Show Notes
The takeaways:
- Community & Relationships
- Concierge
- Email (both drip and lifecycle)
- Staying emotionally healthy and keeping your family intact
- Hyper-automation (how many tools Peldi uses)
- Paid acquisition
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be talking about our takeaways from on MicroConf Europe 2013. This is Startups for the Rest of Us: Episode 155.
[00:10] Music
[00:18] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:27] Mike: And I’m Mike.
[00:28] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
[00:32] Mike: Well MicroConf Europe is over. I had a great time. I think a lot of the attendees did as well but what’s your takeaways?
[00:38] Rob: My takeaways are get to bed early because you came in at 3 AM one night and 2 AM the next. Boy there’s a lot of good takeaways about concierge services and email and staying emotionally and relationally healthy. I think before we get into that, that was a little overview of MicroConf Europe. This is our first year European conference. We’ve done MicroConf three times in Las Vegas but here we did it in Prague in the Czech Republic. We had 120 attendees and speakers from 27 different countries.
[01:05] If you’re listening and you’re interested in more detail about what went on at MicroConf Europe we have a page set up, it’s microconfeuroperecap.com and special thanks to Christoph Engelhardt. He has attended a couple of MicroConfs now and he takes super in depth notes. And microconfeuroperecap.com basically just redirects to a page on his blog where he as painstakingly taken detailed notes about every talk at MicroConf Europe so thanks again to him.
[01:36] Mike: One of the interesting things we did this year at MicroConf was we added a lot more tear downs and we actually modified a little bit of Peldi was here so he’s a big UI expert. He did what we called a UI teardown which was really kind of nice. It was more or less looking at the user experience and making sure that when somebody goes to an application versus the website that they are able to look through, understand what sorts of mistakes that they might make. And really for the enveloper of the products, make sure that they have an understanding of what things they can do to encourage the user statistic around and kind of move them through the application without overwhelming them or confusing them.
[02:14] Rob: Right. If you haven’t heard of tear downs or wonder what they are, it’s basically one of our speakers who tends to be an expert in a certain thing, so Patrick McKenzie is an example expert in copy writing and conversion optimization and so he would stand up in front of the stage and for about 20-30 minutes people could call out their own marketing website. And some of them are just landing pages, some are full Saas or mobile marketing websites and then he would give his thoughts.
[02:40] He would ask questions about it. He asked questions about the product and try to reword things in the way that he thought would work better for that audience. He basically just would go through it and give feedback. So in the past we’ve done one a day at MicroConf and this time we did two kind of shorter ones and we had Dave Collins from software promotions, Mike you did one, Patrick McKenzie did one and then as you said Peldi did some UX teardowns which were cool. He just sprung that on us.
[03:09] I asked him to do teardowns and then he said he’d like to do UX teardowns because he is a UX guy. Peldi’s again behind Balsamiq which is mockup software and he understands a lot about usability. And so it was the first public demonstration of Audit Shark. So we only had one volunteer for UX tear down. So to fill time I volunteered Audit Shark. One of my key points in the conference was show of hands, who wants to see a UX teardown of Audit Shark and there was a ton of people raised their hand. It was really cool. They really wanted to see it. People are curious.
[03:42] Mike: Yeah. That was kind of neat. And it was funny because I think that part of the reason we only got one volunteer was because nobody want to be responsible for the rest of the group not seeing Audit Shark.
[03:52] Rob: Yeah. How did it feel to have it up there to have Peldi talking about it and then to have 120 eyes on with still early software?
[04:01] Mike: I felt fine with it. I mean there’s a lot of things that I know that are still going into it so he was talking about how he got a little confused. He wasn’t quite sure what to do. And as I said there’s this overly that’s going into it that will walk people through the application because that’s an area that during on boarding right now I am walking people through the application. But because all that’s a little bit unclear I don’t want to have to do that forever so I’m doing it manually now and individually but I don’t want to have to do that forever and long term I just can’t. So in order to scale it up that’s how I’m addressing the situation but Peldi obviously noticed that right away.
[04:36] There were some other things that he had that were actually really good feedback. So for example on the page where it lists your account information, at the top there’s information about how to cancel your account. He’s like no, no put that way at the bottom that’s the least important thing. You don’t want that highlighted to people. Honestly, it just never crossed my mind. That’s like that’s a really good point. So I put it way down at the bottom and kind of out of the way a little bit. So if somebody wants to cancel they still can.
[05:04] And I took several other notes about things that need to change or move around a little bit because he pointed out some places in the UI where there are certain menu options that look a little bit redundant and I can understand how those things look redundant, they’re not but that’s obviously not the fault of the person who’s looking at the application. It’s my fault for not labeling them better and coming up with a better way to present them.
[05:24] Rob: Right. Very good. One other thing that was a highlight for me and it was meeting Dan and Ian from Lifestyle Business Podcast or Tropical MBA as it’s now called. We have never met those guys and I hang out with Ian one night and then had diner and discussions with Dan and Ian two other nights. It’s so cool to kind of know people remotely, to listen to their podcast. Dan’s been on our podcast. I’ve been on his and it just – when you sit down with someone in there, they’re just like they are on air and they’re super smart and they’re getting stuff done and we have the four of us just sat and talk because we have so much in common in terms of audience and what we’re trying to do and kind of mission and all that stuff. And so that was absolutely one of the other highlights for me is the hallway track. That was my hallway track this time was hanging out with those guys.
[06:14] Mike: I totally agree. As you mentioned the hallway track it was funny because in talking to different people about the conference and trying to get feedback and they’re like oh, I love being able to talk to all these other people and not that the conference isn’t good and speaker’s good because people don’t want to hurt our feelings about saying that talking to other people is where a lot of the value of the conference is. And I don’t take offense in that in any way, shape or form because I totally agree that is where a lot of the value of MicroConf is it’s not just the speakers, it’s not just some of the content. It is meeting the people who are doing the same things that you are and that’s where a lot of the value of the conference is as well.
[06:54] Rob: Yeah. I think that leads right into our first takeaway which is all about community and or relationships. And one of the key goals of the conference we stood up at the very beginning and introduced ourselves and then we said we want you to take way at least three action items that you can implement in the next week and we want you to takeaway three relationships. And not relationships like oh hello, my name is Rob what’s yours? But relationships like I’m going to keep in touch with you.
[07:19] Because when kind of the fire and the excitement and the motivation that you take away from MicroConf fades which it will over the next several weeks or several months you need someone there to kind of reignite that or to keep you going and whether that means finding a mastermind group which many people came up to me and said they had found people in their country or neighboring country that they were going to start a mastermind group with or whether it just means staying in touch and be email and kind of keeping each other accountable, I think honestly that is at least as valuable if not more than the actual speaker tack. Having the speakers is just an excuse for us all to get together in the hallway. I think Ted Pitt said that the first MicroConf and it holds true every time.
[08:02] Mike: Yeah. I agree. I mean I had a lot of people came up to me and said they had also already scheduled mastermind groups as well and I had some people asking me how I run the mastermind group that I’m in. You have your own mastermind groups and I have one that I’m in. I think that yours and mine are pretty similar because I got a lot of feedback from you about how to put things together and how it should generally work. But yeah, there’s a lot of people who just – some people just never even heard of a mastermind group or what it is or what it does so we talked about that a little bit. What are some of the values, just kind of how to run and how to work it and what sort of benefits you really get out of it.
[08:36] Rob: Yeah, one of the first things within the first half hour of the conference, somebody came up and said its great meeting the other attendees but I want to know who’s here, like can I get an attendee list and I’d love to know who’s here for my country? Because like I said we have 27contires and people naturally do want to find other folks. I mean there were people here from the same city, there were several people from Stockholm, several people from Prague who didn’t know each other and one of them laughed said yeah it took two Americans to fly halfway across the world to bring me and someone who lives like a mile from me together even though we have this common bond. So that type of thing is powerful and that’s the other thing that outlasts just a list of tactics that you get from talks.
[09:17] Mike: Yeah and that being one of them come up to me afterwards and said kind of the same thing but he ran into somebody that he went to high school with and hadn’t seen in 20 years and they live in the same city now which is hundreds of miles away from where they grew up. They landed right next to each other and had no idea and you’re right. It really took us flying across the ocean to kind of bring them together again and now they’re putting together a mastermind group.
[09:40] Rob: Second takeaway that I think you and I both realized it was a theme, and that’s the neat part about these conferences is we come together and there’s no theme. We don’t tell the speakers specifically what to talk about and a theme always emerges. And this year it seemed like something that a number of speakers touched on and talked about moving into is the idea of concierge. This is in terms of getting someone on boarded with a new application and the idea of concierge is you do a lot for them. I would say you do it all for them. In some cases you will.
[10:16] But it’s basically having a non-scalable somewhat manual labor intensive front end in order to get someone to the point where they’re getting value out of your application. So one example is with Drip we offer a free concierge service where – Drip is email marketing software and if you have blog posts or an eBook and you provide us with access to that, we will build your five day mini course out of that content.
[10:44] The other one I can think of is just if you have a JavaScript snippet, little tag that people need to install, one way to do concierge is just to install it for them for free. And if you have any type of lifetime value these are no brainer things especially if you have a tier one support person who can help with that.
[11:02] Mike: Yeah. I mean one of the things that I looked at – and when people are setting up Audit Shark for example in order to get any value out of the software at all they have to install the agent and if they don’t do that then they’re just not going to renew, they’re not going to pay for it because they aren’t getting any value out of it. It’s clearly not working for them. And I think there’s a lot of applications where you can look at that kind of thing and say okay, how can I create an outreach program to people who’ve signed up but are clearly not using the product yet?
[11:27] Because even for a web based Saas app you can tell if somebody is engaged with the product or not and reach out to them and try and figure out what is it that’s holding them back? And in my case for Audit Shark if they haven’t installed the agent or they didn’t take time to do it, I can say hey I can do this for you or I can go through some of these results kind of do some hand holding as you said. Maybe it scales, maybe it doesn’t but if you’re in the early phase that could really help give you a kick start.
[11:54] Rob: Absolutely and you know I recall saying a few episodes ago that I think this is a trend that we’re going to be seeing. It’s not only this concierge during on boarding but its software plus services. It’s Audit Shark finding that your server has security issues and then offering to actually manually remediate those for you, plan that’s included with your normal subscription is that you get instructions on how to remediate them and then for an additional charge you can come in and fix that for them.
[12:25] And same thing with Drip, we have the free version if you have content and if you don’t have any content we do have a $1,000 package where we have a professional email copywriter, write yours from scratch, interviews you and does the whole deal from scratch. And so this is the way to go up market. It’s the way to have a little bit higher price points to provide more value and rise above the den of competition. There’s so much competition in so many of these SaaS niches now because everybody’s kind of moving into the space that kicking it up a notch using some type of non-scalable thing is the way that I think you can stand out and actually build a successful business really quickly.
[13:02] Mike: I think another topic that really came up was leveraging email and obviously Drip kind of falls into that category but life cycle emails and outreach program to people who are not actively engaged in your products to kind of help bring them on board any sort of in-app emails where if based on what customers are dong or not doing you reach out them, try and help them along, give them more information or just reach out to them and say hey, I noticed that you’re not using this. Would you like to – do you need some help? What can I do for you?
[13:32] And because they’re already signed on it’s more or less an effort to cut your churn at that point as well. It’s not cold calling. Its they obviously signed up for the service and I think that you’d get a much better response in many of those cases especially if the product is going to provide value for them.
[13:47] Rob: Yeah. There’s so many touch points along the way where you can provide a prospect or customer with information, with something valuable, education that keeps them kind of engaged or involved with your product. I think Patrick McKenzie summarized it well in his talk. He basically said there’s Drip emails and there’s live cycle emails. I think of it like Drip emails are marketing. Right? It’s prospect stuff. So that’s before someone has signed up for a trial.
[14:17] As soon as someone signs up for a trial, it turns into live cycle emails and that’s where you’re educating more about your product, how to use it, how to get setup, how to get on boarded, answering specific questions they have about it. You’re still educating them but it’s not nearly as much as in the Drip sequence. And then once they become a customer, you can follow-up with lifecycle emails after that so it’s kind of three separate phases of email sending. I mean we had 9 speakers and I think 4 or 5 touched on email, some more heavily than others.
[14:50] But I know for one, some things I took away was my Drip and my live cycle emails are set and locked and loaded on my apps but I noticed some things Patrick McKenzie was doing specifically with some language in a couple of his. It’s awesome because he’s like yeah, take these emails and just like search and replace with your app name. So I think I’m going to take a couple of those and change some of the verbiage in mind to kind of soften in the blow specifically like when credit card fail, there’s some really good verbiage of like don’t worry we’re not the bank or your cellphone company. We’re not going to screw you. You didn’t do anything wrong but if you can log in and update your credit card, it’s a very courteous nice email and I like the way he approached that.
[15:31] Mike: Yeah. It was more of a gentle nudge of hey we’re going to delete all your data or whatever. But I do like that only was there that gentle nudge hey we’re not the credit card company but the other thing that I like that he did was he said you can put language in there that says we’re going to pause your account which is a lot different than saying we’re going to cancel your account. Because pause indicates that it’s a lot more gentle in terms of the language but it is non-conformational and I think that’s just a phenomenal way to put us we’re going to pause your account versus we’re going to cancel or stop you account.
[16:07] Rob: Another takeaway that it seemed to resonate with a lot of the attendees was my wife’s talk on staying emotionally and relationally healthy while launching your startup. As some background, my wife’s a clinical psychologist and she is cofounder of the Walling Family as I said in her intro. She works with a lot folks who have trauma and anxiety and that kind of stuff in her clinical practice not specifically with software people that are startup founders but she’s just been around enough to know what goes into launching a business. Her talk was – several people came up and said that was the talk that stood up for them because it was so different than anything they’ve heard at any conference in the past.
[016:50] Mike: Yeah. I really liked her talk as well. The thing that really struck was that she gave very specific strategies of how to do different things in your life and how to recognize when things are going wrong and how the specific tactics that you can use to deal with those things. It’s one thing to just talk about those things but it’s another to provide a roadmap for what those solutions look like and how it can work out for you. It wasn’t just that the talk was good but it’s just she took it to another level by giving you all the information that you needed to not only recognize the problem but to deal with it as well. I think that was really the part that stuck out for me.
[17:27] Rob: I definitely appreciated that. She knows the audience well enough to know there needed to be some actionable takeaways. I also liked that she integrate research studies. She integrated studies that none of us would read but they’re basically more academic psychological studies of founders of businesses, entrepreneurs, how much stress that puts on people. And there was that interesting stat of entrepreneurs suffer a more from anxiety. Entrepreneurs and their partners suffer a more from anxiety but they have a lot less depression.
[18:03] The difference is running a business can be stressful but it also tends to fulfill you more. It was saying that folks who have 9 to 5’s tend to be less fulfilled and depression tends to be more of an issue. So she focused more on how to deal with anxiety, how to recognize that in yourself what to do to combat it and really gave some tactical things about that.
[18:24] Mike: Another talk that was really interesting was when Peldi got up there and discussed all the different tools that he uses in Balsamiq and how he runs the company. It was just mind boggling to see how many different tools they use and what they use for different things is really like they went out there and they really did the research and figured out which tools were going to work best for them which worked best of tools that they trusted to stay around for the long haul. And then integrated them into their business and just the sheer number of tools was just astounding.
[18:56] Rob: Yeah, when Peldi started talking and I had seen his slides before hand I thought good god how many tools do you use you know? I was almost like why do you use so many tools? But what I realized is that they have 16 employees and they have 200,000 customers and the only way that a company that small – because he’s trying to keep it intentionally small right? He doesn’t want to grow big. I mean you could be at 30 people and supporting 200,000 customers easily. He wants to keep the team small so he is going to great lengths to implement all kinds of tools that bridge that gap and allow him to not grow a big company because as far as I understand his goal’s always been to have fewer employees. He really wanted to be a solopreneur to be honest. So to be at 16 and then have tools bridging the rest of that gap is a really interesting way to look at it.
[19:45] Mike: Yeah and I think that does a couple of different things. One is it makes your company just in general more profitable because you got more customers per employee and so that allows you to do a lot more things for the employees in your company but allows a little bit more I’d say flexibly which in terms of being able to choose the things that are right for your business versus being forced to hire because you have no other choice.
[20:10] There were a couple of things that came up that were not necessarily primary things but individual takeaways that people took from different talks and one of the things that several people said to me after the fact it stood out to them was the idea that when you’re doing paid acquisition you don’t want to pay more than about a third of what the lifetime value of a customer is.
[20:29] And there’s a couple of different reasons for that but I think the one that resonated with some people was the idea that if you’re doing all the heavy lifting and handwork of building a product and building an application you don’t want to be spending and giving away 30% of the sales to somebody who’s really just doing advertising for it. You’re doing all the handwork and basically they’re reaping all the rewards for it. And that I think struck with a bunch of different people and like I said several people came up to me afterwards.
[20:57] Rob: What I like about that kind of the whole discussion about having these – the kind of rules of thumb, they’re like lose metrics, well they’re always debatable. I’ve heard a fair number of times I started work with – trying to get customers at less than a third lifetime value and it makes sense to me, it works for my business and that’s kind of the rule that I use now. But Andy Brice have never heard that but he’s done a lot of paid acquisition. And so someone asked him do you agree with that? And he said you know, I’ve never heard that but that feels about right. And that’s when I realized like a certain point when you’ve been doing something for 8 years and you really know the ins and outs of it like right on the spot he just has intuition about it because he knows it so well.
[21:42] It was kind of cool to see people who have had experience with these things generally agree on something and again maybe he would say it’s 40% or its 30% but its right in that range we can kind of all agree. I feel like that’s valuable as if you’ve never paid acquisition that it gives you a decent realm to shoot for and to know if your way off when you start and 10 years ago no one had this rule of thumb. I’ve never heard it so you just have no idea where you should land as you’re advertising.
[22:08] Mike: Now that you mentioned it, it was Andy Brice I remember hearing him exactly say that. He said that the reason he said that it felt right was because it felt wrong to give away more than 30% of the sale to somebody for doing virtually nothing. And it almost feeds into an affiliate marketing where you have affiliates and he’s got affiliates for his product but the issue is when you’re doing affiliate sales for example, how much do you give them and there’s recommendations all across the board like 20% 30% and he said that the reason it feels wrong is because you’re giving away more than 30% and you’ve done all the hard work. And all they doing is throwing up advertisements for that stuff.
[22:46] And even if you look at the Apple Store, Apple takes 30% of the sale on a lot of different things and if you view it from that standpoint, 30% feels about right then that’s not necessarily a bad deal but especially if they’re giving you a decent size channel.
[23:00] Rob: I think one other them that came up a couple of times which is always interesting at MicroConf because we have at MicroConf we have a mix of people who really do want to stay as a one person software company and then we have folks who are branching in to hiring few employees. But Peldi was 16 employees. Dan and Ian from Lifestyle Business Podcast, they did a really good talk on hiring. And the theme that overlapped both of them was if you’re going to hire you have to have some type of operating dock. They call it an SOD, Standard Operating Dock or SOP Standard Operating Procedure.
[23:35] I mean even Peldi, he said he played it fast and loose for years and didn’t want to have “processes” in place. He hit a point where right around between 10 and 12 employees he just couldn’t go on any longer trying to do everything verbally and he had to start putting stuff in writing and so we got good solid insight from both the way Peldi has approached it and the way Dan and Ian have approached it. Dan and Ian have taken it to another level. I mean it’s like the core of their business and it sounds like the completely reinvented their business when they kind of stumbled on this.
[24:08] But it was neat to see that these two different businesses came across at almost at very, very similar the way that they’ve approached it. And so that’s another thing where I like that it’s kind of a rule of thumb now right? It’s like you got two people who stumbled upon it separately and it’s amazing how similar their approach is to documenting this stuff for their employees and not only for on boarding but just for anytime someone wants to refer to how to do internal email within the company or how to respond to someone about support on Twitter, it’s all documented in their knowledge base.
[24:42] Mike: Yeah. And it’s not just the two different companies came up with it. It’s the two radically different companies came up with them. I mean Dan and Ian do not run a software company. They primarily make physical products and then you’ve got Balsamiq which makes a software produce and the overlap between the businesses at also the core competency is just radically different but they have the same type of problem and they came to the same type of solution so I thought that was kind of an interesting piece of it as well.
[25:12] Another talk that I think resonated with a bunch of people was Adi’s talk when he was putting together public beta and I don’t know how public he’s been with the previous startup that he tried before public beta but there was another one where he felt like he didn’t necessarily do a lot of customer validation. And they had this giant email list and it ended up converting it about half a percent. And with the thousands of emails that they have, half a percent it just doesn’t even remotely make a business.
[25:39] And they spent a fair amount of money building that up and so we decided that for his next thing that he was going to try and do, he was going to do a lot of customer validation and take credit cards. And in some ways, he talked about the internal struggles that he had and taking those credit cards because he knew that he didn’t really have a product yet. The interesting thing that I talked to Adi about this afterwards and said I’ve done something similar, in his case he went through and he went back to those people where he’d taken a credit card and said hey, here’s the real story. I don’t have a product but here’s what we’re working on and I’ll work with you to make sure that we’ve got it.
[26:12] In my case I did that and of those people who I’ve gone back to and had actually paid for it, not a single one of them follow through later and paid for the product that I built afterwards. So he and I talked about that a little bit and it was just – it’s kind of bizarre. I think the theory that we kind of came up with, because I couldn’t get a response from these people at all but the theory that we came up with is because my product was more in the enterprise space that people probably went, got the corporate credit card, got approval from their boss, signed up for it and then when it wasn’t available they had to go their boss and say yeah, I’m sorry I made a mistake and they didn’t want to give it a second chance after that. So it might’ve been to save face on their part.
[26:54] Rob: What I liked about Adi’s talk is he was just really open about it. He actually said that they wanted to take money upfront. They want to get credit card information because he wanted that idea to be more validated. You and I talked about this a number of times. Now Adi was not taking money to fund it. Let’s be clear. He was taking money to validate it. He wanted a bigger commitment from people that they really actually wanted this thing that he was building. He wasn’t doing it so that he could take the money and go build something because he had the money to go build something.
[27:25] Now in the end I guess he wind up – the content’s pretty expensive to build and he didn’t build the content. He instead did forums, got people in, started building community. He basically said himself we promised one thing and we took credit cards and then we let people in for a different thing and we gave them the chance to opt-out at that point and that’s there were a few people who were upset at that but he had kind of switched it up a little bit.
[27:48] But that he gave people a full chance to opt-out and most people did not. It was a very small amount that decided not to. Actually maybe it was 5% so it was still a small amount and he said that was what he needed to feel confident in the idea and it was actually validated and so he would actually do it again.
[28:05] Mike: Yeah. He said even if the opt-out rate had been significantly higher, it wouldn’t matter because the opt-in rate was still significantly higher. That’s what he was looking at, what’s the opt-in rate after? They really know what’s going on, how many of them were willing to stick around or was it just they were kind of interested but not necessarily fully invested in the idea and that having that credit card is really what differentiates whether you’re truly interested or not. And it’s not the only thing you can use but it’s certainly a major indictor.
[28:36] Rob: I think those are the major things that I took away. I have a big list much longer than we can fit in the podcast for our fourth MicroConf I think it was a success, our first one in Europe. There always a lot of work but they’re a lot of fun. I feel like it provided a lot of value for people so I feel good that we decided to do this. I know when we first started we didn’t know if we would sell it out. There always all the doubts and stuff but I’m glad that we did it.
[29:01] Mike: Yeah and I think the tone was definitely set well especially early on and the expectations were set and we did a really good job of making sure that the experience that you get at MicroConf Europe is going to largely mirror what you get in MicroConf Vegas and that was a major goal for us I think. It was to make sure that you get the same type of experience and obviously the speakers and hallway tracks are going to be a little bit different from one another. But knowing that you’re going to get the same level of quality, the same level of experience, what we really wanted to make sure that we didn’t do was say, have people come and then realize that they’re getting a significantly different experience in MicroConf Europe versus the one that we held in Vegas. I think we were really successful at that.
[29:41] Rob: Yeah I think that since we’re done this multiple times that you and I have gotten better at hosting, connecting people, emceeing, you kind of get better at running a conference. You just learn those rules of thumb that make things get better. The question that I got the most at the end of the conference was are you doing it again next year in Europe? I think we are. I mean we haven’t decided 100% but my guess is I don’t see any reason why we wouldn’t. So if you missed out and you’re interested in hearing about MicroConf Europe 2014 head on to microconfeurope.com enter your email address on the upper right and that will put you on the early bird list. We do tend to sell out fairly quick on these conferences so if it’s something you’re thinking about it would likely be fall of 2014 somewhere in central Europe.
[30:27] Music
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Episode 154 | Tools For Testing Your Sales Funnel, Reseller Strategies, Integration Marketing and Other Listener Questions
Show Notes
- Constant Contact
- LessAccounting
- KISSmetrics
- Visual Website Optimizer
- Optimizely
- FairlyCertain
- Authority Labs
- Moz
Transcript
[00:00] Mike: In this episode of Startups for the Rest of Us, Rob and I are going to be answering questions about tools for testing sales funnels, reseller strategies and integration marketing. This is Startups for the Rest of Us: Episode 154.
[00:11] Music
[00:18] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:27] Rob: And I’m Rob.
[00:28] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made.
[00:30] Rob: So I have some good news and some bad news. The good news is Drip launched to 600 more people today, nothing’s broken so far. People are signing up for trials, things look good. The bad news is Google has announced that they’re going for 100% not provided keywords. They’re trying to go to 100% of not sending keywords to root to your website so that you don’t know how people are finding you organically.
[00:57] Of course they dropped some hint we want to protect everybody from the NSA but in fact if you actually buy the same key words through Google ad words, they will tell you the keywords that people are using to find you so sounds like more of a money grab than anything. The reason it’s bad for me is this impacts Hit Tail. Basically Hit Tail relies on those keywords and that’s part of the data that it uses to give you back suggestions.
[01:21] So what I’ve been seeing, I’m kind of panicked when I heard about this and I thought oh man, Hit Tail’s done. If they get 100% Hit Tail doesn’t have much value. But what I’ve noticed is there a steady slow decline over the past 6 to 12 months across all sites and my sites included of the not provided thing rationing up. So my turn rate hasn’t increased. With my own sites, we still get plenty of suggestions and we fill the blog with long tail keywords suggestions. So as of today even though I have sites that are literally at 90% plus not provided, I’m still able to use Hit Tail and get value out of it. It’s not much value as I got 12 months ago but as long as it doesn’t abruptly go to 100% I actually think that Hit Tail can stick around at least in the short term and potentially a little bit further out in that.
[02:10] So that’s been my day, launching a new one and then seeing another one kind of get hammered by that. It’s that third party integration right? It may not be an API that were using but for all intents, anyone of any time can kind of pull the rug out from under you if you’re relying on their data.
[02:23] Mike: Yeah. I mean that’s not even an integration. That’s just an outright reliance on them, so that totally sucks. And reading that, they started doing this back in 2011. I would think they’ve been heavily testing this a lot over the past couple of years and probably start shutting down some of the companies that are doing SEO. I can’t imagine any other reason why they would be doing it other than to basically make more money off of ad words because they want people to use ads. They want people to click on those things.
[02:51] And when people are doing all sorts of organic SEO, then they don’t need those paid advertisements anymore because their search engine is good enough that it’s showing people the results that they want that their algorithm has determined are the best results out there. So it makes sense that they would want to obscure that so that people start having to buy ad words because their traditional SEO “tricks” don’t work anymore.
[03:15] Rob: Right. And Google kind of at a one two punch and the second part of the punch is they went out and blocked all the scrapers. So if you’re doing SEO, you typically use a rank tracker, something like surf fox but it basically tells you enter a bunch of keywords and you enter your website and it tells you where you rank for those. And Google used to have an API for that and they shut that down a couple of years ago. Then these companies were scraping to figure out your rank and now they blocked them. So they’re really rabidly going after SEO and they also shut down I think another couple of blog networks like big link farms they call them.
[03:52] The death of SEO has been coming for a long time. It’s been a slow, slow plod forward. And if Google didn’t own so much of the search landscape I think others search engines would step up. As far as I know still being in the other search engines, they don’t do really any of this stuff. They don’t block this stuff but there just aren’t enough in the market to really make a difference.
[04:13] Mike: Got it. On my end they just finalized a massive upgrade of Audit Shark over the past couple of days. The servers are finally running windows 2012 at this point. Everything’s now on the .net 4.5 framework and all the bugs that I had talked about a couple of weeks ago are completely out of the picture. Basically all the ones that were associated with the upgrade have all been dealt with. So I’m really pleased about that progress and at this point it looks I’m going to be going to the early access customers and working through the process with them.
[04:44] But everything I’m looking at so far basically says that things are ready and good to go. It’s just a matter of hitting that early access list and working through people and making sure they’re getting the value out of it and to kind of iterate in similar to how you’re doing things. I’ll probably a lot more hesitant I’ll say. I’m certainly not going to be emailing 600 people at a time because there’s a lot of traffic that comes in from some of the different components and I want to make sure the infrastructure can fully support it because that’s one of the things that hasn’t been I’d say adequately tested. So I’ll be on boarding people at a much lower rate than I think you are.
[05:20] Rob: Yeah, absolutely. Well if you recall, I started off with one customer and then I brought one customer on at a time until we had 20 people using the system and that took me six weeks to do. So I think you’re at that stage. Then we fixed a bunch of stuff, added features based on their responses. By the end of that I had about nine paying customers almost $500 in revenue and then that’s when I decided to email that first 300 batch. We didn’t upgrade the data base server. We split the server into two. We did a little bit of scaling stuff that took literally 1 or 2 hours to do because with all the virtual stuff it’s easy.
[05:59] I think you’re headed towards that at this point because you’re right. I never would’ve emailed 600 people 3 or 4 months ago because I just didn’t have the confidence that we can handle it. I’d say to be honest I think that’s both from a technology perspective but it’s also just from your processes. You need to make sure you’re answering support emails in a timely manner, how hard is on boarding? Can you walk people through individually? Do you have your trial emails that go out or are you sending those manually because I did that manually early on. Do you have automated billing? There’s a lot of things that if you don’t have them in place yet, that’s another thing that doesn’t scale yet if you don’t have the code written.
[06:34] Mike: Yeah. That’s definitely right. There are some of those things that I got automated and some of them I don’t. So for the time being I have to send out things manually. The code for billing hasn’t been fully tested yet so I want to run those things manually for a little while until we get to a point where I’ve gone through them and said okay I feel like we’ve covered 80% or 90% of the different scenarios that could possibly come up or something could go wrong. And at that point just add in some extra error handling and make sure nothing’s going to go wrong or maybe even just set it up so that it sends me an email says here’s the summary. Please click on this link going to the dashboard and then click the run button to just go through and actually do the billing for everybody.
[07:13] But I do want to be careful about a lot of stuff like that. As you said, until you get to a certain point, I mean you don’t want to just blast a ton of people there because you’re going to overload yourself with either support or all these other problems.
[07:26] Rob: Right. Very good. Well congratulations again. So you have one paying customer and you basically said you’re done with remediation and the UI and now a technology upgrade so you’re going to start moving into contact and early access folks, very good. I subscribed to Patrick McKenzie’s email newsletter and he sent something out within the last week that relates back to a conversation that we had and that Dave had actually called in about and he left a voicemail and was basically talking about getting that payment upfront versus just getting a commitment to pay upfront.
[08:00] Patrick reminded me that Jason Cohen at MicroConf had said I think it’s going to cost $30 a month, will you write me a check for the first month right now to reserve your place? I won’t cash it until we deliver. So Jason had taken a slightly different tact which was getting a commitment upfront and actually getting a check but he wasn’t taking the money. That kind of goes back to our discussion of us saying the important thing is to get the commitment. I think if you actually need the money to build a product, this is not a good approach. Right? Because you’re not supposed to cash this check. You should have the money to build the product on your own and if you don’t, I don’t think this is the way to get it.
[08:39] Mike: My favorite part of that entire email was – and I’ll quote him word per word. Patrick says “My favorite symptom of an unmet need for software is any Excel spreadsheet which is ever updated by one employee, sent to a second employee, updated, and then sent back. Every time that happens a Saas angel gets its wings.”
[08:56] Rob: Very nice.
[08:57] Mike: That reminds me of a comment that we go on episode 138 from Sean who said as you’re doing your research, if you come across anyone that’s using a spreadsheet as attracting tool, that’s a big signal you’ve got an opportunity to build something that can do it better.
[09:08] Rob: Yeah. I heard this. I think this is a software a couple years ago. I liked this approach. I also like the approach which is another one I heard at a conference. Look at the big enterprise tools where there is no lower price Saas version and see what pieces of that you can break off and turn into a more lower price but self service version of it. So you don’t have the long sales cycles. You try to bring it down to the small and medium sized business market instead of the enterprise market and there’s a ton of apps that have done that.
[09:38] I mean think of all the accounting apps, you think of the kind of CRM apps that only used to be a million bucks and now there’s SaaS versions. You see even email marketing apps at first were very, very expensive and in Constant Contact came with a $39 a month version. So I think there are still some fruit. I don’t know if it’s low hanging but those are interesting ways to generate ideas is looking at both enterprise apps and then ways that folks are using excels spreadsheets.
[10:03] Mike: Something else that ties into that is most people are very familiar with excel but I’ve seen a lot of applications written over the top of axis databases. So I think that’s probably another good place where if you find anybody who’s got an access program that has been customized or has been outsourced as some consulting company who came in and built something for them to track different information, that’s another place where you can probably look for a product to build.
[10:31] I think the one thing to be a little bit careful of is that when you get into those types of things it’s a much bigger commitment on the part of the company that brings somebody in to build that for them. So chances are the complexity is going to be a lot higher than they had with an excel spreadsheet but I still think it’s at least worth exploring and asking questions about.
[10:48] Rob: So you also had a little shift in your marketing focus this week. What happened?
[10:52] Mike: I actually cut back on my Facebook advertising just because I didn’t have time to pay attention to it. Facebook was they were sending clicks though but they weren’t necessarily converting as well as I would’ve liked. But because I didn’t have the time to follow-up on it, try and figure out exactly what was happening, I basically just killed it dead in the water for a little while until I could come back to it. Because as I said, we were working on that massive upgrade of the Audit Shark infrastructure and I just didn’t want to be throwing money away. So instead of doing that I just said okay, well I’ll kill this for a little while.
[11:20] Rob: Yeah. A little known fact about paid acquisition is there’s a lot of upfront time investment honing in to make it actually work and then even once it works you still need ongoing maintenance because the ads burn out. Some people call it ad rot but it basically the click through rates will go down over time. I’ve never seen a system where that doesn’t happen especially with visual ads like this. So it’d probably a good idea to cut back on them but you’re going to start them again. I imagine that there’s still a liquid of market out there. You plan to start it up in the next week or two?
[11:52] Mike: Yeah. I mean I’ll be doing it later this week. I’ve still got a bunch of different phrases that I want to try, want to swap out some of the images and just try some different mechanisms for saying the same types of things but in a different way, try to reach different audiences going into different target markets, that sort of thing.
[12:09] Music
[12:12] Rob: Very good. So we’re answering some listen questions today.
[12:15] Mike: That’s right. So the first one that we have is from Carl Falconer and he says hey guys, thanks for all your work creating the podcast. I’ve recently been attending a local lunch and learn series on financial literacy for startups. I’d be interested in learning how you both manage the business accounting not necessarily the tax accounting of your products. For example, things like balance sheets, cash flow etcetera. What’s the decision making process behind your financial models? With all of your experience, have you become better at predicting your breakeven point? Thanks. Carl.
[12:42] Rob: So with a software company I like to keep it very simple and in fact I don’t look at my balance sheet ever aside from cash on hand, that’s pretty much all I would look at as an asset. I like to keep things simple. I like to focus on the business rather than this kind of stuff, the business accounting aspect of it. I know that if I was running a business with inventory or with accounts receivable where you invoice and get paid net 30 you need to look at that stuff. You need to look at cash flow. But for me, the cash flow comes in virtually instantly. The biggest delay I have is with Stripe which is a seven delay from when I get paid. So as long as I have enough cash in the bank, it’s literally a rounding error and it doesn’t matter.
[13:20] So the thing that I look at with my business accounting is the income statement. All that is is all my revenue, all my expenses and I can just look top to bottom and see what came in that month, look at anything that’s kind of funky. I know the rule of thumb. I can set a budget physically in the accounting app or I know rule of thumb of where I should be if something looks out of whacko, go in and investigate.
[13:40] Realistically software companies tend to be especially Saas apps like this tend to be really cash heavy. You’re not typically at a danger of expelling more cash than is coming in once you reach profitability. Frankly I just treat it as kind of a simple cash in cash out business. And the packages that I’ve used are Outright, that’s typically the one I use for the simpler businesses I have and then I use Xero which is xero.com which and that’s for the more complicated scenarios. As Mike and I’ve talked about over the last couple months, we both have bookkeepers now and that’s actually been a god send because it just saves me quite a bit of time getting these things organized this month.
[14:17] Mike: Primary difference between me and you is that I use some different tools. I use Less Accounting for one business and then I use QuickBooks for the other. Just like you, I don’t pay attention too much to anything like balance sheets or accounts receivables or anything like that. The biggest thing is just how much money has come in over the past 30 days and how much money I’m spending on some of the different services. And that can vary from one month to the next. Occasionally I’ll go in to try and identify where all my money is going so that I know at least periodically review whether or not there’s services that I’m just no longer using anymore and whether or not I need to cut them.
[14:54] But I actually have some services that I’ve been using for a while that I just continue paying for them because it’s actually more of a hassle to go in and cancel those accounts than it is to just say oh well, it’s only $5 or $10 a month or whatever. In terms of predicting a breakeven point I don’t even think that comes into mind. Do you think about that at all or no?
[15:14] Rob: Not really. I basically set goals of where I want to grow revenue each month. That’s the one number that I look at. While keeping in mind that I want to acquire customers for substantially less than their lifetime value. As long as I’m doing that I know that the business is going to be profitable down the line. I don’t think that about breakeven. I think about I want revenue to be in X thousand dollars 30 days from now and those are the goals that I’m shooting to hit and the breakeven just kind of comes along with that.
[15:43] Mike: So thanks for the question Carl. Our next question comes from Henry Oswald and he says I’m currently trying to measure my sales funnels and could do with some technical guidance. I’m sure many are in the same boat. Could you elaborate on which tools you used to measure your funnel and or AB testing’s. How do you measure which traffic sources convert? Which three things would you recommend you’d measure for a new site? It feels like this is something everyone says you should do but rarely say how you should do it. Thanks in advance. Henry.
[16:07] Rob: Alright. So here’s how you should do it. In terms of which tools do we use to measure? I use Google analytics because it’s free. I use Kiss Metrics because it provides a little more detailed information but it’s quite expensive. I think it’s $150 a month is the low end plan. And for split testing I used what used to b Google website optimizer that now integrated it into Google analytics and you can get by if you don’t have a high budget analytics. There are solid tools for split testing like visual website optimizer and optimizely. Again I think those started around $100 a month. So it depends on where your budget is and do you have more money than time at this point or not.
[16:44] Your second question is how do you measure which traffic sources convert? You can easily setup a Google analytics goal for any type of conversion that you want. Google had to do that. I mean it will take you two minutes to do. You do a base on the URL someone hits or you just slap a little JavaScript on your receipt page. Again, you can also use Kiss Metrics for this. I use both and check back and forth.
[17:06] And then finally you said which first three things would you recommend you measure for a new website? I’m assuming this is a software or a SaaS website so here’s the three things I would look at. One is your visit to trial conversion ratio. Second is your trial to paid conversion ratio and the third is you should have a Drip email sequence running. I would look at visit to Drip email sequence conversion and then from that sequence into your trial conversion.
[17:35] Mike: But personally, similar to you, I use Google analytics and then I also use Kiss Metrics. So in terms of the tools I use I don’t think that there’s a whole lot different there. The other thing that I’ve used is it’s a C sharp framework for doing AB testing called FairlyCertain. Last I checked there was a bug in it. It wasn’t actually doing the AB test properly so if you did an AB test, the visitor would see the A and the A type test no matter which page they went on. So if you’re running two different tests, they would only see the A version of test one and they would only ever see the A version of test two.
[18:12] So as far as I know that’s a bug in there that I don’t know whether they fixed it or not. I actually went into the code and fixed it myself so that it was random between them. So if you were running more than one AB test on your site it just wasn’t necessarily giving you the correct results. And that’s something you do have to be careful about no matter what AB testing tool you’re using because you want to make sure those results are accurate. So do some testing on your own, make sure it is giving you the right results.
[18:37] In terms of the three things I would recommend measuring for a new site, a new site kind of implies it’s a new piece of software that you’ve unleashed and for those types of things you want to be careful about running AB test when you don’t actually have enough incoming traffic. I think Rob did a really good job of talking about the things that you should definitely be measuring but I would be very, very cautious about running AB test when you don’t have enough traffic to justify those AB tests. If you’re not going to get statistically significant result then you don’t want to be running those tests because they’re going to be giving you misleading information. So Henry thanks for the question.
[19:14] Our next one comes from Dylan and he says hi Rob and mike. I’m trying to come up with a reseller strategy and would love to hear your thoughts. My bootstrap product’s called Activity Book, is an HR enterprise application which requires a private VM so it’s not strictly a Saas application. Sales are fairly high touch at the moment using cold calling and face to face. I have several clients on trial including HR service providers who want the product deploy for each of their clients to be used as an HR portal. The HR service providers will in effect become resellers. In addition to these, I’ve been approached by other companies who’ve asked for reseller programs. This is all great but I’m struggling with a reseller strategy that’s attractive to both parties.
[19:50] Pricing is confusing. Should I give a percentage of the lifetime in the client, just the initial sale or a depreciating percentage during the lifetime? Should I allow them to charge whatever they like as long as I get my fee? I’m also considering white label and allowing the reseller to run training courses in their own configuration services etcetera. What do you guys think? Do you offer reseller packages or know of anyone who has an attractive reseller package? And closing, I’m a long time listener and believe my product has got to the point it is right now due to the inspiration from you guys. If it wasn’t for you two and Seth Godin, I’d have no product. Thanks, Dylan.
[20:21] Rob: Gee. Thanks for the mention next to Seth Godin, that’s a very high compliment. So it’s a little different with the reseller and affiliate right? Because an affiliate typically is just directing traffic over to your site and you’re basically paying them a percentage. Resellers are often valued added right there. Actually doing some installation they should do support, upfront support for you and so they should tend it in general they will get a higher cut for doing that. The other thing the reseller brings is they have their own network of typically of clients either existing ones or new ones they bring in. So that’s typically how I think about the difference between affiliates and resellers in case you listen to this wondering what that might look like.
[21:00] So he asked a couple questions here. The first one was about pricing. He said should I give a percentage of the lifetime of the client, just the initial sale or a depreciating percentage during the lifetime. My thoughts on this and they’re not highly experienced is that I would give them a percentage of the lifetime of the client but not upfront. Assuming you are charging a monthly maintenance fee, there’s nothing more attractive to a business than having recurring revenue and most businesses don’t have that. So you can give a much, more much smaller percentage of that recurring revenue say 10% or 20%but that’s an annuity of that business. And if they’re not used to that, it really can be crazy. The lifetime value to them can be worth a lot.
[21:41] On the flip side if you were to say okay, all the upfront charges, the set of fees, they all go to you so maybe they get 100% of the setup fees in the first month and then you get everything after that. That’s an okay deal for them. Personally if I were in their shoes, I would prefer the recurring. So maybe that is something that you need to feel a couple of them about and figure out which way you should go but I would lean towards giving a portion of that recurring sale.
[22:09] Mike: I actually disagree with you and here’s why. You have to remember that when you’re dealing with resellers of the size that my assumption is these resellers are going to be – I mean they’re an HR service provider. So they probably have 50 to 100 to 200 employees probably even more. When you start getting into those types of companies, they have dedicated sales reps. So the problem you’re going to run into is I don’t know what your software actually sells for but let’s say that it’s $500 a month and you’re going to give them 20% of the sale like Rob suggested. The problem is that $500, they’re going to get 20% of the sale, that means the company is going to get $100 a month which to you and me sounds like a reasonable deal but at the same time they have sales reps to pay.
[22:56] So if that sales rep looks at it and says well why should I sell this software package for $500 a month to customer X when I can sell them $2,500 worth of consulting services and make my numbers for the quarter? Those are the things you have to keep in mind when you’re going to go down this path because it’s ultimately the sales reps that are going to be trying to resell your product, not the business. So although you’re giving them $100 a month in recurrent revenue, it’s not necessarily going to go to the sales reps. The sales reps is not adequately compensated to actually go do that. So that’s something I would be really, really careful about.
[23:31] Rob: Got it. So you would lean towards trying to have a larger upfront fee and basically giving perhaps a huge chunk of that, maybe even 100% of it to the company with the hopes that they would then split that with the sales rep and they’d have more motivation.
[23:44] Mike: Possibly. I would go talk to these companies and find out exactly how their sales reps are compensated and how they’re going to be selling it and you may very well need to work out several different types of reseller agreements with your first several resellers to figure out what’s going to work best and which ones are going to do it because you can take our advice and do one thing and then find out 2 or 3 years down the road that it’s really just not working. What you need to do is try out a couple of different ones and figure out which one’s going to work the best and maybe you tell them upfront hey, let’s try this and we’ll reevaluate in 6 months and try and figure out from there whether or not this is appropriate, whether or not your sales reps are actually going to sell it and figure out what’s going to work for both of you.
[24:26] And I think that if you approach it from that angle and tell the company upfront look, we’re trying to figure this out just as much as you are in terms of reseller. The other thing I’d be cautious about is letting them push you into any specific way of doing things because they may ask you to do something that you may not necessarily be comfortable with but they say well let’s just try it and you get backed into a corner and it turns out it’s just absolutely fantastic for them. Maybe they’re taking all the top line revenue and they’re just sending you the monthly fee which may very well be what you want but just be cautious going down the road that they’re not pushing you around as well.
[25:02] Rob: Right. So you’d lean towards saying that you’re trying to figure it out as much as they are and that you want to do a short trial and maybe try to do one or two sales at this rate and then determine later if you need to adjust it, that kind of thing.
[25:14] Mike: Kind of. I mean I wouldn’t limit it to just one or two sales. I mean I’d probably give it a time limited basis like 5 or 6 months or something like that and then throughout the course of that 6 months, if you have let’s say five different resellers and one of them brings in 25 sales and the other one only brings in one, we have to go to the reseller that only brought in one sale and say hey, I have another reseller who brought in 25 sales. They’re about the same size as you. What is it you’re doing that’s different from them?
[25:41] And try and figure it out from that perspective and say I want to help you guys sell more but unless either I understand how you’re doing things or unable it compare them between you and another customer then it’s very difficult for you to help them and it’s a very non-confrontational way of addressing what eventually would be problem because down the road if they come to you and say we’ve got this huge customer we’re trying to land and they can just become a time sink for you. And if they’re not landing sales then you’re going to end up spending time with them waking through pre-sales things because it is an enterprise sale and you’re just not going to get anything out of it. So you want to be able to compare people and make sure you don’t end up in that situation.
[26:26] Rob: What do you think about the second part of this question? He says should I allow them to charge whatever they like as long as they get my fee?
[26:32] Mike: That’s a tough one because with larger companies, they tend to tack on services. I know that there are certain hardware providers out there who will – they’ll bundle not just hardware and software but they’ll bundle services into price quotes and it could be a little bit difficult to figure out how much of the cost is going to software? How much is going to hardware? How much is going to services? And you’re in a slightly different situation where there’s a private VM so it’s just a virtual machine that you deliver digitally so there’s no hardware directly associated with it but obviously the customer has to have the hardware to run it.
[27:07] I would definitely try to understand how it is that they do their services and what their general pricing looks like before you start making decisions about whether or not you’re going to just a take flat rate or not. The other thing to take into consideration is if you try to be too greedy, they may very well try to emulate exactly what you’re doing and have somebody else go out and build it as a platform for themselves that they can leverage basically for free. So you don’t want to get too greedy but at the same time you don’t want them overstepping their bounds either.
[27:39] Rob: I have a tough time at allowing them to charge whatever they like because then that means you’re leaving the price elasticity on the table. Your business isn’t going to grow. If it’s an enterprise product, the idea is that you’re going to make the most money, a big chunk of your revenue from the higher end sales and if other people are skimming that off the top then I just don’t think your business is going to grow as fast as if you were to kind of keep a control over the ultimate price. The last piece of his question he says I’m also considering white labeling, allowing the reseller to run training courses in their own configuration services etc.
[28:13] Mike: Well I mean these ties a little bit back to the previous one. The thing is allowing them to charge whatever they like is probably not a bad thing because if they’re charging whatever they like, theoretically you’re offering the same product to reseller 1 as you are to reseller 2. The primary difference is that they are offering different services to their customer. Even if you have two resellers who go after the same customer, theoretically they’re offering your service on the back end and you’re going to get paid whether either one sells it. So it doesn’t necessarily matter and they’re going to try and compete on price to some extent.
[28:45] In terms of white labeling, white labeling is tricky. I think that I would get a good handle on just having them act as a reseller before I start going down the white labeling. Because with white labeling you really want to be charging exponentially more and until you know what you should be charging as a reseller, it’s very difficult to know what you should be charging as a white label provider. So Dylan I hope that helps and thanks for the question.
[29:10] Our next question comes from Marco Schwartz and he says hi Mike and Rob. I’ve been following your podcast for about 3 months now and I’m working on my own products and looking for a Saas app idea. I am personally passionate about the restaurant business so I’m thinking about building a web app of this business that would manage accounting, inventory, staff etcetera that would be priced for a monthly fee. I know it’s not really a niche like you would advise in your podcast but on the other side I didn’t find any Saas apps online. I only found some very expensive $1,000 to $2,000 software packages to buy. Am I missing something? I’d love to have your opinion on this idea. Thanks.
[29:42] Rob: I don’t think this is a terrible idea but know upfront that this is going to be high touch sales. You are going to be doing out bound cold calls in the evenings because that’s when restaurants are open or you’re going to be paying in person visits. I don’t know anyone who makes a lot of these kinds of sales directly online using paid acquisition and Facebook ads and SEO and content marketing and that kind of stuff.
[30:07] Now you mentioned a broad range of what your app might do. You said it would manage accounting inventory staff etcetera. That is huge. I bet those packages that sell for $1,000 to $2,000 are massive and probably have 5 or 10 year old code bases and that’s probably why they look so crappy because they’re written in an old technology. But I would bite off a much smaller piece of that and then try to expand outward at a minimum. But know that you are in for high touch sales that you’re going to be dealing with people face to face and I would personally go out and try to sell 10 copies of it first or 10 subscriptions to it first based on the idea or based on mock ups or based on some designs or just something just to see what that feels like.
[30:49] Even if you get 10 no’s, at least you’re going to know what it’s like to have a conversation with restaurant owners and you’re going to have an idea of how hard it is to talk to and potentially sell. I would also suggest that you consider getting in touch with Brian Casel and he has a podcast called Bootstrap Web and he owns a product called Restaurant Engine which is basically think of it like square space for restaurants. It helps them get their websites up and running. At least with Restaurant Engine you can imagine that there are a certain amount of restaurants actively looking online for a new website and looking for website templates and designs and stuff so he has things he can tap into.
[31:26] What you’re talking about is taking over their back office and handling accounting, inventory staff, that’s a more complex proposition. You’re going to need a lot more credibility. It’s going to be a challenge. You said are you missing something? Yeah, I don’t think it’s as easy as perhaps as you’ve presented in this email and I do think that before you write a line of code there’s a lot more feet on the ground research that probably needs to happen.
[31:50] Mike: Yeah. I’ll second what Rob said. I mean the restaurant industry is I’ll say technologically averse. So I’ve looked at this a little bit, there’s a website that came up on Flippa a couple years ago that was also in the restaurant space but they weren’t doing inventory or accounting or staff management anything like that. The only thing that it was intended for was for allowing a restaurant to take orders online. And I forget how much it was selling for but it was probably $2,000 or $3,000 and the price point was I think around $500 or $800 or something like that and they were not getting very many sales. I think they were only getting one or two a month.
[32:28] So the revenue was reasonable but what I am talking to the owner of it, it turned out that there was a lot of high touch sales that went into that because everybody wanted customizations. Everyone wanted it to look like their own website and then it came on to once they bought the software package they wanted all these customizations and then they wanted a whole website design and it tended to turn more into consulting engagements than anything else. The different things that you talked about, the accounting inventory, staff management, each one of those things could be its own software package because it’s such a large problem that can be solved.
[33:04] So I might look at some of those. Maybe you’re looking at a time tracker for restaurants or something like that because you want to be scheduling people to come in and work and that might be something that you want to translate into an online solution. But as Rob said, go talk to them, see if there are ways that you can figure out how they manage that problem now whether or not they do use spreadsheets or just call people up and ask them what their times are. Maybe you can put together a package where people can say this is the hours that I work. These are the hours that I don’t work and have the software package basically take the store hours and manage staff in the business based on who’s going to be available and when they’re not going to be available. So Marco hope that helps, thanks for the question.
[33:50] And the last question of the day is from Frank Anderson and he says hi guys, thanks as always for the inspiring and informative show. I’m building a Saas app and been looking at the various B to B app stores such as Sales Force and Mail Chimp. Do you guys have any experience or perspective on how helpful these can be in terms of getting traction with a new app? Would love to hear this discussed on the podcast. Thanks. Frank. Rob, I think you had a specific term for this. You called it integration marketing?
[34:16] Rob: That’s right. Yeah, I mentioned this in my MicroConf talk this last year. So the answer is it depends. The real key to making this kind of thing work is that you get an upfront buy in that if you build something cool you build a nice landing page that they will do an email blast for you or a blog post or something like that. A tweet, maybe you build it, maybe you don’t but just to build it to be in the app store and get a small trickle of occurring traffic every month, I tend to not do that. I’m not saying it never works out but most of the time that doesn’t work out.
[34:51] What’s really nice if you’re actually looking for establishing a sales channel and trying to get some early traction from early customers, you need that initial blast to all of their customers. And so think a little bit smaller than Sales Force and Mail Chimp because those are the ones that you can apply to and submit your app and you’ll get in. They’re not going to email their customer base about you because you’re a small fish compared to them.
[35:14] So as an example with Hit Tail when I started doing some integration marketing I contacted some smaller SEO Saas apps, some you may never heard of like Authority Labs which is a rank tracker. I actually contact SEOMOZ and wound up on theirs. You’ve probably heard of them. But the larger ones, we’ve integrated Hit Tail with Basecamp. That one didn’t do very well for us. And there were two reasons for that. The first is that they wouldn’t agree upfront to do any cut type of blast because they’re just too big and we knew that. But the integration itself wasn’t very hard and it was the first one we were doing and we kind of just wanted to do it as a trial.
[35:48] The second reason it didn’t work out super well is because the audiences don’t exactly line up. So you’ve named two services, Sales Force and Mail Chimp. Unless your audience really closely aligns with people who are using Sales Force and Mail Chimp, just because they have a lot of people using doesn’t mean a lot of them are going to come use your app. So with Basecamp, I mean it’s like a fraction of percentage of people who come over who actually sign up for trial whereas with SEOMOZ and Authority Labs, those are at least 10 times the sign up rate of the Basecamp integration.
[36:21] So that’s the first thing to think about is who can I find who’s small enough that I can talk to the founder and it’s not some big committee and I can say if I do this and do a really good job at it, are you willing to kind of email the audience and give you that initial kick? The second thing is to think about which apps are out there whose audience is really closely aligned with the customers that you’re seeking. So thanks for the question frank. I hope that’s helpful.
[36:46] If you have a question or comment for us, call our voice mail number at 1-888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. See you next time.
Episode 153 | SaaS Pricing Tactics
Show Notes
- The data behind purchasing behavior at UserVoice – Article link
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I will be discussing software as a service pricing tactic. This is Startups for the Rest of Us: Episode 153.
[00:08] Music
[00:16] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:25] Mike: And I’m Mike.
[00:26] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week Mike?
[00:30] Mike: Well it’s been about three minutes since we recorded our last podcast episode so I’ve got nothing new this week.
[00:35] Rob: Alright. Let’s dive into the topic today which is SaaS pricing tactics. This is based on an article written by Richard White who’s the founder of UserVoice. We’ll obviously link it up in the show notes. But his article is titled The Data Behind Purchasing Behavior at Uservoice – Pricing for Conversion. He did a two parter. We’re looking at part one and these are basically all the tests that they’ve run at UserVoice over the past couple of years.
[01:02] UserVoice is essentially a system to get feedback from your customers and they branch now into online help desk software. What’s cool about Richard’s article is that it’s not a lot of theory. It’s a lot of practical things that they toyed around with and that they struggled with in their early days. So the first thing, we’re going to cover five or six different points.
[01:22] The first one is his take on free plans. Basically for the first 10 months of UserVoice it was entirely free. There were no paid plans. He called it a public beta. And they had 39% month over month growth in account signups during that time. So what they found thought was that as soon as they announced they would be having paid plans at some point in the future, just announcing them, it cut their growth in half. He makes a note, he says you couldn’t even sign up for them. You could just fill out a lead form. And it should be noted that these new plans for the most part included features that weren’t currently available in the existing app.
[02:01] But what they noticed, that makes it sound like oh, well as soon as you introduced paid plans you’re going to cut those sign ups in half. What they found though is after 30 days the percentage of active accounts have doubled during that mite. So they basically cut growth in half but it was essentially the tire kickers who stopped signing up. So the takeaway that Richard White talks about is launching pricing earlier can help you find the real customers of your service and not be distracted by tire kickers.
[02:26] Mike: I find this interesting that one of the things that I think might be a little bit difficult to kind of differentiate is between who are the tire kickers that are using your product versus the ones that are actively looking for a solution to the problem. Because obviously you want to reach out to these people and understand how it is that they’re using it, how you can help them better. But at the end of the day you also have to be charging them for the service because otherwise you’re not going to stay in business for very long.
[02:51] I think that one of the ways you can do that is to figure out whether or not they’re actively using their account. I’m struggling to figure out what other ways you could use to figure out is somebody actually going to pay for this in the future or they’re just kind of playing around with it or using it for a free product that they have and they’re not necessarily willing to actually pull out their credit card and pay for it.
[03:11] Rob: Right. Basically trying to decide of all the active users who are actually using the product and getting value out of it, which of those are going to pay us if we do introduce paid plans? And I agree. That’s a tough question. My gut feeling is that unless you’re in like a real consumer niche or a niche where there are a lot of free options out there, that especially if you’re going B to B that if people are activated and they are actually using it that the vast majority of them would in fact pay you for the service.
[03:41] I can’t say that blanket across the board but if you’re actually saving them time or making them money, I don’t see why that you’re not going to be able to get quite a few of those folks to pay you once you start charging.
[03:56] Mike: Yeah. But even with UserVoice for example, I can see a lot of startups signing up for it and say oh, well I would like to have some sort of help desk or knowledge base for my products but I haven’t launched yet or I’m in the process of launching and trying to get it started. So I’m going to sign up for this free service over here but I wouldn’t be willing to pay for it if they were asking me money for.
[04:14] Rob: Yeah.
[04:15] Mike: So they’re using it in a business like setting but they wouldn’t be willing to pay for it. And that’s kind of what I’m getting at because I can definitely see scenarios like that but maybe that’s just a very specific scenario.
[04:28] Rob: Also, just the idea of having a 10 month free product that’s like a public beta, that’s just crazy. I would never even consider that again. Again, I can’t imagine doing that because the chaos of it, the thousands and thousands of free users who are never going to pay you and are never going to provide value but are going to complain that you don’t build features, it’s just going to be overwhelming. That doesn’t even sound interesting to me.
[04:51] So the whole 10 month public beta thing may have worked for UserVoice because maybe it was an innovative product and they really didn’t know who was going to use it and this was a way just to get people and to figure out how they were going to use it. And if that was their goal then cool, but if you have more of an idea of how your users are going to use it and you’re building something that’s I don’t know, more of a standard product or just more of a known entity, I don’t think – like I’ve always said, free plans don’t work. I don’t like premium models, that kind of stuff.
[05:21] Mike: Yeah. I mean they were funded to the tune of $1.8 million.
[05:24] Rob: Got it.
[05:25] Mike: That’s a little different.
[05:26] Rob: Right. So they really wanted the hockey stick to move up into the right and this is one way of doing it. Not in terms of revenue, just in terms of users. So the next tactic that Richard talked about are the specifics of their pricing plans once they introduced them. He said that they originally announced only two paid plans priced at $289 a month and $589 a month. So they went from free to basically $300 and $600 a month and they received a ton of feedback that people wanted sub $100 plans.
[05:55] So they expanded to five plans. They have a free plan, $19, $89, $289 and $589. What they found after they launched s that 77% of their revenue came from two of the plans. It was the most expensive one, the $589 and their $89 plan. The $289 which is in between those two, he calls it a wedge plan. It didn’t have a ton of extra features over the $89 plan and it was designed to make it easier for you to either stay at $89 or justify making the jump to $589 since that $589 had so many more features than the one below it. Why not just pay the extra amount?
[06:32] He also noted that their lowest plan, the $19 plan had a ton of accounts but at such a low price point relative to the others it was never going to be a significant amount of revenue. I’ve noticed this as well with my apps. I know that I remember WuFoo talking about this when they said it was like 90% of their profit was from their top two plans which were the super high end enterprise plans and everything else was more of a around. So his takeaway that some pricing plans exist simply to make other plans look better. That’s what he calls a wedge plan, that’s in between. While lower pricing plans can be a decent entry level for people, in general you are going to make the vast majority of your revenue and profit from your higher end plans.
[07:13] Mike: Yeah. What’s he’s referring to as a wedge plan is classic anchoring where you’re basically anchoring somebody’s concept of how much something is worth to the different price points by just having it in there. If you look around there’s various examples on the internet where you if you have two different plans that are close to each other in cost, let’s say you’ve got one plan that’s $10,000 and another one that’s $15,000. If you introduce a $30,000 or $40,000 plan then people will go for the $15,000 plan and look at it as much more reasonable than it was before. And in addition they won’t try to negotiate you down on some of the different pricing because you’ve got this massive plan out there that costs so much more and it’s obviously geared to other types of people and to look at it and say oh well, that’s just what it costs.
[07:56] Rob: The third tactic that Richard mentions is discounts. He says we had 13% of paid accounts on some sort of discount with an average discount of 52%. Not surprisingly the lifetime values of these discounted accounts were lower, they were 17% lower, the non-discounted accounts. But it was offset by the fact that they were also 17% less likely to have churned. And his takeaway is discounts can be a useful tool for driving conversions without undermining long term lifetime value. But heavy usage might signal issues with your pricing structure.
[08:30] Mike: Yeah. These numbers that he kind of cited are a little bit confusing because he’s saying that some of the paid amounts that had a discount, they paid less than 50% of what the actual price was. But they provided a lifetime value that was 78% lower than the non-discounted accounts. And he said that it’s offset because there’s 17% less likely to have churned.
[08:51] But what strikes me as odd is it sounds to me like by giving them a discount they’re more likely to stick around for a significantly longer period of time because he’s saying here that the lifetime value was 17% lower but they were given a 50% discount. So those numbers just don’t quite make sense to me. It almost sounds like he’s saying that they stuck around for longer.
[09:14] Rob: Yes. He is saying they stuck around for longer. Basically the mental piece of it is if you have a discount, you don’t want to quit and then not be able to get that discount again. So the fact that some people got what I imagined were positioned as one time discounts of 40% or 50% they felt like they were getting a really good deal so they’re more likely to stick around even if they may not be using it for a month or two. Whereas if you’re paying full price what’s really going to keep you there?
[09:38] I’ve used discounts in a couple different ways. I’m always pretty careful to use them. Typically when I do a launch, I always want to give the people who’ve been on the email list definitely give them a special discount because it’s a nice encouragement for them to get in and try out the app. You give it to them for the life of the account. Your grandfather them in. It’s a great way to get them in on the ground floor and like he said it actually reduces churn which is helpful early on.
[10:01] The other place that I’ve done essentially discounts is with affiliates. I don’t discount and do affiliate commissions but in essence, having an affiliate is kind of like discounting because you’re basically paying that affiliate a portion of the sale. And so I have used affiliate programs to just some success on some of my products so it’s another place I’ve used it.
[10:24] The last one is there are a lot of kind of perps, pages behind pay walls. So like in moz.com which used to be SEO MOZ and there’s a bunch of other membership sites. They will contact me and ask about discounts on a particular product and if it’s behind a pay wall and not going to be available to the general public I will typically – and they have enough of volume that it actually makes sense, I will typically go ahead with that. And so those discounts I’m talking about are a little different I think than what he’s talking about.
[10:53] It sounds to me like they were doing more enterprise sales with these really high price points and so they would probably negotiate individual discounts. I haven’t really done that. I don’t tend to want to argue over pricing but then again I don’t have $600 a month plans like he does. I think this is probably an interesting topic. I’d be interested to see more data on it as well as discuss it more in a future episode.
[11:15] Mike: Yeah. I think we definitely have to take a look at what your pricing points are and if you are selling into the enterprise, it’s almost expected that you will have an enterprise plan of some kind that is largely negotiable. I’ve seen enterprise plans get knocked down by 90% before which is just a crazy number to drop it down by. Some of them are really good negotiators and they will pick two different vendors against one another directly and say well this is my price point. Either you beat it or you lose the bid.
[11:42] Rob: The fourth tactic, Richard talks about is usage limits and he talks about that at one point they added usage limits on the number of users who could give you feedback. Since most of their plans were feature based, they saw very few upgrades post trial so they thought usage limits would drive upgrades as a company scale activity. And to quote him he says “this was a huge failure. It created what I call a success penalty: the more successful you were in activating your users to give you feedback the more expensive the product became.” So his takeaway is if you’re going to price on usage, it needs to be on usage that customer has control over such as number of seats, minutes used, etc.
[12:19] Now my take on this is that usage limits can work and that even if it’s something I don’t have control over, I just don’t buy into this success penalty thing. I think that for UserVoice to provide a lot of value to their customers, people have to get a lot of their customers activated and using it and so he’s right. There is a success penalty that’s not great. But if you look at it like analytics packages at kiss metrics or get clicky or there’s a number of them. They base their pricing on usage.
[12:47] And the idea is that as your traffic increases that you’re probably becoming a more successful company. You’re getting more value out of that product and you’re putting more load on their servers. And so you could call that a success penalty but I believe that works. In fact I based Hit Tail’s pricing on this usage model and that has worked out well for us. So I don’t think this is an absolute always works, always doesn’t. I can see how it didn’t work for UserVoice but I do know that it works in other cases.
[13:16] Mike: I think this is very largely dependent upon the very specific offering that you have, what you’re putting that usage limit on. Even within any given products, I mean you can put a usage limit on a ton of different things. And depending on what you put it on, I think it depends a lot on what the end user values and how much they think they’re going to use of something and how easy it is for them to mentally translate that back to their actual usage to figure out what they’re going to end up paying.
[13:43] I really feel like part of the problem that they had was that people don’t necessarily understand or know or have a good way to predict if they start using this, how much are users going to use it and what plan are they going to end up in because there’s a very big difference between $89 a month plan and a $289 plan. So if you’re kind of borderline and you don’t know if you’re going to have $700 or $800 voters then what does that mean on my website? How many votes am I going to get?
[14:11] It’s like well it depends on your traffic, depends on how engaged they are with your site. Depends on how much your support problems are right now. There’s just so many factors that to me, I look at that and I say that’s just confusing and I would have no idea where I’m actually going to fall within those users limits.
[14:26] Rob: Yeah. I’d agree. I think the other thing, look at mailchimp and a lot of the email marketing systems. I mean they base it on how many subscribers you have and that could also be called a success penalty but I would still say that actually works because when your list does hit 10,000 you really should be paying more than when your list was at 1,000.
[14:41] Mike: The different between something like mailchimp is that you have these people going into your mailing list and you can look at that and you can understand on a monthly basis oh I had 600 this month, 700 this month, 800 the next month. Whereas with what UserVoice was doing they’re saying well you get up to 1,000 voters per month. Well it could be 500 one month. It could be 3,000 the next and because there’s no accurate way to predict that, that’s where the problem comes.
[15:09] Rob: Yeah. That makes sense. And it also as you said, their pricing plans, they’re such a big jump between them that with mailchimp you’ll jump maybe $25 or $50 in a month but you don’t jump $200 like UserVoice did. So it seems to come down to you can do it based on usage limits. You can do it based on featured gating and what he’s saying is gating features for them worked better. I still believe there’s a very strong case to be made for usage limits in a lot of cases.
[15:38] The fifth tactic that he discussed is length of trial. He said moving from a 15 to a 30 day trial had no measurable impact on any metric that they track ‘til they kept it at 30 days for marketing reasons.
[15:51] Mike: That seems like a very arbitrary thing to do. You changed it and nothing’s seemed to change in their metrics so we just leave it there for marketing reason which are entirely arbitrary or arguable at that point.
[16:02] Rob: Yeah. It’s tough to measure. I mean if he got data then I can understand him doing that but I do question the logic of going with 30 days instead of 15 because with 15 you can iterate. You can test so much faster. And you essentially, if there really was no difference, I would always opt for a shorter trial because you just move faster. You can only do 12 split tests a year if your trial is 30 days long. If you want to mess with any emails during that sequence or any of that stuff.
[18:31] Whereas if you’re doing 15 day trials, you can do 24 different tests on your trial. I’ve always found that shorter trials worked better. Here’s the next piece of data I would want is to run some ads with 30 day trial lengths and run ad with 15 days trial lengths and see if one gives you more upfront clicks or more conversions or sends more people into your funnel. Because if that’s the case, then he’s right, you would want to go with all the things being equal, if 30 days just sends more people into the funnel then of course that’s going to make you more money in the long run.
[17:03] Mike: Yeah. But from the way you said it, it sounded like you didn’t have any measure or impact on any metric that they tracked and my assumption would be that they do track the number of people coming in and everything else. So like you said, it’s very, very hard to say.
[17:17] Rob: And the sixth and final tactic that Richard discussed is requiring credit card before trial, something we’ve talked about quite a bit on this podcast in the past. He says moving from requiring a credit card upfront to not requiring a credit card until the end of the trial had no effect on overall conversions. To quote him, he says the general view is that not requiring a credit card up front is good for new services where customers don’t quite know the value of a service. So this switch may have been more beneficial if we had made it earlier but by this point UserVoice was pretty well established and you knew what you were getting into. One group that really loved this switch was his support team – they now had a lot less angry emails from customers who had auto-converted and needed a refund which they always gave he says.
[18:00] Mike: It seems to me like you could still ask for that credit card upfront. If he’s saying that it didn’t have any effect on the conversions or trial sign ups, I find it hard to believe that it had no effect.
[18:10] Rob: It depends on what they were doing. Remember we talked about the totango research thing that we’ll link up on this episode as well but they basically said that your numbers are going to be totally different and this has been my experience. If you asked for it upfront, you get fewer people into your trial sequence but you convert a lot more of them in the other end. And if you’re doing more of low touch sales and you’re not actually reaching out to people, then that’s going to be your best approach.
[18:32] But if you are doing more of an enterprise model where you have inside sales people and you’re again, calling people on the phone, emailing directly, you’re really nurturing them along and you’re doing more of a manual intensive thing, then not asking for credit card and just getting people into the funnel then qualifying them to see, only going after the active users and all that stuff, it’s a much more time intensive approach. But the totango study says that results in more customers overall. So without knowing how UserVoice was operating during the trial, you can’t really make a call as to whether he conflicts with the totango stuff or supports it.
[19:05] Mike: If it really didn’t have any effect on those conversions or trial signups, I would probably lean towards not requiring it just so you reduce those support costs because obviously anyone who gets angry and comes in and says hey, I want to refund and not only do you have to pay the refund fee or whatever, but there are also going to be people who dispute the charges as opposed to reaching out to you so that’s going to cost you money. And then you’re going to have to have more support people to deal with those incoming emails.
[19:31] So everything being equal I would say yeah, in this particular case you wouldn’t want to require the credit cards but I think that in general, if you have a new business that you’re starting up, you want to ask for it just so that you don’t have to do these high touch things.
[19:44] Rob: Right. And I think with the new business as well you want people – as long as you’re conveying the value proposition pretty well n your landing page or pre-trial, then the people who give you the credit card are the most qualified and they’re the ones that you really want to engage with as you’re trying to build out those new features.
[20:00] So if you raise $1.8 million and you have to get to X thousand users per month and you just need growth, growth, growth, then yeah, maybe not asking for credit card is fine. As a bootstrapper, you need to get to revenue. You need to get to it quickly and you need to find the people that are really going to use your app and then find more people like them and you need to build out the things that they want rather than getting – if you ask for credit card upfront versus not, you’re going to probably get five times more. These are real numbers, five times more trial users into your funnel if you don’t ask for credit card.
[20:25] Now the question is is that a good thing or a bad thing? It’s a bad thing if you’re doing all your email support and your volume is five times as high or you’re doing all the on boarding and there’s any type of manual process involved in that because in the end you’re going to convert about the same or maybe it’s a few percentage points more but there’s so much more upfront work for you to do there. So there really are a lot of tradeoffs here and it’s about knowing what is best for your particular scenario.
[21:02] And as we’ve said many times, typical bootstrappers where you’re not quite sure what you’ve built yet, you’re not quite sure who should be using it, how to market all that stuff, I would always go to the people that are at least willing to take a chance to on you by entering their credit card and giving the app a try rather than the four other people who aren’t going to sign up but who would if you didn’t ask for credit card upfront.
[21:25] Mike: Something else to point out is that just because you make a decision one way or the other doesn’t mean that you can’t change it in the future. You could always start out by asking for a credit card and then as you scale up the business and you have people who are dedicated to support or dedicated to following up with new customers who’ve signed up for the service, then you can switch over to that sort of model and do more of an outreach program to help bring those people in.
[21:46] Rob: Absolutely. That’s a thing to remember is none of this are set in stone. All of this stuff is fluid especially in your early days pre-launch and probably for the first 3 to 6 months after launch. You will be changing some of these. So I always look at it as what’s my rule of thumb based on my experience and other people’s experience and research reports like totango. Make the best call that you can and see how that works for your business.
[22:10] And if there’s a big outcry from a lot of people who are interested in actually paying you money, then you need to reevaluate that or if your conversion rates are really low, you need to reevaluate that and that’s kind of the bottom-line with it. Without data for your particular instance, your app, your customers, your marketing, these are all just rules of thumb to get you started. But from there, you’re going to have part gut instinct and you’re going to have part a lot of data gathering to determine which direction to go with all these kind of pivot points.
[22:41] Music
[22:44] Mike: If you have a question for us you can call it in to our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 152 | Strategies For Loading Up Your Pre-launch Email Lists
Show Notes
Transcript
[00:00] Mike: You know I haven’t paid a lot of attention to the discussions around the NSA the past month or so but I have a conspiracy theory I want to share. I think that the NSA is single handedly responsible for unleashing both Perl and Php around the world.
[00:11] Rob: And tune in next week when Mike and I answer hate mail from all the Perl and Php developers in our audience.
[00:16] Mike: This is Startups for the Rest of Us: Episode 152.
[00:19] Music
[00:28] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
[00:34] Rob: And I’m Rob.
[00:35] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
[00:40] Rob: Things are ramping up there. They’re starting to get exciting. Drip, I’m doing another small launch this time to about 25% of our list. So just cranking out a few last minute things before we go live next week. How about you?
[00:54] Mike: Part of the good news and bad news today because we’re recording a little bit early. So the bad news is there’s not going to be a lot updates. But I do have some good news to share and I know it’s only been three days but I have my first confirmed paying customer for AuditShark.
[01:07] Rob: Congratulations man. That’s awesome.
[01:09] Mike: So we’re still straightening out, things with the credit card but the agreement’s already kind of in place.
[01:13] Rob: This is like a momentous occasion. You have your first pay. How does it feel?
[01:17] Mike: Good. It was nice to get the email because I asked very directly. I just said now that the remediation information is in there because you said that was going to be a problem before, now that it’s in there and you could take a look at stuff, what do you think and is this worth paying for? And kind of want to get his thoughts on whether he thought it was valuable or not and whether he still found a need for it in his business and he’s like absolutely. This is what I was looking for.
[01:41] Rob: That’s great news man. Now to find 500 more people exactly like him.
[01:45]Mike: Yup.
[01:47] Rob: Congratulations again.
[01:48] Mike: Thanks.
[01:49] Rob: So I was wondering what your take was on Brecht Palombo’s suggestion for scalable content marketing for Audit Shark? So Brecht Palombo runs – with Scott Yewell, he has a podcast called Bootstrap with Kids and in episode 23 he outlined scalable content strategy.
[02:05] Mike: Well I listened to the episode and it’s funny because at first I was like I don’t think this would really apply to me because the stuff that I’m putting out there is ultra specific and it’s all remediation information so I wasn’t thinking it would be terribly applicable. It just wouldn’t be stuff that people were searching for.
[02:21] And then I got an email from Patrick McKenzie who basically said the exact same thing but he phrased it differently and it really made me think about maybe I could do this? So one of the things that comes to mind, if you haven’t gone over and listen to Bootstrap with Kids, definitely listen to not just that episode but the podcast. His podcast is pretty good. I’ve been listening to it all along.
[02:40] He lays out the strategy where he has something like 15,000 pages that are published to his website based on information that he’s gathering as part of his product. I can basically do the same type of thing within Audit Shark where all the different security control points that I’m looking for and not just those but also the steps that you need to go through in order to remediate them, I could take those, dump them from the database, add some metadata around it in order to address some SEO concerns and formatting and things like that. And then publish them through the website and make them indexable by Google.
[03:13] Rob: Yeah, and that’s the basis of that whole scalable SEO content marketing rather content – it’s not really content marketing because I consider content marketing to be more viral and sharable stuff. But it’s getting into Google and getting a large foot print and then as soon as you have any type of website authority, those pages, they start ranking for those long tail keywords terms and those are the ones that someone’s searching for some really specific searches. They tend to be more likely to have that pain point and more likely to convert.
[03:39] We’ve seen Patrick McKenzie use it with success on Bingo Card Creator and we’ve seen Brecht use it. We’ve see some other examples of it. But I definitely think if nothing else, it’s worth line item in your marketing plan and at least a trial implementation. But the thing is with scalable content I think once you do a trial implementation you might as well scale it up. Right? Because if you go to the problem of kind of defining stuff for 100 pages you might as well go to 500.
[04:02] Mike: Definitely. I think there’s going to be some work around the formatting side of it but in terms of the content itself I don’t think it would be very difficult to just – if you’re going to do it for one page, what’s the difference between 1 and 500? Because you’re already kind of automating it for a couple of pages.
[04:15] Rob: Right.
[04:16] Mike: You almost need to do a lot of them in order to figure out whether or not that’s going to be boosting the traffic because most of them are going to be very long tail things that aren’t going to get a lot of hits but the ones that do are going to be fairly targeted.
[04:28] Rob: Right.
[04:29] Mike: So definitely thanks to Brett and Scott and Patrick McKenzie.
[04:34] Rob: You mentioned you’re having trouble with your Nexus.
[04:37] Mike: Yeah. So it’s only a week old so I’m fairly certain it’s not the hardware but it feels like it’s just buggy. Whenever I open the browser, occasionally it will just crash on me for no good reason and I’ve had it shut down on me just randomly. So I don’t know what’s up with that but you know, I’ve read around a little bit. It seems like the Nexus’ got some bugs in it and it’s more operating system related. And also a lot of the apps that I download, I feel like every single app wants an always on connection to the internet so that they can phone home. And if you don’t have an internet connection they just don’t work.
[05:11] If it weren’t for those apps, I mean I could deal with the bugs. Yeah, it’s a brand new tablet. It’s probably going to have some bugs here and there. They’re going to issue same updates. I’m not real worried about that. The thing that bugs me is the apps always wanting this constantly on internet connection. That’s the part that bugs me because if I’m using it on a plane or something like that, I’m not going to have that. And what’s the point of having a 32 gig flash drive if it’s not even going to be used.
[05:33] Rob: Yeah. That makes it tough.
[05:35] Mike: I mean I’m going to keep it and kind of see how things play out but like I said it was an experiment so just kind of dip my toes into other realms of technology.
[05:43] Rob: Sure.
[05:44] Music
[05:47 Mike: Today’s episode is called strategies for loading up your prelaunch list. We got an email from Jack over at collabinate.com. He says hi guys, love the show. I’ve listened to every episode and was inspired enough to come to MicroConf 2013 which was amazing. I’m building a service called Collabinate which provides an API for hosted activity streams. It’s really all for building Facebook or Twitter style feeds into your apps letting you surface information for your users without making them dig.
[06:10] I’m writing because of something Rob said in the last episode. You mentioned you had 1400 subscribers to the Drip mailing list. My question is how the heck did you get that many sign ups prelaunch? I’ve had my landing page up for a few months now with ad words and Facebook ads pointing people to it for last month and I still have under 50 subscribers. Do I just need to spend more on ads or do you guys have other better strategies for getting more people interested to sign up? Thanks again for the great content you guys put out.
[06:33] So today what we’re going to be doing is we’re going to be talking about some of the different options you had for helping to scale up and build that list and then we’re going to also talk about some of the things to keep in mind while you’re doing that or in some cases before you go about launching into some of these different options.
[06:46] So the first one is to find websites that accept startup submissions. There’s at least a couple dozen places where you can do this. I’ve used a beta list in the past. I’ve got a spreadsheet that I put together with a bunch of them. So you can just go to Google and search for like startup announcements or software betas, things like that. There are a lot of different websites out there including reddit. I think reddit has a couple of sub reddits where you can go in and you can – I think one of them was called rate my startup or something along those lines.
[07:12] There’s tons and tons of places where you can post links back to your website and not just get signups but also get people giving you feedback and comments on either design or the product itself. You do have to be a little bit careful about some of that feedback because if they’re not actually interested in buying it then you kind of want to take some of their suggestions with a bit of grain of salt.
[07:31] Rob: With Drip I was able to get on several of this kind of beta, these prelaunch sites because there are two different types of these. There are some that only accept startups that have launched. I think like killer startups is like that and a few others but then you mentioned beta list and there are just some that are pointing more to like landing pages or startups that are in beta or are going to be launching soon.
[07:52] And the beta list in particular I’m pretty sure I got almost 300 email signups when it appeared on that site. So this is definitely something that’s worth sending at least a little bit of time on. All of the sites are not going to list you because they do get a lot of submissions and all of them are not going to lead to 300 signups but if in aggregate, you can either spend n hour or pay a VA to spend a couple hours and do this. It’s certainly something in those early days doing the things that don’t scale to kind of get the momentum going. It’s definitely up there.
[08:22] Mike: One of the things I did was I complied this list of different sites and then handed it off to somebody to go through all the different sites and get all of the required fields that they were asking for and just build a spreadsheet so that I knew all the information that they were asking for. And then either I will go through it or I’ll probably have somebody else go through it and just paste in the answers to all the different questions that they were asking.
[08:43] So there’s definitely ways to kind of scale us out and form out different pieces of it. But there are things like the description, the sales pitch, things like that, those are things that you’re going to want to kind of craft a little bit and put a fair amount of thought into it. It’s not like you can just say oh well, I need you to go fill out all these different forms because things like the founders name and your website and things like that, those are very straight forward but there are other things like the sales pitches and the URL’s and stuff, some of them you’re going to want to use tracking mechanisms for that kind of stuff.
[09:11] Another option for building your mailing list is use social media like Twitter or Facebook. I’ve been using Twitter to build out the following for Audit Shark and I’ve actually started getting large enough following that people from that are filtering into my mailing list. So basically there are certain tweets that are going out, specifically mention Audit Shark, hey check this is out and I embed different tags and they’re from Google to be able to do the goal tracking and identify clearly whether or not somebody clicked through from Twitter and then onto the landing page and then actually submitted their email address.
[09:43] Rob: Yeah. I think that’s a really good point. If you’re going to do this you should absolutely setup goals in Google analytics so that you can see which sources are converting for you. Because it’s not just about driving traffic. It’s about driving actual emails. And the nice part about this is if you vet these traffic sources early then once you launch and you’re actually going after paying customers, you already know which traffic sources you are going to focus on. So I haven’t done much with the social media angle, getdrip Twitter account and Facebook page but they’re just place holders at this point and I haven’t use them to really to drive leads at all.
[10:15] Mike: Third option is to ask to be a guest on podcasts. There’s a couple different things that this will do for you. The first one is typically it will get you links back to your website and drives them traffic and SEO a little bit. But the other thing is it gets you in front of more people. Clearly you don’t want to just blast out an email to tons and tons of different podcasts and just ask if you can be a guest on their show.
[10:38] What you really want to do is focus on the podcast that you believe are going have an audience that overlaps with whatever problem that your podcast solves. So if for example for Audit Shark I would probably go on to tech oriented podcasts or anything that has to do with dev opts, security management, those types of things. I wouldn’t want to go on to a podcast that talks about marketing and say hey you guys should lock down your servers. It’s not really applicable to the audience and when you start making those pitches, I almost feel like it would make you look bad by making a sales pitch to somebody to have you come on their show when it’s just totally not relevant to their audience because they’re not going to get anything out of it.
[11:12] Rob: Absolutely. And the thing to keep in mind when you’re pitching podcasts is you’re not pitching your product. You’re pitching a story. So what is the compelling story that you can offer to their audience? What is the way that you can make their podcast look good? So when I go on podcasts, I always make sure that I’m not on there to talk about Drip or to talk about Hit Tail but I’m there to educate their audience on how to market. And then I use maybe Drip as an example.
[11:38] or I’ll go on to talk about how to support an app or how to scale something and again it always gets mentioned because that’s the experience. It’s kind of mentioned on the side and that drives people to the site just because they become kind of curious about what you’re up to. So I found that it seems like the podcast listeners, if you’re in the right niche and you do get a nice lock-in with your core audience, you provide a lot of value to, then that works really well. But as soon as you stay out of that one, Mike said the conversion rates go down.
[12:07] Mike: Something else to keep in mind when you’re pitching to podcasters is you don’t want to send out those blank emails. As Rob said you do want to tell a story and you want to make sure you tell them exactly how your story is relevant to their audience.
[12:21] Rob: Right. I think we’ll have better luck talking about your podcast after it’s launched unless you already have a story to tell before it’s launched. Right? You need something interesting to talk about. And when I’ve pitched podcast I typically start with the people that I know because they’re just going to be more likely to let me on. And then once I have a few of them then you can start branching out because you’ve gotten better about talking about your product and your pitch gets a little better.
[12:45] But I hand send emails to every single podcast. I would never do a bulk send because you really have to hand tune that pitch in order for it to be anywhere near relevant. I will also, if I don’t listen to the podcast regularly, I would go back and listen to the previous three or five episodes just to figure out if in fact my information is a good fit for their audience.
[13:06] Mike: Great points. The fourth one is to use paid traffic on some of the various ad network. I did a quick search for ad network on Google and on the first page there was a search result named 25 ad networks for online businesses. So these different ad networks are very easy to find. Google ad words is clearly not the only one. LinkedIn isn’t the only one. Facebook isn’t the only one. There are a lot of them out there. Some of them are very niche ad networks so you can find some that only cater to certain audiences.
[13:31] And if you can find out that caters to the audience that your products solves a problem for, then you’re going to have much better results with that particularly ad network than within some of the others.
[13:41] Rob: Yup. I’ve done this every time, every time I’m going to launch something and I did it with Drip as well. This is a great way to find out which ad networks are going to work for yours and I absolutely got – probably in the several hundred and it may even be a thousand signs ups from this approach.
[13:56] Mike: The fifth one is something that I’ve started doing recently is I subscribed to helpareporter.com and I’ve been looking for any reporters that are doing stories that are related to security. And if you’re not familiar with helpareporter.com they have a daily email that goes out I think three times a day and it will include all these different reporters and a summary of what they’re looking for in terms of a story. They’re generally looking for sources of information.
[14:20] I got one today that was specifically looking for the security practices that you educate your new employees on in small and medium businesses. And they tend to spell out exactly what they’re looking for whether they want to do an interview. Sometimes they’ll say exactly who they’re going to be doing the story for. Sometimes they’ll just say it’s just an anonymous source or they’ll say it’s a podcast or something along those lines.
[14:41] I’ve even seen other startups that are doing this because they are trying to find content for their blog and they’re looking for people to interview. So that’s another way. It’s more SEO related. It’s not necessarily related to loading up your prelaunch list but that’s another avenue for marketing your startup.
[14:55] Rob: I used to use helpareporter. It became too time consuming at a certain point. If you have a bit more budget than you do time, there is a service that I use. It’s called bitesizepr.com. It’s $89 a month and you enter a bunch of info and they monitor helpareporter for you and actually write the pitches for you. You approve them or reject them and then if a reporter contacts and obviously you talk to that reporter but they basically take a lot of the grunt work. The three emails a day was a bit overwhelming for me.
[15:24] Mike: So the sixth strategy is to setup Google alerts and let Google search for new pages which match your search criteria. And in some ways this could be a little bit overloading just like you said that you found helpareporter.com to be because you’ll get emails from Google all the time. And typically you setup these searches and what you’re looking for is anywhere where people are talking about something that relates to your product. You want to go in, take a look and see if there are any non-salesly ways you can comment n whatever the topic is because a lot of these things will come back from blogs.
[15:53] Sometimes you’ll see things that are sales pages of your competitors, those you can generally safely ignore because they’re not usually going to allow people to just randomly comment on their site. But any blog articles that come up, what you’ll do I you’ll put a signature into the profile that you setup and then put the link back to your website and that will help drive some traffic back to your site.
[16:13] You probably want to use a VA for this kind of thing to kind of sort through and filter the data. I would say this is probably not one of the best sources for loading your prelaunch list because 1) it’s time consuming and 2) you’re going to have to put a lot of time and effort into it and you’re relying on traffic that you’re getting. So you’re also going to have probably some issues putting in any sort of tracking codes in and the URL’s that go back to your website. I would definitely rank this lower on the list on a lot of these other strategies.
[16:41] Rob: But I actually think there’s more value here than just building your prelaunch list. If you really are getting alerts and you’re seeing blog posts come up or forum threads or stuff of that nature and you go in and participate, you’re going to learn a lot about that audience and you’re going to learn about whether they are interested in your product. And if you actually post it into a forum or comment discussion and you come back and see what people have said, that alone could help you hone your value prop, hone your headline, hone a direction that your product’s going to go. You could really get into almost that customer development type discussion.
[17:13] I think there’s potentially more value here than just building the list. It’s obviously not scalable but I have definitely done this and spent many hours kind of pounding the pavement in this fashion.
[17:25] Mike: So the seventh option is to ask bloggers if you can write guest articles on their websites. Something to keep in mind here is this is very similar to approaching podcasters and asking them if you can be a guest on their show. Make sure that you’re making individual sales pitches to these guys but also, save your best material for these blog posts. You don’t want to be putting your best material on your own blog. You want to be putting it elsewhere. So that will help drive that traffic back to your website.
[17:48] Rob: I mean this is an entire art right? Of trying to pitch in and get guest blog posts. I get pitched probably once or twice a week for people to guest post in my blog and anyone that I don’t know or haven’t had some connection with almost always gets a no. If you follow me, if we’ve interacted at least once and you pitch a compelling story, you’ll see there are a lot of guest posts on my blog recently because people are doing exciting things and since we met at MicroConf or we’ve emailed in the past or I have some buy in or some interest in their story, it just makes it so much more likely that I’m actually going to say yes.
[18:21] So to be honest, there are some pretty good stories like on hacker news and some other marketing blogs about how to market your app through guest post and like I said, there’s a lot to it, a lot more than we can cover in this episode so I would go to Google and search for that and do some research because there’s a right way to do this and wrong way to do it.
[18:38] So the eight strategy or loading up your prelaunch list is it use SEO. A lot of people think why would I do SEO so early because doesn’t it take months and months to rank for a term? Is it really going to actually play out before my launch? There’s a couple responses to that. A lot of people think that their app is only going to take 3 or 4 months to build and it winds up taking 10 or 11 months. In that time, you can do a heck of a lot of SEO. And even if you don’t get a number one ranking and time to build your list you’ll be way ahead of the game than if you wait until you actually launch. So that’s the first thing.
[19:10] Second thing is I have seen using tactics that go after long tail keywords or giving away some pretty specific templates that are related to your business like Bid Sketch, when Ruben first started, he gave away web design templates and kind of stuff. That was way in advance of his launch and that was a big reason that his mailing list grew. I have seen people give away email templates. I’ve seen people give away all types of stuff that’s landing page templates, all types of stuff that’s actually actionable.
[19:40] So if you plug those two together where you’re doing some SEO for terms that other people aren’t doing a fantastic job with, and you’re giving something away and letting them know hey, if you do this, we’ll also let you know when we launch so that they’re aware of it, you can grow your list a lot faster that way.
[19:55] Mike: Yeah. I’ve seen people giving away different white papers or eBooks or things like that on their websites. A lot of times I’ll see this as a strategy post launch but I think you’re right. You can definitely use this prelaunch in order to start building your mailing list and getting people interested in it. You can also use that to start discussion and help guide the product direction before you launch so that when you do launch so that you aren’t just listening to crickets while you’re trying to wait for sales.
[20:19] Rob: And the ninth and final strategy is to pick some strategic early access customers. One thing that’s happened with Drip is a lot of the early access customers that have been using it and have been happy with it, they are bloggers themselves. They have large Twitter followers. And I haven’t even asked them but almost all of them written a post, a link to Drip, talked about it on Twitter, mentioned that they signed up. They’ve started to create a buzz which I really appreciated.
[20:42] If you are able to strategically pick some people who actually have audiences, the odds are that they always need fresh content and they always want to talk about what they’re doing, new things that they’re innovating. And if so you’re building something interesting and you do have the potential to let in people with audiences, I would always opt to do that early on.
[21:00] Mike: So those are nine different strategies that you could use for loading up your prelaunch list. Now as part of these strategies, there are definitely some things that you want to keep in mind. The first thing you want to keep in mind is that you want to use landing pages as much as possible so you can test what text is and isn’t converting. Because if you’re bringing that traffic to your website, and it’s untargeted traffic and by untargeted I mean it’s not targeted at a specific page, you’re not trying to pitch them on some of other website and bring them in, there’s a disjointed experience between the other site that they were on and the one that they’re going to if they click on I don’t know, something that say peaches and you show them a picture of oranges, that’s a disjointed experience. It’s just not going to jive with what their expectations are and they’re probably just going to bounce off the page.
[21:44] Rob: The other thing, I mentioned it earlier is definitely setup goals and Google analytics is the way I do it. There are obviously other options but if you don’t know which of your sources are converting then you’re leaving a lot of data on the table.
[21:57] Mike: Another thing to keep in mind is do not rely 100% on the vendor’s conversion stackers for some of the different ad networks. One of the ones I’ve been using pretty extensively lately is Facebook and their conversion tracker sometimes works and sometimes it doesn’t. It’s really kind of bizarre. Some things it does, it just doesn’t make a lot of sense and there are things that they do where they’ll count something and then I won’t see it on my website.
[22:21] What you really want to do is make sure that you’re using something that’s kind of a tried and true mechanism. I use kiss metrics. I also use Google analytics. But you want to use something in addition to whatever it it’s they’re offering so that you know that it’s working and you essentially get a double check on those numbers so that you understand whether or not they’re correct and you know whether or not to look for something else.
[22:41] Rob: Another thing I would do early on is install your remarketing pixels so there’s a bunch of providers for remarketing like perfectaudience.com or adroll.com I think Google does it as well. I have tried four different providers. And I found perfectaudience to be the best. It converted the best for me.
[22:59] But I have had the retargeting pixel installed on Drip since the first day I launched the landing page. Now the cookies only last I think for 60 days or 90 days so I won’t be able to retarget everyone who ever visited the site. But when I do launch I’ll have the previous 60 to 90 days worth of people who visited and didn’t give me their email address and I will be able to then show them ads and say Drip has launched or check this out because I know they’re at least mildly interested in the product.
[23:24] So before you start driving traffic to your landing page I would highly recommend it’s free to sign up for perfectaudience or AdRoll. Grab the tracking pixel and put it on your websites so that you can basically start cooking those folks as interested parties.
[23:39] Mike: And some of it kind of ties into that a little bit is if you are doing paid advertising to drive people through, if you don’t have time to manage and track that paid advertising campaign, shut it down because you’re basically just throwing money away, there’s a lot of little tweaks and stuff. You really have to be paying attention to these and put a process in place that allows you to understand whether or not it’s working and if it’s not, you either need to make the tweaks or just kill that particular one because there’s a lot of different things that you can try and if you’re not paying attention to those, you’re just basically flushing money down the drain.
[24:11] Music
[24:14] Rob: If you have a question for us, call our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. See you next time.
Episode 151 | Getting Paid Before You Build, Dealing with Entrpreneurial Angst, Figuring Out How Much to Charge and More Listener Questions
Show Notes
- The Founder Test – based on episode 133
- Study from Totango about asking for credit card up front
- Swell iOS app – Pandora for talk radio
- TweetQureet – top tweets from your timeline in a daily email digest
Transcript
[00:00] Mike: You know, I’m really irritated. Miley Cyrus goes out there and gets naked and licks a hammer and it’s called art. I do it and I get kicked out of home depot.
[00:08] Rob: This is Startups for the Rest of Us: Episode 151.
[00:11] Music
[00:19] 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.
[00:29] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So aside from twerking, what is the word this week sir?
[00:35] Mike: I want to send out a thank you to Julian Corlett for putting up a website based on episode 147. Instead of giving you guys the long URL for it, we decided to just register foundertest.com. So if you go to foundertest.com it will take you over to the site. It’s a really good – I guess a summary of that episode. It takes you through all the different questions that you can answer and basically gives you a score at the end as to how well prepared you are to meet the challenges of starting your own business.
[01:01] Rob: Very nice. So last week I spoke about that I was going to be sitting with a glass of bourbon waiting for the Drip early results to come in, the trial conversions and things did in fact go well. I’m quite pleased with it. So Drip is now in the low four figures of revenue so that’s a good milestone to cross over from three to four. Then I think we’ll be doing another launch similarly. I say a launch, it’s basically an email to another small group within the email list.
[01:27] I originally planned to do 10% or 20% of the list basically send them an email and then send to the other 80% to 90% but given all the work that it took to do that first small chunk, I think I’m just going to kind of break it down into small pieces because since our on boarding is pretty intensive, I just can’t imagine trying to handle eight or nine times the load that we handled to get everybody up to speed.
[01:51] And so in order to not sacrifice people’s early user experience with Drip, kind of take it as it comes and then it will be nice because MicroConf Europe is in two weeks and so I’ll get another group in and before that, probably try to get someone in mid to late October once I feel like we really have it down.
[02:07] Mike: Very cool. I’ve got all the new UI code that we’ve been working on for Audit Shark out live. There’s a bug that’s in there right now that we know about that is not displaying the instructions for fixing problems that it finds and that’s just a problem with the angular js. It strips out all the HTML tags that we basically put in there used in mark down language and angular just strips it out just more for safety considerations than anything else. So we have to figure out a way to either put them back or to strip out that piece a bit.
[02:38] But the other thing that I’ve done is remember how you’ve been asking me if there were any other pieces that are essentially preventing people from moving forward and actually paying for it. And I’ve asked those questions. Right now I’m just waiting for the feedback from them to see where things stand right now with this new code in place is what they’re looking for or if it’s not and we’ve got more work to do.
[02:58] Rob: Very nice. So if I recall you had two things left to get done before you felt like you could start charging. One was the new UI, and you’re saying that’s live and the other is remediation and you said you guys just found a bug that you’re technologists, I’m sure you’ll figure that out in the next week here. Once remediation is done though that’s kind of where you think the line in the sand is drawn but I guess you’re going to wait to hear back. You’ve already asked the question and you’re waiting to hear back if that is in fact the line at which people will start paying.
[03:26] Mike: Yeah. I asked if that was the line and if it’s not then they’ll let me know. But I truly believe that it is and even without it showing some of that stuff right there, I can hack in a little bit. It just won’t look as pretty. It will still give them the information. It just couldn’t probably look a little bit better. That’s a fix. It can be put in on the next day or two so I’m not real worried about that. But really it’s just a matter of getting their feedback and I’m going to start putting more people onto the system regardless of what they say and start getting more than just a few people’s feedback on that.
[03:54] Rob: Yeah. I definitely think that will be helpful. I’ve noticed that the more folks that I get using Drip, the more data points I have and it’s hard to make decisions when you only have 5 or 10 people using your app because everybody’s just kind of all over the place and their specific needs come at you and you feel those are the most important things to do. But when you have 100 or 1,000 people using it, it’s actually easier right? There’s more data coming at you but it’s easier to pick out the things that are most critical and that you should tackle next.
[04:23] So I ran across a really interesting study. It was actually emailed to me by Ruben Gomez in bidsketch and the studies from totango.com and it has something to do with whether you should ask for credit card upfront. And we’ve talked about that time several times on the podcast and so we will link this up in the show notes but it basically supports the stands we’ve taken on the podcast of when in doubt, ask for credit card.
[04:46] But if you have a higher touch sales process and you have people in place, you have the labor force there to make phone calls or to actually close sales, then you can think about not asking for credit card and you will close more people if you’re doing it right. So that was the results of the study but it was nice to see it point out in numbers and totango just did a really good job of putting the study together. What else is going on with you?
[05:10] Mike: Well I bought a Nexus 7. It’s based on the Google android OS and it’s just a seven inch tablet.
[05:16] Rob: So what do you think about android versus IOS?
[05:18] Mike: I feel like it’s harder to find things in the android store and I’ve only used it for a day and a half so I probably don’t have a good basis for saying that just yet. But it feels like it’s a little bit more difficult to find apps that are like business related. It feels like the android ecosystem is trying to push pretty much anything at me like saying go over here for movies, go here for music and here for apps, here for games. And I’m not really interested in most of that other stuff. It’s just having to navigate around in the android store.
[05:58] Part of the reason I bought the Nexus though is because I’ve started to realize in some ways my knowledge of technology is starting to become a little bit obsolete because technology’s just kind of progressing so fast and I really haven’t taken the time to stop and update my skills or familiarize myself with different ecosystems and operating systems in quite some time.
[06:21] So I figured it would be a nice idea to kind of sit back and go through android a little bit because I don’t have an android phone. I’ve got an iPhone. I’ve got iPads and I got a Mac book pro and I also do a lot of stuff on the window side. And android is really just not something that I’ve delve into so I thought it would be a good idea to kind of invest in myself a little bit.
[06:38] Rob: Very nice. Yeah, I’m also taking a tack with that since Drip is written in Rubyonrails I’m actually going through one month rails which we mentioned a few episodes ago, about half way through that course, it’s been good so far. And I also have been working with Git in GitHub. Learning a lot there, just trying to get up to speed so that I know enough to be dangerous and make some tiny changes to Drip now.
[07:00] And again since it is technology that I have never developed in full time, the ruby on the rails syntax makes sense. It’s easy enough to learn now but it’s kind of the larger paradigms I think that are hard to learn when it’s not something you’re doing 30 or 40 hours a week.
[07:16] Mike: I think that learning that stuff is just it’s not just a matter of being comfortable with it but it’s also the matter of being able to make technology decisions for your business moving forward and that’s really the reason why I picked up the Nexus. I know that I think in a month or so there’s rumors that the new iPads are going to be coming out and I’ll probably pick one up then at that point just because the iPad that I have now is from several years ago. It’s the iPad version one. I haven’t bought a new one since then because it’s done everything that I needed it to do.
[07:45] But just from a standpoint of familiarizing myself with different technologies, that’s where I see it as kind of a necessity. Like I’ve said, I’ve looked at some of my skills and I feel they’re becoming a little bit on the obsolete side because I just don’t know enough about these other things to make decisions.
[08:02] Rob: Sure. And that happens fast. So our podcast is now inside an interesting app. It’s an IOS app called Swell and it’s basically Pandora for talk radio, that’s their tag line. So you have to apply to become part of it as a podcaster but as a listener you can just download it for free in the app store. So I’ve heard about it on this week in startups so I emailed them and they let us in which is cool.
[08:27] I’ve been using Swell for a few days and it is pretty good. It starts to hone in on your taste. I wish it had more podcasts. There’s a lot of NPR and like ABC news audio and BBC and stuff so it is definitely more geared towards talk radio at this point. I think they’re trying to keep the quality high. But if they make it a better discovery engine for podcasts, I would absolutely be listening to that a lot because frankly I seek out new podcast and if they do in fact crack this, make it the Pandora for podcasts instead of just for talk radio.
[08:59] Mike: Hey we’ve got another thank you from Joseph Blackman who says hey, I’ve been a listener for over a year and I’m thankful for the breadth and depth of your knowledge. I don’t code. I don’t have a Saas app and I don’t have a startup. I just like the core values and thought processes that you two have. I bought a business in the east bay area because I don’t have any cool ideas of a startup but I know once I get into the corridor it will start to flow. Thanks for being yourselves. Don’t change. Don’t conform. Joseph.
[09:22] So thanks Joseph. It’s really great to hear when people quit their jobs and kind of go down the road of being a bootstrapper.
[09:28] Rob: Yeah. On that note we should add him to the success stories page on the website.
[09:32] Music
[09:35] So today we’re going to be diving into a number of theirs listener voicemails, listener questions, some just listener comments helping other folks out who have written in the past. So we have some good stuff. We’re going to be talking about getting paid before you build a product, dealing with entrepreneurial angst, figuring out how much to charge and a few other things. So let’s kick it off on voicemail to comment on Mike’s recent explanation of Audit Shark.
[09:57] Voicemail from Dave: Hey guys! This is Dave from Ohio calling. Listen. Love the most recent episode. Mike, hats off to you. Hope you are feeling better. It takes a lot of courage to come out and talk about that on the podcast. And certainly hope you’re feeling better. Don’t worry about the Nay Sayers. Screw those guys. Second thing, I really loved the most recent episode because I really have a great idea now of what AuditShark does. I was in that camp of not knowing exactly what it did. It really really helped to understand all that work. And Rob would love to hear the exact same detailed kind of talk about Drip as well. So, listen love the podcast. Guys take care. See ya. Bye-Bye.
[10:30] Rob: Thanks Dave for the voicemail and certainly for the encouragement. I’m glad we did that explanation of AuditShark because I got a couple other comments that said it really enlightened them and gave them a better idea of the problem, the pain point that AuditShark is going after.
[10:43] So Dave asked basically what is Drip and I kind of have it boiled down to just maybe 60 seconds. In essence, so Drip is an email marketing app. It’s the easiest way to capture drive by website visitors and engage with them using an email mini course. So most of us know we should be engaging with prospects via email but it’s time intensive to do that. So Drip’s single purpose, the sole reason that I came up with the idea and then wanted to build this is to fix that time issue with setting up an email mini course and capturing email addresses on your site.
[11:16] So it goes all the way from capturing emails to helping you create a mini course and then to tracking your trial and purchase conversions from the mini course. It’s basically three steps. The first is you install one snippet of java script code into the footer of your website and then you have an email capture form that appears on every page of your site. So you don’t have to modify any code and you can go into the Drip web app and you can modify that headline, moving forward in the description and we’re going to be adding the ability to split test that form against itself. And you can go to hittail.com and you’ll see it in the lower right that’s an example. You can also go to planscope.io and getambassador.com to get an idea of it.
[11:51] So the next step, after you’re capturing emails into Drip is we offer what I think is the fastest way to get an email mini course live. We literally spent weeks building and honing and making it simpler and simpler and I think we have the simplest email sequence or auto responder management flow. So basically creating an auto responder is very simple and I’ve used mailchimp, I’ve used Aweber campaign monitor and I like to say we’ve turned auto responders into a first class citizen instead it being just a bolted on piece like it is with the other providers.
[12:25] So the kicker is so yeah, we’ve given you a tool but now we’ve put something on your to-do list. It’s to put together a five day email course. So for free originally I was going to charge for this but I figured out it’s just to our benefit to do it for free so no charge to people signing up. We will compile a five day email mini course for you if you have some existing content that we can pull from. So if you have five blog posts or an eBook or something we can grab, we have templates that we just put them into. Basically the end goal is to increase your conversions right? Either to trials or buyers, that Drip should pay for itself every month. And so we track those as well.
[13:01] So you can see if someone originally hit your site from say a Google search, searching for particular keyword, then went through your email sequence, clicked on a link and email number five and then converted. That’s another piece of function I haven’t been able to get out of any other – all my analytics tied together, I still can’t see that. And that’s what Drip has given me. It’s given me insight into hittail’s flow.
[13:24] And then yeah, the last point is we do offer split testing within email sequences which is not something that I’ve seen in any other product. So the most common question after I kind of – that’s the pitch right? And the most common question I get is should Drip replace something like mailchimp or does it add on? And it can do both. We have broadcast emails. We have all the basic functionally with something like mailchimp but we also integrate with mailchimp in case you want to – if you’re really invested in mailchimp or Aweber, sales force or something else. We have an integration where we push every Drip subscriber to your either system. Mailchimp’s done and then we’re working on Aweber and sales force and they should be done in the next couple of weeks.
[14:00] Mike: When I got started with Drip, it was very easy to set up an email campaign where if I want to be able to teach somebody and get them on a mailing list, it allows them to do that very quickly and it automatically builds all the codes to put that widget on my site to capture that information. So that’s not something I’ve seen from other email marketing tools that are out there. And then in addition, the sequencing that is in getdrip is I would say superior to a lot of the other things that I’ve seen out there. Not to say there aren’t things that are comparable but it was just very, very easy, very intuitive to get in, get started to do it and I wasn’t even asking for any help.
[14:34] Rob: Nice. So yeah, it’s at getdrip.com it’s just a landing page right now but we are letting people in slowly like I talked about earlier in the episode. Next we have a voicemail that’s about getting paid upfront before building your app and it actually refers back to comments we made a couple episodes ago.
[14:52] Voicemail 2: Hey guys! Love the show. At the end of episode 147 you answered a question about a listener who wanted to know about getting money upfront before a product was built. Your answer did a great job of explaining the options. And your thoughts on the viability of that technique but I would like to see you spin that in a different way. Maybe more in the way that this guy actually asked the question which was what he heard a lot at MicoConf. That means people were really a proponent of that technique. And also if it’s a needed avenue if you need the development money upfront in order to get the product created. And you really feel like it’s the best way to go. What are some of the things to consider as you actually enter into that strategy? Anyway, love the show. Looking forward to the next couple episodes. Have a great day. Bye-Bye.
[15:37] Mike: I think that’s a great question there. From my standpoint, what you’re really trying to do is you’re just trying to validate that people actually are willing to pay for it. When you ask your friends or your peers whether something’s a good idea, nobody wants to hurt your feelings. So they will probably agree with you in many cases when if you were some random person off the street, they may very well disagree with you.
[15:58] And when you’re talking to those types of people that you do have that relationship with, asking them for money is essentially that dividing line. It’s the red line where the rubber meets the road where they’re going to say is this something that I would actually pay for versus something that I just say hey, I think that’s a great idea. And oh yeah, I think you could definitely charge and make money for it.
[16:19] But if they’re not willing to put their money where their mouth is, that’s where it becomes different. I think that’s in many cases the dividing line between when you’re talking to people that you know versus you don’t know as to whether or not it’s a good idea. If you’re talking to just random people and they’re telling you that it’s a good idea and they would pay for it, then you can take them – I’ll say a little bit more face value because they’re not so invested in a friendship relationship with you of any kind that they’re going to say things that will in some ways appease you. And you don’t have that level of investment with people that you’ve just met I’ll say.
[16:50] The second piece of it is whether or not you want to ask for money when you’re trying to fund a product. I think that one’s a little bit harder for me to answer because I’ve never gone down that road. I would have to say that if you absolutely need some level of money to make it work because you need to invest in tools or what have you, I would be doubly sure that what you’re doing is actually going to be received by the market and there are people willing to pay for it and then if you can fund it through your own personal finances.
[17:18] Because really what you’re doing is you’re investing in your own future whether it’s tools or training or infrastructure what have you, those things are an investment of the future and it’s going to be difficult to get to where you want to go if you’re always looking at things as if they were expenses rather than investments.
[17:37] Rob: First comment that Dave made was about a lot of people mentioning about MicroConf, if I recall, only one person mentioned it and then some other people referred back to it. So I don’t take it as something that’s like super popular or that a lot of people are doing. I know Nathan Barry has done it. He’s the only one that I know who’s done this in recent memory and actually had success with it and got I think he had 1,000 in presales or 1,500. It wasn’t a huge amount. It wasn’t enough to fund the development of it for sure.
[18:02] The question that I have about is because I’ve never done this and I don’t plan to do it. I have some reservations about it. I think we mentioned that. But I’m not even sure it’s legal to take money that far in advance when you haven’t even built anything. I know it’s not legal to take money if you don’t have a physical product to send someone. Do you know if it’s even legal to do it if you haven’t built software?
[18:19] Mike: I don’t know if it’s legal but I’ve done it.
[18:21] Rob: Okay. Well, there you go.
[18:24] Mike: I mean it was for my alteria’s training product. I put it out there, had people – they were able to pay for it, they were willing to pay for it and people were actually making payments and then after they made the payment I had to go and refund their money because I didn’t actually had a product. But it was just because I wouldn’t to put that hard line in front of them to say will you cross this line? And if so, what is the bend for that?
[18:43] Rob: Got it. So that’s a good point. You took the money but then you refunded it right away and that’s different than what – Dave’s talking about doing it in order to fund the product so that you would actually be keeping it. I don’t think that’s legal. I’ve never heard anyone do it to fund a company. The other thing is it could get complicated. Let me give you an example. We started building Drip last December and I had emailed folks in like October, November and said here’s the basic idea of it. Would you pay X dollars a month for it and I gave them a specific price and some people said yes, some people said no.
[19:13] The people who said yes I said okay, I understand it has to have value for but I am going to hold you to that. I wanted them to make a commitment. And that’s the key thing you’re trying to get here is an actual commitment for someone to buy it when it does come out. I felt like since I knew these people, some of them anyway, that their commitment was worthwhile. And if I had taken money at that point for the first month or the first six months worth of the service, it would’ve kind of a crazy ride because I expected it to be done in 3 to 4 months, that was the original development cycle and here we are 10 or 11 months later and the product is just about to launch.
[19:45] I mean we do have paying users at this point so I guess early access would’ve gotten it a few months ago but bottom-line is if you take money from someone then you are really on the hook for something very quickly. Like you can’t say alright I’ll be back in a year, give me your first six months of payments. You need to turn something out quickly. So you’d have to have a pretty small product or be pretty sure about your development cycle.
[20:08] Again, I tend to be a little more risk averse than some people. Some people put $20,000 on credit cards and I won’t do that. And this is also an approach. I don’t think there’s as much value in it as some people might think. It might sound great to get this money upfront and be able to pay for it but I have I serious reservations until I see someone pull it off and pull it off well. I also think just doing it on a landing page which is how I’ve seen it done leaves money on the table. I think that you will get more people to buy if you just collect emails and you actually build a product that you have to show to them and then they can decide whether to buy it or not.
[20:37] If you force them to pay five months before the product’s done, you’re going to get less money upfront during your launch. I don’t know if that still answers the question. Thanks Dave for calling in and getting us to discuss it again.
[20:48] Mike: I think the real point is just getting that firm commitment. And when you ask them for money it doesn’t mean that you take the money. It just means that you’re asking them for money. That’s the very subtle difference I think that most people are kind of skipping over in their minds like oh you’re asking for money so you’re taking the money. It’s like no, I’m asking for money and you’re just trying to get that extra level of commitment.
[21:06] Rob: So our next email is actually a comment from MicroConf attendee Tim Kohl. He says hi Mike and Rob. I was catching up on old episodes of your show today and heard your listener Scott Underwood in episode 147. He described how he was contemplating doing a consulting engagement as basically a product development exercise. I actually did the exact same thing last December so thought I’d share my experience.
[21:29] Tim basically goes on to say that he found a company that approached him to make basically a plug-in and it didn’t have the money to pay his full consulting rates so he says so what I did was charge him 25% of my normal hourly rates with the understanding that I’d be building a mini product that I could resell at my leisure. I made sure to bill in my normal way with an invoice at the end of the month listing the full hour rate and then adding a clear 75% discount at the end.
[21:54] This way the client perceived a tremendous value in the work but didn’t have to pay more than they could afford. It had the added bonus of controlling scope while the discounted hourly rate wasn’t huge, it was still large enough to discourage scope creep and motivate the client not to want to add every little custom feature that wouldn’t necessarily make sense to have it when I resold it. The development portion worked beautifully and all told it took only 50 hours to build and I now have a super niche product for which there’s a real need ad no competitors. Mostly everything I developed is easily applicable to other businesses also in his line of work.
[22:28] So that part was a resounding success. But here’s where I messed up. I figured I’d need to resell the solution to 10 people to break even on the 75% hourly rate discount. And if I only count development time then that turns out to be accurate. But I didn’t allow for any time to actually make sales because users in this market are relatively on sophisticated lot. So they’re very hard to find on the internet and it sounds like it’s just much more of a high touch sales process.
[22:51] I spent almost as much time/money in gathering a list of a few hundred phone numbers and having an assistant prequalified leads as I did developing the software itself and now actually making those sales is held up on me finding the time to make those few hundred phone calls. Anyway if you’d like to forward my contact info to Scott feel free. I’d be happy to talk to him if he hasn’t already pulled the trigger. All the best.
[23:11] Rob: So thanks very much Tim for writing and definitely enlightening. I like the way Tim handled that. I also think a difference is Tim’s product only took he said about 50 hours of development where Scott’s if I recall it’s a Saas app and I imagined it’s several hundred hours worth. Our next email is from a listener in southern Indiana and he’s emailing us about dealing with the angst of being an entrepreneur with a good full time gig and he’s wondering how to get out of the 9 to 5 mindset and frankly whether he should.
[23:40] So he says hi Mike and Rob. I’m 33 years old, married, one kid and a nice house with a big mortgage and a full time gig as a systems consultant. The pay is very good for the area in which I live. I like everyone I work with and everything’s going well. There’s nothing to complain about other than it being mundane sometimes. I always say it’s the best job I could have if I liked working for someone else but I’m not happy. What’s wrong whit me here? I have a deep seeded desire to quit worrying about the mundane details that go on in my job and do something more important with my life.
[24:07] I’ve listened to your podcast and consumed a slew of other resources during this time about moonlighting, working for yourself etcetera but I’ve never made a mental commitment to actually seriously think about quitting my job. It’s comfortable, routine, easy and I have little responsibilities like on call schedules. I also have no real support from my wife, family or friends. My entire social circle is made up of 9 to 5ers that either think I’m “interesting” for running my side business or think I’m selfish and should spend more time with my family.
[24:33] I realize I should go out and meet others like me. They do exist in my community but it’s hard for me. I’m a major introvert and I really hate the schmooze sessions. I’d much rather be coding. It’s also hard because they’re outside of my typical social circle. Frankly I have no idea where I go this bug from. I know no one close by that has any desire to do anything else with their lives. I could go on forever but I’ll spare you. I appreciate any advice or assurance you can give me. I just hope I can get my mindset changed and actually take you up on it.
[25:00] Mike: Well there’s a lot there. Where to start? I think that if you look around the country there are probably tons of other places that would provide you with the same experience where there’s not many people who are in your social circle who are interested in doing those kinds of things. I think that unless you live in or around a major city then chances are really good that you’re not going to have friends who are also trying to build a software based interest business. So that’s the first thing. Definitely don’t feel like you’re alone in that regard.
[25:33] The second thing is that you have to really decide whether or not it’s something that you want to do or if it’s just something that you’re interested in. I’ve heard a lot of people who basically looked at different things that they were interested in doing in their life and decided hey, do I want to build a business around this? If you’re interested in let’s say golf, do you want to go out and become a professional golfer? That may or may not be realistic depending on your skill set but the same time, once you decide to do that full time, it becomes a job.
[26:01] So is that what you want to do to yourself? Is that the position you want to put yourself in terms of billing a product? It sounds to me almost like you might be in a better position if you have a co-founder who can do a lot of the customer development side of things and push on that side that you’re not necessarily comfortable with or that you don’t want to do because you’re going to find that when you own your own business, there’s a lot of things that need to be done and if you don’t do them, you’re going to have to find somebody else to do them or they don’t get done.
[26:30] So those are just some of the challenges that you’re going to probably run into going down this road. But I definitely feel like this is a mindset thing that a lot of people have. It’s very difficult to give up a 9 to 5 job that’s very steady, very stable and pays very well. I think if you don’t have the support of your friends and family, I mean your friends are one thing because they may not necessarily understand what it is that you’re trying to do but definitely if you don’t have the support of your family, is very, very hard to try and do anything substantial or make it into anything more than a hobby.
[27:00] Rob: I think the first question that you should ask yourself is how unhappy are you at your job? It sounds like you like your job but there’s some restlessness going on. But how burning is that restlessness? Is it just killing you? Because the people that I know who have left their jobs and made this work, they had to do it. Like in all caps, THEY HAD TO DO IT. It wasn’t a matter of I’m comfortable, I might want to do something – wouldn’t that be fun to do it? Because you’re just not going to make it. You’re not going to make it through the long nights, the weekends, the comments from friends and family, all that kind of stuff.
[27:33] If you have to do this you absolutely – you view it as kind of a lifelong regret if you don’t do this, if in 30 years you look back and said you know what, I had a good life as a consultant and you imagined that that’s going to make you happy then do that. But if it’s a burning desire, and it’s something that you absolutely cannot live your life without doing, then take this more seriously.
[27:52] Second question I would ask is really try to get down to the nuts and bolts of like why do you want to leave your job? Where does that come from? I think like Mike said, is it just an interest or is that something like a burning desire? Is it a hobby? Because I was into startups in the 90’s when I was in college and it was just this fun kind of diversion. It’s something like I don’t know, watching reality TV or reading a romance novel on the plane. It’s just kind of a fun entertainment thing and is that what it’s like for you or do you feel again this burning desire to kind of have a legacy that’s different than the path you’re traveling now.
[28:25] I know it’s complex. It’s not something that we can answer in a single podcast episode here but I hope that helps and definitely thanks for looping us in on your decision. I imagined that a lot of other listeners might feel this way as well. Alright, our next question is about how much this person can charge for their twitter digest service.
[28:43] This is from Andrew Bonnello and he says hi Rob and Mike. I wrote TweetQureet to scratch my own itch and we’ll link that up in the show notes because the name is hard to spell. He said my own itch is too many interesting people to follow, no time to monitor my timeline for top stories. Lists are manual and need maintenance. Tweet recommenders I’ve seen send to use social signals like retweets rather than subject and theme. Can daily tweet filtering based on the user’s own interest be automated?
[29:08] Once the user signs up, they get a daily email digest of up to 10 top tweets. If there are more they can explore a timeline page with the full list. I’ve completed the initial bare release and I’m looking to grow rather than branch the product in new directions. For enterprise customers I want to figure out how much can I charge individuals who get value out of the service. I’m not looking for exponential growth in user numbers or a high profile buy out. I just want a solid engaged user base and a recurring monthly revenue stream of three or four figures. Do you have any suggestions?
[29:36] And a little bit of background, he says I’m a software developer formerly at Google and DreamWorks animation. I quit full time work about three years ago to try and use my software skills to build a sustainable online business for myself.
[29:46] Mike: It sounds like this is geared more at the consumer market than at the business market. Twitter already sends out emails on a daily basis to say hey here are top tweets from people you follow or people you might be interested in hearing from. But it sounds like this is positioned a little bit different where they’re essentially data mining the people you follow to find out what stories are trending within that list of followers that you might be interested in hearing from or hearing more about.
[30:15] Obviously if you’re following a lot of people then there’s tons of tweets that fly by on a daily basis that you never see. So this is essentially a service that will help you filter those down a little bit. It’s hard for me to just generalize and say this is how much you could charge for but because it’s a consumer based product or at least that’s kind of the way that I see it, it seems like you probably could not charge very much.
[30:37] I think that probably $10, $15, $20 is probably the top range. I hate saying you should charge $5 or $6 for it because you start getting down to the point where one support call just blows your entire profit for the entire customer. I think that the $10 to $20 range is probably something you could pull off but again I look at something like this and I would probably not use it. I don’t know if I’m the best person to be asking for pricing advice on that.
[31:03] Rob: I think that’s the key is asking us, you can get our opinion but I probably wouldn’t use this either so I think you really need to find people who are willing to pay you for it. They’re the only people who can tell you what they’d be willing to pay because they get some kind of value out of it. If you’re trying to bootstrap and app like this, you need to find revenue. And in order to do that you have to provide value. So who do you provide value for?
[31:27] I can imagine this as a funded IOS app that’s given away for free when someone raises a million bucks, builds it and then tries to sell it to a twitter or raven tools or Google or someone. So I just don’t even know there’s a revenue model here until you have someone paying you money, I don’t know that I think that there actually is a group that’s willing to pay you unless you do go up into the B to B space. Right?
[31:51] You try to make this – I think we talked a little bit about on twitter but try to make it a brand monitoring or some kind of system that actually helps a company save some time, makes them money, saves the money that’s sold on value. Without that, I just don’t know. Without really knowing who desperately needs this, if it’s just all consumers can use it, then it’s not going to fly.
[32:12] Mike: Yeah. I think the biggest problem that I see with this is that essentially you’re showing people tweets that presumably they’re probably already getting in some way, shape or form and you’re aggregating them in some special way that allows them to see things that are most interesting to them which is very subjective to begin with. So essentially what they’re paying you for is a level of trust that you are searching through the tweets that they’re already supposed to be getting and presenting them with ones that you feel would be interesting.
[32:39] And because those things are already available to them, then you’re somehow saving them time of searching through these. But you’re bridging that gap between how much time are they spending on it versus how much effort does it take to find those. I think that in the consumer space people value their time a lot less than in the business space.
[32:58] Rob: Our next email is from Doug Martin. It’s on the value of consistency. He says I’ve been a long time listener. As I hit refresh on iTunes this morning I had to smile as I saw you guys have put up yet another episode. My podcast list is cluttered with shows that’s repeated out over the years. It is good to know I can count on you guys for great content regularly. Keep up the good work.
[33:18] I just wanted to read that not so much that it’s a compliment to us but it’s more of a testament to like putting something out every week. Remember that it’s easy to be great. It’s hard to be consistent. A lot of people come out and they put out a flurry of 7 or 9 episodes and then poof, they’re gone. And unless you have some kind of idea in mind, some kind of vision, some kind of revenue model, like you have to have things in place, just coming out and putting out a podcast for a week is a nontrivial thing. So definitely appreciate it when folks take notice. I think that’s the reason that we have been able to build an audience over these years is just showing up every week, every Tuesday morning right? Right in their iTunes feed.
[33:52] And our last email of the day is from David Lepont and he says hi guys, I have a comment about your episode where you talk about AB testing. He says I have a reaction to the part about calling customers which as he said is supposed to raise conversion rates. So he’s talking about if you asked for credit cards upfront, then you get a good conversion rate, but if don’t ask then you’re supposed to call customers. That’s kind of the rule of thumb. It’s what I see working with Saas apps who don’t ask for credit cards.
[34:17] He says personally I hate being called by a software company and I find that really aggressive and it would very likely have the opposite effect on me. Many people of my age in their mid 20’s really hate to speak on the phone and feel like every interaction originates from the web or the software world should continue as a communication method on the computer or on the internet. Emails with incentives are really more appealing to me. I don’t know your thoughts on that but that’s my opinion.
[34:39] Mike: David thanks for the reply in that. I do want to point out that just because that’s the way you feel doesn’t mean that that’s the way other people feel. There are definitely people that feel the way that you do and it would probably push them away. But when you’re looking at the numbers and analyzing them kind of independently of feelings, if you’re looking at those numbers, if you’re getting a 20% to 30% measurable increase in the performance of your sales campaigns by reaching out and calling people or if the average dollar amount of a particular sale is going up by calling people then it’s very difficult to argue. Well we shouldn’t do that because there are few people that we’re going to make angry or they don’t like it.
[35:19] Because at the end of the day, you’re in business to stay in business. You’ve got to make money in order to stay in business. And if you’re not making those sales calls and you have to let people go because you didn’t do it because it would make you feel bad to call people when the other side of the coin is you have to let people go then chances are good you should be making those calls. This just kind of continued upon you actually offering a product that has value and the fact of the matter is that you’re running a business and the number one goal of the business is to stay in business.
[35:47] Rob: Yeah. I think a couple of things. One is remember that you’re not your customer. So what you prefer isn’t necessarily what everyone prefers. In aggregate, numbers don’t like. So like Mike said, if it raises your conversion rate overall, that’s something to really keep in account of. I hate phone calls myself. I don’t answer my phone during the day at all. But I have noticed that when software companies have called me and at first, it does kind of put me off but it does remind me that I signed up for their trial and some of them have converted me not by talking to me on the phone but it reminds me to go back in and yeah, that’s right. I have to cancel that or I want to take another look at it. And frankly it’s probably worked more times than it hasn’t.
[36:27] So there’s kind of this fallacy. Developers fall into this a lot. It’s where they say well, I hate signing up for email lists and getting all the spam. So email doesn’t work so I’m not going to have an email signup form and yet we know that email is one of the best, if not the best marketing approaches out there today. And so don’t fall into the trap of thinking because you don’t like something that it doesn’t work.
[36:39] Mike: Yeah. There’s a lot of things that coming from the world of developers and then kind of moving over and doing marketing and sales, there are lots of things that as developers they always irritated the crap out of me and then in going over and seeing the other side of the world is not like everybody’s a developer. There are tons and tons of people who are not developers who don’t fall into that mindset. And you kind of have to keep an open mind when you’re looking at those things.
[37:13] Music
[37:17] If you have a question for us you can call it in to our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 150 | Ten Ideas for Things You Can A/B Test
Show Notes
- Follow @AuditShark
- Andy Brice – Successful Software
- Neil Patel – QuickSprout
- 7 Simple A/B Tests that can increase conversions by 10% or more
- Unbounce.com
- KISSmetrics
- Hub Spot
- ChatterLime
- CrazyEgg
- Inspectlet
Transcript
[00:00] Mike: This is Startups for the Rest of Us, Episode 150.
[00:03] Music
[00:10] 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: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
[00:25] Rob: Well a day or reckoning is here for Drip. Remember the prelaunch email I sent out to 300 something folks a few weeks ago?
[00:31] Mike: Yeah.
[00:32] Rob: Well, we got a bunch of them into trials. They got on boarded and late tonight, sometime after midnight a bunch of them are either going to convert or not convert to paying customers. It’s been exactly three weeks and we have a 21 day trial. So rest assured you can imagine me this evening sitting with very large glass of bourbon and waiting for the news and watching for the billing email to come in. Either way, it’s either going to be a great news and I’m going to celebrate or it’s going to be very bad news and I’m going to drown my sorrows in that glass.
[01:03] Mike: I see. I mean do you have it setup so that people can cancel before it gets to that point? Are they notified or…
[01:08] Rob: Absolutely. Yes. So three days before typically with like a 21 or a 30 day trial, emailing goes out three days prior and it says look, you’re going to be billed or if we don’t have their credit card on file because there’s a few folks that got a no credit card trial early on then we ask them hey, if you want to continue you need to enter your credit card. So everybody gets notification. That’s the idea.
[01:29] And as always, with all of my apps, if they do get billed tonight and they come in tomorrow and they’re like I meant to cancel, we refund them and we cancel their accounts. So it’s not about tricking people into doing it. It’s about letting them know and keeping them happy as customers.
[01:44] Mike: Right. But do you have any sense of how well it’s going?
[01:47] Rob: I do. I’m the cautious optimist. I am excited about it. I’m very pleased with the numbers that I have but I hate talking about things in public like that because if they don’t turn out I feel like I made a big mistake or I misjudge things and then be able in retrospect to talk about it in and the lessons I’ve learned.
[02:04] Mike: Cool.
[02:06] Rob: How about you? What’s the update with Audit Shark? After last week’s episode we’ve already gotten several comments and a couple emails. So I’m interested to hear what’s new?
[02:13] Mike: Well I’m labeling the new UI overhaul of Audit Shark as code complete enough. Essentially that means things are well enough that I can basically push it over the top of the existing version. I haven’t had time to do that. I just haven’t had time to try and push that out to the cloud yet. But there’s remediation steps are being added in to the database and should be done in the next week or two. I talked to the policy developer about that. There’s a few things that need to go into the dashboard but those can be added in over time so I’m not real worried about that.
[02:43] And then there’s other little things here and there like in app walk through, some documentation need to be added. But I think those are minor enough that I can push it out over the top of the existing version and just kind of be done with it and call it code complete enough.
[02:57] Rob: Cool. I re-listened to last week’s episode after the editing and there are a couple of things that I think I’d ask that wound up on the cutting room floor so I wanted to bring them up. One was regarding remediation and you know that customers want that but from what I’ve seen, you haven’t asked the customers who’ve used it if they will pay you at that point if it’s worth it or if – I talked about this is your biggest risk right now. Right? Is not knowing if they’ll pay you.
[03:21] So I guess in the back of my mind it’s like that being your biggest risk, it seems like if you asked them before you implement it then at least you have an idea of whether or not you’re going to be able to charge them for it once remediation is in. Have you thought about that?
[03:33] Mike: I didn’t because I looked at it from a perspective of some of the early feedback I got was okay I’ve done this stuff, now what do I do? It’s like if you used the application and you get to the point where it gives you the results and you just don’t know what to do then that’s a failure on my part. It essentially means that I need to present the information about how to go about fixing that stuff.
[03:55] And when somebody sent me a screencast it actually had some of that information in there. And they just said I’m trying to match these up between what the rules are and what the results are and it’s hard to do and it doesn’t tell me what I’m supposed to do to fix this. I don’t quite understand. I knew that was kind of a gap but I wasn’t sure if I’d b able to get away with it. But it seems pretty clear just from the – you know how you can hear things in a screencast or a video that are a little bit – you get the intonations and things like that you definitely don’t…
[04:22] Rob: Nuance.
[04:23] Mike: Yes. The subtle nuances about how somebody says something and it gives you the impression that’s really, really important. So I have not out right asked but my impression was yes, this is extremely important. It’s got to be there.
[04:38] Rob: Right. And I don’t doubt that, that remediation is something you have to have in advice, at least information on how people can fix their stuff. The thing that I’m wondering is is it that enough? Is that the point at which Audit Shark provides enough value that someone will pay you? Or in say two weeks to get remediation done, is it okay? Here’s my early access people. Now we have remediation. Now are you willing to pay for it? And they’re like well, not really because you still have to build out these other few things. And that’s where the launches just go on and on and on or you kind of never get to launch.
[05:07] So that’s what I’m curious about. I’d love to see you do either some emails or just some interviews, quick Skype calls with some of your early access people and ask them if Audit Shark had this in it, is that the point at which you’re willing to pay my price for it?
[05:22] Mike: That’s a great question. I definitely have to do that. That’s kind of next up on the docket. I mean I have to start reaching out to them and finding out more of that information. One of the things that has come up, a lot of the stuff in the news lately about the NSA spying on people and gathering information from them and there’s questions about sending data from their servers back to mine which are stored on Microsoft’s azure platform. So it’s like well if the NSA has access to those then do they have access to my data and it’s just kind of an open ended question that in some ways has to be addressed in a technical level but it also has to be addressed in a marketing level too.
[05:56] But it did give me an idea about if I can address it at the technical level, would that be a leverage point that I could use to get into additional customers. Hey do you want to make sure all of your stuff is protected from the eyes of the NSA? Not that it’s a guarantee but I can certainly help lock down those machines so that people can’t get in inadvertently…
[06:17] Rob: Very good.
[06:18] Mike: But I totally get where you’re coming from where like there’s certain questions that I have to start asking and that’s definitely one of them.
[06:23] Rob: So in other news, I’ve started doing a little bit of angel investing. It’s interesting. I looked back about 8 months at some goals that I have for 2013 and I really wanted to get more involved with just a handful of startups. I’m only going to do maybe four or five a year and they’re very small amounts like $5,000 to $10,000 certainly until I get the hang of it. But I don’t know, I just find it intriguing to be kind of part of other startups that I’m not running and to have some kind of stake in them even if it’s a small one, I really enjoyed being part of the WP engine investors just hearing the news and watching the growth.
[07:01] It’s that interesting thing of taking those steps up the ladder where you’re an employee and you’re self employed then you’re a business owner and then you’re an investor. Those are kind of – I think of Robert Kiyosaki. He did lay that out. And I liked that idea. So to me I see investing and being able to make money from that is really kind of a high tier of doing things. And I have some cash sitting around from all of my businesses and since I’m not acquiring my next one I feel like it’s just not working for me. Right? It’s not actually doing work. It’s not earning anything sitting in a bank account.
[07:35] So I’ve invested in one here locally that’s pretty cool, kind of a little tech hub software cluster thing that’s going on. And then I think about 3 or 4 others in the last couple of months.
[07:43] Mike: That’s really cool. Yeah, you have to let us know how that goes. I mean I understand there’s only so much that you can say about them or how it’s structured and everything but it’d be interesting to see how that progression goes because I totally get the idea of being a full time employee and moving up to starting your own company and building your own stuff and going on to invest in other peoples.
[08:02] Rob: You know I’m a bootstrap founder right? I certainly believe in raising funding and I think there are cases when funding is a good thing. I think at some point I’ll probably – once I get the hang of it and have any type of insight into it, I’ll probably talk about it on the podcast. But at this point I’m just such a newbie at it and it’s not even worth really hearing my thoughts yet.
[08:21] Mike: The only other things I have going on as I talked about before I was doing some paid advertising campaigns through Facebook and they still need some refinement. Last week I was getting a lot of noise because some of the links that I had pushed out there to some of the landing pages I wasn’t using the right query strings so now at this point I’m starting to get good data but one of the other things that I’ve tweaked was the twitter strategy that I’m using.
[08:45] In just the past week, the twitter followers for the Audit Shark account have kind of stalled out about 180 followers or so. And over the past week I’ve added another 75 followers. The traffic is – I can see it in the analytics its actually translated back into website visits for Audit Shark and a landing page sign ups and that’s nice to see.
[09:04] Rob: That is nice. Instinctively man, I would totally not do twitter at this point. I think it’s too early. Just the value of email, I would say it’s ten times more valuable but I really believe that and I know you’re saying it generated some people on your email list but I think prelaunch, I have a Drip twitter account but at this point it’s really just to kind of gather some followers. We’re not pushing anything out because I just don’t know the real value that’s going to get you at this point right? So early. Unless we’re going to do content marketing or you’re going to be really pushing a lot of stuff out which then gets really time consuming. I think focusing on building that email list is the way to go.
[09:40] Mike: Well the thing is dripping out that content on the Audit Shark twitter account is outsourced at this point. I don’t actually do it. I’m having somebody else do that. The other thing that I found is of the links that go back, about 30% of them are converted into emails.
[09:52] Rob: That is nice. That might be worth a thing. Yeah.
[09:57] Mike: So yeah. I mean it is worth it but there’s a question like how many twitter followers do I actually have and how many am I reaching? Right now that number is really small so that 30% I don’t put a lot of stock in it just because the sample size I think is too small. But it may turn out that if I’m able to amp this up over time, if I am able to kind of get a sustained following week in week out and scale this up then that could be a viable strategy moving forward and it could conceivably help take it to the next level.
[10:29] But because some of that stuff is kind of automated right now, I’m not too worried about spending my time on it. I obviously got a lot of other things to do but I’m just looking at the numbers themselves and making sure that I’m capturing all the information I need to make sure I understand whether it’s worth it or not.
[10:44] Rob: Right. And by automated you mean you have someone doing it. It’s not a bot.
[10:47] Mike: Yes.
[10:48] Rob: Right. Cool. Last point of discussion before we dive into kind of the main feature point of this episode, MicroConf Europe speaker Andy Brice, you might know him from successfulsoftware.net long time blogger he’s a solo founder and he has Perfect Table Plan which is his desktop software that helps people plan their seating charts at weddings. And he’s made a full time living off this for years, offers a lot of good insight on his blog successfulsoftware.net.
[11:15] He is hosting a two day training in Witlshire England in late November. I’m only getting up in the show notes. He has tested a ton of marketing approaches over the years. He has kind of that B to C desktop product. So if you’re anywhere within driving distance of Wiltshire, England, I would definitely consider taking him up on that offer.
[11:34] Music
[11:36] Mike: Today we’re going to be talking about 10 ideas for things that you can AB test in your business. I’m in the midst of working on a bunch of different landing pages for Audit Shark. In doing some of the landing page research, I started coming across a lot of AB testing sites which offer ideas on things that you can test that were not necessarily specific to landing pages.
[11:56] So in episode 148 we talked to Clay Collins specifically about some of the different marketing trends. We talked a little bit about the types of things that do and don’t work but I also wanted to discuss some of the specific tactics that I’ve come across. Not all of them are related to landing page design but some are just simply AB testing you can use to test out your marketing funnel or to use on your pricing page and things like that.
[12:18] I thought it would be a good idea to talk about some of these different things that you can try, not that anyone who’s listening to this is going to try all 10 of them but they’re just interesting ideas that may work in your business or they may not even be applicable but I thought it’d be interesting to just kind of highlight some of the different things you could use.
[12:35] Rob: Right. So these are 10 things aside from headlines right? Because the headlines are the first thing that you should start with. That’s going to tend to be set the messaging up and everything so that’s kind of like number 0 and then starting with number 1, what do we have?
[12:49] Mike: So the first one would be to test whether or not a free trial button is going to work out and we’ll link this up from the show notes because several of these come from a blog article from Neil Patel. But one of the things he highlighted was that if you have a free trial button there, try taking it out or adding one in and letting people know that there is a free trial and seeing if those people go through your funnel and covert. I think the example that he had shown, there was something like 160% increase in signups by adding in a free trial button.
[13:18] Rob: And is that oppose to like a download now button if you’re trying to get say get someone just to get their email and to download something or versus a buy now button?
[13:28] Mike: It was versus a buy now button in that particular case.
[13:31] Rob: And I’m curious about all these. Right? I mean I’ve seen people send – let’s take paid acquisition or SEO traffic. I’ve seen them send it to a landing page and just asked for the email with a download now button offering some type of template or report or something like that. And then track those conversions over time versus just having that try now versus having the buy now.
[13:54] The interesting thing is that depending on the niche, depending on how good your messaging is, there no rule of thumb that I know of the best way to do that. Right? It really depends on you price point, how well you pre-sold someone with an ad, how well your landing page copy is. I think those are maybe some variations that you can think about not just the button itself but actually the whole kind of message of the landing page.
[14:16] Mike: Yeah. That’s exactly right. And again you have to think about this list that we’ve got here are things that you can try that some may make sense for your business, some may not. In terms of the question that you pointed out, is it a free trial versus a buy now or download now or sign up for an email list. The specific example that we’ll link to as I said was a buy now, but take that into consideration about what it is that you’re exactly trying to get people to do.
[14:39] So obviously you’re not going to have a free trial for an email, when you’re trying to capture an email. Free trial versus buy now and even the text on that free trial you may have some other text other than a free trial, 30 day trial or something along those lines. You can try different things.
[14:53] So the next one we have is asking for credit cards upfront versus later on. I think my inclination is to believe that if you’re collecting the credit cards upfront it’s going to essentially disqualify or weed out the people who are not interested in your product or they’re just kind of kicking the tires a little bit. They see that there’s a free trial to sign up for it but they may or may not necessarily be engaged with the product.
[15:14] And depending on how you kind of walk them through the sign up process and on boarding process, it’s going to have a lot of influence over whether or not they ultimately become a customer of yours. That said, I think collecting those credit cards reduce this friction later on and it’s not to say that having friction upfront is a bad thing or having it later on is a bad thing. It depends a lot as you said on your product. But this is certainly something that you can try. My inclination is to believe that capturing them upfront is probably better but it’s something you should definitely test in your business to figure out whether or not it does make a difference and how much of a difference it does make.
[15:49] Rob: I know companies who make both of these approaches work. I’ve said on the podcast before many times that I always default to asking for credit card upfront but the companies who make not asking for credit card upfront do some very specific things. They’re very experienced. Just reminds me a little bit of having a free plan in the sense that free plans can work in certain circumstances if you’re an expert. I feel like credit cards are the same thing.
[16:13] If you punt and you say I’m not going to ask for credit cards then you have to do some specific things during the trial. Most of the companies I know who are making it work are actually getting telephone number instead of credit card and they are having people call them. So if you’re not going to do that or you’re not going to have a well crafted trial email sequence that provides a lot of value that gets people on boarded and then that encourages them heavily towards the end to enter their credit card then you have failed. I don’t know anyone who is not doing that who is making the no credit card approach work.
[16:44] So credit card eliminate tire kickers. They bring in more qualified leads. They bring in people who when they request a feature from you, you can say well at least this person was into this, the value prop of my app enough that I can listen to them. Let’s say you run an experiment and you didn’t ask for credit card and you get 100 people in your free trial. Then you run the same experiment a month later and you get 20 people. So it’s 20%.
[17:09] Who are you going to listen to when people ask for features? You should listen to the people that are more qualified as a rule. And so especially in the early days of your app when you really are not sure what your value prop is, keep trying to figure out what to build. You want more qualified people because those are going to be the people that are more likely to pay you and the people that are more likely to get value out of your app long term.
[17:28] Early on, you don’t need more feedback. Trust me. I’m going through this right now. I have a feature list a mile long and my biggest task these days is weeding that down to which one should we build for the very specific audience that we serve and it’s going to get value from my app. So that’s where especially early on I think asking for credit cards is critical and then testing later on is definitely worthwhile but only once you know what you’re doing and you’re able to handle it with some expertise.
[17:55] Mike: I think the important piece that I heard out of that was the part where if you’re not asking for a credit card, you have to ask for other information. I was at a business software conference a couple years ago where there’s a company and I won’t say their name but they had a software that you could download and you had a trial. As part of that, they would ask you to fill out this information and then you’d get your free trial.
[18:18] Part of that, they would ask you for your contact information and they would actually have developers call and talk to the prospective customers and find out what they liked about the software, what they didn’t, whether they were going to purchase it or not. And they find out that by making those calls, their conversion rate increased something like 60%. It was ridiculous. And their average price point for those purchases was something like 40% more than if somebody had just simply purchased off the website.
[18:45] Rob: Right. So if you have the expertise and the man power to do that, if you think of some of the big venture funded startups like at Kiss Metrics, they don’t ask for credit card upfront but let’s be honest, they have a lot of money. They have a lot of people and they have a lot of folks making phone calls. They’re really kind of working it exactly the right way. And yeah, take another example like Hub Spot. It doesn’t look like they ask for credit card before free trial but go to their free trial page. They ask for first name, last name, email, phone, company name, website URL, number of employees on and there’s like four more questions literally and they’re all required.
[19:17] So yeah you’re right. They’re not asking for credit card but they’re asking for that all information. They are pre-qualifying people because they don’t want to waste their time chasing after tire kickers.
[19:25] Mike: And I’d be willing to bet that they have probably AB tested the heck out of that page just because I know how Dharmesh is in giving his predilection for going after stats and statistics and measuring everything.
[19:37] Rob: Absolutely.
[19:38] Mike: So the third idea for something that you can AB test is to try using trust symbols such as hacker skin and icons or SSL certificate icons, maybe even an extended validation certificate so you get the little green bar in the website browser. And I think these are more applicable on a landing page or where your – to actually taking order information, you’re trying to get them to follow through with an action and you’re trying to inspire confidence and trust.
[20:03] Sometimes you can do that with text but obviously there’s all these different trust icons that you can use from different vendors that will help inspire trust and confidence in your company and in your website.
[20:13] Rob: This is something I’ve never tested. I have added trust symbols to my pages but I’ve never tested conversion rates with trust symbols and without – I heard they work and improve and all this trusted app but I’d be interested if someone has data. I was having dinner with one of the founders of Foxy Cart who sponsored MicroConf last year. They have hosted shopping carts software.
[20:35] And one of the things he said was payment preferences like offering PayPal versus Amazon versus just entering your credit card number and the major differences that they see and one of the things he said was having a buy with Amazon button when someone’s purchasing a product on an e-commerce definitely raises conversions. So I think that’s another thing that you should consider is offering – it’s that easy low friction ability to pay by clicking that one button since you already have your credit card on file with Amazon.
[21:01] Mike: So the fourth idea is to use a live chat widget. This is actually something that I’m testing right now. I’m working with a company called Chatter Lime and essentially what they have is they have a live chat widget and I haven’t integrated into the site yet but the time this episodes goes live, it will be out there.
[21:18] But essentially the idea behind having a chat widget is if somebody has questions about your product, they come to your website, they’re not really quite sure what to do nobody’s going to go to the FAQ page and actually read it. But if there’s a help widget there that either pops up dynamically and asks if they have questions or if it’s just off to the side that they can interact with if they decide that they want to, then they can go ahead and do it.
[21:42] And the difference with something like Chatter Lime is that they actually have people who are manning that behind the scene so I don’t have to do it essentially off loading the capabilities to them and essentially providing them with script. But they can provide me with transcripts to let me know what the conversation was like, what sorts of questions were asked and then essentially enhance whatever the database of answers is that they’re going off of.
[22:05] I feel like this is a huge win in terms of being able to interact with your customers not just for me in Audit Shark but I think in general, most people would find that to be very, very helpful. Obviously I’m going to test it. They’ve see 30% increase in conversion rates in some cases but it seems like it’s definitely worth testing.
[22:23] Rob: I agree. An interesting part is there are a lot of these widgets coming out that you can stick in your site. We were talking before we started recording that you could have a Drip widget in the main area of your site and then once you get into kind of a checkout flow you could add the chat widget. So right when people are at the decision point they have questions about your pricing or your registration page, that’s when you can add a chat window and bravo to Chatter Lime because they’re following this trend that I brought up a couple episodes ago about the DFY versus DYI. It’s like done for you versus do it yourself.
[22:54] And it’s going up market. It’s basically charging more but then they don’t just provide a widget like a bunch of other places do. They’re actually adding that concierge element. So as a founder of Audit Shark, you’re willing to pay them more so that you don’t have to man it yourself or have one of your people doing it. So I definitely think we’re going to be seeing more and more of that kind of business market where you’re going up market and doing the software and service as a single offering.
[23:19] Mike: So number five is to evaluate the number of form fields. As you mentioned before with Hub Spot on the free trial sign up, they’re actually asking for a lot more information and the general rule of thumb is to ask for less. I think that with Hub Spot, what they’re doing is they’re asking for a lot more and in some cases especially if you’re selling any sort of products that deals with sensitive information, it almost seems like asking for more information is going to inspire more trust from the person who’s making the purchase because they’re essentially giving more information.
[23:50] Their vendor is prequalifying you. Maybe they’re looking into seeing who they’re actually working with. They’re doing a little bit more to protect the information. And whether that’s true or not is kind of immaterial. The ideas that if you’re giving them more information, then chances are you’re checking it out. And I’ll give you a very specific example of that. How would you feel about going and buying let’s say an eBook where all they’re asking for is your credit card number and the expiration date?
[24:16] Rob: Well maybe I’d want them to get my email so they can send me the book.
[24:19] Mike: Right. But if they’re not asking for like the CCID number or your name or address or zip code or any of that stuff, wouldn’t that strike you as a little bit odd?
[24:30] Rob: It wouldn’t to me but only because I know that all you need is a credit and an expiration to charge most cards and then you need CVV maybe as some added validation. So I don’t actually ask for address often times like if you go to the HitTail registration from, I don’t ask for address. I don’t think we ask for zip because stripe indicated at a zip is not – if I’m not doing AVS it’s not needed to do just the basic charging and it’s not going to help me get more charges through.
[24:54] Mike: I can definitely see that from programmer’s perspective but I think that from the average user’s perspective they don’t necessarily know all that stuff.
[25:01] Rob: Right. And I’m the man behind the curtain in that scenario.
[25:03] Mike: Right. And that’s kind of my point. But until you actually try this you don’t necessarily know. I think it depends a lot on your product and the type of service that you’re offering and price point and all that other stuff. But again it’s something else that you can test.
[25:15] One thing that I found interesting and this is number six that I came across was adding a sign up form directly to your home page. Have you seen people do that before? Instead of having a call to action where they click through and go to a pricing page or something like that, they actually have their sign up for embedded right into the home page.
[25:33] Rob: I have seen that. You can see an example at outright.com which is an accounting package. If you go to basecamp.com at least the version I’m seeing, I know they split test quite a bit. That one has start your free trial form right on the home page.
[25:46] Mike: Yeah. That’s not something I actually thought about a lot but I did come across something that people are testing to find out whether or not that works and converts or not.
[25:55] Rob: I think it’s an interesting question. I would tend to not do that. I think it’s worth testing but to me I want to optimize the site for first time visitors or for maybe returning visitors who are thinking about potentially signing up. So for first time visitors it’s very unlikely they’re going to land at that page and know that they want to sign up. You have to give them some information about what you are, what your pricing is, what the app does, what the benefits are.
[26:20] I’m not necessarily convinced that having that form right in front is really going to be that useful now. If Basecamp is testing and it’s worked for them and maybe they have kind of a different market or if they’re sending certain types of traffic to it, I think this comes back to something Clay Collins said a couple episodes ago where he talked about the two step opt in process and he talked about like a giving page versus a taking page.
[26:42] And if you arrive at a page and it’s instantly asking you for information, it may put some people off. So actually not having the form there but having that sign up for free trial then you’ve made them click a button to get to that next page in order to – they actually initiated some type of action in order to do it.
[26:58] Mike: I almost feel like there might be other stuff that’s probably lower hanging fruit that you could probably go after and push this off to later.
[27:04] Rob: Yup.
[27:05] Mike: So number seven is to test your testimonials with or without photos and names and websites and company names. This one struck me as a little bit odd. I wouldn’t have thought to start removing some of those things. I would’ve thought that the most compelling types of testimonials would be ones that have pretty much everything. It’s got the name. I think put in a face and a name and a company or a title or something along those lines, giving prospective buyers the confidence that other real people are actually using your product would be the way to go.
[27:36] Rob: I would agree. In my experience, video and photos with testimonials have increased conversions. Adding all the other stuff, adding a bunch of text, name, website, company name, all that stuff, maybe. I mean if people will recognize the company name that it has a meaning but really just having kind of a first name in a website URL or giving them an indicator that they’re legit is one thing but then adding a bunch of text to, I don’t know how much that helps. I think you’re going to have much more impact when dealing with a visual element. Like having that nice headshot there versus not having one or even having a very short small video testimonial.
[28:13] Mike: Number eight is to leverage different types of directional cues and directional cues can be anything from giant arrows that you’ve actually put on the screen or people looking or pointing on different stuff on the page. You can find these in a variety of different places. And I’ve actually done this on the Altiris training website where’s there’s a picture in the lower right corner of somebody who’s actually looking at the view pricing button.
[28:38] I haven’t done a lot of testing to see how much that has really affected it but I have kind of learned over the years that if you use those directional cues, they can help. And because the site doesn’t get enough traffic it’s just not worth AB testing it. But if you do have enough traffic then that’s something that you can look at.
[28:55] Rob: The directional arrow is just kind of an old internet marketing tactic people have used for years. I did hear that Brecht Palombo over on distressedpro.com he said he’s sending some – I think it’s paid traffic to a landing page and it has a head shot of a woman and she’s looking at his button like the call to action button and that’s something that I’ve heard people do. I’ve never used the arrows or people looking at or pointing that stuff but that’s not to say that it doesn’t work.
[29:21] Mike: Yeah. I think for something like this you really need to have software installed that actually takes a look where people’s mouse pointer is going like CrazyEgg or Inspectet or something along those lines so that you can get a much better sense of whether or not that’s working. Because I think that just judging the numbers may be a little difficult but if you can pin point on what people are actually moving their mouse over then that would help give you a better indicator whether or not it’s working.
[29:45] Number nine is to display honest reviews of your product or filtered reviews with your product. And there’s obviously a difference between filter reviews essentially tell everybody the good things about your product. But if you notice on Amazon.com there’s a lot of reviews there that tell you how awful a product is and all the different things that are wrong with it. If you go back, I think it’s still on the MicroConf website but there’s a talk that was done by Jason Cohen of wpengine.com where he talked about honesty.
[30:17] There’s some pretty compelling evidence into here that suggested that if you’re providing all of the negative reviews along with the positive reviews then you’re going to increase sales. I think one of the example he used was Kodak. Another one was Amazon, I mean there’s a lot of anecdotal evidence that suggest that using those is going to increase the conversions. I don’t know whether that translates directly to just using filter reviews. I would think that in the beginning you want to portray your product as well as you can. But it almost seems like if you’re selling something, it’s much more of a commodity you would want to show the negatives as well as the positives.
[30:52] Rob: Yeah. I haven’t seen software vendors do much with reviews. I guess if you’re a B to C vendor, well certainly if you’re mobile then there are going to be reviews in the app stores. But if you’re a B to B vendor, unless you’re on a market place like Capterra or some larger market place, on your own marketing websites, if you don’t have enough volume of actual reviews, you do get emails from people who cancel and they may say your product needs this, it didn’t do this.
[31:19] But that’s not really a review it’s more of maybe this product wasn’t a good fit or it’s just a complaint or something like that. So it’s a little harder to translate I think in the kind of B to B Saas space that I think about.
[31:28] Mike: And the tenth thing that you can AB test is using videos versus text and images. Virtually on any website you can take the content that’s there and translate it into a video of some kind. I don’t see a lot of people doing this to be perfectly honest. Don’t get me wrong. There’s tons and tons of video out there but it’s pretty rare for me to come across information where people are actively testing video versus text. I’ve seen it done a couple of times but there’s not a lot of yes I’ll say case studies that I’ve seen out there doing this.
[32:00] Rob: Yeah. I’ve done this once. I did it what DotNetInvoice with a landing kind of a squeeze page with a video versus a standard Saas landing page which had more text and images. And the video site or the video page just got crushed. But there could be a number of reasons for that. It just happened to do that. I ran it twice and at the time even the number of people who watched the video was less than half the people who hit the page.
[32:25] So that just killed my ability to get people interested in a trial and that’s what I was surprised by. I thought that with a short video that it would be easier to get people to watch it but my rule of thumb is to do text and images, build a standard page, start with that and from there, iterate. Because it’s like you said. It’s pretty easy to go from text and images and create a video out of that like an explainer video, a quick screen cast, something like that without even having to pay a lot of money for it. Those two things are not difficult to test back and forth once you have that video created.
[32:56] I would be interested in seeing some data on this. And I am in talks right now with my growth tech intern started and we’re trying to figure out the best way to test this with Drip because I am interested to see how that test would react to this audience.
[33:08] Mike: Yeah. I’ve definitely heard of cases where it goes the other way. I think that one that I’ve heard talked about in the past is Fog Creek where they’re selling fog bugs and they’ve tested it with Joel giving a talk and a presentation of fog bugs versus one that did not have him doing that. And the one with the video, the engagement was really high and it just absolutely crushed the text only version. I don’t have the numbers for it. I don’t think they published those but I’ve heard anecdotal evidences suggested in that particular case, one of the thoughts behind it was well people just loved to hear Joel talk which is entirely possible. I think it does depend a lot on the video that you’re offering and the audience.
[33:46] So just to recap, the first idea is to test free trial buttons and see if including them or excluding them is going to make a difference in your conversions, asking for credit cards upfront versus later on, using trust symbols. Number four is to use a chat widget of some kind. Number five is to evaluate the number of form fields that you have. Number six is add sign up fields directly to your homepage or landing page. Number seven is to test testimonials with or without some of the different information on them. Number eight is to use directional cues. Number nine is display honest versus filtered reviews. And Number ten is to test videos versus text and images.
[34:23] Music
[34:26] Rob: If you have a question for us call our voice mail number at 1-888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 149 | AuditShark and Drip Updates
Show Notes
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I are going to be talking about launch dates for Drip and Audit Shark. This is Startups for the Rest of Us: Episode 149.
[00:09] Music
[00:17] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:25] Mike: And I’m Mike.
[00:26] Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
[00:29] Mike: Well I kind of wanted to address some comments that were on the podcast blog from episode 147. There was a lot of discussion there. Some of it was based on Audit Shark and what’s been going on with it. It said basically Mike and Rob as co-host is just ignoring what’s going on, pretending everything is fine when Audit Shark hasn’t even been launched after several years. 50 so I kind of wanted to take a couple minutes and address that issue. I think it’s only fair to address it for the listeners.
[00:56] Rob: Yeah. Fire away.
[00:57] Mike: I don’t want to go too far into the details just because they’re not entirely relevant but at the same time one of the things that I haven’t really been forthcoming about on the podcast is that there’s a medical issue that I’ve been dealing with for the past several years which has severely impacted my ability to work on the product. There are some things around motivation as well that are associated with this medical issue.
[01:10] It was probably about I’d say three weeks ago that I was actually diagnosed with it. I’ve been going to a doctor for a couple years trying to figure out what’s going on, finally switched doctors and it was probably only two or three visits and a couple of tests and they were able to pinpoint it. Right now I’m on treatment for it that is a radical change if nothing else.
[01:38] Rob: Right. It was all kinds of symptoms that have impacted your ability probably not only to work on AuditShark but on your consulting contracts I’d imagine to get a lot of stuff accomplished.
[01:49] Mike: Yeah. I mean it’s totally been severely affecting my life in general. You’re encountering the same symptoms over and over and the doctor you’re seeing says oh, I think you should do this, this and this and you do those things and it doesn’t help. And he’s like well you’re not doing them enough. You’re its like there’s something else going on.
[02:04] So, eventually I just decided okay I need to go see somebody else and I did and like I said, I figured out what the problem is and I’m on treatment for it already and things are going extremely well. I mean literally the very first day of treatment, absolutely radical change. I don’t think this is the sole contributing factor. I think it’s a major contributing factor but not the only…
[02:21] Rob: Right. I think that’s important. I mean specifically you emailed me and one of the things you said is I’m not sure I want to talk about it because I don’t want this to turn in some kind of pity party and I don’t want people to think I’m scapegoating this health issue. I would’ve launched Audit Shark years ago if I didn’t have this health issue going so I think we should be clear that’s not what you’re trying to do here.
[02:42] Mike: Like I said, I feel it has been a major contributing factor but it’s certainly not the only one. One of the big things is obviously with AuditShark it’s clearly a much bigger product or project that I would not necessarily advice people going after for their first or second time out but it’s a huge, huge product. There’s a lot of moving parts. It’s very complicated and it’s just hard to put certain things in to focus for everybody in general and make it understandable.
[03:08] Rob: Let’s throw out a couple of mistakes that you’ve admitted to me and I’m sure I will have no problem talking about on the podcast. Bit off, probably a more complex product than you originally thought it would be like I’d bet in your head when you first started you said I’m going to run some auditing stuff and this can take me a few months to cobble together and then if you spent 1,000 hours working on it, it’s probably larger than you originally envisioned.
[03:30]Mike: Definitely. One of the things I did was I built a command line version of it first and that did not take me all that long to do. I was like this is going to be easy. This isn’t going to be very difficult to put something together that I’m going to be able to push out and its going to be a short timeline to get it out to market. And that turned out to be completely not the case and I made several mistakes. I started delving into a bunch of different technologies that I just wasn’t familiar with, I’ve never worked with them before. Windows Azure was one of them, SQL Azure, WCF services.
[04:00] Right now we’re kind of steeped in the middle of MVC and all these other things that are associated with it. They’re all things that I’ve never worked with before and it’s hard to estimate how long something is going to take when you’ve never done it before, anything you’ve been remotely close to it. I’ll be honest, those were just huge mistakes I would say in terms of the implementation, are they the wrong decision ultimately? I don’t think so but they certainly contribute to the amount of time that it’s taken.
[04:25] Rob: Yeah. I think they contribute. You can look at that as maybe mistake number 2 is like you’re going to build a new product and then you’re also biting off the learning curve of multiple technologies at once. They’re probably the right technologies for the job. I think in the end like you said it’s the right decision but it just meant that you spent 2, 3, 4 X what you would’ve spend if you were using the tools that you already had experience with.
[04:46] Mike: Definitely. That’s probably an underestimate.
[04:49] Rob: Yeah. I think another misstep was kind of your early focus on banks and financial institutions. You had some leads there. You talked to a few banks but when it came down to it and you finally had an app that really worked, the sale cycle was going to be really long. There was just a lot of complexity and you needed a high price point to sell into them and so you needed a much, much – I’ll say a much more valuable app. You need an app that provides a lot of value if you’re going to sell it for $10,000 or $20,000 a year than if you do if you’re going to sell it for $500 a year.
[05:16] Mike: Right. Some of it was my own fault for not asking the right questions once I was in there but even in discussing with them they’re like oh well that sounds like a great idea and I’d be interested to see how it goes. But they were more interested I found out later, they were more interested in finding out about how my business worked and how I did it because I was a local entrepreneur. It wasn’t that they were actually interested in solving their own problems. It was they wanted to know how it went because I was a local entrepreneur in their area and it had nothing to do with solving problems.
[05:46] Rob: Right. So if someone’s out there listening now and they probably have heard a lot of the steps over the past few years that you’ve talked about AuditShark, I still get questions. People come up to me at MicroConf and other conferences and say what is Audit Shark and what does it do? Can you explain it in one sentence in a way that I would understand and someone who’s not steeped in security really understands what it does like the simple value proposition. Not the engine behind it, but the value prop.
[06:17] Mike: Sure. So AuditShark allows you to get a second set of eyes on your server that essentially looks at all of the important things that you should be looking at from a security perspective but you probably aren’t for two reasons. One is you don’t know what you should be looking at and two, there’s just so much stuff that you should be looking at that it’s just not worth becoming a security expert to go look at it.
[06:38] Rob: Right. So you sent me this document. The reason I’m asking these questions is you and I have a conversation offline hashing through all this stuff and you sent me a document from cisecurity.org which is like a self funded or a nonprofit that sets up all these agreed upon security checkpoints. So if you have a windows 2008 server, maybe there are 250 different things, knobs that should be checked and they should be set to a certain thing in order for that server to be secure.
[07:02] What AuditShark does is you install it on your server, you install a little client piece on your server and then AuditShark has a web admin that I can log in and I can look to see if everything’s setup correctly. And if it’s not, you’re going to show me, at least give me a little bit of information. This where the remediation part comes in that you’ve talked about. You’re going to give me at least a little bit of information about how I should proceed to go on and fix that.
[07:27] And you’re going to have an up sell where I should be able to subscribe at a higher level or pay you a one off thing to have you or someone like another security expert on your team come in and fix that. Is that correct?
[07:39] Mike: Yeah. That’s pretty accurate.
[07:40] Rob: Okay so that’s your value prop today. So this is the thing that I haven’t understood because you’ve talked about like building your rules engine – this is like 18 months ago. Talk about how you had to get your roles engine built. And that didn’t make sense in the context of just this kind of vague auditing thing. But now that we’re really talking about nuts and bolts of what AuditShark does it’s like oh I get it, the rules engine really just looks at your control points. That goes out and looks at is this bit flipped in the registry or is this port closed or whatever. Is this security setting appropriate?
[09:09] So not only did you build the rules engine, then you went to the cisecurity.org document and you took the things they recommend and you implemented those in Audit Shark. So that the value to Audit Shark to someone like me like the Numa group or another small Saas app is not that I can install an auditing tool. The value is that you’ve pre-programmed all of the specific checkpoints in so that I don’t need to know about security. I can run it, get a report and then either fix the stuff myself if I know how or hire someone to do it.
[08:39] Mike: Exactly and it will give you a score essentially. Let’s say that it runs 250 different control points and you pass 200 out of 250. Well there’s some percentage compliance score that you’re going to have based on that. And you may go trough those extra 50 and say well, this applies or this doesn’t and you can mark them as exceptions or something like that. But basically you can boil that down to a score that says I am 85% compliant according to this policy and over time, your goal is to raise that from 85% to 90% to hopefully close to 100%. I mean there’s certain things you’re not going to do for business reasons and I’ll give you a very specific example.
[09:18] One of the recommendations that they generally have is don’t install a web server on the servers on your environment. It’s like well if you’re running a web server you kind of have to install a web server on the machine. So there are certain things you’re going to just blatantly ignore and you’re going to say I don’t need to listen to this because it’s not important and I have business reasons for doing what I’m about to do.
[09:37] Rob: Okay. So you said you’ve figured out this health issue hopefully and you’re hoping kind of the treatment that you’re on is going to sustain you and your motivation is going to stay up. You’ve been cranking on it for three weeks. What have you gotten done on the past few weeks and where does AuditShark stand today like a realistic assessment of what needs to get done to get it launch?
[09:58] Mike: Sure. I’ll give you a rundown of the things that I’ve done over the past couple weeks. I started getting familiar with Facebook ads and is it just me or the more ads you run, the more they bump up the suggested…
[10:10] Rob: I haven’t seen that. I’m wondering if you run them with different times with the same demographic, sometimes you’ll have other competitors that will bump up or are you using the demographic or have you changed that at all?
[10:20] Mike: I’ve changed the demographic a little bit but on one of them I was running every time I went to save it and this was throughout the course of an hour or two. Every time I went to save it, they would bump it up.
[10:31] Rob: Yeah. I’m not sure to be honest. I’d have to look. Now if your click through rate is going down, every time you click through rate goes down as it decreases, the minimum bid will bump up.
[10:43] Mike: I haven’t paid attention to how much it went up or down. I think it’s actually gone up so I don’t know. I’ve started exploring the Facebook ads. I created a Facebook page so I could actually do paid advertising on Facebook and get it into the news feed area.
[10:58] Rob: The news feed ads are doing a lot better than the right hand side stuff.
[11:02] Mike: yeah. I got very, very little traction on the right hand side. It did show some of them but the click through rates were abysmal. So I didn’t even bother.
[11:11] Rob: So you’re running Facebook ads to do what? Are they going to like an Audit Shark landing page to collect an email address to build a launch list?
[11:16] Mike: Yeah. I actually have two different landing pages that I setup specifically for this and basically I’m funneling people in to those two. I’m testing a couple different marketing pitches kind of for the tag line to see what resonates with people. I tried targeting just computer programmers and that did not work out. That thing just tags hardcore. People click through but they wouldn’t actually convert. I literally got zero people converting to the point I was like well is there something technically wrong that’s preventing them and I couldn’t find anything so I think it’s just the wrong demographic. They’re not interested.
[11:48] So I targeted pretty much every single security related interest that you could find through their specific interest area. I’ve got about a 30% conversion rate when people hit that page so it’s doing I think reasonably well. I did an HTTPS redirect on the page which messed up all of my referral conversions for kiss metrics so I had to undo that. I was thinking well it’s a security product. I should probably make it HTTPS and then anyone who hits it, if it gets flipped over to HTTPS then it messes up the referral. So kind of small mistake there.
[12:25] I also got AuditShark featured on beta list a couple days ago. That drove in a bunch of subscribers on the launch list. I’d say in the past 30 days or so I’ve roughly doubled my launch list. I want to triple it again before the end of September but I haven’t quite figured out how I’m going to go about doing that.
[12:41] Rob: I think paid acquisition if you want to do it that quickly and I have some other ideas for you not Facebook that I think could work well with AuditShark.
[12:49] Mike: But I am committed to actually putting forth a good effort to try and make that happen. Right now I’m working with the new UI design with my lead developer and I’m cautiously optimistic that we’ll be able to actually have it not only in place but on the build server and being pushed out directly through the web by the end of this month.
[13:07] Rob: Right. And just to clarify them, you wrote a new UI because you’re using 3 or 4 year old technology that was clunky and the legacy code was making it very hard for you and your team to build new features so you basically re factored your UI and that’s done and you’re launching that.
[13:24]Mike: Right. The other thing is that over the past four weeks, traffic has consecutively every single week been higher than it was the previous week. Now it looks like it will be higher this coming week. I don’t know for sure but it depends on what other things that I do.
[13:37] Rob: Right. okay so that’s what you’ve done in about the span of three weeks which is probably more than you had done in maybe the few moths prior to that.
[13:42] Mike: Right. That’s an understatement I think.
[13:45] Rob: Okay you’re rolling again and you’re ready to get this thing going. Where does AuditShark stand? How soon can you launch it and what’s left to get people using and paying for AuditShark?
[13:57] Mike: So I have a signup page that’s in place where I’ve sent the URL to a couple people to sign in, install it on their servers. As I said before I got some people using it for early access. The biggest complaint that I’ve seen so far is that there’s no instructions on how to remediate things. So if you look at the reports and it says X is wrong then how do I fix that? The UI doesn’t give any indication of how to do that. You basically have to go back to the policy builder or you have to go back to the reports from the source of where these control points are from.
[14:28] It’s not going to work for the customers. Essentially what I did was I went back to the policy developer and I said hey I need you to start putting these in. He put a bunch of them in. It started working out and then something busted on the policy builder and it took a few days to get that fixed. Right now it’s fixed and I’ve told the policy developer he should be able to go back in and start adding those in. Right now he’s only got 5 out of about 500 done but I’m hoping he’ll be able to go back through the rest of them and put those in place such that when the policies execute against the machines that the customers are running then they’ll be able to see in their reports exactly how to fix these things.
[15:01] Rob: Got it. So that’s where you stand today. You need to get this new version out and do you think you’re going to have it done in the next week and then is that it? Are you all integrated with stripe like you have a sign in page where its going to put a credit card token and all that stuff. All that code’s written?
[15:18] Mike: All that code is written. We ran into a slight problem where somebody couldn’t sign up for early access because Stripe was denying it but it turns out that…
[15:27] Rob: I’ve seen that too. That’s not your problem. I’m seeing that not all over the place but especially with international cards, really get problems with Stripe.
[15:35] Mike: That’s exactly what it was. What happened was the card was entered and then the bank denied it. They just blocked it and the person in the early access didn’t really know what was going on. They said well I tried it and gave him another fake card to use and they were able to get in and actually install it and start working with it and it was probably a week or two later they said hey by the way just to let you know this is what happened and it turns out that their bank has locked the account and locked all other things that they were using it for.
[16:03] Rob: Yeah. We haven’t seen it that bad but I definitely seen one or two people trying to get in. It was our post early access. It was the actual mini launch and we’re still dealing with their bank trying to get them to approve the charge. So you setup on the payment side then. So is there much else to do? Could you flip the switch? Let’s say you get this version two UI live next week. Are you going to launch next week or what’s holding you back?
[16:29] Mike: I’m trying to get the marketing message right. I really want to try and figure out exactly the type of people who I guess would be the initial core market. What tag lines resonate the most with them is really what it comes down to. Because in between the two that I’ve done so far, one of them clearly resonated but I think that the other one was on the wrong demographic. Right now I got them both targeted at the same demographic and I want to test to figure out which one would resonate more so I can do more paid advertising and paid acquisition. But beyond that, there’s not a lot that’s stopping me from just kind of flipping the switch other than the marketing side.
[17:02] Rob: Right. You want to make sure that if you send people to the site that at least a few of them are going to convert into trials. Right? That you’re communicating it well. Now in terms of your early access list, I know you have a launch list and you have some people who you have let in and are using the app. Is it at the point where you think that people will be willing to pay for it as of next week when the new UI comes out? Or do you think that there still more has to be done with remediation in order for it to be worth X dollars a month to folks who are using it?
[17:34] Mike: The remediation information has to be there. I don’t think that it’s a viable product without that remediation information there and that’s reliant upon my policy builder putting that stuff in there. I can certainly talk to them. I probably will and say hey, can you really make an effort to get as many of these possible as you can in this week and next week? Then I’m sure he’ll be able to do that that’s not going to be too big a deal.
[17:55] But its going to take him time. I mean there’s 500 of these things and he’s got to go into every single one of them individually, look it up on the PDF and say okay well what is it that needs to be added in?
[18:06] Rob: Right. 500 control points. Right? 500 settings that you’re checking across two different OS’s like Windows server 2008, Windows server 2012 and you’re checking all these points so you have to basically have some simple instructions on how to fix that or at least resources.
[18:18] Mike: Exactly.
[18:20] Rob: Got it. So sounds like from what you’re telling me is you are honing in on a launch like a true point where people can sign up, use AuditShark and that you think you’re going to be providing enough value that some people will start paying for it very soon.
[18:34] Mike: Yes.
[18:35] Rob: Got it. So MicroConf Europe is coming up in just under a month. You think you’ll launch before then?
[18:41] Mike: I would like to. The question is kind of time…
[18:43] Rob: What are you big risk that are going to keep you from launching here in the next – it sounds like 2 to 3 weeks is the window you’re talking about. What’s going to keep you from doing that?
[18:55] Mike: Right. I think the biggest risk that I face right now is how long its going to take to get the build server to push the new version of the code because it’s a completely different repository. So I’m going to have to reconfigure a lot of different things. And I’ll probably have to basically build a new build script for that to push that out. It leverages all the same data underneath so I don’t have to worry about inconsistencies there because we didn’t make any structural change. It’s basically just a new GUI over the top of it.
[19:21] But obviously I’m going to have to touch base with the early access people and say hey, just letting you know all these stuff has changed a little bit. It’s just going to take time to verify that just because there’s so many moving parts. There’s a bunch of different libraries. There’s the policy builder to which is self updating. There’s the agent which is self updating. I need to make sure that all of the interactions back and forth between work as well as all the self updating capabilities because that’s one of the key pieces that makes AuditShark easier to use so that you don’t have to go in and constantly update the agents every time there been a new build.
[19:51] Beyond that, there’s also a risk with adding all the remediation information. It’s not really a risk so much as it’s how long is that going to take and I don’t know what the answer to that is because of m contractor. He’s not full time. It’s not like he’s doing this every single day for 40 hours a week. So he’s only been able to put in probably 10 to 12 maybe 15 hours a week on any given week and I don’t know how long its going to take him to do all of those.
[20:14] Rob: Kind of thinking out loud here because we haven’t talked about this part but there’s this interesting question of is it more important to get to launch to where people can publically sign up or is it more important to get to where people are paying you for something in private? You know what I’m saying? Because if you think about how I did Drip, I did the ladder. Though we still haven’t launched. And yet I have 100 people in there trying it out. I have a handful of people paying for it and so I would almost…
[20:41] It’s funny that in the comments that we’ve seen there’s always this push towards launch like when are you going to launch it? I would actually say not when you’re going to launch it but when are you going to get that first paying customer? When are you going to get that 10th paying customer? Those are more important than having a public web page that someone can come and sign in and download Audit Shark in my opinion.
[20:58] Mike: I totally agree. It’s definitely important for me to get to the point where people are paying for it because that means they’re seeing value out of it and if they’re seeing value out of it then I can essentially backtrack and say okay well why are you seeing value out of it? And then take the words and phrases of why they’re seeing that value and use those to get more people who would also see that value.
[21:18] Rob: Right. It sounds like you could feasibly – in theory, if you were to go crazy, you could send out an email tomorrow, dear launch list, you could start running ads tomorrow and you could just send people in. They could sign up. They could give their credit card and you’re all set up to do that. They could download it. They could install it and it would do something. It actually audits their server and it tells them hey these things are wrong. And you could say look at me, I launched. But what does that do? Right.
[21:43] It doesn’t do anything because you probably know those people are going to pay because you’ve launched without the value that you need to provide in order to charge someone. And so it sounds like getting the remediation piece in there, that information in there so that people actually hopefully at that point are willing to pay, and I think that’s maybe a bigger risk than anything else you named I think. You named getting V2 UI out and I think you’re going to do that. I have no doubt you get technical issues, I know you can handle. Less than a week that will be done.
[22:14] I bet that remediation stuff will take a couple weeks like you said. The biggest question mark in my mind is once you get remediation in and will then that be enough value for people to pay because if it still isn’t then you have to think about it more. That’s where you have a big question mark of what can I do? What can AuditShark do to make it worth the monthly fee?
[22:37] Mike: Right. And actually that kind of leads back to what I mentioned a couple weeks ago in an episode where I said I’m really thinking about going with a hybrid solution where I’m essentially offering security as a service or to people such that when AuditShark finds something I can go in and then essentially analyze to figure is this applicable to your environment? Is it going to be right for you to do? How do we actually go about remediating this?
[23:02] Because right now, AuditShark is really just an information tool. It tells you the information. It doesn’t actually do it for you but there’s this concern. Obviously these are production servers that people are using. Do you go in and you just automatically fix something? If you find something that’s busted, do you undo it do you bring into compliance and it’s a very hard question to answer because it depends a lot on what you’re looking at.
[23:27] Rob: Yeah.
[23:26] Mike: Even if it’s a new user, oh, well somebody created this new user so they could run a service account for this new software that they installed. And then if I delete it then it just breaks that software. And if it was something they were legitimately using, then of course that’s not going to be a good thing. I could disable the account but I’m still going to break that piece of software that they installed.
[23:43] Rob: Yeah. I don’t see any way that you can just automatically do things like that on a production server. I wouldn’t install something on a production server that did that, that actually made changes without me understanding what it was doing.
[23:56] Mike:And the question that I’ve actually talked to other people about it is would you feel comfortable with a system where it allows you to do that? So like for example there’s this thing that’s wrong and maybe it just gives you a big red button that says this is wrong would you like to fix it? Do you click that button?
[24:12] Rob: I think there’s got to be more info though because fix it, what does fix it mean? That means revert it to what this security doc says it should be but what if I have it that way so that my connection to XYZ, API works or so that a certain piece of software works. I just think there are too many exceptions.
[24:29] Now I get it and I hope if you listen to this, I hope you get the complexity of this and that your tool audits and it actually does something valuable and it shows you information but it’s probably not valuable enough as of today for someone to pay for. So you’re moving trying to push that bar forward and saying in a week or two then I’ll at least have remediation instructions into the app. Hopefully that will be enough for people to pay for.
[24:56] I think your biggest risk is definitely not the technical issues but the question about what point does AuditShark provide enough value that people will pay your monthly fee for it. And it sounds like your hypotheses is that it is having the remediation steps in there will at least convince some people to do it and then offering that value add of you to came in and fix it for an additional cost is maybe even another step up in the value chain.
[25:22] Mike: Right. There’s definitely other things that it have thought of that I think would add value to it and would help push people into the direction of saying yes this is valuable enough for me to pay for but some of them are complicated to the point that there are entire products built around just that functionality. So it’s not like I could say oh, well let me just throw this in there and I’ll wait for that to be done before I launch and so that I know its valuable enough because some people may not care about some of those things. I really need to just get it to a point where its I’ll say valuable enough and then kind of take things from there.
[25:56] Rob: Right. And to clarify, you’re marketing towards small software and Saas businesses is that right?
[26:03] Mike: I wouldn’t necessarily say that it’s just small Saas businesses. It’s more of the businesses who are advanced enough to actually be interested in looking to protect their servers because they have something to protect. One of the things that strikes me is the people who are really interested in AuditShark have been hacked before. The people who have gone through that experience and have gone through the pain to say oh well, what happened on my server? Why did this thing get hacked? Those are the people who have this burning pain to say oh well, I need to actually do something about my servers because my entire business rests upon having these things up and running and if I lose those servers, I lose my business.
[26:41] Rob: Right. People are going to have a dedicated server because they need to be able to install an actual EXE so it’s not shared web hosting or something but it’s a dedicated typically a web server I would imagine. Sure it doesn’t have to be but my guess is the people you’re going to find using the content marketing SEO kind of the online marketing techniques you’re going to go after are more likely going to be small businesses on the web at least to start with. And then it’s like you said, its people who are aware enough that they need to be secure that you can have the notion that they need to lock some stuff down and the willingness to spend the time to do it.
[27:13] Mike: Right. I’ve seen a couple show up on my launch list over the past couple weeks who are healthcare related or financial related whether they’re banks or loaners and some things like that which is interesting to see they’re the people who actually take it seriously. If you’re just looking for a scan of your servers because you want to do it once, probably not a good fit. But if you’re the type of company that’s a little bit paranoid but you don’t necessarily have a security expert on staff and that’s really what it comes down to is if you don’t have a security expert on staff or you don’t have tools that you’re already using to help lock down your machines, then AuditShark is probably a good fit because it can at least point you in the right direction.
[27:53] Rob: Right. Because its runs a scan everyday right? That’s the thing. You install it once and then it gives updated information because you can download – I’m sure I could go online and find like a $99 scanner or a free scanner or something that will scan my server for security holes but yours is as a service.
[28:08] Mike: Right.
[28:09] Rob: And what’s the pricing?
[28:10] Mike: On the low end for two servers, its $79 a month and it basically goes up from there if you get to eight servers a month that’s $199 a month and then for 20 servers its $399 a month. Those are kind of initial prices right now. There’s other functionality that I want to add in but I don’t think that bumping up the price point would be justified until I start adding those other things.
[28:32] Rob: Right. You got to get the first customers in there first paying you for it.
[28:35] Mike: To be fair, I’m not necessarily as interested in saying oh well I have all these people paying me $199 a month. What I’m really interested in is making sure that they are getting the value out of it to say hey $199 a month is a no brainer. So like okay, well what about $299? What about $399? And then trying to find the ideal price point, no that there really is one.
[28:55] Rob: You’re not saying you’re going to raise prices. I mean I would imagine you’d grandfather people in but it’s kind of as you find it’s a no brainer for people to do it then you want to potentially raise prices on future folks.
[29:06] Mike: Right.
[29:07] Rob: So we’ve kind called out a few steps that need to fall into place for you to get to launch. We talked about the V2 UI you’re trying to get out, that’s a technical issue. There’s getting remediation in and that’s a technical issue. Then there’s kind of the risk issue of with remediation, are people willing to pay for it, does it provide enough value and then you want to hone your marketing message right? You want to get like a headliner, a tag liner or a way to describe Audit Shark in just a couple sentences basically or a couple of words frankly because that’s all you have in a website headline or an ad headline.
[29:36] You want to find a pretty good one that converts well for you. Do you feel like if you get those four things dialed in that you’re ready to basically get people paying for it and asking early access customers for money and seeing what happens and then maybe releasing it to the world assuming that they say yes?
[29:54] Mike: Yeah. I think so. The remediation piece is big. I would like to kind of pursue figuring out how to work in services is kind of that hybrid model that I talked about but I haven’t really put any mental time or effort into figuring out how that might look.
[30:09] Rob: Anything else you want to add because I think we’ve kind of done a decent run down of basically the last three years as well as what we hope to see here in the next month or two.
[30:19] Mike: I don’t think there’s too much. I understand the sentiment from people that it’s been a very, very long time and I haven’t launched AuditShark and I’m not exactly a shining example here of how to launch a Micropreneur business but at the same time I do want to point out this is not a Micropreneur endeavor. I’ve said that upfront. I don’t want to scapegoat everything on to the medical issues that I kind of eluded to earlier. But it’s been about three weeks since I started the treatments and everything.
[30:46] So I think that things are going reasonably well and I don’t see any reason why they shouldn’t continue to go well. I can keep people posted as what the progress is. I don’t think it’s going to be very much longer though. So now what we’ve talked a lot about AuditShark do you have any updates of Drip?
[31:02] Rob: Yeah I have 90 seconds of updates. I’ll keep it short. Basically nothing has changed with Drip since we last talked because I’m in the middle of 1) waiting to see how many of our trial users convert because until I see that, I don’t want to send an email to the other thousands on the launch list. In the mean time we’re just building out stuff like cancelation logic and on boarding assistance and FAQ, email support snippets and it’s just trying to get Drip to scale up just a little bit.
[31:32] We’ve had our hands full for the past couple weeks and I just couldn’t imagine emailing ten times what we emailed a couple weeks ago. We couldn’t handle it. So we’re trying to get things like support and on boarding and cancelations automated enough that we can essentially move forward. I don’t have an exact date in mind when we’re going to email that. I’ve been kind of brainstorming of do we maybe just email another 300 in a couple weeks and see how that goes? It’s a super slow way to take it but I just don’t feel like we’re there yet.
[32:02] Development is – I’ll say it’s a bottleneck the most things that need to get done are in the development queue. Marketing is now moving forward. My growth hacker intern started this week and he’s in the ground running so marketing stuff is great. A lot of stuff in place for the launch. We’re stoked about it but we just have to get – there’s more features that have to have to get done that aren’t even features like parts of the app but it’s things that just have to be done in order to bring in several hundred trials all at once. So that’s really it.
[32:31] Next week will probably be boring too because we’re just going to be cranking away at this queue of things that people have asked about. There are also things, we are building a couple things that people have canceled for and I’m concerned that 10% or 20% of the new trials will also need that feature so I’m not building them just to build it. I probably have hundred features that we could build just to build but there are a handful that basically are deal breakers for folks so we want to get those done before I also let the masses in.
[32:55] Mike: Yeah. I know what you’re saying. There’s hundreds of features that I have are in FogBugz that I just have not decided to pursue at the moment. There’s just a huge list and it’s just not worth it right now. Nice to have.
[33:06] Rob: Yeah. They’re nice to have. I’m in a milestone that just says future. It says like V 2.0 future and they’re just all assigned to that.
[33:13] Music
[33:17] Mike: If you have a question or comment you can call it in to our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 148 | Online Marketing Trends with Special Guest Clay Collins
Show Notes
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, we are going to be talking about online marketing trends with startup founder Clay Collins. This is Startups for the Rest of Us: Episode 148.
[00:09] Music
[00:16] Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
[00:24] Mike: And I’m Mike.
[000:25] 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 sir?
[00:30] Mike: I had a great weekend. I spoke at Behavior Con down in Stamford Connecticut. It was a really great conference. There were about 150 people there and they had a bunch of different researchers who came up. They had people who ran different online communities and sold information products and Hiten Shah was there Derek Halpern. I’m sure a bunch of our audiences has heard of those people. But there were a lot of people there who I’ve never heard of before but they had some really good speakers and some really good information to share. So it’s a lot of fun.
[00:56] Rob: That sounds cool. Was that mostly like a marketing conference? Is that the idea? Like to learn marketing techniques?
[01:02] Mike: Not really. It was actually more or less the study of how people buy things and why people buy things. Some of the different speakers did, was they would analyze behaviors that people were performing and then kind of backtrack a little bit, try to figure out why it is they were performing those actions. And then what sort of tweaks could they do or what things could they toggle to get people to do different things to modify or change the behavior that the people were doing.
[01:30] And naturally this really falls underneath the marketing umbrella because as a marketer you’re really trying to influence people’s behaviors to try and get them to buy things but you also want to be able to present them in a way that makes sense to people that is going to make them feel good about whatever that purchase is.
[01:45] Rob: Very cool. Sounds like fun. Well, last week when you were going to Stamford Connecticut, I was doing the Drip prelaunch. So we basically emailed about 12% of the Drip launch list. It was a lot of fun, a lot of work. Derrick and I came in the day the email went out. We were sitting here as it went out and of course nothing happens because nothing happens right when it goes out. But then the following day and the next several days, that’s when all the onboard and the support request come in.
[02:13] So overall, the conversion rate from the email went well. It went better than I expected so I’m happy with that. We tested out all the basic functions of getting people signed up in an automated fashion. So instead of me creating their account, they’re actually entering credit card, signing up through a form and then we also have steps, I call them on boarding steps but it’s just steps for them to get setup and start to get value from the app.
[02:38] We just broke the 100 registered user mark. So that includes paid customers and trial users. Obviously the majority of those are trial users at this point because we have a 21 day trial so more in a few weeks. But as I said in a tweet a couple of weeks ago starting line. Now the real work begins.
[02:53] Mike: That’s awesome. And you still got a huge list to go back to for the rest of the launch right?
[02:58] Rob: Yeah. And that was the idea is I’m taking it slower than maybe if we had our backs to the wall or we’re running out of funding or really need to get out for some specific deadline, it’s a little bit of a luxury to be able to do that because we already saw some things that didn’t go as well as I would like. I’m going to tweak some copy on the landing page some copy in an email that I realized. We had a tiny little numbers mistake on one thing that we tweaked. We’re writing some extra features that people have said that they’re going to cancel because of that.
[03:28] So if we can hone that and kind of move the app up just one more level and really remove the friction then my hope is that once we email this couple thousand personal list that it will be an even better conversion rate. It’s just kind of one more layer, one more iteration before really going live.
[03:45] Mike: That’s really cool. Today I pushed out some code in the vein of getting things done and moving things forward. I pushed out some codes live today that will help address some of the problems that I heard back from people who could blame that when they got results back from Audit Shark they just didn’t know how to fix things that were there.
[04:01] There’s still a fair amount of work to do but what we’ve got so far is we’ve started putting in the remediation info so the people know what needs to be fixed and how to fix it. And then that is being now displayed on the results that people are looking at after the audits run, it pulls back all the results and it will show them right in the UI. It will show them exactly how to fix the things that need to be fixed. And the next step will be to put some sort of a report there that they can actually click on and get a downloaded PDF or something along those lines to make it easier.
[04:32] Because right now it’s just available when you hover the things but I really want to make it so that they can download it and take a look at those things and either hand it off to someone and say hey can you do this or can you do that?
[04:41] Rob: Very nice. You know, I ran across a site. It was actually referred to me by a friend of mine, was in the most recent YC batch. He actually has an interesting startup. It’s a crowd funding commercial real estate site. It’s called realcrowd.com so if you’re an accredited investor and you just want to put in a small amount of money say $10,000 and own part of an office building in San Francisco, it’s a really interesting idea and I’ve been in there looking at what they have to offer.
[05:07] But he referred me to this site called onemonthrails.com it’s a YC company. It’s designed to teach you just enough rails to be able to build like super stripped down prototype of something. So it’s designed for people who are not developers to learn just enough to build kind of a product that maybe they could then use to either recruit a developer or to get some funding so that they could hire a developer that kind of stuff.
[05:30] Now you and I were talking offline and one of the rails is $49 and there’s 5 to 10 hours of training in it, of video training. I see this as that very first step. If you just want to figure out – if you even want to kind of experiment this because the cost is so low. But then that next step after it I think would be Tealeaf Academy. They teach you rails but they take it to another level. They teach you how to build the right production code where you could actually – I think they have a full four month curriculum that you could do one month at a time and pay for them. It’s a little more expensive but it’s a lot more rigorous and there’s a lot more to it.
[06:04] So if you’re out there, you’re non technical and you’re like I just want to learn enough code to kind of tool around, I would consider looking at onemonthrails.com and then if it really drives with you and you want to keep going and get a little better I would recommend Tealeaf Academy. They’re actually a MicroConf sponsor last year. I just want to throw that out because we get that question so often from people who don’t know how to code, should I learn to code and how would I do it?
[06:24] Mike: So have you seen the Chromecast devices that Google quietly started selling a few weeks ago?
[06:30] Rob: Indeed. I bought one the day it came out and it came a couple weeks ago.
[06:35] Mike: what do you think of it?
[06:36] Rob: I like it. I have watched – I’ve never had a way to watch YouTube videos on TV because I have a Roku and they don’t have a YouTube app for Roku. So that’s been really neat to be able to just pull out my phone and basically sling YouTube videos up to the screen but it would be the ideal travel device because it’s as big as a thumb drive and that’s all you need, is a Wi-Fi and a thumb drive.
[06:58] We have a small little apartment that we go to near the coast and for that it works really well. I just plug it in the back of the TV and it can play Netflix and YouTube natively without really much interaction.
[07:10] Mike: I was a little disappointed. I wasn’t terribly impressed by it.
714 Rob: How are you using it?
[07:15] Mike: Initially I was just trying to get the thing working and the instructions just didn’t really seem to make sense. I got it installed and up and running on my Wi-Fi and then I’m like okay, now what do I do with it? I was in the chrome browser trying to add it as a device. It wouldn’t let me and it turns out it’s not a supported device. You can’t add it to chrome browser. I’m like are you kidding seriously? And it turns out it really isn’t. You have to be using it from some sort of a mobile device. It doesn’t work from your chrome browser like a desktop.
[07:45] Rob: No, it works from my Macbook air. I mean it’s not a desktop. It’s a laptop.
[07:48] Mike: That’s the problem. Because you’ve got Wi-Fi on there. Because I don’t have Wi-Fi on this even though it’s all connected in the same network, I couldn’t do anything.
[07:54] Rob: I see. It’s only over Wi-Fi. Yeah, that actually makes sense. Dude, who plugs in anymore? I haven’t plugged in to a cable for years except for when we do the podcast.
[08:05] Mike: What was really odd to me was I was able to do this like its walked me through the process of setting it up and I was able to kind of initialize it through my desktop browser and then it just stopped. It wouldn’t work after that. I got everything setup and then like I was trying to send stuff to it through the browser and it says you can’t install the Netflix app because you don’t have any devices. I’m like I just set it up. What the heck’s going on?
[08:30] Rob: It sounds like you had a weird news case to be honest.
[08:32] Mike: Maybe. Could be right but it seemed really awkward to me that there was nothing anywhere that said you need to set this up on Wi-Fi.
[08:41] Rob: Right. For me it was seamless because I was on Wi-Fi and I’ve had the setup process, it worked for me so it was just easy enough. I thought they did a good job with it. And then I was able to frankly – I watched a bunch of movie trailers because that’s what on YouTube that I’m going to be interested in.
[08:55] Mike: You can’t get it on like a hotel Wi-Fi because they have the pop-ups and stuff. I’ve been able to get my Kindle on a hotel Wi-Fi before because I think there’s something in the routers that recognizes when a device can access those types of things and when it can’t. And like the Kindle just logged in and it just kind of bypasses those things even though all the other devices that I have, it’ll pop up like my iPhone, laptop and stuff. They popup and say hey please enter such and such and log in but I’ve had my Kindle and put it on the hotel network before and it didn’t even ask.
[09:28] Rob: That’s weird because I brought my Roku to many hotels and I’ve never been able to get it on. You have to buy a device – basically it’s a small travel router that you get that travel router onto your laptop and then you use that Mac and the rest to hook into your Roku. It’s like a pole production that I never went to but I found that’s the only way to do it. I wonder if the Kindle has some kind of work around or fancy logic to be able to do that.
[09:50] Mike: It might just be that it says it’s a Kindle and doesn’t have a browser when it connects to the Wi-Fi and maybe there are certain ones that are able to insert and ones can’t.
[10:00] Rob: So we got a pretty cool email this week from Jordan Sherer. He said I’m a Micropreneur academy member and recently full time boot strapper. I wanted to drop you a note today and let you know where the Micropreneur academy has taken me the over the past six months. I’ve been bootstrapping small software products on the side since 2007. It’s been a lot of fun and was the perfect avenue for me to explore things outside of my day job. And of course learn a bit about building products that solve problems and marketing to customers that need a solution.
[10:24] My main desktop app had done well over the years and I was finally able to pull the record and jump out on my own. This is where your podcast and the Micropreneur academy came in and I finally took the leap back in February. Thanks for all your support (even though it wasn’t directed directly to me). After February I tried to figure out where I wanted to take my business. After evaluating a couple of ideas I finally hit a sweet spot with a landing page describing my perfect Google reader replacement called Minimal Reader and that’s mnmlrdr.com.
[10:59] My offering resonated with a lot of people. I had thousands of people sign up and say that they would for my offering. This was definitely encouraging so I pursued development and brought it to life. The product has been complete since June and been an early access since July and I’m finally launching publicly this week. Just wanted to say I really appreciate what you’ve done with startups for the rest of us, Micropreneur academy and MicroConf. It’s been encouraging and a big help in pursuing my dream of growing a software academy.
[11:24] I actually bought a lifetime membership. He has a limited number of lifetime membership to minimal reader. Because I haven’t been widely into RSS for a few years so when Google reader shutdown I wasn’t really disappointed. But I have realized I do want to keep tabs on a few blogs still. They’re kind of these key blogs. What I like about minimal reader is it is super minimal. It’s just black on a white background. It’s got enough features to make it work but there’s not a lot of design to it and it’s responsive. So I log in using the exact same log in through a browser both on my phone and my laptop.
[11:55] I don’t know how long he’s going to have that. It’s like $99 for a lifetime and then he’s going to do a few of those to raise some money to get started and then shut that down. And after that its $36 a year that he’s asking for.
[12:05] Mike: that’s really cool. Great job Jordan.
[12:07] Rob: Yeah. Thanks for writing in and letting us know. And I’ve actually already added Jordan to our success stories page that you added to the website. I think we have a handful of folks on there. This is basically people who’ve listened to the podcast and or attended MicroConf and or have been in the academy and have quit their jobs. I guess we only have four right now but I can list another probably 20 off the top of my head so maybe I’ll email those people and start getting permission and expanding the success stories page.
[12:33] Mike: yeah definitely. That’s would be great.
[12:35] Music
[12:38] Rob: Today we’re going to be talking about online marketing trends and tactics with a guest named Clay Collins and Clay has his own podcast. It’s how I heard about him. It’s called The Marketing Show. And he was gracious enough to spend a half hour with us really diving into several different tactics that he’s learned. I love his unique insight that he has into conversions landing page because he runs a company that’s essentially a Saas business that is a landing page provider.
[13:05] And so he has access to a lot of data that the rest of us don’t have. So we really wanted to bring him n the show and both enlighten us and the audience on online marketing trends for 2013 and 2014.
[13:12] Music
[13:18] So I’d like to welcome clay Collins. He is the founder of Lead Bright which is a software company that makes web applications to help you grow your audience. Their flagship product is lead pages. It’s a Saas app and it’s the easiest way to create landing pages online. I first heard about Clay from his podcast. It’s called The Marketing Show. And in my opinion its one of the most underrated marketing podcast I know of. It’s super tactical. Is it your co-founder clay that you’re on there with?
[13:44] Clay: It’s actually just one of the people that we work with here internally. His name is Andy. Super sharp guy, runs a number of different business. We’ve decided to do a show together.
[13:54] Rob: awesome, yes. So they have just kind of open conversations about online conversion and Clay is just steeped in the world of landing pages, email marketing. I think he comes out of info marketing background and he’s in software now so he has a lot of skills that a lot of software people don’t. It’s a real pleasure to welcome you on the show today clay.
[14:12] Clay: Rob and Mike, it’s great to be here.
[14:15] Rob: Awesome. So what we’re going to do today, we’re going to be talking about some online marketing trends. What I’ve done is I’ve gone through a number of Clay’s older episodes from probably the past 4 to 6 months. And I had notes in my notebook of things they have talked about. It’s a real kind of poignant lessons and some interesting tactical things.
[14:33] So I’m going to throw out a topic. I’m sure you’ll remember talking about it already and then probably ask some questions around that and Mike and I will just bat it around. The first thing is you made a statement you said design is the new copywriting. Basically indicated in an episode you said that design is more important today than it has been in the past for conversions. Tell us a little bit more about how you’re seeing that and what that means to us.
[14:57] Clay: Yeah. So there used to be this phrase in direct sales marketing and people would say if its ugly as hell, it will probably sell. And what they meant then was that you really didn’t need to focus on design, that if you focus sort of the bulk of your efforts on copy writing and making sure that you really nailed the messaging and nailed the hooks and the bullet points and hypnotic NLP wizardry what not that that is what was going to drive conversions for you.
[15:26] I think for a long time that was actually true until we started developing sort of as an online culture the sense of what looks scummy and what didn’t. And then at that point, design kind of took over. I don’t know exactly when that happened. So I was listening to guy I know, this acquaintance Vishen Lakhiani who runs a publishing company called Mind Valley and he was telling me about an experiment that he did. He went out and hired a top flight copy writer. I believe he paid around $25,000 to have a sales letter created from scratch so you have that person rewrite their sales page.
[16:05] And then he took his existing sales page and he had a top flight designer redesign that page. And what he found was that the top flight $25,000 copywriter showed no notable improvement when they split test sort of the old version versus the new version. So he spent a lot of money, didn’t get an improvement. However, when he took his sort of in-house minimally trained copywriter that I guess started out as an intern and rose through the ranks and had hat page redesigned by a top flight designer, conversions went up about 30% on the sales page.
[16:40] I started thinking about that and what was going on. It was around that time that we in our own company hired a designer, a full time in house designer and we just found him on 99 Designs. It’s a best way to interview a designer and anyone who’s bidding for a job on 99 Designs just like necessarily looking for work. Like why would you subject yourself to the whole process of 99 Designs if you weren’t somewhat willing to put yourself out there in order to get some work.
[17:06] We got a designer and we started just systematically going through all the pages in our business and redesigning them changing no code, doing nothing else. And we had just a huge growth in our business as a result of this and a huge lift in our conversions. What was funny is that the designer, I had to communicate almost nothing to them other than here are four other pages that I think look good. Can you make ours kind of look like those?
[17:33] So I did that and I had hired copywriters in the past and it just took a whole lot of just going back and forth with them about the way things are communicated and the subtleties of language. I just came to this conclusion that is far cheaper, far easier and just far more effective to grow your business by focusing on design rather than conversion and good designers now on this global market place are just like incredibly easy to find relative to copywriters and relative to developers.
[18:02] Mike: Do you think a part of that is just that there’s a – I guess I’ll say a minimum barrier to doing the copy versus design where it’s very easy to look at design and this design looks just positively scamming versus this other one which looked really sharp and professional. And when you get into copywriting it’s very difficult to differentiate between somebody who came in and has a lot of education and has a lot of background in doing copy versus your Joe off the street because at the end of the day English words are English words. But there’s a huge difference that’s very visual between a good designer and a bad designer.
[18:40] Clay: Yeah. I think that you can almost immediately tell almost in a deep gut level whether or not someone is a good designer. With copy, a lot of times you can’t tell until you get the split test data back. So even being able to iterate and judge the fruits of someone’s work it’s very difficult with copy and a lot of times, even the best copywriters don’t create a notable result even though they’re charging quite a lot. It takes a lot more domain expertise to nail the copywriting and certainly it takes a lot of training in order to be a developer.
[19:19] But a designer can be a designer for a whole number of industries and it doesn’t necessarily require domain expertise for them to create lift in conversions. They simply need to make it look better. I’m not undermining what designers do. I’m doing quite the opposite. I’m emphasizing it. So yeah, I think what you’re saying is spot on.
[19:36] Rob: I’m curious about the redesigns you mentioned that you hired the designer and had him do and saw some increase in conversions. Were those on the landing pages that you have or was that inside your app itself?
[19:50] Clay: It’s actually both. One of the things we found both with copywriting and with design is that good marketing is often merely a matter of highlighting the things that are most important to highlight. And one of the things that copywriters do is they’ll make sure that things that are bold are bold and things that should stand out are in some cases annoyingly highlighted and bold and underlined and italicized.
[20:18] So what you’re doing with the design is you’re merely highlighting things that are advantageous for you as a business to highlight. And so for example inside of our apps, we highlight things that differentiate us. We highlight things that are advantageous for us to highlight. For example with lead pages we handle, we make it very easy for someone to deliver a lead magnet.
[20:42] So someone opts in and we will deliver that lead magnet. Someone doesn’t have to go in and create a new form and then create a new list then upload the file and then create a new auto responder for that list. Like you just uploaded to lead pages and we just handled delivering it and you can send everyone to your central house list and we’ll handout the bribe. And when you do that or the lead magnet and when you do that at the very bottom of the email, it says digital asset delivery provided by lead pages like at the very, very bottom.
[21:08] So whenever anyone uses that, we kind of get a mini little – there’s not a link or anything but we get a little mention there at the bottom of the email. So it’s advantageous for other people to use our digital asset delivery service. So we do do things like highlight that feature not only because it saves people a whole lot of time but also because it helps us out quite a bit as a business. That’s only something that we’ve recently started doing.
[21:34] Originally what we were doing was – sort if it’s all in our landing pages and it was simple things like I’ll just give you some topics. A call to action should be above the fold. They should be visible without you having to scroll down. That’s a big one. The color of call to action buttons should be yellow. We’ve tested a whole bunch of different colors. When you have an opt-in box or some sort of action you want people to be taking, those just do much better like time and time again when the call to action is on the right side of the page as opposed to the left side of the page, just some basic things like that.
[22:09] We also experimented with hiding the opt-in box and only showing it when someone clicks on a button and then a pop-up shows. So there’s a lot of design things that we did that I just created some style guidelines around and rather than having to explain some complicated series of messaging and branding metaphors and instructions, I really reduced it to use two separate opt-in boxes. Use this color for calls to action. Have things on the right side instead of the left side if you do need to put the call to action on side versus another.
[22:42] It was super easy to communicate these things to a designer and getting the same level of effectiveness out of a set of rules. That would be so much more difficult to do that with copy.
[22:52] Rob: Thanks for dropping that awesome tactical knowledge there.
[22:55] Mike: I have a question about the color thing that you were just mentioning having yellow call to action buttons. Is that specifically related to your site because of the color scheme you used or did you test it against a variety of backgrounds and find that in general yellow works better than say orange or blue or whatever.
[23:11] Clay: So it is a mixture of yellow and orange and it works better provided that it’s not ugly. So if it clearly conflicts with everything then it doesn’t work because it doesn’t look good. But provided that it does work with the color scheme in some way, that it doesn’t out right conflict with the color scheme, we found that yellow works better than red, than blue, than green. In some cases these changes are 2% to 3%. In other cases it’s more like 15% to 20%. But we have found this as a consistent result.
[23:44] Mike: I was kind of curious because I’ve seen a lot of call to actions which are either yellow or orange and I just wasn’t sure whether that was an across the board rule or whether it really depended a little bit more on the color scheme that you’re already using.
[23:58] Rob: What else is interesting is you look at Amazon.com and you look at their add to cart button and that’s always been some type of orange. They’ve changed the shape of it now but it’s still like a yellowish orange. And even their wish list, add to wish list button is a lighter – it’s almost grey but it’s yellow in some places. I haven’t even thought about this because I never did split test button colors on Hit Tail but all of our buttons there are an orange. It does fit on the color scheme. It’s a blue and orange color scheme but that’s something good for me to take home.
[24:28] Clay: Yeah. I think there are findings like this that are really more stable than others. For example, for a long time, the best opt-in lead magnet was like free reports or white paper something like that. So everyone was giving those away. And then at some point when online video was big and sort of the average person could produce a decent video, people realized that if they gave away some sort of video course or series of videos or a video lesson that actually people would be much more likely to opt-in for that. So then everyone was giving away videos and that was working better than free reports.
[25:07] And then someone found out that if you just write something on a piece of paper by hand like a flow chart or some kind of diagram and scanned it and it just looked kind of jenky and handwritten that actually would work the best because it was a pattern interrupt. It was different than what most people were seeing so it’s unique.
[25:25] In marketing, there’s times when there’s like arms races when people are just jumping from thing to thing and everyone becomes immune to the new thing until someone figures out something else that’s different that works and everyone jumps on that bandwagon. And so far, the button color thing seems like it’s not one of those bandwagon things that it’s actually a stable consistent finding that isn’t a subject to marketing fads.
[25:50] Rob: Awesome. That actually leads us really well into the next topic we’re going to talk about which I’ve titled opt-in rewards that work and this is again from another podcast episode you talk about. Talk to us a little bit about what used to work and what isn’t going to work moving forward and then maybe trends you see of what is actually working better from now in the future?
[26:09] Clay: It seems to be – we look at a whole bunch of different landing pages and opt-in bribes and things like that and we’re fortunate with lead pages that we can actually see platform level data. So we can for example with lead pages test button colors across the entire platform and run like across platform split test. We haven’t been able to do this with lead magnets justly yet because it’s kind of hard to figure out how to run this test but it’s something that we want to do.
[26:36] But individually and certainly in our business, we found a shift in what works. When it comes to lead magnets, people are wanting tools and resource lists and things that require very little amount of effort but get a maximum amount of result. So things like spreadsheets where you can plug-in something and get something out of it that’s useful. If I ran a cooking site, I would want to give away a list of recipes right? Because you don’t have to read a lot. You don’t have to process a lot of content. You don’t have to synthesize much. There’s just sort of a list of things on a page and you look at them and you make the recipe, follow the instructions.
[27:18] What’s working really well right now are resource lists. So lists of resources you need to get results in your specific area. I sort of realized this when I was looking at the best selling issues of magazines like back packer magazine and golf digest and photography magazine and reliably with these magazines the best selling issues of these magazines are the gear guides right?
[27:43] So the guides where they’re telling you the top golf clubs to get if its golf magazine to hit a long drive or the best cameras to get or the lenses to get and the tripods to get. People love this stuff. It’s because as humans we have this belief that if we only have the tools the pros had then we would get the same results that the pros have. And in a lot of cases that’s actually true. So what we found really works is just a page or two listing the top resources that a new person or someone approaching a topic should acquire to help them get results as quickly as possible.
[28:19] So life if you’re at a yoga website, you might want to list for a man and a woman what shorts should you buy, what shirt, what yoga mat to get. If you don’t have access to a local yoga studio sort of what DVD set to start with? Because this is really just what people want. They don’t want to have to figure out all this stuff and if you just give someone a list of resources that give them a reliable proven starting point and it’s based on your research and your expertise, that kind of thing can get an insane opt-in rate compared to some like 50 page long eBook that someone has to pour over and carve out time to read.
[28:56] So generally things where people can consume a very small amount of information and get a fairly significant result but software lead magnets do incredibly well. I remember back in the day when I was blogging quite a bit, I remember writing a series of 1500 word blog post where I would painstakingly make some point that I thought was so important. I would get a whole lot of comments but I wouldn’t get a lot of people opting in.
[29:27] Once I spent an entire month writing an eBook and I spent three weeks once making an entire video course showing people how to do something and yet a WordPress plug in that one of our developers made over a weekend blew all of those away in terms of list growth and the number of opt-ins we got because people just value tools. People are sick of long winded eBooks. They’re sick of 15 minute long talking head videos and they just want something that’s going to give them immediate value and isn’t going to require a whole bunch of their time.
[30:02] Mike: That sounds a lot like giving people the information versus giving them the actual tools to do something. Obviously if you give them the information they can do it themselves but if you give them the tools to do it then not only are they a lot more likely to do it but its going to take them a lot less time and effort to do it. So it seems like those things would be much more valuable to them and would therefore convert a lot better.
[30:24] Clay: I think you hit the nail on the head. I think done for you just really out performs do it yourself and I think that’s part of the reason why developers are in such high demands right now is because we are craving as a society tools that automate the information we’ve been given about how to do things. So whenever you can automate an instruction set, that just has a much higher value than just giving someone the instruction set. I think you’re absolutely right.
[30:55]Rob: The next one is email on mobile devices. You mentioned in an episode that over 1/3 of emails are opened on mobile devices. I looked it up today and Litmos is saying of their emails that it’s about 44% so it’s growing. Its going to overtake the majority of emails certainly within a year or two are going to be opened on mobile devices meaning tablets and mobile phones.
[31:17] What are the implications of that for those of us who have been basically been doing email marketing and know how to do it, I’ve been doing it for years. We’re used to larger screens and used to the same basic strategies. What do we have to do differently for mobile devices?
[31:32] Clay: Yeah. A few things. I think the first is you have some big huge complicated template, don’t. If you want some sort of graphical branding or HTML branding on your emails, kind of have something thin and minimalistic and that’s at the top and that sort of establishes whatever you want to establish by having a graphical email in the first place but make that sort of limited because its affecting your screen real estate so that’s one thing.
[31:58] The second thing is that just like you want calls to action to be above the fold, make sure the calls to action in your emails are above the fold that they are clearly visible without anyone having to scroll down on a mobile device. Right? Usually you want to get the click without someone having to move through the email. They should be able to do that without reading a whole lot of information.
[32:22] So don’t have huge overly graphic email templates that you use to send out your newsletter. Make sure the call to action is above the fold. Those are sort of the two rules of thumb and make sure that when someone does click on the link that they are sent to a landing page if you’re looking to get an email address or get someone to take some kind of action, make sure you are sending them to mobile responsive landing pages and that those landing pages don’t require them to input a lot of data.
[32:49] So if someone’s coming from a mobile device, maybe you shouldn’t ask for a first name last name phone number address, email address, location, zip code, nobody’s going to fill that out from their mobile device. Maybe just ask for an email address and then you can follow-up over time by asking for more information or you can move that to a phone call. Maybe just ask for their phone number but I would encourage you to not ask for more than one piece of information when someone’s coming to a landing page from a mobile device.
[33:20] Rob: Awesome. This is especially relevant. My newest product is called Drip and it’s at getdrip.com and we’re launching next month and one thing we really focused on is putting together a single template. We don’t even offer fancy templates at this point. We may never offer them because this is focused on email marketing, not email newsletters. And so it’s good to hear you say that. I’ve always despised that fixed width newsletter templates that have the fancy border around them and now I’m on my iPhone, my finger is over the delete button when those things get there because you try to resize them and the text stretches and it doesn’t wrap right and so it looks really goofy on a small screen.
[34:00] Mike: One of the things you brought up was about having things up above the fold. I’m just curios what your thoughts are on how much that applies to mobile devices and also to desktops general. I was just at a conference called Behavior Con this past week. And one of the researchers who had presented essentially said that at this point, having things above or below the fold doesn’t matter nearly as much because people are doing things on their mobile devices and when they’re browsing web pages they basically expect to have to scroll up and down.
[34:29] So they’re much more comfortable and much more sued to scrolling up and down. I was just curious what your thoughts were and what you have kind of seen out in the field.
[34:38] Clay: Yeah. I think there are a lot of opinions out there. I can tell you that our data has consistently shown that generally speaking and there are huge diversions on this. The more work you require of someone to do something, the less likely they are to do it. Unless you’re being very intentional about requiring more work and its sort of a strategic component of your marketing. We found that when you’re in the context of a trust relationship that you have with someone on your email list, you’ve built up a relationship with them.
[35:09] So given that they’re sort of a context of trust, you are an effective copywriter so you know how to communicate the value of what you’re providing in a very short period of time if you have the links above the fold you’re going to do better. It may or may not be true that people expect to do more scrolling. I think that’s probably true. I don’t think it’s accurate to say that it doesn’t make a different what so ever whether or not the links are above the fold. Certainly in our experience it does make a difference.
[35:36] Rob: Yeah that’s been my experience as well. That could be changing. I guess Mike was saying that the person at Behavior Con was saying that now that mobile is around, people are so used to scrolling but in the past as I was testing it, to me it’s a rule of thumb at this point until I see data otherwise I’m going to have a hard time moving my calls to action below the fold.
[35:54] Clay: We’ll often times do both. So we’ll have a call to action at the very top sort of below the headline and the core messaging and sometimes we’ll have a bunch of bullet points and we’ll have a call to action at the bottom. It’s not really in my opinion one or the other often you can do both. I think generally speaking most businesses have a variety of personas on their website.
[36:17] There’s been this debate like should I give away a free course or an eBook, something like that or a webinar opt-in and we’re like do all of them. Address the variety of psychological profiles that could end up on your website and do various things. I think it’s the same with calls to action. I think it’s the same with the emails. Have a call to action at the top of the email and have one at the bottom so when they’ve scrolled to the bottom and they can no longer see the top that they don’t have to scroll to the top again to hit the link.
[36:46] So I think when in doubt, put more calls to action in your marketing pieces provided that it isn’t overkill and it doesn’t become obnoxious and so in your face that it actually repels people.
[36:57] Rob: Alright. Good advice. Clay, well we’re getting close to wrapping up here. I have 4 or 5 more topics in the outline. If people want to hear about those, these are things like whether you should ask for first name in your opt-in forms. I’m betting a YouTube URL in an email and why that’s a really good way to get a lot of YouTube views as well as a definition of a never ending sales funnel. If people want to find out about those, that they can subscribe to the marketing field podcast and I’d say go back 6 to 12 months and listen through those and you’ll hear all about that stuff.
[37:27] We only have time to tackle one more thing and that is a two step opt-in process. I have never heard of this. You mentioned that you’ve been doing it. Tell us what it is and why it’s working so much better than traditional one step opt-in?
[37:40] Clay: Yes. So I have this realization and I have these hypotheses that when people go to a website or to a landing page for example, they’re making a determination about whether or not it’s a giving page or a taking page. And when all they see is front and center is an opt-in box and they probably never been to that site before, they’re probably going to assume this is a taking page. So how can we change that?
[38:08]And one thing that I tested that ended up working incredible well is taking that opt-in box and only displaying it after someone clicks on the call to action button. So let’s say you’re doing a webinar. Rather than having the webinar opt-in box right there front center on the registration page, have a button that says sign me up for the webinar and when people click on that button you immediately show a popup that allows people to opt-in.
[38:40] I was at a farmer’s market the other day and someone was selling t-shirts at the farmers market. They didn’t have my size. I wore a medium. I went up to the guy and I said hey do you have the shirt in a medium and he immediately reached below the table and handed me a medium shirt. And I was a little shocked at how quickly he did it but because he gave it to me immediately when I asked for it, I ended up buying somehow. It was almost like this hypnotic response. It’s kind of the same way with a two step opt-in form.
[39:10] It creates a yes ladder. If you say yes to clicking on the button that says sign me up for this event, then the probability that you’ll say yes to opting-in as soon as the opt-in box appears is much greater. If you can get someone to commit at a low level of commitment by clicking on that button, the likelihood that you’ll commit at a greater level by opting in when that opt-in box appears as a popup is much greater.
[39:36] Usually when you’re on a landing page, you have to fill out the forms and then you click the submit button. But what if you added an additional step of having someone click a button that triggered a popup that allowed someone to opt-in right? It just puts a really easy step before a more complex step or a more sort of difficult and I guess emotionally taxing step.
[40:00] So there’s a variety of reasons why this works. Another reason why this works is that when you click on a button that says register me for this event and a pop up appears where you can actually fill out a form and opt-in, it really brings the decision to a head. Usually when you’re just looking at a landing page, you can browse the content on the page. You can look at different things and you might leave the page or click on a header link and leave that page.
[40:27] But when you click on a button that says register me for this event and a popup appears with two or three fields that you fill out and then submit, you have to make a decision one way or another about whether or not you’re going to opt-in. you have to make a decision. You can’t just ignore that all together. And by getting a much greater percentage of people who visit a landing page, to make a decision one way or another about whether or not they’re going to opt-in you get a lot more opt-ins.
[40:58] If everyone in the entire world had to make a decision about whether or not they were going to opt-in to your landing page, you would have the world’s biggest email list. But because most people don’t make a decision one way or another when they end up on a landing page, you lose a lot of people. So there’s a variety of reasons why this works we found with our pages we’ve gotten huge bumps in opt-in rates just by adding two step opt-in processes. And sort of the average that we’ve seen is about a 30% relative increase in conversion rate by taking one step opt-in processes and making them two step opt-in processes.
[41:33] Rob: So let’s say someone has a Saas app or a website selling software of some kind. We’ve encouraged them on this show is they should have email opt-ins on their blog and sometimes on their homepage and all that kind of stuff. For a software company, more of a Saas business, what kinds of upfront question or upfront thing would they put on that button? Or what would they be asking to get that first step of the opt-in.
[42:00] Clay: So you’re asking what would be the text on the call to action button.
[42:04] Rob: Yes.
[42:05] Clay: So if you’re doing webinar and I encourage everyone who’s in the Saas business to be doing webinars to drive sales. It could just be like quicker to secure my spot. But if you’re offering a white paper, the best text we ever have found is just the phrase download now. It used to be the winner of all these split tests was the phrase free instant access. There was something about the phrase about combining the word free and instant and access and yielded the highest opt-in rate for a white paper whatever you’re giving away provided that its downloadable.
[42:41] But recently we personally found a doubling of the opt-in rate by changing the words free instant access to download now for white papers and such. It all depends on what you’re giving away. I prefer things that are downloadable because we have this psychological need as humans to possess stuff. If it’s in the cloud and it’s not on our hard drive, we’re not possessing it.
[43:04] If you can give something away that someone can just have tucked in a folder somewhere like even if they never opened it in the rest of their lives, the fact that they can download something and put it on their hard drive to keep and to hold and to hoard or whatever they’re going to do with it, that’s just really powerful. So if you can put the phrase download now on a button, please put that on a button. That’s just working incredibly well.
[43:27] Rob: Yeah when you said there’s throw phrases, free instant access to me sounds just so overplayed now. I feel like I saw that on buttons for years and download now absolutely, I would be much more likely to click on that. That’s awesome. Thank you.
[43:40] To be honest Clay, this has been a real pleasure. You’ve brought a lot of very actionable – that’s what I like about the stuff I’ve heard from you is its super tactical. It’s very focused and some people could say these are like little things, little tweaks you could make but I think they’re big tweaks. These are the things that really once you get a business going, can really take you up those double digit conversion rate increase type things. So I really want to thank you for your time. Mike and I, we know you’re busy running your company Lead Bright. How would folks get in touch with you?
[44:10] Clay: I would encourage people to go to blog.leadpages.net and about once a week we give away a tested and proven landing page template that folks can download and add to their website and do whatever they want with. All of these templates that we give away are ones that we’ve tested internally. We’ve used on multiple client and customer site and that we’ve sort of proven to work.
[44:36] So we provide kind of a free downloadable lead magnet to people on a weekly basis via our blogs. So that’s a good place to find the latest of what we’re doing in terms of our conversion lab. So that’s probably the best way to find me.
[44:51] Rob: Awesome. Very cool. Well thanks again Clay for coming on and yeah, I guess we’ll be chatting with you soon.
[44:58] Clay: Absolutely. Thanks Rob. Thanks Mike.
[45:59] Music
[45:03] Mike: If you have question for us, you can call it in to our voice mail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. You can subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 147 | SaaS Pricing, Segmenting Customers, Selling Before Coding, and More Listener Questions
Show Notes
Transcript
[00:00] Mike: This is Startups for the Rest of Us episode 147.
[00:03] Music
[00:11] 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.
[000:20] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
[00:24] Rob: The word is Drip is in prelaunch. I have 310 emails going out and it’s basically kind of a chunk of our launch list and we’re doing as a test just to make sure that everything works and all the sign up and the trial emails and billing and all that stuff works but it’s pretty exciting. I have a four email launch sequence that I use often and two of those emails of have gone out. So tomorrow is the email that actually lets people in and gets them start using Drip. So it’s kind of the first time that we’re launching to a group of people rather than doing one off stuff.
[00:54] Mike: Yeah, that’s really nice to see.
[00:57] Rob: I want you, AuditShark here like next week or two weeks from now, that’s where I want you to be.
[01:02] Mike: Because I’ve been thinking a lot about how to deal with the issues for remediation. Just because doing things on an automated basis to like remediate them is kind of a scary thing and I’ve actually been looking at putting together kind of a hybrid model where the software does some stuff and then on the back end, there isn’t software that automates it but I can go in and do things myself. So essentially have the software cost one price and then if you want remediation in addition to that, I can charge you an additional fee on top of what the software costs and we’ll go in and manually take care of that.
[01:35] I’ve got a couple people who – there’s one guy that’s really good at operations stuff. He’s worked in a lot of larger production environments and so have I. So either one of us could actually go in and make those fixes and understand the implications of all the fixes that we’re doing. Of course that becomes something of a hybrid offering where you got some software and some services. But I think that because there’s a combined services and software offering, I could actually charge a significant higher price to do that because people are going to understand oh well here’s the cost of the software. Here’s the cost of the remediation effort beyond that and it does bring up the price of the overall offering.
[02:12] You know as well as I do when you first start launching a Saas product that the ramp up is going to be slow and I think adding in services like that is going to ramp up that revenue stream very, very quickly.
[02:21] Rob: Yeah. I think that’s a really good idea. For those who are listening, if you don’t know what remediation means, AuditShark finds problems or confines security issues and remediation means fixing those. And you’re talking about doing some manual work where a person has to be involved and you’re right. It raises your price point but it means you provide so much more value because if you think about what AuditShark probably does is it will add items to my to-do list as a server owner.
[02:46] And this is the same problem I saw with HitTail. It’s the same problem you see with a lot of apps that will cause churn like people feel guilty about it. They don’t want to pay for something that is not actually fixing something. It’s just telling them something needs to be fixed. There’s a big, big difference between those two end points.
[03:01] So I mean I’m doing it with Drip. We have a concierge service where we will write someone’s’ entire email sequence for a fee. We did it with HitTail where we automated the article publishing. We have writers who write articles for people to take that off their to-do list. It’s adding human powering your Saas app basically and it’s taking up the next level both in price point and in the amount of service that you’re able to offer.
[03:24] So yes I fully support that and I think is the future trend because so many of the low hanging fruit Saas apps are being built and they’re done. How much more can you do with invoicing and accounting and these other things? I think that over the next few years we’re going to see these hybrid approaches because most software developers don’t want to do them because they’re messy. We want everything to be code. We want everything to scale.
[03:47] So adding that human powered side to it, you just have such a chance to grow revenue faster and to offer so much more value like exponentially more value to your end customers than you can just do with code.
[03:57] Mike: I think the other significant advantage of doing something like this is the fact that you may not know upfront what its going to take to do all that remediation at least from my product there’s obviously different problems that needs to be solved for other products but for those, there’s going to be a different manual process in place. And you’re not going to necessarily know how to handle that in every situation automatically. So you’re going to have to go through those manual steps.
[04:20] You sometimes have to do things, they just simply don’t scale. And then once you get a handle on how to do them, then you try to automate them and I think this is just a natural extension of that is to be able to do these manually, try and figure out what sorts of things we going to regularly check to make sure we’re not breaking other stuff. And then make those changes, test everything, make sure everything’s still working and figure out what those additional things are that need to be done to make sure it’s still working and automate those down the road.
[04:46] Rob: Or you have a Saas app, you’re thinking about one, ask yourself this question. What can I do to do more for my customers? Even completely non-scalable requires manual labor. What can you do for them to provide them more value and therefore give you the ability to be better than your competition and to be able to charge more. And so you’re going to have a higher revenue for growth.
[05:06] Music
[05:10] So we both hired bookkeepers.
[05:11] Mike: Yeah. How was yours going?
[05:13] Rob: Mine’s going really well. I’ve been happy with him. He’s been doing all my Numa group Books for about two months and he has me setup in Xero which is xero.com and I’m pleased with the software. It’s easy enough to use and finally I’m not like dreading taxes in next year because he actually went all the way back to January and did InDinero, manually migrated my books. He charged me for it which was fair and then now he’s keeping it on a monthly basis. How about you?
[05:41] Mike: Yeah. My book keeper’s been really working out as well. She came in, I think she was here yesterday and worked through the rest of the stuff and all the bills and stuff that I had to pay for the month and I just walked her through the process. So far it’s working out great. I mean it was really nice to just hand her everything and just kind walkway and say let me know if you have questions. I just didn’t even have to think about it. It was awesome.
[06:01] Rob: Yeah. It’s definitely a way off my shoulders. It was reasonably easy when InDinero work but once we started having bugs I was spending a lot of time on it. So it’s nice to know it’s taken care of. It’s like too expensive to outsource in my opinion when you have good software that can do it or if you have a simple solution. If you have a pretty simple scenario where you have one product that’s generating revenue, I would recommend using outright and you can probably do it almost completely automated. If you setup a few rules, even with Xero, you can setup a lot of rules. You can probably most automate it and don’t need a bookkeeper. But once you get more complex or I think like you Mike, you have a lot of paper that you process.
[06:35] Mike: Yeah.
[06:36] Rob: That’s a point where your time is more valuable than sitting there. You’re doing something basically that’s not pushing your business forward. We have two congratulations, two new product launches over the past couple of weeks from long time Micropreneur Academy members. The first is Ivan. He not only launched his split testing plug-in for WordPress but he saw his first sale within a day or two of launching and that’s at abpressoptimizer.com and he gave us a coupon code for our listeners. If you use Startups25 that will get you 25% off.
[07:14] And he dropped us a little note. He said the Micropreneur Academy gave me a realistic outlook and the tools I needed to launch my first product. Having the support of the academy community gave me the motivation to finish my product and made me accountable for my progress. He says out of everything I’ve built in my career, nothing has been this gratifying as when I got that email for the first sale. So definitely, congratulations to Ivan.
[07:36] The other launch is Nitesh Singh also been with the academy for several years and he launched auctionplugin.net it’s also a WordPress plug-in. it enables you to launch an auction site in a few minutes.
[07:48] Mike: I’m just getting a lot of people going to the WordPress space and launching a lot of different plug-ins.
[07:54] Rob: Lot of opportunity there. And it’s like we’ve talked about on the podcast now for the past six months of kind of getting that early win. Because these are the first products that these guys are launching and you launch it and you get – even if it’s a few thousand a month like it shows you that you’re capable of it. It gives you that early win. It gives you confidence and it also teaches you a lot about the different elements that you need to then grow and kind of a more – maybe a more complex app or a complex market. And it’s a stair step approach right? Of starting small and kind of moving up. I think it’s really cool.
[08:26] Mike: I think what I find really interesting is I’ve seen some people launch in these WordPress plug-ins and they don’t know anything about WordPress development. They’re essentially outsourcing the entire thing to other people and then they’re simply attacking the marketing side of things to understand how to sell it, how to put the site up and everything else and really focus in on the marketing and letting somebody else deal with all the code behind it. Even though they are developers and they could theoretically figure out if they wanted to but they’re just not…
[08:53] Rob: Right. I think that’s the nice benefit of something like a WordPress plug-in over Saas is that it’s so much less complex that you can hire a developer and more easily outsource it. There are also a lot of decent WordPress plug-in developers around and they’re not super expensive. Again, building the Saas app can take four to six months of pretty heavy development whereas you can get a plug-in developed in a month and kind of what you see is what you get. There’s just a lot of fewer moving parts and I still maintain that. Right now it’s still a good strategy for someone just getting started.
[09:26] Music
[09:30] Today we are going to be answering some listener questions. Going to the back log. Our first listener question is a voicemail about the best pricing strategy for a B to B Saas app.
[09:41] Dan: Hey my name is Dan and I am representing Chart Breeze. That’s chartbreeze.com it’s charting for your Trello projects. I want to know what’s the right strategy to take when trying to price your Saas project and specifically when trying to price for potential businesses to buy your product not necessarily consumers. Thanks. I’ll listen to your answer. Bye.
[10:06] Rob: So I think Dan really has two questions. First part, he’s kind of asking what’s a general approach for it but I bet he also may appreciate some advice about his site specifically which he said is at chartbreeze.com. In terms of general Saas pricing, I think almost all Saas apps are going to be business to business. There are very few B to C Saas apps that I’ve seen actually work because consumers don’t really love subscriptions.
[10:31] I think in general when you are talking about Saas pricing, just assume that its B to B. There’s a bunch of different approaches you can take. I think that I always like to price on value meaning if it saves someone money or makes them money or saves them time, then you can somehow justify the price that way. Now I know there’s argument about whether or not that kind of pricing actually works but it helps at least shape the thought whether you use that in your marketing or not, it helps at least shape it in your mind of what could this potentially be worth to someone.
[11:00] The second approach that I think about is like a gut feeling of what I’d be willing to pay and I will also ask a handful of people what they think it would be worth. You run the risk – if you’re trying to do both do customer development and develop the product as well as ask them about what they should pay then you kind of have two conflicting things going on. Right. So you can’t do that. I feel like you need to figure out your feature set first, figure out what solves the real paying point and start building that and then ask a separate group of people here’s what I’m building, would you buy it? And how much would you pay?
[11:30] And then, once you get a number that you start feeling comfortable with, like these things are like $29. $29 a month might be a lower number, then go back to the first group and say alright, I’ve solved your problem and I’m going to charge $29 for it. Are you good with it? And then you’re going to see reactions all over the board. Some people will say that’s a no brainer and some people will say it’s way too much. And then try to figure out what’s the different between those guys. Are they both Saas companies buying your app? And is one of them just makes so much more per lead so they’re willing to pay more for it?
[12:03] Try to figure out the point which you can segment and that’s the trick. Its figuring out is it the number of emails sent per month or the number of subscribers that they have or the number of documents they upload. There’s these things to pivot on. You’ve really got to dig in to start figuring that out. It’s not a trivial process. There’s been a lot written on this. I actually like sixteenventures.com which is Lincoln Murphy’s site and he’s written a lot about Saas pricing so if you want to go deeper I would definitely check out sixteenventures.com.
[12:32] Mike: I think for chart breeze, one of the things that strikes me is the plus plan for example is listed at $29 a month and for anyone who’s not looking at it, there’s basic plus then enterprise priced at $9, $29 then $59. If you look at business class Trello, its $25 a month or $200 a year. So to me it seems a little odd to charge more for an add on than for the product itself.
[12:58] Rob: Got it. And for people, Chart Breeze is charts for Trello. It says create gorgeous charts for your Trello boards.
[13:05] Mike: The Trello business class only cost $200 a year. So to me it seems a little odd to charge more for charting capability than it does for the product itself. It’s not to say you can’t pull it off. The other end of the spectrum is that you also have to understand that this is being built on a product that could theoretically be free. So people could be using the free version.
[13:26] I have a hard time coming up with a pricing plan that is an add on for something that’s theoretically free. You can kind of look back at WordPress and say well that’s free. You’re paying for the plug-ins that extend the functionality. And that’s one way to look at it. I don’t know with chart breeze how you would justify that. I really think you need to start digging and find out what people are using it for and then try to come back with a pricing scenario that makes sense for the problems that they’re trying to solve.
[13:52] The other thing you could do is find ways that people are using Trello and build something around that such that your add on product really addresses those needs in a way that leverages the Trello back end and uses your front end. And then essentially what you’re doing is you’re using the Trello engine to power your application as a value app.
[14:10] Rob: Yeah. I think Chart Breeze doesn’t really have a pricing problem. I think it has more of a value proposition problem because I use Trello and I manage. I have now several Trello boards and I’m using it to manage some different things. But I don’t know why I would use Chart Breeze. The homepage headline says Trello plus charts, so that’s what it is, not what it does for me. And it says create gorgeous charts for your Trello boards and my next question is okay, but why?
[14:37] So then there’s three benefits listed on the homepage. See the bigger picture. Work smarter not harder and clearly communicate victories. But none of those freely apply to me or they feel so vague that I don’t understand. I almost need like a case study or multiple case studies specifically how would I use this today? How is it going to save me time, make me money or save me money? That’s really what I want to know when I come to you as a business.
[15:00] Mike: And that’s kind of why I was pointing to finding out what people are using it for and then building a front end that is going to leverage the Trello back end to specifically solve those problems and use it as their value added. Because obviously, you could use Trello for I’ll say bug tracking if you really wanted to but is it really setup for that? The answer is no. But could you build a front end that would leverage that Trello back end using the API’s and make it into a great drag and drop bug tracker and you probably could.
[15:28] So those are the things I’m thinking that would probably be applicable but I think it goes right to the heart of the matter what you just said as why would I use this? I don’t know why anyone would want to chart things in Trello and I think it really depends a lot on what they’re actually using Trello for.
[15:45] Rob: Right. And so if its only software development companies that give you an agile development using Trello then that’s it. Chart Breeze becomes are you on agile development, are you a developer? You want all of that verbiage and you want to tightly niche it to them. If it turns out that realtors want charts because I know there’s a continuum of realtors who are using it then book, that’s when charts becomes in realtors Trello charting app.
[16:08] So I think there’s more digging to be done here to really find out the value prop that you’re offering, very, very specifically boil down into one sentence and to find out the audience that needs that the most. If you don’t know that yet, that’s okay. You just have to do some digging and continue to look for it because I think at this point if you launch with this app, I don’t know if you’ve already launched I don’t think you have a pricing problem. I think you have like I said a value problem and you need to dig deeper to find that before you’re going to be able to really start attracting customers and solving a deep paying point. So thanks for the question Dan.
[16:40] Our next question comes in from Brandon Crocket. He says hey Mike and Rob. My partners and I have been listening to your podcast for a while now and find it very informing. Our company is called Qdaptive web based truly adaptive question generating app that uses class notes to generate study material. Our question is what do you recommend for a small business checking account? We have an LLC formed and we are finding tons of fees associated with the business accounts. Do you have any recommendation for us?
[17:08] Mike: Having recently gone through this process of finding a new bank for my businesses, I’ll give you the one that I think is probably the best for anyone who’s starting out and they’re essentially in a pre-revenue state. Look for local credit unions. And the reason I say that is because if you go to any of the big box banks like bank of America or Wells Fargo, what’s going to happen is you’re going to sign up with them and get an account with them. But the problem is because you’re not carrying a large balance, they’re going to start charging you monthly fees and those fees can be anywhere from $15 to $30 a month.
[17:39] And if you don’t want to be charged those fees then you have to carry this minimum balance which is probably in the neighborhood of $10,000, $15,000 or $20,000. Now when you go to a smaller bank, those smaller banks probably have a little bit more flexibility but it’s really the credit unions where you can start to leverage their business banking side which they don’t necessarily concentrate on. The smaller credit unions concentrate on consumers but they do offer business banking accounts.
[18:04] So for example near me there’s a bank called DCU and they’re digital federal credit union but they have a lot of business services and they actually have some substantial backing on the business side because they take all the stuff that they offer their members and also offer them to businesses because many of the members own businesses. So in order to offer their members more options in terms of banking let’s offer these to our members who own businesses as well.
[18:32] And they’ve kind of grown that so they will offer stuff to a business even if you don’t have personal accounts with them. But because it’s a digital credit union, they are trying to move everything online so for someone like me, that works out really, really well. But you can leverage that too. You go to a local credit union, find out what sorts of business options they have. I did a search in Massachusetts and found half a dozen credit unions that offer business banking and almost all of them were no fee. Almost all of them did not have a monthly minimum that you had to maintain. $5 is a small price to pay to be able to get that business banking account and not have to pay any fees.
[19:08] Rob: I was going to answer this with a BofA (Bank of America) account. I’m not a huge fan of BFA but they do have a nice online banking and you can deposit checks through their mobile app and I don’t pay any fees on any of my accounts but then you pointed out that it’s because I keep a minimum balance. So when you’re first starting out, you’re right, a big bank is always going to charge you fees until you get to that point of having whatever the minimum balance is typically $10,000 to $20,000 for a business checking account in order not to not pay the fee.
[19:36] Mike: Thanks for the question Brandon. Hope that helps.
[10:38] Rob: Our next question is from Sean Walberg about segmenting customers. He says hey Rob and Mike, I enjoy your podcast each week. Thanks for taking the time to share your experiences. I created a tool over at isithacked.com that checks a website for hard to find spam and it’s been doing a great job at catching infections that other tools have missed. People have been asking me to add a subscription feature that will notify me automatically rather than having to go to my site to check their own sites.
[20:04] I’m not sure how I should build pricing plans to segment my potential customers. I’d like to have some way of making product available to micropreneurs but also make sure I have higher price plans that cater to larger customers. Any guidance you can offer will be appreciated.
[20:16] Mike: There’s to different ways that I can see of kind of segmenting the market. The first one would be for those people who only have a limited number of either websites or servers. I don’t think it would actually be all that difficult to figure out whether or not somebody has one website on the same server or 15 different websites on the same server. What I think you’re going to have to deal with is of somebody has 10 websites are they a large business or are they a small business?
[20:43] It can fall either way and I think that’s going to be the challenging part is trying to figure out whether or not they fall into more of a higher tier business plan versus somebody who just has 5 or 6 small products that they’re trying to work and they happen to all be on the same server but they’re just trying to figure out what is going to work for them and that’s what’s not and they just throw away the other ones.
[21:05] Because the problem that they’re going to have is even if they’re making a fair amount of money from one of their products maybe let’s say its $500 or $1,000 a month and the rest of them are making almost zero, you still want those other ones protected if they’re on the same server because if something gets on to one website, it could theoretically cross infect all the other ones or infect the entire server. So you may need to do a little bit of leg work on an individual customer basis and set up pricing tiers to say okay, well based on this number of servers or this number or this number of websites, you’re going to end up in a different tier.
[21:36] You can also combine those a little bit and say one server or up to five websites and kind of say they’re the same thing. I think WP engine talked a little bit about in a podcast I heard about how they segmented their customers and they realized that if somebody had 10 websites, chances were really good that only 2 or 3 of them have a lot of traffic and the rest of them had virtually none and that was applied primarily to bloggers but it has to do with the distribution of how those are spread out.
[22:03] Another way that I can think of to segment the market a little bit is to identify how many times you’re going to hit their website in either a day or a week or a month to say okay we’re going to check it on this time period to see if it’s been hacked or not. Multiple business are going to say I want to know at least once a day or maybe I want to know every hour because I want to make sure that website or the web server isn’t getting hacked. And if it is, I want to know immediately versus somebody who’s just doing it on a more casual basis once a day or once a week is probably fine for them especially if they’re not making any money from it. So those are kind of my thoughts on how to monetize the site.
[22:39] Rob: I think those are all good thoughts on it. The other thing I would look at is I would go to pingdom.com and look at their pricing going to I’d go to sucuri.net because these are related services. Pingdom checks your up time and some other stuff frankly and then Sucuri is malware detection alert and clean up for websites. So they’re more of a competitor for you. And I imagine when you said that you pickup stuff that others don’t, it might be Sucuri whose not because I think they’re kind of the leader.
[23:07] If you look at how they do it, they say one website is $90 a year. Two to five is $190 a year and then six to ten is $290 a year. They kind of do all inclusive plans. I think it’s a reasonable way. You can think about having a one website. If you really want to help out micropreneur you could have a one website tier that’s a little cheaper and then as you get more websites realize well they’ve probably have more revenue so kind of increase the price accordingly as they go up in bulk from as an enterprise that has many websites should be paying more.
[23:38] The other thing, but they’re all these things that Mike said you can pivot on and Pingdom has them as well its like how many SMS alerts do you get? How many email alerts? Do you multi user capabilities? Because if you want multiple users to log in, you have a team of people, then you should definitely be paying more. And these are things you probably don’t have built yet and may just be on your feature list but those are ways to start segmenting your audience.
[24:04] The other thing is if you start doing integrations with anything whether its reporting, pulling in data or pushing data out that in order to use your API you can move that into like a middle tier or a higher tier because just the basic person who simply wants the basic scans might be willing to forgo that in order to pay a lower price. So good question Sean. Thanks for sending that in.
[24:24] I also like the website I have to admit. I think he did a good job here because the headline is “is it hacked?” and then you can enter a URL and they’ll take a look to see if its hacked. And then below that he has want to know more about keeping your site safe? Subscribe to our mailing list. I bet by now he has a decent mailing list of people that when he does go to launch a Saas version or subscription version of this, he actually has a head start.
[24:47] If he hadn’t had that in, I mean you basically have – you’re starting from scratch and even though you site’s been up all this time you don’t have assets. So even though he’s basically doing a free model at this point, Sean is still getting something out of having this site live. He’s basically building a list of people who may be interested in his subscription service down the line.
[25:04] Mike: The other thing I can think of is this type of service just in general I think is aimed more at business than it is at consumers anyway. So I would think that most people are going to be willing to pay for it. I almost feel in many ways if you start down the road of looking at security then changes are good that for somebody to be interested in paying for security, they have to have something that they’re willing to protect or that is on the line that they want to protect.
[25:32] So once you get to that point, changes are good that you probably have money to spend on that anyway. So I don’t know as I would worry too much about the pricing. I understand if you want to try and give back to the community, there are certainly ways to do that. I mean you could have regular pricing plans and then after that, underneath you can say are you a single founder or do you run a small business with one employee? Click here and let us know and we’ll work with you with special pricing or something along those lines.
[25:58] Rob: Our next question is about building a Saas app for a client and turning it into a product. It comes from long time listener Scott Underwood who his emailed before. He says I have a client who requested a proposal for a web app. I have a feeling the bid to develop the app will be higher than he’s expecting. It’s in a niche that I think I might have some promise to market the app as a Saas app.
[26:17] The client has three similar businesses that he would like the app customized for. The apps will be similar but will apply to three distinct business types. So I think it would appeal to a wide market and could be further customized for other similar businesses. My thoughts on how to work these are 1) provide the client with a proposal to create the app for a fixed fee with a monthly maintenance fee and I would retain the intellectual property rights to use the code, to resell it, create a Saas app etc.
[26:42] Option 2) offer to create a Saas app providing him with the functionality he needs and he can be customer 1. I would require him to commit to a minimum 12 month subscription paid monthly so he has an initial lower upfront cost and I have a customer for 12 months. I would also utilize his input and his industry knowledge to improve the app by getting feedback from him and his employees.
[27:01] Option 3) try to get an initial payment of 50% of his first year subscription and then give him 50% off the monthly fee for the first 12 months. There are only one or two similar Saas apps out there in the space and they’re dated so there is room for improvement. The price points for plans are $99 minimum for one location. $600 average for six locations and a high end of about $1,000 for ten locations. I don’t have industry experiences in these businesses but the initial client could provide a lot of feature request and improvement so that the app provides more value.
[27:30] I’ve emailed 10 similar businesses to get their feedback and whether they would be interested in it, benefit from and subscribe to this web application. I’m leading towards option 2 where he agrees to subscribe for one year minimum to the app. The app isn’t overly complex so I think it’s something I could create the initial version of it in a reasonable amount of time to get them up and running and then use his monthly payments to cover improving the app over time. Looking forward to hearing your thoughts.
[27:52] Mike: I think the first thought that comes to mind for me is in your question, there are a couple different ways that you’re trying to get the customer on in committing them to 12 months and paying you on a monthly basis. I would think if this customer really has three different businesses that they’re trying to get this application built for, then it would probably make a lot more sense to charge them upfront a year fee for the entire thing. And that way you don’t have to worry about monthly recurring payments that collections process. You don’t have to worry about it. It makes things a little bit easier. You can probably just get them to cut you a check and be done with it.
[28:24] That does alleviate a lot of the issues with providing them with a price quote that’s going to be well outside of their price range and I think I would first go to them and say flat out look, I think this price quote is going to be far outside your price range. What do you think of this as an option? Let’s just kind of talk through that. So you can kind of float that to them without bringing together a full blown proposal and that’s probably where I would start.
[28:47] In terms of going through and actually making it work I would definitely just try and get them to pay the 12 months and commit upfront to the whole thing. The problem that you’re going to run into that you and the customer are going to need to decide on is when does that time period start? When does that day one of that 12 month contract start because there’s going to be a lot of things that you do that you’re going to try and put these things into the program and you’re just not going to have time for all of it on day one.
[29:15] So there’s going to have to be a line in the sand that you draw to say look, at this point we’re going to pull the trigger and this is when the time period is going to start otherwise you’re going to run into problems down the road as to when the customer thinks that the time should start versus when you think it should start. And you may want to go down the road of having a deadline set at some point. So let’s say right now it’s August. Let’s say you decide December 1st that’s when you’re going to pull the trigger and that’s when the time period is going to start. At some point before then you collect the 12 months.
[29:42] So those are my thoughts on it like I said I would lean towards that initial 12 month subscription and try to get them to just pay all of it upfront and then you can provide them a yearly plan from then on.
[29:53] Rob: My initial thought is this is complicated. While I don’t think it’s a bad idea, I think it’s a last resort. And I think if you could possibly fund this yourself for doing on off hours it’s just going to be easier. It’s going to be less complicated. Because while you’re not technically taking on a partner who has equity, you are going to have someone who maybe thinks that they can dictate every aspect of the app. What if they request a feature and you don’t want to build it? It doesn’t apply to anyone else. It takes a long time to build it. There are a lot of potential conflicts that could come up here.
[30:29] And so I think dealing with the right partner who has an open mind and is willing to work with you on this and is pretty easy to deal with, I think this is realistic. But I think if that person is demanding and or entitled and thinks that by paying you an upfront payment of say $600 a month to about $7,000 for an annual, if they think they could suddenly dictate every aspect of your app that would have otherwise cost him $50,000 to build then that’s a real problem because its going to sideline you. Its going to cost you a lot of time. And potentially a lot of money.
[31:04] If you think about it, building this app, it would be good to have this person’s input because they do have the industry knowledge but frankly marketing it and trying to find that next market, because if you build three versions, I don’t know if you’re going to own all three of those, how you’re possibly going to market all three of those, that’s the real concern. That is an enormous amount of time. If they really are Saas apps that need full on kind of marketing and scaling and all that. It’s not something that one person could easily do.
[31:33] Mike: I think what he’s trying to do is solve the same problem for three different businesses and he’s charging the person for three different subscriptions.
[31:42] Rob: Yeah. That is the thing. You would need to charge for three subscriptions because although you may not have to write the code three times you are going to have to support three different apps, three different instillations, three different deployments, all that stuff. If your client thinks that he can basically pay once and then get three versions out of it, I think that’s another thing to think about is that there’s always a lot more with having three apps than just writing that shared codebase. So in general, I’m not wild about this idea. I don’t think it’s terrible but it’s not an ideal situation. It’s not a scenario I personally would embark upon.
[32:14] Mike: Would you be more comfortable with it if he built the whole thing first and then basically work through the issues with the person and then said okay, if this meets your needs then I’ll charge you for those? Because it seems like that’s really the sticky issue is getting the customer involved so early on the they feel they’re involved in the development effort and its really being customized for their environment.
[32:36] Rob: That’s right. That’s my big concern is you have kind of a marriage there that needs to be well defined as to what their role is and your role is in the specific ownership and who can dictate what gets in the product. Because if stuff goes down in the middle and they request a feature and you say no we’re not going to build it and they get really upset about it and what are you going to do? How do you resolve that? So thanks for the question Scott.
[33:00] So our last question today comes from Brian Donahue. He says hi guys I’m a newbie academy members and I attended my first MicroConf in April. I was very glad I was able to attend. There was one idea that was espoused repeatedly that I’m struggling to understand how to put into practice, the idea that you should sell your product before you’ve written any code. That sounds great but gives me all kinds of anxiety just thinking about it. I’m wondering how the looks in practice.
[33:25] What is the sales pitch? What promises do you make? Are you promising a delivery/lawn schedule? If they actually give you their credit card and you take their money, how long can you reasonably wait before they have something usable? If you have any experience or stories you can relate about this was done successfully, what things need to be in place and how to pre-launch customers engage in and get value from the process, I think that would make for a great show. Well if there’s some info you can point to me that I missed that explains in more specifics, I’d love to find it. Thank again for all your hard work. It’s usually inspirational.
[33:54] Mike: I think one of the things you have to keep in mind when you’re asking people for money or you’re asking them to commit is not necessarily that you’re asking them for the money. It’s asking them for a commitment to at least give the product a fair shot. When push comes to shove and you deliver the product or you’ve handed it to them, put it in front of them and said hey this is what I built. Let me know what your thoughts are. Is this something you’re willing to pay for? And that’s really what you’re trying to get. You’re just trying to get that commitment.
[34:20] It’s not about the money. That money could be a dollar. It could be down payment on a house and to the actual dollar amount in some cases are somewhat immaterial which you really just want is them to give it a fair shot and be in enough pain that they’re willing to come back to your site later on based on an email to actually follow through and sign up. And that’s what you want. You want that commitment. It’s not about the dollars. It’s not about them saying yeah, I want this and I want it in three weeks or three months. Chances are really good if they have this problem now they’re still going to have this problem in three months. They’re still probably going to have this problem in six months.
[34:54] And depending on how painful that is, if the problem is so incredibly painful that they need a solution immediately, there are going to be other people out there like them. So I don’t know as I would worry too much about them finding another solution because if they do find another solution that’s market validation for you. It means there are other products in the market that are solving that problem and you’re going to be able to carve out a space for yourself in that market.
[35:17] Rob: I think Brian’s talking about – a few people pointed out that you should actually get a credit card and charge their card or get a check from them maybe and don’t cash it. As a true commitment that until you have that, you don’t have a true commitment that they actually are going to value what you’re building. I’ve never done that. I don’t think it’s necessary. I do think it’s probably better or I know it’s better than getting a list of emails.
[35:43] But I find that asking someone for a purchase commitment upfront before you’ve built it will – if you do it online in pages in example, it will substantially reduce the number of people who you’re actually going to be able to engage with later on because you have to really sell hard on that page in order to get them to put their credit card number in. Whereas if you promise what the app is going to do and then you get email addresses, you then have a way to contact them and a way to explain what you’re doing and give them updates and get buy-in on the process and hopefully convert them by engaging with them over time and showing them what it is you’re building.
[36:18] So if I was going to do a solely online, that’s definitely how I’d do it. That’s how I’ve done Drip. And for an example you can go to getdrip.com right now you can see the landing page and that’s the promise that I make to people. That’s how I sell before coding. On the flip side, I do know there are people who cold call or get in face to face conversations and then do actually ask for the credit card. I think if that feels odd to you, if it feels scary then maybe don’t do it this time around and wait until you have your legs under you or wait ‘til you have an app that you’ve launched you feel more confident about it and consider at that point.
[36:51] I don’t think that there’s only one right answer to this question. I don’t think the end all be all way of doing it is to always get credit cards because again I think it limits the number of people – not only limits the number of people who you can kind of get in to your early access but it means you really have to flush out early on exactly what you’re building. Because if you explain kind of a vision or a value prop, it’s hard to get someone to write a check for the first month or the first six months of that. It’s really hard.
[37:17] But once you have something to show them then you can say alright, does this do it and how can I chance it so that it does provide you with the value to write that first check? There’s a range here of things you can do and what you feel comfortable with is probably what’s going to work best for you and I do think multiple options are viable here.
[37:34] Music
[37:37] If you have question for us, you can call it in to our voice mail number at 1-888-801-9690 or email it us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll also find a full transcript of each episode. Thanks for listening. See you next time.
Episode 146 | Product Companies Vs. Service Companies
Show Notes
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I discuss product companies versus services companies. This is Startups for the Rest of Us: Episode 146.
[00:08] Music
[00:17] 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.
[00:26] Mike: And I’m Mike.
[00:27] 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?
[00:31] Mike: Well I just got back from vacation. Naturally because of that, I’ve gotten nothing done over the past week or so but other things have still been moving along as the different contractors. I have been working on things here and there. And because of the way some of the things in AuditShark work, I can just make things up and they’re like I didn’t know I could do that and I’m like well, it can now but only because I designated that role case.
[00:52] Rob: Nice. Because you were like off the grid for a few days.
[00:55] Mike: Yeah. We went over to Niagara falls first and spent some time out in that side of New York and then we went to the Adirondacks. From the beach I had 4G wireless access which is kind of awesome.
[01:07] Rob: Awesome. Yeah that is cool, so you could go down there and watch the kids play and get some stuff done.
[01:11] Mike: No, I got nothing done. I sat in the beach and got sunburned.
[01:15] Rob: But you said hey look, I have 4G and I’m not going to do any work.
[01:19] Mike: Exactly. That’s really what happened.
[01:20] Rob: Because whenever I come back from vacation I find that I’m either totally charged up to hit work really hard or I come back and I’m completely unproductive because I would want to stay on vacation. Do you have a typical mode that you come back or does it vary? And how do you feel coming back off of this one?
[01:36] Mike: Because it was such a long drive on Friday and when I got back, I wanted to do nothing for the rest of the day but then on Saturday I spent 5 or 6 hours doing work and I actually got a lot of work done on Saturday. But the past two days, because today’s Tuesday, I really haven’t gotten very much done because I just haven’t really felt like it. I had that burning desire to get things done when I first got back and then it just completely went away for a couple of days.
[02:02] Rob: Yeah. Well we want to send a congratulations to Josh Pigford. He’s a MicroConf attendee this past year and he runs pop survey. He just launched a new app called temper and it’s ate temper.io basically it’s a way to survey your customers on an ongoing basis and to find out how your customers feel about every aspect of your business. So it’s kind of like a little mini survey tool. It’s pretty neat. And he’s basically created a little coupon code for our listeners. It’s a SAAS product so it’s a monthly subscription.
And if you used coupon code podcast, you’re going to get 50% off forever, for as long as you are a customer. So if that’s something, and I’m definitely going to be looking at getting something like this into Drip especially in the early days to figure out how frustrated people are. There’s a bunch of different options but the one I like is kind of the multiple faces and there’s like a sad face, a medium face and a smiley face. And then you can prompt them from their based on what someone clicks when they log in.
[02:55] Mike: Yeah. That’s really cool. I really like the way he’s kind of built the website on and the design and the product itself looks really interesting. It’s very crisp.
[03:03] Rob: I feel the same way about pop survey. The other thing I like about this is I’ve seen it, this functionality custom built in several apps that I use and I’ve never wanted to custom built, and I am so willing to pay for something like this that allows me to – I’m assuming it’s just a snip of a java script that you drop in. I’m so much more willing to do that than to have someone, one of my developers taking off the core app to build a little off shoot product like this.
[03:30] Mike: Yeah, so congrats to Josh on that. Have you checked out the Gmail tabs at all?
[03:35] Rob: Yup. I’ve disabled them after about three days. It was like I had three inboxes to check and I hated flipping through the tabs.
[03:42] Mike: Yeah. I’m kind of in the same boat. I’ve been using it for two days now and you’re right. It feels like I’m flipping through different inboxes and its just like why am I doing this again?
[03:53] Rob: Yeah. I understand the gist of it. I think it depends on how you use your inbox. I actually stuck with inbox zero for 6-8 weeks and just last week I got an inrush of emails and I probably have 20 in my inbox right now but I’m trying to get back to inbox zero. And since I do that and I put things in my Trello list instead of trying to keep in my own inbox. Having the three inboxes – it just didn’t work with my workflow.
[04:18] Mike: I think what bugs me about it is it doesn’t seem that you can customize it be on the tabs that they give you. They give you these certain tabs and that’s it. But I don’t really see them as any different than the labels and stuff that you can apply to things as they come in. You can just say oh well, if it matches these criteria then mark it with this label or that label. I just don’t see it as any different because those labels all appear on the left for me as opposed to the tabs which go right along the top.
[04:43] Rob: Right. I think they’re supposed to learn a little more than your filters. Your filters are static when you set them but…
[04:49] Mike: Yeah. And you can drag and drop things. It will learn but I just don’t really see the point. As you said, I mean if you got one inbox that you’re trying to keep to inbox zero, you feel like you’re switching between 3 or 4 different inboxes. And it kind of sucks.
[05:04] Rob: so I was on the bootstrap web podcast came out a day or two ago and its by Brian Casel. He launched sweetprocess.com we’re actually putting together your SOP docs, your standard operating procedures and other ways of organizing docs for VA’s and other processes. So he interviewed me about scaling a portfolio of software products and it was a pretty fun interview because it wasn’t stuff that I – it was some specific questions that I haven’t answered in the past on other interviews.
[05:31] It’s nice we spend almost maybe 50-55 minutes going into this stuff that we don’t have time necessarily to cover on this podcast and never going to talk on it. So I’ll like that up in the show notes and if you go to casjam.com you can check out that episode.
[05:48] Robert Graham who’s a lifetime academy member, been to every MicroConf, he posted a really insightful comment on episode 144 and it was regarding Dave Ganoe who has sent us a question. And he was considering building an expense tracking apps for engineers and construction firms. So Robert’s comment, the full comment is there. You can read it but I just want to excerpt that.
[06:11] He basically said if you’re serious about the engineers/construction niche, I have a few pieces of advice. There are professional organizations with local meetings for civil engineers in particular. They’re always looking for speakers. Be a speaker. Additionally, go talk to some engineers out there. It’s not hard to send out some hand written emails after researching some promising targets. 5-10 in person meetings will change a lot about how you approach the niche. You can get that done in less than 4 weeks without any trouble. I validated an idea for consulting engineering firms and I built a list and did this in the Austin Texas area.
[06:41] One thing that Rob and Mike did not mention about outbound sales but I think is really important to keep in mind is you may have to do it to get jump started. Jason Cohen’s MicroConf talk included an anecdote about scratching and clawing to get your first 50 customers. You do need a repeatable and affordable channel to build the business but you shouldn’t quit until scratching and clawing and totally unscalable ways doesn’t work. Also happy to chat by email, Dave.
[07:03] So Dave, if you’re listening to this and you would like to get connected with Robert, you can click through to his site. He’s at coldcallingbook.net or you can drop us a line and we’ll connect you with him. So thanks Robert for the obviously good comment and for offering to help out with Dave.
[07:17] Music
[07:21] Mike: So this week we’re going to talk about some of the differences between product and services companies and kind of contrast them a little bit, talk about where the overlap is, talk about some of the pros and cons of where they might be jealous of each other I’ll say.
[07:35] This particular episode is inspired quite a bit by Patrick McKenzie’s blog article where he actually – there’s two different blog articles where he does products versus services and then services versus products. And discusses some of the pros and cons but he also talks about how each of them can learn from the other.
[07:51] Rob: So the purpose of this episode is so product companies can realize that they might not have it as good as they think and service companies can realize that the grass is not always greener on the product side. Is that the idea?
[08:05] Mike: Yeah, that is the idea. And especially when you’re first getting started on the software side, I mean there’s a lot of pressure to go move more towards the services side just because it’s so much easier to build your business in the beginning when you’re doing services because services, it’s very easy to customize those things. Whereas when you build a product is its very much set. It’s trying to solve a very, very specific problem.
[08:27] But with services, you can talk your way around those things. Say well this can’t do that right now but I can make it do that and here’s how much it’s going to cost and how much time etc. When you’re offering a product, it’s very much pre-packaged. It’s hard to do that unless you’re doing an in-person sales. We’re going to talk about some of the pros and cons of each of the different types of companies.
[08:46] So why don’t we start with the pros of being a product company? Running a product company. I think the first one is with the product company, you can typically scale it a lot higher with less people. Usually when you’re trying to scale out the business in terms of the problems that its solving, you use automated resources like you’re throwing additional servers at the problem or you’re writing more codes to solve additional problems or to do it for more people.
[09:10] This is one of those classic draws for product companies where you don’t have to hire more people to process more data from your customers. You simply write more code or you distribute it among more servers and you’re paying for more servers as opposed to paying for more employees to process work.
[09:26] Rob: Right. So when you say scale higher you mean in terms of revenue right? Growing company?
[09:30] Mike: Well both in terms of growing revenue but also in the size and scale of the problems that your solving. Let’s say that you’re analyzing data for customers and whatever that analysis might be, let’s say that you reach this tipping point where one server isn’t enough to solve the problem. You can add another server.
[09:50] Versus if you’re running a services company, somebody gets to the point where they’re overworked, you have to hire somebody else. Well the problem with hiring a new person is you’re doubling your cost which is fairly substantial for having an employee. But when you’re adding a server, the cost of adding a new server to you infrastructure is monumentally less than it is to hire an employee.
[10:13] Rob: Right. And this is I think the holy grail of product companies and why anyone who’s doing services are – I’ll say most people who are doing services do have their eyes on doing products. My eyes were first opened to this when I was reading Joel Spolky’s blog back in probably 2001-2002. He just talked a lot about the economics and product companies and now something takes off, you get a product that really does start scaling up. it can be just astronomically different in terms of having to hire employees.
[10:41] You can just have a much smaller team and yet still like you said, solve bigger problems or have a lot more revenue which I think is probably been the goal for most of us.
[10:52] Mike: Another pro of having a product company is that you’re typically a lot less dependent upon a single customer. When you have services companies, obviously you have to deal with selling those services to the customers and there’s a lot more revenue involved. However, you’re trying to spread that revenue out amongst multiple customers as a product company because you don’t want all of your eggs in one basket. You want lots of people paying you smaller amounts of money so that there’s not one single source of revenue if they decide oh, I don’t need your services anymore, then you’re going to go out of business. Whereas with a product company its really the opposite.
[11:26] Rob: Yeah. This is a big one. I worked with a couple of confuting clients back when I was still doing it who yeah, they just weren’t that easy to work with. And since they were either 50% or 100% of my revenue, I couldn’t really turn them down. It’s so hard to fire a client when you only have one or two of them. I really do think perhaps one of the biggest perks of owning a software company that’s building products is that you really shouldn’t be reliant on any single customer or even any small group of customers.
[11:58] And if you are, I’ve heard of some folks who do this who get this really big contracts and there might be one customer who is 40% or 50% of their revenue and that’s something to get out from other as soon as possible if you find yourself in that situation because at that point, that customer has a lot of control over you. So that’s something like I said, definitely consider trying to solve if you find yourself in that problem.
[12:20] Mike: Yeah and that kind of lands into the next positive thing about having a product company is you control the direction. If a customer wants something out of their products, you can just say well no, it doesn’t do that and it’s not going to ever do that. Very similar to what you just said, if a single customer is locking up 75% or 80% of your revenue then it’s very difficult to tell them no, because then they can just turn around and walk away.
[12:46] But with products, because that is distributed amongst different customers, if one of them comes to you and says hey I want you to build XYZ, you can just tell them no, that doesn’t fit in with our product strategy and you can essentially just move on right there.
[12:58] Rob: One of the big perks of being able to control the direction I think is you’re able to express some of your creativity. You’re able to come up with unique ideas, interesting approaches to solving a problem within your app. You just don’t have to do what a team of people or some committee is deciding. Again, back when I was consulting, it seemed like there were always five people that had to be notified of making any type of decision. So we’d go on to do something what I consider like an innovative or a cool approach to doing something.
[13:28] By the time you get to all these people who just want to keep their jobs and really want to do the same thing, then they’d say well we’ve been doing it this way forever and you’re basically just – you do more or I wind up doing just more boring stuff. that wasn’t not only not creative but I actually think it wasn’t as good a way to solve the problem. And so if you’re able to control that direction, I think like job satisfaction goes up because you’re just able to build something that’s more interesting to you that you can be more proud of.
[13:56] Mike: The biggest pro that you can take away from a product company is that you can take time off and customers generally don’t notice this especially if you have already built your marketing funnels and your sales funnels. And you have most of the product pipeline automated customer support has to be dealt with in some way, shape or form.
[14:12] But that again is something that you could potentially outsource as opposed to when you’re doing services and providing services, if you take off for three weeks, the customer’s probably going to notice and they are not going to be happy about paying you for those three weeks. Whereas if they’re using a product that you’re making available from your website or you’ve already sold them, then they use that and whether you’re around or not, they’re still going to be able to use it and things should still work properly.
[14:37] Rob: Yeah, taking time off is way easier than when you’re consulting. In addition, your mobility tends to increase and your ability to work when you want even when you are working. So if you’re a night owl, you can work then. You can kind of wherever. With MicroConf Europe happens in October, I’m actually bringing my wife and my two kids and we’re going to be in Europe for a month.
[15:00] I’m going to do some work from there. I’m going to do maybe 1-2 hours a day to keep up on things but that’s a lot of flexibility that I really wouldn’t have if I was consulting. A lot of consultants have to be on site and even if you don’t have to be onsite you tend to have to work certain hours even if you’re working remotely so there’s definitely a lot of time and location independence that products can bring.
[15:23] Mike: And if you’re a services company you wouldn’t be able to put in one or two hours a day and still expect to be able to be compensated for the entire day or the entire week. It’s a completely different story. So let’s talk about some of the cons of running a software company. I think that most of these cons tend to be much more front loaded.
[15:44] So if you are starting up a software business and you’re just getting started, you don’t really have a full pipeline of sales. You haven’t really quite hit the product market fit. I feel like these problems are a lot more pervasive into people’s thinking. The first one is that your software tends to solve a very fixed problem.
[16:03] Again if your software solves just one problem but it does it really well for lots and lots of people, that’s great. But when you’re first getting started, you don’t have the revenue to be able to rely on it. So because it just solves a single problem, you’re looking at the services company saying man, I wish I could just turn this a little bit so I could use this in addition to maybe doing consulting and charge them extra for this and do more of a scope of work where you’re reliant on the product but you’re also bringing in your skills to solve the problems that the customer has.
[16:33] Rob: Maybe a sub point to this is since you do solve that fixed problem, if you get a couple of years down the line and your app has become mature and its really solving the problem well, you can find yourself not feeling as creative as you did before, maybe not being as interested in the work you’re doing. I think that you’re less likely to get bored if you’re doing services, if you are a consultant and I think product companies at a certain point when you hit a success level, they do become a little mundane.
[17:01] You have a lot of legacy code to maintain. There are certainly some drawbacks that you wouldn’t see with services companies in terms of it moving to new projects all the time because its often learning new technologies and really being challenged typically with Greenfield development.
[17:17] Mike: Another problem with product companies is it really takes time to hit scale and you’ll read about a lot of these product companies that feel like they come out nowhere but the reality is they’ve been at it for a very, very long time until they got to the point where you even heard about them. And suddenly they’re wildly successful because you didn’t hear about them until yesterday. Reality is most have been working at it for 3, 4, 8, 10 years before they really achieve that level of success that they are more well known by the general public.
[17:47] Rob: Yeah. We talk a lot about that 4-6 month timeframe just to get to launch which is kind of when the journey begins and I would say at least another 4-6 months to kind of learn about your customers and just learn about who gets value out of it and tweak. So now you’re 8-12 months is a reasonable estimate. That’s just about the time you can maybe start figuring yourself out and get to product market fit and actually start doing enough marketing to scale your business.
[18:13] So that’s on the low end. That’s when you’re just starting. And then if you nail everything, maybe it’s another 6-12 months after that, then things are really picking up. So it’s a multi year time frame to hit some that brings in as much as say a consulting firm even if you’re just a one person consultant could bring it on day one.
[18:31] Mike: The next major problem with a product company is there’s no statement of work that clearly tells you what the customer wants. So this is a problem for every product company. I almost don’t think that it is limited to the smaller ones or the ones that are just getting started. Even when you’re trying to make big changes or you’re trying to offer new things to the customers, it can be very challenging to figure out what those are even if you are talking to them because you’re not always on the same page with them. You’re not always using the same terminologies for customers.
[18:58] So it can be very, very difficult to figure out exactly what it is that they want and to be able to present it to them in a way that’s completely understandable such that they’ll look at and say yes that’s exactly what I was looking for, heres my credit card.
[19:10] Rob: Yeah. There is a challenge coming from both being just a software developer or as a like a developer who’s also a consultant is that coming into products is a different game since there isn’t someone there telling you what to do and how to do it. It’s a learned skill and it takes a lot of – there’s a bit of luck in it, of actually getting something that people want but there’s a lot more of talking to a large number of people rather than being able to just sit down with a client who’s writing a really big check and saying what do you want me to build? How should we build it? And working with them to do that, so that’s definitely one of the challenges of building products.
[19:42] Mike: the next problem that product companies usually run into is that when their customers are looking at the product that they’re selling, they are usually going through a lot of comparisons that you as a software vendor not probably to and you can’t talk your way around them because you’re not in those conversations. So you essentially have to build the marketing material on your website in such a way that it addresses those objections that the customer might have and is able to present them at the right times when the customer is making those evolutions.
[20:10] Because they’re going to be looking at not just your product but some other products as well and any of your competitors products, they’re going to take a look at those too. And they’re going to be evaluating pricing, they’re going to evaluate features and possibly even support. Maybe they’ll call up the competitor and find out how quickly their support gets involved. Or they’ll send emails, things like that.
[20:28] I’ve seen customers do this where they’ll – in order to figure out which vendor is the best vendor, they’ll send out emails and contact their support before they actually follow through with the purchase in order to figure out which ones are going to be the better vendor for them moving forward. Sometimes it’s not all about the products. It’s not all about the features. It’s about the support that you provide. And if you’re not providing that timely support, they’re going to walk.
[20:50] Rob: It’s hard to sell a product when you’re not talking to them face to face or when you’re not involved in the conversation that’s going on in their head and that is definitely one of the drawbacks of running products the way that we do like doing the more low touch scalable model you really need to know you customers well and you didn’t know how they think about your product because your copy everywhere will find your website, and your emails, just anywhere they see it, in your app, your help, everything has to be perfectly honed because as soon as you lose someone, you don’t have a chance of explaining something twice. As soon as you lose someone, it’s just so easy for them to wander off and try a competitor.
[21:29] Mike: I think the last major obstacle that product companies have is growing monthly revenue is extremely hard. And although you’re running a SAAS company is really the kind of Holy Grail of software companies, it is notoriously difficult and if you doubted it in any way, shape or form goes take a look at Gail Goodman’s talk from the business software from last year about the long slow SAAS ramp of death. And it’s an hour long but it’s very good. Watch that and you’ll see just how difficult it was for constant contact to get to where they are. And although they’re wildly successful, it was not an easy road.
[22:06] Rob: It can be kind of a crap shoot. We know that there are ways to improve your odds but consulting, you tend to go sell a project and the odds are good that you’re going to get paid, you’re going to get paid well. You’re going to know in a few weeks if you’re not going to get paid. Whereas building a product, you can spend months, years toiling away and still not have success. Its way easier to fail when building a product than it is when you’re just consulting one on one with folks or even starting a small consulting firm.
[22:35] Mike: So now that we’ve talked a lot about the different pros and cons of running a product company, let’s talk about services companies and what sort of things they bring to the table. With a services company, you’re essentially selling consulting services. It can be anything from custom programming to systems management. It can essentially even be as little as outsourced systems administration for example.
[22:56] I mean if somebody could pay you to go to their website everyday and do the same thing day in and day out and essentially what you’re providing them is a service that you have to manually go in and you have to execute them. But you’re really relying on human resources at that point to execute on whatever those tasks are.
[23:14] One of the biggest pros of having a services company is that you typically charge more per customer. And in fact you tend to charge exponentially more per customer. And the reason for that is because everyone knows that when you’re buying professional services, it doesn’t matter who you’re buying it from, there is a human on the other end of that who has to deliver those professional services and that human is going to be expensive in terms of what it cost to keep them employed and all the different benefits that go along with it.
[23:41] There’s an expectation that the customer has that they’re going to generally pay more for that than they would if there was just a pre-packaged off the shelf solution that they could buy, that would execute that process.
[23:53] Rob: The nice part about this is you can actually have a pretty low traffic source, something like even a blog that just gets mildly popular. If you get one lead a month, one consulting leads a month that you’re able to close or one every 2-3 months, you can make a full time living from that. I actually back in the early days, software by Rob where I was one more about coding and that kind of stuff, I would get 1 or 2 inquires a month for consulting services and that was it.
[24:23] Some of them were for $50,000 and $100,000 projects. I didn’t need many of those to kind of fill out my year. Whereas when you’re trying to sell a product for a couple hundred dollars or $20 a month, you just need so much more volume. There’s just a bigger challenge there.
[24:39] Mike: Another nice thing about running a services company is that in some ways it can be easier to avoid working with problem customers. The way you can take a problem customer that you have and you can essentially push them out is to either charge more or fire them. If all of your revenue or the vast majority of your revenue comes from 1 or 2 customers, it could be very difficult to fire that customer but you can always go to them and start charging them more.
[25:02] And essentially what you’re doing is you are justifying the pain that it takes you to deal with them by charging them more. That’s one strategy that you can use to essentially deal with some of these problem customers. And it doesn’t make the problem go away. It just makes it more palatable.
[25:16] Rob: Yeah. With my experience, I actually find it easier with products to not work with problem customers. They’re just easier to fire, to let go off, because the revenue is such a small percentage. But I will say that I found there are a lot more problem customers. A lot of people paying us $20 a month have higher expectations of what we should be doing than the people who used to pay me $20,000 a month for consulting. It’s pretty funny.
[25:42] Mike: Yeah, I was talking more in terms of avoiding working with problem customers like you can tell when you’re talking to somebody when you’re trying to work through the terms or the scope of work or something like that. You can tell when you’re talking to somebody whether they’re going to be a problem customer. And it’s usually fairly obvious. There are a lot of red flags that people send up.
[26:00] You can just tell sometimes that somebody’s going to be a problem customer and then you can just say oh well, other things have come up. Versus – I think that’s a different position than if you are already working with somebody and then they essentially turn into a problem customer or they already were and you just didn’t notice.
[26:16] The next pro for a service company is that it’s easier to customize your service offering on a per customer basis. One of the nice things about running a service companies is if you have a standard set of things that you’re doing for a customer, you can pre-package your service offerings as if they were product.
[26:30] And that allows you some flexibility, allows you to do a lot more standard marketing through SCO and a lot of things that you would do for a product company. And you can essentially have this off the shelf package that somebody can buy and they know what they’re getting. You’ve already essentially laid it out for them but in addition to that, if there are things that somebody wants that aren’t in there, you can customize that for them and say hey, you know what, I know that we said we would do these 17 things but you’ve expressed interest in these four other things that our service offering doesn’t do, I‘m willing to do those and this is how much extra it’s going to cost.
[27:06] Versus if you’re selling an off the shelf product, you’re not involved in those conversations. It’s difficult to say oh well we can also do that for you or we can add those into the product and its gonna take an extra amount of time. You’re not involved in those conversations; it’s difficult to let them know that.
[27:22] The last pro for services is that people understand paying for services. They get that if they’re buying consultant services for software development, they’re paying for a software developer to go and build software for them. When they’re paying for a product especially something like a SAS application or even something that goes into a database and documents it. It can be very difficult for somebody to get a sense of how much value is this providing to me, how much value is this providing to the business? Is this price that I’m looking at paying justified? What does the pricing that the competitor is charging?
[27:57] And they’ll go and try and figure out those things but it’s still very difficult for most people to understand them. And that’s why when you go to some of the different product companies websites and they’re able to lay out all of the different value propositions for the software that they’re providing. Those are the ones that tend to do really well versus the ones that don’t really have those comparisons and its difficult for them to essentially justify their own existence.
[28:22] Rob: And I think especially if you’re dealing with more consumer oriented markets like the mobile app market. The pricing there has just been devastated by the app store specifically apple’s launch of the ios app store. So that people expect to pay $1 or $5 per software now. And I’ve heard from some developers I know that people are paying 99 cents for something they’d be super demanding about like specific features they want built and they would actually like basically try to extort them or blackmail them by saying I’ve going to leave you a one star review unless you do this.
[28:57] Its 99 cents like it’s crazy. Whereas most people pay for someone for some service at some point whether its lawn person or someone to come do your plumbing or your mechanic or something. So you’re right, it is just a little more palatable even in the consumer space for doing that and then definitely any type of B to B situation, people know the cost of developers and that kind of stuff. So there’s going to be so much more flexibility with pricing and then you’re sitting on a five figure bill in front of someone makes a lot more sense if they’re actually getting a specific human being to do something rather than just having an off the shelf software.
[29:33] Mike: So now that we talked about some of the pros of a service company, let’s talk about the cons. I think there are a lot of them who kind of filtered out the list a little bit. One of the first things is if a customer asks for something that can be done you usually end up doing it even if you don’t want to. The primary reason for this is they’re footing the bill.
[29:51] So if the customer puts their foot down and says hey I really want this, then you generally have to do it because you’ve agreed to work for them for whatever the amount is per hour per week and they’re basically calling the shots or making the rules and they’re saying I want this done and this is how much I’m paying you for it.
[30:07] And a lot of times, if you’re under some sort of a contract like that, you really don’t have a choice. I mean you really need to go through and get those done versus a software company where you’re selling off the shelf stuff you can essentially tell the customer look, that’s not in our roadmap or it’s not going to be useful to other people. It’s not something that we’re going to follow-through and do because we never committed to doing that. It was never part of the long term goal or the current implementation of the product.
[30:29] Rob: Yeah. When you’re building a product like I said before, you just have a lot more creative control and when you’re working for someone as a consultant, you need to be a little bit political about things. You often need to be very diplomatic. And sometimes that works and sometimes it doesn’t and so like you said, sometimes you wind up doing things you don’t really want to do but maybe you can’t. You just kind of can’t say no because they are the client after all.
[30:51] Mike: The next major downside to a services company is that cutting costs generally mean firing people. I’ve had to go through this before and its absolutely awful. And it’s not so say that’s going to happen with every single consulting company or even most of them. You can certainly structure the business in such a way that you’re hiring subcontractors yourself and at that point those people are responsible for their own salaries and you don’t have to worry about it.
[31:17] But the reality is you do have to worry about it because if you’re not paying them, they’re going to go elsewhere and you’re going to lose them to either competitors or they’re just going to go off on their own and you’re not going to have access to those resources. You really want to be able to provide the same resources to people over and over again as if you were a product company even though you’re not because you want at least some form of consistency between one offering and the next. You want to be able to leverage the feedback from one customer to help you land the next engagement.
[31:44] Rob: Yeah. I think the other part of this is I found my revenue when I was consulting to be fairly erratic. If you have long term arrangements, obviously that’s different but even with some of the long term gigs I had, they would end abruptly and then I didn’t have other relationships so I’ve kind of scrambled to find other people. And since you only have one client or two clients often that are paying, such a big percentage of your revenue, it does make it more of a challenge than if you have some type of recurring revenue with a product or even if you have one time sales from a product, those, they do tend to be what I found a bit more stable than consulting income.
[32:19] Mike: I also think in general if you take aloof at services companies versus product companies, I think services companies tend to have lower margins than product companies. And part of the reason for that is as we said before, as part of the pros of having a services company, people understand what they’re paying for. They understand paying for somebody’s time. And the problem with that is they also know how much that person’s time is worth so it can be very difficult to charge exurban amounts of money for spending an hour or three hours with somebody unless you’re able to justify that with a solid marketing value and proposition.
[32:52] Next, if you or your employees are not working as a services company, you’re generally losing money. Also once you get to a certain scale as a services company you tend to have middle management. And because those middle managers are not actively working for customers, they’re essentially managing the people underneath them. They’re not contributing to your bottom-line.
[33:11] So especially you have a lot of additional overhead there anytime you bring in middle management and then in addition if you don’t keep those people busy and even if it’s just yourself, if you’re not working as a consultant, you’re generally losing money. Using a subcontractor will shift the overheard burden to them but at the same time, using subcontractors cost more.
[33:31] But in some ways it feels like it hurts less when you’re using a subcontractor and you just don’t have them booked versus having to pay for an employee and they’re not booked for let’s say two weeks at a time and you have to pay for that person even though they’re not working and they’re not contributing any billable hours to the company.
[33:47] Music
[33:52] So I think that about wraps this episode up. I think one of the points Rob and I want to make is there are pros and cons to each different type of company and although we run software companies and that’s kind of the direction that we’re going it’s not necessarily that running a product company is the best decision for everybody. There are perfectly valid reasons to go down the road of building a services company.
[34:12] But I think it’s important to understand there are pros and cons to each of them and it’s not like going down the road of product companies is going to magically remove all of the problems that you could’ve ever possibly thought that would happen to you as running a services or a consulting company. In short, the grass is not always greener on the other side of the fence.
[34:28] If you have question for us, you can call it in to our voice mail number at 1-888-801-9690 or email it to us at question 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.
