Why Most Startups Fail to Scale (The Buyer Psychology Behind FOMO, Viral Growth, and Outrageous Startup Growth)

23:15I'm going to try to make it up on my own. And they're trying to think about their buyers like themselves. And I would say that's actually probably not the way to do that. Like the data doesn't lie. Emotions do. So in order to create this manufactured decision engineering, you got it's trial and error and actually watching and controlling that trial and error and and and then seeing what's actually working. So it's quite the process.

23:48Colin Hodge:Yeah, you need to let the data drive because even the best behavioral scientists and experts in this field, they can't predict this stuff with high accuracy. They can get a better hit rate than just throwing stuff at the wall. Don't get me wrong. But you're still going to have to test it with real data and experiment. And that's part of the fun because we learn new things about how complex our decision environments are and the way that we actually move along a user journey. There are hundreds of influences that could derail them or get them on the right path. And a lot of them just come from their everyday lives.

24:27Colin Hodge:So, you know, a lot of people are using these products when they're distracted, when, you know, their kids or their spouse or, you know, something else is trying to grab their attention or they're not feeling well. So they only have two minutes and then they stop using it. All these different things are part of who they are as a person and understanding that psychology and what they're going through can really help you to keep nudging them along the right path. yeah it's interesting as i'm hearing you talk i think to myself i'm it the businesses know this right and they're doing this and we know the big corporations are doing this let's just say implementing psychological uh triggers and moments to allow or to have us consciously or unconsciously make decisions where else is that happening in the world it's everywhere It's absolutely everywhere.

25:24And that's one of the crazy things that I realized writing this book is these psychological influences are in our everyday interactions.

25:32Colin Hodge:When you go to the cafe, I give an example, but you basically notice there are dozens of these influences that determine whether the cafe is going to be popular, whether you are capturing all of the foot traffic well, whether people are ordering something quickly on the menu and keeping the line moving, how long the line is, all the pricing elements, the seating and the structure of the cafe. So all this stuff is surrounding us and being able to start to recognize them, you also become a little more immune to the influence. Now, not completely. I am still very susceptible to this stuff. But at least now I can recognize more often when somebody is trying to create that sense of urgency, when I'm being nudged toward a lower value but higher priced item, stuff like that.

26:30I couldn't agree more when you're talking about that. I remember I had a friend who used to work at P &G. The schooling he went through to learn this stuff, you can't even find it. It was swore under secrecy. When you walk down the drug aisle, things are not just there by chance. Everything. You just said everything. Even we all know in grocery stores too. That's what they say. always shop on the outside of the grocery store never in the middle right the middle is all the box food but that's designed for a reason there's a reason they have the bread in one corner and the meat and all the way in the other corner because you have to cross the entire place i just think it's so interesting because when i hear that right i go where where do people learn this like how do how does a business owner how can we in our in our businesses uh today implement this stuff go hire the experts so that we can learn this because we know it's there and we probably naturally do it as business entrepreneurs ourselves without even knowing it because it's just kind of ingrained in us but there is there's an art to this there's like what i can tell is like there's a deep understanding a very deep understanding that gets very complex because there's a lot of nuances and what i love what you said was so true even this professional human behavioral scientists, they can predict a little bit better with a little more accuracy of what could happen, but they can't always predict 100 % because you can't predict humans.

28:07Colin Hodge:Yeah, exactly. We have so many different influences on our decisions, on our behavior, that it's impossible to predict with 100 % accuracy. So as we learn more and more of these psychological levers and cognitive biases, and we start to shape their environment, we can nudge them to a higher success rate, but we won't always get it right. I give an example in the book of an expert who is working with a product and they said they ran about 20 experiments and only one out of 20 was success. So that gives you an idea of like how hard some of this can be sometimes. Now, of course, there's always low-hanging fruit in some areas.

28:52Colin Hodge:If you've never done any of this, I could come in and work with somebody and I could say, all right, I'm pretty sure we're going to have at least a 50 % hit rate. It's not going to be 5%, 1 in 20. It's going to be like 50%. But just to give you an idea, like sometimes these things are so hard to control and so unpredictable. But where the value is, is you're not just randomly doing it and frantically copying what you see from competitors or chasing what the latest trends are. You're actually approaching it from a fundamental understanding of how do you do this and applying the next ones that are best for that area.

29:28Colin Hodge:And so I break down, I give a table about like, all right, if you want to do, if you want to optimize your pricing, here are the top five different effects that I suggest trying for that. Because I want people to be able to reference this and be like, all right, I have a problem area, something I want to do better on. Here's where I start with that. And of course, you can always go deeper. But that's the starting point. I love it. Like the basics. I'm not going to say one-on-one, but like some of the starting points, basics. Yeah. And this is all in your book right now. Yeah. So all in the book.

30:01Colin Hodge:And what I love about writing the book is I had to learn this stuff a lot more deeply because I had absorbed a lot of it, but I didn't know all the right labels for everything. And so now to understand the label, understand better psychologically why that effect is working and not just do it from all the thousands of experiments I've run over the years, that That was so illuminating because now I can have a framework and a language to say, all right, we're working on this new feature. Let's start to let's apply these three things. I want to make sure that users are feeling like, you know, we've given them a gift and they want to reciprocate or I want them to feel a bit of FOMO that this offer is going to go away soon.

30:43Colin Hodge:Stuff like that. Or urgency or urgency. Yes. Let me ask you this. As you're writing the book and you're doing this deep study, what was a couple of things that scared you when you read it?

31:02Colin Hodge:Honestly, some of the scary stuff is how much of this you can recognize on social media right now. So social media is just full of all of these triggers. As an example, almost every viral video has some sort of curiosity hook. One of the common ones are open loops. So they'll open a loop about some topic. Your mind naturally wants to close that loop and find out what information are you missing. And so you stick to it and you stay tuned. We see this even in the basic stuff. One of the oldest elements of user experience design is a progress bar. So progress bars are actually open loops. you know it's partially filled we have this desire to see it completely filled but social media is scary because they've gotten so good at fitting it to the specific triggers and types of content that are interesting to us as an individual that it hooks us and we just keep watching and keep swiping and it knows okay it might not label it this way but it knows for instance if you work if you respond very well to open loops and teasing of information in the hook versus some sort of contrast or surprise effect in the beginning.

32:25Colin Hodge:Those are the sorts of things. So social media is scary in those ways. And I hope that more and more of us can recognize these effects being used on us and maybe implement some self-controls, design our own environments to not be as addicted to things like social media that aren't always good for us to be on for hours on end yeah i i you're talking about this is not what this podcast is but you are talking about something that's really important for me especially because i even have kids and i i look back and see how addicted i probably was on it i think you get older you realize it's not real right like it's it's yeah it's not real it's not uh but you think it is right and you make it your whole world but it's interesting because i i have a social channel myself and everything i'm going to say you're going to go yep but i think it's i think it's worth saying because it's actually a live example and i have no problem saying it so we we run this again a curiosity hook we have we have a format called the here's how you know format so here's how you know somebody's an artist or here's how you know you're going to win or here's and we and i tested titles myself i tested all these different titles and I started realizing and seeing something that actually scared me as a human race made me realize, yeah, that's, that's what psychology is.

33:42But it was like, damn, I wish it wasn't this way. So what I found was if I said, here's how, you know, something negative. So if I said, here's how, you know, you're a negative, right? Whatever it might be, wouldn't go viral because nobody wants to hear anything negative about themselves. Right. If I said, here's how, you know, something positive. Right. So here's how, you know, you're happy. Right. That one, that one went pretty quite, you know, quite viral. But if I would have said, you know, here's how, you know, you're, you're ready for the next move. Here's how, you know, you're on your next, you know, next step in life, man, it went okay.

34:23But what went viral and it was scary and we've tested it is when I say, here's how you know somebody is hurting. So it has to be about somebody else and negative. Here's how you know somebody's a narcissist. Here's how you know they're going to lose everything. Instead of here's how you know you'll win. Here's how you know somebody will lose. We'll go viral.

34:51Colin Hodge:that's a really interesting insight and you're right it is a little scary because it it says a lot about maybe our our mindset our natural openness to hearing about negativity from other people but not ourselves or our mindset that i look at it as the mindset that people are and we know this we're addicted to like our brains are more addicted to negative than positive that we know i should say we know it's read a couple marketing books and you'll learn that pretty quickly uh but then it goes to a deeper level it's one thing about being addicted to negative it's it's being happy or wanting to watch or or or spending more time watching someone else suffer than even yourself win that's where i go we got we got a problem in this world there is there is a psychology problem and and and you said it best like social media is not helping that So as you went through your research, where it is the research that says that we can turn this around?

35:54Where's the positive side of this research that says, hey, you know, and I love what you said. This stuff is powerful. This stuff is very powerful. And those psychopaths, I'll call them what they are, who understand this stuff at a deep level and know how to manipulate people and use these for their own personal gain, which happens every single day. It's scary. How can people use this for the good? And for the impact and actually be able to change people's lives instead of just take, take, take, take.

36:23Colin Hodge:Yeah, a key approach that I encourage and we try to use is it is powerful. But if you're helping your customers along to some level of success, you're focused on their success, not your business success. Then you're doing it in an ethical way. Now, you need to have the cojones to align those two things and say, we don't put profits first above customer success. But I really feel that the most sustainable, long lasting and valuable companies are those that focused or refocus at some point on the customer success and making them happy in some cases, but at least better off, leaving them better off than when they started.

37:11Colin Hodge:And so that's the ethical way that I encourage people to do it. And as long as they're making progress toward that, then you can use lots of other nudges to do that. And I find one of the biggest impactful ways to do this is to actually, you know, you can do net promoter scores, you can do that, but you want to find what is your North Star metric and for that user success. and you want to be measuring, is what we're doing actually increasing that? Are we getting on a better path for those users? I love what you just said, the North Star metric. For businesses or people listening that don't understand that, what does that mean, the North Star metric?

37:55Colin Hodge:That is the most important metric that your whole team can look up to, just like the North Star in the sky and use it as guidance of the company's success and the direction that you're trying to get your customers to. So for some companies, we run a dating app, right? So for us, we do this with back and forth conversations people have within their matches. And so that's our value, our measurement of the value we're giving our customers. and as we consider things like we run a new a b test and for turning off a feature or adding a new feature how does it affect that metric that's what we're looking at but every sort of business can have different ones and you can change the north star metric as your business changes or as your priorities change but you definitely want to align everybody it's the the best measurement of the most important aspect or action that's going on with your product.

38:56Interesting. Because just when you're talking, you said a couple of times, you're running this dating app. And I thought right away, I was like, oh, the metric I would assume would be how many matches or how many people got married or something like that. But yours is X amount of conversations back and forth. Because what I learned from you earlier today, that is the magic moment. Is that what I'm hearing? You guys figured out your magic moment is when a couple or two people exchange back and forth conversations. So I'm not going to ask because obviously it's probably IP, but we know as soon as people, two people have X amount of conversations back and forth, we've created a magic moment where they're going to stay likelihood of staying on the app, which means the likelihood of them connecting with more people and the likelihood of them actually getting married.

39:51Colin Hodge:Yeah, yeah, exactly. So we're a casual dating app, so we don't tend to measure for marriages that happen. They do happen from our user base, but that's not our top goal. So yeah, we do measure with the conversations back and forth. If you just, you know, at some point we did just try to optimize simply matches, right? And that is important. It's a preliminary step to the later Northstar metric that we're using here. But at some point you realize that's not enough, right? A match without a conversation is not very valuable. It's more valuable than getting zero matches, but it's not very valuable.

40:32Colin Hodge:And so we wanted to, you know, keep evolving this. And like all of the stuff in user psychology, it's an evolving field and your product is going to evolve. And so right now I could take a look at our own marketing, our own product, and I can probably find dozens of things that I would say, that's probably an area that is ripe for improvement. We could try to run another experiment here. So this stuff is never finished. But the beauty of it is when you're always growing, you're always improving stuff, then you can still keep coming back to this well of user psychology because it's so deep and so rich with potential.

41:12I love it. As we come to an end here, I mean, I definitely want to get the book. Where can people find your book?

41:18Colin Hodge:You can find the book anywhere. It's on Barnes and Noble, Amazon, bookshop.org. It's in some local bookstores. And I, you know, you can find it on my website, ColinHodge.com. And I want to leave with one extra bonus tip, if you don't mind. I was going to ask you, what is one last thing that we need to know about psychology, business, connection, whatever it might be? This is a fun one. So this is a good tip. If you're ever going out to a restaurant or a wine bar and you're on a date or you're in a group, they want you to buy a specific bottle. And so the number one mistake to avoid is never buy the second cheapest bottle of wine.

42:05Colin Hodge:The reason is they price that to try to, they use anchor pricing. And so they have a higher anchor price and the cheapest bottle, which is the lowest anchor. And they make that second cheapest bottle appear like it's a reasonable compromise value. But it's not. Their markup on that is much higher. And you're getting about the same quality usually as the cheapest bottle. so avoid that second cheapest bottle and go for the one higher or the cheapest bottle because they know we're all scared of looking like cheapskates okay oh we're gonna stay here for a second because that's interesting because i want to know that site i'm more interested in that psychological trigger of what's the fear because i know there's a there's a psychological term for sure the the fear of of looking cheap but that's attached to something even deeper uh so i just want to make sure people understand this you're ever got the restaurant and you're opening that that wine list if if you want to look cheap go to the first one don't buy this i'm going to probably say the second or the third one because they're going to be the same comparable wines or whatever it is as the first one uh but it's okay to go to five six seven eight exactly yeah and i talk about in the book i label all of on the sample wine menu i label the effects they're using and how they're affecting your decision process.

43:30Colin Hodge:So, you know, that compromise effect is very powerful and we're avoiding the identity hit, the ego hit that we would take in that judgment as a cheapskate if we're on a date or in a group. So that's the fear is fear of judgment, fear of, well, frankly, having an unsuccessful date, whatever it is. Yeah, no, I think as you were saying, fear of judgment or the fear of looking bad, which then becomes an internal psychological trigger of something that's happened in the past because people don't want to feel bad or they don't want to feel or not look good or look cheap, whatever that might be. So we'll go for the second.

44:10We'll go for the third. It's funny because I think I've heard this and I probably still buy the second or third bottle sometimes. It works. It works. It works. It works. Well, Colin, I love it. for any of those that want the book, they will definitely be in the show notes and it's definitely going to be on YouTube. So again, we started it off with this and I'm going to end it with this because I think it's, it's, there's no joke here. Congratulations to get a book. International bestseller is no joke. It's a huge accomplishment. And to be part of that today, I think is it's awesome. And I can't wait.

44:43And I'm going to tell everyone, you probably need to go read this book. If you're in marketing, you're in sales, you just want to even learn how and what's happening in the world and how it's being used against you. This is a defense mechanism. This is a defense book for you to protect yourself, to protect your own happiness. Get the book. Colin, welcome again. And thank you so much. And I can't wait to see where this goes.

45:07Colin Hodge:Thank you so much for having me. This was really fun. Cheers. Thanks.

45:17you