Episode 49 | 6 Ways To Blow Up Your Conversion Rate and Keep Customers For Life

Show Notes

Transcript

Startups for the Rest of Us Episode 49

Rob Walling:  [0:01] This is Startups for the Rest of Us, Episode 49. [Music]

Rob:  [0:12] Welcome to Startups for the Rest of Us, the podcast that helps developers be awesome at launching software products. Whether you’ve built your first product or just thinking about it. I’m Rob.

Mike Taber:  [0:21] And I’m Mike.

Rob:  [0:22] And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Mike.

Mike: [0:27] Oh you know the same old same old. Just working on AuditShark. I’m a little bit behind. I really wanted to be done with some of the registration pieces that I am not quite done with yet but they’re pretty hard in terms of the process. So I just have to make sure that everything is secure because it’s basically a security product. I want to make sure that it’s doing exactly what I intend it to and people aren’t, kind of, screwing around with it.

Rob: [0:49] Right. So we’ve talked about or you’ve talked about hitting alpha by the end of July. Are you on track for that? Or are you looking to go back a few weeks?

Mike: [0:56] I’m pretty close to it I think. What I considered Alpha is essentially that I can install it into a customer environment if I really needed to or wanted to. At the end of the month I don’t expect it to have certain things

[1:08] So for example there’s not going to be an installer for it but you could install it through the command line if you needed to. And my build machine isn’t going to be up and running. There’s a bunch of other things that are just not going to be there. But if I needed to deploy it I could. And it would work.

Rob: [1:21] Right. So that’s interesting. Yeah. I typically think of an alpha as feature complete but potentially has bugs and like you said maybe not a really fancy installer but it can be installed. Is that what you think you will have at the end of July?

Or do you think there will still be features to implement?

Mike: [1:37] Yeah. I am trying to avoid getting to the point where I feel like there are still features that I need to implement to launch it.

Rob:  [1:42] Right.

Mike: [1:43] There’s still features I want to implement.  I just don’t think I need them to launch.

Rob: [1:47] Right, features you’ll implement after 1.0 type thing.

Mike: [1:37] Right. So I think it will be interesting.

Rob: [1:51] Yeah at our next recording in a couple of weeks it will be just before the end of July. So I will rattle your cage a little more.

Mike: [1:59] Yeah and its funny because that day we have that next recording that will be right at the end of my four day weekend.

Rob: [2:06] OK

Mike: [2:07] So I have a four day weekend coming up where all I am going  to do is work on the product nonstop from like 8:30 or 9 in the morning  until probably 8 or 10 at night.

Rob: [2:14] Right.

Mike: [2:15] So, We’ll see how that works out. I think that will go well.

Rob: [2:18] Alright, cool. So I have four updates actually. One of them is that I used survey.io, which we had talked about in our last episode. And we sent it out to our DotNetInvoice customers. And we got a pretty low response rate. About 7% of people completed the survey. Which actually it isn’t that bad, frankly. I mean it is like an 8 question survey. And so 7% is not unheard of. And it’s actually… I talked to some other people who’ve sent out the survey links. And they are getting, you know, similar response rates unless they use some other fancy tricks.

[2:49] But the information that we got from it is ridiculously good.  Like it’s really really good. And it isn’t going to contribute to changing the direction of the product. I have no doubt about it.

[2:58] So, I’m actually compiling all that right now and, kind of, writing up a .doc. to talk over it with Jeremy my business partner. We’re going to look at changing the kind of features we’re building, the focus we have, changing quite a bit of the marketing message.

[3:12] I bet we could talk an entire episode just about interpreting these results for DotNetInvoice. So maybe we will look at doing that once we have a better handle on it and feel comfortable sharing it.

Mike: [3:21] Now you said you talked to other people who had used it and you said that. What was their response rate in comparison? You said you got a 7% response rate.

Rob: [3:28] Yup. Yeah. They were the same. They were between 6 and 10% response rate.

Mike: [3:35] Wow!

Rob: [3:36] I mean that’s, that’s fairly common right. You send out to an email list and you ask someone to take an 8 question survey. That’s not an unreasonable response rate because half the people aren’t going to open it at all. Unless you word it really well. And even if you word it really well you are still only going to get a 50-60% open rate. And then the number of people who click through and want to give you…and actually complete it. It’s going to be quite a bit lower.

Mike: [3:56] The one thing that I was going to point out was last week we had done an episode on how to run a survey. And as part of that at the very beginning I mentioned that I had sent out that survey to the MicroConf attendees thru surveymonkey. And the response rate at that time was 52%.

Rob: [4:10] Yes! Oh so that is a great example. And that survey was way longer.

Mike: [4:14] 38 questions.

Rob: [4:15] Yeah. And they were in depth and long and all that thing. So yeah, that’s a great example of how engaged an audience can be. Right? Is that the MicroConf people really wanted to give feedback even when we were at the conference. And at the end we told them, like, here’s a heads up. You’re going to get this. Please respond.  We asked them in person.

And I personally talked to in person to a lot of people. And said “Hey! Fill this out when it comes.

[4:35] I think there’s… There’s a great measure of engagement. I think that’s one thing that is really hard to have with virtual customers. Sort of speak. Customers that I have never met face to face and never really even talked to aside from a support email is that they may not be as interested in helping us out and taking their time out. So.

Mike: [4:51] Right. And that’s why I was interested in what the response rate was from others you had talked to because you know 7-10% or so that sounds like a reasonable rate. Honestly, I was shocked when we got more than 50%. And there were even people who emailed me after the fact who said “Hey I haven’t had a chance yet to do this but I am going to do it on this weekend or I can’t do it from here please don’t close it.”

Rob: [5:15] Yeah. I think man there is something to be said for… Well there is a lot to be said for A: the fact that a lot of people listen to our podcast and feel like they know us. And B that they sat there and watched us run this conference for two days. Like they know us as people and we know almost all of them as people. Like now when… It’s crazy as I am just surfing around in the startup world. I’m seeing comments on other blogs. I’m seeing questions on Quora and Answers. And I am amazed at how many more names I am recognizing now.

Mike: [5:42] Oh, I know.

Rob: [5:43] I feel like this community is actually not…It’s not as big as I once thought. Like, we know a lot of people from it now.

Mike: [5:48] Right.

Rob: You know. So I think that has an impact. I just think that we are all…The community is tighter than my customer base is. You know what I am saying?

Mike: [5:57] Yeah.

Rob: [5:58] You know the other piece of news is Amazon shut down their affiliate program in California last week. Because California passed legislation that said that if a company has an affiliate in the state, then Amazon has to start charging sales tax in that state. And so they just shut it down as soon as they passed that. Which is. I am angry at California rather than Amazon. I guess I am a supporter of online commerce and I just hate that taxes keep going up. But it’s weak, man. I don’t make that much money from Amazon in a year. But it’s enough that I am irritated by it.

[6:32] I think they are the fifth or sixth state to do this. I know Colorado did it and I think New York State did it and a couple others. So, Amazon one by one is knocking them down.

Mike: [6:43] Wow. I had heard that they were going to do something. At least they were talking about that sort of thing. But I am really kind of shocked that California went through with that sort of thing because California is such a huge state. It’s got such a huge population. You can’t possibly imagine there isn’t a lot of ecommerce coming into the state.

Rob: [6:59] Dude, but the state is like bankrupt. I mean not quite bankrupt, but it is almost bankrupt. They’ve mismanaged the money. And the state is so big. It has such a dividing line between the haves and the have nots. You know what I am saying?

Mike: [7:08] Right.

Rob: [7:09] So it really is… is a massive state trying to support a large immigrant population and a large group of people who don’t have a lot of money, basically.  Its short sighted in my opinion based on California. I mean they’re really gonna…slowly they are not very business friendly is the bottom line. Like, if they didn’t have a silicon valley already and everyone wanted to be there. There’s no reason you should do business in California. It has the highest fees of any state that I know of. I mean just on and on and on the list is kind of ridiculous. So.

Mike: [7:38] Yeah. I remember when you and I were looking at where to incorporate for the Micropreneur Academy that was one of the considerations.

Rob: [7:45] Yup.

Mike: [7:46] We looked at the fees on a yearly basis for California and they were outrageous.

Rob: [7:48] Yup. That’s right. And. What’s funny is actually Massachusetts is still one of the worst but its way better than California.

Mike: [7:54] I know. That’s what surprised me so much.

Rob: [7:56] Yeah. I guess what I am glad about with this Amazon thing is that Amazon is such a small part of my income. Like, I’m diversified. There’s a guy who makes his whole income, he makes like 55-60k a year on Amazon affiliate sales. So, if he lives in California, I don’t know where he lives, but if he lives in California, like, he would have to move or find another business. But he has a bunch of websites that all create, generate income for him.

Mike: [8:20] Couldn’t you just sign up for earthclass mail or something like that and get a post office box someplace else.

Rob: [8:26] I. You probably… You know what, you probably could. That’s probably what you do. Yeah, I hadn’t thought about that.

Mike: [8:31] For 50 or 60 grand a year I would.

Rob: [8:32] Seriously. Huh. Yeah.

So you mentioned you’ve been reading the Four Hour Work Week.

Mike: [8:37] Ahh. Yes. And I have been doing that probably over the past… well I have spread it out over probably the past two or three months. But I’ve really, kind of, buckled down over the past two weeks or so. And just said “Ok I’m far enough into the book that I’d like to finish it.” And honestly probably the last quarter to third of it, I skimmed it more than anything else. Because a lot of it was about travel and what to do when you get there and things like that. And I’m like I don’t care about this stuff.

Rob: [9:00] Totally. Yup. And all the stuff about being a salaried employee. And how to convince your boss to do something. I was just like blaaaahhh. Like, zip zip zip. You know skim through that.

Mike: [9:09] But I did find it interesting. And I think what I really liked was the idea of taking mini retirements or mini vacations. And that kind of really resonated with me. So, I’m actually seriously looking at spending a month in Switzerland next year.

Rob: [9:25] Awesome.

Mike: [9:26] So, we’ll see how that goes. But my wife was not totally opposed to it when I talked to her about it. But we also have some friends who live out in Switzerland. This girl I know from college, she moved over to the UK for probably 2 or 3 years for work. And she ended up meeting somebody there and got married. And then they and he got a job over as an energy trader in Switzerland. And so they’ve lived there for I’d say the past 3 years or so now. And they are planning on, you know, actually becoming Swiss citizens at this point. I mean they’re totally ingrained in doing that. So.

[9:58] But they are always offering. Say “Hey, come on over and visit us.” And I have been over there twice to visit them because I did some work in Germany last year. And you know Switzerland was nice. It was great.

Rob: [10:10] Yeah I loved Switzerland.  Yeah its gor…The Alps are amazing. Yeah, so I think the mini retirement concept is a really cool one and just kind of learning to fill your time. If you do actually automate and get more time you have to fill it with something or else you will just work more. That’s what we tend to do.

Mike: [10:24] Mmmhhh. There was some study in, I think on CNN or something like that ,that I saw a few weeks or a few months ago that basically said Americans work to work.

Rob: [10:33] Mmmhhhh.

Mike: [10:34] But and the rest of the world works so that they can take vacations.

Rob: [10:38] Yeah. Well cool. I‘m glad you got out of it. You know whenever I recommend Four Hour Work Week to people I always say “There’s only going to be a third of it maybe half of it that’s gonna apply to you. And it depends on what situation you are in which part is going to apply. Skim the rest or even skip the rest.” Is typically what I say.

[10:55] The other two things: one is I was listening to our last podcast where I talked about the movie e-dreams and Startup.com. And one of the companies was Cosmo.com and I said they raised like10 or 20 million dollars and had 3,000 employees at the peak. I was wrong. They raised 250 million dollars and they burned through all of it. So, and the 3,000 employee mark was correct. And then Govworks had raised 60 million dollars and I think I said they raised about 50. So I was pretty close on that. But I just wanted to give a correction there.

[11:27] And then the last thing before we get into the main content is that I have been using Instapaper so often now. Which for people who don’t remember Instapaper adds like a read later like a JavaScript bookmarklet to your browser. And anytime you are on a webpage you can just click read later and it like scrapes the content as text and puts it into…It’s formatted in text. It is like simple HTML and puts it into a repository.

[11:51] And when you are on your iPad or your iPhone later or mobile device, you know, you can just pull it up and read it. And this has been a really cool way for me to aggregate things. It’s not a bookmarking service. I can actually be offline. You know once I download the stuff I can be offline on my iPad and still read it. So. I’ve had a lot of success with it.

Mike: [12:09] Yeah I used Istapaper too based on your recommendation. There’s certain things it doesn’t work for but for the most part it does work pretty well. The problem that I run into is if I go to read something and it doesn’t work for it. I usually forget to go back to it.

Rob: [12:23] Yes. I haven’t had it not work for anything. I mean I’ve probably bookmarked 50 or 60 articles over the past few months. And I have never had one not work.

[12:31] [Music]

Rob: [12:35] Alright well let’s get into the main topic today. We’re talking about 6 ways to blow up your conversion rate and keep customers for life. And this is actually based on an article in Wired magazine that a friend of mine sent me. James Orr in Fresno, this is a shout out to you. And the article is called “How Online Companies Get You To Share More and Spend More”. And so I read through this article and it gives specific examples of like how Amazon and Netflix and Groupon and how they use specific marketing tactics to get us to share more and spend more on their sites.

[13:05] And as I read through it I realized that every one of these could be applied to our businesses. And to other entrepreneurs who listen to our podcast. So. And I didn’t take every single one they describe. Because some of them don’t apply as well. But I did pick the top 6 that we thought could apply. I think that. The funny thing is that, you know, we all know these tricks. Like, as we talk through them they’re, I won’t say they’re obvious but there are things as a marketer, you know, you should know.

[13:32] And yet I’m still swayed by them. Like, as we talk through the first ones we’ll talk about like Amazon Prime and stuff. And I totally am a huge believer in my behavior is swayed.

[13:42] So the first way to blow up your conversion rate and keep customers for life is to eliminate small frictions. And the example given in this article is how Amazon not only keeps your credit card on file but that they offer super saver shipping. So if you purchase over 25 bucks you can typically get free shipping. Shipping costs were a big hang-up. Ahh they really are a big hang-up online.

[14:03] Like, offering free shipping is a big way to reduce frictions. So Amazon has super saver shipping. And then of course we’ve talked about it before but Amazon Prime where you pay 79 bucks a year and you get free 2 day shipping on everything. Is just a crazy friction reducer. And I am a really big believer in this whole concept because I am a victim or a I should say I am proponent of it because I always go to Amazon now when I am going to buy anything. I mean I buy my toothpaste. I buy like toiletries, my deodorant. Like that kind of stuff on Amazon.

Mike: [14:35] Are you serious? Wow!

Rob: [14:36] I do. I do because you can buy a six pack of, you know, like, Tom’s of Maine stuff, which is natural. And it’s cheaper than when I go to the store. And it’s just more convenient. I don’t have to go to the store to get it. And so there’s a lot of stuff that I’m starting to buy now, and especially when it comes in two days.

[14:53] The shipping is free and it is crazy convenient. And, all I have to do is…I remembered at 11 o’clock one night and I just jumped on Amazon real quick. It’s in my past orders. And I just go and click Send me another one of these. So eliminating small frictions especially for busy people is a really big deal.

Mike: [15:10] Come on Rob you’re not busy.  What do you do all day?

Rob: [15:13] I sit around. I don’t have a real job. So I just sit around.

Mike: [15:17] As Rob said one of the things that Amazon does is that they keep your credit card on file. Well, when you have a software as a service application you’re basically doing the exact same thing. You’re keeping somebody’s credit card on file so that once they get over that first hurdle they don’t ever have to go back and continue self justifying that they are paying for that service. Again, it just charges their credit card. Because it reduces that barrier on an ongoing basis, people don’t necessarily think about it nearly as much.

[15:46] Another way that you can apply it is if you are trying to build a login system for whatever application you have. Use something like OpenID. You can also use  Facebook, Google and Twitter. They all have hooks into an OpenID system and so that people can use their existing logins on other sites to login to your app. And essentially what that does is that allows them to just login to your application without actually creating an account. They just click a few buttons and Boom they’re in. And you have already authenticated using the backend OpenID mechanism.

[16:21] So there’s a couple of different things. One of the things that I didn’t see in the article but Amazon had also done this was their little one click ordering. Which I believe they actually patented as well.

Rob: [16:33] Groan. They did, which irritates the crap out of me.

Mike: [16:36] Right.

Rob: [16:37]Yeah,  it does eliminate small frictions which is good.

[16:40] Cool, so the second way to blow up your conversion rates and keep customers for life is to attack your competitors’ biggest weakness. And Netflix did this. Their biggest selling point all these years has been no late fees. And that’s the way they totally usurped the video rental stores. When people. People are convenience minded and when they want to see a movie, they want to see it tonight.

[16:59] Right. Most people don’t want to wait two, three days to get something in the mail. But by attacking the concept of late fees they’re even more hated than the convenience of having something tonight is loved. They were able to, kind of, get an advantage. So, recently if you look at the addition of streaming. It also means they’re eliminating frictions because that means you can now both not have late fees and essentially have movies on the same night.

What are some examples of how a micropreneur, developer, entrepreneur can apply this?

Mike: [17:29] So if you’re looking at  some of your competitors and let’s say one of them charges monthly and people don’t like that. Or you’ve tried their service and you didn’t like the fact that they charged monthly. See if you can make it a onetime purchase. Or if they are charging it as a onetime purchase see if you can build something that charges on a monthly basis. You are trying to essentially set up an opposing force. So if people like monthly fees, they can go to them. If they like one time only fees, they can go to you.

[17:56] And there’s a lot of other ways that you can do this as well. There’s a Micro Niche Finder and Market Samurai are really good examples of this. If you are not familiar with these tools, these are essentially online marketing tools.  Micro Niche Finder and Market Samurai are both good examples where they have charged a onetime fee and are going up against these SaaS applications which are charging on a monthly basis. If you prefer to just pay once you can get these tools. If you prefer to pay on a monthly basis you can pay for the other tools.

[18:23] One of the things you have to think about is when you decide to charge a onetime fee, how much is it justifiable to charge. And is there going to be a barrier to charging that fee. So, if maybe somebody is charging $10 a month and you want to charge $1000 as the onetime fee. That $1000 a month may be very difficult for somebody to justify but $10 a month is really not that bad. And I think the numbers would work out quite a bit differently if you were trying to break them down.

[18:51] Most of the time if you are trying to pitch a SaaS application vs. a downloadable application you generally want to go for…What would you say Rob, maybe 12 months or maybe 18 months, something like that, of costs on a SaaS application?

Rob: [19:08] Yup. That’s the rule of thumb I’d use. Yeah. 12 to 18 months. Exactly. You brought up a really good point here. You can’t just look at it and say “Oh, All the competitors are charging one time fees. I’m going to go SaaS and it’s going to work. Or vice versa. You know if everyone is SaaS then I’m going to go onetime fee. Because the economics of it just may not work out. Or the market may not want that. So you have to test these assumptions.  We’re not saying to go blindly the opposite and it will work.

[19:31] But, we are saying these are ways you could approach this problem.  And if you do your due diligence and you ask customers and figure out that oh this is actually what customers want, then you can essentially attack their biggest weakness using essentially pricing tactics.

Mike: [19:46] Mmmmhhh. Yeah. I’m actually doing that with AuditShark. Quite frankly I haven’t seen a single competitor out there that has a monthly fee for it. And having talked to customers they are much more receptive to the thought of paying for a monthly fee for it. For somebody else who is actually hosting all that backend infrastructure. For all the stuff that’s going on and all the updates. And making sure that things are essentially running smoothly. Because they don’t want to have to deal it. Because it is a complicated problem.

[20:13] And all the competitors that I’m looking at out there, they have these massive solutions that they are charging people anywhere from 10,000 to 50,000 to 200,000 dollars to…Just for the software. And on top of that you have to pay consultant services to come in and actually install it. So I’m kind of flipping the market on its head. And saying “Ok I’m gonna go with a SaaS application and you just pay this monthly fee.” And essentially what that does is it allows them to pay for it out of an operational expenditures budget as opposed to out of their capital expense budget. And depending on your pricing points that may or may not help you.

Rob: [20:50] Alright. The third way to blow up your conversion rates and keep customers for life is to use time constraints and social proof. And the example given for this is Groupon. What’s interesting about Groupon is most people think of it as a discount website. Right. That it’s like you get these cheap deals.  But the thing is while discounts are the basis for Groupon. If it was a website that offered a bunch of cheap stuff, we wouldn’t buy nearly as much as we do.

[21:17] They partner that cheap stuff with a time constraint. Meaning that you only have one day to buy it. And social proof. Meaning that A: you see all of your friends who bought it, typically if you’re logged into Facebook. You know, there’s people who have liked it and you can see that they’ve bought it. And it also says x hundred people have already bought this deal. The deal is on. So Groupon has essentially married these three…I mean these are age old, kinda, marketing tactics. And they have married the three of them to create an obviously very successful and very lucrative business based on their 20 billion dollar valuation or whatever they are talking about going public with.

Mike: [21:55] Right. And the way you can translate this into a micropreneur endeavor  is that essentially using time constraints and to probably a lesser extent social proof because you probably are not going to have quite the market share of Groupon. But you can use time constraints when you are launching your product because  as you’re building a mailing list. You get people signed onto your mailing list and then you can offer a discount to them if they order by such and such date. And once you’ve done your launch you have a two or three day window where you’re saying “Hey. I’m taking orders now.

[22:28] And if you buy by this time, this is going to be your price but the price will go up in three days.” And then you can remind them after maybe a day and a half or two days and say “Ok, you’ve got 12 hours left.” It’s kind of do or die at that point. And you can say “This is the deal. If you want it great. If not go on your way and good luck with whatever else you find.”

Rob: [22:48] Right. And this doesn’t have to be just when you launch your version 1.0. This can be when you launch an updated version. I’m assuming you are not a SaaS app here. Right? I’m assuming you’re more of a downloadable or one time purchase.

Mike: [22:57] Right.

Rob: [22:58] Yeah, if you have a prospect list at anytime and you launch your 2.0 or whatever you can say “Hey. You have a couple of days to take advantage of this deal.” And essentially you’re putting a time constraint on it. And you can offer social proof using things like testimonials. You could also have a Facebook like button on your website but not something I would really recommend. I mean the age old way is to really have more of testimonials in the email or on your website. Of people who are reputable in the industry.

Mike: [23:27] Yeah. And that social proof of using like a facebook like button or something like that can actually work against you if there aren’t enough people who have clicked on the button. The same thing applies for Tweets from Twitter.

Rob: [23:40] So the fourth way mentioned in the article is to get people to invest. To get people to spend time using your product first so that they get invested and then they are sad to lose that data or that time they’ve spent. And the example given in the Wired article is Zynga, who makes the wildly popular Facebook game Farmville. You know a lot of people obviously spend a lot of time investing their time into.

[24:04] And the way they get people to invest, right, is that you can play the game for free. And once you put in a bunch of time and you start planting things. You’ve actually created something and you don’t want to see it go away. So you continue to play and that sucks you in and convinces you to essentially, I think that you buy digital goods? Right? That’s the way they monetize that game. So, before long you find yourself spending money to buy things to keep your crops alive or whatever it is.

Mike: [24:26] One of the examples of getting people to invest in your product is if you have a SaaS application or you are storing data on behalf of your customers, that essentially invests them into your product because if they leave your application or they stop paying for your service, they will be sad that they are going to lose their data.

[24:46] And most people just have this irrational fear of losing data, myself included. I mean we talked about it a little on the last podcast. Where, you know, I went out and got some additional hardware just because I didn’t want to suffer the possibility of losing data because somebody else wasn’t doing their job. Well, it’s the same thing with your customers. Your customers don’t want to lose what they have spent time and effort building up. And whether it’s Zynga and they’ve got all this virtual stuff that you have accumulated. Or it’s, you know, genuine data that applies to their business or pertains to their life. People don’t want to lose that stuff.

[25:23]So, SaaS applications really have it made in this regard. But that sort of stuff also applies for downloadable applications as well. I mean you can certainly get people to continue investing in the software maintenance for your products by sending them the bill every year. And if you don’t send them a bill they are not going to pay it. And obviously you are not going to get that 20% or whatever for the software maintenance.  But people don’t necessarily want to lose the opportunity to get those upgrades either. Even though they probably won’t install them. But they don’t want to lose that opportunity either.

Rob: [25:53] Yeah. I think a key point here is we’re not implying that you should lock someone into your application and not let them out. I mean that’s not the idea, right? It’s that if you get someone really quickly. In the first day or two to start entering data or to start using your app and you provide them value. Then pretty quickly they are not going to want to lose that value.  I mean if they start creating invoices using your app. It’s not that you can’t let them export the invoices or whatever. I mean that’s not the point.  If you provide them so much value that they just don’t want to have to go through the process of finding another provider. Then you have done good. So the key is to figure out how to get people to do that early in the use of your application.

[26:31] The fifth way to blow up your conversion rate and keep customers for life is to use reciprocity .  And the example given in the article is also using Zynga. And they’re basically saying that since Zynga not only gives, essentially gives Farmville away to its users. But once you are in the game, that you are interacting with your friends. And that a friend might give you something in the game. That it makes you feel like you have to give them something. And so this idea of reciprocity is that once someone gives you something to you. You feel a little, a little indebted to them and not in a bad way necessarily.  It’s almost like it makes you feel good and then you then want to do something good for them.

Mike: [27:07] One of the ways that this can apply is, you know, Rob and I, kind of, do this for example for this podcast. I mean this podcast is free. We don’t charge for it. There are other podcasts out there who I know that they really try to make it so that you listen to the podcast and then they try to exploit that reciprocity such that you will then buy into whatever program or other things that they have to offer that maybe add onto that podcast that aren’t necessarily given away for free.

Rob: [27:37] I think another example is… I actually just started a mailing list off of my blog. And the first thing if you sign up for the mailing list is I give you a 170 page professionally designed e-book. That is basically the best articles that I’ve written in the past 6 years on my blog. And it’s compiled. It has a table of contents. It’s attractive and it’s just a great thing to, you know, take with you. It’s EPUB and it’s PDF and it’s totally free.

[28:04] And so the idea is that A: someone will sign up to the list if  that’s interesting to them and B: once they sign up, if  they read that, they are just a little more engaged and they might feel a little more reciprocal to me. Like, Oh this…He’s a nice guy. It’s not a manipulation thing. I don’t view that at all. I mean it’s like talking about the podcast. We’re not doing this to umm to directly sell anything. I mean we’ve mentioned the Academy a few times but that’s not why we do this. You know we do the podcast genuinely to meet people in the community and to… just to be involved and to be known.

[28:36] Coming back to the reciprocity; giving away an e-book like on your website even if it’s a…Let’s say you have invoicing software or you have any type of SaaS app giving away like a 12-15 page e-book that helps your end users and is not salesy at all. Is actually a really good tactic because it allows people to build trust in you and it makes them feel a little bit like … well they owe you a little bit. And again it’s not manipulation,  it is just that you’ve kind of done them a favor, if you have actually provided them real value.

Mike: [29:06] This is one of the things I’m actually doing for my AuditShark product. And probably in about a month or so I’m gonna be putting together sort of a newsletter for AuditShark. It’s not necessarily directly for AuditShark but it’s more related to how to go about doing auditing and compliance in your environment if you don’t necessarily have the resources, what sort of things you should be looking for, what sort of things you might want to stay away from based largely on the the vast amount of consulting experience I’ve gone through in the past 5-6 years. And it’s a lot of stuff that to me is probably fairly basic but most people just don’t know it.

[29:44] They get put into a position where they say “Oh, well I have to do this. What do I do?” and they just have no idea. They don’t know where to start.  They don’t know what they should be thinking about. What sort of pitfalls they may run into.  So I’m going to be putting together this newsletter that I’m not really going to be pitching AuditShark very much in there. I mean I probably will to some extent. But it’s more to help educate people than anything else. And that’s the goal is to educate people. If they buy AuditShark great, if not I hope that I made them understand the problems that they’re facing a little bit better.

Rob: [30:15] Right. And that’s the way to do it. Because as soon as you put a bunch of marketing messages in there, people are going to tune it out. And they’re going to think you are biased and all that. I mean it really has to be valuable content that people can actually use and it helps them on its own. It’s not something that gives them half the solution and then says “Buy my product” and it will give you the rest of the solution. I mean that’s something we’ve been really careful to do on the podcast. To give people all the goods, you know. We don’t say here is half of the stuff and buy my book or sign up for the Academy to get the rest of it. Like, that’s not the deal. We try to give as much value as possible on both of our blogs and in the podcast and in my newsletter and in your newsletter coming up. I mean, that’s the idea is to truly build reciprocity and to build that trust, to build yourself as an expert. It actually has to be quality content.

Mike: [31:02] And that’s definitely something that you guys can implement in the businesses and products that you’re starting. Starting those newsletters, mailing lists to help people out and as Rob said it’s about helping them not necessarily helping you.

Rob: [31:16] And the last way to blow up your conversion rate and keep customers for life is to delay the pain of paying. The example given in this Wired article is Apple and how if you make a purchase in iTunes that you don’t actually receive the email for that purchase until several hours later.  So if you go around and you buy 5 or 6 apps or 5 or 6 songs over the course of an hour you will typically receive like an aggregated email several hours later.

[31:42] And Apple’s likely doing that to kinda cut down on their transaction fees. They’re essentially batching these small purchases. But realistically what this also does is it delays the pain of you paying. Because if you click 5 or 6 songs or apps and you get 5 or 6 emails out of it you are going to notice pretty quickly that you’re buying too much stuff. It’s almost like a reminder. And so what this delay does it essentially, it just kind of aggregates it all and it makes you not think about the money you’re spending until a few hours later.

Mike: [32:13] Now when you see those does that cut down on buyer’s remorse for you?

Rob: [32:17] I don’t know. I think if I was clicking. I mean there have been nights when I’ve clicked and bought several apps or several songs in a row and I think if I was getting an email for each one, A: it would be irritating and B: I probably would start to look and say “Wow! I’m buying quite a bit of stuff.” Because they’re 99 cents apiece it’s not like it would be that much money. But if I saw like 7, 8 emails in my inbox I’d be like “Ok! Slow down.”

Mike: [32:38] (mike laughs) I don’t know because I bought, what was it? the Battlestar Galactica series. And those are not necessarily…you know they’re not 99 cents.  It was like $30 or $40 for the series or for each season. So, those things add up fairly quickly. And I think that if I were to buy one of them and I get an email immediately. And then buy another one and get another email immediately, I probably would hesitate quite a bit more.

[33:02] But in terms of the types of things micropreneurs are doing. One of the things that you can do is you can collect somebody’s credit card up front as part of a free trial for an account that you are hoping will turn into a paid account. And then charge them down the road. You know you don’t necessarily charge them up front. You wait until they’re done with their trial period and then you charge them. And that does a couple of different things. First it lets them try out your software without actually having paid for it yet . But it eliminates the pain and hassle of you having to go to them and saying “Hey! By the way now that you’ve tried this, now please give me your credit card.”

[33:38] You already have it and if they’re happy with it. It’s going to encourage them to just continue using it because you’ve already got their credit card. If you send them an email at that point and say “Hey! By the way I need your credit card in order for you to actually to start paying for this.” That’s when people are going to start thinking about it a little bit more and they’re going to, you know, maybe hesitate more than they probably would otherwise.

Rob: [34:00] Right. And you can and should remind them before you actually charge that card. Right? If it’s a 30 day trial, you’ve collected the card up front about 5 days before, 3 days before you charge the card. You should send them an email. And say “Hey, you know, I hope you’ve been enjoying it and we’re going to charge you for the first month in the next uuhhh, in the next three days.”

[34:18]So it’s not like you’re trying to pull the wool over their eyes but you’re just removing, you’re kind of removing that friction at that point. And ideally if they give you a credit card and they’re in using your app you’ll want to watch what they’re doing. Like, you’ll wanna have an automated system that basically says “Wow, the user has not logged in seven days.” Ping them and send them an email that says “Hey! We’ve noticed you haven’t logged in. Do you need any help? Reply to this email with questions.” Whatever, you know.

[34:40] You’re actually trying to encourage them to use it because you know if you don’t that when you send them that email at day 27 that they are in fact gonna cancel.

Mike: [34:49] The other thing that it allows you to do. It allows you to as part of those usage statistics you can, as Rob said; you can help encourage them to start using it. But you can kinda funnel them down different mailing lists such that if somebody has not used the product at all after 5 days you, you know, send them to one mailing list and that auto responder series will go to them. And if after 10 days if they have started using at that point, maybe you can shift them back. You can get a little bit complicated with it. But it does certainly open up your options in terms of what you can do and from a marketing stand point and sales stand point to try and draw them into using the product.

Rob: [35:27] So to recap our 6 ways to blow up your conversion rate and keep customers for life are:

  1. Eliminate small frictions.
  2. Attack your competitors’ biggest weakness.
  3. Use time constraints and social proof.
  4. Get people to invest.
  5. Use reciprocity.
  6.  Delay the pain of paying.

[35:46] [music]

Mike: [35:50] If you have a question or comment you can call it into our voicemail number at 1-888-801-9690 or you can email it in mp3 or text format to questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. If you enjoyed this podcast, please consider writing a review in iTunes.

[36:10]  Even though we can’t see it right now. We still do look at them when we get a chance. You can search for “Startups”.  You can also subscribe to this podcast in iTunes or via RSS at startupsfortherestofus.com. A full transcript of this podcast is available at our website startupsfortherestofus.com. Thanks for listening. We’ll see you next time.

 

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