One of the most important parts about being in business is
eventually understanding what need you're filling for your customers.
And the funny part is,
you can succeed in business without ever knowing this.
You can start a business, come out with a product, people will buy it.
And you can believe
that you're absolutely filling a particular need when
you're really filling a different one.
For me, one of the most dramatic examples of this was when I worked
for Intuit, the people who make Quicken the checkbook software.
And I went over to the marketing Department.
I was in product development, and I said, So tell me what it is
that our customers need so that we can build that into the product.
And the marketing person said, “they need to feel organized.”
And I thought, okay, what does that mean?
What features should we add?
And the marketing Department just kept saying to me, “Feel organized.”
And I was like, I don't know what that means.
That's ridiculous.
Do they need to be able to reconcile their account more easily?
Whatever.
A few years later, I'm talking to a friend of mine.
I mentioned that I had worked
at Intuit, and my friend looks at me and his eyes get big.
And he says, OMG I love Quicken!
And I said, really, what do you love about it?
And he said, It helps me feel organized.
And I was like, Damn, there's that phrase again.
And I said, okay, so
the need that it's meeting is for you to feel organized.
And he said, yeah.
And then he looked at me and he said,
So tell me what's that field that says category in each transaction.
Now, for those of you who don't know Quicken, the only actual use
for the frickin' program is you categorize each transaction,
and then you say, how much did I spend on entertainment?
How much did I spend on whatever?
So literally, he wasn't even using
the part of the program that helps you be organized.
What he wanted was the organized feeling.
Now the reason this matters, the reason this matter for those
of us who are creating products and services.
Is, if we happen to hit on the right combination, great.
Wonderful.
But if we don't really know why peolpe buy that,
then we can make really dumb business decisions.
So, for example, Uber and Lyft
(two of the least profitable businesses in all of history
by the way, if you don't actually know that) Uber just announced their
first profitable quarter as I'm recording this, except they didn't
actually announce it on an actual profitability basis.
They made up a non existent financial accounting measure,
one that does not exist that no one in the world except Uber uses.
And that number went from negative to positive.
In their fantasy world, they're suddenly profitable.
But what Uber and Lyft started off
saying is, “We're selling people a great customer experience.”
We're selling them the ability
to rate their driver and blah, blah, blah, blah, blah.
And they got huge and gigantic.
However,
now they're starting to raise their prices because they were basically
subsidizing the price of affair using their venture capital.
They are in the process of running
out of venture capital, and they're starting to raise the prices.
A few days ago, I wanted to do a quick errand
to a place that was only about a mile away.
They wanted to charge me $30 each
way. I said, no, I can actually walk it for $30 each way.
It's a nice morning out.
But the thing is, they may think that the need that they're filling
is the need for a great customer experience.
However, they need to pay close attention to actual consumer
behavior because my experience, my experience from talking
with people is what actually triggers that particular buying
decision to go with an Uber or a Lyft over traditional taxi.
Part of it is definitely the customer experience because some
of the taxis are really kind of icky.
However, at the end of the day,
if the taxi is $10 and the Uber is $25, people choose the taxi.
So the need they're really filling
is the need for inexpensive rides and the way they've been providing
that is by subsidizing the rides with their investor money.
And that ain't a great business.
Another one of my favorite examples
is... I'm in America and in America, we simultaneously consume gigantic
amounts of sex and pornography and so on and so forth.
But we pretend we don't.
And we like to point fingers at other people and say, oh,
look at those bad people who are doing the sex thing,
even while it's like the number one source of traffic on the Internet.
So Tumblr. Tumblr was a website that let people create their own
blogs, and it was for musicians and for creative people.
And you could create your own blog.
But it also turned out that people
discovered that the particular interface for Tumbler was great
for pornography. People would curate pornography
collections and other people would come to look at them.
And I think they may have pioneered the Infinite Scroll feature.
So if you were into kinky pictures of people doing things
with cantalope, you could find someone who
curated a bunch of those pictures, you could scroll it.
So Tumblr, which at its peak was being bought and sold for over
a billion dollars, eventually ended up in the hands
of Verizon and somebody at Verizon, probably from the Midwest,
who had subscriptions to every porn channel on the Internet,
but didn't want to admit it, decided that, oh, this is bad and evil.
So let's go ahead and eliminate all the adult blogs off of Tumblr.
And I think it was a year later, after they eliminated the adult logs
that this website that had 100 million views a month that they had
purchased for $1.3 billion sold for $3 million.
It lost. What is that?
99.7% of its value?
Because what they didn't understand is the need that Tumblr was
fulfilling was not the need for blogs.
People could do...
People have been able to do blogs since the web was invented.
I had a blog long enough ago that I'm not going
to tell you when blogs are not actually anything new.
The need that Tumblr was fulfilling
was for curated collections of pornography.
And you'd think they would have known that, but they didn't and it
cost them a tremendous amount of money.
Recently, OnlyFans tried something similar.
OnlyFans got it start as a place for amateur pornographers to
be able to post their videos and text if they wanted
to in pictures and have people subscribe to it.
And it gave them a revenue stream.
And it worked pretty well.
I literally I know six people who survived COVID by making money off
OnlyFans and we're talking, these are people with College
degrees and marketable skills, but they got laid off and they made
more money that year than I ever did.
So it's not a bad business if you do it right.
In any event, OnlyFans.
About a month before I'm recording
this, they decided that they were going to eliminate all of the adult
content because adult content is bad, even though it's the thing
that everyone wants. Within two weeks, the backlash was so severe,
they actually saw the writing on the wall and they said, "Oops,
we're going to reverse that decision!" Because the need that OnlyFans
filled was not the need for Lindsay Lohan to put up her
personal blog about her trials and tribulations.
The need that it filled was as a place for amateur pornographers
to be able to make a living safely from the Privacy of their own home
and for people to be able to subscribe to them.
So it's important to understand what
is the real need that your product or service is filling.
Then when you make your decisions as to whether to sell the company as
to what products to have as to who to partner with.
You can make those decisions in a way that meets more of your
customers needs, not fewer of your customers needs.
Because if you start stopping meeting the needs, pretty soon,
you're not going to have a business, Know your customer's needs.
Fill them. Everyone will be happy.