Demand Curve - The Growth Newsletter #147

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The Growth Newsletter #147

Tasting awful & costing more, single opt-in, & stealing from competitors.

Welcome to all you growth-loving founders and marketers! 

I hope you all survived the drama from Sam Altman getting fired from OpenAI. Twitter hasn't been this entertaining in months. (More in News & Links if you haven't heard.)

And to all the Americans in the crowd, I hope you have a glorious weekend of turkey dinners, college football, and ecomm shopping sprees.

To everyone else, enjoy the quiet week and auto-responders.

Now for: Tasting awful & costing more, single opt-in, and stealing from competitors.

Let's dive in 🦃

– Neal

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1. Win by tasting awful and costing more

Insight from No Bullsh*t Strategy by Alex M H Smith and Alchemy by Rory Sutherland.

In the book Alchemy, Rory Sutherland talked about how one might compete against Coke. You might logically try to compete by doing:

• Larger can
• Lower cost
• Better taste

And you’d be laughed out of the room if you suggested:

• Smaller can
• More expensive
• Tastes awful

But that’s exactly what Red Bull did.

They created a new category that was completely unique at the time: energy drink.

Red Bull’s small size, increased cost, and weird taste were critical to its success:

1. For you to believe its potency you have to put it in a small can so people think that it’s so potent that it’s unsafe to drink a normal-sized can.
2. For you to value it, the "potent ingredients" must make it cost more than a soft drink.
3. And for you to believe it has those potent ingredients, it should have a weird medicinal taste (like Buckley’s “It tastes awful, but it works.”)

As Alex M H Smith says in his book, No Bullsh*t Strategy, the best way to compete is with "Contrarian Value"—find what all your competitors are fighting over and purposefully underperform on it so you can overperform in other ways.

Xbox and Playstation are in a brutal battle to be the fastest console.

To compete, Nintendo created the underpowered Switch allowing it to be played both at home and on the go. And it's now the 3rd most sold console in history.

When all the other soft drinks are battling over taste. Red Bull made theirs taste awful.

Ask yourself:

• What are your competitors battling over?
• What do you already suck at?
• What would happen if you sucked at it even more?

2. Give single opt-in a chance

Insight derived from Drew Price and Own the Inbox.

If there's a form on the Internet, it will be filled out by a bot.

Guaranteed.

And emailing these can hurt the deliverability of all your emails long term.

Double opt-in helps ensure a human clicked it, and hopefully a human who wants it.

BUT not everyone who actually wants the emails will read the confirmation email and click it. Even in the best of cases we're talking ~70% of people. Even if say 10% are spam, then that means 20% of people who want your emails won't get them.

Here's what we do:

• We use an email validation tool (Kickbox) to check if each email is deliverable, low quality, spam, invalid, and more. We only subscribe if marked "deliverable."
• We have an automated "win back" email sequence to people who haven't opened emails recently. If they don't open/click, they're removed.
• If a handful of emails bounce in a row, removed.
• We periodically go through and remove low-quality looking, or clearly test emails.
• We're also quick to remove if yahoo, hotmail, or aol.
• We make it easy to unsubscribe in every email so if someone got it and they don't want it, they can remove themselves.
• We let people configure which emails they receive from us.

We've run this newsletter for nearly 4 years, and our open rates are consistently 40-45%—which is considered very healthy.

It could be even higher with double opt-in, but we're willing to risk it for the biscuit with the strategy above.

3. How to learn from competitors' hard work

Insight from The Growth Guide.

What works for others is more likely to work for you. So it's time to audit your competitors.

The goal is not to steal directly from your competitor's, it's to learn from their success.

And I don't mean your direct competitors. As I said above, you don't want to risk looking too similar to them. Instead, you want to look at other companies that:

1. Target the same audience. Affluent parents. 20-year-old college guys. Hard-core programmers. You have to sell to each of them in completely different ways.
2. Monetize in a similar way. Freemium SaaS, a high-ticket services, and physical. You have to sell each of them in completely differently ways.

They do not need to sell the same thing as you. Instead, you want to see how they're capturing and converting the attention of your audience.

Go to Crunchbase and find companies that fit this bill—preferably ones that are larger and older than your startup as they're hopefully more sophisticated.

Next audit their:

1. Ads

2. Onboarding
3. A/B Tests
4. Content
5. Tech stack
6. Their social media

Read our Growth Guide for a step-by-step instruction on how to do the audit.

Why is all this competitive analysis work worth it? Four reasons:

1. You learn how your audience's attention is already captured and converted.
2. You learn common growth patterns and adopt them as your starting point.
3. You find great ideas you’ve overlooked.
4. You learn what the norms are, particularly for competitors’ ads and landing pages, so you can break them to stand out from everyone else—to rise above the noise.

That last point is key. I'll repeat it a lot.

News and links

News you can use:

• OpenAI's board fired founder and CEO Sam Altman. Then 95% of OpenAI staff threatened to quit. Then the board apologized and said they made a mistake. Then Sam took a job at Microsoft. Then Satya Nadella said Sam may return back to OpenAI. What on earth is going on.

• TikTok launched a tool to provide more insight into how ads drive conversions.

• Google announces update next month to child and teen ad policy language.

• Meta unveils Emu Video and Emu Edit, two new generative AI tools for video asset creation and picture editing.

• Google rolls out new AI features in SGE to boost product visibility & conversions.

• Bing adds AI-generation captions to some of its search result snippets.

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Something fun

From Robert Kaminski.

What did you think of this week's newsletter?

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See you next week.

— Neal and Justin

Neal O'Grady

Justin Setzer