From: alexhormozi
To grow a business, especially after reaching a certain revenue threshold, it becomes crucial to leverage customer feedback for product and service refinement. This approach ensures long-term business value and customer retention [00:07:05].
The Importance of Feedback in Early Stages
In the initial stages of a business, particularly until reaching $100,000 a month in revenue, advertising is the primary focus [00:06:35]. This is because a sufficient volume of customers is necessary to generate enough feedback to determine product quality and identify areas for improvement [00:06:41].
Fixing the “Leaky Bucket”
Once revenue reaches around $100,000 a month, the focus should shift to fixing the product and ensuring customer satisfaction [00:06:50]. If customers are not referring others, staying loyal, or repurchasing, the business has a “leaky bucket” that needs immediate attention [00:07:07]. Addressing these issues early on prevents major problems as the business scales [00:07:09]. By fixing these holes, the business can continue to grow steadily even with the same advertising efforts [00:07:40]. Neglecting product issues and solely increasing advertising leads to an “asymptote” effect, where growth plateaus and reputation suffers due to an inability to deliver quality at scale [00:08:05].
Starting for Free to Gain Feedback and Proof
One effective way to gather initial feedback and build credibility is to always start by offering services or products for free [00:11:29]. This lowers the stakes for customers and allows the business to gain results, conviction, and confidence [00:11:54].
Working with customers for free can generate value in three key ways [00:14:22]:
- Testimonials Customers can provide valuable proof of concept [00:14:25].
- Referrals Satisfied customers can refer others through word-of-mouth [00:14:27].
- Future Payments Customers may choose to stay on and pay once the service is no longer free, especially if they value the results [00:14:32].
This approach provides invaluable feedback for product iterations and allows for the gradual increase of prices over time [00:14:12].
Proof Over Promise
Proof is more compelling than promises in attracting customers [00:15:00]. Businesses should focus on capturing as much proof as possible, which can be done in several ways [00:15:58]:
- Recency Recent proof is more effective than older proof [00:16:11].
- Visuals Visual proof (e.g., screenshots of bank accounts, before-and-after pictures, videos) is more compelling than text-based testimonials [00:16:18].
- High Volume Most businesses have more proof than they realize. Collecting screenshots of reviews from various platforms (Yelp, Google, Facebook) and displaying them prominently can be overwhelming proof [00:16:41].
- Pain-Oriented Testimonials that start by describing the customer’s prior pain convert significantly higher [00:17:37]. This allows prospects to relate to the problem before seeing the solution [00:17:57].
The best time to ask for a testimonial is at the moment of greatest customer satisfaction [00:18:27].
Talking to Customers to Solve Problems
Paul Graham’s philosophy suggests that nearly every business problem can be solved by talking to customers [00:25:34].
“You can solve just about every business Problem by talking to your customers.” [00:25:37]
Customers possess all the necessary information to improve a product or service [00:25:51]:
- Advertising Conversion If advertising isn’t converting, talk to customers [00:25:40].
- Page Conversion If website pages aren’t converting, talk to customers [00:25:44].
- Pricing Issues If the price seems off, talk to customers [00:25:46].
- Product Delivery If the product isn’t delivering, talk to customers [00:25:48].
Engaging in sales calls, even for low-priced items, helps founders learn the precise language customers use, which can then be incorporated into advertising and sales scripts [00:26:47]. This “rocky cut scene” of taking hundreds of calls reveals what truly resonates with customers and drives purchases and retention [00:26:58].
Founders should regularly call customers who have purchased to understand their motivations [00:27:42]. Equally important is contacting those who didn’t buy to understand why [00:27:51].
Customer interactions can also transform neutral customers into “Super Fans” [00:29:16]. By sharing the business’s story and showing care, these Super Fans may generate significant word-of-mouth referrals and demonstrate higher retention [00:29:20].
Learning from Cancellations and Refunds
When customers ask to cancel a recurring membership or request a refund, it’s an opportunity to understand what went wrong [00:29:39]. Instead of minimizing their concerns, validate their frustration and ask, “What would it take for me to make this right?” [00:30:02]. Often, the solution is not as significant as anticipated [00:30:28].
Segmenting Customer Feedback
It is beneficial to talk to different types of customers:
- Super Users For product roadmaps and reinvestment decisions, prioritize feedback from highly invested users who are getting the most out of the product [00:30:43].
- Low/Moderate Users For reducing friction and acquiring new customers, understand why the product didn’t work for those who cancelled or didn’t buy [00:30:48].
The Closer Framework for Sales Calls
When just starting out and making first sales, the “Closer” framework can be used for phone calls with prospects [00:31:13]:
- C - Clarify why they’re there Ask what prompted their engagement (e.g., “What made you hop on the call?”) to understand their initial motivation [00:31:24].
- L - Labeling with a problem Rephrase their core issue to confirm understanding (e.g., “Sounds like you want this outcome and haven’t gotten it yet?“) [00:32:01].
- O - Overview past experiences (Pain Cycle) Explore their previous attempts and the costs of not achieving their desired outcome <a class=“yt=“yt-timestamp” data-t=“00:32:13”>[00:32:13]. This temporarily increases their sense of deprivation and importance of the outcome [00:32:27].
- S - Sell the vacation, not the plane flight Focus on the desired end result and benefits, rather than just features or processes [00:33:34]. A typical pitch involves three key points that, if achieved, would guarantee success [00:34:18].
- E - Explain away concerns Address specific objections related to the program, time, money, decision-making authority, or fear of making a mistake [00:34:44].
- R - Reinforce the decision After the sale, immediately ensure the customer feels valued and impressed by delivering on promised next steps within 24 hours, ideally faster [00:35:13].
This framework is simple enough to be duplicated, allowing for scaling of sales efforts [00:36:14].
The “Look Back Window” and Billing Frequency
Customers evaluate the quality of a purchase based on their most recent experience (the “look back window”) [00:44:17]. To leverage this, businesses should aim for less frequent billing (e.g., annually instead of monthly) to extend the “look back window” [00:45:26]. This provides more time to provide value that exceeds the price, reducing volatility in both the customer’s and the business’s perception of worth [00:46:16].
Offering prepayment discounts or bonuses (e.g., annual pricing) can significantly improve cash flow, allowing for increased marketing and advertising efforts [00:47:56]. A 10-15% adoption of annual prepayment can double cash flow [00:47:50]. This front-loaded cash helps offset customer acquisition costs and sales commissions, creating a profitable “cash conversion cycle” that allows for rapid scaling [00:48:19].
Conclusion
Business growth and improvement heavily rely on an ongoing dialogue with customers. From understanding their pain points to gathering testimonials and optimizing billing cycles, every interaction provides valuable data for refinement and expansion. By continuously seeking and acting on customer feedback, businesses can identify core problems, build stronger products, and create a loyal customer base.