How To Think About "Sales" (And Why Most People Underestimate It)
A nugget from Peter Thiel
Hello Friend!
In today’s edition, I bring you a nugget from Peter Thiel’s book “Zero To One”.
He explains why most people underestimate the role of Sales, the necessity of an effective distribution channel (for business success), and how to think about sales/distribution.
👤 Doer
💡Nugget
✦ Peter Thiel:
Sales works best when hidden. This explains why almost everyone whose job involves distribution—whether they’re in sales, marketing, or advertising—has a job title that has nothing to do with those things. People who sell advertising are called “account executives.” People who sell customers work in “business development.” People who sell companies are “investment bankers.” And people who sell themselves are called “politicians.” There’s a reason for these redescriptions: none of us wants to be reminded when we’re being sold.
The most fundamental reason that even businesspeople underestimate the importance of sales is the systematic effort to hide it at every level of every field in a world secretly driven by it.
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It’s better to think of distribution as something essential to the design of your product. If you’ve invented something new but you haven’t invented an effective way to sell it, you have a bad business—no matter how good the product.
At PayPal, our initial user base was 24 people, all of whom worked at PayPal. Acquiring customers through banner advertising proved too expensive. However, by directly paying people to sign up and then paying them more to refer friends, we achieved extraordinary growth. This strategy cost us $20 per customer, but it also led to 7% daily growth, which meant that our user base nearly doubled every 10 days. After four or five months, we had hundreds of thousands of users and a viable opportunity to build a great company by servicing money transfers for small fees that ended up greatly exceeding our customer acquisition cost.
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Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true. No matter how strong your product—even if it easily fits into already established habits and anybody who tries it likes it immediately—you must still support it with a strong distribution plan.
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Poor sales rather than bad product is the most common cause of failure. If you can get just one distribution channel to work, you have a great business. If you try for several but don’t nail one, you’re finished.…
The Distribution Question: Do you have a way to not just create but deliver your product?
💭 Thoughts
I think this is the cool thing about being a Content Creator—the Content is simultaneously the Product AND the Distribution!
As Alex Hormozi said “It is one of the unique things about the Media Business — How you market the product is also how you fulfill it.” (source)
So being a Content Creator would fit Peter Thiel’s advice of having the distribution to be something essential to the design of the product. Besides, I can build things (such as this Newsletter) which are interesting to the viewers of my YouTube videos, and promote it on my YouTube Channel.
For every text post I upload into YouTube promoting this Newsletter, I get around 100-200 new Subscribers, so I think the YouTube Channel is also working as an effective distribution channel for my Newsletter!
Of course, the Newsletter will only be “financially successful” if I’m able to monetize it in the future with sponsor ads. Otherwise it will remain mostly as just something super fun to do for its own sake, as a way for me to “soak in” the best ideas from the top Doers, and a way to build relationships with other like-minded people (with the occasional donation or affiliate marketing income kicking-in).
Today’s edition is brought to you by Shortform - The platform that I love using to get nuggets from Books!
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The mark of a great non-fiction author:
“It is my ambition to say in ten sentences what others say in a whole book.”
-Friedrich Nietzsche
💥 Stuff I Loved
Wishing you a lovely weekend!
Julio xx
P.S. If you liked this article, you'll definitely enjoy my free 80-page ebook. It’s packed with 23 big ideas (from top influential doers and entrepreneurs) to become better, richer and wiser. Download your copy here!