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GOLD! The Productocracy: How To Print Money (Legally!)

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MJ DeMarco

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Excerpt From: MJ DeMarco. “UNSCRIPTED: Life, Liberty, and the Pursuit of Entrepreneurship.”

Sprinkled throughout the Phoenix area is a quaint little pizza chain called Oregano’s Pizza Bistro. Each location is branded identically in an odd combination of Western rustic and mid-century retro. Hit the bar and you won’t find HDTVs airing sports, but instead old black-and-white films of yesteryear. Instead of LeBron draining jumpers, you’ll get Fred Astaire tap dancing or Jimmy Stewart galloping through Bedford Falls. And the Chicago deep-dish pizza? A diet-destroying, roll-your-eyes-in-the-back-of-your-head, delicious taste explosion. Yum yum.

Unfortunately, any Oregano’s visit must be planned with girded expectations. Hit any location near dinner time and expect a crammed, tortuous wait. I hope you’re patient or not very hungry.

Anyhow, the interesting thing about Oregano’s? I’ve never seen or heard them advertise. Nope, not once.

I’ve never heard a radio commercial, seen a newspaper ad or been mailed a “20% OFF” coupon from the mailbox SuperSaver. The point is they don’t flood the market with advertising because they don’t need to advertise. They possess entrepreneurship’s Holy Grail: a productocracy.

Whereas a meritocracy pulls power to the skilled, a productocracy pulls money to the value creators, businesses who grow organically through peer recommendations and repeat customers, compelled by a distinguished product/service not readily offered elsewhere.

The short-and-sweet definition? Your product contagiously sells itself. Take for example the cancer corollary, a pure productocracy. If you owned the cure for cancer, how long until you made a fortune? Once a small group is cured, your product’s growth would snowball by raves and recommendations. News organizations would stampede your office with billions in free publicity. The need to advertise would be like pissing in the Pacific Ocean to remedy a low tide.

FastlaneFramework.fw.png

Ultimately, a productocracy is what separates average, survive-the-month, zero-growth businesses who are ad dependent from ones who grow exponentially through an expansion loop, or network effects.

In my pizza example, the Oregano’s product and concept is so good that satisfied customers fuel the expansion loop, repeating visits and recommending the restaurant. One satisfied customer creates more satisfied customers, accelerating growth. One plus one equals three. A productocracy is like a raging inferno, whereas advertising is the gas, an optional accelerant, not a necessity.

A productocracy is also the key to attracting value-vouchers, as discussed in the money/value dichotomy. With a productocracy, all excuses and drama become meaningless. No one cares that you failed four prior businesses. No one cares that your teeth are jacked or your dad didn’t love you enough to watch your T-ball game. A productocracy is so impervious to externalities it can overcome a crappy location.

THE PUSH (BUY MY SHIT) VS. THE PULL (YOU WANT MY SHIT)
Every podcast and interview I’ve ever done happened because I was asked. I didn’t solicit myself in a cold email, begging to be interviewed. Likewise, I won translation licenses in the same manner: Publishers contacted me, asking to be a part of my book’s success. My book did the selling, not me.

Behind this phenomenon is a push-pull polarity—the genome that determines if your company is one that grows spectacularly, a productocracy, or one that struggles to survive. Companies held hostage by advertising chain themselves to a push. Companies that grow like weeds and enrich their founders, boast the pull.

Not long ago, whoever spent the most on advertising would win the sales. If the toilet leaked, you searched “plumbers” in the Yellow Pages and phoned the one with the biggest ad. If you ate a new snack cracker, you either saw it advertised on television or it was slotted favorably in the grocery store, where its colorful labeling caught your eye. Both required wheelbarrows of cash. To sell large volumes of product, corporations had to buy large volumes of advertising. Advertising pushes its product to the masses, pushing sales.

Conversely, the pull in the push-pull polarity is a productocracy where products or services have gravity. Customers come to you. Each time the product/service is used, its gravity strengthens. The essence of a pull is word of mouth, social proof, and satisfied users.

A great pulling example is Tesla Motors. In an earnings conference call, Elon Musk implied that his advertising expense (in 2015) would be none. And yet Tesla has sold billions’ worth in cars. How does that happen? The pull of a productocracy. If clients are recommending and sharing your products on social media, congratulations, your product is pulling. Which side of the fence your company sits on is determined by one thing only: the market’s reaction to your product.

When my book was first released, I don’t remember its first sale or how many sold over the first few months. I didn’t care because that wasn’t important. What was important was spotting gravitons, or instances validating a productocracy’s pull. I do, however, remember the first email from a stranger who said the book was life-changing. Then the book was recommended on Twitter by a stranger. Then I saw the same thing on Facebook, and it repeated. These gravitons symbolize a productocracy and its pulling DNA. It also meant I could commit to my book and endeavor for worldwide scale. Without pull’s gravitons, I’d be left with just an unappealing push. And that would make me no different from the other 900,000 books self-published that year.

No thanks.

Unfortunately, most companies operate from a push modality and rely on multi million-dollar ad budgets to maintain sales or marginal growth. Many of these companies start as productocracies, but over time their operations disintegrate into pushes, usually due to stakeholder demotions (more on that later).

Think about it.

When was the last time someone recommended a McDonald’s hamburger to you? Or a nice cold drink of Budweiser? Funny, eh? The truth is, I am suspicious of any company who advertises heavily because it suggests a product that can’t pull.

For example, I avoid both Geico and Progressive Insurance like a stranger on the Vegas Strip snapping porn cards in my grill. Both companies advertise as often as a Chihuahua barks, so anytime I see “Flo” or the gecko, I’m reminded to shut off the television. Despite the advertising, I've never been recommended either.

The same suspicions flow locally.

Ever get one of those thick envelopes filled with coupons mailed to you? The one stuffed with advertisements from nearby home remodelers, pizza joints, and carpet cleaners? Again, the businesses that advertise every week are foisting the red flag of product mediocrity. I simply don’t trust them, and I’d rather go online and post a query to the neighborhood Facebook group.

To test my theory, I conducted an unscientific study. By memory, I wrote down every company who heavily advertises on the radio. Since I listen to a lot of sports talk radio, this was easy. Whenever a company advertises so much that I can’t stop humming their commercial’s musical jingle, they become top-of-mind—but not favorably. So within a few minutes, I came up with five companies. I removed their identifying names (but kept the industry). Here they are:

1. AAA Flooring
2. BBB Air Conditioning & Repair
3. CCC Roofing
4. DDD Pest Elimination
5. FFF and Sons (HVAC)


So after compiling these companies, I logged onto Yelp and examined their user reviews. Mind you, I didn’t do any research into this; I simply wrote down my “top-of-mind” companies who advertised heavily. Here are the results:

AAA FlooringRated 1 star out of 5.
BBB A/C & RepairRated 2.5 stars out of 5.
CCC RoofingRated 2 stars out of 5.
DDD Pest EliminationRated 2 stars out of 5
FFF and Sons (HVAC)Rated 2.5 stars out of 5.

The average Yelp rating for these advertising behemoths?

A pathetic two stars.

And if you included many of the Yelp “not recommended” reviews, it would be in the ONE-STAR range.

Conclusion?

None of these companies are running a productocracy.

Read their reviews and some of their customers go as far as saying they’re running scams. They need advertising to survive. Newer, oblivious customers need to replace the dissatisfied ones—the push is the business.

And if advertising is needed to drive sales, sorry, you’ve got a product problem.

ENGINEERING A PRODUCTOCRACY: IF IT MAKES CENTS, IT MAKES SENSE

As a newbie entrepreneur, whether you live in Menlo Park or in Podunk Park, your number-one goal shouldn’t be sales, but a confirmation of a productocracy. A productocracy is entrepreneurship’s grease fire: exploding growth, filling wallets, and keeping spouses happy. Consider the CENTS framework the scaffolding for a productocracy and an UNSCRIPTED yellow brick road. In other words, if your business eventually makes CENTS, it makes SENSE.

The Commandment of Control
The Commandment of Entry
The Commandment of Need
The Commandment of Time
The Commandment of Scale

Excerpt From: MJ DeMarco. “UNSCRIPTED: Life, Liberty, and the Pursuit of Entrepreneurship.”
 

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TheRedShaman

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Excerpt From: MJ DeMarco. “UNSCRIPTED: Life, Liberty, and the Pursuit of Entrepreneurship.”

Sprinkled throughout the Phoenix area is a quaint little pizza chain called Oregano’s Pizza Bistro. Each location is branded identically in an odd combination of Western rustic and mid-century retro. Hit the bar and you won’t find HDTVs airing sports, but instead old black-and-white films of yesteryear. Instead of LeBron draining jumpers, you’ll get Fred Astaire tap dancing or Jimmy Stewart galloping through Bedford Falls. And the Chicago deep-dish pizza? A diet-destroying, roll-your-eyes-in-the-back-of-your-head, delicious taste explosion. Yum yum.

Unfortunately, any Oregano’s visit must be planned with girded expectations. Hit any location near dinner time and expect a crammed, tortuous wait. I hope you’re patient or not very hungry.

Anyhow, the interesting thing about Oregano’s? I’ve never seen or heard them advertise. Nope, not once.

I’ve never heard a radio commercial, seen a newspaper ad or been mailed a “20% OFF” coupon from the mailbox SuperSaver. The point is they don’t flood the market with advertising because they don’t need to advertise. They possess entrepreneurship’s Holy Grail: a productocracy.

Whereas a meritocracy pulls power to the skilled, a productocracy pulls money to the value creators, businesses who grow organically through peer recommendations and repeat customers, compelled by a distinguished product/service not readily offered elsewhere.
I'm going through another reread of UNscripted and I found this entire chapter (on productocracies) to be the most useful!

It makes complete sense. If you don't spend money on advertising it creates a forcing function for the business owner to put more value in the product (creation) as advertisement. Wheras those who spend alot of money advertising do not require to put as much value into the product. The concept is so fitting with the Chess piece of the Queen that you mention in the first book. A good marketing strategy can sell absolute garbage and still make money, however it could never be a productocracy as eventually (in todays digital world) reveiws will be posted and your revenue goes into the trash too.
 

elusive97

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Thanks for sharing! I haven't got the book yet but this is gold. I especially love the push vs pull concept!
 

The-J

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One of my favorite chapters in the book. I've had clients who simply weren't running these and were counting on me to get them sales on Facebook. It works initially, then we scale and run into problems. Maybe it even works for months, but then we stop getting the CPAs we want.

What happens then? We start over, turn down the ad budget... and sales slow to a trickle. Why? Because their repeat buyers are low and nobody else is finding out about the product without the advertising. Indicative of no productocracy.
 

Black_Dragon43

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@MJ DeMarco An interesting concept! I am going to order Unscripted, have not read it yet.

I see a slight shift from the original TMF here and its emphasis on marketing, to a much greater emphasis on product. Below are a few quotes from the original TMF:

"If you have an OK product (weak knight), poor customer service (drunk bishops), and incompetent people (a castle full of idiots), you can survive with a powerful queen. The queen is the most powerful piece in chess and it is also in business [...] Marketing is a game of perceptions, and whatever the perception is, that's the reality [...] Marketing and branding (the queen) is the most powerful tool in your Fastlane toolbox"

In the original TMF, at least in the way I understood it, the emphasis was on marketing from the start. It started with marketing - finding needs in the market and then fulfilling them by creating a brand and having a unique selling proposition that made you stand out. A large part of it was how to take your product and tweak it to achieve a unique position that would then allow you to be one step ahead of the competition by better marketing, better positioning, and better brand-building.

You gave the example of Coke vs Pepsi in the chapter quoted above with regards to branding. And how you always buy Coke, not Pepsi, pretty much regardless of the underlying product since Coke is a brand. And yet, Coke, as I'm sure you know, is an advertising business first and foremost. It's their marketing & advertising, not people recommending it, that has created its moat, and allows it to dominate the industry.

The chapter quoted, Chapter 43 (Build Brands, Not Businesses), was my favorite chapter of TMF, and part of the reason why I got into marketing many years ago. So it's been a huge influence on me, and I really appreciate your insights.

Now I agree that Coke is very different from Tesla. Tesla is a product-focused business, and Coke is a marketing-focused business. So you are right that Tesla is a Productocracy. But is Coke one? And if they're not, then do you need to be one to be Fastlane? Or are there rather two paths to the Fastlane? Does such a thing as a Marketocracy exist, or do we just call that a Brand?

I'd be curious to know your thoughts. Maybe I'm misreading this since I don't have the rest of the context (haven't read Unscripted yet - my understanding is built from the concepts revealed on the forum), but personally I notice a slight shift in your attitude with regards to the original chess metaphor in TMF, so I was curious if you have indeed changed your mind, and if so why?
 
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MJ DeMarco

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I see a slight shift from the original TMF here and its emphasis on marketing, to a much greater emphasis on product. Below are a few quotes from the original TMF:
Marketing is KING because marketing can sell a shitty product.
Marketing is KING because marketing can create the illusion of relative value.
Marketing is KING because marketing it anchors perceived value, what moves money.
Marketing is KING because it is the only thing that can dress a bad product.

There is no shift.

The only shift is the internet is rife with shitty products sold with great marketing. It is the foundation for fraud and scams. Perhaps that is why you perceive an emphasis shift where really, this isn't one .
 

BellaPippin

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And the Chicago deep-dish pizza? A diet-destroying, roll-your-eyes-in-the-back-of-your-head, delicious taste explosion. Yum yum.

Wait they sell deep dish or are you just reminishing?

Because speaking of deep-dish productocracy, Pequod's has had to open a bar next door for people who are waiting, which blows my mind. But I can't blame them either. They also have no need for advertising whatsoever.
 

rollerskates

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One of my favorite parts of the book! Over the last year, I switched from pushing my own handmade goods (whose market is at best, lackluster, due to competition) to branching out into finding a target customer in a few niches to sell vintage versions of what I used to make. And you know what? It rocks. I know a lot about a few niches related to my handmade days, and so I know what's trending in those areas. I've never spent a dollar on advertising but people keep buying because they are looking for what I am selling.

Also, as a bonus, I have come up with a plan to fast lane part of this, where I wouldn't have thought it possible, but it is and I can tie all the business parts together.

Granted, this first year of the target customer/product driven focus is very small potatoes, but I grew potatoes! And like we know, from The Martian, potatoes are perfect nutrition. ;)

Anyway, point is, make it a productocracy. It might take a while to figure out the customer and a niche, but it works.
 

Black_Dragon43

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The only shift is the internet is rife with shitty products sold with great marketing. It is the foundation for fraud and scams. Perhaps that is why you perceive an emphasis shift where really, this isn't one .
Well, I don't call lying about your product "great marketing" - that is fraud, not marketing as far as I'm concerned, and will get you in trouble sooner or later. Great marketing is when you're able to create a product that fills a need in a unique way, or when you're able to take an existing product and position it such that it delivers value. That takes intelligence. Lying doesn't take anything, because anyone can make up anything.
 

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mehul-x

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Thanks MJ !! A powerful concept as always
As per my understanding, the gist here is to concentrate on product and make it great / perfect or close to perfection (productocracy) and most importantly customers should be delighted after using it. Then you don't need to rely much on ads to promote your product, it will be 'pulled' by network effect. Though during the launch it's inevitable to market the product to grab first customers.

Comments are welcome to correct my understanding..
 
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MJ DeMarco

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Marketing is KING because marketing can sell a shitty product.
Marketing is KING because marketing can create the illusion of relative value.
Marketing is KING because marketing it anchors perceived value, what moves money.
Marketing is KING because it is the only thing that can dress a bad product.

There is no shift.

The only shift is the internet is rife with shitty products sold with great marketing. It is the foundation for fraud and scams. Perhaps that is why you perceive an emphasis shift where really, this isn't one .
Income store, eh?

Folks thought there was a productocracy. There was none. It was a scam in a nice suit.
Thanks MJ !! A powerful concept as always
As per my understanding, the gist here is to concentrate on product and make it great / perfect or close to perfection (productocracy) and most importantly customers should be delighted after using it. Then you don't need to rely much on ads to promote your product, it will be 'pulled' by network effect. Though during the launch it's inevitable to market the product to grab first customers.

Comments are welcome to correct my understanding..
Doesn't need to be perfect, just exceed expectations and skew value on a few variables.

Though during the launch it's inevitable to market the product to grab first customers.
Yup.

Some videos which should be linked to this thread...

View: https://www.youtube.com/watch?v=LE4iUdRu8sw


View: https://www.youtube.com/watch?v=Hr_sj4Cq6GM
 

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