Originally posted as a Twitter thread on December 08, 2022
“The Goldilocks Zone of Cost Irrelevance”
Some of the most valuable companies provide a crucial service, but don’t charge enough to have customers care enough to switch/think about switching
Janitorial services, payroll services, etc. Hard to be displaced / hard to get in.
At TrialPay I called this the “Janitorial Services Problem” — imagine writing a BigCo CEO: “I will make your toilets 19% cleaner for 7% less cost!”
CEO likely won’t care or even care enough to *find the person who DOES care*
It’s actually possible nobody does!
There really is a Goldilocks Zone here. If you represent a giant cost, it’s worth optimizing/RFPing. If you’re too cheap you likely can’t afford a sales team to sell in. But if you’re “just right” — irrelevant to COGS, but you have high margins and a large n of customers…wow
For many of our clients we were a small % of their revenue. Nice, but not crucial. Unlike janitorial services (which every office needs), we were doing something new — so category creation in a zone of irrelevance (eventually it became a category, though)
Moreover, put yourself in the shoes of the CEO…who likely only cares about 1-3 BIG things/KPIs that will move revenue, profits, stock price, save their job, secure their bonus, etc
So if you have a “janitorial services” type product — hard to get in, hard to displace, not incredibly relevant — how do you start? Some things we tried to do…
If leading with your product — do not just try to “go high” — selling to the CEO, board, whatever. They likely will not care! They will not care to find the person who cares! This is a rookie mistake I see many entrepreneurs make.
HOWEVER, if you do get a high level connection, try to lead with something they care about, and link it to your service. I would always try to figure the key priorities of the company and try to lead with that, versus “we’ll make/save you some small incremental dollars”
As an example, they might have (strategically) cared about showing they were ramping up Facebook customer acquisition (in 2011). Or mobile. Optics — if linked to a “braggable” KPI — almost always trump small dollars.
One other clever thing we did was use a bundled hook, as I called it. BigCo CEO didn’t care about our product, but did care about supporting Charity XYZ — so it was a much better reach out to say “we are working on something to support XYZ…”
We did a promotion called “The BigBundle” where 100% of proceeds benefited the American Cancer Society. We kept nothing, not even payment fees. The bundle consisted of…products from our merchant customers that we would sell to consumers.
It turned out to be a pretty clever hook — doing well by doing good — to get more companies to use us. In order to include their product, they needed to sign a contract with us, integrate some code (so we could deliver/authorize), etc.
I often described a customer journey as 10 stages.
Stage 1: Who the hell are you? Go away
…
Stage 6: Contract signed
Stage 7: Code integration complete
Stage 8: Small test done
…
Stage 10: Fully live and turned on, key integrations done
The “BigBundle” got us to Stage 7 with several dozen NEW customers — which then made it really easy to solve the Janitorial Services Problem in the future
After finishing the charitable promo, we had signed contracts and live integrations — so now the sales pitch was so much easier. “Just reply ‘yes’ and the toilets will automatically get 19% cleaner at 7% less cost — we’re already integrated and past procurement”
And once we were the new Janitorial Services Company, we could defend our position quite nicely — knowing how hard it was to get in 🙂
Inspired by a morning conversation with @davidu and @martin_casado — thanks guys!