If you’ve been around Facebook groups, podcasts or blogs over the past couple of years I’m sure you’ve heard the term “funnel hacking” being thrown around. There are a lot of people talking about funnel hacking like it’s the magic key that unlocks the seven-figure business kingdom overnight.
Spoiler alert: it doesn’t.
If you’re not entirely sure what the heck funnel hacking IS, let me break this down for you. Instead of using just online businesses as the example for this, though, let me use a more tangible example.
You probably know that I’m from Seattle. I was born and raised here. I went to the University of Washington and I’ve worked here professionally since I graduated from the University of Washington business school in the late 1990s.
Being from Seattle, I’ve watched the rise of Howard Schultz’s coffee giant Starbucks, as well as another player that you may or may not have been familiar with named Tully’s.
If you like coffee, you know all about Starbucks and you may even have a favorite beverage at your local shop. But what you may not know is that Tully’s basically ‘funnel hacked’ Starbucks when they first started, even if the founder of Tully’s didn’t call it funnel hacking back then.
Like Howard Schultz, the founder of Tully’s coffee, Tom ‘Tully’ O’Keefe was also from Seattle and saw the startup and growth of Starbucks.
In fact, O’Keefe was a successful real-estate developer in the Seattle area who was approached about leasing a space to Starbucks for a coffee store in one of his shopping centers.
That’s when a lightbulb went off in his head and O’Keefe realized no one was really competing with Starbucks even though the business was growing like gangbusters.
Funnel Hacking Isn’t a Magic Solution
O’Keefe, a coffee lover himself, decided it wouldn’t be hard at all to start a coffee business. So he developed a business plan, started Tully’s coffee and six months later, they were in business.
O’Keefe decided to steal the Starbucks model and make it just a bit better. His plan included things like ‘friendlier baristas’ as well as larger, more family-friendly coffee shops that included toys and play areas for kids, fireplaces and super comfy chairs. Kind of like the deluxe Starbucks you’ll see in some markets today, but I digress.
O’Keefe also decided to one-up Starbucks on the roasting. I can’t even tell you how many American Marketing Association meetings and other networking events I went to where someone from the Tully’s corporate headquarters was there telling us how the Tully’s coffee was so superior because it was roasted in small batches and not burnt.
O’Keefe was trying to tell consumers that the coffee brand and taste they had come to love was poor quality and burnt-tasting, which doesn’t go over well with a loyal fan base.
The final bit of ‘funnel hacking’ that Tully’s did was they started off by putting a Tully’s location across the street from a Starbucks, basically following Starbucks around to prime locations.
All of this resulted in a brand that looked great from the outside, but on the inside it wasn’t working.
Here’s the thing. People just didn’t see enough of a difference between Tully’s and Starbucks to be convinced that Tully’s was better. It seemed like an off-brand Starbucks. It was nice, but it wasn’t what we were used to. The drink names were different, the drinks tasted a little different, and it just wasn’t a difference that was meaningful enough to stick.
But that’s what happens when you try to become a carbon copy of someone else and also try to convince your audience that you’re better. It just doesn’t work.
Instead Tully’s would have been better off to innovate. To come up with something exciting, new and interesting instead of just ripping off Starbucks.
As Tully’s tried to compete, they found that all they could really do was reduce their price and try to be just a little bit less expensive than Starbuck. This sucked the profit out of the business and eventually left Tully’s bankrupt and in ruins.
So when I hear people giving advice that all you need to do to become the next online millionaire is to funnel hack your competition, I know without a doubt that they haven’t learned any business lessons at all.
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