Sales Happen When Buyers Fear Missing Out
ROI (and I) are naïve
Sales don’t happen when benefits exceed price. I did not know this. Here’s what I learned.
I started this newsletter to incentivize me to finish Tidy First?. It worked. The prospect of losing a paying subscriber because I couldn’t be bothered to write one more chapter this week was too much to bear. So I wrote. And I finished the book.
Along the way I got caught up in the turbulence & eddies of the newsletter revolution. The top newsletters were earning life-changing money for their authors. After a slow start I was earning life-modestly-enhancing money. How far could this accidental business take me? (Previous reviews of my progress towards a sustainable business are here & here.)
Goals
To review, my four financial goals are:
Predictable revenue exceeds fixed expenses. “Predictable” in this case means my Mechanical Orchard salary + newsletter subscriptions.
Newsletter revenue exceeds fixed expenses. I love working at Mechanical Orchard but it would still feel good for employment to be a choice, for my own business to be sustainable.
House & retirement. Newsletter income exceeds fixed expenses by enough that I can buy a house & be saving towards retirement.
(This is an asset goal, not an income goal) Savings exceeds predicted future needs. I never have to earn another dollar.
Progress
Here is my newsletter revenue to date:
Before December I had a revenue stream that was nice but didn’t address my financial goals. When I announced the price increase in January, revenue jumped. People (like you) who had been reading but weren’t paying now signed up to avoid paying more later.
That was a great month, I can tell you. Money & subscribers were rolling in all day. If every month was like that, I would be able to devote more time & energy to ideas & writing. Goal #1 was in sight. The growth wasn’t sustainable.
The smaller blip in March was my 30% off birthday sale. Took me closer to goal #1. However, even though my churn numbers are smaller than average, without something driving new paying subscriptions, revenue is going to drift downwards.
Okay, so that’s goal #1. How close am I to having a sustainable business?
At this scale I don’t look so close. I’m not almost there, I’m a third of the way there. For further perspective, here are goals 2 & 3:
Ouch
Relying strictly on newsletter revenue to reach my financial goals doesn’t look like a winning strategy. I’m going to need other sources of revenue. The first Tidy First? book is selling well, but “well” for a technical book doesn’t move this graph noticeably.
I don’t know what to do with my business that would reliably get me through my goals. I’m going to do what I know how to do: write. You’ll see chapters on book 2, Tidy Together?, coming soon. I expect to take about 6 months to write the sequel. The theme of the book is “software design is an exercise in human relationships” at the team level.
I will also hustle other parts of my business:
Speaking. This used to provide significant revenue but collapsed during the tech downturn.
Consulting. Expensive for me to provide (time & energy) but rewarding & potentially valuable for clients.
Sponsorships & ads? Eww.
Education. Seems like the material on software design should be valuable to companies who want the benefits it provides. However, I have no experience selling to companies. Leading me to the lesson of this essay.
FOMO
I naively assumed that people transacted when value exceeded price. I blindly pursued adding more value to this newsletter. It sort of worked—revenue grew, just not at a pace that approached sustainability.
The big jump in revenue came not from a big jump in value, but from the prospect of losing out on the chance for the value of a paying subscription. I’m trying to apply this lesson as I think about corporate sales—not, “What is the ROI to the company? How can I improve it?” but rather, “How can I communicate what the company is missing out on by not getting better at software design?”
“Don’t miss out” goes against all my instincts. Having dealt with truckloads of negativity in my life I have made a consistent habit of positivity. (Several Thinkies deal in positivity—you’re missing out on a weekly Thinkie if you aren’t paying for a subscription.)
When I tell non-geeks about my revelation the consistent response is “duh”. Okay, maybe most everyone understands this about human motivation, but I sure didn’t. Now I’m trying to rewire my brain so I have a chance of creating a sustainable business.
It would be interesting to poll your subscribers and see how many are paying out of pocket vs how many expense the subscription through their employer. I would bet that the huge uptick in subscribers before the price increase were nearly all people who don't think their company would pay for your newsletter -- and I would also bet that a majority of your subscribers overall are paying out of pocket (despite the potential benefits to their employer). For that audience, $25/month ($250/year) is steep.
I subscribe to quite a few newsletters, to the point that I've had to cancel older subscriptions in order to afford (justify) subscribing to newer newsletters. Several writers I subscribe to live almost entirely on their newsletter income, but they live a near-subsistence life on that income (some other writers have jobs, so the newsletter is "pocket money" on top).
What we're willing to spend personal money on isn't always very rational :)
A couple huge, timely examples of FOMO driving sales: Fortnite and Taylor Swift.
Fortnite's in-game item shop is nothing but limited time offers, on the scale of 1 day (usually) to a few weeks (occasionally). When a beloved item returns to the shop, no one knows if or when it'll ever be back. Players who buy a seasonal Battle Pass get the opportunity to earn items that will never return once the season ends. And nearly all of these items are cosmetics, visible on a player's avatar in game, so they can be shown off for bragging rights.
Taylor Swift's merchandise shop is also chock full of limited-time items. When a new album comes out, there are limited runs of deluxe editions to collect, and limited runs of themed apparel, jewelry, posters, pins, etc. Every few weeks, there's a new limited-time offer, either something new or something returning. And everything is displayable: even the deluxe edition albums can be shown off in specially made display cases sold alongside them.