Clayton Christensen on why customers pay a premium, or: bad products are expensive

If you hire a product to get a job done and it doesn’t do the job well, then you have to take it back, or throw it away, or give it away, or repair it, and go out and find something that will do the job well. And if that doesn’t do well then you have to test it, and talk to your friends…

When you find yourself buying a product and find that it doesn’t do the job well, it is very costly to find something that does it well. And that’s the reason why it can be so profitable if you organise around a job to be done: because customers will be delighted to pay a premium price for your product because the alternative – of something that doesn’t do the job well – is very costly.

Clayton Christensen – Where does Growth come from? (Talk at Google)

Clayton Christensen: Jobs to be done (1)

Here’s a great insight from Clayton Christensen: people don’t buy a product or service because of abstract needs, but rather when they have a specific job to do.

So people don’t use public transport, or cars, or taxis because they need transportation in general, but when they need to go and do something specific at a specific time.

All people need to be healthy, but they only consume medical services when they notice that they are sick, or hurt, and have the ‘job to do’ of getting better.

All people have an abstract need for education of one sort or another at all times, but they generally only seek out and pay (in some combination of money, time and effort) for books or teachers or schooling when they have a need or want for a specific thing.

You can watch Christensen’s famous (and funny) example of what people “hire” MacDonald’s milkshakes for in the video below.

Benefits of thinking about customer behaviour in this way include…

  • Better understanding of why people ‘buy’ what you offer – understanding the job to be done is for more helpful for improving your offering than general demographic information or market research into how you might improve your product because it’s more specific, focusing on the critical moments when people actually buy
  • More insight into who else might buy your product – instead of asking “who is similar to my customer?” you ask “Who has a similar job to do?” and “What other jobs does our product do well?”
  • Stability – Christensen points out that ‘jobs’ are far more stable than products and users. Julius Caesar, Queen Victoria, Winston Churchill and Steve Jobs, for example, all needed to get letters securely from A to B – but the services they made use of to get the job done were radically different.

No shortage of money

There is no money shortage.

It might not be where you’d like it, and there might not be people lining up to give it to you for whatever you think it would be well used for… but there’s plenty of money.

Whose money?

It’s usually best if the money comes directly from the people you’re serving – call them customers, clients, partners, or even beneficiaries. This gives you one set of people to focus on*, one main audience to talk with and listen to, one set of incentives driving what you do: meeting their needs and serving them better.

Changing the market

It may be – especially if you’re running a non-profit – that the direct consumers of what you offer don’t have the money to buy it in its current form. In this case you have a few options:

  • Do a better job of convincing your users of the value that you offer
  • Find ways to make it cheaper – strip your product down to the smallest possible offering that makes a difference to your customers, and sell that.
  • Work out the scale at which your original product becomes cheap enough for your target clients to buy. Then sell to people who can afford it now, and gradually move down the market as the product gets better and cheaper.
  • Develop a two-tier business model where one set of customers pays a high price for your product (possibly for a premium version) , covering enough costs to enable you to subsidise it for another set of customers. This subsidy can be direct (you sell the same product to beneficiaries for a lower price) or indirect (the premium product covers enough of your running costs that you can afford to sell a lower-spec product for a lower price. In the case of direct subsidies it can be difficult to draw clear lines about who gets a discount, and who pays full price.
  • Look for the other side of a two-sided market – this means that one set of customers is in some sense ‘buying’ the other set: donors ‘buy’ impact and transformation; advertisers ‘buy’ access to the attention of customers (see Google and Facebook); corporate-social responsibility departments ‘buy’ reputation and visibility. If the sound of this makes you uneasy, good – we need to be clear-eyed about this, even in the world of well-intentioned charity.



*Okay, your product might several distinct groups of people – but they’re all ‘customers’

Marc Andreesen: Edison vs Tesla (“Whose fault was that?”)

Brian: How do you talk to people though who have that chip on their shoulder, like, they look at someone like Elon as like, “Well, hey, that guy’s just as a showman!” Do you know what I mean? Like, not him specifically, but they almost feel like it cheapens what they do; like…

Marc: Oh, this is actually interesting. Elon actually used to tell us, it’s the Edison vs. Tesla thing.

So actually, in Edison’s day — so, you know, Edison is credited for phonograph, indoor lighting, all this stuff; and then Tesla was this guy, had all these super genius, like, there’s this huge debate over AC vs DC electricity, and there’s an ultimate power grid that we could have that runs a DC that’s much better, and Tesla had that idea — and there’s this whole thing.

And so there’s this kind of engineer archetype of like Edison was the showman, he was a mediocre engineer but he was the showman. And Tesla was the unappreciated genius. And it’s a perfect example of this. It’s like, okay, well, whose fault was that?

Brian: Right. Right… you’re saying it was Tesla’s fault.

Marc: Like, what kept Nikola Tesla from like — I mean, the stuff Edison did to go promote his stuff, like, it wasn’t that — it’s the same thing; it wasn’t that hard to figure out. There were lots of people in that era that wanted to finance, you know, as an example, Edison raised all this money. There were lots of people who wanted to finance electricity. I mean, talk about like a growth market.

Marc Andreessen on The Moment with Brian Koppelman*

*Full transcript here.

DriverlessSpecodile (The DC Podcast Spec)

This is an attempt at speccing the DC podcast using questions from Seth Godin’s This is Marketing.

1. Audience: Who do I seek to serve?

What is the world view of the audience you’re seeking to reach? 

The Driverless Crocodile podcast is for people who believe that the world can be better – in big ways or small – and they have a responsibility to do or make something to make it so… and want to. It’s for people who believe that tools and ways of understanding help.

I will focus on people who want to hear and read about ideas and tools to help them make change happen (build the future), and to learn from other people who are doing similar work – people not necessarily much further along in the journey than they are.

What are they afraid of?

Probably, like me, they’re afraid of not making a positive difference, not being able to gather people to their vision, or not being able to find a sustainable funding model for the work that they do. They might be afraid of what will happen if people like them don’t take action to change our trajectory.

2. Purpose: What change do I seek to make?

What change are you seeking to make? 

I’m seeking to make more positive change happen then otherwise might be the case. I hope to do this by:

  1. Sharing a vision of the world as it is and of the possible (the Steve Jobs thing) so that people believe they can cause change (“if these people did it, I can”)
  2. Articulating values that they probably already have – to strengthen values by talking about them, justifying them and possibly challenging them.
  3. To share tools, strategies, models that people will find useful and be able to apply, equipping them to build a better future.
  4. Start conversations and connect people who share this vision and values.

What story will you tell? Is it true? 

I promise that engaging with what I make will help you… turn the idea or desire for change that you’re mulling over into something real – or eliminate it as a possibility after trying it out.

How will it change their status?

My audience might be on their way to losing some types of status (wealth, position) on their way to gaining another kind – they may come to measure their own status in terms of vision, self-respect because they can make things happen and get more done, status from people who share their worldview and aims because of their contribution.

3. Mechanism and Ecosystem: How will it work?

How will people hear about it?

  • Existing readers of DC
  • Word of mouth – me to some friends, them to their friends (if it’s worth spreading)
  • Guests telling their friends – and then onto word of mouth
  • Perhaps some will share on facebook

What happens when people use it?

They listen in their podcast app or online… I need to look into the best way to share it.

How will they tell others?

Wherever they meet and talk about things with their friends

Where’s the network effect?

Hopefully though guests recommending other guests.

Where does the money come from? Where does it go?

My money, my time, to do this. Anything else (amazon links, sponsorship) is an unlikely bonus.

What asset are you building?

An ‘evergreen’ web of writing, links and recommendations that I would have loved someone to introduce me to 15 or 20 years ago.

4. Impact: How will we know if it’s working?

Are you proud of it?

That’s a good first check.

What change do you hope to see?

See above.

Where do we go next?

If it works, and it gets easy – up the tempo, find more interesting guests.

As powerful as a smile

Real marketing is built into what you do and why you do it. It’s part of your story, something that you do organically when your business is aligned with your mission and values. Kept promises, free returns, obsession with the details, returned emails, clean tables, and attentive staff – all of this is your real marketing.

Real marketing creates a deeper impact, leaves a lasting impression, and is as powerful as a smile.

Bernadette Jiwa – The Fortune Cookie Principle

Why do people come to you for the thing you provide?
What do they get? Why do they want it? How does it make them feel?
What makes them come back?
Do they tell other people about you? What do they say?

What do your actions / words and tone of voice / website / way you dress / your office / commitment to doing things well say about who you are and what you’re doing? Do they say the same thing?
For a non-profit organisation, do you smile at your donors and your clients in the same way? (you should)
Are you an example of these things for your team? How do you articulate them to the team, to new members, to partners?

DC Podcast: Spec-tacular (spec for a spec)

This is a ‘spec for a spec’ pulling together some threads from This is Marketing (‘The Simple Marketing Promise’, ‘Marketing in five steps’ and ‘Simple Marketing Worksheet’) and this page.

1. Audience: Who do I seek to serve?

What is the world view of the audience you’re seeking to reach?
My product is for people who believe…

I will focus on people who want…

What are they afraid of?

2. Purpose: What change do I seek to make?

What change are you seeking to make?

What story will you tell? Is it true?
I promise that engaging with what I make will help you…

How will it change their status?

3. Mechanism and Ecosystem: How will it work?

How will people hear about it?

What happens when people use it?

How will they tell others?
Where’s the network effect?

Where does the money come from? Where does it go?

What asset are you building?

4. Impact: How will we know if it’s working?

Are you proud of it?

What change do you hope to see?

Where do we go next?

In their hands

Make something people can use.

Put it in their hands.

See what happens.

If they’re eager to pay – attention, time, money – you’re onto something.

Watch them. Listen to them. Tweak it. Make more of it. See what they think.

If they tell their friends – and if their friends tell their friends – then you’ve got it.

What change do you seek in the world? Who are the people you seek to serve?

You’ve got it when they’ve got it.

You’ll know you’ve got it when you meet someone for the first time, and the thing you made is already in their hands.

A downhill slope (find others)

If you’re in a book group, social pressure is going to get you to read that book. The act of joining the book group is the hard part. Once you’re in the book group, the books are going to get read, because now you’re playing a game. It’s a game you’re enrolled in, it’s one you want to move forward.

The easiest way to start creating this game dynamic is to form a group. To find others, to find others and challenge those others to play the game with you. Because we all know that solitaire might be a little fun, but solitaire isn’t the kind of game we dream of when we dream of games.

We do better when we do it together.

Seth Godin – Akimbo – The Wedding Industrial Complex

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Make it happen. Find others. Say the words.

Bootstrapping the non-profit organisation Rule 5: Own your Assets

This is the fifth post in a series applying Seth Godin’s rules of bootstrapping (see also here) to building a non-profit organisation.

Build and own an asset that’s difficult for other people to reproduce

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This is an interesting one in the non-profit world, because an attitude of generosity – of wanting to see problems solved more than we want to build empires – suggests that we should welcome others working in our ‘market’ as allies rather than competitors.

But there’s an important point about attitude here – we should always be building assets, and the most valuable ones we can build will always be those that are difficult for others to reproduce.

These assets might be products – in our case, curriculum and reading books. They might be services – delivering teacher training.
They might be processes – the ways that the pieces of what you do fit together to create value.
They might be things like reputation, trust, and relationships.

Investing in building any of these assets – from building a physical product to making a spec or howto for a process, to training your team – is always worth the time – a gift to your future self.

Here’s a thought experiment that links back to this post from a few weeks ago. Imagine that each central piece of your (charitable) business model was widely available at low cost (what if you open sourced it?). In the absence of each piece, what about your organisation means that people would still want to work with you? How would your clients answer this? How about your donors?