How A ‘Ghetto’ Product Can Still Have Huge Success
3 lessons we learn from Groupon, Zappos, and Craigslist
Every startup has the dream of being the next household name. We all hope that one day we can attain the success of Instagram, Facebook, Groupon, and Craigslist. We try to learn as many lessons as possible from the successes of these startups.
It’s difficult to learn lessons from startups that have already grown into large organizations though. Trying to take early-stage startup lessons from what Instagram is today is incredibly difficult.
Once a startup is massive you can’t really imitate them unless you’ve already grown to a large scale startup yourself. What we can do though, is look at how those startups began. In the early stages, what decisions did they make that guided them to their present-day success?
There are three startups that I believe provide great examples for the fledgling startup. Groupon, Zappos, and Craigslist. What did these 3 startups all do similar that led to their great successes?
Groupon
The idea of Groupon was ingenious. But it wasn’t just the idea that made Groupon successful, it was the unique way they executed.
Groupon did not start off with a beautiful, polished, product. Their initial product would be what many would consider “ghetto”. Andrew Mason, founder of Groupon himself says:
We took a WordPress Blog and we skinned it to say Groupon and then every day we would do a new post. It was totally ghetto. We would sell T-shirts on the first version of Groupon. We’d say in the write-up, “This T-shirt will come in the color red, size large. If you want a different color or size, e-mail that to us.” We didn’t have a form to add that stuff. It was just so cobbled together
“Ghetto.” Building a platform that we consider “ghetto” would make us cringe. The average person looking at a product like that would probably have many negative things to say about it. But how did this “ghetto” website turn into a billion-dollar company?
What was accomplished by this “ghetto” website was substantial? It proved that people really liked the concept. When Groupon saw that people were using the product, and how they were using the product, it gave them the direction they needed for further development.
As entrepreneurs, we’re afraid of building something that people consider “ghetto”. Instead, we want to build a product that people all “ooh” and “ahh” over from day 1. This is counterproductive.
A beautiful product that doesn’t satisfy customer needs is not a good product.
What’s most important than polish, is providing value to the customer.
Value is not based upon beauty and complexity, it’s based upon how well you solve a problem.
Figure out how to fix a problem before wasting time on elegance and complex feature sets.
By starting small, Groupon was able to validate their idea. Once the idea was validated, they could take customer feedback and apply that to better fix a problem. The focus from day 1 was not building a product to show off to others, but one that presented value to the customer.
Like Groupon, your initial focus should not be on the way the product looks, but on how it solves the customer’s problem.
Zappos
We all know Zappos. Amazon bought them for $1.2 billion. Huge success. But how did they start? They started very small.
The founder Nick Swinmurn ran an experiment. His theory was that customers would buy shoes online. To test his theory he asked local shoe stores if he could take pictures of their inventory. He would post the pictures online and if someone bought one he would come back to the shoe store and buy the shoe at full price.
Simple and to the point.
They didn’t start off with anything amazing. He didn’t build a large product in anticipation of a massive influx of customers overwhelming him. He didn’t build with the mindset that he already knew for a fact his product would go viral. Instead, he built a product with the goal of testing the validity of a theory.
When we have an idea, it’s too easy to feel that when people hear about what we’ve created, they’ll flock to us in droves. But that’s crazy dangerous. That approach is based on a guess, not a fact. You don’t know if people are going to like your product until it’s out there.
By building a very simple product first, Zappos accomplished 3 things:
From Lean Startup by Eric Reis
1. It had more accurate data about customer demand be cause it was observing real customer behavior, not asking hypothetical questions.
2. It put itself in a position to interact with real custom ers and learn about their needs. For example, the busi ness plan might call for discounted pricing, but how are customer perceptions of the product affected by the dis counting strategy?
3. It allowed itselfto be surprised when customers behaved in unexpected ways, revealing information Zappos might not have known to ask about. For example, what if customers returned the shoes?
By building a simple product, Zappos was able to obtain the necessary feedback to guide their future decisions. That’s a fundamental reason why starting from the smallest product possible is advantageous.
When you start small, your future development will be based on feedback, not conjecture. Instead of building what you think the customer needs, you’re able to build what you know the customer needs because you’ve gotten their feedback. That understanding can be the difference between succeeding or failing.
Craigslist
The first time I saw Craigslist I was surprised. It was not a beautiful product by any means. If you were to base the value of the site only on its looks, you would never imagine that it would become anything. But yet look at what’s happened. How did Craigslist become a household name?
In early ’95, [Craig Newmark] decided to help out, in a very small way, telling people about cool events around San Francisco like the Anon Salon and Joe’s Digital Diner. It spread through word of mouth, and became large enough to demand the use of a list server, majordomo, which required a name.
Craiglist started from simply telling people about cool events. In fact, it truly began with him just sending out emails to friends about cool stuff in San Francisco. Why is this significant?
He didn’t worry about aesthetics, he focused on getting to the heart of a problem. People wanted to know what was going on. The key was solving an issue, and that’s what he did.
He could have built some extravagant app that crawled the web for interesting events and notified users when they were in the area of one. He could have spent tens of thousands investing in software to automate this process. But he didn’t. Instead, he focused on solving the problem, not being fancy.
But here’s the question, what would you have done? Would you have built Craiglist or a fancy app? I know before I would have built the fancy, fluffy app. Now I know that’s madness.
Think about this
If you had to make a hammer, how concerned would you be about the way it looks? If you had to buy a hammer, would you buy the most beautiful? The one that has a bunch of features of which you don’t care about? No. You would buy the hammer that does exactly what you need for the task at hand.
That should be your mindset when building your product.
Your first responsibility is to solve a problem. Everything else is secondary at best. It takes a lot of time and energy to solve a problem. So focus your energies on that. Don’t be concerned with things that don’t matter. If beauty is not essential to the solving of a problem, then don’t focus on it.
All three of these startups started very small
When these startups began, some people would consider them to have been “ghetto”. But look how successful they’ve become. You’ll find that this is a common thread amongst many successful startups.
When you’re strapped for cash and time, you need to make sure your focus is on the right place. That right place is solving the customer’s problems.
Zappos had a simple website, nothing fancy. But from this, they learned what was necessary to build a large scale online shoe store.
Groupon began with a “ghetto” website. But from that “ghetto” website they were able to discover and address the needs of a large customer base.
Craigslist began with just emailing people about cool events in San Francisco. But from that, they discovered a way to provide valuable content to a large customer base.
These founders were not afraid to start small. They weren’t afraid to put themselves out there even though they didn’t have the polished products that people are used to. They didn’t let the fear of criticism stop them from shipping.
Zappos didn’t build a massive ecosystem in order to validate the concept like companies that have failed have done in the past.
Swinmurn [Zappos CEO] could have waited a long time, insisting on testing his complete vision complete with warehouses, distribution partners, and the promise of significant sales. Many early e-commerce pioneers did just that, including infamous dot-com failures such as Webvan and Pets.com. — Lean Startup by Eric Reis
Groupon didn’t build a website with an intricate purchasing system capable of supporting millions of users.
Craigslist has never built an extremely beautiful website or an advanced online checkout system.
And yet all three of these startups are extremely successful.
Final Thoughts
You can make a ton of features before the customer has even seen the product. You can spend large blocks of time redesigning your product. But that’s all wasted if it is not connected to solving the problem of the customer.
Build small, learn, and then build more. That’s the way to be successful. Remember, until your startup has traction, everything is still a theory. Don’t have the mindset of “once I build this product everyone will flock to it” until you have proof of such. The proof is based upon customer feedback and usage, not upon what you think is going to be successful.
Imitate the Zappos, the Craigslist, and the Groupon model, and you’ll greatly increase the chances of your startup’s success.
