The Product Equation

Hi, 

This week, I spent 3 days building a Murphy bed. And let me just say, it was a battle. With only one trip to Home Depot, I am proud to say that it is done, and hasn’t fallen apart. 

But it did get me thinking, it would take a lot for me to get a new Murphy bed. It could be the best deal in the world, it could be the coolest looking item, but I have already invested so much energy into the one that I already have that it would be hard to part ways. 

There are two ideas that actually support my feelings: The Ikea Effect and the Endowment Effect.

The Ikea Effect essentially states that something that you build will be more valuable to you than something that was premade. 

The Endowment Effect on the other hand, is the idea that we overvalue the things that we already have when we are trying to replace them. The classic example of this is a mug, it will take a mug that is exponentially more expensive than the mug you already have to be seen as worthy of replacing it. 

It got me thinking, why is that? But more importantly, how can I spin this into a newsletter? 

Good news for you, I have the answer for the second question. 

Let’s dive in. 

When I was jotting down my notes for this week, this idea of Business nouns kept popping into my head. 

A business noun is pretty simple: Persons, Places, and Things. 

Nothing quite new yet. 

The Persons: Employees, Founders, Customers, Contractors, etc. 

The Places: Retail Store, Offices, Website, Popup, Online Community, etc. 

The Things: Items or Services… no etc. 

I very intentionally called it an item rather than a product. 

From my perspective, every business has a product, but not every business sells an item or service. 

For something to become a product an item or service must be paired with other business nouns to create the product. 

When you create a pairing of all the business nouns that creates an experience around the item that turns it into your product. 

Item + Experience = Product 

So why create an equation for what a product is? 

People are not creating the endowment or Ikea effect with items, they are being created through the experiences that they are having with the items. 

It matters very little what the actual item does, what matters very much is the things that you have done with the item that have created lasting memories. 

I will give you a business example. 

In 2021, we ran a Kickstarter for our second journal: The Istoria Magic Academy. Over 30 days, we raised $302,000. Once all the orders were in I tallied up all the different items that we would fulfill. It was 44,000 items.  

These items ranged from journals (obviously), enamel pins, pens, maps, and plushies. Ultimately, we only sold about 12,000 journals. So what was the point of the other items? Upsells?

There was definitely an upsell component to it, but the real juice was connection. We created items that would round out the experience with the journals. The enamel pins could go on hats or bags and be brandished as badges of honor. The pens could be wielded like a sword that was a physical embodiment of heroism. And the plushies, well people love plushies. 

You see, for that Kickstarter, we live-streamed, talked to our heroes (customers), and focused on the experience of backing the Kickstarter. 

At the end of the day, journals are just glue, paper, and ink. But for just a moment, we were able to show people that they could be much more because we didn’t stop at the item, and built a product. 

I will leave you with this famous Maya Angelou quote, “At the end of the day people won't remember what you said or did, they will remember how you made them feel.”

Toodles, 

Kyle