Show Notes
- AWPCP
- Business Directory Plugin
- How to Buy a Website – An eBook by Dave Rodenbaugh
- Built From Ideas
Transcript
[00:00] Mike: This is Startups for the Rest of Us: Episode 156.
[00:04] Music
[00:11] Mike: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it.
[00:19] Mike: I’m Mike.
[00:20] Dave: And I’m Dave.
[00:21] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Dave?
[00:26] Dave: I’m doing pretty good Mike. How about yourself?
[00:29] Mike: Not too bad. Rob is touring Europe at the moment. So post MicroConf Europe, Rob and his family decided they were going to spend some time in Europe and we got almost enough episodes recorded in advance of his trip to cover. Dave I’ve invited you on to kind of bridge that gap a little bit, so why don’t you tell the listeners a little bit about yourself and why you were entitled to be here I’ll say.
[00:56] Dave: My name’s Dave Rodenbaugh. I’m a long time member of the Micropreneur Academy which Rob and Mike run of course. And I’ve launched a few products using what I’ve actually learned in there. Right now I am currently running two WordPress plugins. One is called AWPCP which stands for Another WordPress Classifieds Plugin and this is way for WordPress sites to add on classifieds into their content easily and quickly. I also run one for business directories, same kind of deal which allows people to add yelp like features or yellow pages directories to their current content. And since content just came these days, everybody wants something new and different on their sites.
[01:38] I also wrote an eBook about buying websites on Flippa which I think is actually been mentioned already in the podcast a couple of times and this is a means for bootstrapping your own business without having to build it yourself and that’s on howtobuyawebsite.org. So I’ve been bootstrapping my businesses for about three years now and I have an alter ego as a software consultant and enterprise java land. I haven’t quite weaned myself off that yet but it’s certainly my goal to do that. Rob, specifically told me that I needed to be off of consulting by next MicroConf although I don’t know exactly what the punishment is going to be. I’m trying to shoot for that right now. We’ll see how it goes.
[02:21] Very excited to fill in here this week for Rob. Those are quite some big shoes literally and metaphorically to fill. I mean have you actually seen Rob’s shoe size? I’ll try to be a good sidekick for you this round though Mike. I can’t promise my jokes are any better though.
[02:35] Mike: I’ll go into the typical updates that I usually give. The first on is for AuditShark. I’ve on boarded a couple of new users over the past couple weeks and had some direction conversations with them, trying to get to the root of what’s stopping them from paying for the products. Just doing the typical customer development stuff. And right now primarily looks like reporting is the issue. So they’re looking for some very specific reports that need to integrate into their workflow of how they’re going to use the product and how they’re going to integrate it in into their business. So it’s nice to see that the things that they’re asking for are all on the roadmap but the downside is those things that they’re asking for are on the roadmap. They’re just not quite done yet.
[03:13] I did manage to get the entire tutorial mechanism that Peldi had commented needed to be in place back at MicroConf Europe. I got that into the product. So that’s there now and people can use that and it actually looks really, really sleek. And by the time this episode goes live, I’ll be at the business software conference and I know a bunch of people who are going to be there, also be really good to touch base with those guys again.
[03:39] And then the last thing is that Corey Maass from thebirdy.com he’s launched a new venture aimed at helping people who have more money than time to get their products off the ground. He has a website that he’s put together called builtfromideas.com and it aims to put products from conception to MVP status in about four weeks. Obviously there’s a charge for this. It’s not like he’s doing it for free but it’s essentially a new consulting business that he’s putting together and it sounds like a great concept. I’m really interested in hearing how well it turns out because I talked to a lot of people who definitely have more money than time.
[04:11] And this could very well be a way for them to get a solid developer in place who they talk to, have the discussions with and kind of convey their ideas and bat it back and forth and really collaborate on it as opposed to the traditional true outsourcing model where you hand everything off and hope that what you give back is what you need to succeed with that product.
[04:32] Dave: That sounds pretty cool.
[04:33] Music
[04:36] Mike: So for today’s episode, last year at the Business of Software Conference Gail Goodman had talked about the long slow SaaS ramp of death and we’ve mention it a couple of times. But today we’re going to talk about some ways that you can short circuit that ramp. This is inspired by a blog post that somebody tweeted to me. We’re going to go through this blog post and talk a little bit about how you can jumpstart your SaaS business to bridge that cash flow gap.
[05:00] So within this article it talks about having a certain number of customers and trying to get the six figures whit it. If you just look at the raw numbers, if you have 200 customers each paying about $50 a month then you’ll have about $10,000 a month in revenue which gives you about $200,000 a year plus around $20,000 for yearly expenses, you can almost brute force your way to 200 customers with phone calls, trade shows, meet ups, cold call and that kind of thing. The problem is that getting there can be a painfully long and slow growth curve even if you do brute force that number.
[05:30] Brute forcing it, it can get you there faster but it is still going to take you a while. It could still take you months, upwards of 6, 10, 12 months in order to get to that point until you are self sufficient. So Dave, why don’t you talk a little bit about the basic cash flow problem?
[05:46] Dave: Well sure. The cash flow problem that you have in any sort of software service business is that let’s say you have a business where you’re making $30 a month for a customer and let’s just also say for the sake of argument that your lifetime value of that customer is basically two years worth of revenue. So that’s like $720 worth of revenue that you’re going to get out of them. You’re only getting that in chunks of $30 a month at a time. So what you fundamentally have here is a cash flow issue. All the value of that customer is really locked up in the future of the service that you’re providing to them.
[06:29] Now, there are some ways to shortcut that, in fact this is one of the things that Jason Cohen had mentioned at the last MicroConf and that is to have an annual plan. So you say okay, if you buy a year’s worth of this service upfront, I’ll discount it a month or two months out of there. So instead of paying $360 maybe you’re only paying $300 and you get the entire month. That helps you build some cash up front and it also give the customer a discount so it’s sort of win-win for both of you.
[07:00] The problem is not every customer of yours is going to take advantage of this and still you’re going to have this cash flow problem one way or the other. You might be able to get a little extra cash out of it but you still have the challenge of trying to get new people on board to your service and you got to get them through the sales cycle and you’ve got to convince them of the value proposition and you’ve got to have compelling marketing.
[07:22] So all of that becomes a real drag on your business. It’s really hard to keep expanding your business and adding new features and things like that. If you simply don’t have the cash to pay for it upfront. So one of the things that we’d like to talk about today is how the hybrid model, what we’re calling the hybrid model can solve this cash flow problem.
[07:43] Mike: One of the issues with getting started there that you kind eluded to was the fact that when you are trying to acquire these customers even if you’re not brute forcing it, if you’re doing some of the traditional marketing efforts, you incur some sort of cost to acquire these customers and hopefully you don’t have a very high cost of acquisition for these customers but it still does cost money to acquire them. And that’s part of the cash flow problem as well because that factors into how quickly you can acquire customers because if it cost you $50 to acquire a customer and it takes you a year to make $50 from them, then you can only land so many customers before you’re broke.
[08:24] Then you have to gather money from your existing customer base and once you’ve done that then you can put it towards acquiring more customers. Especially with a Saas model, getting people with an annual plan will help overcome that. But as Dave said, you can’t get everybody on an annual plan.
[08:40] Dave: Sure. it’s even a little worse than that Mike because if you’re having to factor expenses into this whole thing, cash flow is even a bigger problem because it tends to mean that you’re going to emphasize your free channels of acquisition over your paid channels or you may not even have the option to do the paid channels because you simply don’t have enough cash on hand to go and figure out okay, well if I ran this ad words campaign, will I actually be able to pay that back if it’s costing me $25 a click on these ad words key words, am I going to be able to get enough customers out of that? I mean there’s some testing that has to go on during this process of ramping your SaaS app. Right?
[09:22] Mike: Yeah, definitely. I think that’s actually one of the things that pushes people away from doing any sort of paid acquisition is the fact that you don’t know if you’re going to get your money back. And even if you are reasonably sure that you’re going to get your money back, the question is how long is it going to take for you to get your money back?
[09:39] And that’s a very hard question to answer especially when our your cost for acquiring those customers tends to be high and you’re looking at you revenue the following month and let’s say you laid out $2,000 to $4,000 to do some paid acquisition. In the next month you showed increase in revenue of $300 or $500 or something like that and you look at that and said well, I’m not going to get my money back for another six months so I can’t even afford to do more paid acquisition next month. Even though just looking at those numbers you can tell that it would benefit you in the long run but you just don’t have the cash to be able to do that sort of thing. Does this kind of imply that there’s something fundamentally wrong with SaaS?
[10:18] Dave: Well, no. It turns out of course that there’s not. SaaS is just very, very hard to get things started up in a smooth and running fashion. Right? I think the term that Rob likes to use and the term that was thrown around in Gail Goodman’s talk was the fact that this is a flywheel. A flywheel is something that doesn’t just spin up very quickly or spin down very quickly. It’s slow, it’s heavy and once you start it moving, it tends to keep moving at that same speed. So the problem is you’ve got to dump enough time and energy to get that flywheel cranking to start with in order to get your cash coming out on the other side and that’s the hard part of the SaaS right?
[11:01] Mike: Definitely. So one of the things you can do to overcome that inertia problem with the SaaS flywheel is actually to add services and one of the things that I think is very common early on when you have a SaaS business is that it can be very difficult for your potential customers to understand the value of that service especially if you’re not laying it out very clearly for them.
[11:24] How many people are actually reading the marketing collateral that you’re putting together on our website? I get a lot of people coming to my website that clearly they’re not reading the FAQ and they end up on the chat widget and start asking questions that the people who are manning that chat widget are trained to read the FAQ and try their best to answer people’s questions. And it’s amazing the number of people who come through and will look at that and either send emails directly into through the support page or go to the chat widget and start asking the same questions that already appear on the FAQ.
[11:57] Dave: Absolutely. Something else that takes a while to get that slide wheel running is the fact that just getting your messaging and your value propositions right so that it aligns with the problem that the customer has on the first place, that’s a very iterative thing. I remember just listening on this podcast with Rob talking about Drip. All the various things that he had to go through in order to find the right channel to acquire his customers.
[12:23] He started out with some deal on Appsumo but even he said at the time that was sort of one time test to find out if that was actually a good channel of acquisition or not and I think the conclusion that he came to was that it wasn’t. But it certainly cost him a good amount of money to go out there and get that setup and sell all of those things on Appsumo because you don’t get 100% of that revenue right back.
[12:47] So in order to come up with an effective key word campaign, what you really need to do is you need to make sure that you’ve got catchy titles and something that really clicks with the customer’s pain. And you’re not going to get that right out of the gate. I mean you have to refine that each time. So you put something on ad words, you test that out, you see if your customers respond to it and if they don’t then you have to go back and tweak and you don’t really know exactly how long that’s going to take for you to come up with the exact message that’s going to resonate with your customer. So that costs time and it costs money.
[13:23] Mike: Yeah. I think one of the things that resonates with a lot of people especially over the last two MicroConfs where Rob has given his talk about what he did with HitTail was just how long it took for him to get to the point where he really felt like he got his messaging correct and I mean he basically laid it out in a chart and you said here’s the part where I was learning. And basically the growth graph is almost flat and then here’s where I was building and it starts to rise a little bit and then here’s where he was scaling and that process took him a very, very long time.
[13:55] I mean a lot of people come out of the gate, they launch a Saas business and they think that it’s going to be successful very, very quickly and the fact is it turns out that’s really not the case. And it doesn’t matter how large your mailing list is. It doesn’t matter how well qualified that list is. It depends a lot on time and that’s just kind of the nature of the beast because even if you do have a large mailing list you get a lot of people who signed in, they won’t necessarily stick around. They’re going to be basing their opinions off of the initial messaging and unless you nail it right out of the gate, the chances are good that they’re not going to stick around for a long period of time. And that process as you said, it’s very iterative.
[13:34] So let’s start talking about some of the benefits of offering a hybrid model. A hybrid Saas solution gives you long term recurring revenue while the services will help bridge the cash flow gap. And in some ways those services are acting as consulting income but there is a very big differentiator between value added services and consulting and more specifically that is the rate at which you’re charging people. You want the customer to be thinking really, really inexpensive but highly optimized outsourcing. That’s what you want them to think and that’s how you essentially need to present it to them.
[15:06] And these services that you’re offering can drive a lot more value for individual customers in the short term for three very important reasons. The first one is it’s more cost effective for the customer than hiring as consulting. The second is this offering can be customized on the fly without having to write code. And when you’re writing an application, it’s always expensive to write code. That’s why everybody or at least most people design their products first, do mockups, things like that. It’s a lot easier to change things in design phase than it is after you’ve already written a code.
[15:36] So if a customer says hey I need you to do XYZ, the software may not do that but that’s okay because if you have the capability to kind of build it on the fly then it doesn’t matter. And the third thing is that it reduces the risk of the customer for investing their time, money and effort into learning your product but not get in the desired results. If you’re working alongside of them, it gives you a lot of flexibility and a lot of leeway to get them the information and the data they need along with the results that they need without writing the code or relying on the products to do all of those things which it may not have the capabilities to do just yet.
[16:11] Dave: So Mike, in the discussions that I saw from MicroConf Europe I heard somebody mentioned something about a concierge service. Is that what you’re talking about here?
[16:19] Mike: I don’t think so. So in MicroConf Europe there was a lot of discussion about a concierge service and I almost see that concierge service is a fancy way of saying human assistant on boarding. You eventually do things for free for the customers to get them on boarded because you know that the lifetime value for those customers is going to be high enough to justify the initial labor cost but you want to be able to get them on board and you’re trying to decrease the barriers to that entry so that you can start getting their feedback and leveraging their monthly payments.
[16:50] And obviously at scale, this doesn’t work. But early on you need to get them on boarded and get them pass the painful parts of the on boarding process while you iron out those wrinkles. Offering services along with your product is completely different than a concierge service because you’re charging people for the value of the human labor that you’re providing not necessarily the service itself. Obviously you’re going to charge them for whatever your service is but you’re charging them specifically for the services that you’re offering and you can price these based on value.
[17:20] Presumably you’re working with these customers hand in hand because you’re trying to jumpstart their business a bit by leveraging the product you’ve build and it does give you that immediate cash flow but more importantly than that, it gives you knowledge of exactly how they need to integrate your product into their business processes. So it lets you get that inside view that you would probably not have if they just signed for your service and were paying you $50 or$100 a month because you’re working hand in hand with them. You’re going to get that inside view of exactly how it integrates with their processes, what tools do they use, how they’re using the data and it gives you insights that you would not normally be able to get.
[17:58] Dave: I get it. Okay, yes. So as it turns out this is actually something that without really knowing what the terminology was that I kind of ended up migrating my two WordPress plugins to among the way. I had a number of customers that were always begging for I would need to have feature X or I really wish that your produce could just do Y. And I kind of push them off a lot of the time and I said hey, why don’t you go to Odesk and hire a developer on there. We’re really working on the features that are going on and the plugin right now and I don’t have time to do this.
[18:35] And eventually I realized that was just dumb. I mean I’m turning down things that people really want to see in the plugin. When I kept hearing the same feature over and over and over I realized I really needed to either put that into the plugin myself or have them sort guide what that feature was so it was something that was valuable to them. So I started adding what I sort of called it was the custom feature model. But basically it goes like this. Somebody is working with the classified or the business directory plugin and they come to me and they say yeah, I really want feature X, doesn’t really matter what feature X is.
[19:08] And then I say okay, well here’s what’s it going to take to add in feature X. And that feature is something that would be generally useful to the plugin and something that would be useful to the community as a whole so everybody who’s using classifies would want that or everybody who’s using a business directory would probably want that. And then we go back and forth. We get it to their liking. We go back and forth in this interactive process, once we agree upon what the feature is actually going to be, we’ll integrate it into the main plugin itself and then we’ll release that so that they have access to it indefinitely for the future for all their upgrades. And the rest of the community gets a cool new feature added on without them having to do anything about that.
[19:50] So it’s definitely been pretty successful in the plugins that I’ve run so far, I probably do about four figures of revenue of just this custom staff that’s being added onto the plugin in addition to the regular product sales that I’m doing as well.
[20:05] Mike: So when you’re having people do that, are there requests that you deny as well? There’s two different sides of this I think. One is you’re essentially taking feature request from people and charging them for building those things because they need them now. They need them probably on a timeline. So there’s also a flipside to this and that’s the fact that not every request that comes in is something that you can just arbitrarily say yes to. I mean you also have to kind of draw the line some place and say there are certain requests that people are going to make that I just can’t do. Right?
[20:36] Dave: Oh my god, yes of course. So I get probably about 50% of them I put in sort of the outlandish category.
[20:43] Mike: 50% really?
[20:45] Dave: Yeah. It’s really that high. I’ll get people coming in and they’ll say hey, can you do like this whole site customization for me? No, I’m not going to build all these features around the plugin that are for your site for example. Some of them could be some very weirded requests. Once I sort of cut out these outlandish ones there, then I can fine tune that a bit and say look, is this feature that you’re asking for something that somebody else in the community might also want? It doesn’t necessarily have to be something that everybody could use but at least try to think of it, is this something that at least maybe 10% of my other customers could probably use. And then if that’s the case, I’ll try to include it.
[21:20] Mike: I mean that’s just saying that you can double your business overnight by accepting this outlandish request.
[21:26] Dave: Well, but actually it’s another problem and that is a scalability issue. So I have a limited number of develops that work with me on these plugin and if I were to start engaging them and say okay I want you to work on this outlandish site request over here where the guy wants everything purple on his site. Well that guy, once he’s engaged in all that work, he’s not available to do somebody else’s totally reasonable feature request or it might be that outlandish feature request is something that’s going to take him like two weeks of his time to customize for this whole site because it’s very elaborate and it’s very detailed.
[22:01] Well that’s two weeks of opportunity cost that I’m losing and I can’t really use him for priority support request. I can’t use him to build additional features into the plugin that I might want to put in there that are on my long term road map. I can’t use him to do other customer requests that actually aren’t outlandish and might only take a day or two. And trying to get a new developer trained up on that code base is something that takes time and if I can’t keep a developer busy all the time then he’s going to wander off and not going to be available for that.
[22:31] So I have to balance the availability, the cost and the utility really of what it is they’re asking for and see if it’s something that kind of benefits everybody across the board as opposed to just benefit just them in particular.
[22:45] Mike: I also think there’s a bigger problem there in that if you go through this massive undertaking for somebody else, realistically you then have to support whatever those changes and modifications are for this other customer and they’re going to have some expectation of when you come out with a new version of the plugin that they’re going to have access to all those features so then you’re on the hook for supporting them moving forward and it’s really just not cost effective to support them ‘til the end of time even if they are paying 20% of the cost of the plugin at that point.
[23:17] Dave: Right. Absolutely and in fact that’s another policy that have is whatever feature somebody asks for, it’s something that I roll into the main plugin and that’s just really good sense so that if they want to upgrade in the future, they automatically can do so without worrying about whether I took that out or – and I don’t have to worry about okay, I’ve got this custom branch over here that I built for Bob. Did I put all of the bug fixes into Bob’s branch that I put into the trunk? I don’t want to deal with that particularly when you’ve got dozens and dozens of customers that are asking for custom stuff. You really just kind of want one main development branch and everything is in there so that you can support that in a reasonable way for everybody.
[23:58] Mike: So before the podcast you had mentioned that copy hackers also does this to some extent as well. Right?
[24:04] Dave: Absolutely. There’s actually a slightly different model though. They’re doing product sales directly on their websites. It’s eBooks about how to do amazing things on getting copy that converts and ways to write that are more compelling than when you might just do it off the cuff for example. And when you make a product sale with them, you end up getting added to an auto responder email list and then copy hackers will send you emails about here’s a tip for this and here’s a trick for that and hey did you know this?
[24:37] And then during that auto responder series you’ll eventually get something that says hey, by the way we’ve got custom consulting services that allow you to do things like advanced copywriting seminars, here’s a way that you can get a site review from us. So these are definitely very high end high touch semi-consulting kind of services here but it’s clearly a very substantial part of their business model because they’ve got this auto responder series that’s built around trying to get you to buy these things at the end. So I’m sure that Joanna Wiebe and company are getting some serious benefit out of this.
[25:15] Mike: So those are some great ways to take the products that you have put out there and essentially start bringing in more services income because of those products. One of the things that I’ve been looking at is how I can do that with AuditShark. And I came up with a short list of things I kind of wanted to go through them with you. And just kind of discuss what sorts of things fall under the concierge category versus which ones fall under the service category. And remember the concierge is essentially assisting the customers with on boarding versus services which is an going up sell that you’re essentially charging them for labor and the value that you are providing for them.
[25:52] Dave: Sure.
[25:53] Mike: So the first couple that I have is installing the AuditShark agent. Seems pretty clear I could offer that as a service and I know that there are companies out there that will charge for setup and installation. But it seems to me this falls more under the concierge service. Do you think I should charge for that or no?
[26:10] Dave: Well this actually reminds me of a quote that’s in Gail Goodman’s Business of Software talk and that is the number one way to get the customer to stay is to get them successful early. So installing the AuditShark agent is absolutely a core piece of your software offering. If they have trouble installing that, would they get any benefit out of your product?
[26:31] Mike: No, not at all. In fact, if they don’t install it, they get zero benefit.
[26:35] Dave: Yeah, exactly. I mean there’s definitely some things that you want to smooth out and make as clear and as easy to use as possible. I remember that quote from Patrick McKenzie at I think it was the second MicroConf. He said you want to script the first five minutes of your application like the invasion of Normandy. This is definitely one of those things is that you want to make your installation of the AuditShark agent the absolutely smoothest possible.
[27:03] But when you’re first starting out, you don’t know where people are going to struggle with that. So this is a great example of early on to make it a concierge service you install it, you get to learn where those problems are in the installation and then you can use that knowledge later to do that scripting of the invasion of Normandy thing like Patrick says.
[27:24] Mike: Right. So the next one was a consultation on the product capabilities and what it can do and how they should be using it. Concierge or service?
[27:34] Dave: I think that one should probably be concierge and once you kind of figure out what product capability they’re asking about the most, this is something that you can probably make a web page out of. So when somebody asks you about that, maybe you can start up an auto responder series and give them the top five things that everybody’s been asking about the product capabilities in that auto responder.
[27:57] Mike: I was almost thinking a webinar actually, free webinar about what it can do for them, how can they specifically solve certain problems that they may be having or don’t even necessarily know that they have.
[28:07] Dave: So you’re thinking it’s more of this is before they’ve really bought the thing as opposed to after.
[28:14] Mike: Well, I think it should be moved to before. So what I find is obviously there’s the tutorials and stuff once you get into the product but before that, people might have questions about how would I use this? How would I integrate this into my business? So I think in some it’s really just educating them about what the product does and why it does the things that it’s doing. So in some ways I think that there are certain information that would be presented after they purchased and there’s other information about that would be presented before they purchased. And I think before, it’s really about what problems it’s solving and then afterwards it’s about how to do that with the products. And when I came up with this, it was really about after they have purchased.
[28:54] Dave: Yeah, that totally sounds like a concierge thing. It was educational that that seems like something that you want to give away.
[29:00] Mike: So the next one was a consultation on what the customer should be doing security wise. So essentially have a discussion about for example how many servers they have, what type of servers they are, what they’re doing today, what they might want to be considering doing in the future, how AuditShark can kind of play into that, what are your thoughts on that?
[29:18] Dave: I think you can go either way on this one but I’m going to lean towards concierge because AuditShark is early enough in its lifecycle that you might actually find this space of customer’s engagement to be actually very educational for you and find things that AuditShark might be missing as key or core features. So probably I would say concierge.
[29:44] Mike: The next one is building custom policies for customers where if they have specific requirements that need to be met, an ISO standard for example or specific things in PCI or the SAQ’s compliance, something along those lines that they need. What do you think? Where does that fall? Would that be under service or would that be under concierge or does that depend a lot on how much effort it takes?
[30:03] Dave: I would say this is something that you might keep in your back pocket as a customer could say hey, I’m really interested in AuditShark and I’d like to sign up for two years but I need the small change to a custom policy and then you look at it, it actually is really a small change. So that kind of thing you might do as a concierge to sort of land the customer but if a customer comes to you and says I need this totally complex custom policy that you’ve never done before, that feels like kind of service thing like it’s an add on to an overall product that they might be getting there. I would say it would very much depend on the situation and the customer’s request.
[30:43] Mike: So it seems like in cases like this, it might be a little difficult to put together something along those lines of a standard offering to say it’s going to cost $300 per X because there’s such a variable time commitment on our sides to be able to do that and in addition it may be something that depending on what it is that they’re specifically asking for, maybe something that could be integrated into the product or maybe something that’s completely custom for that. And maybe that falls under two different packages, one where there’s a lower cost if it gets integrated into the product or a higher cost if it’s more of direct consulting engagement.
[31:16] Dave: Yeah, something like that. I would say that this is going to be one of those things that you’re going to go through and figure out how much time is required to build a custom policy. And it might be that you come to this number it says it always takes two hours to build a custom policy of average complexity. And so if that’s the case then you can sort of put a standard price on it. But if it’s anything like when I add features to the plugin, when somebody asks for something, I never know whether it’s a 2 hour change or an 18 hour change. That’s something that my developers usually have to come back and tell me.
[31:49] So I can’t really put standard prices on those features and I think you will know after you’ve done say half a dozen custom policies as to whether you can offer that as a standard thing or you have to kind of estimate it on a per customer basis.
[32:03] Mike: I can do ball park estimates based on just the operating system or the type of application as to whether it would be 80 hours or 120. It typically tends to be one of those two numbers. It depends exactly on what the operating system is and how complicated the benchmark is that they’re trying to have implemented. Something else is reporting I think that when most Saas applications launch, initially they have very, very little reporting. What are your thoughts on where reporting falls into this thing?
[32:31] Dave: You know, based on my experience with reporting and the enterprise java space and previous to that C and C++ reports are almost always so accustomed to whoever that customer needs to find out whatever magic metrics they’re trying to get to that this absolutely positively feels like a service that you would what to as a value added thing. It’s going to be kind of time consuming. It’s going to be customer specific but at the same time it’s going to build high value for them and make them want to use your product that much more. So I wouldn’t do that as concierge for sure.
[33:04] Mike: But aren’t some of those reports that are being built, aren’t they the type of things that other customers would want? If you have a standard SaaS app application there are going to be different types of reports that could be generally useful to everybody. I mean well, aren’t there going to be situations where you’re going to go to those customers and have to make a judgment call and say well, I don’t want to charge you this full amount because this is going to be generally useful to everybody.
[33:28] Dave: Early on the in the product here, I presume that you don’t have any reports built into AuditShark at this point because of where you’re at in the app is that right?
[33:35] Mike: I have one.
[33:36] Dave: Well, yeah, I mean this early in the product probably don’t know what reports the customers are dying to have. So you might say hey you know what, I’ll split the cost of this report with you to build it here but it’s going to be pretty substantial. If you don’t have this report in your application, I just don’t want to get your service at all. That might be something where you say alright, I’ll build it and I will get your business after that.
[34:00] But I think it’s going to be on a case by case basis. it’s going to really depend on the report. If it’s a very elaborate specific report that that customer is probably the only one that will ever want that, well that would definitely be a service. If it’s a generally useful report and it’s something that you were planning on adding anyway, maybe throw it in just to sweeten the deal for the customer or maybe you split the cost with them, I don’t know. I think it’s going to depend.
[34:26] Mike: Part of the reason why I’m going through some of these is to give you guys some ideas about the different things that you can do in your application whether or not you should be charging for them. Another one I came up with was analyzing reports and providing situational base recommendations. And that’s very clearly a service because you are not only looking at a report that is specific to a customer but you’re then providing them recommendations based on the output of that report. So again that’s very much a consulting arrangement.
[34:55] And then the last one was providing remediation services and for AuditShark when it identifies something that’s wrong, the customer right now has to go fix it. I could theoretically automate the remediation but I don’t want to because there are a lot of considerations around that. For example what if something goes wrong, who’s responsible for that, what happens if the machine reboots in the middle of the day? There’s all this scheduling and what happens if something goes wrong and it needs to be rolled back. Is that something that’s possible with the product?
[35:23] There’s a lot of problems with doing that stuff in an automated fashion and it seems to me that making that into a service offering is a very much a value add for the customer and I can charge them based on for example the number of things that I’m fixing. And at that point, the real key to the value proposition here is that I’m essentially rewriting what they’re being charge for. So no longer am I saying give me $50 or $75 an hour and I will work for you for that time period. I’m saying here’s a fixed unit of work which may take 5 minutes, it may take 5 hours but you’re getting a set cost for it.
[36:01] That’s kind of the ideal situation to be in when you’re trying to offer services to people because you’re going to be able to know what your cost are for the time period that you’re talking but you’re no longer billing directly for the hours that you’re working. You’re charging based on the value that you’re providing with the customer, not the time that you’re providing the customer.
[36:20] Dave: Absolutely. In fact your remediation services remind me of exactly what Rob does with HitTail and the article writing service. Wouldn’t you agree?
[36:29] Mike: Totally, yes it definitely does.
[36:30] Dave: Yeah. I mean that was something that Rob didn’t have right away and eventually he realized that was the one thing everybody really wanted after they got these long tail key words is a way to take advantage of that with Google SCO and having that service that wrote the articles for you was a great way to do that. So you might have the side remediation service consulting thing.
[36:51] Mike: Yeah and that’s something I‘ve had a hard time pricing. Some of them are very, very quick to do but there’s also potential for things to go horribly wrong. So I’ve been a little bit gun shy in terms of moving forward with this piece of it. I mean I’m reasonably confident of my own abilities to look at things and say yes or no, this could have major effects on somebody’s systems. But there’s always that possibility I mean whenever you reboot a machine, you never necessarily know what other things have been done on it aside from the changes that you’ve made that a reboot is going to cause those things to service.
[37:24] Dave: Yeah, totally agree. That’s definitely something that you want to have humans involved with. So be very careful there.
[37:31] Mike: So we talked a lot about the cash flow problem with SaaS and some of the benefits that a hybrid model can bring to the table and resolving some of those issues. But where does this hybrid services model really fall down? There’s got to be places where adding services into the mix just simply doesn’t work.
[37:47] Dave: Yeah. I can speak a little bit from experience on this here. One of the places that it really doesn’t scale in my plugin is there’s a point at which I have to balance features that I want to add versus features that customers want to add. And sometimes it’s very easy to thread those two together because I’m just not getting very many customer requests. But like the past few months I got swamped with all these customer requests and so my developers are constantly filling and estimating these particularly client requests and they’re not doing other things that I’ve been trying to push the roadmap along for the plugin or to do releases or other things.
[38:25] And I’m spending more time managing those customer projects instead of going and doing things like training a new support guy or witting documentation for the website or doing marketing or promotion or working on other projects. When you’re working on something like this, you kind of start it out without the intention of it scaling but at some point you get so many requests for it that it stops being able to scale even in a manual manner anymore.
[38:52] You have to kind of setup back and say is this something I want to keep doing? Do I want to expand it by adding another person who’s dealing just with these requests now or do I want to just stop offering it all together and say I have enough customers that I don’t need this to generate my revenue anymore. I want to focus on something else. So that’s definitely something that the plugin have struggled with and continue to struggle with.
[39:16] Mike: Does that give you justification to raise the price of some of that custom work?
[39:20] Dave: it probably does but there’s definitely price points which the customers will simply say that’s not something I’m willing to pay for anymore. I mean I’ve already seen that one. If somebody comes to me with one of the outlandish requests early on my modus operandi was to basically come back to them and say alright, that’s going to be doable but it’s going to cost you $1500. And for the most part, the customers got the hint at that point and said oh well, okay that’s too expensive. I’m not going to do it.
[39:46] Somebody actually took me up on that one time so what the hell was their problem. Once they called my bluff I had to actually go and do it. So that was a good three months of custom work that followed having to suffer through that because there was definitely a lot of back and forth and iteration and I said to myself no, I’m never going to do that again. You really have to be careful about what you wish for there. Raising the prices isn’t always the solution.
[40:13] Mike: Yeah I’ve been at situations like that myself where I gave somebody a price thinking they’re definitely going to say no and then they said yes and I’m like oh shoot. Now I actually have to go do this. But it sort of makes up for it because they’re paying you really well but sometimes the headaches are not just worth the money.
[40:29] Dave: Totally not worth the money.
[40:32] Mike: I think one of the really nice things that this article that we’re looking at as roadmap for this podcast pointed out was that in the early days of the product, think of the services side as a life support or plan B for your SaaS app, I really like that way of thinking of this.
[40:47] Dave: Yeah, that is nice. It certainly does help you get pass that cash flow gap right away which is a major problem for sure.
[40:55] Mike: So to kind of recap a little bit, we’ve talked about the cash flow problem. We’ve talked about some of the benefits of the hybrid model and how there are differences between a concierge service and the paid value add services that you’re offering. Again it’s just very important to keep in mind that there’s a difference between services that you’re offering to on board people which is the concierge side of things versus the services that you are charging them additional money for.
[41:22] And that could be product customizations, it can be analysis of reports. It can be custom pieces of the product that you’re building. There’s a lot of different ways you can provide value with your products to the customers without resorting to writing additional software. Again, this falls very much under the services umbrella and people definitely understand services. With the new SaaS app sometimes it’s difficult for people to understand those.
[41:45] Dave: And the one thing I’d like to close with is that in Gail’s Business of Software talk, another thing that she sort of closed it up what was you don’t really own the gas pedal on word of mouth. The best gas pedal is a great experience and in this particular case, if you do a product and service hybrid you’re going to be giving people that great experience early on so that’s really going to help drive the growth of your business quite a bit.
[42:10] Mike: That’s a great way to wrap it up. If you have question for us, you can call it in to our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 155 | Six Key Takeaways from MicroConf Europe 2013
Show Notes
The takeaways:
- Community & Relationships
- Concierge
- Email (both drip and lifecycle)
- Staying emotionally healthy and keeping your family intact
- Hyper-automation (how many tools Peldi uses)
- Paid acquisition
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be talking about our takeaways from on MicroConf Europe 2013. This is Startups for the Rest of Us: Episode 155.
[00:10] Music
[00:18] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:27] Mike: And I’m Mike.
[00:28] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
[00:32] Mike: Well MicroConf Europe is over. I had a great time. I think a lot of the attendees did as well but what’s your takeaways?
[00:38] Rob: My takeaways are get to bed early because you came in at 3 AM one night and 2 AM the next. Boy there’s a lot of good takeaways about concierge services and email and staying emotionally and relationally healthy. I think before we get into that, that was a little overview of MicroConf Europe. This is our first year European conference. We’ve done MicroConf three times in Las Vegas but here we did it in Prague in the Czech Republic. We had 120 attendees and speakers from 27 different countries.
[01:05] If you’re listening and you’re interested in more detail about what went on at MicroConf Europe we have a page set up, it’s microconfeuroperecap.com and special thanks to Christoph Engelhardt. He has attended a couple of MicroConfs now and he takes super in depth notes. And microconfeuroperecap.com basically just redirects to a page on his blog where he as painstakingly taken detailed notes about every talk at MicroConf Europe so thanks again to him.
[01:36] Mike: One of the interesting things we did this year at MicroConf was we added a lot more tear downs and we actually modified a little bit of Peldi was here so he’s a big UI expert. He did what we called a UI teardown which was really kind of nice. It was more or less looking at the user experience and making sure that when somebody goes to an application versus the website that they are able to look through, understand what sorts of mistakes that they might make. And really for the enveloper of the products, make sure that they have an understanding of what things they can do to encourage the user statistic around and kind of move them through the application without overwhelming them or confusing them.
[02:14] Rob: Right. If you haven’t heard of tear downs or wonder what they are, it’s basically one of our speakers who tends to be an expert in a certain thing, so Patrick McKenzie is an example expert in copy writing and conversion optimization and so he would stand up in front of the stage and for about 20-30 minutes people could call out their own marketing website. And some of them are just landing pages, some are full Saas or mobile marketing websites and then he would give his thoughts.
[02:40] He would ask questions about it. He asked questions about the product and try to reword things in the way that he thought would work better for that audience. He basically just would go through it and give feedback. So in the past we’ve done one a day at MicroConf and this time we did two kind of shorter ones and we had Dave Collins from software promotions, Mike you did one, Patrick McKenzie did one and then as you said Peldi did some UX teardowns which were cool. He just sprung that on us.
[03:09] I asked him to do teardowns and then he said he’d like to do UX teardowns because he is a UX guy. Peldi’s again behind Balsamiq which is mockup software and he understands a lot about usability. And so it was the first public demonstration of Audit Shark. So we only had one volunteer for UX tear down. So to fill time I volunteered Audit Shark. One of my key points in the conference was show of hands, who wants to see a UX teardown of Audit Shark and there was a ton of people raised their hand. It was really cool. They really wanted to see it. People are curious.
[03:42] Mike: Yeah. That was kind of neat. And it was funny because I think that part of the reason we only got one volunteer was because nobody want to be responsible for the rest of the group not seeing Audit Shark.
[03:52] Rob: Yeah. How did it feel to have it up there to have Peldi talking about it and then to have 120 eyes on with still early software?
[04:01] Mike: I felt fine with it. I mean there’s a lot of things that I know that are still going into it so he was talking about how he got a little confused. He wasn’t quite sure what to do. And as I said there’s this overly that’s going into it that will walk people through the application because that’s an area that during on boarding right now I am walking people through the application. But because all that’s a little bit unclear I don’t want to have to do that forever so I’m doing it manually now and individually but I don’t want to have to do that forever and long term I just can’t. So in order to scale it up that’s how I’m addressing the situation but Peldi obviously noticed that right away.
[04:36] There were some other things that he had that were actually really good feedback. So for example on the page where it lists your account information, at the top there’s information about how to cancel your account. He’s like no, no put that way at the bottom that’s the least important thing. You don’t want that highlighted to people. Honestly, it just never crossed my mind. That’s like that’s a really good point. So I put it way down at the bottom and kind of out of the way a little bit. So if somebody wants to cancel they still can.
[05:04] And I took several other notes about things that need to change or move around a little bit because he pointed out some places in the UI where there are certain menu options that look a little bit redundant and I can understand how those things look redundant, they’re not but that’s obviously not the fault of the person who’s looking at the application. It’s my fault for not labeling them better and coming up with a better way to present them.
[05:24] Rob: Right. Very good. One other thing that was a highlight for me and it was meeting Dan and Ian from Lifestyle Business Podcast or Tropical MBA as it’s now called. We have never met those guys and I hang out with Ian one night and then had diner and discussions with Dan and Ian two other nights. It’s so cool to kind of know people remotely, to listen to their podcast. Dan’s been on our podcast. I’ve been on his and it just – when you sit down with someone in there, they’re just like they are on air and they’re super smart and they’re getting stuff done and we have the four of us just sat and talk because we have so much in common in terms of audience and what we’re trying to do and kind of mission and all that stuff. And so that was absolutely one of the other highlights for me is the hallway track. That was my hallway track this time was hanging out with those guys.
[06:14] Mike: I totally agree. As you mentioned the hallway track it was funny because in talking to different people about the conference and trying to get feedback and they’re like oh, I love being able to talk to all these other people and not that the conference isn’t good and speaker’s good because people don’t want to hurt our feelings about saying that talking to other people is where a lot of the value of the conference is. And I don’t take offense in that in any way, shape or form because I totally agree that is where a lot of the value of MicroConf is it’s not just the speakers, it’s not just some of the content. It is meeting the people who are doing the same things that you are and that’s where a lot of the value of the conference is as well.
[06:54] Rob: Yeah. I think that leads right into our first takeaway which is all about community and or relationships. And one of the key goals of the conference we stood up at the very beginning and introduced ourselves and then we said we want you to take way at least three action items that you can implement in the next week and we want you to takeaway three relationships. And not relationships like oh hello, my name is Rob what’s yours? But relationships like I’m going to keep in touch with you.
[07:19] Because when kind of the fire and the excitement and the motivation that you take away from MicroConf fades which it will over the next several weeks or several months you need someone there to kind of reignite that or to keep you going and whether that means finding a mastermind group which many people came up to me and said they had found people in their country or neighboring country that they were going to start a mastermind group with or whether it just means staying in touch and be email and kind of keeping each other accountable, I think honestly that is at least as valuable if not more than the actual speaker tack. Having the speakers is just an excuse for us all to get together in the hallway. I think Ted Pitt said that the first MicroConf and it holds true every time.
[08:02] Mike: Yeah. I agree. I mean I had a lot of people came up to me and said they had also already scheduled mastermind groups as well and I had some people asking me how I run the mastermind group that I’m in. You have your own mastermind groups and I have one that I’m in. I think that yours and mine are pretty similar because I got a lot of feedback from you about how to put things together and how it should generally work. But yeah, there’s a lot of people who just – some people just never even heard of a mastermind group or what it is or what it does so we talked about that a little bit. What are some of the values, just kind of how to run and how to work it and what sort of benefits you really get out of it.
[08:36] Rob: Yeah, one of the first things within the first half hour of the conference, somebody came up and said its great meeting the other attendees but I want to know who’s here, like can I get an attendee list and I’d love to know who’s here for my country? Because like I said we have 27contires and people naturally do want to find other folks. I mean there were people here from the same city, there were several people from Stockholm, several people from Prague who didn’t know each other and one of them laughed said yeah it took two Americans to fly halfway across the world to bring me and someone who lives like a mile from me together even though we have this common bond. So that type of thing is powerful and that’s the other thing that outlasts just a list of tactics that you get from talks.
[09:17] Mike: Yeah and that being one of them come up to me afterwards and said kind of the same thing but he ran into somebody that he went to high school with and hadn’t seen in 20 years and they live in the same city now which is hundreds of miles away from where they grew up. They landed right next to each other and had no idea and you’re right. It really took us flying across the ocean to kind of bring them together again and now they’re putting together a mastermind group.
[09:40] Rob: Second takeaway that I think you and I both realized it was a theme, and that’s the neat part about these conferences is we come together and there’s no theme. We don’t tell the speakers specifically what to talk about and a theme always emerges. And this year it seemed like something that a number of speakers touched on and talked about moving into is the idea of concierge. This is in terms of getting someone on boarded with a new application and the idea of concierge is you do a lot for them. I would say you do it all for them. In some cases you will.
[10:16] But it’s basically having a non-scalable somewhat manual labor intensive front end in order to get someone to the point where they’re getting value out of your application. So one example is with Drip we offer a free concierge service where – Drip is email marketing software and if you have blog posts or an eBook and you provide us with access to that, we will build your five day mini course out of that content.
[10:44] The other one I can think of is just if you have a JavaScript snippet, little tag that people need to install, one way to do concierge is just to install it for them for free. And if you have any type of lifetime value these are no brainer things especially if you have a tier one support person who can help with that.
[11:02] Mike: Yeah. I mean one of the things that I looked at – and when people are setting up Audit Shark for example in order to get any value out of the software at all they have to install the agent and if they don’t do that then they’re just not going to renew, they’re not going to pay for it because they aren’t getting any value out of it. It’s clearly not working for them. And I think there’s a lot of applications where you can look at that kind of thing and say okay, how can I create an outreach program to people who’ve signed up but are clearly not using the product yet?
[11:27] Because even for a web based Saas app you can tell if somebody is engaged with the product or not and reach out to them and try and figure out what is it that’s holding them back? And in my case for Audit Shark if they haven’t installed the agent or they didn’t take time to do it, I can say hey I can do this for you or I can go through some of these results kind of do some hand holding as you said. Maybe it scales, maybe it doesn’t but if you’re in the early phase that could really help give you a kick start.
[11:54] Rob: Absolutely and you know I recall saying a few episodes ago that I think this is a trend that we’re going to be seeing. It’s not only this concierge during on boarding but its software plus services. It’s Audit Shark finding that your server has security issues and then offering to actually manually remediate those for you, plan that’s included with your normal subscription is that you get instructions on how to remediate them and then for an additional charge you can come in and fix that for them.
[12:25] And same thing with Drip, we have the free version if you have content and if you don’t have any content we do have a $1,000 package where we have a professional email copywriter, write yours from scratch, interviews you and does the whole deal from scratch. And so this is the way to go up market. It’s the way to have a little bit higher price points to provide more value and rise above the den of competition. There’s so much competition in so many of these SaaS niches now because everybody’s kind of moving into the space that kicking it up a notch using some type of non-scalable thing is the way that I think you can stand out and actually build a successful business really quickly.
[13:02] Mike: I think another topic that really came up was leveraging email and obviously Drip kind of falls into that category but life cycle emails and outreach program to people who are not actively engaged in your products to kind of help bring them on board any sort of in-app emails where if based on what customers are dong or not doing you reach out them, try and help them along, give them more information or just reach out to them and say hey, I noticed that you’re not using this. Would you like to – do you need some help? What can I do for you?
[13:32] And because they’re already signed on it’s more or less an effort to cut your churn at that point as well. It’s not cold calling. Its they obviously signed up for the service and I think that you’d get a much better response in many of those cases especially if the product is going to provide value for them.
[13:47] Rob: Yeah. There’s so many touch points along the way where you can provide a prospect or customer with information, with something valuable, education that keeps them kind of engaged or involved with your product. I think Patrick McKenzie summarized it well in his talk. He basically said there’s Drip emails and there’s live cycle emails. I think of it like Drip emails are marketing. Right? It’s prospect stuff. So that’s before someone has signed up for a trial.
[14:17] As soon as someone signs up for a trial, it turns into live cycle emails and that’s where you’re educating more about your product, how to use it, how to get setup, how to get on boarded, answering specific questions they have about it. You’re still educating them but it’s not nearly as much as in the Drip sequence. And then once they become a customer, you can follow-up with lifecycle emails after that so it’s kind of three separate phases of email sending. I mean we had 9 speakers and I think 4 or 5 touched on email, some more heavily than others.
[14:50] But I know for one, some things I took away was my Drip and my live cycle emails are set and locked and loaded on my apps but I noticed some things Patrick McKenzie was doing specifically with some language in a couple of his. It’s awesome because he’s like yeah, take these emails and just like search and replace with your app name. So I think I’m going to take a couple of those and change some of the verbiage in mind to kind of soften in the blow specifically like when credit card fail, there’s some really good verbiage of like don’t worry we’re not the bank or your cellphone company. We’re not going to screw you. You didn’t do anything wrong but if you can log in and update your credit card, it’s a very courteous nice email and I like the way he approached that.
[15:31] Mike: Yeah. It was more of a gentle nudge of hey we’re going to delete all your data or whatever. But I do like that only was there that gentle nudge hey we’re not the credit card company but the other thing that I like that he did was he said you can put language in there that says we’re going to pause your account which is a lot different than saying we’re going to cancel your account. Because pause indicates that it’s a lot more gentle in terms of the language but it is non-conformational and I think that’s just a phenomenal way to put us we’re going to pause your account versus we’re going to cancel or stop you account.
[16:07] Rob: Another takeaway that it seemed to resonate with a lot of the attendees was my wife’s talk on staying emotionally and relationally healthy while launching your startup. As some background, my wife’s a clinical psychologist and she is cofounder of the Walling Family as I said in her intro. She works with a lot folks who have trauma and anxiety and that kind of stuff in her clinical practice not specifically with software people that are startup founders but she’s just been around enough to know what goes into launching a business. Her talk was – several people came up and said that was the talk that stood up for them because it was so different than anything they’ve heard at any conference in the past.
[016:50] Mike: Yeah. I really liked her talk as well. The thing that really struck was that she gave very specific strategies of how to do different things in your life and how to recognize when things are going wrong and how the specific tactics that you can use to deal with those things. It’s one thing to just talk about those things but it’s another to provide a roadmap for what those solutions look like and how it can work out for you. It wasn’t just that the talk was good but it’s just she took it to another level by giving you all the information that you needed to not only recognize the problem but to deal with it as well. I think that was really the part that stuck out for me.
[17:27] Rob: I definitely appreciated that. She knows the audience well enough to know there needed to be some actionable takeaways. I also liked that she integrate research studies. She integrated studies that none of us would read but they’re basically more academic psychological studies of founders of businesses, entrepreneurs, how much stress that puts on people. And there was that interesting stat of entrepreneurs suffer a more from anxiety. Entrepreneurs and their partners suffer a more from anxiety but they have a lot less depression.
[18:03] The difference is running a business can be stressful but it also tends to fulfill you more. It was saying that folks who have 9 to 5’s tend to be less fulfilled and depression tends to be more of an issue. So she focused more on how to deal with anxiety, how to recognize that in yourself what to do to combat it and really gave some tactical things about that.
[18:24] Mike: Another talk that was really interesting was when Peldi got up there and discussed all the different tools that he uses in Balsamiq and how he runs the company. It was just mind boggling to see how many different tools they use and what they use for different things is really like they went out there and they really did the research and figured out which tools were going to work best for them which worked best of tools that they trusted to stay around for the long haul. And then integrated them into their business and just the sheer number of tools was just astounding.
[18:56] Rob: Yeah, when Peldi started talking and I had seen his slides before hand I thought good god how many tools do you use you know? I was almost like why do you use so many tools? But what I realized is that they have 16 employees and they have 200,000 customers and the only way that a company that small – because he’s trying to keep it intentionally small right? He doesn’t want to grow big. I mean you could be at 30 people and supporting 200,000 customers easily. He wants to keep the team small so he is going to great lengths to implement all kinds of tools that bridge that gap and allow him to not grow a big company because as far as I understand his goal’s always been to have fewer employees. He really wanted to be a solopreneur to be honest. So to be at 16 and then have tools bridging the rest of that gap is a really interesting way to look at it.
[19:45] Mike: Yeah and I think that does a couple of different things. One is it makes your company just in general more profitable because you got more customers per employee and so that allows you to do a lot more things for the employees in your company but allows a little bit more I’d say flexibly which in terms of being able to choose the things that are right for your business versus being forced to hire because you have no other choice.
[20:10] There were a couple of things that came up that were not necessarily primary things but individual takeaways that people took from different talks and one of the things that several people said to me after the fact it stood out to them was the idea that when you’re doing paid acquisition you don’t want to pay more than about a third of what the lifetime value of a customer is.
[20:29] And there’s a couple of different reasons for that but I think the one that resonated with some people was the idea that if you’re doing all the heavy lifting and handwork of building a product and building an application you don’t want to be spending and giving away 30% of the sales to somebody who’s really just doing advertising for it. You’re doing all the handwork and basically they’re reaping all the rewards for it. And that I think struck with a bunch of different people and like I said several people came up to me afterwards.
[20:57] Rob: What I like about that kind of the whole discussion about having these – the kind of rules of thumb, they’re like lose metrics, well they’re always debatable. I’ve heard a fair number of times I started work with – trying to get customers at less than a third lifetime value and it makes sense to me, it works for my business and that’s kind of the rule that I use now. But Andy Brice have never heard that but he’s done a lot of paid acquisition. And so someone asked him do you agree with that? And he said you know, I’ve never heard that but that feels about right. And that’s when I realized like a certain point when you’ve been doing something for 8 years and you really know the ins and outs of it like right on the spot he just has intuition about it because he knows it so well.
[21:42] It was kind of cool to see people who have had experience with these things generally agree on something and again maybe he would say it’s 40% or its 30% but its right in that range we can kind of all agree. I feel like that’s valuable as if you’ve never paid acquisition that it gives you a decent realm to shoot for and to know if your way off when you start and 10 years ago no one had this rule of thumb. I’ve never heard it so you just have no idea where you should land as you’re advertising.
[22:08] Mike: Now that you mentioned it, it was Andy Brice I remember hearing him exactly say that. He said that the reason he said that it felt right was because it felt wrong to give away more than 30% of the sale to somebody for doing virtually nothing. And it almost feeds into an affiliate marketing where you have affiliates and he’s got affiliates for his product but the issue is when you’re doing affiliate sales for example, how much do you give them and there’s recommendations all across the board like 20% 30% and he said that the reason it feels wrong is because you’re giving away more than 30% and you’ve done all the hard work. And all they doing is throwing up advertisements for that stuff.
[22:46] And even if you look at the Apple Store, Apple takes 30% of the sale on a lot of different things and if you view it from that standpoint, 30% feels about right then that’s not necessarily a bad deal but especially if they’re giving you a decent size channel.
[23:00] Rob: I think one other them that came up a couple of times which is always interesting at MicroConf because we have at MicroConf we have a mix of people who really do want to stay as a one person software company and then we have folks who are branching in to hiring few employees. But Peldi was 16 employees. Dan and Ian from Lifestyle Business Podcast, they did a really good talk on hiring. And the theme that overlapped both of them was if you’re going to hire you have to have some type of operating dock. They call it an SOD, Standard Operating Dock or SOP Standard Operating Procedure.
[23:35] I mean even Peldi, he said he played it fast and loose for years and didn’t want to have “processes” in place. He hit a point where right around between 10 and 12 employees he just couldn’t go on any longer trying to do everything verbally and he had to start putting stuff in writing and so we got good solid insight from both the way Peldi has approached it and the way Dan and Ian have approached it. Dan and Ian have taken it to another level. I mean it’s like the core of their business and it sounds like the completely reinvented their business when they kind of stumbled on this.
[24:08] But it was neat to see that these two different businesses came across at almost at very, very similar the way that they’ve approached it. And so that’s another thing where I like that it’s kind of a rule of thumb now right? It’s like you got two people who stumbled upon it separately and it’s amazing how similar their approach is to documenting this stuff for their employees and not only for on boarding but just for anytime someone wants to refer to how to do internal email within the company or how to respond to someone about support on Twitter, it’s all documented in their knowledge base.
[24:42] Mike: Yeah. And it’s not just the two different companies came up with it. It’s the two radically different companies came up with them. I mean Dan and Ian do not run a software company. They primarily make physical products and then you’ve got Balsamiq which makes a software produce and the overlap between the businesses at also the core competency is just radically different but they have the same type of problem and they came to the same type of solution so I thought that was kind of an interesting piece of it as well.
[25:12] Another talk that I think resonated with a bunch of people was Adi’s talk when he was putting together public beta and I don’t know how public he’s been with the previous startup that he tried before public beta but there was another one where he felt like he didn’t necessarily do a lot of customer validation. And they had this giant email list and it ended up converting it about half a percent. And with the thousands of emails that they have, half a percent it just doesn’t even remotely make a business.
[25:39] And they spent a fair amount of money building that up and so we decided that for his next thing that he was going to try and do, he was going to do a lot of customer validation and take credit cards. And in some ways, he talked about the internal struggles that he had and taking those credit cards because he knew that he didn’t really have a product yet. The interesting thing that I talked to Adi about this afterwards and said I’ve done something similar, in his case he went through and he went back to those people where he’d taken a credit card and said hey, here’s the real story. I don’t have a product but here’s what we’re working on and I’ll work with you to make sure that we’ve got it.
[26:12] In my case I did that and of those people who I’ve gone back to and had actually paid for it, not a single one of them follow through later and paid for the product that I built afterwards. So he and I talked about that a little bit and it was just – it’s kind of bizarre. I think the theory that we kind of came up with, because I couldn’t get a response from these people at all but the theory that we came up with is because my product was more in the enterprise space that people probably went, got the corporate credit card, got approval from their boss, signed up for it and then when it wasn’t available they had to go their boss and say yeah, I’m sorry I made a mistake and they didn’t want to give it a second chance after that. So it might’ve been to save face on their part.
[26:54] Rob: What I liked about Adi’s talk is he was just really open about it. He actually said that they wanted to take money upfront. They want to get credit card information because he wanted that idea to be more validated. You and I talked about this a number of times. Now Adi was not taking money to fund it. Let’s be clear. He was taking money to validate it. He wanted a bigger commitment from people that they really actually wanted this thing that he was building. He wasn’t doing it so that he could take the money and go build something because he had the money to go build something.
[27:25] Now in the end I guess he wind up – the content’s pretty expensive to build and he didn’t build the content. He instead did forums, got people in, started building community. He basically said himself we promised one thing and we took credit cards and then we let people in for a different thing and we gave them the chance to opt-out at that point and that’s there were a few people who were upset at that but he had kind of switched it up a little bit.
[27:48] But that he gave people a full chance to opt-out and most people did not. It was a very small amount that decided not to. Actually maybe it was 5% so it was still a small amount and he said that was what he needed to feel confident in the idea and it was actually validated and so he would actually do it again.
[28:05] Mike: Yeah. He said even if the opt-out rate had been significantly higher, it wouldn’t matter because the opt-in rate was still significantly higher. That’s what he was looking at, what’s the opt-in rate after? They really know what’s going on, how many of them were willing to stick around or was it just they were kind of interested but not necessarily fully invested in the idea and that having that credit card is really what differentiates whether you’re truly interested or not. And it’s not the only thing you can use but it’s certainly a major indictor.
[28:36] Rob: I think those are the major things that I took away. I have a big list much longer than we can fit in the podcast for our fourth MicroConf I think it was a success, our first one in Europe. There always a lot of work but they’re a lot of fun. I feel like it provided a lot of value for people so I feel good that we decided to do this. I know when we first started we didn’t know if we would sell it out. There always all the doubts and stuff but I’m glad that we did it.
[29:01] Mike: Yeah and I think the tone was definitely set well especially early on and the expectations were set and we did a really good job of making sure that the experience that you get at MicroConf Europe is going to largely mirror what you get in MicroConf Vegas and that was a major goal for us I think. It was to make sure that you get the same type of experience and obviously the speakers and hallway tracks are going to be a little bit different from one another. But knowing that you’re going to get the same level of quality, the same level of experience, what we really wanted to make sure that we didn’t do was say, have people come and then realize that they’re getting a significantly different experience in MicroConf Europe versus the one that we held in Vegas. I think we were really successful at that.
[29:41] Rob: Yeah I think that since we’re done this multiple times that you and I have gotten better at hosting, connecting people, emceeing, you kind of get better at running a conference. You just learn those rules of thumb that make things get better. The question that I got the most at the end of the conference was are you doing it again next year in Europe? I think we are. I mean we haven’t decided 100% but my guess is I don’t see any reason why we wouldn’t. So if you missed out and you’re interested in hearing about MicroConf Europe 2014 head on to microconfeurope.com enter your email address on the upper right and that will put you on the early bird list. We do tend to sell out fairly quick on these conferences so if it’s something you’re thinking about it would likely be fall of 2014 somewhere in central Europe.
[30:27] Music
[30:30] If you have question for us, you can call it in to our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 154 | Tools For Testing Your Sales Funnel, Reseller Strategies, Integration Marketing and Other Listener Questions
Show Notes
- Constant Contact
- LessAccounting
- KISSmetrics
- Visual Website Optimizer
- Optimizely
- FairlyCertain
- Authority Labs
- Moz
Transcript
[00:00] Mike: In this episode of Startups for the Rest of Us, Rob and I are going to be answering questions about tools for testing sales funnels, reseller strategies and integration marketing. This is Startups for the Rest of Us: Episode 154.
[00:11] Music
[00:18] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:27] Rob: And I’m Rob.
[00:28] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made.
[00:30] Rob: So I have some good news and some bad news. The good news is Drip launched to 600 more people today, nothing’s broken so far. People are signing up for trials, things look good. The bad news is Google has announced that they’re going for 100% not provided keywords. They’re trying to go to 100% of not sending keywords to root to your website so that you don’t know how people are finding you organically.
[00:57] Of course they dropped some hint we want to protect everybody from the NSA but in fact if you actually buy the same key words through Google ad words, they will tell you the keywords that people are using to find you so sounds like more of a money grab than anything. The reason it’s bad for me is this impacts Hit Tail. Basically Hit Tail relies on those keywords and that’s part of the data that it uses to give you back suggestions.
[01:21] So what I’ve been seeing, I’m kind of panicked when I heard about this and I thought oh man, Hit Tail’s done. If they get 100% Hit Tail doesn’t have much value. But what I’ve noticed is there a steady slow decline over the past 6 to 12 months across all sites and my sites included of the not provided thing rationing up. So my turn rate hasn’t increased. With my own sites, we still get plenty of suggestions and we fill the blog with long tail keywords suggestions. So as of today even though I have sites that are literally at 90% plus not provided, I’m still able to use Hit Tail and get value out of it. It’s not much value as I got 12 months ago but as long as it doesn’t abruptly go to 100% I actually think that Hit Tail can stick around at least in the short term and potentially a little bit further out in that.
[02:10] So that’s been my day, launching a new one and then seeing another one kind of get hammered by that. It’s that third party integration right? It may not be an API that were using but for all intents, anyone of any time can kind of pull the rug out from under you if you’re relying on their data.
[02:23] Mike: Yeah. I mean that’s not even an integration. That’s just an outright reliance on them, so that totally sucks. And reading that, they started doing this back in 2011. I would think they’ve been heavily testing this a lot over the past couple of years and probably start shutting down some of the companies that are doing SEO. I can’t imagine any other reason why they would be doing it other than to basically make more money off of ad words because they want people to use ads. They want people to click on those things.
[02:51] And when people are doing all sorts of organic SEO, then they don’t need those paid advertisements anymore because their search engine is good enough that it’s showing people the results that they want that their algorithm has determined are the best results out there. So it makes sense that they would want to obscure that so that people start having to buy ad words because their traditional SEO “tricks” don’t work anymore.
[03:15] Rob: Right. And Google kind of at a one two punch and the second part of the punch is they went out and blocked all the scrapers. So if you’re doing SEO, you typically use a rank tracker, something like surf fox but it basically tells you enter a bunch of keywords and you enter your website and it tells you where you rank for those. And Google used to have an API for that and they shut that down a couple of years ago. Then these companies were scraping to figure out your rank and now they blocked them. So they’re really rabidly going after SEO and they also shut down I think another couple of blog networks like big link farms they call them.
[03:52] The death of SEO has been coming for a long time. It’s been a slow, slow plod forward. And if Google didn’t own so much of the search landscape I think others search engines would step up. As far as I know still being in the other search engines, they don’t do really any of this stuff. They don’t block this stuff but there just aren’t enough in the market to really make a difference.
[04:13] Mike: Got it. On my end they just finalized a massive upgrade of Audit Shark over the past couple of days. The servers are finally running windows 2012 at this point. Everything’s now on the .net 4.5 framework and all the bugs that I had talked about a couple of weeks ago are completely out of the picture. Basically all the ones that were associated with the upgrade have all been dealt with. So I’m really pleased about that progress and at this point it looks I’m going to be going to the early access customers and working through the process with them.
[04:44] But everything I’m looking at so far basically says that things are ready and good to go. It’s just a matter of hitting that early access list and working through people and making sure they’re getting the value out of it and to kind of iterate in similar to how you’re doing things. I’ll probably a lot more hesitant I’ll say. I’m certainly not going to be emailing 600 people at a time because there’s a lot of traffic that comes in from some of the different components and I want to make sure the infrastructure can fully support it because that’s one of the things that hasn’t been I’d say adequately tested. So I’ll be on boarding people at a much lower rate than I think you are.
[05:20] Rob: Yeah, absolutely. Well if you recall, I started off with one customer and then I brought one customer on at a time until we had 20 people using the system and that took me six weeks to do. So I think you’re at that stage. Then we fixed a bunch of stuff, added features based on their responses. By the end of that I had about nine paying customers almost $500 in revenue and then that’s when I decided to email that first 300 batch. We didn’t upgrade the data base server. We split the server into two. We did a little bit of scaling stuff that took literally 1 or 2 hours to do because with all the virtual stuff it’s easy.
[05:59] I think you’re headed towards that at this point because you’re right. I never would’ve emailed 600 people 3 or 4 months ago because I just didn’t have the confidence that we can handle it. I’d say to be honest I think that’s both from a technology perspective but it’s also just from your processes. You need to make sure you’re answering support emails in a timely manner, how hard is on boarding? Can you walk people through individually? Do you have your trial emails that go out or are you sending those manually because I did that manually early on. Do you have automated billing? There’s a lot of things that if you don’t have them in place yet, that’s another thing that doesn’t scale yet if you don’t have the code written.
[06:34] Mike: Yeah. That’s definitely right. There are some of those things that I got automated and some of them I don’t. So for the time being I have to send out things manually. The code for billing hasn’t been fully tested yet so I want to run those things manually for a little while until we get to a point where I’ve gone through them and said okay I feel like we’ve covered 80% or 90% of the different scenarios that could possibly come up or something could go wrong. And at that point just add in some extra error handling and make sure nothing’s going to go wrong or maybe even just set it up so that it sends me an email says here’s the summary. Please click on this link going to the dashboard and then click the run button to just go through and actually do the billing for everybody.
[07:13] But I do want to be careful about a lot of stuff like that. As you said, until you get to a certain point, I mean you don’t want to just blast a ton of people there because you’re going to overload yourself with either support or all these other problems.
[07:26] Rob: Right. Very good. Well congratulations again. So you have one paying customer and you basically said you’re done with remediation and the UI and now a technology upgrade so you’re going to start moving into contact and early access folks, very good. I subscribed to Patrick McKenzie’s email newsletter and he sent something out within the last week that relates back to a conversation that we had and that Dave had actually called in about and he left a voicemail and was basically talking about getting that payment upfront versus just getting a commitment to pay upfront.
[08:00] Patrick reminded me that Jason Cohen at MicroConf had said I think it’s going to cost $30 a month, will you write me a check for the first month right now to reserve your place? I won’t cash it until we deliver. So Jason had taken a slightly different tact which was getting a commitment upfront and actually getting a check but he wasn’t taking the money. That kind of goes back to our discussion of us saying the important thing is to get the commitment. I think if you actually need the money to build a product, this is not a good approach. Right? Because you’re not supposed to cash this check. You should have the money to build the product on your own and if you don’t, I don’t think this is the way to get it.
[08:39] Mike: My favorite part of that entire email was – and I’ll quote him word per word. Patrick says “My favorite symptom of an unmet need for software is any Excel spreadsheet which is ever updated by one employee, sent to a second employee, updated, and then sent back. Every time that happens a Saas angel gets its wings.”
[08:56] Rob: Very nice.
[08:57] Mike: That reminds me of a comment that we go on episode 138 from Sean who said as you’re doing your research, if you come across anyone that’s using a spreadsheet as attracting tool, that’s a big signal you’ve got an opportunity to build something that can do it better.
[09:08] Rob: Yeah. I heard this. I think this is a software a couple years ago. I liked this approach. I also like the approach which is another one I heard at a conference. Look at the big enterprise tools where there is no lower price Saas version and see what pieces of that you can break off and turn into a more lower price but self service version of it. So you don’t have the long sales cycles. You try to bring it down to the small and medium sized business market instead of the enterprise market and there’s a ton of apps that have done that.
[09:38] I mean think of all the accounting apps, you think of the kind of CRM apps that only used to be a million bucks and now there’s SaaS versions. You see even email marketing apps at first were very, very expensive and in Constant Contact came with a $39 a month version. So I think there are still some fruit. I don’t know if it’s low hanging but those are interesting ways to generate ideas is looking at both enterprise apps and then ways that folks are using excels spreadsheets.
[10:03] Mike: Something else that ties into that is most people are very familiar with excel but I’ve seen a lot of applications written over the top of axis databases. So I think that’s probably another good place where if you find anybody who’s got an access program that has been customized or has been outsourced as some consulting company who came in and built something for them to track different information, that’s another place where you can probably look for a product to build.
[10:31] I think the one thing to be a little bit careful of is that when you get into those types of things it’s a much bigger commitment on the part of the company that brings somebody in to build that for them. So chances are the complexity is going to be a lot higher than they had with an excel spreadsheet but I still think it’s at least worth exploring and asking questions about.
[10:48] Rob: So you also had a little shift in your marketing focus this week. What happened?
[10:52] Mike: I actually cut back on my Facebook advertising just because I didn’t have time to pay attention to it. Facebook was they were sending clicks though but they weren’t necessarily converting as well as I would’ve liked. But because I didn’t have the time to follow-up on it, try and figure out exactly what was happening, I basically just killed it dead in the water for a little while until I could come back to it. Because as I said, we were working on that massive upgrade of the Audit Shark infrastructure and I just didn’t want to be throwing money away. So instead of doing that I just said okay, well I’ll kill this for a little while.
[11:20] Rob: Yeah. A little known fact about paid acquisition is there’s a lot of upfront time investment honing in to make it actually work and then even once it works you still need ongoing maintenance because the ads burn out. Some people call it ad rot but it basically the click through rates will go down over time. I’ve never seen a system where that doesn’t happen especially with visual ads like this. So it’d probably a good idea to cut back on them but you’re going to start them again. I imagine that there’s still a liquid of market out there. You plan to start it up in the next week or two?
[11:52] Mike: Yeah. I mean I’ll be doing it later this week. I’ve still got a bunch of different phrases that I want to try, want to swap out some of the images and just try some different mechanisms for saying the same types of things but in a different way, try to reach different audiences going into different target markets, that sort of thing.
[12:09] Music
[12:12] Rob: Very good. So we’re answering some listen questions today.
[12:15] Mike: That’s right. So the first one that we have is from Carl Falconer and he says hey guys, thanks for all your work creating the podcast. I’ve recently been attending a local lunch and learn series on financial literacy for startups. I’d be interested in learning how you both manage the business accounting not necessarily the tax accounting of your products. For example, things like balance sheets, cash flow etcetera. What’s the decision making process behind your financial models? With all of your experience, have you become better at predicting your breakeven point? Thanks. Carl.
[12:42] Rob: So with a software company I like to keep it very simple and in fact I don’t look at my balance sheet ever aside from cash on hand, that’s pretty much all I would look at as an asset. I like to keep things simple. I like to focus on the business rather than this kind of stuff, the business accounting aspect of it. I know that if I was running a business with inventory or with accounts receivable where you invoice and get paid net 30 you need to look at that stuff. You need to look at cash flow. But for me, the cash flow comes in virtually instantly. The biggest delay I have is with Stripe which is a seven delay from when I get paid. So as long as I have enough cash in the bank, it’s literally a rounding error and it doesn’t matter.
[13:20] So the thing that I look at with my business accounting is the income statement. All that is is all my revenue, all my expenses and I can just look top to bottom and see what came in that month, look at anything that’s kind of funky. I know the rule of thumb. I can set a budget physically in the accounting app or I know rule of thumb of where I should be if something looks out of whacko, go in and investigate.
[13:40] Realistically software companies tend to be especially Saas apps like this tend to be really cash heavy. You’re not typically at a danger of expelling more cash than is coming in once you reach profitability. Frankly I just treat it as kind of a simple cash in cash out business. And the packages that I’ve used are Outright, that’s typically the one I use for the simpler businesses I have and then I use Xero which is xero.com which and that’s for the more complicated scenarios. As Mike and I’ve talked about over the last couple months, we both have bookkeepers now and that’s actually been a god send because it just saves me quite a bit of time getting these things organized this month.
[14:17] Mike: Primary difference between me and you is that I use some different tools. I use Less Accounting for one business and then I use QuickBooks for the other. Just like you, I don’t pay attention too much to anything like balance sheets or accounts receivables or anything like that. The biggest thing is just how much money has come in over the past 30 days and how much money I’m spending on some of the different services. And that can vary from one month to the next. Occasionally I’ll go in to try and identify where all my money is going so that I know at least periodically review whether or not there’s services that I’m just no longer using anymore and whether or not I need to cut them.
[14:54] But I actually have some services that I’ve been using for a while that I just continue paying for them because it’s actually more of a hassle to go in and cancel those accounts than it is to just say oh well, it’s only $5 or $10 a month or whatever. In terms of predicting a breakeven point I don’t even think that comes into mind. Do you think about that at all or no?
[15:14] Rob: Not really. I basically set goals of where I want to grow revenue each month. That’s the one number that I look at. While keeping in mind that I want to acquire customers for substantially less than their lifetime value. As long as I’m doing that I know that the business is going to be profitable down the line. I don’t think that about breakeven. I think about I want revenue to be in X thousand dollars 30 days from now and those are the goals that I’m shooting to hit and the breakeven just kind of comes along with that.
[15:43] Mike: So thanks for the question Carl. Our next question comes from Henry Oswald and he says I’m currently trying to measure my sales funnels and could do with some technical guidance. I’m sure many are in the same boat. Could you elaborate on which tools you used to measure your funnel and or AB testing’s. How do you measure which traffic sources convert? Which three things would you recommend you’d measure for a new site? It feels like this is something everyone says you should do but rarely say how you should do it. Thanks in advance. Henry.
[16:07] Rob: Alright. So here’s how you should do it. In terms of which tools do we use to measure? I use Google analytics because it’s free. I use Kiss Metrics because it provides a little more detailed information but it’s quite expensive. I think it’s $150 a month is the low end plan. And for split testing I used what used to b Google website optimizer that now integrated it into Google analytics and you can get by if you don’t have a high budget analytics. There are solid tools for split testing like visual website optimizer and optimizely. Again I think those started around $100 a month. So it depends on where your budget is and do you have more money than time at this point or not.
[16:44] Your second question is how do you measure which traffic sources convert? You can easily setup a Google analytics goal for any type of conversion that you want. Google had to do that. I mean it will take you two minutes to do. You do a base on the URL someone hits or you just slap a little JavaScript on your receipt page. Again, you can also use Kiss Metrics for this. I use both and check back and forth.
[17:06] And then finally you said which first three things would you recommend you measure for a new website? I’m assuming this is a software or a SaaS website so here’s the three things I would look at. One is your visit to trial conversion ratio. Second is your trial to paid conversion ratio and the third is you should have a Drip email sequence running. I would look at visit to Drip email sequence conversion and then from that sequence into your trial conversion.
[17:35] Mike: But personally, similar to you, I use Google analytics and then I also use Kiss Metrics. So in terms of the tools I use I don’t think that there’s a whole lot different there. The other thing that I’ve used is it’s a C sharp framework for doing AB testing called FairlyCertain. Last I checked there was a bug in it. It wasn’t actually doing the AB test properly so if you did an AB test, the visitor would see the A and the A type test no matter which page they went on. So if you’re running two different tests, they would only see the A version of test one and they would only ever see the A version of test two.
[18:12] So as far as I know that’s a bug in there that I don’t know whether they fixed it or not. I actually went into the code and fixed it myself so that it was random between them. So if you were running more than one AB test on your site it just wasn’t necessarily giving you the correct results. And that’s something you do have to be careful about no matter what AB testing tool you’re using because you want to make sure those results are accurate. So do some testing on your own, make sure it is giving you the right results.
[18:37] In terms of the three things I would recommend measuring for a new site, a new site kind of implies it’s a new piece of software that you’ve unleashed and for those types of things you want to be careful about running AB test when you don’t actually have enough incoming traffic. I think Rob did a really good job of talking about the things that you should definitely be measuring but I would be very, very cautious about running AB test when you don’t have enough traffic to justify those AB tests. If you’re not going to get statistically significant result then you don’t want to be running those tests because they’re going to be giving you misleading information. So Henry thanks for the question.
[19:14] Our next one comes from Dylan and he says hi Rob and mike. I’m trying to come up with a reseller strategy and would love to hear your thoughts. My bootstrap product’s called Activity Book, is an HR enterprise application which requires a private VM so it’s not strictly a Saas application. Sales are fairly high touch at the moment using cold calling and face to face. I have several clients on trial including HR service providers who want the product deploy for each of their clients to be used as an HR portal. The HR service providers will in effect become resellers. In addition to these, I’ve been approached by other companies who’ve asked for reseller programs. This is all great but I’m struggling with a reseller strategy that’s attractive to both parties.
[19:50] Pricing is confusing. Should I give a percentage of the lifetime in the client, just the initial sale or a depreciating percentage during the lifetime? Should I allow them to charge whatever they like as long as I get my fee? I’m also considering white label and allowing the reseller to run training courses in their own configuration services etcetera. What do you guys think? Do you offer reseller packages or know of anyone who has an attractive reseller package? And closing, I’m a long time listener and believe my product has got to the point it is right now due to the inspiration from you guys. If it wasn’t for you two and Seth Godin, I’d have no product. Thanks, Dylan.
[20:21] Rob: Gee. Thanks for the mention next to Seth Godin, that’s a very high compliment. So it’s a little different with the reseller and affiliate right? Because an affiliate typically is just directing traffic over to your site and you’re basically paying them a percentage. Resellers are often valued added right there. Actually doing some installation they should do support, upfront support for you and so they should tend it in general they will get a higher cut for doing that. The other thing the reseller brings is they have their own network of typically of clients either existing ones or new ones they bring in. So that’s typically how I think about the difference between affiliates and resellers in case you listen to this wondering what that might look like.
[21:00] So he asked a couple questions here. The first one was about pricing. He said should I give a percentage of the lifetime of the client, just the initial sale or a depreciating percentage during the lifetime. My thoughts on this and they’re not highly experienced is that I would give them a percentage of the lifetime of the client but not upfront. Assuming you are charging a monthly maintenance fee, there’s nothing more attractive to a business than having recurring revenue and most businesses don’t have that. So you can give a much, more much smaller percentage of that recurring revenue say 10% or 20%but that’s an annuity of that business. And if they’re not used to that, it really can be crazy. The lifetime value to them can be worth a lot.
[21:41] On the flip side if you were to say okay, all the upfront charges, the set of fees, they all go to you so maybe they get 100% of the setup fees in the first month and then you get everything after that. That’s an okay deal for them. Personally if I were in their shoes, I would prefer the recurring. So maybe that is something that you need to feel a couple of them about and figure out which way you should go but I would lean towards giving a portion of that recurring sale.
[22:09] Mike: I actually disagree with you and here’s why. You have to remember that when you’re dealing with resellers of the size that my assumption is these resellers are going to be – I mean they’re an HR service provider. So they probably have 50 to 100 to 200 employees probably even more. When you start getting into those types of companies, they have dedicated sales reps. So the problem you’re going to run into is I don’t know what your software actually sells for but let’s say that it’s $500 a month and you’re going to give them 20% of the sale like Rob suggested. The problem is that $500, they’re going to get 20% of the sale, that means the company is going to get $100 a month which to you and me sounds like a reasonable deal but at the same time they have sales reps to pay.
[22:56] So if that sales rep looks at it and says well why should I sell this software package for $500 a month to customer X when I can sell them $2,500 worth of consulting services and make my numbers for the quarter? Those are the things you have to keep in mind when you’re going to go down this path because it’s ultimately the sales reps that are going to be trying to resell your product, not the business. So although you’re giving them $100 a month in recurrent revenue, it’s not necessarily going to go to the sales reps. The sales reps is not adequately compensated to actually go do that. So that’s something I would be really, really careful about.
[23:31] Rob: Got it. So you would lean towards trying to have a larger upfront fee and basically giving perhaps a huge chunk of that, maybe even 100% of it to the company with the hopes that they would then split that with the sales rep and they’d have more motivation.
[23:44] Mike: Possibly. I would go talk to these companies and find out exactly how their sales reps are compensated and how they’re going to be selling it and you may very well need to work out several different types of reseller agreements with your first several resellers to figure out what’s going to work best and which ones are going to do it because you can take our advice and do one thing and then find out 2 or 3 years down the road that it’s really just not working. What you need to do is try out a couple of different ones and figure out which one’s going to work the best and maybe you tell them upfront hey, let’s try this and we’ll reevaluate in 6 months and try and figure out from there whether or not this is appropriate, whether or not your sales reps are actually going to sell it and figure out what’s going to work for both of you.
[24:26] And I think that if you approach it from that angle and tell the company upfront look, we’re trying to figure this out just as much as you are in terms of reseller. The other thing I’d be cautious about is letting them push you into any specific way of doing things because they may ask you to do something that you may not necessarily be comfortable with but they say well let’s just try it and you get backed into a corner and it turns out it’s just absolutely fantastic for them. Maybe they’re taking all the top line revenue and they’re just sending you the monthly fee which may very well be what you want but just be cautious going down the road that they’re not pushing you around as well.
[25:02] Rob: Right. So you’d lean towards saying that you’re trying to figure it out as much as they are and that you want to do a short trial and maybe try to do one or two sales at this rate and then determine later if you need to adjust it, that kind of thing.
[25:14] Mike: Kind of. I mean I wouldn’t limit it to just one or two sales. I mean I’d probably give it a time limited basis like 5 or 6 months or something like that and then throughout the course of that 6 months, if you have let’s say five different resellers and one of them brings in 25 sales and the other one only brings in one, we have to go to the reseller that only brought in one sale and say hey, I have another reseller who brought in 25 sales. They’re about the same size as you. What is it you’re doing that’s different from them?
[25:41] And try and figure it out from that perspective and say I want to help you guys sell more but unless either I understand how you’re doing things or unable it compare them between you and another customer then it’s very difficult for you to help them and it’s a very non-confrontational way of addressing what eventually would be problem because down the road if they come to you and say we’ve got this huge customer we’re trying to land and they can just become a time sink for you. And if they’re not landing sales then you’re going to end up spending time with them waking through pre-sales things because it is an enterprise sale and you’re just not going to get anything out of it. So you want to be able to compare people and make sure you don’t end up in that situation.
[26:26] Rob: What do you think about the second part of this question? He says should I allow them to charge whatever they like as long as they get my fee?
[26:32] Mike: That’s a tough one because with larger companies, they tend to tack on services. I know that there are certain hardware providers out there who will – they’ll bundle not just hardware and software but they’ll bundle services into price quotes and it could be a little bit difficult to figure out how much of the cost is going to software? How much is going to hardware? How much is going to services? And you’re in a slightly different situation where there’s a private VM so it’s just a virtual machine that you deliver digitally so there’s no hardware directly associated with it but obviously the customer has to have the hardware to run it.
[27:07] I would definitely try to understand how it is that they do their services and what their general pricing looks like before you start making decisions about whether or not you’re going to just a take flat rate or not. The other thing to take into consideration is if you try to be too greedy, they may very well try to emulate exactly what you’re doing and have somebody else go out and build it as a platform for themselves that they can leverage basically for free. So you don’t want to get too greedy but at the same time you don’t want them overstepping their bounds either.
[27:39] Rob: I have a tough time at allowing them to charge whatever they like because then that means you’re leaving the price elasticity on the table. Your business isn’t going to grow. If it’s an enterprise product, the idea is that you’re going to make the most money, a big chunk of your revenue from the higher end sales and if other people are skimming that off the top then I just don’t think your business is going to grow as fast as if you were to kind of keep a control over the ultimate price. The last piece of his question he says I’m also considering white labeling, allowing the reseller to run training courses in their own configuration services etc.
[28:13] Mike: Well I mean these ties a little bit back to the previous one. The thing is allowing them to charge whatever they like is probably not a bad thing because if they’re charging whatever they like, theoretically you’re offering the same product to reseller 1 as you are to reseller 2. The primary difference is that they are offering different services to their customer. Even if you have two resellers who go after the same customer, theoretically they’re offering your service on the back end and you’re going to get paid whether either one sells it. So it doesn’t necessarily matter and they’re going to try and compete on price to some extent.
[28:45] In terms of white labeling, white labeling is tricky. I think that I would get a good handle on just having them act as a reseller before I start going down the white labeling. Because with white labeling you really want to be charging exponentially more and until you know what you should be charging as a reseller, it’s very difficult to know what you should be charging as a white label provider. So Dylan I hope that helps and thanks for the question.
[29:10] Our next question comes from Marco Schwartz and he says hi Mike and Rob. I’ve been following your podcast for about 3 months now and I’m working on my own products and looking for a Saas app idea. I am personally passionate about the restaurant business so I’m thinking about building a web app of this business that would manage accounting, inventory, staff etcetera that would be priced for a monthly fee. I know it’s not really a niche like you would advise in your podcast but on the other side I didn’t find any Saas apps online. I only found some very expensive $1,000 to $2,000 software packages to buy. Am I missing something? I’d love to have your opinion on this idea. Thanks.
[29:42] Rob: I don’t think this is a terrible idea but know upfront that this is going to be high touch sales. You are going to be doing out bound cold calls in the evenings because that’s when restaurants are open or you’re going to be paying in person visits. I don’t know anyone who makes a lot of these kinds of sales directly online using paid acquisition and Facebook ads and SEO and content marketing and that kind of stuff.
[30:07] Now you mentioned a broad range of what your app might do. You said it would manage accounting inventory staff etcetera. That is huge. I bet those packages that sell for $1,000 to $2,000 are massive and probably have 5 or 10 year old code bases and that’s probably why they look so crappy because they’re written in an old technology. But I would bite off a much smaller piece of that and then try to expand outward at a minimum. But know that you are in for high touch sales that you’re going to be dealing with people face to face and I would personally go out and try to sell 10 copies of it first or 10 subscriptions to it first based on the idea or based on mock ups or based on some designs or just something just to see what that feels like.
[30:49] Even if you get 10 no’s, at least you’re going to know what it’s like to have a conversation with restaurant owners and you’re going to have an idea of how hard it is to talk to and potentially sell. I would also suggest that you consider getting in touch with Brian Casel and he has a podcast called Bootstrap Web and he owns a product called Restaurant Engine which is basically think of it like square space for restaurants. It helps them get their websites up and running. At least with Restaurant Engine you can imagine that there are a certain amount of restaurants actively looking online for a new website and looking for website templates and designs and stuff so he has things he can tap into.
[31:26] What you’re talking about is taking over their back office and handling accounting, inventory staff, that’s a more complex proposition. You’re going to need a lot more credibility. It’s going to be a challenge. You said are you missing something? Yeah, I don’t think it’s as easy as perhaps as you’ve presented in this email and I do think that before you write a line of code there’s a lot more feet on the ground research that probably needs to happen.
[31:50] Mike: Yeah. I’ll second what Rob said. I mean the restaurant industry is I’ll say technologically averse. So I’ve looked at this a little bit, there’s a website that came up on Flippa a couple years ago that was also in the restaurant space but they weren’t doing inventory or accounting or staff management anything like that. The only thing that it was intended for was for allowing a restaurant to take orders online. And I forget how much it was selling for but it was probably $2,000 or $3,000 and the price point was I think around $500 or $800 or something like that and they were not getting very many sales. I think they were only getting one or two a month.
[32:28] So the revenue was reasonable but what I am talking to the owner of it, it turned out that there was a lot of high touch sales that went into that because everybody wanted customizations. Everyone wanted it to look like their own website and then it came on to once they bought the software package they wanted all these customizations and then they wanted a whole website design and it tended to turn more into consulting engagements than anything else. The different things that you talked about, the accounting inventory, staff management, each one of those things could be its own software package because it’s such a large problem that can be solved.
[33:04] So I might look at some of those. Maybe you’re looking at a time tracker for restaurants or something like that because you want to be scheduling people to come in and work and that might be something that you want to translate into an online solution. But as Rob said, go talk to them, see if there are ways that you can figure out how they manage that problem now whether or not they do use spreadsheets or just call people up and ask them what their times are. Maybe you can put together a package where people can say this is the hours that I work. These are the hours that I don’t work and have the software package basically take the store hours and manage staff in the business based on who’s going to be available and when they’re not going to be available. So Marco hope that helps, thanks for the question.
[33:50] And the last question of the day is from Frank Anderson and he says hi guys, thanks as always for the inspiring and informative show. I’m building a Saas app and been looking at the various B to B app stores such as Sales Force and Mail Chimp. Do you guys have any experience or perspective on how helpful these can be in terms of getting traction with a new app? Would love to hear this discussed on the podcast. Thanks. Frank. Rob, I think you had a specific term for this. You called it integration marketing?
[34:16] Rob: That’s right. Yeah, I mentioned this in my MicroConf talk this last year. So the answer is it depends. The real key to making this kind of thing work is that you get an upfront buy in that if you build something cool you build a nice landing page that they will do an email blast for you or a blog post or something like that. A tweet, maybe you build it, maybe you don’t but just to build it to be in the app store and get a small trickle of occurring traffic every month, I tend to not do that. I’m not saying it never works out but most of the time that doesn’t work out.
[34:51] What’s really nice if you’re actually looking for establishing a sales channel and trying to get some early traction from early customers, you need that initial blast to all of their customers. And so think a little bit smaller than Sales Force and Mail Chimp because those are the ones that you can apply to and submit your app and you’ll get in. They’re not going to email their customer base about you because you’re a small fish compared to them.
[35:14] So as an example with Hit Tail when I started doing some integration marketing I contacted some smaller SEO Saas apps, some you may never heard of like Authority Labs which is a rank tracker. I actually contact SEOMOZ and wound up on theirs. You’ve probably heard of them. But the larger ones, we’ve integrated Hit Tail with Basecamp. That one didn’t do very well for us. And there were two reasons for that. The first is that they wouldn’t agree upfront to do any cut type of blast because they’re just too big and we knew that. But the integration itself wasn’t very hard and it was the first one we were doing and we kind of just wanted to do it as a trial.
[35:48] The second reason it didn’t work out super well is because the audiences don’t exactly line up. So you’ve named two services, Sales Force and Mail Chimp. Unless your audience really closely aligns with people who are using Sales Force and Mail Chimp, just because they have a lot of people using doesn’t mean a lot of them are going to come use your app. So with Basecamp, I mean it’s like a fraction of percentage of people who come over who actually sign up for trial whereas with SEOMOZ and Authority Labs, those are at least 10 times the sign up rate of the Basecamp integration.
[36:21] So that’s the first thing to think about is who can I find who’s small enough that I can talk to the founder and it’s not some big committee and I can say if I do this and do a really good job at it, are you willing to kind of email the audience and give you that initial kick? The second thing is to think about which apps are out there whose audience is really closely aligned with the customers that you’re seeking. So thanks for the question frank. I hope that’s helpful.
[36:46] If you have a question or comment for us, call our voice mail number at 1-888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. See you next time.
Episode 153 | SaaS Pricing Tactics
Show Notes
- The data behind purchasing behavior at UserVoice – Article link
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I will be discussing software as a service pricing tactic. This is Startups for the Rest of Us: Episode 153.
[00:08] Music
[00:16] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:25] Mike: And I’m Mike.
[00:26] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Mike?
[00:30] Mike: Well it’s been about three minutes since we recorded our last podcast episode so I’ve got nothing new this week.
[00:35] Rob: Alright. Let’s dive into the topic today which is SaaS pricing tactics. This is based on an article written by Richard White who’s the founder of UserVoice. We’ll obviously link it up in the show notes. But his article is titled The Data Behind Purchasing Behavior at Uservoice – Pricing for Conversion. He did a two parter. We’re looking at part one and these are basically all the tests that they’ve run at UserVoice over the past couple of years.
[01:02] UserVoice is essentially a system to get feedback from your customers and they branch now into online help desk software. What’s cool about Richard’s article is that it’s not a lot of theory. It’s a lot of practical things that they toyed around with and that they struggled with in their early days. So the first thing, we’re going to cover five or six different points.
[01:22] The first one is his take on free plans. Basically for the first 10 months of UserVoice it was entirely free. There were no paid plans. He called it a public beta. And they had 39% month over month growth in account signups during that time. So what they found thought was that as soon as they announced they would be having paid plans at some point in the future, just announcing them, it cut their growth in half. He makes a note, he says you couldn’t even sign up for them. You could just fill out a lead form. And it should be noted that these new plans for the most part included features that weren’t currently available in the existing app.
[02:01] But what they noticed, that makes it sound like oh, well as soon as you introduced paid plans you’re going to cut those sign ups in half. What they found though is after 30 days the percentage of active accounts have doubled during that mite. So they basically cut growth in half but it was essentially the tire kickers who stopped signing up. So the takeaway that Richard White talks about is launching pricing earlier can help you find the real customers of your service and not be distracted by tire kickers.
[02:26] Mike: I find this interesting that one of the things that I think might be a little bit difficult to kind of differentiate is between who are the tire kickers that are using your product versus the ones that are actively looking for a solution to the problem. Because obviously you want to reach out to these people and understand how it is that they’re using it, how you can help them better. But at the end of the day you also have to be charging them for the service because otherwise you’re not going to stay in business for very long.
[02:51] I think that one of the ways you can do that is to figure out whether or not they’re actively using their account. I’m struggling to figure out what other ways you could use to figure out is somebody actually going to pay for this in the future or they’re just kind of playing around with it or using it for a free product that they have and they’re not necessarily willing to actually pull out their credit card and pay for it.
[03:11] Rob: Right. Basically trying to decide of all the active users who are actually using the product and getting value out of it, which of those are going to pay us if we do introduce paid plans? And I agree. That’s a tough question. My gut feeling is that unless you’re in like a real consumer niche or a niche where there are a lot of free options out there, that especially if you’re going B to B that if people are activated and they are actually using it that the vast majority of them would in fact pay you for the service.
[03:41] I can’t say that blanket across the board but if you’re actually saving them time or making them money, I don’t see why that you’re not going to be able to get quite a few of those folks to pay you once you start charging.
[03:56] Mike: Yeah. But even with UserVoice for example, I can see a lot of startups signing up for it and say oh, well I would like to have some sort of help desk or knowledge base for my products but I haven’t launched yet or I’m in the process of launching and trying to get it started. So I’m going to sign up for this free service over here but I wouldn’t be willing to pay for it if they were asking me money for.
[04:14] Rob: Yeah.
[04:15] Mike: So they’re using it in a business like setting but they wouldn’t be willing to pay for it. And that’s kind of what I’m getting at because I can definitely see scenarios like that but maybe that’s just a very specific scenario.
[04:28] Rob: Also, just the idea of having a 10 month free product that’s like a public beta, that’s just crazy. I would never even consider that again. Again, I can’t imagine doing that because the chaos of it, the thousands and thousands of free users who are never going to pay you and are never going to provide value but are going to complain that you don’t build features, it’s just going to be overwhelming. That doesn’t even sound interesting to me.
[04:51] So the whole 10 month public beta thing may have worked for UserVoice because maybe it was an innovative product and they really didn’t know who was going to use it and this was a way just to get people and to figure out how they were going to use it. And if that was their goal then cool, but if you have more of an idea of how your users are going to use it and you’re building something that’s I don’t know, more of a standard product or just more of a known entity, I don’t think – like I’ve always said, free plans don’t work. I don’t like premium models, that kind of stuff.
[05:21] Mike: Yeah. I mean they were funded to the tune of $1.8 million.
[05:24] Rob: Got it.
[05:25] Mike: That’s a little different.
[05:26] Rob: Right. So they really wanted the hockey stick to move up into the right and this is one way of doing it. Not in terms of revenue, just in terms of users. So the next tactic that Richard talked about are the specifics of their pricing plans once they introduced them. He said that they originally announced only two paid plans priced at $289 a month and $589 a month. So they went from free to basically $300 and $600 a month and they received a ton of feedback that people wanted sub $100 plans.
[05:55] So they expanded to five plans. They have a free plan, $19, $89, $289 and $589. What they found after they launched s that 77% of their revenue came from two of the plans. It was the most expensive one, the $589 and their $89 plan. The $289 which is in between those two, he calls it a wedge plan. It didn’t have a ton of extra features over the $89 plan and it was designed to make it easier for you to either stay at $89 or justify making the jump to $589 since that $589 had so many more features than the one below it. Why not just pay the extra amount?
[06:32] He also noted that their lowest plan, the $19 plan had a ton of accounts but at such a low price point relative to the others it was never going to be a significant amount of revenue. I’ve noticed this as well with my apps. I know that I remember WuFoo talking about this when they said it was like 90% of their profit was from their top two plans which were the super high end enterprise plans and everything else was more of a around. So his takeaway that some pricing plans exist simply to make other plans look better. That’s what he calls a wedge plan, that’s in between. While lower pricing plans can be a decent entry level for people, in general you are going to make the vast majority of your revenue and profit from your higher end plans.
[07:13] Mike: Yeah. What’s he’s referring to as a wedge plan is classic anchoring where you’re basically anchoring somebody’s concept of how much something is worth to the different price points by just having it in there. If you look around there’s various examples on the internet where you if you have two different plans that are close to each other in cost, let’s say you’ve got one plan that’s $10,000 and another one that’s $15,000. If you introduce a $30,000 or $40,000 plan then people will go for the $15,000 plan and look at it as much more reasonable than it was before. And in addition they won’t try to negotiate you down on some of the different pricing because you’ve got this massive plan out there that costs so much more and it’s obviously geared to other types of people and to look at it and say oh well, that’s just what it costs.
[07:56] Rob: The third tactic that Richard mentions is discounts. He says we had 13% of paid accounts on some sort of discount with an average discount of 52%. Not surprisingly the lifetime values of these discounted accounts were lower, they were 17% lower, the non-discounted accounts. But it was offset by the fact that they were also 17% less likely to have churned. And his takeaway is discounts can be a useful tool for driving conversions without undermining long term lifetime value. But heavy usage might signal issues with your pricing structure.
[08:30] Mike: Yeah. These numbers that he kind of cited are a little bit confusing because he’s saying that some of the paid amounts that had a discount, they paid less than 50% of what the actual price was. But they provided a lifetime value that was 78% lower than the non-discounted accounts. And he said that it’s offset because there’s 17% less likely to have churned.
[08:51] But what strikes me as odd is it sounds to me like by giving them a discount they’re more likely to stick around for a significantly longer period of time because he’s saying here that the lifetime value was 17% lower but they were given a 50% discount. So those numbers just don’t quite make sense to me. It almost sounds like he’s saying that they stuck around for longer.
[09:14] Rob: Yes. He is saying they stuck around for longer. Basically the mental piece of it is if you have a discount, you don’t want to quit and then not be able to get that discount again. So the fact that some people got what I imagined were positioned as one time discounts of 40% or 50% they felt like they were getting a really good deal so they’re more likely to stick around even if they may not be using it for a month or two. Whereas if you’re paying full price what’s really going to keep you there?
[09:38] I’ve used discounts in a couple different ways. I’m always pretty careful to use them. Typically when I do a launch, I always want to give the people who’ve been on the email list definitely give them a special discount because it’s a nice encouragement for them to get in and try out the app. You give it to them for the life of the account. Your grandfather them in. It’s a great way to get them in on the ground floor and like he said it actually reduces churn which is helpful early on.
[10:01] The other place that I’ve done essentially discounts is with affiliates. I don’t discount and do affiliate commissions but in essence, having an affiliate is kind of like discounting because you’re basically paying that affiliate a portion of the sale. And so I have used affiliate programs to just some success on some of my products so it’s another place I’ve used it.
[10:24] The last one is there are a lot of kind of perps, pages behind pay walls. So like in moz.com which used to be SEO MOZ and there’s a bunch of other membership sites. They will contact me and ask about discounts on a particular product and if it’s behind a pay wall and not going to be available to the general public I will typically – and they have enough of volume that it actually makes sense, I will typically go ahead with that. And so those discounts I’m talking about are a little different I think than what he’s talking about.
[10:53] It sounds to me like they were doing more enterprise sales with these really high price points and so they would probably negotiate individual discounts. I haven’t really done that. I don’t tend to want to argue over pricing but then again I don’t have $600 a month plans like he does. I think this is probably an interesting topic. I’d be interested to see more data on it as well as discuss it more in a future episode.
[11:15] Mike: Yeah. I think we definitely have to take a look at what your pricing points are and if you are selling into the enterprise, it’s almost expected that you will have an enterprise plan of some kind that is largely negotiable. I’ve seen enterprise plans get knocked down by 90% before which is just a crazy number to drop it down by. Some of them are really good negotiators and they will pick two different vendors against one another directly and say well this is my price point. Either you beat it or you lose the bid.
[11:42] Rob: The fourth tactic, Richard talks about is usage limits and he talks about that at one point they added usage limits on the number of users who could give you feedback. Since most of their plans were feature based, they saw very few upgrades post trial so they thought usage limits would drive upgrades as a company scale activity. And to quote him he says “this was a huge failure. It created what I call a success penalty: the more successful you were in activating your users to give you feedback the more expensive the product became.” So his takeaway is if you’re going to price on usage, it needs to be on usage that customer has control over such as number of seats, minutes used, etc.
[12:19] Now my take on this is that usage limits can work and that even if it’s something I don’t have control over, I just don’t buy into this success penalty thing. I think that for UserVoice to provide a lot of value to their customers, people have to get a lot of their customers activated and using it and so he’s right. There is a success penalty that’s not great. But if you look at it like analytics packages at kiss metrics or get clicky or there’s a number of them. They base their pricing on usage.
[12:47] And the idea is that as your traffic increases that you’re probably becoming a more successful company. You’re getting more value out of that product and you’re putting more load on their servers. And so you could call that a success penalty but I believe that works. In fact I based Hit Tail’s pricing on this usage model and that has worked out well for us. So I don’t think this is an absolute always works, always doesn’t. I can see how it didn’t work for UserVoice but I do know that it works in other cases.
[13:16] Mike: I think this is very largely dependent upon the very specific offering that you have, what you’re putting that usage limit on. Even within any given products, I mean you can put a usage limit on a ton of different things. And depending on what you put it on, I think it depends a lot on what the end user values and how much they think they’re going to use of something and how easy it is for them to mentally translate that back to their actual usage to figure out what they’re going to end up paying.
[13:43] I really feel like part of the problem that they had was that people don’t necessarily understand or know or have a good way to predict if they start using this, how much are users going to use it and what plan are they going to end up in because there’s a very big difference between $89 a month plan and a $289 plan. So if you’re kind of borderline and you don’t know if you’re going to have $700 or $800 voters then what does that mean on my website? How many votes am I going to get?
[14:11] It’s like well it depends on your traffic, depends on how engaged they are with your site. Depends on how much your support problems are right now. There’s just so many factors that to me, I look at that and I say that’s just confusing and I would have no idea where I’m actually going to fall within those users limits.
[14:26] Rob: Yeah. I’d agree. I think the other thing, look at mailchimp and a lot of the email marketing systems. I mean they base it on how many subscribers you have and that could also be called a success penalty but I would still say that actually works because when your list does hit 10,000 you really should be paying more than when your list was at 1,000.
[14:41] Mike: The different between something like mailchimp is that you have these people going into your mailing list and you can look at that and you can understand on a monthly basis oh I had 600 this month, 700 this month, 800 the next month. Whereas with what UserVoice was doing they’re saying well you get up to 1,000 voters per month. Well it could be 500 one month. It could be 3,000 the next and because there’s no accurate way to predict that, that’s where the problem comes.
[15:09] Rob: Yeah. That makes sense. And it also as you said, their pricing plans, they’re such a big jump between them that with mailchimp you’ll jump maybe $25 or $50 in a month but you don’t jump $200 like UserVoice did. So it seems to come down to you can do it based on usage limits. You can do it based on featured gating and what he’s saying is gating features for them worked better. I still believe there’s a very strong case to be made for usage limits in a lot of cases.
[15:38] The fifth tactic that he discussed is length of trial. He said moving from a 15 to a 30 day trial had no measurable impact on any metric that they track ‘til they kept it at 30 days for marketing reasons.
[15:51] Mike: That seems like a very arbitrary thing to do. You changed it and nothing’s seemed to change in their metrics so we just leave it there for marketing reason which are entirely arbitrary or arguable at that point.
[16:02] Rob: Yeah. It’s tough to measure. I mean if he got data then I can understand him doing that but I do question the logic of going with 30 days instead of 15 because with 15 you can iterate. You can test so much faster. And you essentially, if there really was no difference, I would always opt for a shorter trial because you just move faster. You can only do 12 split tests a year if your trial is 30 days long. If you want to mess with any emails during that sequence or any of that stuff.
[18:31] Whereas if you’re doing 15 day trials, you can do 24 different tests on your trial. I’ve always found that shorter trials worked better. Here’s the next piece of data I would want is to run some ads with 30 day trial lengths and run ad with 15 days trial lengths and see if one gives you more upfront clicks or more conversions or sends more people into your funnel. Because if that’s the case, then he’s right, you would want to go with all the things being equal, if 30 days just sends more people into the funnel then of course that’s going to make you more money in the long run.
[17:03] Mike: Yeah. But from the way you said it, it sounded like you didn’t have any measure or impact on any metric that they tracked and my assumption would be that they do track the number of people coming in and everything else. So like you said, it’s very, very hard to say.
[17:17] Rob: And the sixth and final tactic that Richard discussed is requiring credit card before trial, something we’ve talked about quite a bit on this podcast in the past. He says moving from requiring a credit card upfront to not requiring a credit card until the end of the trial had no effect on overall conversions. To quote him, he says the general view is that not requiring a credit card up front is good for new services where customers don’t quite know the value of a service. So this switch may have been more beneficial if we had made it earlier but by this point UserVoice was pretty well established and you knew what you were getting into. One group that really loved this switch was his support team – they now had a lot less angry emails from customers who had auto-converted and needed a refund which they always gave he says.
[18:00] Mike: It seems to me like you could still ask for that credit card upfront. If he’s saying that it didn’t have any effect on the conversions or trial sign ups, I find it hard to believe that it had no effect.
[18:10] Rob: It depends on what they were doing. Remember we talked about the totango research thing that we’ll link up on this episode as well but they basically said that your numbers are going to be totally different and this has been my experience. If you asked for it upfront, you get fewer people into your trial sequence but you convert a lot more of them in the other end. And if you’re doing more of low touch sales and you’re not actually reaching out to people, then that’s going to be your best approach.
[18:32] But if you are doing more of an enterprise model where you have inside sales people and you’re again, calling people on the phone, emailing directly, you’re really nurturing them along and you’re doing more of a manual intensive thing, then not asking for credit card and just getting people into the funnel then qualifying them to see, only going after the active users and all that stuff, it’s a much more time intensive approach. But the totango study says that results in more customers overall. So without knowing how UserVoice was operating during the trial, you can’t really make a call as to whether he conflicts with the totango stuff or supports it.
[19:05] Mike: If it really didn’t have any effect on those conversions or trial signups, I would probably lean towards not requiring it just so you reduce those support costs because obviously anyone who gets angry and comes in and says hey, I want to refund and not only do you have to pay the refund fee or whatever, but there are also going to be people who dispute the charges as opposed to reaching out to you so that’s going to cost you money. And then you’re going to have to have more support people to deal with those incoming emails.
[19:31] So everything being equal I would say yeah, in this particular case you wouldn’t want to require the credit cards but I think that in general, if you have a new business that you’re starting up, you want to ask for it just so that you don’t have to do these high touch things.
[19:44] Rob: Right. And I think with the new business as well you want people – as long as you’re conveying the value proposition pretty well n your landing page or pre-trial, then the people who give you the credit card are the most qualified and they’re the ones that you really want to engage with as you’re trying to build out those new features.
[20:00] So if you raise $1.8 million and you have to get to X thousand users per month and you just need growth, growth, growth, then yeah, maybe not asking for credit card is fine. As a bootstrapper, you need to get to revenue. You need to get to it quickly and you need to find the people that are really going to use your app and then find more people like them and you need to build out the things that they want rather than getting – if you ask for credit card upfront versus not, you’re going to probably get five times more. These are real numbers, five times more trial users into your funnel if you don’t ask for credit card.
[20:25] Now the question is is that a good thing or a bad thing? It’s a bad thing if you’re doing all your email support and your volume is five times as high or you’re doing all the on boarding and there’s any type of manual process involved in that because in the end you’re going to convert about the same or maybe it’s a few percentage points more but there’s so much more upfront work for you to do there. So there really are a lot of tradeoffs here and it’s about knowing what is best for your particular scenario.
[21:02] And as we’ve said many times, typical bootstrappers where you’re not quite sure what you’ve built yet, you’re not quite sure who should be using it, how to market all that stuff, I would always go to the people that are at least willing to take a chance to on you by entering their credit card and giving the app a try rather than the four other people who aren’t going to sign up but who would if you didn’t ask for credit card upfront.
[21:25] Mike: Something else to point out is that just because you make a decision one way or the other doesn’t mean that you can’t change it in the future. You could always start out by asking for a credit card and then as you scale up the business and you have people who are dedicated to support or dedicated to following up with new customers who’ve signed up for the service, then you can switch over to that sort of model and do more of an outreach program to help bring those people in.
[21:46] Rob: Absolutely. That’s a thing to remember is none of this are set in stone. All of this stuff is fluid especially in your early days pre-launch and probably for the first 3 to 6 months after launch. You will be changing some of these. So I always look at it as what’s my rule of thumb based on my experience and other people’s experience and research reports like totango. Make the best call that you can and see how that works for your business.
[22:10] And if there’s a big outcry from a lot of people who are interested in actually paying you money, then you need to reevaluate that or if your conversion rates are really low, you need to reevaluate that and that’s kind of the bottom-line with it. Without data for your particular instance, your app, your customers, your marketing, these are all just rules of thumb to get you started. But from there, you’re going to have part gut instinct and you’re going to have part a lot of data gathering to determine which direction to go with all these kind of pivot points.
[22:41] Music
[22:44] Mike: If you have a question for us you can call it in to our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 152 | Strategies For Loading Up Your Pre-launch Email Lists
Show Notes
Transcript
[00:00] Mike: You know I haven’t paid a lot of attention to the discussions around the NSA the past month or so but I have a conspiracy theory I want to share. I think that the NSA is single handedly responsible for unleashing both Perl and Php around the world.
[00:11] Rob: And tune in next week when Mike and I answer hate mail from all the Perl and Php developers in our audience.
[00:16] Mike: This is Startups for the Rest of Us: Episode 152.
[00:19] Music
[00:28] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:34] Rob: And I’m Rob.
[00:35] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
[00:40] Rob: Things are ramping up there. They’re starting to get exciting. Drip, I’m doing another small launch this time to about 25% of our list. So just cranking out a few last minute things before we go live next week. How about you?
[00:54] Mike: Part of the good news and bad news today because we’re recording a little bit early. So the bad news is there’s not going to be a lot updates. But I do have some good news to share and I know it’s only been three days but I have my first confirmed paying customer for AuditShark.
[01:07] Rob: Congratulations man. That’s awesome.
[01:09] Mike: So we’re still straightening out, things with the credit card but the agreement’s already kind of in place.
[01:13] Rob: This is like a momentous occasion. You have your first pay. How does it feel?
[01:17] Mike: Good. It was nice to get the email because I asked very directly. I just said now that the remediation information is in there because you said that was going to be a problem before, now that it’s in there and you could take a look at stuff, what do you think and is this worth paying for? And kind of want to get his thoughts on whether he thought it was valuable or not and whether he still found a need for it in his business and he’s like absolutely. This is what I was looking for.
[01:41] Rob: That’s great news man. Now to find 500 more people exactly like him.
[01:45]Mike: Yup.
[01:47] Rob: Congratulations again.
[01:48] Mike: Thanks.
[01:49] Rob: So I was wondering what your take was on Brecht Palombo’s suggestion for scalable content marketing for Audit Shark? So Brecht Palombo runs – with Scott Yewell, he has a podcast called Bootstrap with Kids and in episode 23 he outlined scalable content strategy.
[02:05] Mike: Well I listened to the episode and it’s funny because at first I was like I don’t think this would really apply to me because the stuff that I’m putting out there is ultra specific and it’s all remediation information so I wasn’t thinking it would be terribly applicable. It just wouldn’t be stuff that people were searching for.
[02:21] And then I got an email from Patrick McKenzie who basically said the exact same thing but he phrased it differently and it really made me think about maybe I could do this? So one of the things that comes to mind, if you haven’t gone over and listen to Bootstrap with Kids, definitely listen to not just that episode but the podcast. His podcast is pretty good. I’ve been listening to it all along.
[02:40] He lays out the strategy where he has something like 15,000 pages that are published to his website based on information that he’s gathering as part of his product. I can basically do the same type of thing within Audit Shark where all the different security control points that I’m looking for and not just those but also the steps that you need to go through in order to remediate them, I could take those, dump them from the database, add some metadata around it in order to address some SEO concerns and formatting and things like that. And then publish them through the website and make them indexable by Google.
[03:13] Rob: Yeah, and that’s the basis of that whole scalable SEO content marketing rather content – it’s not really content marketing because I consider content marketing to be more viral and sharable stuff. But it’s getting into Google and getting a large foot print and then as soon as you have any type of website authority, those pages, they start ranking for those long tail keywords terms and those are the ones that someone’s searching for some really specific searches. They tend to be more likely to have that pain point and more likely to convert.
[03:39] We’ve seen Patrick McKenzie use it with success on Bingo Card Creator and we’ve seen Brecht use it. We’ve see some other examples of it. But I definitely think if nothing else, it’s worth line item in your marketing plan and at least a trial implementation. But the thing is with scalable content I think once you do a trial implementation you might as well scale it up. Right? Because if you go to the problem of kind of defining stuff for 100 pages you might as well go to 500.
[04:02] Mike: Definitely. I think there’s going to be some work around the formatting side of it but in terms of the content itself I don’t think it would be very difficult to just – if you’re going to do it for one page, what’s the difference between 1 and 500? Because you’re already kind of automating it for a couple of pages.
[04:15] Rob: Right.
[04:16] Mike: You almost need to do a lot of them in order to figure out whether or not that’s going to be boosting the traffic because most of them are going to be very long tail things that aren’t going to get a lot of hits but the ones that do are going to be fairly targeted.
[04:28] Rob: Right.
[04:29] Mike: So definitely thanks to Brett and Scott and Patrick McKenzie.
[04:34] Rob: You mentioned you’re having trouble with your Nexus.
[04:37] Mike: Yeah. So it’s only a week old so I’m fairly certain it’s not the hardware but it feels like it’s just buggy. Whenever I open the browser, occasionally it will just crash on me for no good reason and I’ve had it shut down on me just randomly. So I don’t know what’s up with that but you know, I’ve read around a little bit. It seems like the Nexus’ got some bugs in it and it’s more operating system related. And also a lot of the apps that I download, I feel like every single app wants an always on connection to the internet so that they can phone home. And if you don’t have an internet connection they just don’t work.
[05:11] If it weren’t for those apps, I mean I could deal with the bugs. Yeah, it’s a brand new tablet. It’s probably going to have some bugs here and there. They’re going to issue same updates. I’m not real worried about that. The thing that bugs me is the apps always wanting this constantly on internet connection. That’s the part that bugs me because if I’m using it on a plane or something like that, I’m not going to have that. And what’s the point of having a 32 gig flash drive if it’s not even going to be used.
[05:33] Rob: Yeah. That makes it tough.
[05:35] Mike: I mean I’m going to keep it and kind of see how things play out but like I said it was an experiment so just kind of dip my toes into other realms of technology.
[05:43] Rob: Sure.
[05:44] Music
[05:47 Mike: Today’s episode is called strategies for loading up your prelaunch list. We got an email from Jack over at collabinate.com. He says hi guys, love the show. I’ve listened to every episode and was inspired enough to come to MicroConf 2013 which was amazing. I’m building a service called Collabinate which provides an API for hosted activity streams. It’s really all for building Facebook or Twitter style feeds into your apps letting you surface information for your users without making them dig.
[06:10] I’m writing because of something Rob said in the last episode. You mentioned you had 1400 subscribers to the Drip mailing list. My question is how the heck did you get that many sign ups prelaunch? I’ve had my landing page up for a few months now with ad words and Facebook ads pointing people to it for last month and I still have under 50 subscribers. Do I just need to spend more on ads or do you guys have other better strategies for getting more people interested to sign up? Thanks again for the great content you guys put out.
[06:33] So today what we’re going to be doing is we’re going to be talking about some of the different options you had for helping to scale up and build that list and then we’re going to also talk about some of the things to keep in mind while you’re doing that or in some cases before you go about launching into some of these different options.
[06:46] So the first one is to find websites that accept startup submissions. There’s at least a couple dozen places where you can do this. I’ve used a beta list in the past. I’ve got a spreadsheet that I put together with a bunch of them. So you can just go to Google and search for like startup announcements or software betas, things like that. There are a lot of different websites out there including reddit. I think reddit has a couple of sub reddits where you can go in and you can – I think one of them was called rate my startup or something along those lines.
[07:12] There’s tons and tons of places where you can post links back to your website and not just get signups but also get people giving you feedback and comments on either design or the product itself. You do have to be a little bit careful about some of that feedback because if they’re not actually interested in buying it then you kind of want to take some of their suggestions with a bit of grain of salt.
[07:31] Rob: With Drip I was able to get on several of this kind of beta, these prelaunch sites because there are two different types of these. There are some that only accept startups that have launched. I think like killer startups is like that and a few others but then you mentioned beta list and there are just some that are pointing more to like landing pages or startups that are in beta or are going to be launching soon.
[07:52] And the beta list in particular I’m pretty sure I got almost 300 email signups when it appeared on that site. So this is definitely something that’s worth sending at least a little bit of time on. All of the sites are not going to list you because they do get a lot of submissions and all of them are not going to lead to 300 signups but if in aggregate, you can either spend n hour or pay a VA to spend a couple hours and do this. It’s certainly something in those early days doing the things that don’t scale to kind of get the momentum going. It’s definitely up there.
[08:22] Mike: One of the things I did was I complied this list of different sites and then handed it off to somebody to go through all the different sites and get all of the required fields that they were asking for and just build a spreadsheet so that I knew all the information that they were asking for. And then either I will go through it or I’ll probably have somebody else go through it and just paste in the answers to all the different questions that they were asking.
[08:43] So there’s definitely ways to kind of scale us out and form out different pieces of it. But there are things like the description, the sales pitch, things like that, those are things that you’re going to want to kind of craft a little bit and put a fair amount of thought into it. It’s not like you can just say oh well, I need you to go fill out all these different forms because things like the founders name and your website and things like that, those are very straight forward but there are other things like the sales pitches and the URL’s and stuff, some of them you’re going to want to use tracking mechanisms for that kind of stuff.
[09:11] Another option for building your mailing list is use social media like Twitter or Facebook. I’ve been using Twitter to build out the following for Audit Shark and I’ve actually started getting large enough following that people from that are filtering into my mailing list. So basically there are certain tweets that are going out, specifically mention Audit Shark, hey check this is out and I embed different tags and they’re from Google to be able to do the goal tracking and identify clearly whether or not somebody clicked through from Twitter and then onto the landing page and then actually submitted their email address.
[09:43] Rob: Yeah. I think that’s a really good point. If you’re going to do this you should absolutely setup goals in Google analytics so that you can see which sources are converting for you. Because it’s not just about driving traffic. It’s about driving actual emails. And the nice part about this is if you vet these traffic sources early then once you launch and you’re actually going after paying customers, you already know which traffic sources you are going to focus on. So I haven’t done much with the social media angle, getdrip Twitter account and Facebook page but they’re just place holders at this point and I haven’t use them to really to drive leads at all.
[10:15] Mike: Third option is to ask to be a guest on podcasts. There’s a couple different things that this will do for you. The first one is typically it will get you links back to your website and drives them traffic and SEO a little bit. But the other thing is it gets you in front of more people. Clearly you don’t want to just blast out an email to tons and tons of different podcasts and just ask if you can be a guest on their show.
[10:38] What you really want to do is focus on the podcast that you believe are going have an audience that overlaps with whatever problem that your podcast solves. So if for example for Audit Shark I would probably go on to tech oriented podcasts or anything that has to do with dev opts, security management, those types of things. I wouldn’t want to go on to a podcast that talks about marketing and say hey you guys should lock down your servers. It’s not really applicable to the audience and when you start making those pitches, I almost feel like it would make you look bad by making a sales pitch to somebody to have you come on their show when it’s just totally not relevant to their audience because they’re not going to get anything out of it.
[11:12] Rob: Absolutely. And the thing to keep in mind when you’re pitching podcasts is you’re not pitching your product. You’re pitching a story. So what is the compelling story that you can offer to their audience? What is the way that you can make their podcast look good? So when I go on podcasts, I always make sure that I’m not on there to talk about Drip or to talk about Hit Tail but I’m there to educate their audience on how to market. And then I use maybe Drip as an example.
[11:38] or I’ll go on to talk about how to support an app or how to scale something and again it always gets mentioned because that’s the experience. It’s kind of mentioned on the side and that drives people to the site just because they become kind of curious about what you’re up to. So I found that it seems like the podcast listeners, if you’re in the right niche and you do get a nice lock-in with your core audience, you provide a lot of value to, then that works really well. But as soon as you stay out of that one, Mike said the conversion rates go down.
[12:07] Mike: Something else to keep in mind when you’re pitching to podcasters is you don’t want to send out those blank emails. As Rob said you do want to tell a story and you want to make sure you tell them exactly how your story is relevant to their audience.
[12:21] Rob: Right. I think we’ll have better luck talking about your podcast after it’s launched unless you already have a story to tell before it’s launched. Right? You need something interesting to talk about. And when I’ve pitched podcast I typically start with the people that I know because they’re just going to be more likely to let me on. And then once I have a few of them then you can start branching out because you’ve gotten better about talking about your product and your pitch gets a little better.
[12:45] But I hand send emails to every single podcast. I would never do a bulk send because you really have to hand tune that pitch in order for it to be anywhere near relevant. I will also, if I don’t listen to the podcast regularly, I would go back and listen to the previous three or five episodes just to figure out if in fact my information is a good fit for their audience.
[13:06] Mike: Great points. The fourth one is to use paid traffic on some of the various ad network. I did a quick search for ad network on Google and on the first page there was a search result named 25 ad networks for online businesses. So these different ad networks are very easy to find. Google ad words is clearly not the only one. LinkedIn isn’t the only one. Facebook isn’t the only one. There are a lot of them out there. Some of them are very niche ad networks so you can find some that only cater to certain audiences.
[13:31] And if you can find out that caters to the audience that your products solves a problem for, then you’re going to have much better results with that particularly ad network than within some of the others.
[13:41] Rob: Yup. I’ve done this every time, every time I’m going to launch something and I did it with Drip as well. This is a great way to find out which ad networks are going to work for yours and I absolutely got – probably in the several hundred and it may even be a thousand signs ups from this approach.
[13:56] Mike: The fifth one is something that I’ve started doing recently is I subscribed to helpareporter.com and I’ve been looking for any reporters that are doing stories that are related to security. And if you’re not familiar with helpareporter.com they have a daily email that goes out I think three times a day and it will include all these different reporters and a summary of what they’re looking for in terms of a story. They’re generally looking for sources of information.
[14:20] I got one today that was specifically looking for the security practices that you educate your new employees on in small and medium businesses. And they tend to spell out exactly what they’re looking for whether they want to do an interview. Sometimes they’ll say exactly who they’re going to be doing the story for. Sometimes they’ll just say it’s just an anonymous source or they’ll say it’s a podcast or something along those lines.
[14:41] I’ve even seen other startups that are doing this because they are trying to find content for their blog and they’re looking for people to interview. So that’s another way. It’s more SEO related. It’s not necessarily related to loading up your prelaunch list but that’s another avenue for marketing your startup.
[14:55] Rob: I used to use helpareporter. It became too time consuming at a certain point. If you have a bit more budget than you do time, there is a service that I use. It’s called bitesizepr.com. It’s $89 a month and you enter a bunch of info and they monitor helpareporter for you and actually write the pitches for you. You approve them or reject them and then if a reporter contacts and obviously you talk to that reporter but they basically take a lot of the grunt work. The three emails a day was a bit overwhelming for me.
[15:24] Mike: So the sixth strategy is to setup Google alerts and let Google search for new pages which match your search criteria. And in some ways this could be a little bit overloading just like you said that you found helpareporter.com to be because you’ll get emails from Google all the time. And typically you setup these searches and what you’re looking for is anywhere where people are talking about something that relates to your product. You want to go in, take a look and see if there are any non-salesly ways you can comment n whatever the topic is because a lot of these things will come back from blogs.
[15:53] Sometimes you’ll see things that are sales pages of your competitors, those you can generally safely ignore because they’re not usually going to allow people to just randomly comment on their site. But any blog articles that come up, what you’ll do I you’ll put a signature into the profile that you setup and then put the link back to your website and that will help drive some traffic back to your site.
[16:13] You probably want to use a VA for this kind of thing to kind of sort through and filter the data. I would say this is probably not one of the best sources for loading your prelaunch list because 1) it’s time consuming and 2) you’re going to have to put a lot of time and effort into it and you’re relying on traffic that you’re getting. So you’re also going to have probably some issues putting in any sort of tracking codes in and the URL’s that go back to your website. I would definitely rank this lower on the list on a lot of these other strategies.
[16:41] Rob: But I actually think there’s more value here than just building your prelaunch list. If you really are getting alerts and you’re seeing blog posts come up or forum threads or stuff of that nature and you go in and participate, you’re going to learn a lot about that audience and you’re going to learn about whether they are interested in your product. And if you actually post it into a forum or comment discussion and you come back and see what people have said, that alone could help you hone your value prop, hone your headline, hone a direction that your product’s going to go. You could really get into almost that customer development type discussion.
[17:13] I think there’s potentially more value here than just building the list. It’s obviously not scalable but I have definitely done this and spent many hours kind of pounding the pavement in this fashion.
[17:25] Mike: So the seventh option is to ask bloggers if you can write guest articles on their websites. Something to keep in mind here is this is very similar to approaching podcasters and asking them if you can be a guest on their show. Make sure that you’re making individual sales pitches to these guys but also, save your best material for these blog posts. You don’t want to be putting your best material on your own blog. You want to be putting it elsewhere. So that will help drive that traffic back to your website.
[17:48] Rob: I mean this is an entire art right? Of trying to pitch in and get guest blog posts. I get pitched probably once or twice a week for people to guest post in my blog and anyone that I don’t know or haven’t had some connection with almost always gets a no. If you follow me, if we’ve interacted at least once and you pitch a compelling story, you’ll see there are a lot of guest posts on my blog recently because people are doing exciting things and since we met at MicroConf or we’ve emailed in the past or I have some buy in or some interest in their story, it just makes it so much more likely that I’m actually going to say yes.
[18:21] So to be honest, there are some pretty good stories like on hacker news and some other marketing blogs about how to market your app through guest post and like I said, there’s a lot to it, a lot more than we can cover in this episode so I would go to Google and search for that and do some research because there’s a right way to do this and wrong way to do it.
[18:38] So the eight strategy or loading up your prelaunch list is it use SEO. A lot of people think why would I do SEO so early because doesn’t it take months and months to rank for a term? Is it really going to actually play out before my launch? There’s a couple responses to that. A lot of people think that their app is only going to take 3 or 4 months to build and it winds up taking 10 or 11 months. In that time, you can do a heck of a lot of SEO. And even if you don’t get a number one ranking and time to build your list you’ll be way ahead of the game than if you wait until you actually launch. So that’s the first thing.
[19:10] Second thing is I have seen using tactics that go after long tail keywords or giving away some pretty specific templates that are related to your business like Bid Sketch, when Ruben first started, he gave away web design templates and kind of stuff. That was way in advance of his launch and that was a big reason that his mailing list grew. I have seen people give away email templates. I’ve seen people give away all types of stuff that’s landing page templates, all types of stuff that’s actually actionable.
[19:40] So if you plug those two together where you’re doing some SEO for terms that other people aren’t doing a fantastic job with, and you’re giving something away and letting them know hey, if you do this, we’ll also let you know when we launch so that they’re aware of it, you can grow your list a lot faster that way.
[19:55] Mike: Yeah. I’ve seen people giving away different white papers or eBooks or things like that on their websites. A lot of times I’ll see this as a strategy post launch but I think you’re right. You can definitely use this prelaunch in order to start building your mailing list and getting people interested in it. You can also use that to start discussion and help guide the product direction before you launch so that when you do launch so that you aren’t just listening to crickets while you’re trying to wait for sales.
[20:19] Rob: And the ninth and final strategy is to pick some strategic early access customers. One thing that’s happened with Drip is a lot of the early access customers that have been using it and have been happy with it, they are bloggers themselves. They have large Twitter followers. And I haven’t even asked them but almost all of them written a post, a link to Drip, talked about it on Twitter, mentioned that they signed up. They’ve started to create a buzz which I really appreciated.
[20:42] If you are able to strategically pick some people who actually have audiences, the odds are that they always need fresh content and they always want to talk about what they’re doing, new things that they’re innovating. And if so you’re building something interesting and you do have the potential to let in people with audiences, I would always opt to do that early on.
[21:00] Mike: So those are nine different strategies that you could use for loading up your prelaunch list. Now as part of these strategies, there are definitely some things that you want to keep in mind. The first thing you want to keep in mind is that you want to use landing pages as much as possible so you can test what text is and isn’t converting. Because if you’re bringing that traffic to your website, and it’s untargeted traffic and by untargeted I mean it’s not targeted at a specific page, you’re not trying to pitch them on some of other website and bring them in, there’s a disjointed experience between the other site that they were on and the one that they’re going to if they click on I don’t know, something that say peaches and you show them a picture of oranges, that’s a disjointed experience. It’s just not going to jive with what their expectations are and they’re probably just going to bounce off the page.
[21:44] Rob: The other thing, I mentioned it earlier is definitely setup goals and Google analytics is the way I do it. There are obviously other options but if you don’t know which of your sources are converting then you’re leaving a lot of data on the table.
[21:57] Mike: Another thing to keep in mind is do not rely 100% on the vendor’s conversion stackers for some of the different ad networks. One of the ones I’ve been using pretty extensively lately is Facebook and their conversion tracker sometimes works and sometimes it doesn’t. It’s really kind of bizarre. Some things it does, it just doesn’t make a lot of sense and there are things that they do where they’ll count something and then I won’t see it on my website.
[22:21] What you really want to do is make sure that you’re using something that’s kind of a tried and true mechanism. I use kiss metrics. I also use Google analytics. But you want to use something in addition to whatever it it’s they’re offering so that you know that it’s working and you essentially get a double check on those numbers so that you understand whether or not they’re correct and you know whether or not to look for something else.
[22:41] Rob: Another thing I would do early on is install your remarketing pixels so there’s a bunch of providers for remarketing like perfectaudience.com or adroll.com I think Google does it as well. I have tried four different providers. And I found perfectaudience to be the best. It converted the best for me.
[22:59] But I have had the retargeting pixel installed on Drip since the first day I launched the landing page. Now the cookies only last I think for 60 days or 90 days so I won’t be able to retarget everyone who ever visited the site. But when I do launch I’ll have the previous 60 to 90 days worth of people who visited and didn’t give me their email address and I will be able to then show them ads and say Drip has launched or check this out because I know they’re at least mildly interested in the product.
[23:24] So before you start driving traffic to your landing page I would highly recommend it’s free to sign up for perfectaudience or AdRoll. Grab the tracking pixel and put it on your websites so that you can basically start cooking those folks as interested parties.
[23:39] Mike: And some of it kind of ties into that a little bit is if you are doing paid advertising to drive people through, if you don’t have time to manage and track that paid advertising campaign, shut it down because you’re basically just throwing money away, there’s a lot of little tweaks and stuff. You really have to be paying attention to these and put a process in place that allows you to understand whether or not it’s working and if it’s not, you either need to make the tweaks or just kill that particular one because there’s a lot of different things that you can try and if you’re not paying attention to those, you’re just basically flushing money down the drain.
[24:11] Music
[24:14] Rob: If you have a question for us, call our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. See you next time.