Lenny's Podcast: Product | Career | Growth - 5 questions to ask when your product stops growing | Jason Cohen (2x unicorn founder)

Starting point is 00:00:00 A lot of product teams, a lot of founders built something. It starts to show some success. And then all of a sudden it just stops growing. There's a series of questions that I asked to diagnose why is growth slowing. The first question is, are customers leaving? Think about the gauntlet they went through to get to the product. How do they even find out about me? That was hard already and improbable.

Starting point is 00:00:17 They didn't just bounce off the homepage, which is again improbable. And they got to the pricing page. That didn't scare them off. They actually had the budget and bought the stupid thing. And after all of that, which clearly means they wanted it to work, they're like, no, bye. What? Like just on an emotional level, you got to go, wait a minute, that's terrible. Step two is pricing, positioning. Your prices are way too low because you just guessed and you haven't changed them. What often happens is you raise prices and signups don't change. Just think about a company with 1,000 employees and 400 million in revenue or whatever.

Starting point is 00:00:46 If they see a product that's $2 a month or even $100 a month, thought is like, that can't be good enough. We position this conversation as how to deal with stalled growth, but it's actually just as useful for how do I grow more? Do you know right now which channels are saturated and which aren't? You can't just allow on marketing forever. Just adding one little feature and then hoping we can flog AdWords is not going to work. What comes next? The last question is, do you need to grow? We all have heard the phrase, if you're not growing, you're dying.

Starting point is 00:01:12 Is that true or is that the kind of thing that investors use to make founders try to grow even when they shouldn't? Today, my guest is Jason Cohen. Jason is a four-time founder, including two unicorns, one being WP Engine. He's not just an incredible builder and entrepreneur. He's also an incredible writer and share of product wisdom. He's been sharing his advice online for over 20 years now. I've been a huge fan of Jason's from afar for so long, and it was such a treat to have him on the podcast.

Starting point is 00:01:41 There are a million things we could have talked about, and I'm definitely going to have them back. In this conversation, we spent the entire time talking about as very actionable and a very helpful framework for what to do when your product's growth stalls. I found his way of looking at the problem incredibly practical and real and actionable. And if you're looking for ideas for how to rekindle your product's growth, or just accelerate the growth of your product, you're going to walk away from this conversation

Starting point is 00:02:06 with your mind buzzing. Also, I'll add that after 20 years of blogging online, Jason is about to publish his very first real book. It's called Hidden Multipliars. You can now pre-order online at hidden multipliers.com. I am going to grab a bunch. I bet after listening to this conversation, you will too. If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube, and if you become an insider subscriber of my newsletter, you get a year free of over 20 incredible products, including a year free of lovable, replid, bolt, gamma, neda, and linear, devon, post hoc, superhuman, discript, whisper, flow, perplexity, warped, granola, magic pattern, drag cast, trap, your demobin, and stripe atlas.

Starting point is 00:02:46 Head on over to lenniesnewsletter.com and click product pass. With that, I bring you Jason Cohen after a short word from our sponsors. This episode is brought to you by 10 Webb. The company that pioneered AI website building before ChatGPT. In the last three years, over 2 million websites have been generated with 10Web's vibe coding platform. 10Web's vibe coding platform is a powerful way to build websites. Think of it as lovable for WordPress, front-end and back end. Users can build any website at any complexity, e-commerce, portfolios, information websites, blogs,

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Starting point is 00:05:22 And thank you so much for being here. And welcome to the podcast. Thank you. It's an honor to have you here. It's an honor to have you here. I have wanted to get you on this podcast for so long. You are both an incredible builder and a founder. And you're such a great communicator.

Starting point is 00:05:39 You have been writing at a smart bear.com, which I want to get the backstory on for so long. How long have you been writing there, by the way? Almost 20 years. I started when blogging was cool. And I'm still waiting for blogging to come back. and be cool again, but it's not yet. I think it is cool.

Starting point is 00:05:56 It is like. Newsletters are cool now. Yeah. Newsletters are cool. I don't know if you saw Twitter now is encouraging long form writing. There's like this article's feature. So I think it's cool. I think you've survived.

Starting point is 00:06:04 Yes. Okay. I was also talking to Gemini trying to figure out how many posts you've written. I was like count the number of blog posts on a smart bearer.com. How many do you have a sense of how many things you've written on there? Yeah, it's not that many. It's something like maybe 100 and, well, I would say between 150 and 200 that I'm proud of and probably about 300, 350. And that's it over, you know, about 18 years. And that's

Starting point is 00:06:26 because I only write in depth somewhere long, not all or long, but none are short, I guess. And I've always had a rule, even though you're supposed to write really regularly and not just for algorithms, but they used to say, again, back in the aughts where I started, oh, yeah, it needs to be like really regular so people know when to expect your thing and they plug it into their day and all this. So it's always been sure that you should be, that you should be regular. And I never was because my attitude was always, I will only put out stuff if it's the best that I can do. It's up to the reader to decide if it's good or useful. And so if I don't have that, I'm just not going to publish. That's the way it is. And so there's years where I published

Starting point is 00:07:07 once or twice only the whole year. Maybe I was busy or didn't have the energy. Other years where, yeah, I posted, you know, 40 times or something. But even then, it's only that because I can't, It can't do something of that magnitude. And also found unicorns, which I did during that same time and run them. I can't do that all at the same time and produce a lot. So it's fewer and hopefully better, but that's in the eye of the reader, of course. Like when you say, I've done 300, not too many. Well, not for 18 years.

Starting point is 00:07:33 Right? Like over that time you expect. But I think this actually, this is where I was going to go, but I think this is a really important lesson I've also learned. I always used to tell people the key to being successful writing stuff online and just content in general is, quality and consistency, but I've just more and more realized quality is actually the only thing that matters and the consistency doesn't matter. So the only difference is like the more rarely you write, the more awesome it has to be. It is a lot of pressure. I feel that. And then I tell myself, that will just prevent you from writing anything and that's not good. So yeah, you tend to

Starting point is 00:08:08 want every thing you make to be the best thing you've ever made. And on the one hand, I want to hold on to that because it's motivation to be good and not to let the bar slip. On the other hand, you can go into paralysis, which is obviously bad. So yeah, I still struggle with that, but I think that's that is the tension. Okay. So with 300-ish post, 200 you're proud of. There are so many directions we can go. There's a few that I pick that I want to spend most of our time on. The first is you have a really pragmatic way of approaching growth stalling. And the reason I want to spend time here is because a lot of product teams, a lot of founders build something. It starts to show some success.

Starting point is 00:08:48 It's going. It's growing. And then all of a sudden, it just stops growing. And I think that's one of the most painful things to go through. And there's never, I've never come across a way to think about how do I solve this? Because I think a lot of people are just like, okay, I guess that is not working. Let's move on to something else. You have a very specific way of approaching this problem.

Starting point is 00:09:06 And I want to, I want to read actually a quote from Will Smith. And this is something that has stuck with me over since I read it. because it's so true. So in his biography, he has this line. People ask him, what's it like to be famous? And his answer is, becoming famous is amazing. Being famous is a mixed bag. Losing fame is miserable.

Starting point is 00:09:28 That's funny. So first of all, I think a lot of people are experiencing this right now. You have a lot of companies that have reasonable products, and their growth has slowed. Why? Could be the economy, because it's not as good as a lot of indicators. Say we all know that, for example, jobs are not as good as the indicator say. It could because AI or the threat of AI or the expectation

Starting point is 00:09:48 of the of AI, blah, blah, blah. Who knows? It also can just be size. As you get bigger, growth slows because you're not going to grow 2x a year forever. So it slows. There's like just mechanical things. So there's many reasons why things slow. And sometimes it's all of a sudden, although then maybe there's some event like an algorithm changes or, you know, something happens. But actually I think what's really common is it just slowly gets slower. In other words, it decelerates. But just it kind of, I wouldn't say sneaks up on you because most people are looking at growth all the time, so it's not sneaky. But it is, it is sort of, um, uh, a little bit more gradual. Or just like, you just feel more like you're running through mud. Like, oh, God, we're just still doing so much work

Starting point is 00:10:31 and it's not having as much of an impact. And so, um, that's what I see. And when I say, that's what I see. So I've built four companies. The last one is a unicorn. The one before that is also a unicorn. The previous one was bootstrap. This one was VC funded. And I've invested in about 60 startups. Some of them failed completely.

Starting point is 00:10:49 Some of them were very successful. Some of the middle because, of course. Right. And so when I say that's what I've seen, that's the context of what I mean by what I've seen. So there's, I wouldn't say a checklist, but there's a series of questions that I asked to diagnose,

Starting point is 00:11:04 why is growth slowing in this order? Because it's one of these things where the first one that's a problem, if you don't fix that, it doesn't matter if you fix one of the ones below. Just like if, I don't know, maybe if you had a marketing funnel and there's a step where everything falls apart, and you're like, well, I'll just tune the bottom of it a little. It's like, that's not going to work. It's like to help enough. Like you got to go with the biggest issue. So this is in that sort of order.

Starting point is 00:11:29 So the first question is, is our customers leaving, i.e. logo churn, right? Churn with N. You can do churn with MR, too, but just for simplicity, let's say. let's say with customers. And it's the worst problem for a couple of reasons. One is there's nothing you can do about it once it happens. Like they're gone. There's no saving them, increasing their revenue.

Starting point is 00:11:48 Like there's nothing in the future you can do. Also, it's often correlated with things like negative reviews or other things on social media, which is another kind of preventing growth. It's kind of a two punch thing of like they're not here and they may be like actively hurting your growth. So that sucks. The math is undeniable, which I want to talk. about because this is something where there's a metric I like that is unusual and people find

Starting point is 00:12:14 useful. But before I get to the metric, there's also this kind of visceral thing, which is the customer saying this product, I don't want it. And when I think about the gauntlet they went through to get to the product, how do they even find out about me? That was hard already and improbable that they see an ad or hear it. And then they clicked, which is improbable. And then they they didn't just bounce off the home page, which is again improbable. They actually were like, oh, yeah, this sounds pretty good. And then they got to the pricing page. And that didn't scare them off.

Starting point is 00:12:45 They actually had the budget and bought the stupid thing. Then they went through onboarding and invested their time, et cetera, et cetera. That is a crazy gauntlet that almost no one gets through. And after all of that, which clearly means they wanted it to work, they're like, no, bye. What? Like, just on an emotional level, you got to go. Wait, that's terrible. I'm fundamentally not fulfilling whatever.

Starting point is 00:13:07 promise I made or they thought I made, which is whether that's a product issue or a communication issue. Okay, like there's lots of, but one way or another, like, something is really fundamentally broken just in terms of like, I'm a product person. So what I want to do is make a product that other people want to buy and use. And if they don't, like, no matter what the metrics say, I'm, you know, we're failing our mission, our customers, whatever. So there's just even that non-mathematical reason to go, oh my God, right? So, uh, so to me, that's already enough reason. But the math is very interesting. And what I find is when I talk to people, especially on Twitter or something where people are just yapping around whatever they're doing,

Starting point is 00:13:48 you say things like, you know, anything about 3% per month cancellation is terrible. And people are like, oh, no, it's okay. Five is fine, seven, six. Everyone's yapping about what they, and it's very abstract. Like who is four better, much worse than five? Like, I don't know. And I heard someone else and blah, blah, So it's very, I don't know, like generic and rough. So there's a different metric that I like to use, which is, which, which, which, which, which, um, which keys off of this idea that I think, again, people don't appreciate, which is cancellations grow faster than marketing. And so cancellations overpower the growth of the company and slow it to a halt, i.e. growth slows, right? to where you literally cannot grow anymore. There's a maximum ceiling of how big you could ever be, thanks to cancellations.

Starting point is 00:14:39 And when you know what that number is, it's much more real and visceral and scary. And so just to justify what I just said, just imagine any company, and imagine you just tripled the number of customers that are there and paying. And the same kind, the same age, you know, just the same kind of stuff just tripled, right? overnight. So the next month would marketing deliver more new customers than a month before? No, because marketing doesn't, none of your marketing efforts care how many customers you have. AdWords delivers the same number of leads and, you know, SEO delivers the same. Like, it does not care how big you are these, these efforts. So you're still going to be

Starting point is 00:15:17 growing at the same rate as you were the previous month. But cancellations in absolute terms, like the number of customers who leave, will triple. Because you have 5% cancellation and triple it. Okay, so still 5% of a triple number is triple. Right. So this is the point is that cancellations automatically grow as you grow, even if you're doing everything right, but marketing doesn't. Marketing grows only as fast as you can improve marketing.

Starting point is 00:15:43 We all know that's quite hard actually. It's linear. It's hard to find new channels that aren't trivial. Like it's hard. Of course, we're going to do it, but it's hard whereas cancellations grow automatically as you grow, right? So cancellations always overtake marketing for this reason. Like the metaphor here is a leaky bucket where are you adding enough water to keep up with the leak essentially?

Starting point is 00:16:03 Right, except the leaks automatically increase and that's what people don't appreciate. Because it's a percentage of your entire customer base. Yes. So we say when in marketing we say things like I'm adding 100 leads a month. But in cancellations, we say 5%. Why do you say percent? Because it's based on your size. And it's exponential.

Starting point is 00:16:20 That's a 5% is in exponential. And so there's this maximum size you could ever be. it's when churn equals growth, right? Like that's, that's the math. So how would you compute that? It's actually quite simple because let's say you have this 5% per month just just take a number. So it's simply the amount of new customers you add divided by that cancellation rate.

Starting point is 00:16:41 That is the amount that, that is the limit. So let's suppose you add 100 customers a month and you have 5% cancellation. So 100 divided by 5% is 2,000. So a company like that will never have more than 2,000 customers. And by the way, as you are, that number, growth is very slow because you bring in a bunch of customers and almost the same number leave, so growth is slowing. Ah, look, we've diagnosed my growth slows automatically at all SaaS companies. So that's why this is the first thing because it's so it's such a hard cap limit and it means that people don't want your product.

Starting point is 00:17:12 Like these are two reasons why it's the most important thing. Just to clarify, this is logo churn. This is like number of customers, not revenue churn. Yeah. Well, it is both logo churn and revenue churn. Do the same math. You could say dollars in divided by dollars cancellation rate or number of customers. I've been saying number of customers just to keep it simple because I think when you look at it and say, wow, we will never have more than 2,000 customers.

Starting point is 00:17:36 It's just such a like a visceral. Oh my God, we had to do something about that. Now, of course, one thing you could do is have more marketing. But you know that already. If growth is slowing, you're already thinking how do I get more out of marketing. You knew that. The point is that cancellation is this hard limit pulling you down with all these other. they're really bad either implications or side effects, which is why it's so important.

Starting point is 00:17:58 Cool. And when you say marketing, just to clarify, this includes basically all growth work, PLG stuff, marketing, sales. Yeah, yeah, right. Great. Yeah, PLG is nice, but that doesn't, you still need marketing to bring the people in in the first place. PLG just means there's not a salesperson unless you're expanding or some other segment. Cool. Yeah, it's like the whole bucket of just bringing new customers in. Yeah. Yeah. So, okay, so assuming you agree like, yeah, I don't like customers leaving. That sucks. So obviously we want to find out why they're canceling and do something about it. And the kind of root issue here is they don't want to tell you. Like they're already out the door. They've already like stopped investing in you like mentally. So the last thing I want to do is

Starting point is 00:18:35 spend time with you or like really think about it and diagnose it with you. And I have a funny story about this for myself. So at smart bear people would cancel. We put up this form and and a drop down list, you know, too expensive. It's project ended. You know, those little stuff like we do so we could gather data. And one of them did have more, more selection than the rest. And I realized it was the first one on the list. And I thought, huh, I wonder if people are just picking the first one. So then then we randomized the list. So everyone saw a different order of the list. And now all the items were picked equally. Like, oh, right. It's complete noise. And I know other companies have done similar things also with the similar results. So this is,

Starting point is 00:19:17 this is a global phenomenon. So, okay, so what do you do? Like, the, The point is it's hard, right? So the first thing is you want to ask open-ended questions. I know it's easy. You want to just get a list, but this is the problem. At least with open-ended questions, I mean, most people won't answer, but at least you might be able to get some kind of thing that they generated. And when you do this, the wrong way is to ask why did you cancel? Because again, this allows them to say something really simple like budget, which may or not be true. I'll get to that in a second. What you want to do is say, what made you cancel. In other words, what about the product or situation or whatever caused the cancellation? Just phrasing it that way,

Starting point is 00:19:58 you get much better results. And I stole this from a company called Groove, who has this great case study online about this very thing. They had an email that they sent out, which is a very great email. And they started by asking, why did you cancel? They got 10% usable responses. They changed the same email to what made you cancel. And it's 20% usable responses. So this is, this is, there's like, I guess maybe some anecdata that this is a good idea. But the point is you really want them thinking about the product and not just coming up with an excuse.

Starting point is 00:20:27 The next thing is when you can, the few times you do talk to them, so you want to go into delve as far as you can into there because most people won't talk. The temptation is to hear what they generate at first and say that's the answer. So like a really common one is it's too expensive. I think anyone who's looked at cancellation data at any company

Starting point is 00:20:45 will agree that too expensive is often the number one or at least like top three reason in one form or another, and that is never, ever, ever the reason. How do I know? Because they already looked at your homepage, read all the stuff, saw what you promised, looked at the pricing page, and decided to buy it. That means it, whatever was in their mind of what it is, is not too expensive. They already decided with their actions. It was not too expensive.

Starting point is 00:21:13 Something else happened, like, but you didn't fulfill the promise that at least they thought you made. Or something else didn't work. Or, you know, now it is possible they lost budget, but that doesn't mean you're too expensive. That means they lost budget. That's a very different reason. Right? That's not that you're, so it's sort of like, this happens in, in health care, for example. So when someone dies, the doctor has to write the what's called the proximate cause, which is what, why did they actually die?

Starting point is 00:21:42 But then you try to also write down the real reason. So let's say someone comes in and the proximate cause of death is they stop breathing. Well, you could stop there, and that's like listening to it's expensive and going, that's it. Well, why did they stop breathing? Because they ran their car into a telephone pole and were injured so much that eventually they stopped breathing. Why did they run their car into a telephone pole? Because they passed out at the wheel. Why did they pass it at the wheel?

Starting point is 00:22:09 Because they had undiagnosed diabetes. Now we're getting somewhere. It still isn't just one root cause, another as a sidebar. I hate the idea of a root cause. complex systems do not have one root cause. They often have many interlocking things that could be done to detect earlier or to change it or to reduce or not one root cause. So the root cause analysis to me is, by the way, an incorrect thing. I'm explaining why right now with the healthcare, right? Because, well, what about the sign diagnoses? Well, maybe part of the problem is we have a health care system

Starting point is 00:22:38 that isn't preventative. And part of it is that, but they didn't go to the doctor anyway. And, you know, okay, so there's all kinds of things that could be useful and interesting to prevent this or make it better. That's the point. That's what an analysis should be. is this array of things, not the root cause. Anyway, something along the lines of undiagnosed diabetes is much more of a cause than stopped breathing. So when we say it's too expensive and that's the reason, you're making this fallacy. You've got to go into, well, they wanted this stuff, but it didn't work with linear,

Starting point is 00:23:09 which is what they use. It only works with Jira. And so there's a lack of integration. Now, maybe we should write that integration. Maybe we shouldn't. Of course, it depends on how much we hear about it. And, you know, of course, it's going to depend on other things. things, but that's the reason, not it was expensive, right? And so, so this idea of like getting

Starting point is 00:23:24 into not even the root cause, but let's say rooter causes. The roots cause. Yeah, they're more root. I think some people probably say five Ys and just paper over what I just said with that. And maybe so, but I just, you know, let's not be so simplistic about that. Because again, five Y sometimes implies that there's some root cause at the bottom of the Y's. Let's be a little bit more, let's be a little more smart about that. So anyway, these things too expensive. This is not it. Maybe project ended really is project ended.

Starting point is 00:23:52 Okay. But even there, I see just today, today, on an entrepreneur forum on, I'm on, someone said, yeah, you know, we're starting to see more people have project ended as the reason. And so there's nothing we can do about that. See, that's incorrect. That's only true if you only look at the proximate thing, which is project ended. You're correct that you can't make that project not end exactly. Yeah. Okay, but wait a minute. If your software was more successful and the project was more successful, would it have ended? Or is that actually an indicator that your product wasn't that useful or didn't do its job? It's possible. Like in this case, who knows, right? But that's possible that it really is your fault. Another example is, but you picked what target segments you were going after. Did you pick like a market segment that was easier to sell to? But their projects end, like small business.

Starting point is 00:24:47 business and consumers where very often the small business does go out of business or the project and et cetera, because when things are small, they're, you know, have high variance and lots of things can knock them off the path and so on. And so is it your fault for picking the wrong ideal customer profile or target segment? And so, yes, that one case of that one project, that's not your fault, quote unquote, but by saying that you're, you're just like ignoring the fact that there is maybe something to do about it. Now, all this is maybe. None of this proves you should like change your market, right? But the fact, but when you say it's, there's nothing we can do about it, you're, you were closing the door on these things that might be the right thing. And very

Starting point is 00:25:26 often, as I think probably a lot of people here on this, on this, on this, listening to this, no, the market segment you pick has a lot to do with your retention rate. Because everyone acts differently, right? And so anyway, so I know it's a lot on this topic, but I just feel constantly people make this particular mistake of not, not getting, you know, not, you know, just like abdicating responsibility or just listening to the first thing they hear and saying that's the reason and that's not right. So that's the big thing about listening. Another thing is you got to ask when people are in trouble but not yet canceled. You might be able to save them. You certainly can learn more because you can talk to them like they're not shut off yet from you. So this might be

Starting point is 00:26:10 they never uploaded their data so they're not being successful. They are calling tech support too much. they're in trouble. They're not calling text board enough. They're not engaged. They didn't log in for a while. Like there's all kinds of things where, now, of course, this is all going to, the details are going to depend on the product, obviously. But there are signals that are correlated with cancellation. Now, if you have a lot of data, you can literally correlate signals of cancellation and try to extract that, you know, precisely. But even without data, you can guess and guessing and having a theory, acting accordingly. And as you get more data adjusting your theory, this is a, this is a, this is a, This is a wise way to proceed even without data. So if you can catch them when they seem like they're off the happy path, they're in trouble, like that's a better time to do it. And then the last thing I would say about this detection is if you don't know what to do or all else being equal, then focus on onboarding.

Starting point is 00:27:06 Almost all companies have a whole lot more cancellation in the first day, 30 days, 90 days depends, right? But the first period, then the whole rest of the customer. customer's life. And also small changes in the onboarding can have large effects on cancellation. Whereas later on, that's not necessarily true. It could be, but it's not necessarily true. So a really dramatic version of this is if you've ever done YouTube videos, which I mean, I know you have, but if a listener has ever done YouTube video and you see the retention, quote, unquote, of the viewer on a YouTube video, it has this thing where it falls like just so much you can't believe in the first 30 seconds. And then if it's a decent video, it'll flatten out

Starting point is 00:27:44 as people decide to watch the video. So in that in that crazy looking curve, for the people that watch it for 15 minutes, maybe there's something you could do to keep a few of them staying to the end, but that's not going to change very much how many people get to the end. Whereas, like for me, I've only done a few, but what I see is about 50% fall off in the first 30 seconds. Well, if I can get that from 50% to 55% stay, that's an additional. And at the end of the I only have 20% still there, which is pretty good for a longer video. But if I get it from 50 to 55, I might go from 20 to 25% staying. In other words, if I shift at 10% at the front, which maybe I could do, like I can't

Starting point is 00:28:26 be dramatic, but maybe a little, then in the output, I might be able to increase it by 20, 30%. So that's a huge change. And so the SaaS equivalent is, as we all know, if they leave early, not only is it bad, but it's super unprofitable because you spent all this money to acquire them and then they never stayed around long enough to pay it back, much less to be profitable. So if you can do a little bit in the onboarding or shift the onboarding percentage a little bit, it pays off enormously in revenue and profit over time by making them successful. And so again, if you don't know what to do, onboarding is a good bet. And even if you do know what to do, I'll still bet that onboarding is a

Starting point is 00:29:04 good bet for where to go. Oh, man. I'm so happy we're spending so much time on this very specific first step of logo churn because the way you described it is so visceral you've spent it took so much it's like impossible how far this customer got already like they are using your product yeah understand it and mostly and then they still decide to leave so brutal the way you're going to believe them when they say it's because of the cost right like it just doesn't even make sense when you put it that way right so let me let me kind of summarize the advice you shared here because this is so good. So step one is look at LogoTurn, the way to understand and essentially to understand how big of a problem this is and why you need to spend time here is look at this,

Starting point is 00:29:50 basically do the math, what's how many new customers you're getting divided by the cancellation rate? And that essentially tells you what's like, if that doesn't change, what's the maximum number of customers you will ever have? Exactly. That's going to be a sad number. And then the question is, okay, cool, how do I reduce the cancellation rate? Obviously, as you said, everyone wants new customers, more new customers. Yeah, and I know you're going to do that anyway, but you got this cap. Exactly. Okay.

Starting point is 00:30:12 So a few things you've shared here. One is, instead of asking people in a multiple choice, why did you decide to cancel, you make it free form and you make the question, how would you do you say it? Was it what made you cancel? What made you cancel? Yeah. Great. Yeah.

Starting point is 00:30:28 And then you could use AI to help summarize these things, I imagine, instead of. Yeah. I think what I find with AI is this, with this sort of thing, with surveys. is this. AI is good at picking out themes. It is bad at picking out details that are actionable. When I say AI, of course, I mean LLMs, which is probably what we mean when we're looking at natural language, right? And if you think about it, it sort of makes sense because the LLM is an averaging machine, right?

Starting point is 00:30:57 It's predicting the most likely, that's an averaging kind of a thing. And so when what you're looking for is a kind of average, it's usually pretty good. So summarization, topics, themes. But when you're asking for like, what is interesting and not average, it's actually pretty bad at it. One way that I found that's sort of useful is, yes, I'll ask it about themes, but then I'll say, now pick out every specific detail that goes under one of these themes, put it along with, like which customer said it and the link to, you know, blah, blah, blah.

Starting point is 00:31:29 So you have to, you know, play with this to tune it right. But like that kind of thing so that a human being can then still see the detail, which is what triggers in your mind, wait a minute, but that means we should do that, right? Because the topics won't do that. The topics will be, I already know what the topics will be.

Starting point is 00:31:43 It'll be stuff like, I couldn't figure out how to do this, this integration, right? Like the topics are actually not going to be that surprising, probably. It's the details that are going to be the triggers for actionable stuff or patterns or something like that. So, yeah, AI is not useless,

Starting point is 00:32:03 but it's not as useful as it sounds. It's probably still a good idea to just read all this stuff. Although AI might be able to clean up, you know, maybe people's grammar is bad. It's a weird language. Okay, yes. Like, that's annoying. You can clean that up.

Starting point is 00:32:16 But I wouldn't rely on AI to do the thinking for that reason. That's such good advice. I actually have a really cool guest post coming out soon that gives a bunch of really specific techniques to avoid AI hallucinating or just giving you really bad results from this very specific synthesis work. because it turns out AI is very not great at actually being honest about some of the stuff. So we'll link to it if it comes out before this.

Starting point is 00:32:42 And like I think in real life, most people don't have that much. The volume of these cancellations unless it's like a super consumer app is not that high. So you don't even need AI for this. Just like read it. And then this is like it's like way

Starting point is 00:32:52 to your next piece of advice, which is essentially the five Ys but not the five wise where you kind of force yourself to dig into what's the real reason that forced them to cancel. It's probably not pricing. It's probably not the project. ended. There's something deeper.

Starting point is 00:33:06 Yeah. And then advice number three is try to catch people early. Try to catch them before they turn. If you don't have a lot of customers, it's a lot easier. If you have a lot, it's obviously harder. There's always been this like, holy grail idea of a product that just like watches metrics and tells you this person's going to cancel. I haven't see that. What I would say is it's, it is not hard. You don't need a lot of customers to go talk to the ones who are in trouble. You do need a lot of data. You do need a lot of data. or customers to mathematically know what behaviors are correlated with cancel and therefore to spend your time wisely, then you need a lot more data. But to your point, even if you have the data,

Starting point is 00:33:45 it's not entirely clear whether some kind of mechanistic thing is all that important. One way I look at it is, you know, it's very common advice. You should try to get more good customers and fewer bad customers. Of course, you should. And so therefore, they say, you should see what the good customers have in common. But that's not the end of the sentence. Because a lot of the things the good customers have in common, they also have in common with the bad customers because it's just what your customers do, just what anybody does. So it's what the good customers have in common that are different from what the bad customers have in common. Okay, so with that in mind, this kind of like, it has to be both or else you're sort of not

Starting point is 00:34:24 getting, you're just getting correlations that are not helpful. The cancellations or talking to people who are in trouble is another application of that. So what is, correlated with people who actually end up canceling, not just what, you know. And so I think that mindset is is correct if you add the other side of that to it. Really important nuance. Yeah. Okay. And then the final step just to close this out is onboarding, work on onboarding activation. Something that's one of the most recurring themes on this podcast is just the power across every dimension of improving onboarding, improving activation. Yeah. Sweet. Okay. So this is just step one, which is already full of gold if your growth has slowed. So step one is focus on your logo churn, the number of customers

Starting point is 00:35:08 leaving people leaving actually canceling your product. So I kind of look at it like a question. So like the first question is, are people leaving it too much? Because if your monthly cancellation is 2% for S&B, that's good. So you could try to work on it, but since it's already good, it's still probably a good idea to work. It's probably a good ROI for you to work on it. But it's possible that you've got diminishing returns and that this isn't really the reason, where it's not really reasonable for it to go. I mean, how low can it go for SMB? Like, there's some floor, and you might be near it.

Starting point is 00:35:37 So the first question is like, is, is logo turn too high and trying to set a threshold that, you know, lower than what people normally want to do? So the next question I have is, is the pricing correct? Which, of course, pricing is a perennially interesting topic. I know. There's this funny thing of, especially with newer companies, that the pricing is always too low.

Starting point is 00:35:58 It's not always, but like that's the common thing. Patrick Campbell, who has 4,200 data points about startups, let that sink in a little, has this great quote, which goes like this, your prices are way too low because you just guessed and you haven't changed them. It's like, yeah, if you really like look deep within, you realize like, yeah, or we just picked whatever our competitors are doing and that's it or we added or subtracted something because reasons. Right, that's probably not good. And people are scared to rate prices for obvious reasons. But the, but the, if we set aside the emotional reasons, whether they're correct or not,

Starting point is 00:36:37 the sort of economic reason people normally give is they have in their mind this, this microeconomic supply and demand curve thing. And the demand curve says that if you raise the price, demand goes down. That's why demand curves always going that way. Right. And so they understand. I think everyone understands, right, but maybe you raise prices by 10%. But signups go down only five.

Starting point is 00:36:58 percent. So overall is better. But the opposite could happen too if I'm on the other side of the demand curve and okay. So that's how most people think of it. However, this is not how it works. So that's how it works in microeconomic 101 textbooks. That's not how it works in the real world often. So what usually what often happens is you raise prices and signups don't change. When I say signups, I mean they're like science per month, you know, the rated sign. Or signups go up. This happens all the time. Even, even, even, even. Even for like solopreneurs on Twitter who have, you know, strange projects or everything, happens all the time.

Starting point is 00:37:33 They raise prices. They're like, I was scared. But then then signups went up. I once talked to a guy, this is, this is really funny. I'm not going to not say the name to protect the name, right? But, but, but, so he had a product that was that he was selling essentially to enterprise and government, so larger companies. And it was to me way too cheap.

Starting point is 00:37:52 So he said something like, yeah, I charged $300. Like $300 a month, that's not enough. goes, no, per year. I said, okay, wait. I said, okay, just do me. How many signups do you get a week? And he's like, one or two, because this is enterprise. And it was a startup.

Starting point is 00:38:08 I said, okay, just for fun, just change it from per month, per year to per month. So in other words, we're 12xing the price, right? So he did. And he still got one or two per week. Like, nothing changed. I'm like, okay, what are you going to do next? And he goes, oh, my gosh. Well, now.

Starting point is 00:38:28 I have so much more money and profits. I'm going to like hire an engineer. I'm going to do this marketing. And I'm like, time out. What you're going to do is raise prices again. Like you just told me you, you 12xed the price and nothing observable changed. That means you're not near the price yet, right?

Starting point is 00:38:45 You're going to, you don't have to 10x it again necessarily. Maybe 2x, maybe 50%. But like, you're not done. I mean, you can do those other things too. But you're not done with the price. Like it didn't even occur to them still. Okay. So why does this?

Starting point is 00:38:58 happen. The reason is that pricing selects the market. So if you only think of the market as people with very limited budgets, barely can do anything, not getting much value out of it, then it is true that if you raise prices, you'll get fewer of them because they were never getting that much value out of it anyway. They don't have that much money. So if you raise prices, they're gone. But think about just even a mid-sized company. Forget about enterprise. Just think about a company with 1,000 employees and 400 million in revenue or whatever. And if they see a product that's, you know, $2 a month or even $100 a month, and their thought is like, well, that can't be good enough.

Starting point is 00:39:37 They're not mature enough. It's not going to do enough. The support's not going to be good enough. They probably don't have good governance policies or other things that we need, you know, et cetera. Whether that's true or not, like this is what it looks like is it's low quality, cheap, whatever aimed at SMB. So they just won't buy.

Starting point is 00:39:53 They're not in the market for the thing. So it's not true that they have this demand curve where, since it's cheap, they all want it. That's what microeconomics curve says. It's so cheap that they should all want it. No, they don't. None of them want it because it looks bad. So as it gets into a price range that makes sense for the kinds of things that they need, then their demand actually goes up. Then it can stay up while it's in a good range. And then, of course, at some point, you are priced out of them that that particular kind of company is like, I'm not going to spend $10 million a year on it. Are you kidding? So yes, it does slope down and go away. So it's not a normal curve, but it is like, it slopes up and then it's something and slopes down. Who knows exactly what it looks, what shape it is? Probably none of us know. But it's more like a mesa and not a line that goes up to down like we like in the textbook.

Starting point is 00:40:40 For that market, it's only the very lowest, you might even say worst in terms of metrics end of the market that has the microeconomic slope that you're worried about. So what happens is you raise prices and you enter a different market. And that's why the signups go up or okay. you leave behind perhaps a worse market anyway. And of course, everyone will tell you, you know, the more they pay, the higher retention is. And then, you know, like all the, all the kinds of stuff goes better when you,

Starting point is 00:41:09 when you, when you charge more. So this question is pricing correct. This is kind of what's in my mind when I ask that question. It's like probably the answer is no, because pricing is very hard. It's just as much art as it is science. You've had some really good people on here on pricing. In fact, so good that I've bought some of the books to those people. I've talked about because I love I love the interview about right so so like so I believe in all that

Starting point is 00:41:32 no problem no problem I believe in it nevertheless they also say it's art and science and it's it's very difficult to and also once you augur it in the world changes like five 10 years later the market is different the world's different and so it's still it's still unclear also price is not just the number on the web page it's easy to think that right but how it's structured is just as important. How the products positioned is just as important. So, for example, this example I've written about before online is this example, it actually was something that happened in my life, but I changed the story to make it like simple and miserable and clear without having to get into lots of detail. So the sort of story version is how this company was able

Starting point is 00:42:22 to charge eight times as much for the same product just by talking about it differently. So just by positioning it differently, eight times as much. Again, this happened to me, but it's too complicated. It's not interesting. Those details are not interesting. So say there's this company called Double Down. And the idea is that it halves the cost of your AdWords because it makes it so efficient. So that's what it says in the webpage, cut your AdWords cost in half, which is a very good

Starting point is 00:42:49 pitch, isn't it? It's simple, obviously valuable. But when you think, so let's suppose I'm a customer and I spend $40,000 a month on AdWords. What am I willing to pay for Double Down? Well, if you do cut my AdWords in half, then, all right, I save, I save $20K. But I'm not willing to give $20K to Double Down because then I'm not saving any money. Or to actually save money. I need to give double down less money.

Starting point is 00:43:14 How much less? I don't know. Let's just call it a quarter. So I pay double down $5K to save $20. so I'm really saving 15. Double down's making 5K a month. That's pretty good. Everyone's pretty happy at this 5 grand a month price point.

Starting point is 00:43:30 So there's nothing wrong with this. No one's doing anything wrong like that's a perfectly valid company. However, think about these two situations that the CMO might be, or the chief product officer might be in, in talking to the CEO at the end of the year. Well, a scenario one goes, we started using this tool double down and it halved our cost. So we got, we able to spend that money on some other stuff.

Starting point is 00:43:52 We're able to save money. And the CEO would say, great, that's good. Let's, we're going to renew and I'm happy to hear it. Again, nothing wrong here. But let's take a different tact altogether. What does the CEO want to hear more? Growth or saves money? Both are good.

Starting point is 00:44:08 But I know which one is healthier for the company, increases market share, is better competitively, and also makes the company more valuable. It's the growth. So what we'd really like the CMO to tell the CEO is I increase the growth rate of the company. Not so much I save money. That would be way better. So here's how we could do that with Double Down. Yes, Double Down has the cost.

Starting point is 00:44:33 But what that means is right now, right now the company is paying 200 bucks per lead. What's call them leads, right? Whatever this is outputting, right? Well, if I have the cost of a lead, I could get. get twice the leads for the same money. I'm already willing to spend $200 a lead, and I'm already spending $40K a month for it. So if Double Down has the cost, it means I can get more leads. So the way I could pitch Double Down is double the leads per month with period.

Starting point is 00:45:08 Now, if I'm willing to spend $40K for this number of leads, how much am I willing to spend to double the leads? 40K. I just said I'm willing to spend 40K for this number of leads. So doubling it, I'm willing to spend 40K to double it. So if I give double down 40K, not five for the same product, which is the leads are cheaper. But now the pitch is I doubled the leads for 40K instead of having the cost for 5K. So double down gets 8X the money because it gets 40K for this product, not 8, not 5K for this product. Amazing starting.

Starting point is 00:45:44 And everyone's happy because the CEO goes, what did you do? And they said, like, oh, my God, I doubled leads. What? Yeah. I mean, at the same, at the same ROI as we had before, same cac, I doubled leads. CEO goes, how can we do more of that? Like, I mean, just everything is so much better. Same product.

Starting point is 00:46:00 Now, I know it's a little bit of an exaggeration, et cetera, because I'm trying to make a point, right? But the, but the big point is, the largest point is pricing is not just the number on the page. it's positioning, it's how their budgets work, it's how it's structured like it's per site or it's per usage or it's per seat or it's per all of this stuff is part of what pricing is. And often even if it's the same price or the same product, depending on how that's structured, it either seems fair and good or it seems like unfair and too expensive or whatever.

Starting point is 00:46:34 And so in particular with the positioning, the big lesson for product managers is sell more of what the company values like growth, it doesn't have to be growth. It could be something else. Their retention for their customers, how competitive they are in the market. Like there's various things they could value. Growth is an obvious one. Sell them that they're going to get more of what they value as opposed to saving, cutting, ROI, saves time, saves money, more efficient. And again, there's nothing wrong with saving money, saves time. It's just that it caps this price and this value that is, they perceive that you do, whereas if you deliver more of the value

Starting point is 00:47:17 that they already value, it's, I don't want to say uncapped completely, but like the cap is maybe an order of magnitude higher than saving. So again, it's, it's valuable to save. You don't do anything wrong. Like, that's not how to talk about what it is and therefore help set the price. So, yeah, so it's a long way of saying, so again, when I think is your pricing correct? I'm thinking in the, maybe a more general way than just like the number I'm thinking about the structure, the positioning and all that. And my guess is when growth is slowing, that there's a lot of improvement that could be had there. Oh, man. This is such, this story is so powerful. Who does not want to change some copy on their website and double their growth and triple their price? And the biggest takeaway here is when you say

Starting point is 00:48:04 is pricing correct isn't like what is the number 20 or 25 or 100. It's almost is the market we are going after correct is the way we are selling to them correct. Is this price communicating the right sort of story? And then also is the positioning of what problem we solve for you. Correct. So there's a lot here. And luckily, I've done a bunch of episodes along this stuff. Yes. Yes. Yes. Which will point people to go much deeper because this is a very, this is a deep skill. And there's a lot to do here. One thing I'll mention specifically. So Jen Abel, a recent podcast guest, it was her second visit to the podcast. She has a lot of really good. good advice on this of just how to price and how to reposition the way you're selling it.

Starting point is 00:48:46 Specifically, she had this really interesting insight that enterprises, their sweet spot for contracts is like 75 to 150K. That's like how they normally buy SaaS software. And it sounds absurd, but that's kind of what you want to. You want your product to be in that bucket versus like $1,000 a month, $2,000 a month. And everything just gets easier if you're like, okay, this is one of those. Okay, cool. It gets easier.

Starting point is 00:49:07 The thing, I don't want to go off too much of a tangent, but the, the, the, the, thing you have to remember is that pricing is not this knob that you can turn separate from the rest of your strategy. So when you say like even when I just said raise prices or whatever, but you can't just raise prices. Like these new customers have different demands. Now maybe you need suck too. Now your other governance stuff matters. Now integrating to certain systems you didn't know about matters. Maybe now they need professional services. Like, you can't just raise prices and change market in like that's it. And maybe that's wise to do, but maybe it's not. Maybe you realize that, sure, of course, that other market has certain

Starting point is 00:49:52 advantages, but they also have disadvantages. And we don't want those either because we'll no longer be competitive, because the way that we're distinguished, competitive, special, interesting, valuable is only valuable in the market we're in. The next market does not value it like that. And so, uh-oh, actually, that would be really bad for us. Or it could even be cultural. We're a company, like Buffer is a great example. Buffer could go up market and try to sell, you know, social media tools or whatever, but they realized we are a company for the little people. I don't want to sell to a big company. We're never going to make a product for them. We don't want to. This is who we are. This is what we want to do. This is what's fulfilling to us. So we're not going to go there.

Starting point is 00:50:33 So it can be cultural. It can be certain goals. It can be other aspects of the business model or the strategy. but it's not this kind of like, oh, I'll just change this. It's a decision about the whole strategy. And that, too, we could talk about for hours. But I'll just, let's just caution that, oh, I'll just go enterprise. Like, is, of course, not how it goes.

Starting point is 00:50:53 We got this. Yeah, I love Jen. Pricing and sales stuff is good. She's great on Twitter, too. She's, I love it. I love Jen. And that is such an important nuance. You know, don't build the thing you're miserable building.

Starting point is 00:51:03 And just like, okay, I listen to a podcast. We're going to raise their price of 10x and life will be grand. There's also downsides. Yes. Yeah. Okay. Amazing advice. Okay. There's so much here again. This can be so in conversation pricing, positioning. Yeah, yeah, for sure. We'll link folks to a bunch of cool advice that we've covered on this podcast, too.

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Starting point is 00:52:19 Okay, so the third one is, our existing customers growing. I think everyone probably knows this, but just to say it, okay, if cancellations overtake marketing and in magnitude, one way to come back, I mean, one thing is, okay, make the cancellations lower, but they can't be zero. So another, what else do we have to combat cancellation? that would be proportional to our size so that it keeps up, unlike marketing, right? Or, you know, basic direct marketing. So one would be, all right, two percent left, but of the remaining 98 percent, some of those

Starting point is 00:52:52 upgraded or otherwise paid us more, maybe it's usage-based, whatever it is, they're paying us more. And so that covers the gap. And that's, and yes, if I tripled the company overnight, that would triple. And so that's the answer. So that is an answer. And maybe that's obvious, but, you know, it's useful to tie it back to the, the sort of model, the mental model we've got going.

Starting point is 00:53:11 And of course, the metric here is NRR net revenue retention. And the way that's computed is you say, what is the revenue of customers right now? Like so existing customers, existing whatever, just the whole total. And then one year from now, what of that remains? So not new customers coming in, not talking about them because we're asking about the cohort that exists. What remains? So with cancels, it goes down, with down. grades it goes down, but with upgrades it goes up. So when I say remains, it could end higher than we

Starting point is 00:53:43 started if upgrades exceed cancellations and downgrades. And now we are talking about MRR and not N because N doesn't have this, N doesn't have an upgrade and just only goes down, which again is why I think the N is actually the most important one. Because think about it, like a lot of times people think, so if you've heard of NR, you might think, well, that's my golden metric. I'm done. But the issue is if NRR is positive, but N goes down too fast, it doesn't matter because not enough people are left. And so there's not enough people left over to upgrade. And so actually you're wrong.

Starting point is 00:54:19 And so NR does not include that. And therefore, it actually undercounts what's going on in a bad way, like in a way that hurts you. There's yet another way to see why what I'm saying is right. You know, there's this thing in investments where let's say I started out at $100. and the stock goes down 5%. So now it's at 95. No, it goes on 20%.

Starting point is 00:54:40 Now it's at 80. Then it goes up 20%. Is it back to 100? No, because 20% more than 80 is 96. So if it goes down 20% and up 20%, it does not come back to zero. It's worse. When you have a loss, a percentage loss,

Starting point is 00:54:58 you have to have a greater percentage gain just to get back to where you were. In this case, a loss of 20% requires a gain of 25% to get back to where you work. This is why NRR isn't quite right. Because NRR is saying that a loss of 20% from cancellations is offset by 20% from upgrades. As we just saw, no, it's not. That only gets us to 96% actually.

Starting point is 00:55:22 So this is why, like, again, I believe in NRR I'm saying you got to look and track it. Like, it's good. Just in the back of your mind, realize it's not quite that good. And looking at N helps me keep, keeps you honest. about what's really going on with these customer cohorts, right? So that's why they're both useful, in fact. But this is why they're both useful. So NRR, of course, is important.

Starting point is 00:55:44 A nice way to see this is, if everything I'm saying is true, and there's these limits and stuff because of cancellation, then there should be no way to get a big company like a public SaaS company, unless NRR is greater than 100, like otherwise cancellation should just win. And that is, in fact, the case. There's over 100 SaaS public companies. and something like two of them have NRR less than 100%. Like, that's how it goes.

Starting point is 00:56:09 And those companies have horrible financials and their valuations are bad. Like, it's not good. It's not a good thing, right? So, and in fact, the median for an IPOed SaaS company, like at IPO, the median NR is 119%. So that's, so yes, that's what it takes. You can't do this. You're limited unless now your goal may or may or

Starting point is 00:56:33 not be to get that big, but the point being, it's mandatory for growth. Now, if the literal customers are just leaving, like, you know, you got to plug that hole first, like you said, but okay, if they're okay, that's why this is in order. If that's generally okay, now we turn to NR to say, okay, but the ones who stay, they're hopefully happy, they need to grow. Okay. So that's the kind of the full story of NR. I think people don't quite, people who've heard of NR don't necessarily think about all those things and realize that. So a good question is, okay, what do I do with NRR? But I think the answers are pretty clear.

Starting point is 00:57:08 Like you add features, you have different tiers, you change the pricing in some way with usage or seats or something that kind of goes up automatically as they get more value out of it. So I don't think that's terribly interesting to like double click into it. It's sort of obvious. I would say, oh, look, it's tied into pricing because their behavior. But the main thing is you wanted to where the customer themselves would agree when they pay more, that they are getting more value. Hopefully, they even think they're getting far more

Starting point is 00:57:37 value than the price going of, right? I'm going to say this as if it's precise, which it's not. But they need to feel like if the price doubles, yeah, but I'm getting five times the value. So that's fine. Like, that should be the feeling whether they can measure it or not. A good way to do that is to say, well, then you should be measuring whether they're getting value out of it. Often we measure like usage metrics and other kinds of metrics within our product because we can. But actually, what's really important is to measure how does the customer value this? And we need to measure that so that we make that go up. Because if we make that go up, they'll be willing to pay in whatever

Starting point is 00:58:14 structure. And if that isn't going up, they won't be willing to pay. So even if we start making them, they'll leave. And we all know, we're all probably done it ourselves. We've all had products we love. But then as we scale, the price goes up faster than we feel the value is. And then we start looking for other products. We've all experienced that. So that's what I'm saying. To do that, you want some sort of measure of the value the customer is getting. If you're really lucky, that can be a number. That would be wonderful. Then go do that.

Starting point is 00:58:41 And maybe that's your North Star. But admittedly, it's not always possible. So then the question is the usual questions of metrics. Are there proxy metrics that we understand are not the full picture, but they're helpful. They're part of it. And I'm a big believer in saying not all important things are numbers. Even things like how differentiated are we in the market? Not a number, but it's very important.

Starting point is 00:59:01 So this might be one of those things that's important, but not a number. So, okay, can we get some proxy metrics even of behavior and other things? That's something better than some metric that's, you know, just operational. And even if it's qualitative, okay, can we do that? Can we talk to customers and ask them qualitative questions to try to say, like, you know, I would just say like, do your best here because only when you generate more value for the customer, you can then decide how to split that with the customer in terms of things like price. Right.

Starting point is 00:59:35 But that's, that's my, that's in fact how I think of it, that very phrase. How do we create more value for the customer and then split that with them? And when you do that, you're keeping the customer forefront in mind. You are taking, like splitting means you get some. Like, let's not forget. It's not a charity. And on the other hand, first we should think, how are we generating value for customers and then think, and then we can take a little, we've earned the ability to take a little.

Starting point is 00:59:59 piece of that. So to me, this is the right way to think about NRR, not just we'll add a feature and make them pay. True, but let's actually take it from this different, but let's get there from this different perspective. Amazing. There's a, uh, in the recent Modivon episode where we go into pricing, you actually have some really good tactical advice for measuring the value that you're giving to a company to quantify that, uh, which feeds into this idea of how do I create more value for you and then how do we split it? Yeah. The other element of this that's top of mind is just the sland and expand strategy. There's a lot of companies that are just like, okay, cool, we'll get in with some price, we'll expand. That'll be amazing. Which is essentially expanding as NRR going above

Starting point is 01:00:36 100%. Yes. Something Jen actually shared in her in her chat that was really important is that you can't expand that much in, at least for a while. Because if you get in for like 10K, if you go up to, okay, now it's 100K, someone's going to be like, what is this? This can't go up 10x. Are we getting 10x value from this? You can just raise prices later. You're kind of stuck at that reference points. You have to be really careful there. Yeah, I think that's right. And maybe you don't deserve it. Like, in other words, especially when there's investors or other sort of forces saying like, hey, we need to X, Y and Z, forces that are not the customer saying that.

Starting point is 01:01:13 Yeah, you can be coerced into making pricing or other kinds of policies that, in fact, are not good for the customer. So one tool I use is when anyone claims anything, really, is that really true or is that really actually good for the customer? Because look, we are going to do things that are selfishly good for us. We have to. We can't just do things that are bad for us. But is this, in fact, good for the customer? Because often, even in an internal proposal, we say it as if it is. Oh, this price will be good.

Starting point is 01:01:49 It'll raise prices on everyone. But it's better because of this reason that we're, we're sort of. of justifying, right? It's like, well, is it, will the customers say this is better? If the answer is no, it's like, okay, it's not, it's better for us, but sorry, we have an equation where it has to be better for us and better for the customer. Sorry, it's an and, and of course, not all companies do that. And we experience that all of us, um, as, as consumers on the other end of that. We don't like it. And, and that's not a good long-term strategy, even though I might work in the short term, as many bad long-term strategies are. I love just how

Starting point is 01:02:21 this third step just reveals how powerful the sequences that we're going through. Step one is this logo retention. Essentially, do we have product market fit? Step two is pricing, positioning. Essentially, are we going after the right market and charging them the right amount, roughly? And then here it's just, can we grow? Is there something here that can continue to expand because you're going to get eaten alive if you're especially, and this is, just to be clear, this is B2B SaaS primarily that we're talking about here. It's harder to grow NRR if your consumer product that has, I don't know, just like a tier two.

Starting point is 01:02:55 What I would say is the rules are true everywhere because they're based in the mechanics of finance and the business. You're right that in the consumer segment or small business segment for that matter, they tend not to grow. So that doesn't mean the NRA question is invalid. It means, dang, we can't think of anything. That's okay. Then you go on to the next question because you can't think of anything. But you know, but it would be more strategic if we could. Yeah.

Starting point is 01:03:25 And are we trying hard enough? As a consumer, I do not want to spend more with AT&T, but they're also not giving me any more value. But there are other products as a consumer, like Amazon, where they do. So you're right, but it would be as a product manager, it would be 10 times more valuable for you to think of something like that, you know, than to move on to other things, and et cetera. Or there's other ways like other products.

Starting point is 01:03:51 We didn't talk about it and it's okay because of course each one of these is you could go on forever, right? But another way is a second product. A second product sold to the same segments that you're in so that your existing customers can buy it. Well, I don't know why that wouldn't work in consumer. It certainly works in consumer and apparel. I think about AG1, which has all these new, like I'm doing their sleep supplement and there goes. There's a new thing you can buy. Yeah.

Starting point is 01:04:15 So like, so is it harder? Yeah, of course, of course. Like all of these are like easier or harder in different segments in ways. Like, of course, of course. I'm not trying to say otherwise. But I would say the mechanics of how the finances work is the same. You're just saying, I don't have this lever to pull. And then I would say, okay, well, then you need different levers.

Starting point is 01:04:34 One that we didn't talk about is one way to offset the cancellations is existing customers grow. But another way is if existing customers bring in new customers. So they didn't grow, but they brought their friend. Now, this is absolutely something that happens in consumer, but it's also an answer to this thing where cancellations grow exponentially, because existing customers bring in new does triple if you have more existing customers. Aha. So this is stuff like, you know, refer a friend and all this kind of stuff.

Starting point is 01:05:06 Again, like some of this is obvious we don't need to enumerate that. So those things are good. And so in consumer, you might say, oh, it's easier to try to get someone to invite a friend with a coupon and blah, blah, blah, blah, than it is to try to get them to grow. But in B2B, that may not be true, right? I don't get a mid-sized company to refer. Like, that doesn't make sense.

Starting point is 01:05:24 So once again, this question of how do we have the existing base help us grow is still correct in consumer, but its manifestation could be very different. Of course, I agree with that. But, I mean, how could we not say? I mean, of course things like word of mouth and invite a friend. Of course, that's enormous with consumer. And this is one of the reasons why. I just love picturing the people listening to this.

Starting point is 01:05:46 especially product folks founders. I imagine many of them are just sitting here taking all these notes of how to help grow their product. Because as we position this conversation as how to deal with stalled growth, but it's actually just as useful how do I grow more? Oh, for sure. Right, right, right.

Starting point is 01:06:03 Which is classic. Clearly it's more growth that just may be a little more evocative. It's so good. If growth is good, yeah, sure you want to grow more, but it's not the problem. Like if growth is really good, the problem is generally operationally scaling to meet the growth.

Starting point is 01:06:17 And so you're focused on that. It's when growth slows, we're like, whoa, wait, wait, wait, wait, wait. We have to focus on growth now, must, as opposed to, of course, it's always nice. So, yeah. Yeah. And I was thinking as we were talking about consumer NRR, if you look at Duolingo, they've done a great job here. There's so many ways you can pay them more for all these little advances, get all these gems, change the color of your app to like something fancy.

Starting point is 01:06:41 Yeah, yeah. Yeah. Okay. So there's more. Let's keep going. So we've done three. There's more. More you can do.

Starting point is 01:06:47 So, okay, logo churn, pricing, NR. And then maybe it's stalled. So this is really a stalled question. Maybe your acquisition channels, your marking channels, are saturated. We're done. What we tend to do is flog the people doing AdWords, get more. Flog the SEO people, get more searches, right? It's possible that this is it.

Starting point is 01:07:12 maybe this is it in some sort of physical law. There literally isn't anything else. Or maybe this is it just this is how good we can be. Just not that this is it, right? But there really are limits. You know, there's different words for it. Inventory is sort of the old word like with magazine ads.

Starting point is 01:07:29 Inventory was the word. But there's just this amount. Like there is only so many searches in your area. And you can only appear once in the search results for a given keyword. So there is this limit of like what you can get, even if you were number one position for everything, you know, other things that are,

Starting point is 01:07:44 that are not even practical. There's still a limit. And there's some kind of practical limit that's below there that we don't really know, but, you know, maybe we're there or maybe we're close. And worse,

Starting point is 01:07:54 channels tend to decline over time. So I think people talk about S curves, right? Oh, I didn't figure out this market. Then I figured it out. You know, we unlocked it. Now we're getting, you know,

Starting point is 01:08:06 100 leads per month through Facebook or whatever. But then it kind of taps out. And then we go into the optimization mode. Can we eke out another blah, blah, blah, blah, which is right. Oh, it's right. And you call that an S curve because it's shaped like that. But that's not what happens. What happens is it starts with an S curve and then it starts sagging. Its butt starts sagging down. So I wrote an article about this called the elephant curve, which is what I named it. Right. Because it's like this trunk and then, but then it's this butt. And what and there's different reasons why this happens. But

Starting point is 01:08:37 if you talk to any marketer, they'll all tell you, oh my God, let me tell you this story. Right. They all have stories about it because, yeah, this is what happens. There's different reasons that, first of all, the audience gets saturated, you know, because there's all these little marketing isms. And I don't know if they're true or not. I don't think any of it has any data that actually proves it, but whatever. Like, you know, if words start with the same letter, that's better. I don't think anyone's ever proved that's true, but markers seem to think so.

Starting point is 01:09:05 Okay. Well, one of the things is someone has to see it seven times before they act. Okay. All right. Well, maybe they saw it. times are ready, so they don't want it. You know, and they saw it 20 times, right? So, so you,

Starting point is 01:09:17 initially you got, you hit people who hadn't seen it yet, right? But now you have. And, you know, especially with magazine ads, as I used to do before there was no such thing. That's exactly what would happen. You'd have this nice surge and then like, well, we've seen this, we've seen it before. So you still get a little trick, you still get some because, you know, it was just that moment they needed to see it again.

Starting point is 01:09:36 Okay. But like there's this sort of, but a lot of people have already seen it and they don't want it or the channel is declining and they'll never tell you when I did magazine ads every year they would tell you what their circulation is and every year it would go up and then the magazine would go out of business conferences are the same way attendance is great attendance is great oh wait we're out of business because we couldn't get enough people to go what what they said it was great and but but you know more quietly ad words Facebook ads even SEO searches it's that this does happen all over the place affiliates it can happen And now with AI, I don't even know, right? It's disrupting everything. I, you know, we've all heard stories going all different directions. I think the answer is, I don't know. Shrug is the answer.

Starting point is 01:10:21 And what will it be like in two years? Another shrug. But the point being, they're not all going to be growing a lot. Like, that's not one of the futures that AI will bring it. So it has the sag. That's just a very long way of maybe trying to prove this point. But it's yet another reason why you can't just rely on marketing forever. because they not only you try to stack things, but there's not like infinite number of marketing channels you could advertise them that your customers are actually going to. And they sag. Oh no. Like it's even harder to keep up. So it's kind of like the secret like in reinforcing my very first point here with with this. But here are they all saturated because we could flog marketing all we want. It's not going to work. So maybe growth is slowing because this is all our channels are saturated, possibly even sagging. But even if not, okay, not growing. And so.

Starting point is 01:11:09 we can't just flog the marketing department. It's going to take something else, right? The obvious thing is get more channels, but again, maybe there aren't any. So again, there's many possible things to do, but this is like this critical thing to notice because I guess I put it this way, do you know right now which channels are saturated and which aren't? If the answer is no, I'm like, well, okay, maybe that's because the answer is all. You know, that needs to change how you think, just adding one little feature.

Starting point is 01:11:39 and then hoping we can flog outwards is not going to work. Even if the feature is great, not going to work. So there's different things that could work, but that's not one of them. And yet that's probably what we're doing. Let's add another feature and marketing can flog it is often the answer. But if you're in the state, that isn't the answer. So this is why like you can say it's obvious to say this is that. But are you acting like this is true?

Starting point is 01:12:02 You know, often we don't. Okay. So there are many things to do. Again, we don't have to numerate all of them or something. It's just simply the right question to ask. But for example, some people are like, we've done direct. Maybe we should try things like SEO and social and these other indirects or vice versa. We're really good at SEO, but we've never taken out ads.

Starting point is 01:12:21 Often, if you've done ads and they're optimized, you know what content might be good to write stuff for SEO. And maybe even vice versa, maybe. So it's a good idea. And sometimes it works, but here I have no data. I only have my feeling here. Actually, you probably have a lot more visibility into this. But my experience is a product that's sold really well direct actually doesn't do well in things like social and SEO and vice versa. If you're getting a lot of traffic through SEO, adding ads often like costs a lot and doesn't really move the needle.

Starting point is 01:12:51 You can tell me like is that because I don't have data to support that theory. Yeah, my take is like you can always get some percentage of win from all these different channels. Usually one channel is where most of your growth will come from. And so over time, everyone just adds every channel. Everyone's doing ads. Everyone's doing SEO in some form. but it's usually like sales or word of mouth or ads that drives everything. Everything else is kind of a little layer on top.

Starting point is 01:13:15 Yeah. So should you do that? Yeah, probably, especially if you're at some scale and you can just afford to because it's such a clear thing to do. But probably you'll have to get more creative about what it means to add a channel or something like a new product or a new market where it's actually new. It's expanding in a new way rather than trying to incrementally expand what you're already doing.

Starting point is 01:13:35 So an example of getting creative on a channel is what Constant Contact did when they had this very problem of growth is slow. We don't know how we sell email marketing newsletters to small business before all these modern tools existed. And one of the things they did that restarted growth is they physically went to a bunch of cities and held workshops showing here's how to do email marketing for your small business. So the restaurateur and the dentist and everyone would come to these sessions. and they teach them how, of course, teaching them how with constant contacts and they became customers, right? That you would think there's no way this is cost effective. Physically being in these cities and dragging people in for a $20 a month product, like, no way. It was very effective and actually solved in that moment their restarted growth.

Starting point is 01:14:22 They were very clever about, first of all, it's a clever idea, but then they were clever about how to do it. They took like power users who were also agencies. So like these could become customers of there. Okay. So it's all like you could be clever about like how is it that we do something. something different, something new. So that's possible. Of course, it's always hard to say, think of something clever.

Starting point is 01:14:40 That's a weird finger-wagging thing to do. But, okay, it's true. But, yeah, it could be a different type of channel. For example, HubSpot famously tested selling through agencies instead of direct. They ended up being 50% of the revenue after four or five years. So it's one of the main reasons why they're able to continue growing. Same thing happens with my company, WP Engine. tons of our websites are sold through,

Starting point is 01:15:06 through agencies that create WordPress sites. So there could be something that's not direct anymore. That's, you know, another channel of human beings or something like that. Could be, could in fact dramatically change your growth rate. There's lots of examples like those. So, but it could be like it's time for the next product. Like, and I said that earlier because it's always possible. Of course we all know that's very hard.

Starting point is 01:15:30 It's, it's risky. I have sort of a framework that I use. to think about that kind of expansion, which I'm happy to, happy to provide. I've also written it up, but I'm happy to say it right here. But usually you want to stay in the target in the target market you're already good at and grow from there. But sometimes the whole point of the expansion is to change the, or change target maker or add something where you're leveraging something else about the company that you have as an asset going somewhere else. So this is what this framework helps decide. But one way or another, you probably want to plant one foot into some strength or

Starting point is 01:16:02 that you have, move the other foot, which is the risky part. But the idea is that, yeah, but we have this big upside. So we're taking that bet. And like that becomes a smart bet. So with things, of course, that's true for any of these things. But especially if acquisition channels are full. And it's like we literally can't ask the marketing department. Like that's just not one of the choices.

Starting point is 01:16:23 It almost forces us to start taking these more drastic bets to say, well, we got to do something. And that's not one of them. I just want to keep saying how awesome this advice is and how many people. are going to benefit from like, you know, none of this is like, oh, I've never ever thought of any of this. It's just like the very methodical sequence of questions you should be asking yourself to help you not just undo stalled growth, but also just come up with a bunch of great growth ideas. And this specific section, it's like, it makes sense.

Starting point is 01:16:51 Somebody's discovered alpha in a growth channel. Say, Zapdi I just launched TikTok just. You know, there's like, oh, cool, what's the new thing? Okay, let's get there quick. And then you drive a bunch of growth. It's awesome. Eventually, everyone's going to start doing that. And so you should assume everything that is working for you now will slow down.

Starting point is 01:17:08 I've missed your post on the elephant S curve. What do you call it, the elephant curve? Yeah, elephant curve. It's so, yeah, that's so real. It's not just this S curve that will forever continue to drive when it will actually dip and decline over time because of the people discover it and start using it. Yeah. I love that.

Starting point is 01:17:27 So the idea here is, and the classic advice is, like, not a, whether it's an S curve or an L-thing curve, think about are you starting to approach the apex of that and start to explore other channels before you slow down or start to dip? Yeah, it's easy to hear stuff like, well, if marketing is full, do something else. And you go, I know. But then you look at people's behavior. And it's like, well, you're not acting like you know. So maybe it needs to be sad in enough detail that you actually. do something about it. And this is, it's important to note, this is a very hard problem.

Starting point is 01:18:01 Most companies do not really solve this. Something worked for them. Sure. And then it stops working and then like, all right, well, we found something. And then it just kind of went away. There's a couple posts we're going to link to the show notes that will help you come up with ideas that are all around new growth channels that are emerging. One is by Emily Kramer around ecosystems as a new growth channel.

Starting point is 01:18:22 And there's a lot of really cool advice there around this kind of emerging combination of influencers and content and partners, where it's your ecosystem that helps grow. Basically, there's a quote from the head of growth at WIS where it's like, why start with zero and you can start with 10,000, essentially growing through someone with an audience already. And then there's going to be a post out by the time this comes out around ChatGPT's App Store, which is going to let you submit apps. And that's a really interesting, potentially huge new growth channel for companies. So, cool stuff happening there. So just to summarize, look, go retention, pricing, NRR, marketing, channel saturation. What comes next?

Starting point is 01:19:04 The last question is, do you need to grow? It's okay. Growth is stalled. And if we assume every question before has been answered in a satisfactory way, you could ask, hey, is that a problem? What do we mean by grow? What do we need to do exactly? Now, of course, you should know these kind of things, goals all the time. But, and again, like, obviously the answer could be, once again, oh, new products. These other things were like this company. When we say, do you need to grow? If we define you as this product and this market and this company, the answer might be, no,

Starting point is 01:19:41 what we need to do is have a different product or in a different market or a different thing. Or you could change the word revenue. If you say, do you need to grow revenue? You could change the word revenue and say, you know what? What we could do is maximize profit instead of revenue. now we've been maximizing revenue, but maybe you maximize profit instead. And so this is a company like 37 signals or really lots of bootstrap companies who have hit some sort of limit and realize that's okay.

Starting point is 01:20:09 Like the founders are getting paid millions of dollars a year in dividends and like it's okay. But I don't have to get. In fact, if I got bigger, it might be an organization that I don't like or serving a market segment that I don't want to serve or whatever. And so maybe growing forever isn't the goal actually or growing. revenue isn't. You could ask philosophically, why grow anything? Why isn't it just okay to have stasis? And we all have heard the phrase, if you're not growing, you're dying. Right? This is a classic company thing. Is that true or is that the kind of thing that like investors use to

Starting point is 01:20:45 like make founders grow or try to grow even when they shouldn't? It might be. But I would submit that even at a bootstrap company that has other values and culture, other than growth at all costs, that that phrase is still fairly relevant because if the company stagnant for years, is that a great environment for everyone? As the founder, did you start this company in order to do the same thing every day? Is that while you did it? Do you really want to do? Is that fulfilling for you?

Starting point is 01:21:19 What about everyone else? Nobody wants to further their career. They just want to do the same thing every day and never further their career, not really learn anything, not really innovate? Does it feel good to just not be not be growing? The answer could be yes. If I'm a CPA and I have some clients and life is good, the answer could be yes. I'm not saying, I'm not dictating the answer here. I was asking because a lot of times, whether it's our careers or as founders, our companies, a lot of times we've just been in the mode of, well, I've got to grow, I've got to get promoted, I've got to do more, I've got my resume. We've got in that mode for

Starting point is 01:21:55 so long, like maybe our whole life that I was going to say lose sight of, but maybe we never had sight of. Wait, does this make me happy? Is this what I really want? Am I fulfilled doing this? Or even if I do have these goals, have I gotten stuck in a rut where my goal is growth and, you know, I don't know, more money, more everything. And I'm done I'm stuck in a rut here. Like what? Sometimes we forget to take a step back and go, wait a minute. What is this, is this still right? or do I need to turn the page and have a new chapter of life right now? And so this question, do you need to grow or if you're not growing, you're dying? Well, for some people know, they like doing the same thing forever.

Starting point is 01:22:33 And that's great, actually. That's nice. But for many people, especially the kind of people who want to get into product and build stuff and innovate and people who start companies, a lot of people like that are not the kind of people that want to just, you know, kind of do wrote things for 20 years. And so the not growing part, what I like to say is maybe the you and if you are not growing, you're dying, is you, the person as opposed to you the company. It's also you the company, right? But like, what if we took it to mean you?

Starting point is 01:23:06 If you are not growing, then in some sense, maybe for some people, you're dying. Maybe if you're listening to this, that's you. You got to be, you're a shark and you got to go. And we all know people too who claim they hate work. they do hate work, let's not say claim, they do hate work, but then they retire and kind of go downhill because they don't have a purpose or this or that, the other thing. In that case, it was true if they're not growing, they're dying, literally. So, again, I don't mean to overstate this, and I certainly don't mean to claim that there's

Starting point is 01:23:40 some answer that's right for everybody, of course, but surely this is the right kind of question. And surely for many people who are listening to this, the answer is, yeah, I mean, in some sense, some very rough sense, that's probably right for me. And so if I'm in a stagnant situation and really every other option has been exhausted and isn't going to happen, this is simply a stagnant thing. Maybe there's something else needs to happen. I need to leave. The company needs to change some drastic way. I sell the company. I change jobs. I don't know. Of course, it's going to be super context specific and personal, right? But like something dramatic may need to change because nothing incrementally is changing. So this final question, do you need to grow?

Starting point is 01:24:23 Or if you're not growing, you're dying, is that true? And are you therefore dying what needs to happen? You know, so if you were looking for more metrics and another framework, sorry, that's as existential, but it is, it is existential. So do you have to only ask this at the end of the chain? No, of course you should feel fulfilled. You know, of course you want to be checking in with yourself at least annually. of course, but I sort of put it at the end of my list in the sense that I'm assuming the original question is about the company, but especially with smaller companies, but also also with big public companies. There's plenty of big public companies that aren't growing,

Starting point is 01:25:04 aren't there? So like this is, this is true of all scales because there are natural sizes for things. So yeah, it's a little philosophical, but I think it's quite important. Such a beautiful way to wrap up this piece. A lot of people listening to the podcast are bootstrap founders. And for them, this is actually very much an option. They can just be happy with the revenue they're generating. Like with my newsletter right now, I'd be very sad if it stopped growing. But also just it's amazing the life it has created for me.

Starting point is 01:25:37 And even if it did stop growing and just stayed flat and doesn't become an elephant curve, that'd be incredible. In like, in practice, psychologically still hard for that to be the game. And that's why this component of the of the sequence is really important. Like, why do you actually need to grow? Is that just your ego? Is that just like used to growth? It can also help you, help you avoid doing unnatural things that you actually regret to grow.

Starting point is 01:26:04 So like if growth at all costs is just the thing, like there's probably ways you could quote unquote grow the newsletter that you would just say, I just wouldn't be proud of that. And the newsletter is doing so well. They don't need to do that. And so again, maybe that's a softer version. because growth hasn't actually stopped, but okay, it's a softer version of, I certainly don't agree with growth, you might say, I certainly don't agree with growth at all costs. I'm going to grow as much as possible within the things that I'm proud of.

Starting point is 01:26:30 Like, if we grew fast, but the content was crappy, I'm just not willing to do that. It's like, not the point, you know. So it helps set up these boundaries of like, wait a minute, not if, dot, that, dot. And, you know, early on, we may not have that flexibility. You could argue that you should have those values early on because that's who you are and that's what you're doing and people will respond. So I could argue you should have that all along. But I could also argue that at the beginning, you're just trying to do something where you don't die.

Starting point is 01:26:55 You're starting to blog. You're probably copying other people's style. You probably don't have that much unique things to say. So there's a lot of reasons. That's okay. You're just trying to get going. It's okay. At 20 years later, if you have no style and no voice of your own and nothing, you just say that's probably not good.

Starting point is 01:27:08 But to get going, sure. So sometimes we have this thing where we get going with maybe looser. I don't want to say values. I'm not saying that's unethical, but like looser sort of bar of. or a pride that we have in our own work, and we tighten it up as we're sort of able, as we can afford to, you might even say. So good, but then that becomes a nice filter here of like, what, what is it in a greater sense I'm trying to do here? I'm willing to do here.

Starting point is 01:27:35 So if you're not growing, you're dying fair, but like that has to come with these limits. And the more successful you are, the more you can be serious about those limits. I think an important element of this is also the product you're currently working on, maybe it's okay for it just to not grow. There's a good opportunity to do some else, have this thing maybe running on the side, maybe sunset at some point. But it's a good opportunity to be like, okay, wait, what else is out there? We had a recent podcast conversation with Matt McGinnis,

Starting point is 01:28:01 CPO at Rippling, and there's some really good advice he shared on just when to quit, when to quit your startup. Just like, you know, if it's like four or five years in, it's just not clicking, maybe it's time to move on. And even though people do succeed, years in, most likely it's not going to be you. I have a book almost out now that's on pre-order about topics like what we've been talking. The next book I want to write is on this topic of how do I make these decisions of uncertainty? Like maybe it is time to quit.

Starting point is 01:28:29 Maybe I should move to a different city. Maybe I should marry this person. Maybe I should launch this company. Maybe it's time to, maybe I should use this strategy where you want to, you want to use probability and expected value. It's unlikely that dot, dot, dot, right? But the truth is we don't know what the probability is. we don't know what the probability curves look like. We actually can't use expected value.

Starting point is 01:28:49 And anyway, even if you could have expected value, I am a human being, this is my life. And I either sell the company or I don't. And so all this stuff about probability and like, that's not, that doesn't apply to me. I need other ways of sorting this out. So I guess I would just say briefly,

Starting point is 01:29:06 um, probability is not going to work for these decisions. So that doesn't say what is right. Um, but it's not. not that. And so, which is nice because you can put those tools down. I'll do some market research to see if I'll still my company. Nope. That's not where the answers are. More questions than answers on that way. Yeah. Speaking of the book, let's give you a chance to share what is what you're

Starting point is 01:29:33 working on and when this is coming out and where folks can find it. Sure. So the book is called hidden multipliers. And you can pre-order it at hidden multipliers.com. Or I guess if this is out long enough, I'll order it, I guess, depending on when you're listening to this. And it's, it's a lot of stuff kind of like we were talking about today, these questions of, it's called multipliers because the idea is little things that you can do or little decisions you can make that have a huge impact. And like moving the cancellation rate from 5 to 4%. Sounds small, has a huge thing.

Starting point is 01:30:07 Onboarding, as opposed to later use thing. So those are some examples, but the book is, of course, full of different kinds of topics, but all of this idea of this stuff that has such a big impact on things like revenue or profit. And either, just as you said earlier, either maybe you have never thought of it that way, so you didn't really, you weren't thinking about it right, or yeah, you've heard that. You say, I know, but your actions don't reflect it. And so if we go deep enough with examples and specific things to do, then you can actually act on that supposed knowledge and realize those multipliers. And just to remind people that you're all hidden, multisplifiers. And there's an S at the end.

Starting point is 01:30:46 Hidden multipliers. Right. There's more than one. There's more than one. Yeah. Jason, I had other things I wanted to talk about, but I feel like this episode's actually going to be stronger if we just focus on the thing that we've been talking about, which is installing growth.

Starting point is 01:31:02 So if we do that, is there anything else you want to mention or leave listeners with before we get to a couple corners and then the lightning round? I think if you tried to find a common thread throughout all this stuff about growth, it comes back to the customer getting value. And I know we already talked about that, but I think if there could be one thing where it would help solve kind of all of it, it would be that they really are getting value. Your product actually promises the right thing and then it actually delivers on that thing and the customers can onboard so that they can do the thing. and the customers know they realize that they're getting the thing and you're measuring the thing. So, you know, it's increasing. That is probably, if I was an LLM, I'd probably say that's the common thread. There's many ways that manifest, of course, but if that's your North Star is how are we

Starting point is 01:31:58 actually creating value in the way the customer values it and their language and their way and their way of understanding it, I wouldn't say all the pieces magically fit into place, but certainly isn't that sort of the root thing that that is going to make all the stuff work, then there will be a good way to do pricing. They will stay as long as possible. And these things will probably be right if that. So this idea of creating value for the customer and then figuring out of split with them is probably the root idea.

Starting point is 01:32:26 And of course, I hesitate because platitudes like that are actually not actionable, not very actionable. You're like, all right, well, I'll move on with my day. And that's why Twitter's not so useful. But given that we've gone into so much detail, perhaps that's a nice way of summarizing it. I think that's such an important point. I think what's also interesting is some of your advice is the value may, you may be picking

Starting point is 01:32:46 the wrong customer, the wrong market, you may be positioning it wrong. So the value may be there. You're just trying to convince the wrong about it. Yeah, there's so many ways to get it wrong. Right? Because like we said, all these things have to be right. You just said another one, which is, and do you have to state in a way that when this person hits the homepage, they know it?

Starting point is 01:33:05 It's true, but do they know that? So many things have to go right. What a tough job we've got over here. Just solving people's problems. Come on. Well, at least we're growing. So now we will be after this conversation. Okay.

Starting point is 01:33:22 So I'm going to take us to a recurring corner, a recurring segment on the podcast that I call AI Corner. What's one way that you have discovered using AI in your work or in your life that might be helpful for folks to you? there's a lot of data on the internet and it's often in things like images, which makes it hard to do your own analysis or plug it in or et cetera, come up with your own models or apply it. But I found that AI is really good actually, especially Gemini, you just give it to it and give a chart to it and say like make this into a table that I can paste,

Starting point is 01:33:54 like literally say that I can paste into Google sheets. And it will do it in a way that literally you can copy it and it will actually paste correctly into Google sheets and then you can do stuff. So especially with the book and and my articles, I love to use real data whenever I can, of course. And so I do that all the time. So I think that kind of interpretation is very useful. And so all of a sudden you can get 10 examples of something

Starting point is 01:34:20 in test the theory where before it was kind of just too hard and he didn't. That's an awesome tip because people know you can generate all these infographics with especially with Gemini and Nano, banana and all these things. That's really cool to know. You can just feed it here. Here's a chart and make it text. Yeah. Okay, I'm going to now take us to Contrarian Corner. The question here is, what's something that you believe that most other people don't? A-B-testing doesn't work very well, and it doesn't work on most things. It won't work on strategy or vision or insights. Like nothing actually important to the success of the company. You don't A-B-Test whether Uber is a good idea. And then even when you do A-B-test the details where I agree, like, sometimes that can work, what happens is people,

Starting point is 01:35:05 try things like, oh, I'll just, you know, try this verb and that verb and this ad and that ad. And then like, oh, the seventh or eighth one, I got a positive result. That must be good. And what happens is you keep doing that. You pick the best one and then you go on and you find another one and pick best one. And then a year later, you look back and you should be like 50 or 100 percent better because you've stacked these things. And you look back and like nothing's different. The conversion rates are the same as they've always been. You see, what the hell happened? I thought I picked the winner. And the answer is, and a combination of the tools not being statistically accurate, which they're not.

Starting point is 01:35:40 And the fact that you will get false positives, even if the tool is statistically accurate, means that most of them are false positives. Even if the tool is 95% accurate, when the thing you're looking for is rare, which it is in the case of AB testing, the false positives happen more often than the actual thing happens. And so most of the results you get are false positives anyway. So as a result, this isn't true of all AB testing, But for what most people do, and they just do the sort of the mundane AB testing, you can't AB test the important things and the details are mostly false positives.

Starting point is 01:36:13 So it's an enormous waste of time. Unless you're incredibly sophisticated, I know there's special groups that actually are very sophisticated. Fine. If you're not doing that, it's sort of like the poker table. If you don't know who the Patsy is, it's you. If you don't have all of this information and knowledge about AB testing, then you're the Patsy. Bam. All right.

Starting point is 01:36:32 I will just say that I have found A B testing useful in my career. I think it's maybe at a certain scale when you're just kind of trying to optimize and continue to grow, you know, where it's like millions of users. Like a percentage gain is like millions of dollars. True. Most people are not working at that scale. Right. Right. Yeah.

Starting point is 01:36:50 So just wanted to for folks that find it valuable. That's true. But I love it. However, even so, on your own podcast when you were interviewing the guy from Shopify, and he was saying how. maybe a third of the things that they found with their systems just disappear, to just magically disappear. And they have a team of 100 people and they're really good at it. And like their effects disappear all the time.

Starting point is 01:37:14 So they double check later whether the immediate effect goes away because even then. Right. I think that was the CTO of Shopify conversation. Oh, yeah. Yeah, sweet. Okay. I'm scler off of memory because I listened to a lot of episodes, but I was such a good one. I love that.

Starting point is 01:37:27 Yeah, where they leave like a holdout group essentially and then they just look back was affect something that lasted and most times it didn't. Yeah. So there you go. And that's with a lot of end. So that's what I mean. If you're doing that level of stuff, good for you. But if you're not, I don't know, man.

Starting point is 01:37:42 There we go. Well, Jason, it's always a really good sign when I'm just like, I can't wait to get this conversation out the door and into people's minds because there's so much value here. I'm just already anticipating all people are going to reply and just like, I get so many ideas for what to do with my product, which is exactly the goal. And with that, we have reached our very exciting lightning round. I've got five questions for you. Are you ready? Boy, yeah, I mean, I don't like talking a long time anyway, so lightning is great. Here we go.

Starting point is 01:38:11 What are two or three books that you find yourself recommending most to other people? For writing on writing well by William Zinzer. I know I'm not the only one, but that's kind of the point. On my best day, I write like that. And then for product, I actually like crossing the chasm, which of course everyone's heard of, but what I find is no one's read it. So you know a little picture

Starting point is 01:38:35 and you think you know what the chasm is, what I find is very quickly I realized, oh, you haven't read the book, you saw a blog post, and there's so much good stuff in there, how to define a market and really what to do with this model. It's fantastic. So I highly recommend reading the book. I've had a Jeffrey Moore on the podcast.

Starting point is 01:38:52 We dove into a lot of this stuff. One of the things that always stuck with me is when early companies are looking for someone like them to adopt the thing. That's something that really stuck with me. It's not like they're looking for an early adopter to be like, oh, this is awesome. Like they're looking for someone that feels like them to say this is great. And so the early adopters are just going to spread to other early adopters and there's

Starting point is 01:39:13 there's work to do. Yeah. Part of that's because he defines a market and among other things as and the people in the market respect the opinions of the other people in the market. Exactly. And that's when you realize, oh, so jumping to a different market, it's not impossible. It's just like case studies aren't going to work. Yeah, it's a new thing.

Starting point is 01:39:30 Okay. And then on writing, well, such a huge trend of the book. That's like the book that most helped me write. And if you summarize the book, for me, it's just cut. Cut more and more of your stuff. There's always to cut. I love this phrase where he's on a panel with this guy who is like an amateur writer. And his kind of summary is to that guy is, the guy told him,

Starting point is 01:39:56 I never knew writing could be hard. And Zinser says, I never knew writing could be easy. Both of those kind of summarized the turmoil of being a writer. Yeah, the classic maybe Hemingway, maybe not quote, writing is easy. I just sit at the typewriter and bleed. And bleed, yeah. So good. Okay, moving on.

Starting point is 01:40:17 Favorite recent movie or TV show? ER from 1994. 15 seasons. Why do I say that? Besides fact, I think is good. I have a 16-year-old daughter and we're now on season, I think 13, watching this whole thing.

Starting point is 01:40:34 She says it holds up after 25 years and being, you know, Gen Alpha or whatever, I don't even know what it is. And so if this is an era an era when, you know, shows were an hour long and seasons were forever, and she says it's great TV.

Starting point is 01:40:50 It must be great TV. Wow. I've not had this podcast yet. Also, the pit. I don't know. If you enjoy ER, You'll enjoy The Pit, which just won all these awards. Yeah, it's good. On Netflix.

Starting point is 01:41:01 Fun fact, my cousin was in ER, not as a recurring character, but she was like a young girl patient. And actually is a fancy actress in the world. Oh, cool. That was her start. Okay, next question. Favorite product you've recently discovered that you really love? This is probably not unique, but whisper flow for dictation. It's really good.

Starting point is 01:41:21 I like the keyboard shortcuts because, you know, I just use it all the time in all the software. and anything Anchor makes. They have like power stations and docks and recharge. And the K. Yeah. A and K. Yeah. You're right.

Starting point is 01:41:35 And just all their stuff is super high quality and works really well. Everything seems to charge twice as fast and plug into an anchor thing. So I don't know. Whatever it is, it's really good. I got a new anchor charger. I also love anchor. That has like a display on the side when you plugged in stuff and it's got like multiple ports and it shows you like the percentage. It's charging and the wattage for outlet.

Starting point is 01:41:54 I love it. They're just like, how do we make this? more fancy and fun and charge more. Yeah. I love it. And then Whisperflow, quick shout out. There are,

Starting point is 01:42:03 you get a year free whisper flow by becoming an insider, I think even just an annual subscriber of my newsletter as part of the product pass. And so, check it out Lenny's productpass.com. You could also check out.

Starting point is 01:42:15 I do not know that. I'm not a shill for them. No, I love that. I love when people recommend products in the product pass. Because I'm a subscriber for long enough that I didn't get that.

Starting point is 01:42:23 You missed out. You missed out. There's 19 products in there right now. And by the time this comes out, there will be even more. Okay. Two more questions. Do you have a favorite life motto that you find yourself coming back to in work or in life? Yes.

Starting point is 01:42:35 Be yourself. Everyone else is taken. And it's attributed to Oscar Wilde, but I tried to look into that as I tried to get all my annotations correct for the book. And there's no evidence that he said it. But there's also no evidence who said it. So let's say it's Oscar Wilde because he said lots of things like that. I love that. And it's such a deep point.

Starting point is 01:42:55 you know, it's easy to hear and be like, yeah, yeah, yeah. But it's something I've learned to be more and more true over time, especially as you see people online doing their thing and just like, oh, I want to be like that. And then you realize, no, you've got to be yourself. No. And the people who love you or like what you do also want you to be yourself because that's what they love. And if you changed, then they wouldn't love that. So final question. You have this fancy award behind you on your desk. I'm curious what's the story there. That's the Ernst and Young Entrepreneur of the Year award for 2017 for Central. Texas, which I co-run with the CEO of WP Engine, Heather Brunner, which is awesome because I often call

Starting point is 01:43:32 Heather a late joining co-founder because that's what at LinkedIn, that's what Reed Hoffman called Jeff Weiner, because Jeff was like, you know, four years in, but was so impactful to everything, the success of the company, the culture, that didda-da-da-da, that like basically is a co-founder. And that's exactly what Heather is like at WP Engine. It's now been 11 years since she became the CEO. So this is a, you know, there's lots of data to back us up. And I used to say to people at the at WP engine, like,

Starting point is 01:44:05 if I just told you that Heather was a co-founder, you'd say, yeah, no kidding. I'm like, right. That's why I think of it that way, because so do you. Because so do it anyone, because that's the impact she's had. So we co-won that award, which is nice because you almost never have co-winners. In fact, like, I can't remember another one. I mean, I know there are others, but it's rare enough. I can't think of another one.

Starting point is 01:44:24 So it's really cool that we co-won that entrepreneur award. Jason, this was so awesome. I really appreciate making time. I really appreciate you sharing so much wisdom with us. Two final questions where can folks find you online, point them to your book, your website, and how can listeners be useful to you? Yeah.

Starting point is 01:44:41 I mean, to be useful, order the book. Hidden multipliers.com. Or, of course, you don't have to. I have all these articles online for free. So you can go to Asmartbear.com. and I'm on Twitter and other stuff that's all linked off of that website. And the articles, they're, they're free. I don't have ads.

Starting point is 01:45:00 I don't sell courses. I don't, I don't sell anything. So like that's, that's very, very noncommercial. And so in fact, the one thing I've ever done with writing that costs money is the book because, you know,

Starting point is 01:45:11 it's a physical book. I've got to charge something so I can ship it and everything. So, but I think hidden multipliers is, it's certainly my best work. So, so I'm very, I'm very proud of that.

Starting point is 01:45:22 but you don't have to buy it. It's okay. This is our chance to repay you for all the content you've got out over time. And so I'm going to order a number of them. Jason, thank you so much for being here. Thank you. This is fun. So fun. Bye, everyone. Thank you so much for listening.

Starting point is 01:45:40 If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lenniespodcast.com. See you in the next episode.

Lenny's Podcast: Product | Career | Growth - 5 questions to ask when your product stops growing | Jason Cohen (2x unicorn founder)

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