The other night my wife and I watched the movie The Founder. It’s the story of McDonald’s and Ray Kroc. There are multiple lessons to be learned watching it. After the movie, my wife and I talked about the different ways to view it. To generalize broadly:
- If you went into the movie with a bias against McDonald’s and a bias against big corporations you thought the McDonald’s brothers were stripped clean by Kroc and he was a fraud.
- If you appreciated what it takes to execute on a startup and the qualities great founders have you saw that in Kroc.
There are plenty of other things to glean out of the movie as well.
One of them is having a spanking brand new whiz-bang product and your approach to customers. People are mostly risk-averse. Check out Ray Kroc’s initial flyer and advertisement for the first McDonald’s or the ninth McDonald’s depending on how you count them. It’s totally designed to answer all potential customer objections.
Notice the bottom? That’s there to defray the risk of trying something brand new. Seth Godin mentions this in his blogpost. The notion of persistent stability is also the notion of getting rid of risk. Seth says, “Before there are any conversations at all about ROI, decision-makers need to feel safe, safe enough to believe that there will a future that matches their expectations.”
I did a calculation. In 1955 if you took a family of four and bought 4 burgers, fries and shakes it would cost you $1.80. In today’s dollars that is equal to $16.57 (cumulative inflation rate of 820.4%). The US median family income was just under $5000/yr before taxes in 1955. McDonald’s wasn’t “cheap”, but it wasn’t really expensive either. Most of all, it was fast. Kroc was selling good food at a decent price and it was super convenient. His customers didn’t balk at the price.
One problem I have seen with early-stage startups is their lack of ability to sell to big customers. It’s hard to get them to move off the schneid. It’s really important for startups to figure out how to derisk their offering. Some of it is the Kroc method of showing how many millions are eating hamburgers. The way I see a lot of startups do it is an introductory price. However, that hurts margins and it’s always hard to raise the price. If you compete on price there is a risk that you will become a commodity business.
In your selling process, it’s very critical that you ask a lot of questions and make sure you actually hear what the customer is saying. Listen hard and requestion to make sure you get it right. This is especially true when you are uncovering what their expectations will be when they use the product. If expectations don’t match up to reality, you won’t get a repeat sale. Ideally, you are in a position where you can underpromise and over deliver. Then, no one cares about the price.