Below Water Level

Summary
I once took leaps of logic, leading to the most painful failure. At the end, I learned the first lesson in business.

About a decade back, I was at a company where our primary product was domain names. Domain names are bought as an annual subscription with the first renewal at the end of the first year.

Our renewal data showed first year renewals falling off a cliff. Most domains were not being renewed at the end of the first year. Those which did renew for the second year, usually stuck around for the subsequent years also.

Year after year, we used to struggle with the question: what could be done to encourage higher renewals at the end of the first year? The more the first year renewals, the better margin on each customer and higher payout on the Cost of Customer Acquisition. The cells in the spreadsheet stared back at me as an opportunity waiting to be addressed.

Someone came up with the idea of a simple web site designer which could bridge the gap between the domain name and the actual purpose for which they were bought, i.e. setting up a website. The solution was a no-code designer that would take inputs from the customer about their business or life. Then, generate a static, one page site, which we would instantly host on the purchased domain name.

The thinking was that domain buyers had to go through a lot of hoops to set up a website. Because it was so difficult to marry a domain name with a simple website, most customers just gave up after buying a domain name. A major reason why renewals fell off the cliff. We had some experience with this lifecycle. In addition to domain names, we also sold advanced site hosting and sophisticated web site design tools. We knew a gap existed. We simply had to plug it.

The idea was perfect. It had been a long-standing business problem, we would be rockstars to address it finally. The excitement of a new product, showing incredible output and a shiny new toy resulted in analytical caution being thrown to the wind.

After six months of investment and three months after launch, I had nothing to show for customer adoption, very few new sales, very low attach to domain purchases. We shut the effort down.

I learned that an opportunity is of value only if there is an underlying customer struggle. I had equated the opportunity shown in numbers with a real struggle that customers must be facing. A rookie mistake in hindsight. Customers did not see first year renewal as a problem. I took a leap of logic and the opportunity remained just that.