Episode 352 | Housing Multiple Products Under One Brand, Stair-Stepping, Pricing Tiers, and More Listener Questions

Show Notes

In this episode of Startups For The Rest Of Us, Rob and Mike take a number of listener questions including housing multiple products under one brand, stair-stepping, and dealing with pricing tiers.

Items mentioned in this episode:

Transcript

Rob: In this episode of Startups for the Rest of Us, Mike and I talk about housing multiple products into one brand, stair stepping, pricing tiers, and more listener questions. This is Startups for the Rest of Us episode 352.

Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs, be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.

Mike: And I’m Mike.

Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?

Mike: I finished up my 21 day video series and I made Bluetick live over bluetick.io. I pushed it out to my mailing list and went from there. That went out on Tuesday and it is now Thursday.

Rob: Indeed, you did. Congratulations, man. This is a big milestone.

Mike: Thank you.

Rob: You’re public. People can go to bluetick.io, sign up for a trial, the whole deal.

Mike: Yup, for the time being. I’m debating whether or not to pull it back now at this point and make people go through a demo.

Rob: Demo only?

Mike: I don’t know. I’m going back and forth on that, to be honest. I have to think about it a little bit more but we’ll see how it goes. I need to think about it and figure out what would be the best strategy, because I know how the demos and stuff go and I also know how the product is portrayed on the website because the website is just not finished yet. It might be best to go in that direction at least for a little while, anyway. I can even do a launch every three or four weeks or something like that.

Rob: It feels to me, at this point, it’s time consuming but it feels like the right choice to still do demos so you can hear. You’ve built something that a small number of people want. You’re edging into some product market fit because you have paying customers and you’re in the low four figures. To get to where that’s 10 or 20 times that number, I think you have more to go, to build some unique features and I think those demos will really help not just close more sales, but will just help with the education and the customer development effort.

Mike: I totally agree with that.

Rob: Sounds good.

Mike: How about you? What’s new with you this week?

Rob: WordCamp Minneapolis is happening starting tomorrow. It’s over the weekend. That will be the weekend before this podcast goes live. I’m actually moderating a panel there with Cory Miller, my wife Sherry, and a guy from OSMI, which is Open Sourcing Mental Illness. It’s about staying sane while starting up or staying sane while being a developer and that kind of stuff. It should be fun here, Friday morning.

On Monday, I fly out to California. It feels kind of a much needed vacation. I’ve been travelling quite a bit but most of it has been work time. When I went to Chicago with my son, I pretty much worked that whole week. I’m actually planning to go to Central Coast, California and really take some time away and do some thinking about what I want to see in my life, both professionally and personally over the next 6 to 12 months.

I won’t have time to do a full retreat by any stretch, but I bet I’ll be able to carve out a few hours here and there. It feels long overdue to just step away from the laptop, get my head clear, and get a little bit of distance from work, both literally and figuratively.

Mike: Cool. Sounds like a good time.

Rob: I hope it is.

Mike: What’s on the agenda for today?

Rob: We have more listener questions. I’m finally getting to where we have, I don’t know, maybe after this episode, we’ll only have maybe half dozen in the queue. That feels good because we get backed up where we have 20, 30 in the queue and I feel like we’re not answering people’s questions in a reasonable amount of time. Cool part today is we do have a couple of voicemails. And as I like to say, if you want to go to the top of the question queue, you can send us an audio file to questions@startupsfortherestofus.com or you can call our voicemail number at 1-888-801-9690.

Let’s dive into the first voicemail.

Jeff:     Hey there Mike and Rob. This is Jeff Olsen calling from Saint Paul, Minnesota. A question for you guys. We have two profitable sites, one of them is membership. It’s called Food Blogger Pro, and the other is a food blog called Pinch Of Yum. We’re using some of the profits from those sites to build some software. One is a WordPress plugin. We’re building that [00:04:21]. The other is a SaaS app called [00:04:26] that reads nutrition information for content creators.

Wondering what your suggestion would be for how to structure that as a business. You have multiple businesses, multiple brands, you put this all under one umbrella, multiple LLCs, multiple [00:04:44]. We’d love to hear you talk through how that works, thanks.

Rob: Just to clarify. They have a food blog that would be, I would say it’s a B2C play. It’s amazing recipes and pictures of food. It’s called Pinch of Yum. Then they have a membership website for people who want to become food bloggers, which is cool because they have the proof of concept. They’re not teaching people how to become food bloggers without being food bloggers themselves. That’s a membership website.

And then they have two pieces of software that they’re either building or have built. One is a WordPress plugin. I think that’s for food bloggers. And then they have a SaaS app that does nutrition information. I assume it embeds it on a site or reads it or something like that.

There are four things. They’re all food related but they’re not all B2C. There’s B2C and then there’s B2food blogger. It sounds like maybe two or three of them are. With that background, it sounds like there are really two questions to think about. It’s like there’s corporate structure for LLCs versus one and it sounds like there’s a branding thing, like should they be multiple brands or should they perhaps be all shared under one website. What do you think about all that, Mike?

Mike: I think I’m a little confused about why all of them are starting at the same time or at least it feels that way based on how the question was worded. Do you know…?

Rob: Yeah, I do know more than that. Pinch Of Yum has been around for years and then they started the membership website. That’s been around for a few years but less than the food blog. I think these software things are in the works or maybe the WordPress plugin is done and they’ve kind of done them sequentially. I would of them like I had a blog and then, I would actually have to think about this, but I think what is now FounderCafe but what used to be called Micropreneur Academy came next, then the podcast came and then MicroConf. It’s kind of they were sequentially but there was overlap type of thing. What do you think?

Mike: It’s a tough call. I don’t know as much about each of those individual things. It seems that if there’s both B2C and B2B mixed in, then that makes things difficult and you probably want to separate them a little bit more. But if there’s much more overlap in that and it’s all B2C, then combining them would probably be a better way to go, especially if they’re all kind of in the same niche or a general field or vicinity to each other.

The advantage to separating them completely is that you can cross promote between them and people will probably feel like those are completely different services or things. But I think if it’s a B2C play, then chances are good that they’re probably not going to subscribe to more than one of them if it’s a paid membership or something like that.

I think that there are pros and cons to each of them. I don’t know if there’s a best solution though. Maybe just combining the B2C stuff and then combining the B2B stuff would be the way to go there. In terms of the corporate structure, I don’t know if you really even need to separate them. Not unless you plan on spending one of them off. That’s something you could really do later if you really needed to.

As you start combining them, it’s going to be difficult to disentangle them, especially if you put them all under the same corporate umbrella. The two B2C plays would be difficult to separate if you intertwine them early, and the same with the B2B stuff. The B2B stuff I think would be probably easier to separate but maybe not.

Rob: I am obviously with the caveat that neither you or I are lawyers nor can we give legal advice. I can tell you from the corporate structure perspective what I had done and then where it tripped me up. But I had a single LLC in all my products. He basically has four products. You can call them businesses but really, you manage them like products. You could manage them under a single corporate umbrella. That’s how I did it for years.

Eventually, when Drip did become, it was obvious it was more than a product, it was becoming an entire business and had more employees than the rest of my products combined, that is when I spun that out into its own S Corp. That was a painful process to do. It took several months part time of going through books and setting up new stuff and trying to pull it out.

That was very, very handy that I had done that once we started talking about acquisitions in terms of people acquiring us because once it was spun out, it was so much easier for them to just acquire all the assets of this company, of this corporation, rather than trying to… it would have been a nightmare. I don’t even want to think about how much of a mess that would’ve been.

That would be the first thing I would think. If you really do plan to keep a lifestyle business and you think you will keep these things forever, then you could think about doing the way I had, which was put them all under one LLC. It is the easiest way. If you think you would ever sell one or more of them, then unfortunately, you got to think about breaking them out and having their own Stripe account and each one having their own bank account so that it doesn’t all co mingle. Those are tradeoffs there.

In terms of brand, I agree with Mike. You just think about the audience. It sounds like one is B2C and the rest are actually B2food blogger. It services for food bloggers and software for food bloggers. Then it seems like you have two brands. You have the Pinch Of Yum which is a great brand on its own and has an audience. And then maybe somewhere on there, you have a little thing that’s a food blogger or want to be a food blogger. We also offer this and it leads over to those three things.

They may have their own websites, but I do think there should be kind of a central brand that you come up with that these things are related and you can cross sell them assuming again that it’s the same audience for all three.

Mike: Just to tackle a little bit what Rob said about splitting the business and then possibly selling it later, one thing you could do is a hybrid approach. When you’re doing things in your books, like when you’re hooking things up to a Stripe account for example, you can create different Stripe accounts for each product and then on the back end, inside of Stripe, you can essentially just add different email addresses. It gives you the ability to see and toggle back and forth between them and then send all the transactions and stuff back in your books, and keep them separate in your books so that you can specify a “product line” or a line of business and attribute the expenses and income from each of those things into that product line.

The difficulty comes when you have a single service that you use that spans multiple ones. Let’s say you have a Drip account. You use it for all of them and so it’s one subscription and you pay, I don’t know, $100 or $200 a month and you use it for all four of them. Then you almost have to say, “Well, yes. This goes into this bucket. It’s mutually used by everyone.” If you do sell it later on, you can point directly to those things and separate them out easily when you do go to sell the business. You could even do that in advance of selling it.

If you get to a point where you decide hey, I want to do this, you split everything out, put it all into its own separate LLC or different business, and you’ve got everything already separated. That’s a hybrid approach you could go. That’s actually the kind of hybrid approach that I’ve taken right now just because of all the different things that I have going on. It’s interesting to be able to separate the different products and say this is how much revenue this gets versus how much the expenses are.

Rob: Good question. I appreciate you sending that in. Hope the answer was helpful. Our next question comes from a founder who wanted to stay anonymous. He says, “I’m working for a founder on an idea to automate a process that works in a couple of very lucrative industries. Before I started, there was no product, just an idea and a false start with a development company. I feel like I’m doing the work of a co founder. They’re supplying me industry knowledge, contacts, and funding. I’m running all the discovery, coming up with growth hacking strategies, doing the prototyping, setting the technical and product strategy, and working to build the product with the development company.”

I don’t think Chris is a developer but they’re outsourcing the development. He’s kind of being a product lead. It’s what it sounds like. “I’m due to sign a proper contract of employment with him under a new limited company in a couple of months. My question is what can I expect/demand in the new contract? Is it too much to ask for equity or share options?”

Mike, I feel like there are two questions. Number one is do you feel like he is doing the work of a co founder or more of a product lead? And two, there’s his question. What can he expect or demand?

Mike: From the description that I hear here, it does sound to me a lot like the co founder. I’m a little unclear on the part where he says that they’re supplying the industry knowledge, contacts, and funding avenues. I’m running all the discovery, coming up with growth hacking strategies, doing the prototyping, etc. It sounds to me like that’s almost the division that you would make between two co founders or between an investor and somebody who is building the business.

It seems odd to me there’s this whole industry knowledge, and contacts, and funding avenues. And then separate from that, this person is doing discovery. What kind of discovery is that? Is that like product discovery? Is it customer discovery? It seems a little odd that that has been delegated to him. But it does seem to me like this is much more of a co founder relationship than anything else. I’m not real sure how many people are involved either. Is it one other person? Is it two or three? That’s not real clear from the question either. I think based on that, I would look at that to see how you would approach it.

If things are gumming along where there’s an expectation of a contract, I think it would be a mistake to wait for that contract to appear and then negotiate from there because once it’s down in writing, they’ve already got their expectations written down and what they think is fair and then you’re negotiating from where they’re already at, and it may not even be close to what you’re looking for. I think if you have those discussions early on before they write anything down, then you can probably get much closer to what it is that you’re looking for, whether that’s co founder status or 50% if it’s only one other person or 33% if it’s two other people, etc.

But I would not wait until you get that contract in front of you to start having those discussions because otherwise, you’re going to find yourself probably disappointed just because the expectations weren’t set up front.

Rob: I feel like this is a tough one because I’m not convinced that he’s doing the role of a co founder. I feel like he is a product person. I think the question when I think about a co founder is how hard are you to replace. If you’re working for free and doing a bunch of work, you’re really hard to replace because it’s hard to find people who work for free and who do a good job.

But if you’re getting paid a fair salary for what you’re doing and the expectation thus far has been that you kind of are a contractor or an employee, I think you have to think about how hard would it be to replace you. You and them are the only ones that are going to know this because there’s a lot of details and moving parts with this.

I feel like if you’re more of someone that they could just find someone else to manage this and pay them a salary and they do have the funding to do it, then I think you are much less in a co founder role or at least a very minority co founder. In that case, your percentage drops. I think if you truly are driving the vision and bringing just levels of game that most people would not be capable of bringing, then you could consider yourself, there’s like founding employees. There are phrases like that.

Typically, co founders are people who are putting in money. Most of the co founders will be putting in money as well. It’s not always but there’s a lot more equality between what everybody is doing. Frankly, industry knowledge, contacts, and funding avenues are actually I’m going to say they’re the harder part. Building a great product is not easy but there are a lot of people who can do that. Whereas trying to replace the people with the industry knowledge of a specific industry, the contacts of the specific industry and funding avenues, that is pretty important stuff.

All that to say, I think that if you do feel like you’re truly a co founder, I agree with Mike that you’re going to want to start this conversation early before stuff gets in writing. Yes, I definitely feel in both cases to be honest that you’re entitled or that you should get some type of equity, even if you are someone who they can replace, founding employees often get 1% equity, 2%, 3% equity. It’s a pretty small amount but it’s not totally unheard of if you really are driving the product.

I would even think, depending on how big the business might get eventually, even up to 5%, if you do truly feel like a co founder or consider yourself that, now, we’re talking 10% to 50%. It depends on how many people are involved. That’s kind of the range I would think about. What do you think?

Mike: I actually had missed the part about the paid work. I was operating under the assumption that it was more or less unpaid and part time on the side. I just missed the part where he said he was getting paid for it. I guess I would reverse a little bit but I do agree with you that it sounds to me like he’s pulling a fair amount of the load. He did comment it like I know you said that all the prototyping and the technical stuff and product strategy.

You can put people in to do that stuff, but what’s the discovery that he’s doing? That’s the part that I’m unclear. Is it actual customer discovery? If so, how much industry knowledge and contacts are they actually bringing? That was my question about it. It could go either way. I think there are a lot of subtleties here that we’re just not quite getting.

Rob: I know he wants to stay anonymous because obviously, he wouldn’t want someone to overhear it. He can’t give us all the details but it really does depend on a lot of those details. I think those were general thoughts but wish you the best of luck with that.

Our next question is from David. It’s a question about pricing tiers and dead zones. He says, “Our product Uber rider has a tiered per seat pricing model, where the more seats you purchase, the lower the per seat cost. This leads to dead zones where the price for 40 seats and 50 seats are almost the same if you target 50 as a breakpoint. Is this a bad approach and should a flat per seat price model be adopted to avoid this? We have had some push backs from larger 200 plus seat customers that the pricing was too high. How do you strike a balance here?”

What do you think, Mike?

Mike: This is hard because I’ve looked at specifically this problem before and you’re absolutely right. There are places where it is more cost effective to buy more seats than less, especially if you’re right on those thresholds. What I’ve seen larger companies do in these cases is that they’ll essentially sell you a larger package. Even just for the soul reason that it costs less money and they sell it based on the idea that it gives you overhead.

When you swap people in and out or people leave the company, you don’t have to worry as much about whether or not the license is blocked for x number of days or if you’re transferring it to a new person that you hired in anticipation of someone else leaving. You can just reuse it between them because you’ve got the overhead to play around with.

You can work that into sales discussions. When you start looking at extremely large customers where you mentioned the 200 plus seat customers, I’ve seen pricing for enterprise customers go as low as 10% of the list price. If you’re getting pushed back there, it could be that that’s the problem. They’re expecting a larger discount than you’re providing but at the same time, you also want to be a little bit careful of that because just because somebody is complaining about the price, it doesn’t mean that it’s too high.

If all of them are walking and not buying it, then yeah, that’s probably an issue to look at. But just because they say that it’s too high, it doesn’t mean that it actually is.

Rob: Yeah, it’s funny. I’ve always leaned towards having this flat per seat pricing and then offering discounts to larger customers because larger customers are going to tend to talk to anyways in advance or there’s a point where you just call for pricing and you deal with them. You give them whatever discount you need to land them.

But I have seen more apps that used to have flat per seat pricing move towards tiers, FogBugz is an example. The reason they moved, from what I can see, is they actually wanted to lower the pricing on the low end. You can now get a five seat FogBugz account for $20 a month. That means $4 per seat. As soon as you go to over 5, you need to go to the 10 seat license and that’s $100 so now you’re paying $10 per person. What they want to do is take the air out of the low end and they switching costs are hard in these systems and so they’re actually trying to get people in so that they use the product, get locked in and enjoy using the product hopefully.

And then eventually, way up high, I don’t know, it’s like 250 seats. It starts to drop very slowly and I think that could be a prejudice. If you drop the price slowly enough, then you won’t have dead zones or you could just put it up to a point, have just a few tiers that are flat because that’s how FogBugz is. The 10 is 100. The 20 is 200. The 30 is 300. It’s just pretty much linear. It kind of is like having no discount and then wherever the point where customers feel they deserve a discount or need a discount, you can just do a call us or expect the people to ask about it.

I could go either way. I think in the early days, if I were still trying to get market share, product market fit, all that stuff, I think it’s easier to keep it simple. But once you have more data, more information about usage, you know whether you have lock in or not, you know if the low end is going to be something that you really want to go after, you just get more knowledge about the space, you could actually make your pricing more complex because you have data with which to drive that pricing.

I think trying to guess out of it early on without data is probably a bad move and it’s going to mean you re-do your pricing multiple times. Whereas if you start flat, simple, and just go forward, you can always move to tiers later. I hope that was helpful, David.

Our next question is about health insurance in the US. It’s from Albert. He says, “Hey guys, over the past few months, I’ve grown more and more frustrated by my current 9:00AM to 5:00PM job and more excited about my side project. I’ve been considering quitting my job if I manage earn enough funding to be able to support myself for a year or two, while working on the startup full time. My main concern would be the health insurance situation. If I were to quit my job and give up its benefits, how do you recommend I get health insurance? Should I get personal insurance or are there any services that work with startups and single founders? I’m based in Florida. Thanks.”

The US, Mike. The only country in the world where people voted for the right to go bankrupt from health insurance issues. It’s kind of catastrophic for entrepreneurs. I think it’s an absolute catastrophe that there are founders, I see this, people talk to me, they don’t want to leave their jobs and be a founder and founders are the people who make a difference in the economy. It’s like the small businesses, people who create jobs. That’s where real job creation happens. What’s the number? It’s like 80% of jobs created last year are in companies like 10 people or smaller. Some insane number like that.

The fact that this many people are concerned about it and rightfully so, because it is expensive, it’s just a real shit storm. I think it’s something that we got to figure out. Anyways, that’s his concern. What do you think about it?

Mike: Like you said, it’s a hard situation. I don’t think that there’s any easy answer. I’ve had conversations with people about this. Depending on where you live, the rates can vary pretty dramatically from one place to the next. I’ve seen things as low $800 a month for a small family of four and then I’ve also seen rates as high as $1,500 to $1,800 for what appears to be the same coverage.

I remember bouncing back and forth between various insurance companies for about four or five years mainly because the same exact plan would rise dramatically in price from one year to the next and then the exact same coverage from a different insurance company would be dramatically lower for no good reason. Like I said, I have my conspiracy theory about what they’re doing and how they’re trying to figure out how much can we charge people. And they just jack up the price until enough people turn out, then they turn around and then they change the price.

Rob: That’s such a conspiracy though because they regulate it. We had the guy write in, you know.

Mike: I know. I know. But it still feels that way. No matter what, you feel like you’re getting screwed by the health insurance companies, that’s just the way it is. Whether it’s happening or not, whether they’re doing a delivery or not, you feel that way. I don’t have any good answers here. I used to use an insurance broker in Massachusetts. You really can’t do that anymore because it’s small potatoes for them and a lot of the larger insurance companies don’t work with the brokers anymore. The small brokers just said, “We’re done. We don’t do that anymore.”

Rob: Isn’t it just when you go on an exchange? That’s what they have now, right? Is it healthcare.gov or whatever in the US?

Mike: You can but you’re not required to.

Rob: I understand but that would be where I would start.

Mike: Yeah.

Rob: That’s probably where I would start looking. As well as, Kaiser is not as cheap as it used to be. I had Kaiser my entire life growing up until I was in my 20’s. There’s always the HMO horse. They’re actually a premium brand now, they’re very expensive. Not very, they are expensive. But I would rather fall back to that. This is just personal, what I used to do when I was in between things that provided health insurance. I would do Kaiser or I would go to these exchanges or even go to, yeah there’s healthcare.gov for the government but there’s like a ehealthinsurance.com and there’s a couple other, I think was it healthcare.net? I’m trying to look for it right now.

It’s basically these places where they will give you quotes. There’s a bunch of people competing. You can at least look up insurance by state, and by this, and by benefit. It’s just a matter of doing some research and then realizing that the premiums are way too high for every plan and that you’re not going to want to use any of them. That’s how it always is for me. And then just picking the least of the evils.

Mike: Something else you can do is talk to a CPA and find out what you can right off and what you can’t because depending on whether you buy an individual plan for yourself as a family, where you’re paying out of pocket, versus buying it through the business, that may make a difference. It might cost you a little bit more but if you can write off more of it or write off the whole thing, then it drops your overall taxes. There are games that you can play there too. Just be aware that there is a big difference between an individual plan which is for you or just your family or whatever versus one that comes and insures your business and the employees in it, which you can be an employee in the business.

And then you also have to be careful about whether or not you’re classified as an employee in the business, based on what the state requirements are and whether or not you have to provide coverage. I think if you’re under 50 employees, you’re kind of exempt from most of those things but you opt in one way or the other.

Rob: Right. What we did with Drip as it started gaining a little momentum and we’re still very small but some people were trying to get their own personal health insurance and it was a lot more expensive and it wasn’t taken by as many doctors. I went to Zenefits. Since we were an S Corp, just got it set up there and was able to get everybody health insurance through Zenefits. It still was quite painful. It seems like it should be easier than it is but these are the options that I would look into.

Our last question for the day is from Mike Fleming. He’s asking about multiple email provider conundrum. He says, “The short version is what’s the best way to combine transactional email, newsletter, and Drip campaigns in terms of subscriber consolidation and cost effectiveness? As a small SaaS owner, I used Postmark for transactional emails and MailChimp for newsletters. I’d love to add Drip campaigns. When I do though, I’ll have two providers. MailChimp and Drip that I have separate silos of user info. There’s a third if you count my apps user accounts. If you combine my newsletter subscription and user accounts, I’m well into Drip’s custom pricing tier, which is cost prohibitive for me at this time. My problem consists of having these email mechanisms while managing the silos and not breaking the bank. What are best practices in this area? Also, thanks for all the great info over the years. Every Sunday, I load my iPod with Startups for the Rest of Us. It’s the first thing I listen to on my Monday morning commute. Thanks.”

I have thoughts on this.

Mike: Really. Do you, now?

Rob: Yeah. Can you imagine why?

Mike: I can imagine why. I would love to hear this. I have a couple of my own but I’m curious to hear what you have to say specifically.

Rob: To me, your apps user accounts, you got to decide what’s the source of truth for your business. If you have a SaaS app, then to me, your database should be the source of truth for all of this stuff and everything else should try to sync up with it but you should always look back at your database. It’s different if I sell my book and I have a blog. For those, Drip is my source of truth. I have no database because they’re not SaaS apps. Your mileage may vary but if you’re a SaaS app, I think your own database is the source of truth.

In which case, Postmark’s transactional so that’s not another source of tags or anything. It’s just a mechanism to get email out. Really, you have your own database and it should sync up with whatever email provider you’re using. You’re using MailChimp right now for newsletters. I would either stay whole hog on MailChimp or whole hog on Drip. I know Drip can do obviously way more automation and more sophisticated, more powerful than MailChimp. If the pricing doesn’t work and you can’t possibly get over there, then I would just hack MailChimp. I know it sucks but hack it until it works.

Once you have the money or realize that the hacking was too much of a pain in the ass, because oftentimes another $50 or $100 a month sounds like a lot until you are maintaining these hacks because you outgrow MailChimp, which is how we get a lot of folks who do come from MailChimp to Drip. They have just outgrown it and they had hack after hack trying to do modern stuff. MailChimp has “automation” but it’s not that good.

As much as I respect MailChimp, I like the founder, Ben Chestnut, when I email him, he emails me back. I respect the hell out of what they’ve done. They have legacy and it’s tough to get around that. Smaller episodes like Drip have been able to, I would say, just do a better job at making it easy to do exactly what you’re trying to do. Drip campaigns, autoresponders, and sophisticated funnels.

That’s the weighing, the balance that I would do. I would not spread my people across both MailChimp and Drip. Again, you could try to sync it up using API, we both have APIs. I just don’t think that’s worth it. I think you have to bite the bullet. You pay extra. Our pricing is actually quite similar to MailChimp so it’s funny that I don’t know exactly how many subscriber you have, maybe there’s a tier where it goes off the rails but it’s usually 20% different or something. It’s not like we’re twice the price or anything.

That’s how I would think about it. Again, your SaaS database, source of truth and then stay with a single provider and go with the one that does the best job. I personally, what do you call it, it wouldn’t be pennywise and pound foolish in the sense of I want to spend five extra hours writing custom code to make MailChimp do something when it’s like how much is five hours worth to me? How many months of extra 20% or 30% could that pay for in a tool that could actually do this out of the box, so to speak. Those are my thoughts. What do you think, Mike?

Mike: I guess my thought really went directly to the number of subscribers he had. I totally agree with what you’re saying about not splitting them up because that was the first thing that I had actually thought of, splitting them up and saying okay, all the newsletter subscribers, you put those on MailChimp and then all your actual users, you put them in Drip. I think that you’re just asking for trouble at that point so I immediately discount it, probably like you did.

My second thought was going to the list itself and the list size and the pricing differences between them. While you were talking, I just pulled them up and plugged in 100,000 subscribers into Drip and into MailChimp. I’m not clear on MailChimp, if it’s 100,000 subscribers, he didn’t say that number but I just pulled the number out of the hat. It’s $475 a month, and then on Drip it’s $779.

The question in my mind becomes there’s two things. One is as you said, how much extra time are you going to spend trying to make it work in MailChimp and my guess is it’s probably more than three or four hours a month. The other thing is with the mailing list of 100,000 subscribers, what could you do that would get you an extra $300 a month out of that mailing list?

It seems like with that many people on it, you should be able to or you should at least be able to call that list down to a bit more of a reasonable size if those people are not active. Get those people off that mailing list if they’re just not opening emails and they’re not engaged in any way, shape, or form. Like they’re not doing you any good, they’re dragging all your stats down and they’re giving you false information.

Rob: I’m glad you compared pricing. I’m showing $649 although I guess that’s annual if you go to Drip annual. You’re right. That is a 70% difference or 60% difference or something. It’s a lot more there. One thing that we have noticed, and this is not marketing speak or anything, we notice when people come over from MailChimp or AWeber or these other list based solutions, if they have 100,000, since you can have duplicates, the same person can be in multiple lists and you would get charged for each of those, we typically see 20% to 30% drops in list size. 100,000 that would go in Drip would only be 70,000 or 80,000. In which case the pricings could run up here. 70,000 is going to be $569. 80,000 is going to be $600 or something.

It brings you down even closer. Again, I’m not saying you should move to Drip or that you’re a fool to stick with MailChimp because they built a solid tool but it depends on what you’re doing and like Mike said, how much extra are you going to get out of a tool that allows you to build sophisticated flows and to do things based on people’s behaviours and what their purchase behaviours and that kind of stuff.

In addition, we have pruning built in. That’s another way to get your list down. It’s just remove everybody who hasn’t opened the last x emails. That’s how people keep list size down. There really isn’t pruning in almost every other email tool. Everyone of our competitors doesn’t have that because it makes them less money but we built that tool to make super one click easy to get people out. Again, that’s another way to reduce that cost.

I think that’s a good question though. I bet other folks have thought about it as well. I appreciate you sending that in.

Mike: With that question, I think we’re running pretty close to out of time. If you have a question for us, you can call it into our voicemail 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 and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.

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