, none of them are democratic, none of them are run by the people, right? Yet there it is.
Sort of like simply 100% fruit. I think, uh, this is especially interesting to me because it doesnât work. Everyone just laughed. I mean, no one here, like if you didnât believe that the 100% fruit had fruit you certainly donât believe that North Korea is a republic, right? So it obviously does not work. So what does it do? All it does is establish that they will lie about even obvious things. Right? Theyâve just destroyed any possibility of trust, to NO benefit at all.
And itâs easy to laugh at it, but I contend that a lot of the stuff, again, that you say on Twitter, thatâs on your home page, thatâs in your marketing material, thatâs in your product description, is exactly the same. Almost no benefit, very transparent, probably hurting you. So for example, hereâs a website, very typical website. They are the âleading provider of internet marketing solutions.â Leading! This is it! This is the top. And you can tell, I mean, look at that website, it looks cutting edge in this field of internet marketing, does it not? [laughter]
Yeah, okay, it wasnât changed since 2002, thatâs okay! Iâm sure internet marketing hasnât changed a lot since then, itâs all right. To me this is like the Peopleâs Republic. Itâs just not true. But again, I donât really care about the fact that theyâre spinning or exaggerating, I really want to ask, does this make them more money? Would they make more money if they said something else, or is this actually a good technique?
And where better to start than social media because if you ask any pundit what are some of the key things you have to do to be successful in social media, they say- all of them say- âYouâve got to be genuine, authentic, honest, in a word, human.â Even though we just established that humans are not really often those things. So, this is a field where itâs common knowledge honesty is supposed to win, and does it and do people and is that how people get ahead in social media?
So in order to try to answer this question, I looked at Gary Vaynerchuk, who you may know is on the vanguard of marketing on Twitter. He believes that, as you can see, honesty is important for all companies to do, in any media, particularly this one, heâs got almost a million followers, people love him, and so if heâs preaching the gospel of honesty in things like marketing and social media, then hopefully his followers will agree and do the same. Itâs hard to measure if people are honest of Twitter, thatâs kind of weird, so this is what I did. I used a tool to do a sentiment analysis on people that talk about @garyvee. Thatâs his Twitter handle. Sentiment analysis means if itâs positive or negative, thatâs all.
And the result is that only 9% of the time does anybody say anything negative about @garyvee. But it gets worse than that because I started looking at the actual tweets that were marked negative, and stuff like this- âgood damn or bad damn?â- thatâs not really negative, thatâs just something odd. [laugher]
This guy is self-deprecating, âoh, Iâm terrible, oh!â This guy said Garyâs book is doing better than Tim Ferrissâs book, okay, not really negative is that? âI accidentally just butt-dialed @garyvee.â [laughter] I think what that tweet is really saying is, âI got Gary Veeâs phone number!â [laughter] When I went through the actually tweets and tried to see which ones were negative, I found 0 negative tweets about Gary Vee. In thousands. 0! And thatâs not honest. Thereâs no way you agree with everything, thereâs nothing negative to say, ever. Nothing to question, nothing ever, thatâs not honest. I looked at my own Twitter followers. I didnât even have to look at the individual tweets, it already came back 100% positive. Not true. But whatâs interesting, if you look at the people who are celebrities in social media, you find that they do tell their own brand of honesty, what they feel is true. Even though it may offend a lot of people, right? Joel Spolsky says that â99% of developers suck, and in fact, of that 1% most of them are not even fit to work at his company.â Right? Stuff like that.
I was talking to James Altucher, he said that on his blog, he was getting about 100 hits a day. And then he made a decision in November of last year that he was going to tell all the truth about all his stuff and within a few months he was getting 10,000 hits a day. The people that are successful do, in fact, tell the truth. In other words, all that stuff people say you should do is true! You should be honest and genuine and all this stuff. But they donât. They donât. Now, is telling the truth the only reason why these folks are successful? No no no, right? Thereâs also content and lots of other things. But itâs obviously a key component. And something everybody knows they should do by witnessing thatâs what they say you should do, and they donât do it anyway. In this notion of âItâs 100% Positiveâ I feel is not only like the language that comes out of places like North Korea, itâs not only Twitter. I think itâs generally the language of business. And I think itâs most obvious in the feature-comparison charge or the analysis chart. The analysis is that you have all the checks, youâre the best, and all your crappy competitors are found lacking in all kinds of ways, right? And this is interesting because itâs a different kind of dishonesty. Like, I believe this tool X-Compare pro, I believe that it supports pdfs, thatâs not a lie. The lie is that this tool on the end Araxis Merge, I happen to know that it has about 100 features, literally. This would seem to suggest otherwise. Itâs a lie by omission. And you know the old phrase, a lie by omission is twice the lie. And the question again is this making them more money? And all these charts look the same. Except for this one, itâs got red checks and not green. I like this one because itâs a lice treatment, and one of the benefits is itâs non-flammable. [laughter]Â Talk about understanding the job and what needs to be done. Oh my god! Which is good, I mean, if you like putting your cigarette out on your kidsâ heads then this is important to you. I guess. [laughter]
Theyâre all like this though, right? Theyâre all the same. Yours probably look like this, too. And your investor pitches probably look like this, too. Itâs 100% positive, again. Lying by omission, same mistake as social media, again the question is, though, does this make you more money? Wouldnât it turn off your customers if you admitted that your product had any flaws at all? Now hereâs the neat part. There are hundreds of companies running, asking this question as an experiment, today, and measuring whether it makes them more money, and Iâm going to show you the data that comes out of there. Isnât that nice? Data. [voices agreeing]
And theyâre doing this in the form of putting out customer reviews that are uncensored on their product pages. Good and the bad. Now, itâs obvious why this is good for consumers. For example, hereâs shirt you can buy on Amazon, and surely you are wondering right now, âIs this shirt hideous or totally awesome?â [laughter]
Now, fortunately, Amazon has customer reviews, and so you can tell objectively that is totally awesome! Right? And you can even learn why itâs totally awesome. One guy says, âI have this exact picture tattooed on my chest but the shirt comes in handy in cold weather.â [laughter] Nice. Another one says, âMy child was born without bones but I put this shirt on him and he grew bones.â [shrug] Actually, I like that 148 people give it 1 star. âI hate it.â Okay. More than give it 2 stars, anyway. But to take a more serious and realistic example, hereâs a quote we put on our homepage on my company WordPress Engine: âThey solved problems [others] couldnât,â the site was âmore profitable,â and he doesnât say he likes us or loves us, he says, âTotal crush!â Oh my god! [laughter]
Right? This is totally going to increase sales, no doubt the good customer reviews, testimonials, will increase sales. But- if youâre going to be uncensored, hereâs a fun review. I like this one because if you search for this product on Google, this review appears before the productâs actual home page. Itâs titled âWorst Product Imaginableâ so you can see whatâs coming. He starts with the good news [on-screen: I didnât hang myself after using it][laughter] then he gets to the flip side and says itâs terrible. He describes how he would put a pipe bomb in it and ship it back to the manufacturer. But he says, âI know the governmentâs watching me, so Iâm just kidding.â He has a rant like this. And then he has advice for people still considering buying this product. So obviously, this is going to hurt sales.
So itâs a great question to say, on balance, whatâs going to happen to our revenue if we put up these customer reviews? And youâd think some forward-looking start-up would be the one to run an experiment like this, but actually one of the first was Canon Camera, international consumer brand company, not one youâd think would have the balls to do this, but they did. And I want to show you what happened. So first of all, of course they knew their sales like this block, relatively speaking, whatever the sales were beforehand. And then, once they put up the customer review feature, they were able to see after the fact which ones were high-rated and which ones were low-rated. And then of course they were able to measure the change in revenue on the online store in these two categories. So not surprisingly the high-rated products doubled in revenue. Terrific right? High reviews, no surprise there. And so the only question now is, with the low-rated products, with the loss in revenue, on the balance are you making more money? In other words, is it a good idea? So hereâs what happened to the revenue of the lower-rated products. Almost the same increase! Uh, good! I guess! Right? Yay! But why? Of course, they wanted to know. So they did dig in.
And the answer I experienced myself just a month ago. This is my girl Abigail, aw, and sheâs playing with her space ship, which she loves to do. Recently she had a second birthday and she was wearing a crown, and I said âOh, is Abigail a princess?â And she goes, âNo! I scientist.â [laughter] Yes! Yes! So hereâs Scientist Abigail with her space ship, putting her little man on the toilet, actually, but thatâs okay. So this is a toy you put the toys in the door, close the door and you can fly it around. Right? No big deal. Now the first time she did this, she picked up the rocket ship like this and flies it around because thatâs what you do with a rocket ship, right? This is a normal-use case for a plastic rocket ship. And the door opens up, hits her in the head, all the toys fall out.
And Grandma, who bought her the space ship, said, âOh yeah, it does that.â HUH? Why did you buy a rocket ship that you knew had this weird flaw that the door hits her in the head and so on. And she says, âWell, I needed to buy a space ship that was under $40, and this one had all the features I wanted, and I figured this didnât matter that much.â And hereâs the crux of why the low-rated products, if you describe why theyâre low-rated, can sell more. Because weâre used to the idea that a cheaper product is going to have flaws, or itâs not going to be as good in various ways as expensive products. The Canon camera on the right here costs 30 times as much as the one on the left. Obviously, itâs going to be better in various ways. And weâre okay with that. Just tell me what is actually the trade-off Iâm making, and Iâm probably okay with some trade off, and Iâm more likely to buy right then because I understand what Iâm getting into. So the revenue is better. So they also measure profitability, which you might think would be similar because itâs just the same widgets going out, right? And obviously, profitability of the high-rated products went up. But get this- the low-rated products became even more profitable. And the reason is that returns were diminished 20%. And they were diminished for the same reason- because if I know whatâs wrong with it, and I get it, and it has that flaw, Iâm not going to return it, probably, or not as often. Of course. And the reason that is such a huge impact on profitability is that returns, even in software, are devastatingly expensive. Because- and Iâll just go through this really fast- letâs say you sell a camera for $100, now Canonâs profit margin is 10%, so they spent, in general, $90 to make it and ship it and market it and so on, so they made $10, fine.
Now the product is returned, and the rule of thumb is that you lost ALL of your money. Because sometimes you canât resell the camera and you did lose all your money and anyway you spent time on tech support and you had to pay to ship it back, and maybe you had to fix it before it went back out, and you had to pay to repackage it, blablablablabla. You lost all of your money, now youâre down $90 that you spent getting rid of it. And so, because youâll only make $10 a camera, the next NINE cameras you successfully sell, the profit of that just goes to getting back to zero. You sell ten cameras just to get back to where you were when you sold the first one, so returns are devastating. And theyâre also devastating in software, by the way, because it is tech support, itâs wasting your time, and so forth. There we go. Oh, Iâm pushing the wrong button, sorry. [laugh] So, you might think, maybe itâs just Canon, maybe itâs just this product and so forth, but BizarreVoice, which is a company in Austin that ran this experiment for them, because they make the software that does the reviews, theyâve done this with, this very same experiment with all these brands, and 500 more customers besides, and every single time itâs exactly the same result.
Of course, the exact numbers change, but revenues always go up on both types of products, and profits on the low-rated ones go up even more because returns go down, every single time. Even in this kind of market. And this brings up something Eric Spink brought up- is Eric here? I know heâs not speaking this year, I guess not- uh, this is Eric. Heâs not a legend as he says. Eric has this great quote, he says, âTradeshows are like sex. When theyâre good, theyâre really, really good. When theyâre bad, theyâre still pretty good.â To me, thatâs telling the truth about your products, too. Even when itâs bad news about the products, even when youâre talking about flaws, actually, itâs a good idea. So that makes you rethink whether this [goes back to a feature-comparison chart] is actually the right way to present your product to your customers, whether this actually makes you more money, I contend it does not. And I think it doesnât just apply to describing products, itâs all of this language, itâs all this ridiculous language, this North Korea-type of language, which I feel is not earning you anything. And this is a simple example, especially if you look at the company About page, it starts to get really awful. Like, hereâs an example of one I saw recently. âwebMethods provides business integration software to integrate, assemble and optimize availableâŚâ I canât do it. [laughter]
Sorry, I canât do it. Itâs horrid, right? It doesnât⌠I donât know what it means, I donât know what they do, I know their stock price is down 90% over the last 5 years, but I donât know what they do. Itâs just masking anything thatâs resembling the truth, or [laughs] resembling information. Itâs sort of, to me, like North Korea, itâs hiding behind saying anything because I guess that way, what, they canât catch you on a lie, and Iâm not sure. Iâm not sure what that means. So the opposite of this, this is the time when I pick on Peldi. Seems like every time I do a presentation Iâve got to pick on Peldi. Hereâs the opposite. This is what Peldiâs company page looked like when he started Balsamiq mockups. I know everyone in this room knows Peldi, I donât have to introduce him. I love it because he starts with saying, âHello!â Hello, weird. I mean, the first thing he does is admit, âone guy in a studio.â Thatâs it, and there he is. With the exposed pipes. Thatâs it. And then, it gets much worse. I mean, thatâs not too bad. Then it gets worse. He goes, âI know, it sounds iffy.â Iffy?? Iffy, my companyâs iffy, it says, on the company page. [laughs] Great, itâs nice to have entrepreneurs with confidence. How can one person support a whole software company? âThat remains to be seen.â So in other words, I know this sounds like itâs not going to work, it probably wonât, I agree with you. [laughter] What the hell? Right? [laughs] So, this was Peldiâs revenue which he published on his blog so itâs okay for me to republish. Here, Peldi made about a million dollars in his first 12 months. Now, did he make a million dollars because he was honest? Well, I think it was a component. Obviously, there were other components like having a product people wanted, and that worked, right?
But hereâs the key thing.
You would assume that saying that kind of stuff on your company page would prevent sales. And maybe some people would buy because they want to support a single person doing a start-up, but, come on, in general, especially with the competition in design tools and stuff, surely that would prevent some kind of sales especially with something so âiffy,â and yet obviously what it did not do is prevent sales, right? This kind of brings me to my central thesis about what to do with honesty in business, and that is to be proactively honest. And I think thatâs what Peldi did. I think that when Peldi says, âIâm one guy, Iâm trying to make this work,â thatâs a lot of truth to lay on somebody and what it does is it earns him the ability to do lots of other things. Like, he can not answer an email on Sunday on tech support and he gets forgiveness because itâs one guy in his studio. And he can decide to raise rates and apologize and say, âBut Iâm trying to make this work and I think this is more fair,â and when Time Warner raises my bill by $3 I pitch a fit and say maybe we should get satellite and like itâs a whole thing, and if Peldi raises his prices by, you know, $20, I think in general he gets some leeway there because when you tell the truth you get to do other things. You get to have problems and people give you forgiveness. You get to do things and people will give you forgiveness. But I will, of course, this is sort of a nebulous example so I want to give you a lot of other specific things, again, with data, although I will point out that I think the Canon example is the same thing.
By admitting that the products have these certain limitations, it then gives you the credibility to say, âBut it does have these nice features. And I think maybe in general you want to buy it.â So I want to give you an example- with data- again, from my company WordPress Engine. This is a chart of our short-term cancellation rate, meaning, a customer that has been with us for only a short period of time, like a month. And what is the percentage of those folks who cancel? You can see that generally itâs around 7-8% of those brand-new customers who cancel, and there was this massive spike, what the heck did we do wrong there? Well, the answer is we had an hour of downtime. And my company is a WordPress hosting company, so downtime is literally the worst thing you could do, is just not host any more, right? Thatâs the worst.
So imagine youâre a brand-new customer and you set up your blog and then itâs down for an hour. In fact, Iâm surprised that more than one if five people didnât cancel, right? Itâs pretty bad. So, not really a surprise there. No new information yet. Hereâs the big thing. We had a twelve-hour outage there. Twelve hours! In order of magnitude worse. Look at the cancellation rate. Literally, 100% of the problem of cancellation was mitigated the second time we had an outage. What did we do differently? And the answer is that we were proactively honest about what was happening. As soon as we even thought there might be a problem, we started writing about it, twittering about it, and then while it was going on we starting explaining what was happening. It actually wasnât even our fault, it turns out, it was actually the data center we were in, and so on.
And we kept up through the whole thing. And just by being completely transparent about the problem that was happening, we literally negated all of the negative impact that such an event has. All. So, even if you agree that this is a good idea, so you think, okay great, whatever Peldi put on that page, whatever nutty thing he wrote, that worked, or worked good enough, so Iâll just go to the way-back machine and pull that out, [laughter] and Iâll put that on my company page, Iâll change the name and a couple of particulars, and Iâll check that box, now Iâm being transparent, and I move on with my business. And unfortunately that doesnât work either, itâs not that simple, and I want to tell you a story so you can see why that doesnât count.
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This is Blake Mycoskie, heâs got a company that sells shoes. Blake was in Argentina, in the poor sections of Argentina, and he saw that the children had no shoes. Hereâs why that matters, there are two reasons why this is important. The first one is that if you donât have shoes you get sick all the time, because you have punctures and cuts and youâre stepping in mud and water, and so youâre constantly getting infection. The second thing is that if you donât have shoes you canât travel far, because if you donât have shoes obviously you donât have other methods of transportation that are even better, right? And if you canât travel far then you canât go to school. And if you canât go to school then you canât have a level of education greater than those around you. And if you canât do that, then itâs unlikely that youâll ever be able to change your situation of poverty. So not having shoes is a really big problem, and Blake said, âIâm going to fix it.â
So every time you buy a pair of shoes from his company, called Toms, he gives a pair of shoes to a kid in Argentina. Thatâs why the flag is the Argentinian flag, and it says Toms. And now itâs around the world and not just Argentina and heâs given away millions of pairs of shoes. Hereâs Blake, giving shoes to kids. This is marketing. Itâs a great story, itâs all for the right reasons, but this is still marketing and advertising, right? Not all marketing is bad, just like not all sales folks are evil, as youâll see, I think itâs tomorrow when Paul Kenny talks. Not all marketing is bad, but it still is marketing. This is the reason you should buy these shoes from Blake, right? So, it stands to reason, just like you might copy Peldiâs home page, this is a good marketing trick! It works! And itâs a good message.
So, in 2010 Skechers decided to try it. Bobs! Changing the world. Buy a pair of Bob, Skechers will [grunts]. Those shoes look familiar? Yeah. They look really⌠even the shoes are the same shoes, right? Everythingâs the same. They got such a torrent of hatemail that in 24 hours they pulled the campaign. But think about this for a second. Think about this from an economistâs point of view. What do you mean, hatemail? Kids are going to get shoes! Whatâs the problem? Okay, you copied some other guyâs idea, and? Theyâll sell some shoes, and more kids will get shoes. What is your problem? If you liked one thing, why not the other? Itâs as identical as it can be, right? And the only difference is that one of them is honest, and the other one is a marketing trick. And the only thing separating the âtrickâ from the real thing is the honesty. And so, this is essentially their tactic, right? This is their thought process. You can copy it and do the same thing, and thatâs not honest so it doesnât work because honesty is the part that worked, not the actual thing that you did. Itâs not Peldiâs specific words on the page, itâs that he was honest and that was consistent throughout the company and thatâs the thing that people respond to. So, rather than copying Peldiâs words or any nice thing that you see that you like, you want to copy the inspiration or the thing behind it thatâs driving it. And so, as an example, using me again because thatâs only fair, hereâs our About page, our company page, and we show a picture of Austin because weâre really proud that everyoneâs in Austin, and we say things like, âwe proudly host 0.0006% of the 50 million WordPress blogs on Earth, and more everyday,â saying like we know weâre small and we know our place, but weâre growing and weâre still proud of it.
Also youâll notice how Peldiâs thing was very friendly, hereâs a picture of Peldi and you know, whereas this is a little more formal because our products are also more expensive so thatâs part of the kind of look and feel that we want to have that we try to be consistent with. At the bottom, though, this is the interesting thing, I think, because no other hosting company says this, and itâs not about features. Because, after all, itâs all service and stuff and we have reasons why weâre better than this one and better than that one, but at the end of the day, itâs service and stuff and people obviously host all over the place so. [shrug] This is what we say: When you host with WP Engine, youâre betting on us, personally. And so hereâs who we are. And then, sort of like Peldi, we have pictures and bios and the same kind of stuff you often have on the page, but I think that message is actually the interesting thing. That weâre okay with one of our key advantages, or just differentiators, letâs say, being us, and whether you want to bet on us when your site has problems, or not. And I think thatâs an interesting claim, certainly one that our competitors donât make. So this is our brand of who we are and how we try to be transparent.
But all this brings up another questions because, so you donât want to have omission like the feature comparison chart because the stuff youâre omitting would actually make you more money to admit, it seems. At the same time though, you want to put yourself in a good light, obviously. Right? So whereâs the line between sort of spinning and not really being honest, and telling the truth. So for example, if you put up a picture of yourself like Peldi did, he didnât pick a crappy picture in bad lighting. Obviously didnât just select randomly off the iPhone and throw it up. Youâre going to, all the pictures of you in all kinds of lighting circumstances are honest, those are all images of you, but clearly youâre going to pick one thatâs better. So, to sort of lead into how I think you should do this, and how Iâve done this, I want to start with some examples from a dating site, online dating site, called OkCupid, because they actually have some data on this very question about pictures and how to select them.
So, first of all, if youâre male, and youâre trying to get dates, hereâs what you do. The best thing you can do is have a picture with an animal. Women like it if you have a dog or something. Second best is if you show off muscles like this guy, although they note that you first should have muscles to show, otherwise it is a negative [laughter], okay. Worst thing you can do is be traveling. Nobody likes a wandering guy, apparently. Donât want to see you elsewhere. To be fair, we have to do the other side. Women are actually just the opposite- we donât want to see you with your horse. Nope, thatâs the absolute worst thing, is the animal stuff. [laughter] Nope. No competition. Now you might think something like cleavage, showing skin, would be the most, itâs actually not at all. By far the best thing you can do is what they term the âMyspaceâ shot which is what these women are doing, which is where you hold the camera at an angle and above and you kind of get big bobble-head, little tiny feet, sort of look and feel to it, and thatâs the best thing you can do. Bizarre.Obviously, all kinds of photos represent you but for some reason thatâs better. So, what is the equivalent of sort of selecting among the things you could do, all of which are sort of telling the truth, how do you select the things that are best for you? How do you use that? And the same principle, that if you tell the truth about the things that are bad, then you earn permission to get all the benefits or all the advantages that you also have.
This to me is the guiding principle of how you address things, especially in the worst conditions, which is when you are trying to overcome some kind of objection, and all start-ups have this, right? Worry are you guys going to be out of business in two years, youâre not big enough to do what I want, you talk too much on your blog, you donât blog enough, whatever. Right? Like thereâs always these things that we all get. If youâre not, I donât know, IBM. Even then, they probably get other objections. So I want to explain in three very specific cases how I use the same principle to overcome these sort of typical start-up objections, because you are small. What are you going to say about it? And youâll see the pattern there and see that you can use this pattern in fact for any of this kind of stuff.
So the first one, again, we get this one a lot. âI need 24/7 support.â And of course if you are a start-up you do not have that. Right? So hereâs how we address it. I say, âIf you call Rackspace at 3 am on a Sunday, they will answer the phone on the first ring, and the person who answers that phone will not know anything about your blog, and they will not be able to fix it. They will say, âthe server is working, the network is up, do you want me to reboot the server?â And that is whatâs going to happen. Theyâre there, but theyâre not going to help. And youâre right- youâre right! Weâre not going to be there at all. No one is going to answer the phone. Too bad. But hereâs the different- when you call Rackspace at 2 pm on a Thursday, the same guy answers the phone on the first ring and still canât help you, but not us! Then everybody at the company is an expert, we donât have too many customers in ratio to the number of experts we have, and therefore we actually can help you. So in general, youâre going to be better off with us.â In other words, by admitting âYouâre right, it sucks, um [shrug] we donât have that support, youâre not going to get it. If thatâs important that somebody answers the phone you should not be with us.â I say that to people. But by admitting that, I get to say, âBut weâre smarter.â And I get the believability in that because I admit that we have, I agree, we have that problem. This is really common, right? Everyone gets this.
So, someone says, âI donât want to be your biggest customer.â And I say, âOf course you donât! Who wants to be the biggest customer of a start-up? Nobody wants to. I get that. In fact, itâs worse than that. We probably will have scaling issues with you, and youâre going to have some weird custom thing that we havenât seen before thatâs going to break, like, itâs going to be really bad probably.â I tell them that. I say, âBut, but for our company to be successful, we will have to make blogs like yours work. We have to! If we canât make blogs like yours work, we will literally go out of business. It is that important to us. And so, whatever things may arise, you can be sure that everyone at the companyâs first priority is going to be fixing that and making it work. We have to.â And another thing I can say is, âRight now we have a biggest customer, too. And they had the same problems and they canât wait for you to sign up so that theyâre not the biggest customer, and let me give you their phone number so that you can ask them what itâs like to be the biggest customer at our company. And you can see for yourself whether that feels like a good idea to you.â So, again, by saying, âYouâre right. This is dangerous. This is bad. Iâm not trying to skirt around, Iâm not trying to wave a magic wand- youâre right! But we know that. If I know that, then that means you can have some confidence that Iâm going to actually follow through with what I say about making you the most important customer, also.â To date we have never once lost a biggest customer sales call. Not once. And I say this stuff. âIt will probably not work.â I say it every time. Usually it does work, by the way, without too much extra problem, but I donât say that! I admit that, I set up that expectation that it probably wonât, every time, and we never lose the sale.
The third one- this is just for Paul, because hereâs the point where I rag on sales guys a little, and then Paul can come in tomorrow and save the day on that. So, um, âenterpriseâ sales just means youâre asking big companies for lots of money. And the reason I wanted to put this one in is that itâs also traditionally an area where start-ups have a tough time breaking in. Because itâs the âIf you buy from IBM, you donât get firedâ sort of syndrome, itâs hard for the little guy to break in. For all these reasons. But at Smart Bear, this is exactly what we did. So I want to give you at least a little sliver of I started off with these sales calls, these demos, again, using these same principles. How we won those accounts. So a typical Enterprise sales call is exactly the stereotypical, horrible thing you think it is. Thereâs a sales guy in a suit- nobody else in the room is in a suit- sales guy is going through Power Point slides with stuff like the company mission statement, which nobody wants to hear, right? No one cares. Talk about a pile of crap. Whatever the mission statement is. Right? Itâs like web methods. All mission statements are crap. And the sales person doesnât know all the answers to the questions about the product for some reason. Thereâs a sales engineer sitting there. She does know the answers. But sheâs not to speak unless spoken to. [laughter] Laughing means that you agree that that is the case. So, of course, Iâm not capable of this little dance, right? So, I came in and, first of all, itâs easier to start just by tackling the elephant in the room, the obvious absurdity that most business is all the time. Just attack it head-on. Thatâs a fun way to break the ice. So, I said, âI know everyone here I hope is looking forward to my 47 Power Point slides. So I really hate to disappoint you but I donât have any slides. I was just going to show you the product and answer questions.â And of course everyoneâs like [makes sound], because nobody wakes up in the morning saying âI hope heâs got Power Point! I hope thereâs a lot of slides in there, bullets and stuff. And I hope he reads the slides, too.â So that was easy. But thatâs the easy truth. Just having fun. Then I had to get into saying bad things about ourselves, which you never do in a typical Enterprise, you do not say bad things.
So hereâs how I started, for context. I was selling a software-developer tool that allowed developers to review each otherâs work. So they can identify and fix bugs. So I started by saying, âYou know, a lot of people get our software thinking theyâll install it, and then their software will just have fewer bugs. And itâs not true. It often doesnât work. And thatâs because, if the developers donât want code review to work, if they donât believe in that process or, honestly, if they donât really value fixing bugs, they just donât care, then just putting a tool in place is not going to fix that. Tools donât fix social problems. So a lot of times you put it in place, hoping some magical process will just make fewer bugs, and itâs not true. People have to want to become better, otherwise they just do a perfunctory review, and they âdonât find anything,â and then you have wasted a lot of time.â So, âthis might not work.â Sound familiar? [laughter] You never say that! Youâre not supposed to say that. Leading with how itâs probably not going to work. But because I said that, it earned me the credibility to say the next thing, which is this: âBut I do think a tool can save time and aggravation in four very specific ways.â And I said them, one, two, three, four. âSo as I go through the demo, you can see for yourself if you think it would save you time in those ways, and if it does, then I hope you agree that this is an obvious buy.â So again, the question is, this is not normal, but does it work? One time, a guy pulled his wallet out, slapped it on the table, and said, âIâll buy it right now.â And I said, âWhy?â Remember, Enterprise sales are usually like an 18-month cycles and POs and whatnot. Right? I said, âWhy?â and he goes, âBecause if thatâs your attitude about the product then I know itâs going to work and I know youâre going to work with us and weâll be successful at it, letâs just go.â [shrug] Now, thatâs not normal, that doesnât prove anything. So hereâs the data. 50% of the time that I did a demo, using this same technique- I always did the same stupid script and the same dumb line about slides and everyone [grunts] about the slides, every time [laughter], right? 50% of the time I closed an order worth $12,000 or more. And very few Enterprise salesmen of any industry anywhere has that kind of stat. Now, again, was my technique at the beginning, is that why? Well, itâs obviously one of many reasons why, but again, I feel especially as a start-up, benefit is in these big orders. And that 12 grand was just in the beginning, usually we were going more for like six figures and now itâs become seven. And I do believe that this was one of those things where a start-up can do it, big companies wonât, in fact your competitors probably wonât even though theyâre start-ups, because itâs unusual. And it immediately differentiates you from all the other guys in a suit that walk into a room and talk to them about crap. Immediately. So I think it worked for us. So I want to ask this question. What happens at that very moment where you decide to lie? Youâre on the phone with a potential customer, and they say âHow many people at your start-up?â and the answer is 1. You pause and you say 3. What happened right there? Because you obviously made the choice, because the obvious answer is 1, right? [laughs] Like, clearly. But I think weâre so accustomed to lying all the time, exaggerating, and whatnot, itâs actually easier in some twisted way to say three. Which I find interesting, just in itself. But what happened in that moment that you lied, whatâs going on there? And is it okay, do you want to change that, do you want to have some of these advantages, whatâs happening? So I think thereâs two things happening here, which are instructive.
The first thing is that you are probably continuing an existing lie. If your website makes it look like itâs a substantial company, and thereâs only one person, you canât really say thereâs one person, because it doesnât make sense, and youâre discovered. Youâre revealed. Or at least itâs inconsistent and doesnât feel right. But thereâs an interesting thing about that which, again, hereâs some data from this book from Adelaide and Amy [on-screen: book entitled âThe Big Enough Companyâ]. They run a coworking space in New York women entrepreneurs, and when they were writing this book of theirs- you can kind of tell what itâs about just from the title- itâs well-titled. They did over 200 interviews of entrepreneurs to make this book to find out, what do all these entrepreneurs think in retrospect about these things that not only made them successful but made them fulfilled, maybe even happy. And one of the things that came up is this issue of lying, even these tiny little white lie lying, was detrimental not only to the growth of the company, and to their own sense of fulfillment and happiness running the company. And this is how- I forget if it was Adelaide or Amy who told me it this way, but hereâs how they said it: they said, âThe benefits that are accrued from lying are small. Whereas the penalties if youâre discovered are massive.â So again, this idea of, like, it looks like the company is big, it turns out itâs not, then that kills the trust and it kind of kills the whole thing. And the benefits from lying are very small, just like the benefits of North Korea pretending to be a republic are small to non-existent. So when you think youâre sounding big by saying 3 instead of 1, if youâre talking to L Martin, thereâs like twice as many people in the conference room at their site as there are in your whole company, itâs not like theyâre going to think, âOh, 3! Thatâs substantial.â No! Like thereâs almost no benefit there. In fact, on your web page when youâre trying to look big when youâre not, you donât look that big. Youâre not really fooling people as much as you think you are. And to the extent that you are, itâs not really helping you that much. Youâre putting all this energy into what? Into improving what, exactly? When it seems to me like telling the truth actually is a competitive advantage, and can earn you certain advantages, is a place to spend energy on. The first thing is the inconsistency which I feel is just not a valuable trade-off.
And the second thing I think happens is fear. Youâre on the phone with the potential customer, and you say youâre only one person, so they think, âToo small, not going to buy,â and they donât. Or youâre afraid to be discovered in some way, or theyâll think that you personally are not worthy, or something. Just afraid of the consequences of whatever they may think or do when they discover the truth. And part of this is absolutely true, there is no doubt that there are people who will not buy from you if youâre person, or whatever other things are true about your company, there are people who will not go with us if we donât have 24/7 support. But my contention is, number one, those people, if you fooled them, are not going to get whatever service they thought they were going to get and theyâre not going to be happy in the long run. And in fact, youâll waste a lot of time with them before they leave you, and I donât think thatâs actually very constructive or profitable. And the second thing is, again, your fear is largely unfounded because although those people exist, I think Iâve just shown you with those three examples and those other before it, how if you tackle that same fear, âOh, yeah, weâre only one person, butâŚâ Right?
If you tackle if head-on, âYouâre right, Iâm only one person, sometimes Iâm busy and I donât have time for you. Sometimes Iâm traveling and I canât answer the phone. Sometimes this, sometimes that, BUT! But.â See, now you get to say something else which other people cannot say. âBut Iâm a boutique shop. I have this very specific set of skills and Iâm one of the few people on earth most suited to fix your particular problem.â Or something. Whatever the thing is that is that thing. Iâve showed you a couple of examples, you see the pattern, I find that the pattern almost always works. And theyâre almost always ready to embrace whatever the thing is. In fact, I think the thing about our cancellation rate shows that not only are they okay with the limitations, but you literally earn forgiveness on whatever happens that was even unforeseen. I think thatâs incredibly powerful and way more interesting, powerful, and good for your business in a profitability, revenue, and growth sense, than the little benefits you think youâre getting from telling lies. I also think that this is not limited to just certain industries and stuff. I mean we just went through, what, marketing on Twitter, large-scale international consumer whatever stuff, one guy in Italy doing one tool in a niche, high-end hosting servicey-type stuff, enterprise sales calls⌠Like, I think this is actually one of the few things thatâs universal. And I think itâs universal because itâs a personal thing. Itâs not about what business plan you have, or what industry youâre in, but as Paul likes to say- I keep referring to Paul [laughs]- but as Paul likes to say, like people, of course, are buying from people, a corporation is a financial thing, people buy from people, and this is a thing you do in relationships, isnât it? Unless youâre just going after a one-night stand, being up-front and honest at the beginning is part of how you build a real, genuine relationship, and people, in reality, are willing to forgive a lot of things if youâre also genuine and so forth. I think itâs exactly the same, why wouldnât it be the same? Itâs still people.
And itâs not even just business. Howard Stern is by far the most successful person in the medium of radio, and he is asked of course all the time in interviews, âWhat makes you so successful? What makes you so ahead of everybody?â and he always says that because heâs honest about what, and he tries to remove the filter between brain and mouth and all that. And thatâs not what people hear. Because then they say, âWell, what about all those other shock jocks that do all the sort of offensive stuff? And how come the shock jocks arenât as successful?â Itâs because itâs not about the shock part. Thatâs actually not it, thatâs not the interesting thing. The interesting thing is that everything that happens on the show is an honest reflection, itâs almost the first reality show. And thatâs the interesting thing, and he tells everyone, and it doesnât matter, because if you turn on the radio itâs going to be some shock jock with a voice like this, thatâs not real, and theyâre not listening. And theyâre not doing it. And theyâre not as successful as him. I think everywhere you look you see these kinds of things, and yet people donât do it. Howard Stern says it, nobody listens. And people say on Twitter you should be honest. And then theyâre not.
So, even though Iâm saying this to this whole room, even though hopefully Iâve convinced you at least a little bit, and Iâve showed you data and Iâve showed you all these examples, I still think that almost nobody in this room actually has the stones to do it. I think that if you go back and go to your company page and you really try to tell the truth about it, I think if you go to the sales call, and youâre challenged with something difficult, I think probably youâll wuss out and not do it, because itâs easier not to. And thatâs why, for the few of you who do have what it takes to do this, and be honest, I think that you will have a massive competitive advantage that your competitors will not have, definitely that your large, entrenched competitors will not have. And I think that no matter how many times I say this, that it will still be true, and I donât think this is one of those messages where everyone will do it and the playing field is level again, because everyoneâs already saying, if you look, people are already saying to do this. And people, itâs just too hard for them to do. So letâs see if you have the stones to do it. Thanks. [clapping]
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