Most founders protect their best-selling product like it’s the family dog.
Kenny Rueter shot his.
In 2015, he took Kajabi — a profitable, seven-figure software business he’d built from a backyard sprinkler toy — and ordered his team to build something designed to replace it entirely. Not improve it. Replace it.
That’s the kind of decision that gets CEOs fired. Instead, it built a $2 billion company.
I’ve spent enough years running marketing teams to know that the hardest calls aren’t about competitors. They’re about your own product. Kajabi’s story is one of the clearest examples I’ve seen of a product cannibalization strategy done right, and it holds lessons most executives never get to test in real life.
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From a Garden Hose to a Business Platform
The origin story sounds almost too simple.
Kenny Rueter built a PVC sprinkler toy for his kids. Neighbors wanted one. He and Travis Rosser almost went into manufacturing.
Then they saw the real opportunity: selling instructions as a digital course, not pipes as a product.
That pivot mattered. They weren’t chasing a market. They were solving their own problem first.
Building the course website exposed a bigger gap. Selling knowledge online in 2009 meant duct-taping together a merchant account, WordPress, a membership plugin, video hosting, and an email tool. Nothing talked to anything else.
Rueter and Rosser stopped thinking about their sprinkler idea. They started thinking about every other person stuck in that same mess.
That’s Kajabi’s actual founding insight. The product wasn’t a course. It was the infrastructure underneath it.
Building Demand Before the Product Existed
Here’s where the marketing gets interesting.
Kajabi didn’t launch with ads or a big reveal. They ran a whisper campaign.
They gave early internet marketing influencers — people like Frank Kern and Jeff Walker — free access to the software. In exchange, every course page carried a quiet footer link: “Powered by Kajabi.”
Click it, and you got almost nothing. Just an email signup and a promise to explain later.
That restraint was the strategy. Curiosity plus scarcity plus social proof from people your audience already trusted.
By launch day in October 2010, Kajabi had a waitlist of nearly 10,000 people. They hit a million dollars in annual recurring revenue almost immediately.
I’ve run plenty of product launches. Most burn budget trying to manufacture the excitement Kajabi got for free by letting other people’s success do the selling.
The Decision to Kill Their Own Product
Five years in, Kajabi was comfortable. Profitable, self-funded, no outside investors, founders coaching Little League on the side.
Comfortable is usually where good companies start dying slowly.
By 2015, Teachable and Udemy were gaining ground. The all-in-one promise that once made Kajabi special was starting to look dated next to newer, more integrated platforms.
Rueter made the uncomfortable call. Instead of patching the original product, he rebuilt it from scratch, with the explicit goal of making the old version obsolete.
This is the core of any real product cannibalization strategy: you stop optimizing what exists and start building what makes it irrelevant.
Most executives talk about disruption like it’s something that happens to other companies. Rueter aimed it at his own revenue line.
Funding Growth Without a Single Investor
The rebuild needed a launch mechanism, and this is where the marketing instincts really show up.
They offered early adopters a “Founder” plan: pay $997 a year, lock that price forever.
Simple offer. Clear incentive. No ambiguity about the deal.
It generated $3 million in two weeks. That funded years of development without touching venture capital.
I’d argue this is underrated as a growth tactic. A price-lock offer isn’t just a discount. It’s a signal to your most loyal users that their early trust gets rewarded, not punished, when you rebuild.
Turning Off the Ad Spend That “Worked”
By 2016, Jonathan Cronstedt joined as President, and the company ran an experiment that should make every marketing leader uncomfortable.
They were spending a million dollars a month on paid media. Attribution reports said it was working beautifully.
So they turned it all off. For a full month.
Growth didn’t move. At all.
That result told them something most companies never learn about themselves: their real engine wasn’t paid acquisition. It was product experience and word of mouth.
I’ve seen this exact scenario play out on a smaller scale more than once. Attribution models are confident. They’re also frequently wrong about what’s actually driving growth.
Turning Customer Success Into Marketing
Once Kajabi knew their flywheel was organic, they built marketing around amplifying it, not manufacturing it.
The Kajabi Hero program is the clearest example. Hit $1,000 in sales, get a t-shirt.
Sounds small. It wasn’t.
Users posted their shirts in a private community. That created visible, ongoing social proof, which fed straight back into the “Powered by Kajabi” footer strategy from years earlier.
The program scaled up — jackets at higher revenue tiers, plaques for million-dollar earners. But the mechanism stayed the same: celebrate the customer’s win publicly, and let that become your best advertising.
This is a subheading worth sitting with, because it flips a common assumption in growth marketing. Most teams measure success by their own revenue. Kajabi measured it by their customers’ revenue, then marketed that instead.
What This Means for Anyone Running Growth
A few things I’d take directly into a strategy meeting from this story.
Test your own flywheel. If you paused paid spend tomorrow, would growth actually stop? If yes, that’s not a marketing win. That’s a dependency you haven’t priced correctly.
Don’t get precious about your own product. The 2015 rebuild worked because Rueter treated his own software as a competitor. Legacy code doesn’t care how much revenue it generated last quarter.
Marketing and product aren’t separate departments here. The Hero program wasn’t a campaign layered on top of the product. It was the product experience, and it reduced churn because of it.
By 2021, Kajabi had raised $550 million at a $2 billion valuation, and its users had collectively earned over $2 billion through the platform.
That second number is the one I’d frame on the wall. Somewhere in that founder’s decision to bet against his own bestselling product is the actual playbook — not the t-shirts, not the whisper campaign, but the willingness to treat comfort as the real competitor.