Show Notes
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[00:00] Mike: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about six ways to rehab existing application. Welcome to Startups for the Rest of Us: Episode 124.
[00:08] Music
[00:17] 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. I’m Mike.
[00:25] Rob: And I’m Rob.
[00:25] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rob?
[00:30] Rob: I’m doing well. I’m knee deep in MicroConf logistical details and I am super stoked about something we’re trying this year. We’re doing Attendee Talks where we’re inviting people who already have tickets to MicroConf to submit ideas for talks that they want to give. The talks are short. They’re 12 minutes and we have received 21 submissions so far and then we’re – I’m sending out e-mail today or tomorrow to allow attendees to vote talks. They have like eight votes that they can distribute among all the 21 and then the ones that that go to the top will be given during MicroConf. So, I’m kind of knee deep in getting all that set up and we’re surprised there’s no platform really designed to do that like no SaaS app I could just pay for so I’d hacked something to make it work. But I’m stoked about the idea, the talk ideas that came through and the quality, the folks who, you know, submitted them. I know a lot of them by name. It has me excited to hear what’s going to come out with the audience.
[01:23] Mike: Yeah, I think the only downside is that I looked through the list of 21 talks and there’s a lot of really good ones in there. So, you really have to pick and choose which ones that you really, really want to listen to versus the ones you’re kind of lukewarm about and even though you still may want to listen to them. So, it’d be interesting to see what shakes out of the top though.
[01:40] Rob: Yeah, I agree. How about you? What’s going on?
[01:42] Mike: I am neck deep in AuditShark changes for the Linux early access people.
[01:47] Rob: Shifting focus might be a strong word but do you feel like that’s what you’re doing from Windows to Linux or seems to be more of a need in a Linux community for this?
[01:55] Mike: Yeah, I’m kind of back pedaling from my initial thoughts about whether I could just launch with Windows only and it seems like because there are so many people who are out there who are using Linux that it seems like leaving them out would be a poor choice. I’ve got things relatively working at the moment that I added a couple of things in and one of the customers asked me for SSH key support so because before, all I could support was a direct SSH connection and now, I have to support the certificates and everything else. But that’s coming along well that should be done in the next day or so. So, I should be able to hand that off to him ad start running.
[02:29] Rob: And once that’s done, is that when you’re done with early access or is that – does that going for another week or two after?
[02:34] Mike: No, it will go on after that. So, that will —
[02:36] Rob: Okay.
[02:36] Mike: …just kind of be the start of early access for this customer and probably several others as well. Once I get that in place, then I’m going to really hit the e-mail lines and start talking to people and saying, “Hey, you know, now the support is not only Linux but, you know, the keys and everything else,” and kind of see what shakes out of that. I think with the product itself is in a good spot. It’s just a matter of getting people in there to see what things are really interested in finding out about their systems.
[03:01] Rob: Did you hear that Google Reader is shutting down?
[03:04] Mike: I did.
[03:05] Rob: I think there’s an opportunity there. I think there’s an opportunity for someone to do a really niche play and go after journalist or high end power users of Google Reader who are willing to pay for it. I think going for a free plan or a free Google Reader has already not worked. There are several replacement Feedly and a few others and they’ve already shut down their free plans because they were inundated. I think they got like hundreds of thousands of new signups and they just shut their free plan down which is once again it’s like “Don’t start the free plan.” They weren’t listening to us at Feedly I think.
[03:34] Mike: I think that there’s too many people who are already there that I think there’s going to be this gold rush mentality of “Oh, Google is shutting something down and there’s a great opportunity here and let me see if I can exploit it.” But the problem is that there is already a market here that is pretty heavily saturated and there’s people who do this particular thing pretty well and unless they do what you just said which was pick a very niche market and try to exploit just those people, then it’s not going to fly. And in fact is that they could have done that regardless whether Google was shutting it down or not. It doesn’t matter. I mean if you really have a product that is geared for a specific type of person, it wouldn’t matter whether the Google is still running Google Reader or not.
[04:16] Rob: Well, but I think a lot of journalists and a lot of power users of Google Reader just wouldn’t have had reasons to switch but now it’s the big switch where you have literally hundreds of thousands if not millions of people who are suddenly looking for an alternative and you’re right, it is a gold rush. I mean there is going to be this massive switching going on and there’s a lot of opportunity there for someone to take advantage of. The question is whether you could get something out quick enough, right? Because there’s going to be media buzz and there’s going to be people switching for, what, maybe the next few weeks. I bet if you could get something. I mean seriously do like Coding Binge and get something out in a week or two that could at least do the very, very basics but do it really well. Do it similar…very similar to how Google Reader actually does it because that’s a complain I’ve heard is there are these alternatives but none of them do it quite like Google Reader did and I just keep waiting for someone to say, “Ha, here’s the winning ticket, you know, here’s the system that actually is able to do this.”
[05:12] Mike: In many ways, I kind of see it like Microsoft Word where Google docs does an okay job but at the same time Microsoft Word does the job too and there’s this minimum feature set that you have to have and as long as you got that minimum feature set covered, the rest of it is kind of icing on the cake but isn’t necessarily enough to make you want to choose that unless somebody really does get something out there that has some sort of killer feature that is going to shift somebody in one direction or the other, I just don’t see it happening and plus because it is at gold rush mentality, there are a lot of other people who are going to be doing this kind of thing. There’s going to be a lot of competition and you need some way to stand out and I don’t know what that would look like. I think that for every person who does something well here, there’s going to be probably a hundred or 500 who don’t or who [0:06:00] – will make an attempt and it’s just doesn’t pan out for them.
[06:04] Rob: Right, you certainly would have an advantage if you already have an existing codebase that was at least kind of doing this and you could repurpose it because to start from scratch at this point would seriously behind in the race. I also think there’s risk that Google may — due to the public outcry may decide to open source it or maybe they don’t shut it down. I don’t know if that’s going to happen. It seems unlikely but there’s a lot of risk but if you did Binge for a few weeks and try to get something out, you could just be shut down if Google decides to do a 180 on this decision.
[06:32] Mike: Well, I’ve read in some places that the – part of the reason why it’s getting shut down was because they were trying to pull a lot of the features from their – a lot of the social features and put them in to Google Plus and because of that, you know, it makes sense to kind of shut down that project so you have to do something with those people and you can move them in Google Plus or some other things that allow Google to have that social presence and at that point, you’re right, it may makes sense for them to say, “Okay, well we’re going to open source this and if you want to, you can run it on the Google app’s platform but you’re going to have to pay for us for the subscription.” And so, maybe they could turn it in to a money maker at that point but I don’t know.
[07:10] Music
[07:13] Mike: Today we’re going to talk about how to rehab an existing application and taking an existing application that either you acquired or you’ve kind of let fall by the wayside. It can be well worth the effort to rehab that application back to I guess its original roots so that you can actually make money from it. But the key is to know what those things are. And today, we’re going to talk about how to identify the problems with an existing application and how to fix them and essentially break it down in to two main categories and those two categories are cutting expenses and growing revenue.
[07:45] Rob: And I think you touched on some important points there. This isn’t just for people who are acquiring apps. This can very well be for any app that needs to be rehab. So, if you have an app that you’ve either neglected or one that you have been working on but you just haven’t been making the progress you want, it maybe a good time for you to take a step back, get some new set of eyes on this thing to evaluate the product from this – I think we’re going to look at seven or eight different angles and figure out which of this need improvement and then we’ll get to the rehabbing. So, it’s both for people who acquired and who are just working on existing apps that they already own.
[08:20] Mike: So, we’re going to talk about cutting expenses first. And the first way that you can start cutting expenses is by looking at your products and identifying whether or not it has a free plan. If it has a free plan, get rid of it. It’s essentially baggage that you don’t need especially if the product is kind of limping along and it’s not doing very well. The support cost that are related to a free plan can just kill you and unless you have a really solid understanding of how long it takes to leverage those free users in the paying users, you really need to reduce the distractions and concentrate on delivering value to people that they are going to pay for versus providing a free servers that people are going to use because they don’t want to pay for it.
[08:59] Rob: Yeah, I view having the free plan and anything get rid of it unless it’s a way of reducing expenses and more as a way of ensuring that you are getting revenue from people who value your app because it’s likely that if you do have a free plan and you have several hundred or in the thousands of people using it, that some of those people, a good chunk of them would pay you something for your app if they didn’t have the option or the free plan. And if your app is in need of rehab meaning you either considering shutting it down or it’s just not…not doing the revenue that you need or if you’ve acquired it, then obviously, you need to get it to the point where it’s making enough revenue to basically justify your time in to where you can keep the app up and spend time maintaining it and supporting everyone. And to me, it’s valuable to all the existing users like you owe it to your users who are getting value out of it to continue supporting the app and if you need to charge people money to do that, then that’s how this works. I mean that’s how SaaS apps and for profit software works.
[09:59] Mike: This isn’t to say that free plans don’t ever work, it’s just that you need to understand all of the numbers behind in order to make something like that work. And if you have a product that is limping along, you need to understand all the underpinnings and make sure that it’s a successful product before you start doing a free plan which is essentially a marketing effort of some kind.
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[10:21] Mike: So, the second way of cutting expenses is to identify excessive hardware or software cost. If it’s a web app that’s got 200 users that’s running at a dedicated server, you can probably move it over to a VPS. Make sure that you look at the actual consumption of that application and make sure that the hardware that it’s running on is not severely over spec.
[10:40] Rob: I actually got an e-mail question this week from a member of the Academy and he said that he’s heard you and I talked about difficulties we faced with DreamHost and how we’ve moved sites to DaringHost. And my reply to him was we do still recommend DreamHost. DreamHost is not actually a bad host and especially if you get a brand new account on a new server, it will serve you pretty well for quite some time. Eventually it gets older and the hardware starts failing and they don’t really replace stuff in time but the idea is that premature in the optimizing and going with an Amazon EC2 instance that costs 70 bucks a month or you know, going through Rackspace and paying 50 or a hundred bucks a month or like you said getting a dedicated server which is obviously many hundreds of dollars a month and getting that up for a landing page, to have a landing page to sit on it for five, six months while you build your app, it just doesn’t make sense if you have any type of cash constraints. Obviously if you have funding or if you have a ton of money and you’re moving really fast, then this doesn’t count but we’re talking about bootstrappers. So, we’re talking about people where $500 over the course of six months is actually a decent amount of money, right? Like it’s money that you can use to acquire customers to pay to have articles written and infographics built.
[11:49] You know, with all the troubles that we’ve had with DreamHost and you know, a little bit of downtime here and there and some of slowness of stuff, I still have more than 25 websites on it. I still have audio files and video files, this podcast, the audio files anyway are host from DreamHost. There’s a lot of flexibility that it offers that I still recommend and while shared hosting is not something I would run a successful SaaS app from, it’s absolutely a decent place to get started very quickly and inexpensively and to get your code running on a box that’s not your local machine, to start doing some testing on a real server. And then even running, you know, early access and a beta and that kind of stuff, completely acceptable like I could see doing that on shared hosting and from there moving to a VPS either on DreamHost or, you know, potentially if you’re going to move it, I would consider moving it to another host at that point. And once you have people paying money for it and you know that you’re going to be ramping up.
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[12:46] Mike: So, third place that you can cut unnecessary expenses is looking at the subscriptions that you have that are associated with the application. And there’s a lot of different things that you may be paying for, you may be paying for data fees or customer support software or Analytics, make sure that you take a look at all these different things and add up how much it’s costing you on a monthly basis. Make sure that you really need that subscription that’s associated with the application and one thing that definitely counts in to this is a merchant account. If you have a merchant account of any kind, merchant accounts will run you 50, $75 a month and that’s generally bare minimum just to have the merchant account and on top of that, you’re paying for the transaction percentages on top of that.
[13:25] So, make sure that you take a look at all those subscriptions, add them up, find out whether or not you’re losing money on it because I have seen applications where you start adding up all the subscriptions that are associated with running that application and it turns out that it’s losing money. And just by kind of nitpicking through them and identifying the ones that aren’t necessary, you can save yourself quite a bit of money. And in some cases, you can turn an application that’s not making any money in to something that’s making a couple of hundred dollars a month.
[13:51] Rob: There’s definitely a balance here. If you’re a busy founder and you have a straight path that you can see to growing your app by several hundred or a thousand dollars a month, then spending a lot of time trying to minimize smaller expenses is probably not warranted. But if you don’t have that path, the app is not growing, you’re still feeling around for the marketing approaches that work, then spending some time in reducing this ongoing recurring expenses like you said can definitely be worth the time. If nothing else, it’s actually an interesting morale boost that month where you break even or that month when you make that first 1, 2, 300 bucks. Down the line, if the app hits 10 grand, you’ll look back and you say, “Boy, I really did need to optimize and save that $50 on the merchant account.” But early on, you need those small wins to kind of build your confidence, get you to profitability.
[14:41] I, for one, have done a number of things like canceling an authorized .NET account that an app I acquired was running on because the thing was it was over 75 bucks a month just to have the account around and by signing up for something like Stripe, you have suddenly know, you know, you have $0 out of pocket per month and you add that up to a couple other expense reductions and pretty soon like you said, you can go from making zero to making 1 or 200 bucks a month and you just feel a lot better about the app at that point.
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[15:11] Rob: So, the second category of approaches to rehabbing an app is growing revenue and it looks like we have five things outlined for this section. And the first one is if your app doesn’t have a lot of traffic. There are a lot of negative things about not having a lot of traffic. One, it makes it really hard to test. If you want to do any type of split testing of messaging or positioning, if you don’t have much traffic, it’s just – it takes forever to do or it’s nearly impossible. In addition without a lot of traffic, your numbers are skewed in terms of trying to get a percentage of people that convert to trials. If you only get a hundred or 200 uniques a month, you can get 5% converting to trials one month and you can get 0% in X month. And so your numbers are just all over the place until you hit that critical mass.
[15:55] So, it is important early on to focus on increasing traffic to a point and then iterating through the other four things that we’re going to talk about. Bottom line is if your site has low traffic, there’s a ton of approaches. I mean this is that big question, right, how do I market my app? I would say if you’re wondering how to increase traffic to your site, put together a marketing plan, look at episode 122 where we talk about paid acquisition content marketing joint ventures and we outlined a lot of startup B2B marketing strategies and go from there. Get started. Turning that 1 to 200 uniques a month, you want to get that to 2,000 and then 3 or 4,000 and that’s when you can really start running some test and figuring out what you need to improve on your site.
[16:38] Mike: The key piece of this is that if you have low traffic, you need to identify that as being a problem for the application. It’s okay that if a particular website or a particular application has low traffic as long as it’s converting well. If you don’t have good conversions, if it’s not bringing a lot of revenue and you have low traffic, then you need to identify that low traffic is one of the problems and be able to address that issue.
[17:01] Rob: No, that’s exactly right and you don’t want an app with 500 uniques a month that has never been optimized that has a crappy funnel and that you’re not looking at the key metrics that your churn is high. All those things that has low lifetime value, that app is almost worthless. You’re just – you’re not going to get very many customers. But if you build that app up and you hone all those things I just said, you know, you really dial them in and you focus on them and improve them and you build it up to 5 or 10,000 a month and then eventually for some reason it falls back down to 500 a month, you are going to convert and keep so many more customers from that same 500. It can literally be 5 times more revenue just because your funnel is improved. So, that’s a good point. It’s not that having low traffic is a terrible thing, it’s that without enough traffic you can’t optimize and then cycle back and generate more traffic.
[17:54] So, the second approach to growing revenue is to optimize your customer acquisition process and it’s basically reducing friction when your customers sign up for your app and when they’re getting on boarded. So, when they’re getting set up with your app, the steps they have to take to get value from the app. You want to minimize friction during that entire process. So, as an example, if you sign a process in multiple pages, look at how that can be trimmed down. There’s almost always room to shrink your registration form. Never ask for the password twice. Let just adds one more element and if they’ve missed enter a password, use the ‘forgot password’ link later. It’s not that important to reduce your conversion rate to make sure that they got it right the first time. Never ask for a user name. Always use their e-mail so that eliminates another form. Never ask for captcha unless you’re receiving 10, 15, 20 spam sign ups.
[18:40] It’s just one more form, so go through your signup process. Have someone else screencast through your signup process. You can use tool like UserTesting or Feedback Army or just ask a friend or colleague to go through it and give you brutally honest feedback. In addition, you can install a tool like CrazyEgg or Inspectlet and record what people are doing in your signup process and see when they’re canceling that has actually been a better help, you know, than Analytics are kind of tricky, right, because they’ll show when people bails but you can’t really see why and adding a better tool to do that will give you some insight.
[19:11] Mike: And as Rob said there are some clear cut ideas about what you should and shouldn’t be asking for in the signup pages. There’s a lot of research that’s been down around what sort of things should be on the signup pages and if you look around in the Unbounce has a lot of good articles and good information on their website about that kind of stuff but there’s definitely whitepapers out there as well. They show a lot of case studies around what changes have been made to a site and what it’s conversion rate was before or after and how well it produced results after the redesign based on some things that they added or took away.
[19:43] Rob: And if you’re on doubt and you don’t know what to put on your registration form, you should make it four or maybe five fields. It should be an e-mail address and a password and their e-mail address, also the services, their username and then you should, assuming you’re asking for credit card number which I would default to if you are a SaaS app to ask for the credit card number before the trial, you ask for – so the actual credit card number, the expiration date and potentially the CVV and that will you put to five. Sometimes there’s reason to ask for other form elements but to be honest, I’ve seen registration forms like HitTail’s when I first took it over, I think it was 15 fields and it was all types of stuff, company and phone number and even like address that it isn’t actually needed to charge your credit card and unless you’re having problems with credit card fraud, you should enable AVS which is the fraud detection that then requires a zip code.
[20:33] If you are having problems with fraud and you have charged back and stuff and now, you know, that’s the time to optimize on that. But early on, it’s about you’re optimizing for reducing friction and that will help you get more people in to your form process. In addition, while I do default to asking for credit card upfront, it’s absolutely worth testing not asking for it. You know, if you can get more people in to your app and help you reduce some friction in the on boarding process that can be beneficial as well. But by default, people want to take the easy way out, new founders especially, the easy way out is to not ask for that credit card and hope people will convert later and typically, that results in very, very low trial to paid conversion rates.
[21:11] The third approach to growing revenue is to identify your key performance metrics and not just to identify the metrics but actually track them on a daily basis or weekly basis. And so these are things like your conversion rate from visitors to trial, conversion rate from trial to paid, the lifetime value, the customer, the average monthly value of the customer. Churn is the other one and you know those, what is that? Maybe five metrics and you know them cold and you really focus on them and focus on improving them, you’re going to get 80 or 90% of the way there. Don’t actually feel like tracking metrics is this overwhelming process. There are people who make entire careers out of it just like there are people who make careers out of SEO, yes, it can be a very complex thing. Take the 90-20 approach to it and get 90% of the value and 20% of the time by just looking at a few metrics.
[21:57] Mike: One thing to be really careful about when looking for this the key performance indicators is that there are certain types of metrics that don’t mean a whole heck of a lot and one of those for example is the number of people who sign up. That number should theoretically grow overtime the same way with direct traffic measurements. Some people will say, “Oh, well, my direct traffic is going up. So, it’s must be word of mouth that’s spreading my application,” and that’s not necessarily true. The fact is though that you want to concentrate on metrics that actually means something to the business. The number of new signups per day doesn’t mean a whole lot especially if those people cancel a week after they started their subscription. It means a lot more if they stick around for six months.
[22:36] So, you will know things like churn and lifetime value and those things are much more important than these, you know, I’ll call them vanity metrics where, yes, it’s nice to have the number of people signing up on a daily basis increase but what you really looking for is for those people who stick around because it means that the mechanism that brought them to your website means they are qualified traffic and what you really looking for is qualified traffic. And if you can back track from your lifetime value and churn and identify the sources of that traffic, you can double down on them later.
[23:06] Rob: Fourth approach to growing revenue is to reduce churn. Obviously, you have to be tracking churn and looking at it in order to reduce it. Churn is a huge deal and it’s actually really hard to fix. It’s hard to have a blanket answer on how to fix it. Reducing friction can be reduced to, you know, some basic rules of how to get people on board but reducing churn what I found is the best ways to ask people. E-mail everyone who churns for a week or two weeks or a month and you know, you can have a VA do it as I’ve done with HitTail or you can do it yourself. You need to get two groups of people. One, people who try the app but never convert to paid and then you’ll have a whole group, a whole list of why they didn’t convert. Then you ask customers who paid you and then canceled at some point after that and they’ll have a different set of reasons.
[23:53] And basically one by one, you go through and you might have 20 reasons in each of those groups and you try to boil those down in some action steps. And several other reasons will group together in to like the person not understanding how it works and not understanding the value proper, either just spend too much time setting it up or something like that, I recommend just putting together a bulleted list of points that you need to have action item essentially that you need to get done. I’ve called them operation retention in the past. We’re actually just wrapping up operation retention 2, once again to decrease churn with HitTail. What I found overwhelmingly is that there is often a feature or two that is having people churn but a big part of is really getting people to get value out of your app like it’s education. A lot of it is recording new screencast and e-mailing them at the right time.
[24:40] Life cycle e-mails are big win for this kind of thing and touching base with people periodically, you know, really getting them to get value out of the app because that’s going to be the best way to have them convert to paid customers and just stick around. It’s about the beauty of the SaaS model but it’s also the curse of it, right, it’s that someone can cancel at anytime. And so, you really do need to provide value for them and in order for them to get value out of it, they have to be using the app. That’s one of the big ways that I’d see reducing churn.
[25:05] Mike: One of the ways that you can leverage the data that you’re getting out of your application for this churn is to take a look and kind of categorize how long people stick around for it and see if you can aggregate them in to cohort where if people who have signed up, all of approximately the same time, see if they stick around for a varying amounts of time or whether they all cancel it around the same time because it may very well be that you’re introducing things in to your application that are causing them to quit and you happen to see that everyone from this particular point quit and if that may help you as your win on specific changes that are being introduced in to your application that are causing that.
[25:45] Rob: But if you look back at the four points we’ve covered, the first one was having low traffic, so increasing traffic and the second one was optimizing your customer acquisition process. Third one was identifying your key performance metrics and the fourth one was reducing churn. And those go in order like you need enough traffic so that you’re able to optimize your customer process, you’re able to get some metrics that are stable. So, you need enough people going through your funnel to figure that out, then you need to reduce churn to keep enough people there and once you’ve reduced churn to a point where I’ll say it’s reasonable and you aren’t just bleeding new trials or bleeding customers, that’s when you cycle back and you go back to number one and you increase traffic again.
[26:25] So, you take it from that 3 to 5,000 uniques that I talked about earlier. Maybe you try to double it to 10,000 and at that point, you’re going to learn more because your market is going to expand a little bit. And then you come through again and you optimize that acquisition process. You identify your key performance metrics. You reduce your churn again and it is the cycle in each time you go through and I mean this is can be a 6-month cycle, you know, of just stepping through these things. But a mistake that I see people make is they just focus one of this and they just focus on traffic, traffic, traffic but if you’re bleeding customers at the other end, it doesn’t help where if you’re always focus on reducing friction or reducing churn but you’re not driving enough traffic, then you don’t have enough data and you aren’t optimizing that whole cycle of it. And like I said, you can literally get 5X out of the cycle maybe even 10X because if you double each of this which is not that hard to do especially early on they multiple each other. It’s not additive. It’s actually multiplicative. So, a 2X improvement in 1 step is then times to 2X times to 2X, you’re looking at in 8X improvement, that is honestly it’s kind of trivial especially early on in an apps lifetime.
[27:27] Mike: It definitely helps significantly more and then overtime as you grow the application, you get more customers, you know, it multiplies in to a larger number.
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[27:38] Rob: So, the fifth and final approach to growing revenue we’re going to talk about today is selling more to your existing customers and by that I mean providing more value to your existing customers that they are then willing to pay more for. And examples of this are building new add-ons to your app. I talked about this last year on my MicroConf talk but in essence with DotNetInvoice, we added a QuickBooks module that allows you to live sync with QuickBooks and it was at a lot of development time but on a $300 like DotNetInvoice, we’re able to charge another 99 bucks for that module. So we’ve, you know, increased our lifetime value by 33% in that case. With HitTail, talked about adding the one-click articles and that has created a lot of value for people and not only has that generated revenue but it is helped tremendously with retention because people feel like they’re getting more value out of the app and you can find an approach like that but actually gives you double value. It actually retains people and generates revenue even better.
[28:34] In my mind you should always be thinking of how to move up the chain in terms of providing that next level of value for customers. So, if I had an app that was to help people build documentation for their software, I would launch the app, have people using it and then as soon as people, I would try to figure out how to concierge service where we would actually write their documentation for them and I would find someone, contract them, hire them, whatever it took but have that next price point because there’s probably going to be someone willing to pay a pretty penny for that and it’s going to make a way, way more likely, you know, to use your app and to stick with it.
[29:07] Mike: One of the things that goes along with that is that it’s very difficult to move somebody from paying nothing for something to even paying a dollar. So, whether your price point is a dollar or, you know, a hundred or a thousand dollars doesn’t really matter. The point is that there’s this huge amount of friction that’s in the way between them pulling out their credit card and actually signing up for your service. Once they’ve decided to do that, then it is significantly easier to make upsells to them and that’s a lot of what Rob was talking about was providing them opportunities to buy more stuff. So, whether you do it right at the point of sale or whether you do it afterwards where Rob did that with HitTail where he’s providing value to customers with the keywords suggestions and then offering to write articles for them that will help them with their SEO.
[29:50] Those are two different ways to do it but at the end of the day, it’s the same thing. I mean you’re basically increasing the lifetime value of those customers and because they are already being charged for the service, because they’ve already made the conscious decision to move ahead and actually pay for it, they’re going to be much more likely to do that than if they were on a free plan or just trialing the software.
[30:09] Rob: The fact is a lot of it is about building trust. If someone pays you a few bucks a month to use your app and they are getting some value of it and then you add a new service that it may costs double, double what…what you’ve already provided them but they trust that you are solving their problem and that what you provided them so far has been relatively low friction, it has provided a lot of value for them, they either save time, they save money or they make money, then it’s kind of a no-brainer, right? It’s like the big trepidation with signing up from a new app is like you said it’s giving your credit card to a new company. It’s entering your log in credentials and figuring out your log in credentials. It’s just getting ramped up and figuring out, spending the 20 minutes to get set up.
[30:48] But if you already somewhere and you already set up and someone says, “Hey, with this one-click, you can get even more value out of the app and of course you charge something less than of how you’re going to get out it,” then hopefully, build the trust in your customers that it’s worth their while. And that’s the idea like I said going up the value chain. It’s like how can I provide my customers with more value and make a little more money in the process but really provide them with way more value than I’m charging them for because that always has to be the equation.
[31:17] Mike: So, just to recap the eight ways to rehab an existing application is that they fall in to two different categories. The first one is cutting the expenses. If they has a free plan, cut the free plan. Step two is to analyze excessive hardware cost and get rid of them. Step three is to analyze any unnecessary subscriptions and get rid of those. The second category is growing revenue. If you have low traffic, then you need to address that issue. Step two is to optimize your customer acquisition process. Step three is to identify the KPIs that are associated with the business and step five is to sell more to existing customers.
[31:50] Rob: If you have a question or comment, call it in to our voicemail number at 888-801-9690 or e-mail 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. We’ll see you next time.
Episode 123 | How to Sell an App, How to Run a Smoke Test, Mobile Game Marketing, and More Listener Questions
Show Notes
Trancript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be talking about whether to sell your app, how to run a smoke test and a question about mobile game marketing. This is of Startups for the Rest of Us: Episode 123.
[00:13] Music
[00:20] Rob: 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.
[00:29] Mike: And I’m Mike.
[00:30] 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?
[00:35] Mike: So, we have two new MicroConf sponsors we picked up PickFu and Tealeaf Academy. PickFu is a lightweight marketing polling software application for logo designs, marketing material, product ideas and the Tealeaf Academy is the online boot camp for learning how to develop web applications.
[00:52] Rob: Many thanks to PickFu and Tealeaf Academy. While we’re talking about MicroConf, we have a couple of speakers that had been on the works for a month or so have finally confirmed that Josh Kaufman who’s the author of bestselling book Personal MBA and he also runs a website personalmba.com, I really enjoy this book. It’s a long kind of compendium that covers a lot of topics and so some of the topics didn’t apply to me but a lot of them were very well-covered. So, we’re please to have Josh and he’s going to be covering like idea validation, vetting an idea and some processes for doing that. So, I’m super excited to hear from Josh and the other speaker is Joanna Wiebe from Copy Hackers. I bet a lot of people in the audience know her. She’s been on Tech Zing and Mixergy and Copy Hackers is a series of books that she wrote on copywriting for startups. So, excited to hear what she has to say as well.
[01:44] Mike: Very cool.
[01:44] Rob: What else is new?
[01:46] Mike: Well, I’ve got an early access customer scheduled for next week who is going to be going through some of the Linux auditing that I’ve got set up. I’d still need to implement SSH keys but over the past couple of days I’ve been working pretty hard on the Linux stuff and that stuff seems like it’s all working right now. So, I just need to implement the SSH keys that will allow them to essentially restrict how the application gets on to their machines and where it’s going to come in from because they have IP address restrictions as well. So, it will only be able to come in for my servers using these particular keys.
[02:20] I’ve had a couple of different conversations with two really large customers over the past two weeks who have auditing needs. One of them is a local municipal government which has 15,000 employees and the other one is a public company and both of them are having the exact same problem and it’s a long the lines of what AuditShark is intended to do. So, I hadn’t plan on implementing some of this functionality for a while but when giving customers demand you kind of do what needs to be done. So, I’ll be looking at how to add that functionality and pick up those guys as customers.
[02:51] Rob: And how do you hook up with those two big gorillas?
[02:53] Mike: One of them found the AuditShark through the podcast actually. So there was somebody who was working at the company and found it and kind of forwarded the information to his co-worker who said he definitely be interested in talking to me and then the other one I did some consulting work for them and they’d seem to be having this problem. I was just kind of talking to them in general about what sort of challenges and stuff they were running in to and the problem came up. I had a nice conversation about it but it turned out that after that one then this public company came and found me. So, yeah, it’d be interesting to see how that it turns out though.
[03:27] Rob: The early access going well, are you still looking at next week or so to end that? Have you gotten a feedback yet?
[03:34] Mike: I don’t think so. I’m still looking for more. I think that the Linux stuff is going to play in to it a lot more than I originally thought. There’s much more demand for the Linux side of things than there is on the Windows side. The Windows side is more of a take a second look at the machines but it’s not real clear what people are really looking for or what they’re interested in seeing whereas on the Linux side, there are a lot more distributions. There’s a lot more clean cut rules about what sorts of things you should be doing and should be looking at. So, I think that the Linux side is definitely going to be bring to light a lot more things.
[04:05] Rob: Very good. Yeah, on my end I have a couple of updates. One is that was originally hoping that I’d be able to launch Drip in early April but I knew that if it slip at all that I wouldn’t be able to launch it until after MicroConf because launching like the second week of April is just not possible given how much, you know, time is required and mental energy is required to put up MicroConf. So, over the last couple of months, we have either iterated on a few things or we have added enough features to kick it just over the edge. So, our code complete deadline like the early access deadline was April 1 for a while and it’s now April 10 and that’s just too far for me to be comfortable with it. So, we’re still going to start early access at that point. I’m probably going to have it installed on HitTail and HitTail is going to be using Drip within the next probably 7 to 10 days is the goal and then once we get through about a week, a week and a half of that and have all the kick sort out then we’ll start the first early access customer and then probably bring a few more on in April but the launch launch that where it goes public, goes live will be after MicroConf and – I struggled through this decision, you know, whether to push it off or not but it is absolutely the right decision now that I look at all the pros and cons of it.
[05:16] There are a very few reasons not to push it off. It gives us more time to handle things and we saw a very specific and spelled out project schedules so it’s not as if I’m saying, “Oh, we’re just going to push it off two months. It’s like we saw a milestones that we’re hitting every week and it’ll just be better for all of us involved because I was starting out to pull late nights and get stress out about things and I think like you I always underestimate how much time MicroConf is going to take. Third year you think I would learn by now but it just takes more time than, you know, than I think it’s going to prepare for it.
[05:46] Mike: Yeah, you and I were talking about it earlier and it’s only six weeks out at this point. So – [Laughter]
[05:50] Rob: Yeah, it’s crunch time.
[05:51] Mike: Definitely creeping up quick.
[05:52] Rob: Definitely. I also wanted to mention a correction and our editor actually caught this. She said two weeks in a row you had said that I was quoted in the Wall Street Journal and I corrected you and said, “No, it’s the New York Times.” Well, it is the Wall Street Journal. So, I shouldn’t have corrected you.
[06:07] Music
[06:10] Rob: This week, we are answering a bunch of listener questions. We had some really good listener questions in the queue. I’m excited about it. Our first question is from Dan Taylor and he says, “Hi, guys, a long-term fan here. Here’s a question for the show. My situation is that I along with the two minority partners developed Course Director which is a SaaS app for schools and colleges that integrates with Google apps and is sold via the Google apps marketplace. We’ve built it in to a respectable 5-figure income. We have a recurring revenue model charging a certain amount per use per year. The current reality is we have all now that too much going on with our main projects and the time we are taking to support our clients and add new features and in general it just getting to be too much.”
[06:53] “So, we’ve all looked at all our options and detail and decided we definitely like to sell our app which for someone currently in the education space that could easily be a 6-figure income. Someone based in the US pretty much easier – have much easier time with the business just for starters as a majority of customers are there. So, you’ve talked before about buying an app. I want to find out if you had any thoughts about selling an app. Cheers and love the show. Dan.” The thing I want to point out is that remember last episode we talked about one of the launch mistakes and it’s not growing your startup fast enough so that you lose interest. This is —
[07:22] Mike: Uh huh.
[07:22] Rob: …that’s basically what it looks like has happened to you, right? It’s like you have an app and it’s kind of successful and that actually sucks more than having an app is not successful at all because if you have an app that’s not successful at all, you can shut it down and move on and you don’t feel bad. You don’t feel bad letting customers down. You don’t feel bad about the all of the revenue you’re leaving on the table and Dan – so Dan is in a tough situation. It’s almost – almost worse to have some success than it is to have none because now he’s in a situation of like what to do with this app?
[07:50] So, I think before I tried to sell it, I would look at automating this as much as possible and whether that means writing some code or hiring like a product manager or a general manager, someone to help run the app depending on how much revenue is coming in and depending on how much time it actually takes. I would look at that first because selling an app is not trivial especially if this thing is making 5 figures a year and you want 1, 2, 3 times annual revenue, that’s a non-trivial purchase price. And so, it’s going to take a long time and you’re going to need to find the exact right buyer. You could always throw it up on Flippa and try to get 12 to 18 months revenue but in this price range, it’s not going to be an easy sell.
[08:31] So, that’s the first thing that I’d entertain. It’s always easier – it’s like an easy out to sell and I know people just want to cut ties and walk away and it would feel really good not to have to worry about it at all but that’s not always a right choice. I mean you really have to ask…ask yourself the question, “If I could find someone who was maintaining this and doing a really good job and it was kind of throwing off a dividend for me, would I prefer to do that rather than let this go at probably a bargain basement price.” Because to be honest apps are bought not sold. What I mean by that is if you go to sell an app, the odds of you getting more than 12 to 18 months of net profit are pretty low. It does happen but in general, it’s just going to be tough going cold in to a market especially if you need a high touch sales and I’m not sure if you do it or not with this app.
[09:18] And if you decide you do in fact want to sell, it’s just a matter of looking at some good Flippa auctions that have done a good job and maybe modeling your post after theirs providing a lot of information, very honest upfront and not having too high expectation, you know, for what you’re planning to get in terms of price. In addition, the last chapter of my book, Start Small, Stay Small covers this. It’s just, you know, maybe ten pages but it covers in detail how I would go about selling an app and it actually has a sample listing from Flippa.
[09:46] Mike: Part of the challenge is you’re running in to is the fact that it’s not just him but it’s him and two minority partners. So, there are these other people who are involved and they probably have some sort of decision making ability in to it and the problem is that as you said it, it seems like it’s more like burnout than anything else but there’s a big gap in the 5-figure annual income and if you look at the average player’s point here’s $1500 a year, well, it doesn’t take very many customers in order to hit $1500 a year and if you go look on Course Director, there are 28 verified reviews and 39 regular reviews. So, you could probably guesstimate and say, okay, well, it’s probably got 60 customers or something like that but still about 75,000 a year. It’s not enough for one person to live on but with some effort and work, it could be. You know, how do you shake off those other partners? I mean maybe that’s another option is to find a way to have one of the partners buy out the other two —
[10:43] Rob: Right and even potentially using revenue from the app if you’re motivated to do so.
[10:48] Mike: Right and that could get around the potential problem of dragging out a sale for six months to a year or two years trying to find a potential buyer who would be a good fit.
[11:00] Rob: Right, I quickly jump to the conclusion that he should post it on Flippa but that’s probably not the first thing I would do. If you do in fact decide to sell, I would find your strategic, right? Find the companies who would benefit the most from this and reach out to them and probably do cold e-mails or calling and say, “Hey, I have an app and it’s for sale on limited market, you know.” And try to sell it to them first before you just go to the broader market because the broader market really is a more of a wholesale price and if you can find someone who actually has strategic value for this app and they could do a lot better with it.
[11:31] Mike: Yeah and to find people like that too you could potentially approach and sell. There are publicly available list of approved vendors for each state. So, what you would do is you probably go find one of those approved vendors. They are allowed to sell typically through like a bulk purchasing. So, for example, I’m in Massachusetts and I’m sure that there’s a publicly available list where I can go there and say, okay, well can the state or federal agencies who were based here buy from such and such vendor because they have to be listed there in order to use some of their pre-arranged purchasing agreements and you could just go down the list and see which of those in one or multiple states kind of fits the criteria for company that you might want to sell CourseDirector to. That’s probably where I would start looking for that kind of thing.
[12:21] Rob: So, thanks for the question, Dan. I hope that helps. Our next question is on smoke testing and this is from Alex. He says, “I’m an indie consultant getting ready to experiment with MVPs for some products of my own. According to the lean methodology I should or could set up a landing page with a “Buy now for 99 cents” button and have that redirect not to a Shopping Cart since there’s really nothing to purchase at this time but to an e-mail sign-up form. But what do I tell my potential customer on that e-mail sign-up form? Do I, one, tell them they’re part of a product experiment which is the truth? Two, tell them that the product isn’t done quite just yet, a half truth? Or three, we’re overloaded with business right now and if you give us your e-mail, we’ll put you online, a lie? What are your feelings, thoughts and experiences with this dilemma?”
[13:05] Mike: I think my first thought is where is the fourth option that basically says that you’re trying to validate the idea and with enough interest? I mean because the first one is pretty close I think. It says, “Tell them they’re part of a product experiment.” But when you’re putting content like that on a website, I think that by saying exactly that you’re going to turn people away and you’re going to get a much lower conversion rate to begin with because people don’t like to be guinea pigs. So, even though they are on a daily basis, they don’t like being told flat out that they’re guinea pigs. So, what I would do is I would say, you know, you’re validating this product idea and assuming there’s enough interest, you’re going to move forward with it. You don’t want to come out and say, “Hey, you’re part of a product experiment. Please give us your e-mail address.”
[13:45] Rob: I also question how you’re going to sell a 99 cent product or how you’re going to vet a 99 cent product using a landing page because I have never heard of that being done. I think that the minimum price to really do this or to consider using the marketing kind of the funnel approach where you drive traffic to a page and you convert it either to e-mails at this stage or to purchases eventually, I mean there’s just a minimum purchase price where that works because otherwise you need absolute free traffic.
[14:13] So, I guess if you had a bunch of SEO and resending people to it and you could convert one out of a hundred, maybe, you know, then you’ll make a 99 cents per hundred visitors which is just a tiny, tiny amount. So, I think in the last year, your lifetime value of your customers is a lot higher than 99 cents. I just question the value of a smoke test at all. I haven’t seen it done with price points that are this low. So, Alex if you do this and you know, you find out that it does or doesn’t work, we’d love to hear back from you.
[14:39] Mike: If you had to guess, what would your price point, your minimum price point be?
[14:43] Rob: Yeah, I was going to say 19 bucks one-time or like between 5 and 10 bucks a month SaaS. I think anything less than either of those. Unless you have extenuating circumstances like you have in-app purchases that actually mean, you know, you have a higher lifetime value, I think the rule start bending on the edge cases, right? It’s like if you have a $3 one-time purchase product or you have a $10,000 one-time purchase product, it just I just don’t think this approach works as well because one is high touch and one is solo touch that you can’t even really afford to test it.
[15:16] Mike: Uh huh.
[15:17] Rob: So, thanks, Alex. I hope that helps. Our next question is from Joe Hopkins and it’s a question about whether mobile gaming follows our marketing rules. He says, “Hi, Rob and Mike. I love your show. I discovered it a few weeks ago and have since gone back and listen to most of the episodes. I left my job about a year ago to focus on my bootstrap mobile game business and I found your podcast to be very helpful and much more applicable than other podcast that focus on larger VC back startups with no revenue. What are your thoughts on how your podcast relates to mobile gaming? Does your marketing advice apply to casual gaming that generates revenue by selling one dollar games? Should I look in the marketing funnels and acquisitions on episode 112 or am playing in a different game? Currently my business generates most of its revenue from one hit game that generates a humble $100 a day. Thanks.” And Joe is from doubletapsoftware.com.
[16:01] Mike: I’d have to say that most of the stuff that we talked about is probably not applicable to the mobile gaming environment. I almost have to go so far to say that most of the stuff that we talked about is probably not applicable to the majority of the mobile environment to begin with. I mean I’d certainly don’t have any experience, you know, selling mobile games and I would have a hard time giving somebody advice to say, “Oh, this stuff is going to work for you in this environment.” I mean you could certainly try it and if it works, great. If it doesn’t, then you at least tried something new.
[16:32] Rob: Yeah, the tough part with giving advice and being focus, the more focus your advice gets, the fewer people that actually applies to. And I think overtime if you look back to our early episodes, we really did include a big – so other people will include mobile and we included web and probably even desktop. But as time is going on, the audience I think had shaped around web apps and a lot of SaaS apps and some one-time download stuff. But for the most part, a lot of questions that come in really specifically are about SaaS apps and web apps. And so, a lot of what we do talk about absolutely applies to that kind of app and as you break out of there and get past the edges like you said, mobile I think a good chunk of what we talked about works but probably not the funnel stuff, the funnel optimization because it’s just – it’s sold in such a different way because the app store model is different.
[17:19] But if you think of optimizing for iTunes like optimizing for Google in terms of just getting traffic in and then if you think of your listing in the iTunes App Store or the Android App Store as your marketing website, then the fundamental stuff that we discussed still applies there but maybe not the exact tactic that we talked about when we talk about, you know, including a video demo or whatever, you know, on your website. Obviously, you can’t do that in the iTunes App Store but if you go one step further than a lot of you competitors and instead of just having some basic screenshots in your app, you actually have kind of a marketing website that you build within that little iOS App Store frame, people who just do a better job of marketing their app, right?
[18:01] So, the bottom line is I think in general what we say applies to both to mobile and web and desktop but there certainly are some specifics that won’t and I think these things you called out like having a marketing funnel and being able to pay for ads and that kinds of stuff, it just doesn’t work with 99 cent lifetime values. Gaming is another, like another animal all together and almost none of what we say applies to gaming because gaming is a hit-based business. You’re going to hear more important information if you talk to like a record executive or someone building movies or TV shows because they’re not bought on value, right? And we talk mostly about things that are bought or sold on value. That means that they save someone time, make them money or save them money.
[18:45] Mike: Yeah, one of the problems that I’ve seen as you said it’s a hit-based business but even with some of the games that I bought for my phone I mean I’ve looked through with some of the other games that been developed by the same developer and a lot of them I just don’t like. So, they’ll come out with a great game and then I look to see what other things that they have and a lot of the other stuff just isn’t as good or isn’t something I’m interested in. I mean the only thing that I can think of a strategy would be to find a hit game that you’ve developed and then build related apps around it that do similar things or have a similar type of game play but are not exactly the same thing.
[19:20] I think Rovio did a really good job with expanding their Angry Birds franchise and making all these different variations of what is essentially the same game and that might work very well in the mobile space. I don’t know how well it would work in like a desktop game space but obviously, there’s a lot of games that come out where you have sequels to them and they take years to develop. But I think with the mobile space, you might do a lot better churning out some of those games that are very much related, share a lot of the same codebase.
[19:50] Rob: Yeah and Patrick Thompson from Inkstone Software who has a QuickReader that I mentioned last week, he has built a portfolio, a nice set of portfolio of related apps. Now, they’re not games but it is in the mobile space and he did a talk at Portland Mobile Users Group that was fascinating and it actually linked up pretty well with a lot of what you and I talked about on the podcast. There were one or two places where we diverse and that’s because mobile is different from the web. But for the most part, a lot of the stuff that we talked about here, he basically confirmed as, you know, is true and works well within the mobile space.
[20:24] Mike: And there’s a link to that talk on the last podcast episode.
[20:28] Rob: So, thanks for your question, Joe. Our next question is from Mike Nava [Phonetic] and he says, “Hey, guys. I wanted to drop you a note and tell you how nice to stumble across your podcast a few weeks ago.” He has a long e-mail so, I will summarize. He says, “My concern is as a startup within I think a cool idea that solves a problem, how much do I put out there? I do not want someone to take the idea and start their own before I have a chance to develop it fully. So, let say, I’m at MicroConf in April and I talk about what I’m developing. Is that safe? I guess everyone is there to help one another and learn but maybe you can understand the paranoia as who knows when I will have another idea as good as this one. Anyway, keep up the great podcast, I’ll be listening.”
[21:05] Mike: I have a couple of different thoughts on this. The first one is nobody is going to steal your idea and the second one is nobody cares about stealing your idea. The reason they don’t care about stealing your idea is because it’s not successful. The second you’re successful with it, everyone and their mother is going to want to steal it but until you’ve proven it, nobody is going to care. You can talk about it for months or years on end and nobody is going to bother because you haven’t proven it yet and you know, you can look all over the web and ask how much my idea is worth and everyone is going to tell you it’s worthless. It’s the implementation of that idea that’s worth money and until you’ve proven that the idea is viable and the people are willing to pay for it, I don’t think you have anything at all to worry about.
[21:44] Rob: And I also think there’s a fine line between talking to a few people at a conference or a few people maybe online versus projecting it on a podcast live to thousands of people or blogging about it and detailing your entire marketing approach, right? It’s like you definitely need to keep some stuff under your vest especially what you have as a competitive advantage. You should have something as a competitive advantage and so, you don’t want to give all of that away but talking about an idea and just getting more feedback on it, I’ve never heard of anyone stealing an idea like that. We’re all way too busy with our own ideas that we think are great.
[22:19] Mike: Yeah, I mean how long have I talk about AuditShark in this podcast and I have yet to see anyone out there who has come to me and said, “Hey, Mike, somebody stole your AuditShark idea.” I mean it’s just – I haven’t seen that yet and I think it’s, you know, partially because nobody wants to steal an idea that’s unproven.
[22:34] Rob: Right and the value that you’re going to get from discussing it with other founders or hopefully, even other potential customers because they’re the real important ones, right? It’s like discussing with founders might get you some good feedback but if we’re not the target market, then there’s not nearly as much value as actually going and talking about it with customers. So, I would even err on the side of looking for customers rather than just talking about it with other founders.
[22:56] Music
[22:59] Rob: Our next question is from Leonard Teo [Phonetic]. He says, “I’m a big fan of your blog and a micropreneur of sorts. My small consulting side business has grown in to a 3-person company of Ballistic.com [Phonetic]. My question for you that is been in my mind since starting, what is your advice for micropreneurs wanting to take a vacation? For example, I built an app in my spare time earlier this year and I’m afraid to actually launch it because I also became a father and I’ve had to take extended periods of time off work. When I’m actually around I can provide support within 48 to 72 hours but what about when you need to take a week or two off, what do you do? I have two other friends in the same boat. They bring their laptops on vacation and find themselves having to work and burned out and depressed. I really appreciate your thoughts. Thanks in advance.”
[23:39] Mike: It sounds to me like there’s not necessarily enough automation to make going on vacation viable and you know, just the comment about, “My friends are on the same boat. They bring their laptops on vacation and find themselves having to work and are burned out and depressed,” that just strikes me as a situation where there is not enough automation such that it could be handed off to somebody else to take care of I think is a problem. I mean that’s probably the start of the problem and that’s where you got to focus some resources because if you don’t have processes and procedures in place for other people to follow, then you’ll never be able to take a vacation and it won’t matter whether that vacation is something that you planned or something that, you know, just came out of the blue and is an emergency where you’ve got to go, you know, maybe somebody is in the hospital or maybe you end up in the hospital. I mean what happens at that point? Is there any way for you to hand off the business to somebody else and say, “Hey, I need you to run this on effectively autopilot for a little while, while I go deal with this other situation.”
[24:37] So, I would treat a vacation as really no different than that but you really need to focus some time and effort and energy in to automating enough stuff so that that’s possible. I mean if you’re taking your laptop on your vacation just because you’re afraid of what can happen, there’s probably not enough automation or you’re just too afraid to take that vacation. To kind of test this out, what you could do is not respond to e-mails for two days and it doesn’t have to be, you know, a week just make it for two days and I don’t mean or a weekend. I mean in like, you know, a Tuesday to Thursday or something like that and not answer e-mails and see what happens. And I can almost guarantee that the world is not going to end. I mean you’ll at least be able to come back to those on Thursday and the reality is even for business applications, a lot of people do not expect a turn around time of two hours and they appreciate it but at the same time, whether you’re going to live your life, why are you building this business. And if you’re not building the business for yourself, then what’s the point?
[25:34] Rob: Yeah, my thoughts are hire a VA like hire a VA as soon as you can because what you built is it sounds like you built a job rather than a business. And if you want a job, you know, you can probably go make more money working for someone else. It’s not having a business that you can step away from even for a week or two. It’s – I just — I don’t even think that’s really a business. There’s a book called Built to Sell that I highly recommend you read if you haven’t already. It’s a little bit cheesy. It’s told as like a fable but the concepts in it are sound and it’s about building a business that is more automated that it has processes and it’s something that you can step away from and the funny thing is once you build your business up to where it’s actually saleable and it really is a solid business, you probably won’t want to sell it because at that point, then it’s basically it’s throwing off cash and you’re going to enjoy working on it so much more because you’re able to work on it rather than…than in the business.
[26:25] I just think that hiring a VA or hiring someone to handle the stuff that you’re doing day to day, it has to be your first step. It reminds me of – I remember the old MicroISV Movement and there were so many people in that movement who were taking about, “Oh, it’s, you know, it’s so hard because I work 12-hour days and as soon I started hiring VAs that’s where like I realized that you didn’t have to do that same old thing, right?” You didn’t have to do that same old thing of doing everything even if you are a one-person software company. You don’t have to do everything yourself. You need to get help in there so that you can step away and I know a number of micropreneurs, myself included who take a lot of time off, we take way more time off than when we worked full time. And I’ve rarely if ever worry about the business having any type of misstep during that time. So, I hope that answers your question.
[27:14] Our next one is about whether or not to move to a SaaS and this is from Robert Longley and he says, “Love the show. I have a software application for social services that I’ve sold to a few different organizations. It’s installed on their servers but I would like to start offering it as a SaaS solution. Most smaller agencies don’t have the stuff or the infrastructure to host it themselves. They also want to customize it beyond their ability to pay for it. A SaaS solution would solve part of the problem but getting people to standardize it is a pain. There’s also the issue of liabilities since there’s a lot of personal data. Any suggestions on best direction given some of these challenges? Thanks. Rob.”
[27:50] I have a couple of thoughts to start. I do think that SaaS is probably the way to go here because as you said I’ve worked for the city of Pasadena and I did worked with the Health Department and some other departments that didn’t have a lot of funding and didn’t have a lot of technical expertise and their ability to host things was – it just wasn’t up to snuff. I will think that SaaS is a really good option for these guys and I also think that their data would be more secure with you rather than less secure because you’re going to worry about it and you’re going to do the right things in terms of securing their data, definitely a lot of personal information. So, you are absolutely going to need to have this high security and therefore, you’re going to need to have a price point that supports that, right? You can’t charge 9 bucks a month and have exceptional security. You do have to be able to pay for that security and that includes doing it yourself which is a lot of time or hiring someone to do it which involves money. You do need to make it work because obviously, you don’t want to get hack and lose people’s information.
[28:43] Second thing you mentioned is people wanting to customize it beyond their ability to pay for it. What I would think about is if there’s a way to allow them to customize it within the app, if there’s a way to build the module and allows them to do mostly the customizations that they’ve asked for in the past because obviously, if you move the SaaS, you’re not going to have separate codebases from all of these agencies and my guess is that you will be able to find some type of middle ground that allows people to either configure their account and set up custom feels – I’m assuming custom feels and custom work flows is what they want. You can look at an example like FogBugz or you know, something that allows people to set up those custom types of things and see how they’ve done it because obviously they are SaaS app and they don’t have separate codebases for everyone.
[29:28] Mike: Yeah, I think Rob’s got a lot of good points. I think one thing you definitely want to focus on is going to the people who are using the older versions of your software and trying to upsell them to a newer version that is hosted by you and you know, you can start off those discussions by asking them why they didn’t renew or how things are working for them and try and find out as much information from them before you start pitching them on a new system because you know, you want to use it for two different things. One, you want to use it to find out whether or not they’re still using it. You can essentially use those yearly maintenance fees to say, “Hey, well, if you [Audio Glitch] get onto to this new system, you’ll get the full version of the software, you get everything that you needed plus it’s going to be continually updated. You’re not going to have to worry about upgrades or security or all of these different things.” And then you price all of that stuff in there and you should be able to gradually move some people over.
[30:20] Now, there’s going to be this subset of people who are not going to move no matter what and there’s not going to be a lot you can do about them. I would actually draw a line in the sand and try to move completely away from those people who have a hosted version. I think you have said that this is – it’s got a sequel server back end and it say web application. But if you’re asking the smaller organizations to host that themselves, I mean it seems like that’s just a recipe for disaster when it comes to support cost because you’re going to spend a lot of time and effort with that support that these people are not going to have that expertise and chances are good that they’re going to have to hire somebody to come in anyway. So, you can use all of those as part of your sales pitch to tell them, “Hey, well, you don’t have to do this. You don’t have to do that. This is the one price that you’re going to have to pay and that’s it.” And so I think that there’s a lot of good sales opportunities there. You’d just really need to work out with some of those customers exactly how you’re going to migrate them from their existing system on to the new system.
[31:16] Rob: So, thanks for your question, Rob. I hope that was helpful.
[31:19] Music
[31:22] Mike: If you have a question for us, you can call in to our voicemail number at 1-888-801-9690 or you can e-mail 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. We’ll see you next time.
Episode 122 | Four B 2 B Marketing Strategies for Startups
Show Notes
- VMWare Fusion
- AdRoll
- Patrick Thompson of Inkstone Software and his Mobile Portland Talk – Adventures in App Marketing
- QuickReader
- MegaReader
- Bidsketch
- Red Gate
- FoxyCart
- Balsamiq
- Software Promotions
- Microsoft
- Constant Contact
- WePay
- Koombea
- Dashable
- BookingTimes
- inbound.org
- HubSpot
- SEOmoz
- Buffer
- Ultimate Sales Machine by Chet Holmes
- AdBrite
- Chitka
- Advertise.com
- BuySellAds
- Dan Martell of Clarity.fm
Transcript
[00:00] Mike:This is Startups for the Rest of Us episode 122
[00:02] Music
[00:10] 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. I’m Mike.
[00:19] Rob: And I’m Rob.
[00:20] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rob?
[00:24] Rob: I am doing great on my new MacBook Air. Good grief this thing is nice. It’s just an amazing piece of hardware. And I had messed around with it in the Apple Store for, well, for years frankly. It was when it first came out, I want to go down and see it and I used it and you know, it feels so slick in the store. And I kept thinking, “Yeah, but if I get it at home and really start working on it, it’s just not going to… it’s not goingto continue to feel like.” And sure enough, I’ve pretty much been on it nonstop since yesterday. And now, when I go back to any of my other computers that aren’t made out of the awesome aluminum and you know, don’t just have this…this gorgeous screen, everything else feels like a plastic toy now.
[01:01] Mike: Uh huh. Yeah, I found the exact same experience and going from – actually I have a Lenovo and then I went to the MacBook Air and then every once in a while I go back and take a look at the other stuff and it’s just…it’s just a world of difference between them.
[01:16] Rob: Yeah and the thing that convinced me to really give it a shot is that I love my iPhone and my iPad so much and I use them all the time and I love the experience on them. I love the UI. I love the UX. I mean it’s just such a cool ecosystem and I bought…I bought in to it, you know, I mean I have a tons of apps. I wouldn’t switch to Android now purely because I just have so many apps and I just, you know, I have such an investment now in the ecosystem. And so I realize like why, what other reasons that I’m sticking with Windows because I use Macs all through college so, during the 90’s and then it was like 1999 when I switched to Windows and there were bunch of reasons for doing that. But I’ve used Windows now, you know, since then so for about 13 years.
[01:55] But there isn’t much actually keeping me using Windows anymore and when I looked at the Windows 8 UI I realized the learning curve of moving to that, I just realized why not go through a, you know, maybe a different learning curve and move over to what I think especially with the gestures and with all of the stuff they built in Mac OS or move over to what I think is actually a better OS. And I don’t know if it’s a better OS. Do you think it is? Do you use it enough to know?
[02:19] Mike: I don’t know. I alternate back and forth between them. I think that the kernel itself seems like it can handle certain things better than on the Windows side. So, like for multitasking, it seems like the OS X kernel handles some of that stuff a lot better but the vast majority of the stuff that I do is still in Windows. So, I still have a lot of stuff running in there. I don’t know. I mean I like the gestures as well but personally, I kind of like switching back and forth between the operating system because there are certain things I do in Windows and I have find that I’m much more productive there than I am on the OS X side and then same thing with OS X or certain things I do over there which I feel like I do a lot better over there.
[02:57] Rob: Yeah, if I’m going to do this, I’m going to switch 90 to 95% over to OS X and so there will definitely be a learning curve that already has been but I – although I have to have Windows up to do some .NET development, I’m doing so little of that anymore that I’m pretty much going wholesale over to the Mac side. And I got to be honest, the gestures have been pretty amazing. I’ve been really impressed with it. I have a question. Is it cheating to map the command functionality to your control key because that’s what I’ve done because the – you know, my keyboard shortcut hand has been doing this for 13 years having control everything instead of this command key. So, remap it but I’m wondering like, hah, am I really making a wholesale change if I do that?
[03:35] Mike: Like I said I switched back and forth between the two almost all the time because I run them side by side through VMware Fusion and one of the things that I kind of realized that – I used to be a very big proponent of just leave everything with the default settings, that way you don’t have to worry about it if vendor screws up an upgrade or if you move from one machine to another. But the fact of the matter is that like over the years, I’ve come to the realization that, you know, I don’t generally use other people’s computers and I like my machine to conform to me versus me conforming to the machine. So, I just remapped a bunch of things to make things easier for me. So, I did remap some of the keys. I don’t think I remap the command key.
[04:14] Rob: What’s going on with you this week?
[04:16] Mike: So, I’ve been doing a lot of work with AdRoll lately. Their interface looks really topnotch but one of the things that really bugs me about using the AdRoll is the fact that when you’re doing things, it takes forever for some things to show up.
[04:28] Rob: So, what is – there is a delay between when your ads are running?
[04:32] Mike: I assume that there would be for that but like if you – when you first start out with AdRoll, there’s a few things that – or to me like when I first signed up, it has absolutely nothing about like what their media requirements are. So, image sizes or anything like that. You basically have to create an account and then you get in, then you go through the process of creating a campaign and they’re like, “Oh, you need images. There are these sizes.” Like, “Thanks. That would have been nice to know before my two-week trial started so that I could go to my designer and have that stuff ready.”
[04:58] So, it took me about a week to kind of get through that process and then once I got through that process, then they said, “Oh, well, you got to install the smart pixel.” So, I go to install the smart pixel and it doesn’t work and I try all these different things, still doesn’t work. I get on the phone with support and they’re like, “Oh, well, your JavaScript is indented. It’s not copied exactly the way we sent it to you.” One, that seems ridiculous. I mean as a programmer that just seems absolutely ludicrous that my JavaScript is indented differently than you indented and that’s why it’s not working. But aside from that, I asked them how long it would take for things to show up and they’re like, “Oh, yeah it would take about a day for us to see that you’ve got this pixel installed.” I’m just like it’s just frustrating as all hack.
[05:37] Rob: Right because you want to get rolling on it quick?
[05:39] Mike: Well, yeah because I’ve got – you know, I’ve got, you know, deadlines that I’m trying to meet. I’ve got certain timelines that I’m trying to do things in and it’s just – it takes forever to get some of the stuff done and then they try to say that for them to recognize like different visitors, they batch it up and it could be in 16 hours or so before they recognize at any given visitors come in and they force you to have a minimum number of visitors before they’ll start running any of your campaigns.
[06:01] Rob: Right.
[06:02] Mike: So —
[06:02] Rob: Yup, so it does take a while. You know, you should ask them to extend your trial.
[06:05] Mike: Yeah.
[06:06] Rob: Yeah, I mean you need more than 14 days because you’re — it sounds like you’re already eight days in to it and you don’t even have ads running. So —
[06:11] Mike: Right, right.
[06:11] Rob: …I would – I’d probably ask for…for 14 days from the start of the ads. I think when I did – for I don’t use AdRoll anymore but when I did, that’s what we did because I went through a similar thing whereas like a week before I was up and then they started my trial then.
[06:23] Mike: Got it.
[06:24] Rob: Hey, I wanted to bring up another Micropreneur Academy member who has a lot of success. His name is Patrick Thompson. He’s a lifetime member. He’s attended both of the MicroConf these last couple of years and he’s coming to this one as well but he has a whole suite, a portfolio of mobile apps. And he started off with QuickReader and he also has an app called MegaReader. You can check him up by going to quickreader.net and he has links to all of his apps there. He has multiple languages and all kinds of stuff quicker that teaches you how to speed read. It’s a pretty cool app. I’ve used it and then MegaReader is more just like an e-book reader that you can get access to a bunch of free public domain content.
[07:01] The thing I like about what Patrick did, he’s had great success and he’s, you know, been living off his apps for a few years now and he’s just starting to do some talks in his local area up in Portland kind of his experience and things he’s learned but he made this great viral video. He hired some guys to do it and it didn’t actually generate that many sales for him but we’ll link it up in the show notes. It’s pretty funny. It’s just kind of like a humorous commercial of someone using his…his QuickReader app. So, wanted to congratulate Patrick on, you know, all of his success.
[07:31] Mike: Speaking of MicroConf, I realized that we haven’t really thanked any of this year’s sponsors for MicroConf on the podcast yet or even mentioning anything about them. So, this year we have Ruben Gamez from Bidsketch as being a sponsor this year again. We also have Red Gate, FoxyCart, Balsamiq and SoftwarePromotions and then Microsoft and Constant Contact are both coming in with big sponsorships this year. So, just want to definitely say big round of thanks to those guys for helping out. And we also have a WePay, Koombea and Dashable who are signed on as sponsors. So, we’ll be talking a little bit more about those guys in the coming podcast. We’ll definitely link to those guys in the show notes. But if you’re interested in any of the services that they have to offer, definitely check them out. We’ve been trying to concentrate on sponsors who would be able to kind of contribute to the community itself and have things that will help people with their businesses and launch them —
[08:22] Rob: Our sponsors are such a critical part of MicroConf both of the first two years. We wouldn’t been able to pull it off without the sponsor money. You know, we rely a lot on our sponsors and so we definitely want to give a big thanks to those guys.
[08:33] Music
[08:37] Mike: Today we’re going to be talking about some B2B startup marketing strategies. And this podcast idea came from Adam Clinckett who lives in Brisbane, Australia. He’s also a Micropreneur Academy member who runs a website called BookingTimes which is a SaaS-based practice management software for health, dental and medical providers. And he wanted to know some more ways that he could get in front of small business customers. So, his product is I’ll say just about launch – he’s more or less doing beta testing, early access but he’s really looking for ways that he can start scaling up some of his marketing efforts and getting in front of more small business customers that are specifically in search of the type of problems that he’s having.
[09:16] Rob: It’s a big question, right? We actually get this question or at least I get e-mail fairly regularly of, “Hey, I’m about to launch. How do I market my app?” And it’s like, wow, that is a huge, huge question. Literally, you could write books on it, right? There had been literally books written on this but specifically what’s nice about Adam’s question is he had a few things that he threw out that he was asking for more information about and knowing specifically what his app is, actually, you know, kind of corrals the conversation so that we can spend 20, 25 minutes on here and actually get…get some realistic information out.
[09:50] I want to start by saying we could come out with a hundred different approaches from marketing, right? We could just – we could threw out AdWords and SEO and info graphics and all the stuff but you can’t just go on those directions at once. You have to find approaches that work since most of the approaches you try are not going to work. And I think that’s important to realize is that most of the stuff you try is not going to work but a few anomalies that you pull out and that you’re able to capitalize on and scale up, that’s what’s going to be the flywheel that grows your business.
[10:17] And so the two steps in doing this to find the approaches that work are number one, to put together a big list of ideas. And most people don’t do this. They skip the step. I’ve taken the time with both of my last couple of apps to put together a Google doc which is the big bulleted list in different categories and such. In HitTail, it’s 14 pages and for Drip, it’s 10 pages. And this is just single space bulleted list of all these thoughts, these ideas, these – they come both from me as well as podcast I’m listening to and audio books and overtime, I’ve gathered this huge corpus of essentially marketing ideas. And you obviously have to pair this down and you prioritize them, use your best judgment. I mean you basically take your best guess at which one you think is going to have the most impact. Start at the top and then start implementing them.
[11:00] And that’s why you have to track everything, right, because you’re just – you’re kind of throwing darts. You have educated guesses but you basically…you basically taking a guess of what’s going to work. And so step two is to track everything, see what’s converting, see what’s repeatable and shut it down if it’s not.
[11:15] Mike: And I think those are great points to follow and you said people aren’t putting together these lists. So, when they get to the point where they’re working through a set of early access customers and they’re really identifying and zeroing in on the issues that people are having, they turn around and they say, “Okay. What’s next?” And they don’t necessarily have a good idea of where to go and this list that you put together can definitely help point you in the right direction because then you can use it to prioritize that list and say, “Okay, I want to try this next and if that doesn’t work, maybe do some tweaks with it, readjust and then continue working through that list.”
[11:47] Rob: So, we’ve broken down this marketing strategy in to four different categories.
[11:52] Mike: The first one is inbound marketing and there’s a few different things that fall in to this category. There’s concept marketing, there’s blogs, you can use info graphics, head term SEO on marketing pages, forums, all these different things that you can try. And for content marketing, you can either use a blog or an e-mail list, specifically what you do depends a lot on what your primary goals are. So, if you’re trying to drive traffic to your site, you’re going to do one thing. If you’re trying to educate the users, you’re going to do something slightly different. So, you really need to try and determine what your primary focus is before you start going and implementing some of these things.
[12:28] So, for example, if you wanted to drive traffic to your site, an e-mail campaign is probably not the best way to do it.You’re probably going to want to lean more towards using blogs or info graphics. And if you don’t know where your business is at, if you’re not tracking ay of the metrics associated with this, it’s going to make it hard for you to measure how well you’re doing with any of these things.
[12:48] Rob: Yeah, with the inbound marketing, there are some really great resources. The HubSpot provides a ton of fairly detailed reports. You can also find a lot of people doing inbound marketing at inbound.org which is a joint venture between SEOmoz and HubSpot. The thing to keep in mind when you’re doing inbound marketing is this is a lot of what most startup focus on or even just most online products. This is a lot of aside from paid acquisition, this is kind of the main thing that people doing internet marketing focus on. And it’s easy to get caught up in the flavor of the week. That can work in certain niches or “Hey, there’s a Facebook page marketing strategy that does this and that,” but the thing to keep in mind is that the fundamentals that had worked for years, they’re going to continue to work and that is things like blogs, info graphics and choosing head terms of SEO and going after them with your…your main pages.
[13:38] I think in terms of blogs, it’s kind of overhyped or just over talked about. A lot of people when they start their, you know, start their marketing side, they launch a blog and they don’t even really know what to put on there. And you got to think this through because you can’t just sit there and write about your app or write about how to use it or write about anything because no one cares about that. What you have to do is educate them. If to educate them on a topic that somehow relates to your app. So, if you look at the blog of KISSmetrics which is a blog.kissmetrics.com, they do a fantastic job of actually creating that’s content marketing at its best, right? It’s actually creating articles that people want to read and that they are drawn two or three in social media and they share it through Twitter and Facebook. Buffer did a similar job. If you go to bufferapp.com I think it’s slash blog.
[14:23] One of the founders, you know, just blogged per about a year. He also did a lot of guest posts as well but that is one way to use a blog as a true social media content marketing thing and you could also add info graphics guides, tutorials, pocket guides, et cetera to that and it just draws in traffic. But it draws in waves of traffic. It’s not – doesn’t tend to be a super long flywheel.
[14:41] The other way to think about it is to think about a blog as a long tail SEO tool and that’s where a tool like HitTail comes in as that you would – you pick certain keywords and you just have someone cranking out articles. And so, as an example with the HitTail blog, I have a writer who is writing – I think she writes four articles a month. Right now, about to kick her up to eight articles a month. And she logs in to HitTail and looks at the terms that are suggested for our site and then she turns each of those in to an article. And so, these are not big blockbuster top 10 ways to do this, you know, awesome articles like you see on KISSmetrics. They’re really – they are smaller articles and they’re building a snowball of traffic overtime. It’s long tail SEO and its traffic that has – doesn’t have a lot of competition and it’s very consistent but it is not huge burst of traffic. So, there’s really, you know, two pretty different ways to approach blogging and that type of inbound marketing.
[15:32] Mike: Something else we haven’t really talked about is some of the mainstream media. So, press releases, newspaper articles and getting listed on news websites like CNN or you know, various blogs out there. And one of the issues with getting involved with those or getting links back from those places is that it’s very – you get a lot of traffic. It comes in huge waves. You’ll get a lot of traffic very quickly but then it will taper off just as quickly because as a new site, things are important [0:16:00] on the day that they’re released and they are heavily promoted, maybe they get to the front page of that website and then they fall off and they end up in obscurity where nobody ever goes to look at them. And you will still get some of the backlinks from that stuff but it won’t be nearly as much as you would from as Rob mentioned some of the other types of blog and strategies that you want to look at.
[16:21] Rob: Yeah, the traffic also doesn’t convert that well. Mainstream media may send you a lot of traffic but you’re going to just get a tiny, tiny amount of those people who are actually interested in your app. And when I have that quote in the New York Times, I got more trials that week from a mention on a WordPress blog. It was a popular WordPress blog but obviously, the readership of that WordPress blog is a lot less than the New York Times but it’s just so much more targeted. So, it would – given that it’s really, really hard to get in to mainstream media and to get mentioned in a large publication like that, for now, unless you really know how to do it, I would say forget it because it’s so much easier to target the smaller niche blogs and podcasts and the pitch is easy.
[17:06] If you pitch a podcast, they’re almost always looking for content, they’re looking for people with interesting stories and as long as you can come up with an interesting story, you say, “Hey, let’s chat. Here’s the story. I’m not going to plug my app. I’m a developer. I, you know, I’d love to share my knowledge and educate and blah, blah, blah.” And I mean you just get a good pitch down. When I did kind of – the podcast towards HitTail about 15 months ago, I e-mailed 12 podcasts and I got 11 yeses and I went on all of them. And that was in early stage inbound marketing approach that I used.
[17:32] In terms of blogs, going out and pitching guest posts to blogs, you have to do it right but it can absolutely work well. This was a technique used by Buffer. I’ve actually used this as well with a couple of my apps. It is very time-consuming and in fact, all of these inbound marketing strategies are fairly time-consuming but they’re free, right? Unless you’re hiring the writing out and at a certain point, you will need to because you just won’t have enough time to do it but these are the strategies that can drive a lot of traffic and that don’t require a huge amount of money to get started on. So, these are definitely the early stage kind of foundational things that if you’re a bootstrap startup and you don’t have a ton of money invest that I would recommend that you…you start looking at.
[18:10] Mike: I think the last one that we also haven’t talked about is forums and [Laughter] forums are one of those things that have really fallen by the wayside in terms of I’ll say mainstream developers that I talked to and associated with. Most people don’t think to go look on forums but it’s just mindboggling the number of people who still go to forums and still use forums. There’s all these niche websites where they will have their own forums for different things.
[18:35] And LinkedIn I think is probably becoming one of the places where a lot of people are – at least in the professional community are gravitating towards because they have all these different forums and communities where you can subscribe to different groups and as a member of that group, you can post in their “private forums.” And then they send out e-mail to everybody who’s in the group saying, “These are some of the new topics that have come up,” which draws people back in to the website and obviously that benefits LinkedIn. But if you’re talking about things that are relevant to that community, then you can use that to help drive traffic to your website. And it’s not just limited to LinkedIn. You can definitely use the strategy on other websites where they’re discussing particular problems that are associated with that niche.
[19:16] Rob: One of the best ways at least long term when you’re first getting started and you’re just trying to get every user to come to your site to check out your app, it’s cool to just hang around at some forums. It totally doesn’t scale but you hang around. You get known. You don’t want to be the spammer guy who comes in with a commercial everytime or you actually want to be in some way involved in these forums. It doesn’t scale long term but it’s something that you can think about. Long term, set up Google alerts and look for some key phrases on the internet. Google will find these forum threads and you can pop in and at least check it…check them out and if they’re asking something specifically about your product name, you can always step in and say, “Hey, I’m the owner and here’s the answer to your question. Here are my thoughts, whatever.”
[19:51] I still do this with HitTail, by the way. It gets mentioned on forums and I pop in and say I’m the owner and people have never had a problem with it because you’re not – you’ve already been mentioned so it’s not like you’re coming in [0:20:00] to pitch your app. And then if they have – if they’re talking about something else related to your apps. So, you know, with HitTail might be long tail SEO or long tail keywords or something, you have to use your judgment of whether or not you can pop in and just offer suggestions or thoughts and then include your link in the signature or you can just mention that, “By the way, I’m the owner of this tool. So, I take my name with a grain of salt.” When I do this, I’m very careful not to – to try not to come off as being like a sleazebag guy because you see the people on the forums who do that and it’s irritating but this is definitely a way to take the pulse of people because these are actually people discussing your app or your topic.
[20:35] Aside from one-on-one conversations and e-mails, this is a really good way not only to, you know, to get people interested in your product but also to figure out their pain points and to figure out the issues that they’re having perhaps with competitive tools.
[20:49] Music
[20:52] Mike: So, the next approach that we’ve came up with is outbound marketing and with outbound, you’re really talking about reaching out to people through the phone, you’re using direct mail, e-mail, outreach to people. One of the things that I’ve found is that e-mail is a proverbial gold mine and there’s a lot of different reasons for this. And the first one is that it’s almost free to send these e-mails. Obviously, if you’re sending them through your own ISP because you’re sending direct one-to-one communications, there’s obviously no issues with that. But even when you start sending out, you know, hundreds or thousands of e-mails is very, very cost-effective to send these e-mails out to people.
[21:26] And using things like MailChimp or AWeber or Constant Contact, you can get in front of people who want to hear that information especially if you built up a mailing list because these are people who signed up for that mailing list and they have essentially said that they want to hear from you about this topic that you put together for them. So, for whatever reasons that you put in front of them to convince them to sign up for the e-mail list, those are the reasons that you continue sending e-mails to this list and promoting whatever material it is that you want to send to them. So, whether it’s security information or in the case of Adam if you’re sending information about how as a small business they can deal with specific problems that are in that industry, so if there’s new legislation that’s coming out or if there are new tools that they might want to be aware of, these are all great things to share with them. And as long as you’re sharing information as opposed to giving them a sales pitch every week, it’s going to go over really well.
[22:18] Rob: I think there’s two ways to look at e-mail outreach. The one that you said is building up your mailing list, right. People come to the website and then you build the list and you educate and offer insight and you help them out and then overtime you just kind of become a trusted advisor and they might check out your app. The other way that I’ve seen donepretty well is – I’ve actually had it done to me by several companies and I become their customers is the CEO or the founder or someone e-mails with a short e-mail. It’s out of the blue and unsolicited and – but it’s a compelling pitch and it’s like, “Hey, here’s what we do for companies like HitTail or you know, like Drip.”
[22:52] And these have been from a variety of different startups that are basically catering to other startups. And so I get the e-mail. It’s a plain text e-mail. It’s not so marketing e-mail because if it was a marketing e-mail, I’d mark it as spam right, because you can’t do unsolicited commercial bulk e-mail to just a list but these people are actually seeking people out and this has worked well. As long as it have a compelling value pitch and it’s not something that they’re just – it’s not a bulk e-mail. It’s not a copy and paste thing. They mentioned me by name. They mentioned something specific about my app. They mentioned how their app can help and it’s just maybe two to three sentences and not all of them are kind of well for sure but I at least investigated when someone reaches out that way.
[23:27] And this is similar to the phone or direct e-mail. Obviously, those are more time-intensive or expensive approaches. All three of those can work and I think if you’re considering this approach, you really need to read the book Ultimate Sales Machine by Chet Holmes and he talks about putting together your dream 100 which is the top 100 clients that you would like to have and then, you know, you can use these approaches in tandem, in a sequence contact the same dream 100 multiple times work to get them to try out your app. In addition, you have to have a high enough lifetime value to make this worthwhile. You can’t sell a product for 9 bucks a month or a one-time $20 fee and do these approaches. They’re just too time-consuming and too manual. So, you really need to have a higher and other subscription app or a high upfront price point or to justify the time and or expense of these outbound approaches.
[24:16] Mike: And in terms of direct e-mail outreach like you had just mentioned, you can try to templatized that approach where you create an e-mail template and then you have a couple of sentences where you’re going to essentially insert personal details about that person. So, maybe there’s one or two sentences in there say, “Hey, I heard you on such and such podcast,” or “I heard you on Mixergy and you were talking about this. And I’d just want to let you know this is what we do.” And those are ways that you can cut down on the amount of time and effort that it takes to build those but as Rob said you really do have to make sure that you are being personable, you’re relating to them directly and you’re letting them know that it isn’t just them part of this massive mailing list that you bought from some place.
[24:59] Rob: So, the third marketing category we have is paid acquisition. And paid acquisition is something that scales really well but it’s really hard to get right and it’s hard to find a channel that you can actually scale up. The typical approach to getting started with paid acquisition is to try a number of different ad networks, number of different headlines. Hopefully, you already have an idea of your customer demographics or where they would be or what they would be searching on. And the interesting thing to think about is that most ad networks are not going to work for B2B because they’re catering towards consumers. So, ad networks like AdBrite and Chitika and Advertise.com. There’s a bunch of them that I specifically tried out about a year ago. They’re just – they junk traffic if you’re trying to sell B2B stuff.
[25:43] So, the ad networks that I know of that probably have the most volume are Google AdWords and now, Bing Ads since they have the inventory of all the Yahoo searches. They actually have a reasonable amount of volume. LinkedIn Ads, Facebook Ads and BuySellAds. I’m sure there are others out there but those are the ones that can provide enough people that if they actually do work that they can scale up. You can also buy clicks through StumbleUpon but those do tend to be people that are kind of wasting time rather than wanting to buy stuff. So, I’d use that as more of a viral market approach rather than a paid acquisition strategy for a B2B app.
[26:15] And the thing to think about when you’re doing these paid ads is you really have to go on with a small budget do a trial and see if the cost to acquire a customer is less than your lifetime value and it should be a lot less. A typical rule is it should be a third or less of your lifetime value. And if you can make that work and scale this up, you have found an amazing flywheel and really have. It’s a lot harder than it sounds. People think when they’re starting these apps that they can just buytraffic and it’s going to convert and it’s actually quite hard to do that. And even if you find a source that will convert, it tends to be really hard to scale it up because as you try to expand your ad span, the quality of your traffic goes down and so then you start having to pay higher and higher amounts to acquire customers. That’s really the high level overview of this. There’s obviously a lot of details to this topic that certainly are more in-depth course is wanted.
[27:06] Music
[27:09] Mike: And the fourth marketing strategy is to leverage partnerships and what’s referred to is OPN which is Other People’s Networks.
[27:16] Rob: OPN is from Dan Martell. I want to give him credit MicroConf 2012 his talk. He talked about OPN and how you can, you know, build your startup through using other people’s networks.
[27:26] Mike: So, with partnerships, what you’re really looking for is either joint ventures or integration marketing or affiliate programs. Any of these things can be mechanisms to help scale your business up and obviously, you need to know what your sales pitch is going to be and what resonates with your customers because that’s what other people are going to want to know. They’re going to want to know what sort of market you have, what sort of audience, what do they respond to, how is there an overlap between your users and their users. Those are all important things and one of the things you have to be really careful of is it you are not going and [0:28:00] approaching people who’s networks are I’ll say worlds of magnitude larger than yours.
[28:06] So, if you have a network of users that is a hundred or 200 people, you don’t want to approach somebody who’s got a network of hundred thousand people and ask them to do a joint venture because it’s probably not going to work very well especially if you’re saying, “Hey, you can promote something to your users and I’ll promote something to my users.” That…that just not going to work really well because one of theirs questions is going to be “How many users do you have?” And when they find out that there’s this giant disparity between them, it’s going to reflect very poorly on you.
[28:33] So, what you really want to do is you want to find out if there are ways that you can sell your product through them and essentially give them a cut. It’s a slightly different way of doing a joint venture but you have to know what those numbers look like before you start going and approaching people because you want to know what’s going to be in it for them.
[28:51] Rob: Yeah, I’ve had some joint venture e-mails that have gone really well and I’ve had others that have just beentrain wrecks but luckily, you do enough of this and it kind of evens out. The key is to really know your audience and know that you’re going to have overlap with the potential partner’s audience. That’s the bottom line. The nice part is once you get an e-mail or two and you’ve send them out and they worked, then approaching new joint venture partners and saying, “Hey, e-mail your audience and I’ll e-mail mine. We won’t do any affiliate stuff. It’s just kind of one for one, our list are similar size.” That actually doesn’t take that much time.
[29:22] And I was surprised I was doing this last year for HitTail and I e-mailed nine potential partners. They are like SEO rank trackers just affiliated tools, right, people who would use that – would use these tools but also probably use HitTail and I got nine responses within about three days of people who were like, “Yeah, absolutely, let’s do that.” And I was overwhelmed and I’ve only done two of those because, well, because I want to space them out. I was surprised at the…at that response and I dothink this is, you know, an underutilized approach.
[29:49] And then the second part of partnerships you touched on was integration marketing that I have also mentioned in the past and that’s things like HitTail, we integrated with Basecamp. We have a HubSpot integration we’ll be launching here next week or so. Well, we have a WordPress plug-in. And not only you’re trying to get the partner to tweet out, potentially blog about you and get you some traffic but you also want to be on their integration’s page because those pages do get a nice chunk of traffic both from search engines and from, you know, the people who are actually using the app. I’ve seen integrationmarketing worked quite well and we’re going to, you know, continue to invest in that with both HitTail and Drip.
[30:24] Mike: So, those are the four B2B startup marketing strategies that we came up with. The first one is inbound marketing. The second one is outbound. Third is paid acquisition and then fourth is partnership. And sort of a bonus, we also thought about how to improve word of mouth. And one of the things that I’m not really convinced of is that you can effectively do this as a small business as a scalable level to make it worth it because how many times do you have to hear about a product before you decided to look in to it or seriously look in to it. If you look at some of the research behind how many times when someone hear something before they start investigating it, what you’ll find is it’s like half a dozen to a dozen times.
[31:02] And the unfortunate part of that is it means that you need to get in front of them half a dozen to a dozen times before they even start considering you as an option or decide, “Hah, I’ve seen that before. Maybe I should look in to it.” And as a small business, you can’t do that effectively when you are so small. Companies like Microsoft and Dropbox can do that because they will get in front of people dozens and dozens of times and it’s very easy for them to do it because they’ve got billions and billions of dollars to spend on marketing. You don’t as a small business. So, you’re going to run in to problems trying to leverage word of mouth to get in front of more people.
[31:36] Rob: Yeah, I agree with what you said. I also think that, you know, building a great product is probably the best way. Solving…solving a problem really well is a good way to get people to talk about you but as you said when you only have 50 or a hundred customers which when you’re getting started that’s what you have, people aren’t going to be talking about you. You don’t have the scale. I think another aspect to this that can be helpful to get people talk…to talk about you is to try to be everywhere. That means beyond blogs and be running ads and pipe in on forums and be on podcasts and be in the conferences. As long as you’re within that small enough niche, you’re not trying to target the entire world, you can pretty quickly cover the landscape of a lot of places where people frequent.
[32:15] If you look at the web design niche I mean if you…if you guest posted on five web design blogs to very specific ones, within a month and were also on a couple of web design podcasts, you would cover a huge amount of territory and people would start to feel like, “Wow, this guy really is everywhere.” So, that’s another way to get people kind of thinking you’re at top of mind and if they feel like you’re more legitimate. I mean you are. You are actually out there especially if the stuff you’re sharing is interesting and educational, it can really get people more excited or more interested and willing to talk about your app.
[32:44] The idea that you’re going to just have your existing customers go out and promote your app, it’s not – I mean yeah, it can get you a few extra customers and you can use a product like Ambassador. If you go to getambassador.com it’s actually what I used on a couple of my apps, that’s actually a great way to do it. They give you some forms and some other ways for your customers to share your product with, you know, other people and actually to get a cut off the price if that’s what you want or just out of the goodness of their heart. I mean however you want to set it up is fine but – so there are definitely tools out there to do it. I haven’t seen this done to scale to really starting, you know, getting aside from viral loop applications which are typical B2C apps, I have to see an example of one before I believe that word of mouth can really be use in and be a repeatable process to grow a B2B app.
[33:30] Mike: That’s right and I think that in terms of focusing on improving word of mouth for your application, I think that there’s a lot of other much lower hanging fruit that it’s probably warranted to go after than to concentrate on “How do I improve word of mouth for my application when I’m just starting out?”
[33:47] Music
[33:50] Rob: If you have a question or comment, call our voicemail number at 888-801-9690 or e-mail 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. We’ll see you next time.
Episode 121 | Seven Catastrophically Common Launch Mistakes
Show Notes
- Macbook Air
- Light Point Security
- RSA Conference
- Launch Festival
- Pirate Metrics
- Why Free plans don’t work
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, we’re going to be discussing Seven Catastrophically Common Launch Mistakes. This is Startups for the Rest of Us: Episode 121.
[00:09] Music
[00:18] Rob: 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 is the word this week, sir?
[00:33] Mike: So, I have suffered from a nerd injury.
[00:35] Rob: You e-mailed me you said, “I think we need to push off the podcast by a day.” And you said, “I tripped over my headphone cable and when I was getting up, I think it pulled something in my headphones.”
[00:47] Mike: The USB connector bent that’s when the cable got yanked. So, I don’t know. There is something in there where the Windows recognizes that it’s connected to the machine and it sees exactly what kind of headphones it is. There is no sound coming out of it. And the microphone doesn’t work.
[01:01] Rob: Well, so you bought new headphones and I bought a MacBook Air.
[01:04] Mike: Do you want to trade?
[01:05] Rob: Yeah, mine is – it’s pretty beefy. It’s got a 512 gig SSD drive and 8 gigs of RAM.
[01:11] Mike: Actually the extra space is really not that big of deal to me because mine has 256 gig SSD and let’s see, I have half of it allocated for Windows. The other half allocated for OS X and you know, I still have plenty of free space on it. So, that’s not a big deal. It’s the 8 gigs of RAM would be nice to have but I’d exchange that for a better screen anyway.
[01:31] Rob: Yeah, that makes sense. Hey, I’m finally going Mac. I mean partly because you’ve been able to pull it off well and I know you do. You probably do a lot more Windows development than I do. I’m down now to just a very small amount of some .NET console apps that I maintain. Everything else I could do on a Mac with a good text editor. To be honest, there is no other hardware that I can find that anybody makes that runs a Windows that is all comfortable to Mac hardware. It’s just like crazy that no one has been able to catch up with them but then I really I was playing with the MacBook Air in the Apple Store and the gestures look really – I was just flipping around. It sounds like, wow, this is a nice OS. It’s really impress. So, I’m going to give it a shot but I look at Windows 8 and I’ve gotten on a couple of machines with that on and I’m thinking I know I can learn this but why – if I went go through a learning curve, I might as well just take the time now and jump to Mac, you know.
[02:19] Mike: Yeah, I think that the things that I would say about switching from regular Windows desktop to a MacBook Air is that if you want to run Windows on in too just go at VMware Fusion. So, it costs you like, you know, fifty to a hundred bucks or whatever to buy the software. And then in OS X because it allows you to have virtual screens, you can have that full screen on another window, basically, on another – on a virtual screen and you just three-finger swipe between operating systems and it’s completely seamless.
[02:45] And then the other thing that you’ll probably have to do because you’re a Windows user and you’re used to the function keys actually acting like function keys, you’ll want to remap those so that you have to hold down control function, whatever the function is to get to the OS X shortcuts. So, like for example if you hit – there’s one of them where you can turn the brightness up or another one where you can hold turn the brightness down. But when you’re in Windows, those things typically you’ll do like control F5 to compile in visual studio, that doesn’t work. You have to hold down control function F5 in order to do it. So, the key mappings are a little bit messed up. So, I would advice switching over those key mappings so that you have to hold down the function key in order to get that top row to work in OS X.
[03:26] Rob: Very nice. So, that’s what’s going on in my world. How about you?
[03:29] Mike: It’s tax time. Somebody needs to just kill me. [Laughter]
[03:32] Rob: Yeah, and you know, remember last year, you said your tax date was March 15th?
[03:35] Mike: Yup.
[03:35] Rob: And I was like, “Oh, mine’s April 15th because I’m an LLC and you’re a corp.” And then my accountant gets in touch and like “I just filed an extension for you.” So, this year, I’m trying not to do that. I’m actually going to try to file the LLC stuff on time on March 15th and then do the personal stuff by April 15th.
[03:50] Mike: Uh huh. So, what else you got going on?
[03:52] Rob: Well, you know, this week actually I have two pretty cool stories, success stories from some Micropreneurs. We have one is from Brecht Palombo. He’s a lifetime Academy member and he e-mailed me this week and he said, “Your Academy got me started and I now have a SaaS. It’s three years old and it broke six figures last year and it’s tracking the low five figures monthly for the last few months. I left my consulting business behind last October.” That was really cool. This is why we do this. I love hearing stories like this. His URL is distressedpro.com.
[04:21] And the other congratulations I want to send out is to co-founder of Light Point Security. It’s Zula Gonzalez. She’s also a lifetime Academy member and they were — Light Point Security was recognized as one of the top ten most innovative security companies by RSA, the RSA Conference I guess in 2013. And she said that they’re going to be presenting at the RSA Conference in February for a chance to win most innovative company. She also got in to the Launch Festival with Jason Calacanis but they got in to a local Maryland startup festival that had like a higher prize and a higher possibility for them to win. So, they bowed out of Launch and they’re doing the one in Maryland instead but lots going on for them. So, I’d just wanted to give both of those guys a shout out. That company again was Light Point Security and it’s at lightpointsecurity.com. So, congrats to both of you guys.
[05:06] Mike: You know, the only other thing I have is that I’ve been working on the documentation for AuditShark because I’ve been talking to people and they’ve looked at how AuditShark works and they say it great what it does but I don’t necessarily understand how to put anything together. So, I’ve been working on the documentation a lot more to kind of help solve that problem and put it – writing documentation for a technical product that’s, you know, when all of the product documentation also is technical, it’s just a nightmare.
[05:31] Rob: Yeah, true is. So, are you doing that yourself?
[05:33] Mike: Yeah, so I decided to just do it myself. You know, it’s coming along and I’ve got a lot of the documentation out on the website then there’s a development area where I’ve got more documentation that I’m trying to find tune in before I push it live to the website. But it’s getting there.
[05:46] Rob: Any news on the early access, any changes or are you still looking at couple of weeks to end it and going to launch?
[05:51] Mike: No, I’m going to actually do one more round with some early access people. I got to identify. I want to identify about eight people to send in to this next round and once I’ve identified those, I’ll kind of turn them all loose at the same time and kind of see what they think. Get some feedback from them. If there’s anything that I can fix quickly, I will. Otherwise, I’ll just kind of plow forward and push it out there and fix things as needed.
[06:12] Music
[06:15] Rob: We’re going to be talking Seven Catastrophically Common Launch Mistakes. I feel like I’ve been saying the same thing for years. I guess I started blogging in 2005. That’d be eight years but I really started harping on the startup stuff and started to learning and talking about these mistakes that I’ve made. Share insights about putting up landing pages and tracking key metrics and all the stuff and yet, at least a couple of times a month I either hear a podcast or read a Hacker News story, I see something where people are making – they’re still making these exact same mistakes. And I almost feel – I sent an e-mail the other day to a colleague and I said, “I feel like we’re not moving forward like the industry is still making the same mistakes that has been for years and like I want us to push forward from that.” Do you experience the same thing?
[06:55] Mike: Yeah, and it’s usually because you’re being introduced to new people or there’s new people who are kind of coming in to it. So, three years ago, somebody who wasn’t interested in doing a startup is now interested in doing one and three years ago, there was this great idea about building a SaaS-based business and recurring revenue and all these things, and now they’re getting in to it, they’re like, “Hey, did you hear about this new SaaS-based business and recurring revenue.” And I was like, “Well, I heard about it three years ago but you weren’t here then so you didn’t hear the conversation.”
[07:23] Rob: Yeah, so I guess that’s really what this episode is. It’s a collection of mistakes that I’ve heard basically within the last two weeks from a number of different blog posts, podcast discussions and other things. And some of these, personally actually I called it out like “I made this mistake” and other times they just said a quote that made me like smack myself in the head and said, “Oh, man, like how are you running a business? Like how – no wonder it failed.” You know, a lot of these are postmortems on why they failed and it’s like, “No wonder it failed. You made some basic fundamental mistakes.” And we’re going to cover seven mistakes.
[07:55] The first one is not putting up a landing page before you start coding. We talked a lot about putting up landing pages and there’s a number of different reasons for them. Even if you’re not trying to test the market and do a smoke test and validate the idea, even if you’re just going to charge in and code it anyways, not having a landing page is a huge mistake. It’s a huge mistake. I will say it ten more times, it is a huge mistake. You get so much information out of having a landing page up because as you talk to people about it whether it’s on a podcast or whether it’s at a conference or whether it’s just one-on-one as you’re talking them about it, you can always say, “Hey, check out the landing page and it gives you a little more info and enter your e-mail if you’re interested.”
[08:34] And so you get huge benefits from this. One, you get a short, even if it’s just a small list of e-mails, you have people who might be interested in beta testing the thing and getting beta testers who are interested in your app who are in the niche that you’re serving is a non-trivial task. So, that’s – it’s a really big deal. The other thing is allows you to test verbiage and positioning and figure out where traffic is coming from, figure out which sources are converting. There’s so much information you could get before you write along a code or before you launch your app. I’m in the middle of this right now and I’m realizing once again, the intense value that you can get from a simple landing page and running some split test and tracking who converts. I already have a much better picture of who my ultimate customer will be for Drip than I did two months ago before I had this landing page up.
[09:19] Mike: I would add a lot to that but I think that it leads a lot more in to mistake number two which is not tracking key metrics from the start. And really you start with that landing page because not having a landing page is mistake number one and but mistake number two is not tracking the metrics for that landing page. If you’re not figuring out who’s coming in to that landing page, what keywords they’re clicking on to get there, how they’re getting to the landing page, what words on the page are making them convert versus which ones are not. So, if you’re not doing A/B testing on there, you — that’s another mistake. You have to be looking at these things and tracking the right data because if you’re not tracking the right things then you’re not ultimately going to be successful with it because you don’t know what’s working and what’s not.
[09:58] Rob: Right and you don’t have to be a complete data analyst and not focus on building a really good product, right? You don’t have to sit there and analyze data all the time and build your whole business and base it all on this data that’s coming in. That’s not what I’m talking about that. What we’re talking about is just getting a little more information about who’s getting value and who’s interested in your product and especially early on in your product, this information is way, way more valuable than the money that a customer will give you because the money even if it is a subscription, it’s just a tiny little piece of this puzzle whereas getting more inside in to who is actually using your app, that’s a leverageable point, right? It’s something that they can open up an entire new markets or entire new marketing approaches and ideas and it’s just carries itself through. It’s a flywheel on its own to learn that, “Hey, it’s just so happens that women 20 to 40 years old are my key demographic and there are the ones who this is really clicking with.”
[10:54] Mike: Yeah, I mean if – in any given case, if you could give away ten subscriptions to whatever your product is in exchange for a 5% boost in revenue because you have boosted the conversion rate for that, hands down no questions ask. Go ahead and do it because in the long run, you’re looking at that 5% and on day one, yeah, 5% of $10 is 50 cents but when you start looking at a thousand dollars or $10,000, I mean that adds up very, very quickly and that is repetitive and it accumulates overtime.
[11:23] Rob: Right. I heard a comment on a podcast where the guy said, “I don’t know where the traffic came from to our landing page but I think it converted pretty well.”
[11:31] Mike: [Laughter]
[11:32] Rob: And I was thinking to myself how, like how did you do that because don’t you realize that whatever traffic came there that all of those sources are now – depending on how they convert in to actual e-mails, those are your market like those are the people you’re now going to approach to write guest posts or to publish an info graphic or to advertise on their blog or to just something, you know, just network with because they are your people. They’re – if someone is blogging about designers and you build a tool for designers, then that’s it, you know. If it converts, this is your market and learning the stuff upfront early on is critical. So, if you want specifics about what you should track, obviously, put Google Analytics on there, that’s your first key.
[12:09] The next one is spent two minutes to set up a goal in Google Analytics so you can track which of the traffic sources actually convert in to e-mails like actually provide your e-mail and then beyond the landing because this whole thing about tracking metrics, it doesn’t just apply to having landing page. So, that once you get your marketing set up, you should track them as well. I track trial to paid conversion percentage. I track churn even if it’s in approximation, even if you can’t get an exact number. There are — yes, there are five, ten different ways to calculate churn. Pick one. Even if you don’t know what exactly, just pick one and go with it because you will notice the relative change overtime. I mean you look at your churn and it’s catastrophically high about 30% of your subscribers are leaving per month, you’re going to know that you need to fix something. And if you’re not measuring it, you just have no insight in to that.
[12:52] And the last thing I would always look for is, you know, where conversions are coming from. I got to be honest, if you don’t want to track metrics, if this whole discussion feels like a burden, it feels like something you don’t want to do, then I genuinely think you should not be launching a product. I think that one out of a hundred people ho had success with the product, don’t track their metrics and I think the other 99 look at the stuff that we’re talking about and that’s how you build a true sustainable business.
[13:18] Mike: You know, speaking of metrics, remember when we had a podcast when we’re talking about pirate metrics?
[13:22] Rob: Yup.
[13:22] Mike: So, Tyler Moore has a website called piratemetrics.com where he has a product that’s designed to do a lot of what you just talked about. It’s designed to measure acquisition, activation, retention, referral and revenue. So, if you hate doing metrics, then go sign up for that service and take a look at it and see if it’s something that’s going to meet your needs. And it can help you do some of that stuff.
[13:43] Rob: Nice. It’s a really cool site. Yeah, I agree. I think Pirate Metrics is a good option and KISSmetrics can be another one. It’s a little more complicated. There’s a lot to it. That’s the thing is people hear discussions about metrics and it’s like it feels too complicated and so they just don’t anything. The thing is if you measure just two or three key metrics, you are 80 to 90% of the way there. And so, take the advice and go to piratemetrics.com.
[14:09] Mike: And I think that’s a good point is just measuring two or three because you have to start somewhere and until you start digging in to those things and start really understanding what they mean for your business, then it’s hard to figure out what other metrics you should be looking at. So, starting out very small is probably better than starting out with a ton of metrics because a ton of metrics is going to be overwhelming and you’re not going to know what you should be looking at or what is important to pay attention to. Starting with just two or three metrics, you’re going to have a good idea of what those numbers mean after a month or two and then you’re going to say, “Well, based on this information, I need to know that. How do I get it?” And then you start building those additional things in and overtime your metrics dashboard is going to grow to the point that it’s going to support all of the different things that you need to figure out.
[14:50] Rob: So, mistake number three is assuming or saying that people are finding you through word of mouth because what this really means is “I don’t know how people are finding us.” And this ties in with not tracking metrics but everytime I’ve talked to a founder who tells me that their app is selling via word of mouth and I’ve actually been able to go in to their Analytics, everytime I found out that it’s not word of mouth that’s selling the app. Either they have something misconfigured with the Analytics that isn’t showing refers. I’ve seen that happened. I’ve also seen people say, “Well, my direct traffic is growing and I can’t explain why and so, it must just be people talking. It’s word of mouth.”
[15:25] The thing is if you have a SaaS app or any type of app where people come back to it to log in and you don’t figure out a report and figure out a way to exclude those people, then your traffic is going to increase overtime naturally. That’s not word of mouth. That’s just having a thousand customers when you used to have ten and your traffic is just a lot more. So, word of mouth really is not as pervasive or as common as most people think. Most people think, “I’m going to build a great product, great design, app is going to work and everybody going to talk about it.”
[15:52] Now, people telling each other by blogging about it or by tweeting about it or by saying it in some trackable form because if they put it on a blog post and they link to you, then you’re going to see that as a referrer. And that’s not what I’m talking about here. I’m talking about this when people say, “Oh, my direct traffic and I have all this traffic coming in that I just can’t describe and so that must be word of mouth,” that’s the stuff I’m talking about. I think it’s a dream of developers we think that that marketing and sales are scammy that just building an awesome product is going to be enough to do it and the bottom line is you really is not in almost all cases. I’d say one out of a hundred it is and all of the other people actually know where their traffic is coming from and they just don’t assume it’s word of mouth.
[16:31] Mike: I think part of that is just a misinterpretation of the data by someone who is looking at it and saying, “Oh, well, you know, I don’t know where this traffic is coming from. It looks like it’s direct and most of it is direct. So, it must be word of mouth.” And then they parrot that out to other people and people read it and if you’re not thinking about it in this way to understand that that’s probably what’s happening in this original person just misinterpreted the data and then that turns around and gets parroted out because, “Oh, well, they grew their business based on word of mouth. That’s all I need to do.” And that’s kind of how that myth of by word of mouth gets started and that’s how I guess continues to grow and be out there because nobody will kill this myth because there’s no definitive evidence to say, “Well, that didn’t exists.”
[17:13] Rob: I heard someone who wants to be an indie developer. He’s like a freelancer but he was talking about how he didn’t want to do marketing because he thought, “I felt like marketing was scammy or something.” And there are always these examples that are thrown around that they’re like to hear these companies that just all they did was build great products and they didn’t market like everybody else. They just went and did their own thing and focused on the products. And examples thrown out are like Apple, Dropbox, there’s a new app called Mailbox that has 700,000 people on an…on e-mail list. That’s an iOS app. And I think Sparrow is another one. The thing is…is brilliant marketing is invisible and all of these companies have world-class marketing and PR talent. They are machines and they do it so well that you don’t even see it. You’re not seeing behind the curtain. They are so good at it that it’s invisible to you. The fact that everyone is “talking about it” is a carefully orchestrated and constructed PR and marketing campaign.
[18:04] Mike: yeah, I’ve heard a lot of people compare what they want to do to like Apple and just say, “Oh, I just want to build a great product and people will love it and they’ll tell their other friends about it.” And it’s just like that is such a pipe dream. It just does not happen. I mean there are certainly rare cases where it does but by and large that doesn’t happen and the chances of it happening to you are infinite test and really small.
[18:26] So, mistake number four is running an open beta. And you really don’t want to run an open beta because you want to be able to tightly control who is seeing things and you want to be able to directly solicit feedback from people. Now, if you run a beta and you just open it up to the world, what happens is people come in. They’re going to sign up for it and they may check it out, they may not but chances are really good that they’re not going to give you a feedback and they’re not going to give you the feedback that you need because they’re not vested in the product. You’re not putting them through your marketing pipeline. You’re not talking to them in the way that you would to a prospective customer and therefore, you’re not pitching them on the product.
[19:03] So, when they just sign up and just get dropped in to your application, the problem is that they’re just not seeing all of that stuff. So, you don’t get the feedback that you need in order to tweak it such that is going to be effective when you get to the point where you start charging for people. And the second thing is charging people. You really want to charge people as early as you possibly can. You don’t want to give accounts away free to people because you want them to pay for it to help validate your ideas so that you can determine whether or not it’s something that you need to continue with or whether you need to continue to refine your message until you find the pain point that people are having that they are willing to pay for.
[19:40] Rob: Right, imagine that you put yourself on a launch list. You’re a potential customer of an app that you hear about and their e-mail on a landing page. And then two months later you get in a single e-mail that sent out to everyone that says, “Hey, everyone. We just launched. Click here to get in to our beta and give us feedback.” You’re very unlikely to do it whereas if instead you received a personal e-mail from the CEO that says, “Hey, so and so,” addresses you by first name or says, “Hey, you’re on our launch list.” It’s a plain text e-mail that obviously came directly from him. It’s not a list. Him or her. And they say, “You know, hey, we really need – we’d hand pick a handful out of our massive launch list and we would love for you to come in. Have a look at the app and if, you know, if you’d like to test it out, we’d love to have you do it.” And that way you really go – get in to the people who have a dire need for your app, who have desire to actually give you a real feedback. They’re going to take the time to walk through it.
[20:33] And then like Mike said you can make the decision. You’re – let’s say you do like five beta testers and then they gave you a really good feedback. Maybe you do comp them. You know, maybe you comp five people but you don’t comp your all 500 people on your list because these are your best customers. These are the people who are most excited to hear about it and they are the people who you spent months getting on to your e-mail list, getting them to your landing page and getting them to sign up. So, to basically just open up to everyone and comp everyone, I didn’t even realize people were doing this anymore honestly until I heard this a couple of weeks ago. And I was like no, you can’t do this because this is how to start on day one with zero revenue. You’ve heard all this time you go to the launch and then you basically just take your launch list and you throw them in a trash because, yeah, you have a hundred or 200 or 300 users but now you’re supporting them and you have no revenue and people are actually happy to pay. If you provide them value, they will value the app more if you charge them something for it.
[21:26] And then this shows you can already start getting information about who’s using it and why and when people do cancel, you want to know that and you want to know why and if it’s a free plan and they just stop using it, you don’t know if they would have canceled or not. It’s just…it’s just a much more opaque process to do this. It’s not just about leaving money on the table but it is about getting paid for your effort to be honest. It’s about starting off after all of this work and getting at least a little bit of money that can help you bootstrap this app and grow it because it’s hard enough to get this thing off the ground without taking, you know, four months of your pre-launch marketing efforts and just…and throw them away.
[22:01] And mistake number five is launching with a single launch e-mail. In an ideal world, you have at least two e-mails. You can have up to four in my opinion. Your launch is an event. It’s an event for you and it’s an event for people who are actually interested in your app. So, imagine this. You’re on a launch list. You haven’t heard from anyone for two months and suddenly you get this e-mail and it’s like, “Hey, App-tastic has launched and come and see our new app. Here’s the link.” I get this all the time and I don’t remember what list I signed up for. I don’t remember why I’m on this list. I don’t even know if it’s spam or if I actually did sign up for it.
[22:35] So, that is epic fail. Do not do it. What you want to do is send out an e-mail a week or two before your launch and tell the people right on the start, “Hey, you’re receiving this e-mail because you subscribed at this URL and this is the product. This is probably why you subscribed and this is the app – what it is and what it does.” And build a little bit of anticipation. Either send a screen shot they haven’t seen before, short screencast. Send them a link to something they couldn’t have access to before and what this does is it starts building some anticipation with people who are actually interested in the app. If people aren’t interested in the app, put right there at the top, “If you don’t want to hear anymore about this, unsubscribe here,” and include a link and let them get off your list because there will be a core group who’s really excited about or there should be or else you’re not doing a very good job of you know, vetting your product.
[23:19] But what this does is it starts getting you a little bit of data about, “Hey, who’s clicking on this thing? How many people click on that? Are they interested in this app and you know, what can I do to engage with these people a little more?” And so you e-mail them a couple of weeks before hand and then you can either e-mail them the day of the launch or e-mail them a couple of days before and say, “Hey, everything is set and here’s going to be the ultimate pricing and you’re going to get a small discount for being on the list. Thanks a lot. You have a couple of days to take advantage of that.” And then, you know, you can send them an e-mail the day that that expire.
[23:48] So, somewhere between two and four e-mails but make it a little more of a process. It’s like you’re not bothering people. You’re not spamming people. They signed up for a list to hear about your app. Give them something to be excited about. This approach alone can seriously take you from closing 1 to 3% of your list up in to the 15 or 20%. It can easily do that at least getting people to try the app out. Maybe not full purchases but it’s just night and day.
[24:13] Mike: So, mistake number six is having a free plan. And unless you really know what you’re doing, you do not want to have a free plan. And there’s a bunch of different reasons for this. The first one is that it skews your metrics. It makes things way too complicated to try and figure out whether it’s people who are on the free plan are canceling and chances are good that those people are not going to cancel. So, what’s really going to happen is you’re going to have this metric that shows you that your cancelation rate is only 2% when the reality is all the people who are on your free plan, they’re not going to cancel anyway because it doesn’t costs them anything. So, now you’ve got the skewed percentage that in no way, shape or form accurately reflects what your churn is going to be for that application. So, unless you have experience and some very specific knowledge of how you’re going to convert these free users and the paid users, don’t even bother. Rob, you said it best in the – was it at Wall Street Journal where you were quoted as saying free plans are like a samurai sword?
[25:08] Rob: Yeah, it was in New York Times.
[25:09] Mike: New York Times
[25:10] Rob: And yeah, it was free plans are like a samurai sword. If you’re a master, you can do amazing things with it. But if you’re a beginner, you’re more likely to cut your arm off. I really believe that. It’s just what you said. It’s like having expertise and there are people who can use free plans to fantastic results but it is way, way harder than it looks. You need to look behind the curtain and see how much experiences people have and precisely how they use that free plan that’s very specific uses in very specific ways that they tried to get people to convert from free to paid. There’s all these things in place that if you don’t do these things, you are just screwing up and you’re just seeing the façade of how or it’s on the outside.
[25:45] The other thing is you need a good chunk of money to be able to outlast the free plan because I’ve heard like Dropbox and Evernote, they convert X percent after a year of people using their app. So, do you have the money to support all of those users for a year, you know, all those free users without getting revenue? If you don’t, then in general it’s not a good idea.
[26:05] Mobile apps are likely they’re different, right? Having a free version with an app purchases or having a light version, I’ve heard these things work very well. The free versions do not really support burden with mobile apps like they are with web based software and in my opinion they can actually can work as a really good marketing channel but that’s not what we’re talking about here. We’re really are talking about having a free tier. Again, unless you know what you’re doing or I mean even look at MailChimp, they didn’t have a free tier when they launched. They got very big and now they just – they know their numbers right? Inside and out, they know all of their metrics. They track everything and now, they introduced a free product.
[26:39] Obviously, they have the knowledge and the expertise to be able to make that work but on day one, when you’re trying to launch, it’s just too easy of an option for everyone to pick and that’s, again, it’s kind of like – it’s kind of a kindle throwing your launch list in the trash because you don’t get people actually using the app and actually paying for it which means they have to commit to it and actually commit to using it and you know, which will ultimately make the app better because they give you feedback and they’re more invested in it.
[27:04] Mike: It can also be a distraction especially when you’re first launching because you might start getting feedback from people, “Hey, I’d like it if it did this,” or “I’d like it if it did that.” But these people aren’t paying for it. So, they’re not seeing enough value in it to pay for it yet you’re going to accept advice from them and that’s really just not a good path to go down because you’re taking advice from people who have a vested interest and not paying for it. What you really need to concentrated on is those people who are paying for it and by eliminating the free app or the free plan for your app, then you eliminate that possibility of bringing in that input from those types of people. And then down the road as Rob said like MailChimp did once they got to a point where they knew what their numbers are and they were able to offer the free plan and measure it and they’ve tweaked it several times over the past 18 months to try and figure out what’s working or what’s not, at what point will we be able to convert people in to a paid version of the application.
[27:57] Rob: Right and I can name a number of people off the top of my head who have launched with free plans and who close them down or make them extremely hard to find within a few months of launching. Over and over it’s the same pattern. Launch with the free plan because look, Dropbox did it and then you just – you wind up getting 600 users and no one converts and you don’t know what to do and you don’t have the time to figure out or you don’t have the experience to do it and you just kind of bail on it. It’s very common.
[28:22] Mike: You know, I would add a mistake 6.1 to this which is offering a low priced plan which is probably going to be more of a support burden than its worth. And I’ve seen a lot of people where they’ll have – they’ll launching new product. They’re like, “Well, you know, $10 or $20 a month seems right but I’m going to have this $5 plan or $8 plan,” because people, you know, have this mental hurdle about paying more than $10 for something. That’s totally ridiculous. You really need to be charging people what the product is worth and what they’re wiling to pay and not trying to get people to use the product and then in an effort to have them upgrade later. Offer them value upfront. Make sure that it’s going to be at a price point that’s going to support you and the support burdens that you’re going to undertake.
[29:04] Rob: It is a usage-based thing where like Dropbox, your usage is naturally increases overtime and so as you use more space than you would upgrade tiers, I could feasibly having a little price tier but boy, it’s really – I would default to not doing that, you know. I just – I would say that’s a one time where you may consider doing it as if someone is naturally just to be using the product, got to naturally upgrade to those higher tier things and you will lose them otherwise if they’re not going to sign up.
[29:32] Mistake number seven is not growing fast enough. And I know probably what you’re thinking here and say, “Wait, Rob and Mike? They’re like – they’re not all about growth startups.” The thing is well and we’re not, right? [Laughter] You can…you can start a startup and – or start your app, launch your app and not grow it and just grow it to a place where you’re comfortable and that’s okay. It’s not all about growth. The problem is that you need to grow your app fast enough to keep yourself interested in the project or else you’ll abandon it. The number one reason that bootstrap startups fail is because they don’t make enough money to keep the person interested, bottom line. Not growing fast enough it will kill your app because you either get bored, other things come up. If you launch an app and it’s making 10 grand a month, by month 2, you are much, much less likely to be bored with the thing than if you launch it and you’re making $300 by month 2.
[30:19] Mike: Something else that factors in to that is having the application be able to support all of the costs to that is essentially causing you because whenever you launch an application, typically, you have to pay for hosting, you have to pay for any Analytic services, all these other things that you’re probably using to help promote the app and run your software and all the infrastructure that’s in place, your bug tracking, your source control, everything else, it’s going to costs you at least some money. And it’s not to say you can’t get open source solutions but the fact of the matter is that your time is worth something. So, you have to take those in to consideration and if it’s not covering its cost, unless it’s a real labor of love, you’re going to find that it’s very difficult to continue that for a long period of time.
[31:01] Rob: So, those are the Seven Catastrophically Common Launch Mistakes. Mistake number one is not putting up a landing page before you start coding. Mistake number two is not tracking key metrics from the start. Mistake number three is saying people are finding you through word of mouth. Mistake number four is running an open beta. Mistake number five is launching with a single launch e-mail. Mistake number six is having a free plan and mistake number seven is not growing fast enough to keep yourself interested in the product.
[31:27] Music
[31:31] Mike: If you have a question for us, you can call it in to our voicemail number at 1-888-801-9690 or you can e-mail 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. We’ll see you next time.