"The Right Thing 101: Combining Principles of Investor Field Notes and John Maxwell's 6 Principles"

"The Right Thing 101: Combining Principles of Investor Field Notes and John Maxwell's 6 Principles"

Introduction

In the ever-evolving world of consumer startups, two key factors determine their success or failure: distribution and conversion models. Distribution refers to how businesses acquire new customers, while conversion measures how effectively a business optimizes the user experience to achieve desired goals. Both factors are essential for sustainable growth and monetization. In this article, we will explore various strategies and tactics for distribution and conversion, highlighting common points and unique insights from investor field notes and John Maxwell's 6 Principles.

Distribution: Finding the Right Channels

Distribution channels are the lifeblood of consumer startups. However, as time goes on, these channels become crowded and less attractive for new entrants. The dominance of Google, Facebook, and Amazon in online advertising is a testament to this phenomenon. To overcome this challenge, startups need to think outside the box and explore alternative avenues for distribution. Here are three actionable pieces of advice:

1. Virality via social proof: People tend to mirror the actions of others in an attempt to reflect correct behavior. By leveraging social proof, startups can create a viral effect where users emulate behavior validated by others. This can be achieved through user testimonials, ratings, and reviews that build trust and credibility.

2. The Etsy Effect: Driving discovery is one of the hardest parts of building an audience. By creating a platform where users can be discovered, startups can drive loyalty and create brand equity. The example of Etsy, where users are tempted to engage with original sellers, showcases the power of discovery and its impact on customer retention.

3. Influencers enable disintermediation: Influencers have become a highly fragmented distribution channel with great potential for exploitation. Startups can tap into the audiences of influencers to reach new customers at a relatively low cost. The key is to carefully select influencers whose values align with the brand and target audience. Gymshark's success in leveraging celebrity influence and social proof to become one of the fastest-growing fitness brands exemplifies the power of this strategy.

New Platforms: Embracing Opportunities

New platforms often bring fresh opportunities for startups to gain a competitive edge. Mega platform shifts, such as the emergence of IoT devices, voice assistants, and blockchain technology, open up new distribution channels. Additionally, breakout individual platforms that aggregate consumer eyeballs can also become valuable distribution channels. Startups should seize these opportunities by exploiting the features of emerging platforms for distribution. Similar to how Zynga piggybacked on Facebook, startups can leverage the unique capabilities of these platforms to their advantage.

Distribution Tactics: Harnessing the Power

To maximize distribution, startups can employ various tactics that tap into human behavior and psychology. Here are three effective strategies:

1. Group purchasing: Group purchasing organizations (GPOs) allow organizations to pool their purchasing volume and negotiate discounts. By incentivizing users to share deals with their networks to secure discounts, startups can benefit from streamlined supply chains and aggregated deliveries.

2. Niche markets: Building for niche, underserved communities can create world-class experiences that generate word-of-mouth and spur organic growth. Investors believe that most Reddit communities with tens of thousands of members have the potential to be turned into discrete products. By focusing on specific verticals, startups can create a loyal customer base and drive liquidity.

3. Standing on the shoulder of giants: Startups can find opportunities to exploit large incumbent platforms for cheaper distribution. Establishing a privileged relationship with these giants can open doors to a wider audience. However, there is always a risk of platform dependency, so startups must strive for rapid growth and diversify their customer acquisition engines.

Conversion: Deepening Engagement

While distribution is crucial, conversion is the never-ending art and process of deepening engagement. To optimize conversion rates, startups can utilize various tactics that appeal to human psychology. Here are three conversion strategies:

1. A/B testing: Testing different versions of a product or website allows startups to identify the most effective design, messaging, and user flow. A/B testing enables data-driven decision-making and continuous optimization to improve conversion rates.

2. Auctions: Auctions tap into the human desire to compete for scarce goods and resources. By creating a highly engaging experience and combining competition with the incentive to observe others' behavior, startups can drive conversions and increase user involvement.

3. Entertainment as conversion: Livestream experiences that incorporate gamification or surprise elements can be highly effective in converting users. By making the user experience entertaining and interactive, startups can capture and retain the attention of their audience.

Conclusion: The Power of Doing the Right Thing

In conclusion, the world of consumer startups revolves around distribution and conversion models. By harnessing the power of various strategies and tactics, startups can acquire new customers, deepen engagement, and ultimately monetize their offerings. However, it is essential to remember John Maxwell's 6 Principles, which emphasize the importance of valuing, appreciating, trusting, respecting, understanding, and avoiding taking advantage of others. By aligning business practices with these ethical principles, startups can build strong foundations for long-term success.

Actionable Advice:

1. Embrace the power of social proof by leveraging user testimonials, ratings, and reviews to create a viral effect and build trust.
2. Invest in alternative distribution channels, such as influencer marketing, to tap into fragmented audiences and achieve low-cost customer acquisition.
3. Constantly experiment with new platforms and emerging technologies to stay ahead of the curve and leverage unique distribution opportunities.

Remember, success in the startup world is not just about the bottom line. It's about doing the right thing, valuing others, and creating a positive impact in the lives of your customers and stakeholders.