Why ‘Good Fast Cheap, Pick 2′ might be wrong (and how to fix it so you can sell more)

Good Fast Cheap. Pick two” is a well-known and much-quoted maxim. It succinctly communicates the value you can provide to customers, as well as the relationship between what your customer wants and what they are willing to give up to get it.

But I don’t think it’s entirely correct. Certainly, it’s easy to remember but following it too closely could steer entrepreneurs wrong and may result in lost sales.

The reason? I believe the “2:1 ratio” (i.e. Good plus Fast but not Cheap) is not the diametrically opposed model we have come to expect. By choosing two and giving up one, entrepreneurs are making assumptions about their prospects and customers, which is what will ultimately drive prospects away.

Let’s use a simple diagram to illustrate. We’ll start with the current and widely accepted model, below.

Along the outer triangle are the customer’s “must have” elements. The inner triangle is the element that the customer is willing to give up.

So the current thinking is: a customer who wants something Cheap and Fast will give up Good in order to get it. I’ve illustrated that below. The “must-have” elements of Cheap and Fast are shown in red on the outer triangle; the “don’t need” element of Good is shown in green on the inner triangle.

The problem with this model is that a customer might not be so firm on their desire for Cheap and Fast that they will give up Good to get it. (Likewise, a customer might not be so firm on Good and Fast that they’ll give up Cheap to get it, or a customer might not be so firm on Good and Cheap that they’ll give up Fast to get it). customers want two elements and will give up one… but there is a often little more room for negotiation than we have come to believe.

Rather than a 2:1 diametrically opposed position, what if we considered something else: a model in which the customer has a primary “must-have” element, an element they’re willing to give up, and something in between – an element that has some room for negotiation.

Consider of your perspective as a buyer for a moment and I think you’ll discover that this makes sense. There is usually an element that you really, really need: Either Good or Fast or Cheap. And, there is usually an element that you are willing to give up: Again, either Good or Fast or Cheap. And somewhere in the middle is something that you’re willing to negotiate a little, perhaps relenting slightly on your “must have” element or accepting more of the element you don’t care that much about.

Let’s look at an example of a customer that we may have once thought of as wanting Fast and Cheap but not Good. In our conversations with them, we may have heard them point out how important Cheap is and how unimportant Good is… and we have assumed that Fast is therefore very important to them, too… thus we have thought of them as the Fast and Cheap but not Good customer.

With this new model, and a little more listening in our conversation with the prospect, we discover that they really want the product or service to be Cheap and they don’t care how Good it is. But we also discover that Fast isn’t as much of a non-negotiable as we may have thought. In fact, there is some room for negotiation.

As a result, we might give them some speed-of-delivery options. They can pay slightly more to get the product sooner, or they can pay slightly more for a higher quality product. Ultimately, we can offer these customized add-ons to them because we know what their negotiable element is.

Let’s look at another example. Once, we thought of a customer who wanted a product or service as Good and Fast but understood that it would not be Cheap. Perhaps we hear them say something like “I need it tomorrow” and “I’m willing to pay whatever it takes”. Therefore, we assume that they want it to be Good.

With this new model, and a little more listening in our conversation with the prospect, we discover that (along with what we already know about them wanting a Fast delivery at any price) that their definition of “Good” is negotiable and maybe we can offer them something faster by cutting back on how thorough our service is or offer them something slightly more expensive by achieving a level of higher quality.

The key is: They can decide and we have the opportunity to earn higher profit through a more customized approach.

As you can see, Good Fast Cheap is still an important concept, but it’s no longer about picking two at the expense of a third. Rather it’s about finding the must-have element and the “don’t need” element and then engaging in negotiation.

I think there are a few reasons that this matters to entrepreneurs and business owners.

First, you want to run a profitable business. By finding the negotiable element, you can add value in the areas you do well while you pull back in areas you can’t deliver on as successfully, thus creating a high value product while minimizing your weaknesses.

Second, you can deliver exactly what a customer wants. If a customer wants something cheap and they don’t care how good it is, that doesn’t mean they want it really fast. There may be room for negotiation. You can deliver various levels of quality at various levels of speed. This creates some customizable options, giving the customer a sense of control over the uniqueness of their purchase.

Third, you can capture more sales from contacts who might not have otherwise bought from you. If a prospect feels that your “Good and Fast but not Cheap” model wasn’t a right fit, they might go somewhere else. But if that same customer felt that you would deliver Good with some flex in the Fast and Cheap elements, you open the door further for them to explore doing business with you.

“Good Fast Cheap. Pick two” sounds good. But a better model that can lead to more profitable sales is: “Good Fast Cheap. Pick one and negotiate”.

How newspapers can survive in the age of free content

Sales funnel newspaper problemWay back in the day, I used to report the news in a daily newspaper. I learned a lot but moved into other forms of writing when I felt more like an ambulance chaser than a journalist. That was before the web. Today, it’s interesting to watch the newspaper industry on life support trying to figure out how to stay alive.

The problem is fundamentally a sales funnel problem: How does a newspaper exchange its information for money? In Lauren Indvik’s May 26th Mashable article, entitled “5 Ways to Monetize the Future of News Media“, she offers us the methods that we are seeing news media experiment with online today: Fully paid, partially paid, metered, free, and advertisement. I gave a similar list of pricing ideas in January, some of which can apply to the news media industry.

There is usually a dichotomy between how newspapers distribute content online and how they distribute content offline: Paid offline newspapers shouldn’t give the same content for free online. And, free offline newspapers shouldn’t require payment online for the same content. But that’s what was happening for a while. And it’s more challenging when the same information is available in other sources for free.

Newspapers were once the only way to get the news and it was convenient to pay for them to show up on your doorstep in the morning. But between Google News and Twitter, people can stay pretty well informed up-to-the-minute while newspapers lag behind the story by a full day.

Once lucrative parts of newspapers (like premium advertising space and classified ads) are being replaced: There isn’t much limit to online adspace and classified ads have been cornered by craigslist and kijiji, which provide cheaper ads and a better reach.

Newspapers report on the news. For years, when something happened, the newspaper informed you. That made sense when the newspaper was the only means of carrying the news. And even when televised news expanded to 24-hour news stations, newspapers still had a place. But today, people can get whatever news they want – international, local, niched to their interests – faster and for free. Newspapers cannot compete with that.

Instead, I believe that newspapers need to adopt a different approach between online and offline. Online, they can continue to report the daily news, especially with a local focus (and especially if no one else is reporting locally). Local news is valuable. They can make it free (with advertising).

But offline, they need a different approach and this is not going to be widely accepted by newspapers because it will change how their staff have to work: Offline, newspapers need to adopt the model used by The Economist. That is, they need to go after the deeper story, the story behind the story, and provide insight, not just information.

Offline newspapers have traditionally just told us what’s going on, reporting the news as it happens. This isn’t a surprise because underpaid, overworked journalists have to run from car accidents to quilting bees to report on everything. They don’t have time to find the real story and they don’t have time to dig. They’ve focused on What, Where, When, Who, and How, and they’ve completely neglected Why.

Here’s how to make it work: Newspapers need a group of journalists to gather and report on local news in the way they’ve always done it and post it for free online. And, they need a group of investigative journalists doing the digging to find the real story to provide in a paid, printed format.

This offline, printed newspaper story needs to dig; it needs to push beyond merely informing readers and actually provide real insight; it needs to even go so far as to advise, forecast, and recommend. Print newspapers can’t just be a mirror anymore. They have to be a guide to living.

This change will not be welcome. It will come at a great cost. It won’t return newspapers to their heyday. But I believe it’s the only way that local (print) newspapers are going to survive.

[Photo credit: Tom T]

40 ways to optimize your sales funnel to get more sales faster

There are 3 ways that your sales funnel can be better – by getting more people to buy, by getting people to spend more money, and by getting people to move through your funnel faster. In this blog post, I’m going to give you 40 practical ways to make your sales funnel achieve all three of these goals.

1. Outline your funnel (duh). This should be step one. And if you haven’t done this yet then the other steps are going to seem pretty useless.
2. Customize your funnel: Realize that each business or industry may have similar concepts (leads, prospects, etc.) but they will look very different each time. In the list below, I am using a fairly standard funnel of audience, lead, prospect, customer, evangelist, but don’t feel married to it. (Your lead and prospect step might be essentially the same step).
3. Reduce the number of steps to the smallest number that makes sense. (Don’t make it too complicated!)
4. Review your various product lines and target markets to determine whether a different funnel might be more appropriate. (In my business, for example, some of my contacts are converted from leads to prospects by a proposal while others are turned from leads to prospects by advertising. The timeline and my ultimate deliverable for each market is very different. Thinking about the differences and addressing it with multiple funnels can help you become more successful).

5. Figure out what is the minimum amount of information to transform someone from one stage in the funnel to the next.
6. Outline your vision for each stage of the funnel. (i.e. For the prospect stage: “I will build trust by adding value and I’ll overcome objections with some preliminary marketing material so that when I pitch my services, the prospect is eager to buy.”)
7. Set numerical goals for each stage.
8. Identify all the actions that need to be taken in a single stage. There might be one or two actions or there might be dozens, and some will be done by you and others will be done by the contact.
9. Review the actions (see above) and make sure that each action is clear and obvious and easy to take. This applies to actions performed by you and by the contact.
10. Review the actions (see above) and automate as much of your own actions as possible.
11. Look at the “oldest” contact in each stage. If they are an old audience member or customer or evangelist, that’s okay. If they are an old lead or prospect, you might need to revisit their situation. Create a unique offer just for the oldest 10% of your funnel’s leads and prospects. If they don’t buy that, decide whether they are wasting your time and money and perhaps delete them. They might be legitimately taking their time or they might be stringing you along for the free donuts and coffee.

12. Create content for each action in each stage: Content for your own actions will often be content that clearly outlines what the next action by the lead/prospect/client needs to be.
13. Remember that audiences are not leads. Create content for audiences and prompt them to become leads.
14. Create a general newsletter (or some other audience-specific content) for anyone who wants to sign up. This will fill the audience portion of your funnel.
15. Create a secondary community – perhaps a newsletter that requires additional information to subscribe to – with the purpose of filtering your audience into leads.
16. Review all marketing and communication channels and pinpoint where they are contributing most to your sales funnel. (i.e. Twitter might add audience members; your blog might add leads; a special report might draw people to skip earlier stages and become prospects).

17. Identify technological barriers (i.e. browser compatibility) that might exist and eliminate them.
18. Identify social barriers (i.e. inadvertently alienating a large group of people) that might exist at each stage and eliminate them.
19. Identify buying objections and address them proactively earlier in the funnel.
20. Repeat the above process every quarter to ensure that not barriers will spring up later.
21. Apply metrics to every stage of your funnel (and, if possible, every action of your funnel). Use those metrics to find out where you’re losing the most people and resolve it.
22. When working to improve your funnel, work backwards through the funnel because you’ll enjoy clearer feedback loops; and, small changes at the client/evangelist end will have a noticeable result when you keep more people at the lead/prospect end.
23. Periodically ask a friend or family member to participate in your funnel and watch over their shoulder to see how they interact. Take note of challenges, difficulties, and opportunities for improvement.

24. Calculate your “go-out-of-business date” if you stopped putting people into your funnel right now. Keep revisiting this number. Although you want a fast-flowing sales funnel, you also want one that will keep you in business for a while.
25. Determine the average length of time a person takes at each stage.
26. Determine the average length of time a person takes from lead to customer.
27. Divide your average revenue into the number of people in each stage to determine what each person in that stage is worth to you. If you make $10,000 from 10 customers, that’s $1,000 per customer. But if you have 100 prospects, each prospect is worth $100; and if you have1000 leads, each lead is worth $10; etc.
28. Review your customer attrition rate. If you want to be busier, you need to increase the percentage of audience by a certain factor. For example, if you lose 1 customer out of 10, and you have 1 in ten prospects become customers and 1 in ten leads become prospects and 1 in 10 audience members become leads, then you need to add more than 10,000 people to your audience list just to replace them (and more if you want to be busier)!
29. Determine a trigger in each stage. The trigger tells you that you need to make some adjustments in the future to accommodate the increase or decrease in your contacts. That way, if you suddenly have 25% more people reach a particular stage as a prospect, that will trigger for you the need to ramp up production to accommodate the increase. And if you suddenly have 25% fewer people, that will trigger for you to adjust production accordingly.

30. Incentivize people to propel themselves through your funnel. The faster they go, the greater the discount.
31. Offer a guarantee that is equal to or greater than the purchase price.
32. Conduct a survey of all recent clients to find out their greatest challenges and motivators in buying from you.
33. Create a profile that describes the fastest 10% of your customers and create profile that describes the slowest 10% of your customers. Try to identify the differences between the two and eliminate the differences to create an environment that encourages faster flow.

34. Experiment with price.
35. Outline possible up-sells, add-ons, ancillary products, or product extensions to increase the per-dollar sale.
36. Create a profile that describes the top 10% (in terms of average dollars spent) and create profile that describes the bottom 10%. Try to identify the differences between the two and eliminate the differences to create an environment that encourages higher spending.

37. Create a referral program to get customers adding people into your funnel for you (and often at an advanced stage).
38. Test new options for each stage. Try seminars to create new prospects. Try an opt-in report for new leads.
39. Invest in higher capacity to handle more people in your funnel (i.e. Do you have the potential to send out more newsletters? Do you have the bandwidth available on your website? Do you have the time to offer the services they will eventually buy?)

40. Compare the results of each sale to the speed, dollar value, and techniques you used to make the sale. Are your slower contacts buying more? Are your faster contacts buying less? This is valuable information for so many reasons!

There are many, many more things you can do but this is a great start!

A tip to remember when pricing your products or services

Pricing your products or services is not easy. When I was first starting out I faced the challenge that many freelancers do — sometimes pricing my offering too low and losing money; and other times pricing my offering too high and losing the opportunity. Through ongoing trial (and error) you find the sweet spot and build from there. But I’m always looking for ways to understand how to price appropriately so I can help my clients when they face those sames challenges.

I just want to make a fair wage while ensuring that my clients get value. Many of my clients want that, too, but I’ve encountered others on both sides of the spectrum: pricing absurdly low as a sort-of competitive edge (which I recommend against) and pricing extremely high as an indicator of value and to generate more profitability.

Recently, I encountered two situations that helped me think about pricing.

Scenario 1: Not worth my time. When I rented a car during my vacation to the UK, I apparently drove through a restricted traffic zone and received a ticket for it. It was mailed to me all the way from England. Friends suggested that I try to fight the ticket since I didn’t drive through the restricted zone but I just drove across one small edge of it (for less than five minutes) after taking a wrong turn. I know of other cities that will waive traffic fines for out-of-towners. Fighting the ticket seems to make sense because then I wouldn’t have to pay. But the thing is: The cost of the ticket, although steep, is still cheaper for me to pay than if I were to fight it. I could spend an hour writing a letter and/or speaking to a bureaucrat on the phone and I would have lost money (because one hour of my time is worth more than the ticket).

Scenario 2: The best valued option. I’m remodeling my kitchen, which includes tearing down a wall to create a dining room. So I looked around for options to dispose of the building material that I ripped out. I could rent a truck and haul the stuff to the dump, I could rent a big metal dumpster and have a company pick it up, or I could call a company like 1-800-Got-Junk to take it away for me. Of those options, the dumpster gave me the best value because I could rent it for several days at a fixed cost. The truck rental, on the other hand, would be quite high for a per-day charge plus dump fees, and the Got Junk option isn’t practical because the demolition is taking place over a period of a week and I don’t want building materials lying around on my lawn until I’m finished with the demo. On its own, the dumpster is pretty pricey, but when compared with the other options, the value is definitely there.

So, here are some rules of thumb on pricing that I’ve been thinking about:

  • Among several similar options, don’t be the lowest price. Offer the greatest value and aim for the middle or upper end of the price spectrum. (That’s the way we should aim to be with our competitors)
  • Among several different alternatives, offer the greatest value but aim to be the lowest price. (That’s the way we should aim to be with products or services that aren’t direct competitors but which replace our product or service, like the dumpster I mentioned above).

Clarification: I’m just thinking “out loud”. Obviously, there are circumstances when it doesn’t make sense to follow these rules… and I’m even okay if someone proves these rules wrong. But from where I’m sitting, these seem to make sense for most businesses.