In this episode, Rob chats with John Howard, a MicroConf Connect member and founder of Slingshot. They unpack the business model of measurable swag giveaways and then dive deep into John’s pricing strategy and explore alternatives as well as opportunities to move into a subscription-based model.
The topics we cover
[9:26] Starting a physical product business
[24:53] Previous pricing models
[30:48] Customer acquisition
[39:41] Removing setup fee or raising prices
Links from the show
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This week I had a really interesting conversation with John Howard of Slingshot. He initially connected with me through MicroConf connect. That is our Slack channel. It has more than 1600 founders and aspiring founders. It’s microconfconnect.com. We connected there and he was asking me some pressing questions and I said look, I don’t do consulting, but I’d be happy to have a conversation with you if we can record it. If it’s good, we’ll put it out as a podcast episode. That’s what this conversation is. It’s John explaining how his business works and it’s not just a straight ahead SaaS, there’s some SaaS-ish elements, but he’s dealing with physical products as well. You’ll hear me just try to dive in and kind of get my head around his business and then try to explore options for him.
He was specifically wondering if he was missing anything on the pricing front. We looked at his pricing and kind of tried to analyze it and look at it from different angles, and figure out what other type of options he has. But before we dive into that conversation, I got a couple emails with feedback on episode 525 which is where I read on-air an email that I had sent about 15 years ago around the time that I acquired DotNet Invoice. It was to a friend of mine who was asking to be a cofounder.
I got a couple pieces of feedback on that episode. The first is from Ralph and he says, I really enjoyed the episode where you read your old email. I’ve listened to 124 episodes of Startups for the Rest of Us to continuously back to 415 and I’ve cherry picked some older ones. I’d already heard about your purchase of .net invoice, how you made mistakes, etcetera. However, hearing it again from the viewpoint of the ghost of startups past rather than you looking back from today, brought home the distance you’ve covered in that time and that others could do the same. I particularly liked your analysis of why you were seeking a cofounder and why the friend you approached would have been wrong.
Another piece of feedback comes from Daniel and he said I like the episode this week, but I’m in the group that would completely disagree with you about a business plan. To cut in here, in the episode I talked about how my friend suggested we should create a business plan and that wasn’t something that I wanted to do. I didn’t think it needed to be done for this little product. Back to Daniel’s email. He said, obviously you caveated that point heavily and said that they’re good for some people and not others. However, I challenge you to take that further. Just an idea, but why don’t you debate that with one of your regular guests? I’m sure one of them would take the opposite side. It could be of use for anyone starting out to hear both sides of the discussion. Best wishes and happy holidays.
Thanks for the suggestion Daniel, I may take you up on that. In fact, if you have been a guest on Startups for the Rest of Us and would like to come back on and discuss business plans with me, I’d be happy to do it. I think that this stance that I take is I believe in having a marketing plan and I believe in having a budget. A marketing plan can literally be a one page Google doc with bullets in it or a Notion doc and the budget is usually just a spreadsheet that gives me some idea of how I’m not going to run over. That is my “business plan.”
The business plans that I was seeing you create with the software just seemed like a lot of extra headache, and work, and guessing. Maybe we’re using different words for it or maybe Daniel or others feel like even for a product that’s doing $500 a month, or you think it’s going to make $1000 a month that you should actually create a full on business plan for it.
I think I’m just more of a lean thinker than that or maybe I also don’t love a lot of process and creating a lot of documents that I think don’t have a lot of value to me. That is my style and I do tend to keep stuff in my head until it needs to come out. I might write a quick document that is describing the direction we’re headed, but I know that other folks want more detail, and I do think it’s kind of an interesting way to think about it. I don’t think it’s one size fits all. Anyways, thanks for the feedback. I really appreciate it. Now, let’s dive into my pricing deep dive with John Howard of Slingshot.
John Howard, thanks so much for joining me today.
John: I appreciate it. Thanks for having me on.
Rob: Absolutely. I’m pretty excited to dig into pricing for Slingshot. You hit me up in MicroConf Connect. To folks who aren’t in there, we have more than 1600 founders and aspiring founders now in our Slack group, so microconfconnect.com. You DMed me and you said, hey, I heard you gave some pricing advice on a recent podcast. You want to chat? I was like, well, I’m busy. I got stuff going on, but if you’re interested in perhaps coming on the podcast, we can have a pretty good conversation about it. I appreciate you taking the time to do it.
John: It’s so awesome and I appreciate it.
Rob: If folks want to check out what you’re working on, it’s useslingshot.com and your H1 is, your easiest swag campaign ever. Quality branded swag, a custom merchandise store for employees and fans, and worldwide fulfillment. Where you stand now, you’re the only employee, you’re the single founder. You do have, you told me, many contractors who are doing design, or development, or fulfillment, or just filling in all the gaps that you can’t handle on the day-to-day basis as a founder. Do you want to give folks an idea of where the business stands? Whether you are willing to share revenue or just some type of size to give an idea of the stage? It is December of 2020, and you launched it in January. It’s about a year old, but I’m guessing you have worked on it for quite a bit before then.
John: Basically, 2019 is when I launched it. Actually, it was January 1st.
Rob: It’s almost two years, got it.
John: Yeah. Totally different model that was working pretty well. We had about 10 clients on that model month-to-month. It was a unique swag store that give away points and you can transfer those points and be like, hey, you did something great, or the KPI, or the birthday, or start date. I’m really fine, but we knew it was one of the things that wasn’t a requirement at a company though. We’re still trying to build that really fun product market fit for the necessities and it’s hard to do.
Then Covid hit in March. When that hit this year, every single person quit except for one. We’re still trying to build up that market and find out what that was. Since then, I’ve met a lot of smart people since then that helped me guide my way to the true product market. We now have an awesome platform that as of now we’re going to hit around $200,000 by the end of this year in revenue.
I still am the only employee and I’m wearing a billion hats as my wife knows. Other than that, I am able to really export. People that actually physically know that I pay for fulfillment in some warehouse, and I pay people for marketing, and to help me out in building new product releases, but allows me to really focus on sales, client relationships, and et cetera. We’re doing really well. It’s a totally different change but still in the same vein that we are giving away great swag to people who deserve it.
Rob: That’s the thing, your background is in design and UX, and if folks want to check you out on Dribbble you have John Howard is your username and you actually started an agency called Black Airplane which is at blackairplane.com that you exited about 4-5 years ago. You sold it to someone who could level it up. The logos on the homepage of that are Coca-Cola, McDonald’s, Home Depot, The Weather Channel. I mean those were I’m assuming many clients that you closed. Are you the double threat of an amazing designer and also an enterprise sales person?
John: That would be a little braggadocious for me, but I appreciate that. I look at things more for the user experience side and that’s what has given me an ability—I’ve always wanted to start a business. I think that was my first love. I lost my job at an agency that I worked at. They forced me into, hey, why not start an agency? You love business and you love doing design work. That was the love story there and because of that, I put all my effort into making that happen. That was Black Airplane. I did not do any development there, it was really just design. We ended up working with some really amazing clients as you mentioned some of those. Coca-Cola being one of the most recognizable here in Atlanta and because of that, I kind of handed that off.
At one point, I really wanted to go build a product company. Especially working with products all the time, people who are doing products, it just keeps you energized. I handed it off to people much more formidable to me to be building an agency in building that up and they’re just doing a tremendous job. They made it now the whole gamut of design and development. It’s really grown, there’s about 18 people now. When I left it was two people and we had eight contractors, so big change.
Rob: Good for you. That’s cool to know when to hand something off, when to let it kind of take wings and give it to someone who perhaps can take it to that next level if it’s not something you want to do. I’m curious then, so you are running this agency, the description on the homepage is we’re a digital product design and development firm in Woodstock, Georgia. We’re on a mission to make sure no digital experience gets left behind.
You obviously have the chops whether your own design skills or through the network of contractors or employees that you worked with to build full on digital products, web and mobile, whatever. Why start something with a physical component? Basically, you started a product that allows other brands to launch their own swag campaigns or swag shops versus just going and building a software product, a SaaS, or whatever because you obviously have the skill and experience to do that.
John: Yeah, I’ve done that before. If I could show my rap sheet of how many things have failed, I could give you a long list. I’ve done a lot of that work. They made minor successes here and there, but I’ve learned a lot along the way. I had just been really fascinated with the physical and marrying the digital world to a physical product. I think I’ve really been obsessed with that for a long time. What got me excited about it was at Black Airplane, we did swag. I don’t know how the swag looks now there, but it’s always been great. We never slapped our websites and names. We were about people’s swag. It gave them really great swag. Every single time, people would brag on something we had.
I used to joke that people would wear the Black Airplane swag out to the park or on a date. They wouldn’t rip the sleeves off and cut off their grass, it wasn’t one of those types of shirts that you hated, or hats, or whatever. It was really nice stuff. I saw that people got really excited about that. I just felt a relief. I’m really obsessed with your experience. I want to build this product and platform and marry that experience of getting something from an employee, or colleague, or boss, and then receiving that in your hand physically seeing that side of things as well. Both of those things got me really excited.
Rob: That makes sense. The companies that I’ve launched and pretty swag for, I always took that same tac. Especially at several of the Drip shirts, I had a professional artist, he actually is a comic book artist, to design this character called Drippy who, rest in peace, Drippy was retired after the acquisition. I remember telling the designer, I want this to be something that could appear in a store like in Urban Outfitters, or some store that someone might see. Obviously, I wanted branding, and perhaps a logo, and maybe at a tagline somewhere on it, but it’s not this big prominent thing.
John: Right. You’re not walking around here with your billboard, that’s not the point of it.
Rob: Exactly. You decided to launch this, I know we want to get into pricing, but I just have so many questions because when I look around the internet, I see this is a solved problem in my opinion as an outsider. Printfection, spreadshirt.com, printful.com, swag.com, activeimprints.com, axomo.com, I literally searched for 45 seconds and I found those. I guess the first question is, are you crazy for entering such a crowded space? The second question is, how are you different from them? Because I know you’re not crazy. From your past, I know you’re an enterprise salesperson, a designer, and a gifted business person. I know you wouldn’t enter the space and be $200,000 of annual revenue by accident.
John: Great question. I think those are fun to kind of pose. I don’t usually get those in sales calls because people are calling me for that reason. They don’t want to deal with it. I think that the question usually originally I thought, people just love giving away swag, we have the point system in place. The reason we killed that is we thought the people wanted to give away things. We thought that was the […] and we wanted to give away great swag and they wanted a platform to do that and the avenue to really reward people.
I think they still do, just nowadays, it’s just overwhelming. People ops is really the general term. There are so many that are involved. I started out with more people ops demographic I was trying to reach, but a lot of people try to get away things or something for themselves, they’re just too busy. They don’t want to do any of that.
Even the things like Printful and Printify, I recommend to people all the time, so that if their budget doesn’t get us, they want to do DIY solution, go set that up. You got to set up your website, your location, you got to generate terms, and set up your little call to action pages, and go print stuff, talk to vendors, and all that. I go on and on because I want that to feel heavy, because it is. Even with the Printify or Printful solution. You’re having to go set that up for yourself and get that running.
The quality is not there, you can’t print in multiple locations. You don’t get the same quality of shirt and hats, you can’t do things that are super custom and unique. You’re bound by two things. One is the uniqueness of the campaign and the main one is 90% of why we sell it because it’s just too much work to go to ship things out to ship stations, setting it all up to get it all running, the full gamut of the campaign.
Our differentiator now is not based on, hey, we do really great swag. That’s a given. I don’t even sell that anymore, right now it’s basically like, you don’t have time to do this. I know you love your people, we thought we’d solve that for you. Now what we’re going to do is take everything off of your hands. All you got to do is get excited about rewarding your people.
I think we keep people in that excited ethereal place when they’re working at a job which they’re pressured to perform and they want to go home and not think about this stuff. They just want to get excited about their people. When you remove all the other burden off of them, it frees them up hourly monetarily to go do a really, really great job at that. The fact that they also track campaign usage to again on Printify and Printful, you can see how many things are sold, but you can’t tell the conversion rate of people that did something because of that movement.
We actually track that. We have extremely high conversion rates on our call to action pages of people that willingly got something free and then chose to do another action for their company. That’s how we’re different. We really alleviate time and then we track the actual conversion rates on your swag campaigns.
Rob: I want to touch on a few points there. One, you mentioned people ops, for those who haven’t heard that term before, it’s the new term for HR. Human resources is becoming less and less of a term that’s used. People ops are the folks who are helping you manage your people typically at a larger organization.
The second thing you mentioned is people will get something for free and then take another action for your company. I think there’s two questions there. One, are you right now focused on let’s say larger companies? I’m in Minneapolis. I think of Target, Best Buy, General Mills, these are large Fortune 1000 maybe even 500 companies. I forget who’s in the 500 at the given time, but those are large companies and they may want to give away a bunch of swag for free to their employees.
I guess the first question is, is that more the type of client you’d be looking for versus I think producer Xander and I who work on MicroConf together, we have talked at different times about setting up a MicroConf swag shop where the swag wouldn’t be free, but we’d probably sell it at cost. We want people to wear it, but also we can’t lose $10,000 giving stuff away for free. I guess the first question is those are the two things I think of when I think of a swag shop. Are you focused on one over the other?
John: Right now, they’re all giveaway campaigns. That’s the primary sponsor revenue earlier. All of that is attributed. Actually, 95% of that right now wants to keep things outside of that or attribute it to a giveaway campaign. We did start with the internal employees. It’s people who, hey, do you want to give away things to your employees? That area is just too small and people already really focused on doing that anyway. A lot of them realize, if I gave away things to people external from here, I’m already doing that through advertisement and setting up ads. My conversion rates are usually .1%-4% on a high print ad.
Power campaigns right now that we’re tracking are converting, again, the conversions are all subjective, but converting on they got something free and then they did something with it are around 20%. It’s extremely high because you’re giving them something free and they’re going to do another action after that, but that’s where we’re at now.
We are also going to start focusing on launching a new product called […] that’s going to focus on the same. We’ll do all of this for you, we’ll save you all this time while you focus on your brand, but you can actually sell your products. We’re really working with people that know their brand very well, that know they can make money off the products they sell.
Rob: Got it. I want to dig into that action then because I’m not sure I quite understand when you say, they’re running ads to give stuff away. Again, just come back to Target or Best Buy, they wouldn’t run Facebook ads to say, get a free shirt that says Target on it or free Best Buy swag. What am I missing there?
John: For sure. Yeah, they would more run ads to give away something free like a document or a PDF and hope that you convert and give your email address or something, but you are not proactively doing anything from there. I’ll give you three examples of what we do. Basically, if Best Buy were to say, we want to run a thank campaign and spend all of our money on giving away swag. It could be small or large, it doesn’t matter, but something really unique and cool we’ve had done for Best Buy. We want to give that away free.
What happens is these people get code. Maybe they attended an online conference, maybe they went to something physical, a booth at Best Buy, but they did something. When they get this code, they go to put it on the internet which is Slingshot. We have a site setup for them. After that, we have a page where they can either cool down—basically a celebration page that says, your product is on the way, we have some information there.
What we can do is we can set up a custom call to action that happens on that page. That means, we already got them excited waiting for the free thing. They did that first. We didn’t ask them for something before they gave them something free. After that, because they’re at this high and getting excited about something, we then ask them to do a call to action. Three of those to give you an example, recently, to make it really quick, that’s one. They would’ve made a post about the beta of Illustrator. They want people to post and further talk about the beta after they got their free product, it’s just a tweet button. You basically tweet it, edit it the way you wanted to.
We also have one where you can fill in Glassdoor reviews. This is after 60 days of being an employee in certain companies. This company had the call to action where you say here’s your free item. If you love to do this, we have an optional thing as well, would you post it? Go to Glassdoor and leave a review for our company.
The third one, you want to ask two questions after you use their product. They give you something free, after you’ve been using a trial of the product. This conversion page, the call to action page after, again, it’s optional. They’re able to say, here’s a few questions I can fill in and submit this. It just helps them along. They get free stuff from that. The conversion rate is really measuring after the excitement, after they got the free item, will they fill something out or do an action.
Rob: Fascinating. This is like a whole ecosystem. This is something I really have not been exposed to. I’ve seen swag shops for conferences or companies. Back in the day, I was a Microsoft MVP in asp.net. It just means that you pass some certifications and you become an influencer in the community and then they nominate you and you get a bunch of free software.
John: New swag, yeah.
Rob: They give you I think I got $100 credit at their company store. I could software and I could get other stuff. I’ve been exposed there and I’ve obviously been exposed through MicroConf, or Drip, or the companies I’ve started to extend our brand and everything. This is a completely different thing that I have not seen before. We have trial users, give them something and then ask them a question, or we’re going to ask for Glassdoor reviews, or as you said Adobe illustrator wanting beta users to tweet about it.
John: Right. That was done really fascinatingly well. We’ve tested it and made the collection basis nicer, mobile, make sure it’s something really easy and simple they want to do. We always negotiate the complication with clients, because they want to always ask more, or do something more, and we have to say no, or put it before the form. We want to ask them this before they get something free.
We always thought that again, you want genuine responses. We measure genuine responses to getting something free, and then voluntarily choosing to take action after that. We’re truly like MailChimp you can measure mail, why can you not measure swag campaigns the same way. It was a little different there, but why can’t you do that? We kind of have been pitching that back and forth ourselves. Building something that is measurable in the same way with swag.
Rob: I often say when someone’s launching a new product, if you’re going to compete with existing competition which most of us these days are, I say, look you should own a unique position, you should own a traffic channel, or you can be cheap. Those tend to be the three things. There’s always like, be careful with the cheap, because unless you truly have a competitive pricing advantage, then you’ll just become a commodity, and blah, blah, blah.
For you again, competing with these other things that kind of do—again on the surface, it all seems to be the same for me, but as I’m digging I’m like, you actually are differentiated. Are you essentially, you’re a full service, high quality, high priced version of these things? You have the CTA aspect, the call to action aspect built-in. Is that what makes you different than other options I would look for?
John: Yeah, I think that’s really the main one. Basically it’s nice quality swag. We made everything really high quality. There’s no effort from you at all. If we say the easiest swag campaign around, it truly is. All you have to do is go, I want to give out codes today? We’ll take care of the rest. It’s that easy. I want to start a new campaign off this in the exact swag from last time because I want to extend that. You could do the same thing and then afterwards, you’re going to measure it.
It’s really that cyclical like, just getting excited about giving away things and wow, there’s an option here where I could measure that as well and it’s going to show me that. That’s where you get excited more. You’re going from people ops now to really talking to a lot of marketing people. We started out with people ops and marketing. They are super excited about it, they have so many ideas that we can force them to drill down which marketing people have these challenges, drilled down into one call to action. If you want to start a different campaign to test out like an A/B test, you can do that. But really, one call to action you can get them to do after coming off this hive and something free.
Rob: That’s what I was going to say. The call to action piece almost seems, aside from the full service which I think is great, because it raises the price point and makes it easier for people to get onboard. The call to action piece, is anyone else doing that? Tying a post swag call to action where I signed up, I selected the shirt or the hat. I love the hat that I just got from Adobe. That’s going to be now shipped to me and now of course I’m willing to tweet about it. It sounds like you have all that built into your system. Is anyone else doing that?
John: Not that we’ve seen in that way. I have seen other swag stores that have some kind of plug in that says, can I get some feedback? But it’s usually disrupting. I’m user experience centric. Everything’s got to be easy. Everything built into our platform is extremely easy. We tied in to Google. I think they naturally grab all your information. We don’t store any information, your payment information, our call to action for our stores that’s coming out for the payment stores. If you want to sell swag, it’s super easy. It’s all one click.
Everything is UX centric, so because of that user experience, I haven’t seen anybody really marry them up in the way that we have. They’re just people using plugins on wordpress stores that are very heavy, or themes, or whatever it is. Even Printful and Printify which are our competitors in the manufacturing space, we don’t even mind that people send us their swag. They have other people that use swag from outside of here because they get it from somewhere else or they prefer a different vendor. We don’t mind it all, we just take it on. We still charge the fulfillment fee for the package and set them up on the call to action as well.
Rob: Got it. That’s the thing where you’ve innovated here from what I can see and why I now understand how you’re different. You’re going after marketing leads or folks who actually want to get to a call to action and they’re going to do it through swag. Because that’s the thing, marketers are used to spending money to get things. They’re used to paying writers for SEO, they’re used to paying SEO consultants to help with it. They’re used to paying for ads to drive people to places. Spending money on marketing to get a tweet, or to get a survey answer, or to get a Glassdoor review, that’s nothing new. You’re just providing this whole other thing as a service.
John: Right, incentivizing stuff they already do, bringing it together, that’s really what we’re doing.
Rob: Okay, we’re 20 minutes in and I have a picture. I really need to understand that, because if we start to talk about pricing from the top, I would have dug into why aren’t you $99 a month plus X of fulfillment like Printfection or Printful, but that’s not the value you’re providing.
John: We’ve been there.
Rob: Exactly. Talk me through that. I’m sure you’ve had many pricing models before. Maybe don’t go through all of them, but you could briefly touch on this is how we’ve evolved and where we are today. Then you and I can kind of bat around what’s working, what’s not, and just figure out if you’re on track.
John: For sure, we’ll talk about that. I’ll make a really brief, back when we started in January, 2019, a year ago, that was when you bought points. You pay for the points up front basically. Whenever something was done, you get a one off of print. We didn’t use Printify Print, but we used a local vendor with really high quality swag, but you could buy the points and you paid a monthly fee of $99 a month. It was really nice, it was great.
Again, all these people went away during Covid, so our new model, we started out still doing the monthly fee and every time we’re having these conversations with people that are already paying a ton of money, they’re like, why am I paying monthly if I’m going to be doing new campaign with you all the time? We ended up charging —instead of doing the monthly fee of $99 or $299 with some of our clients, we ended up staying at $99 per campaign that we set up, up in the front. That’s basically three months of what we used to charge up front, it’s built in and we know they’re going to be re-upping.
Almost every client we’re working with now has a new campaign coming out every couple months. They’re re-upping or rebuying into that campaign process. They’re paying that $99 each on a one A/B campaign page set up.
Rob: Okay, which seems inexpensive to me. You’re essentially doing enterprise sales with larger companies and we talked about Adobe, that lead time to close that deal was not 15 days. I can assure everyone listening that it was months and months. If it’s $99 to set it up then where are you making your money? Because I know that your margins are pretty good, we talk a little bit offline in advance. Where do you make your margin then?
John: To give you a back-story, Adobe for someone like that, working with those types of company, it took me almost 10 hours to get on board it, of me filling out things to make sure I was set up to even allow us to get into their system. They have to approve you with this big group of people. To get into their system that’s really hard in the first place, enterprise sales are extremely hard, but once we’re in, the lead times are not very long. We really have been setting up campaigns for a lot of the Adobe. We work with almost every Adobe team now as well.
With the Adobe team, things didn’t get set up within probably 10 days, 30 days max to get paid for that. We charge everything up front so we wait on invoices to get paid before we’ll start a campaign. That’s one way we don’t take on the scary parts, so we’re trying to bootstrap. We worked that out early on. We’re making our money based on the margins inside of the campaign itself. That’s actually for the Swag and then to fulfill that Swag. Our campaign profit margin is around 35% to 40% off of the actual amount. Basically, they’ll send us the amount, we’ll then go buy the Swag, get all that done for, you don’t have to worry about it. We make about a 35% to 40% margin there, and then it’s $350 right now per package to send those out. All that are bundled up into one package price that they pay for to start a campaign.
Rob: Got it. I’m imagining this campaign since they’re pre-buying shirts, hats, mugs or whatever. This is thousands of dollars, if not tens of thousands depending on—I mean they’re placing an order with you. They’re saying we want 100 shirts, 100 hats, 100 mugs or maybe it’s 500 each and then you say okay. That’s $8000 or $12,000. Is that the idea?
John: Yeah. What we end up doing too, it’s around $6000 on average, around $5800, we’re calculating per campaign that’s launched. That doesn’t mean you have other ones who are tiny. We work a lot with tiny companies as well. Those are probably around 20%, 80-20 rule. We do work with a lot of small companies as well that run smaller campaigns. The cool thing about that is we’re not changing how much we charge for the swag that they’re purchasing. There is a minimum entry to even jump into a branded campaign.
The cool thing is we’re really pushing people to buy five agnostic items, so sure that you’re going to have to always re-up and buy new smalls, new mediums or new larges that’s a property of the swag closet. We do still order those items and people pressure us to get those types of items. They really want it, they really want that certain item, but really we’re sneaky people to think it can be reused for new campaigns over and over again. Maybe they’ll buy something new. This year it’s going to be the sticker, the hat and the socks or whatever it is. Next year, it’s the socks and this. They can always having to campaign running with existing swags or really pulling from that at all times.
Rob: That would probably exclude MicroConf from doing it because we would be looking for a print on demand solution, such that we wouldn’t want to come up with let’s say $5800 to basically populate your—because I assume you have a warehouse and you’re doing all the fulfillment. That would make less sense for us given that we have no idea what the demand is because we’re not thinking in terms of campaigns. This isn’t as much marketing, I want a call to action for us. We truly just would want a swag store to extend our brand and run it at break even. I mean that’s accurate, right? It’s not necessarily a fit for the model that you’re looking at.
John: Yeah. Thinking of MicroConf, everybody that I know that’s in that group that I personally know as a DIY person. They’re sending everything up. They’re chaining it all together. There are no code solutions. Slingshot was built with no code, almost everything is. We’ve got some custom code in it but 90% of Slingshot is built on no code. We’re doing that, making this much with having a no code solution is play. Because of that, I think a lot of people want to chain together their own stores and their own brand and put their logo wherever they want, but you’re very limited on what you can purchase. Sometimes people don’t care. Again, if it’s brand awareness like I know MicroConf and I just want to get something from that field made by what I get from them, it doesn’t really matter.
If it’s you choosing, you being Rob, what items you want to go out to these people, the one off solutions where we restarted, it was really great. You’re hoping that people have great brand awareness. You’re hoping that they could generate that. With people giving away things, there’s always a demand. They can always give away or run a new campaign. There’s always a need to get a new call to action or return on investment for something they’re giving away. Just because the buy ins are a lot higher there, with our new store, we’re really focusing on companies that know where they’re at with their brand and want to move to a new solution where they can focus more on their brand and worry less about running everything else.
Rob: How are you finding these new marketing customers? Because it feels to me like this is almost a new—this is something I haven’t heard of before of using swag truly as not just brand awareness but as a marketing assets that I’m going to give this away in order to get the call to action, the tweet, the survey, that glass door responses. I can’t imagine anyone searching for this. If I’m in marketing at Target, I’m not searching swag to give away so that I can get someone to tweet about Target. That’s a challenging position for bootstrappers to be in because you often want to fill demand.
That’s the easiest way to do it. There’s already search demand. There’s people seeking and I can either run some ads or I can do content or SEO and I can get in the way of that traffic channel. It wouldn’t seem that you’re able to do that. How are you finding new customers and then we’ll actually talk about pricing? I promise.
John: That’s fine. The cool thing is when I even asked you for pricing is like I know where I’m at but I want to make sure I’m not in the wrong place. He might have another opinion that yours, as smart as you and just be helpful, which is the reason for that. Aside from that, like you said, it’s not easy. There’s a lot of not training I would say, but there’s a lot of people—the eye-opening moment that you had 20 minutes into the call, I have to make that happen usually within 5 minutes of the call.
I always schedule calls for 15 minutes to force that reaction, our demo is only 30 seconds to show the actual platform. When I do that it’s really like how do I plan the phone call before that, it’s really writing about it a lot, talking about some of our success. I’m not an influencer by any means, but I do work with a lot of enterprise companies who know that if John’s seeing something in this area of your experience, I’m going to at least check it out and trust it.
I have a great group of advocates on my side that help me extend my voice and reach because I’m a transparent guy. I’m open about everything. I’m always reaching out to someone as did to you. I did that to get him on this call today, but as you said I reached out. I was hoping I could get your ear up. I think of the whole thing as like I made a lot of relationships that way.
I’m not really doing traditional marketing and sales right now. We are working on setting that up. Right now, it’s very much word of mouth, through LinkedIn, talking about different ways that people are looking for things. No, they are not finding us organically searching through that, but the cool thing is everybody that filling out these calls to actions and claiming swag is coming through our domain to do so. The volume is ridiculous. If you look at our stats, our volume is just people passing through. We’ve had quite a few people come through that goes, I love this system. Can I talk to you about this?
Rob: You have a viral loop there?
John: Yeah. That is built in. I’ve been doing that for 10 years and making sure that’s in place when we launched. That’s built in so I don’t have to spend a lot on marketing right now to do that.
Rob: That’s interesting because I think as we talk about pricing, one thing in the back of my mind that’s a little disconcerting is that you’re not on subscription. If you don’t have repeat buyers, the fact that you said that Adobe—you’re working with most of the departments, probably means that you’re just getting new projects constantly and that is what’s going to make or break this business. Because if you had to find a new Adobe or just a new client every month or every week or whatever to fill your pipeline and keep your revenue, this is a grind, this is a sales business.
The beauty of SaaS or subscription or recurring revenue is that you don’t necessarily have to do that constantly and you can build this flywheel. Your flywheel is not going to be subscriptions, it’s going to be reorders in essence from these larger orgs. Has that been the case so far, most of the companies you’re working with are coming back and doing more and more campaigns?
John: Yeah. Even at Adobe, their departments or divisions or what they call them internally but a lot of people really did know someone else that works there is 21,000 I think people that work there now, latest count. A lot that I work with have heard it, I heard of Slingshot used here but I don’t know who you are. I don’t know this other person but has heard of it. A lot of the people, we are relying right now on re-ups. They are doing that because they’re seeing the value there. We were able to show them statistics.
Getting a new organization like that set up, that’s monumental. That’s why I stopped and said right now we’re working on having some new organizations that are that large that have different groups that can break out. Really tell one another without knowing who started it, tell each other about the product and service. We are reliant upon that being new campaigns and banking on that right now honestly.
Instead of the month to month, which seems to me—when I talk to people, it seems to be almost like you’re charging us month to month, but already charging us a huge amount for the campaign project. We talk about building that in so it covers us for a few months just to create somewhat, not predictable revenue, but built in revenue from that. We’ve gotten away for the month to month subscription altogether. Definitely, I thought about reintroducing—I don’t think I have the right platform to reintroduce that yet, that makes sense not to say it during a sales call.
That’s why I’ve been really stagnant on whether we should do this or not. Right now, we’re killing it, but I don’t know how long that will last without at least some kind of predictability month to month.
Rob: Right. It doesn’t seem to me like the subscription is going to work given this current marketing campaign. You call them campaigns because they are marketing campaigns in essence. That’s why I was confused when I looked at your home page. I’m like, why is he calling a swag store a campaign? Because again, I’m coming from the MicroConf mindset of we would just want a store that’s open year round and you could come and buy a shirt at cost or maybe if you attend MicroConf, we send you a coupon code where you get it for free. That kind of thing wouldn’t be a campaign and so that’s how you’re differentiating. You’re talking about marketing campaigns.
When I think about how marketing campaigns are thought about, they have a budget and they have an ROI that if we pay $5 per tweet or at $10 per Glassdoor review, or whatever that may be, maybe $50, then that’s a success. Back in the day, if I could pay $100 per new trial at Drip, we were minting money. When I think about writing a check for $6000 as you’re saying the average price is $5800 for a campaign, you’re right, the $99 a month seems superfluous. To get us all on the same page then, you charge this upfront fee to manufacture and a warehouse the merchandise for this campaign and then you charge a per package fulfillment charge. I think you said it was $3.50.
Rob: Okay, is that it? I mean that’s basically your car pricing if I were to come to you from Target, so that you’d be like, alright, how many mugs and other things you want to print? It’s $5000 or $10,000 plus this fulfillment fee, does that kind of summarize where you’re at?
John: Yeah. We want to be one packaged price. We do break it down so you’ll see things like a line item because people need that to take it back to their teams because every team works differently. It is all one package price at the end of the day is all you’re paying.
Rob: It’s enterprise sales. I mean it reminds me a little bit of custom software back in the day or even not back in the day, you’re running Black Airplane which was custom UX. That’s what this feels like. The advantage you have right now is that no one else is doing it. Is that right? I mean it’s essentially a green field and you can price it within reason where you want it to be?
John: Yeah. There’s somebody that can always come up with something competitive. I’m not excited about that but I do look forward to beating them, it’s the competitive nature in me. Really, once they talk to us, they’re going to get that same experience at scale always. It’ll always be scalable. I think it could be our next big challenge, can we always scale the experience that the person on the other i.e. in this case you would receive every time you engage with our team?
Like you said, it’s very much like Black Airplane it was an agency world. I’m used to selling to enterprise companies that they invest in. The cool advantage I think here I know there’s other things like Printful, and Printify, etcetera. There’s a million of them that exist. You’re having to piece those together, but most people who are sending swag out to the void and they’re paying for that. They just do it like it’s natural. I got a startup, I have a company or a new niche. I’m going to buy a swag for the whole company. We’re just helping you measure that and make it meaningful.
I think that’s really the advantage that every time I talk to someone, it’s completely unique. It’s like wait I’m already doing this, but you’re going to help me actually do this, do something with it and make it mean something. I think that’s what keeps people’s eyes really wide. They’re not really paying a premium when it comes to we bought the swag, we went to the post office, we had everybody’s addresses and we shipped all the stuff out to them. We have to store it all down at our swag closet. Even in my LinkedIn, I said I’m saving you from your swag closet and save your sanity or something like that.
It’s being cute by playing on it. It’s a lot. People don’t always use the swag, they always do that for printouts, they get really great stuff but actually it’s something that people will use that you can measure against for an ROI.
Rob: Got it. When I hear your pricing, it seems to make a lot of sense. The fulfillment cost, I’m used to it. That’s what FBA, Fulfillment by Amazon does. That’s what any warehouse is going to charge you. They’re going to charge you a monthly storage fee, which it sounds like you’ve baked into the campaign costs, so it’s all one line. I know it’s line items but it’s all one big price. They charge storage and they charge fulfillment and then of course the actual payment to USPS, or UPS or FedEx or wherever you’re shipping. All that feels like it makes sense to me.
When I think about pricing, your set up fee is $99, should that either go away or should that go up, especially for the first one? I would be thinking there and I would be thinking about your margins on your large quotes or just any quote. Have you had complaints about we quoted $5000, that’s too much. Can you build an extra 10%, 20%, 30% margin in there, given that you are not a commodity at this point. That you really are something that is value add, someone would have to chain together all these other services in order to do it.
You’re already charging a premium price, can you charge a bit more? Those are probably the only two areas that I think of, is that set up fee or effectively just raising prices, building more margin into your quotes.
John: As we move and I work with great ops people. I say this, I mean, to my dearest heart, I love working with people that are super, super focused on just loving on people. That’s just the way I’ve always done business, sounds cheesy but you’ll see my point on everything, like love on people first, everything else will follow. I want to make sure that the people I’m working with are focused entirely on their people, not just their campaign, but in that vein of thought.
As we move further away from people ops and focus more in that marginal area people ops to, hey, introduce me to your marketing team leader, CMO, or whatever at whatever organization. They’re going to want more measurability on this. As we get more into measurability, which we’re doing a great job now as new pieces are coming out at the end of the year, there’s some really exciting things. They’re not going to be heavy. I don’t want the product to ever feel heavy. When they see this, it’ll be one of the things they can look at and say, you know what, there’s absolutely ROI here. It’s measurable and we can actually spend more money. That’s where I think I’ll be more comfortable even increasing margin there.
Right now, the balance is probably about 40-60, 40 being people ops, 60 marketing reps that we’re working with. I want to be careful to not just be inundated with ROI, measurability when some people just want to give away something for free and just do that, because that’s the company they are. Even in Adobe, it’s about split now, the half of people we’re working with, most of them, can you show me the measurements? It’s awesome. I wish we could see more numbers.
Somebody said the other day, more numbers it’s better for me. The more I can see, it’s better. I think we’re in the middle of figuring out what that is. I don’t think we’ll ever lose people ops, but I want to make sure the experience is top of the line, which is right now that the third page is optional. It’s completely optional if you want to measure or not. 90% of our campaigns are measuring right now.
Rob: As I think about it, it’s like you’re in a good spot in terms of not being commoditized once someone understands what you do. I think you can go up market into larger campaigns, in which case, as you’re doing now, you’re charging a big lump sum to make it worthwhile, to do the enterprise sales process. If you go up to $20,000, $30,000, $50,000 campaigns, that all plays out. It’s more enterprise sales and it doesn’t seem to bother you. A lot of people don’t like it, but you seem to be good at it and doing it.
You are leaving room below you for someone to come in and do a print on demand version of this exact same thing at, let’s say, $99 a month price point. Obviously, they would have to build a lot of the margin into either that monthly fee or more likely the fulfillment and the production itself. They’ll charge on that on the t-shirt print or on the mug print.
I don’t necessarily think you should bother with that. You’re a single founder. You’re having success and I think where you are up is going to be amazing. I think if someone were to compete with you, they would probably start in that realm, going after the folks who maybe can’t afford the $6000 or $10,000 up front, or aren’t confident enough in it and almost want a test bed of print on demand approach to do more one of things. It’s a higher unit cost obviously but it’s a lower upfront fee.
John: I think to just pretend I was to do that and if anybody were to listen to this in the future, if I was to that, that’s where I would start as well. I would come up with let me piece together our WordPress theme and then put together something on the end that asks for some information or get a plugin or whatever in the front end, do Printful or Printify or whatever it is. Even those on demand prices, they’re on demand for a reason, talk about quality but they’re on demand for a reason.
You’re paid to get something on demand, but you’re still paying a premium when you look at the prices for those items. They would have to build in a lot of margin to make that work. Everybody I worked with, which is again, the power of negotiation—I’m not saying I’m the expert of all experts in this area, I’m not. I’ve been in a lot of great relationships over the last—I’m 37 now, but over the last 10 to 15 years and because of that I’ve been able to work my margins way down. Even when I say margins on my prop, but even larger campaigns that are running with lots of items, we work with a lot of small companies to pay pretty much the exact same amount aside from the fulfillment fees that they would, almost exactly if they were to run externally.
Now, it’s going to be, again, tough depending on who you go to, but they’re paying pretty comparably to that, unless they go to a vendor like a print shop and work with them, they’re not going to get their margins down. Even if this person we’re competing or I was competing against myself, the reason I didn’t go that route is because there are not really a lot of margin to make there either, unless you’re charging some pricing.
I actually worked with local vendors to get their prices way down, so that I can go and compete with the one off with way better quality, way better options, unlimited items you can choose from. We work with almost every company brand out there. Because of that, it is competitive but they’re going to struggle as well in trying to create margin there.
Rob: Yeah, and that’s the challenge of dealing with physical goods and especially custom physical goods is that doing one versus 100 is ridiculously expensive. In fact with Drip, we’d print 100 t-shirts at a time and I believe the cost, I went directly to this printer that I had a good relationship with and it was like high quality print, high quality shirt, $7 or $8 a piece and then we had a poly bag for $1 and then shipping was nothing. It was so inexpensive.
We went and looked at print on demand because I didn’t want to have a box of t-shirts in my garage, per what you’re saying. I believe the print on demand for comparable quality is about $21 or something in that realm. That’s what you’re saying and that’s where if you build a SaaS app, we forget that when you’re building software, unit economics really are much less relevant and obviously you’re in a position where that is perhaps the most. It is a competitive advantage given what you’ve discovered.
I appreciate you coming on the show today, John. I don’t know how helpful it was for you, but it certainly was pretty interesting to me to dig into this world and then to see that connection tie into marketing calls to action because that’s of course been my life for 15 or 20 years.
John: I love Drip. I think when I talked to you originally, I didn’t even know what startup I was doing, but I talked to you about four, five or six years, I don’t remember. You were at Drip, we talked through—I think I wrote our you on Twitter and we ended up talking for a while after that on email. It was super nice that you reached out. I was super surprised that hardly anybody does that. I’m like, I’m going to be that same person. Now, when somebody reaches out to me, I do my best. I can’t do it now but let’s go meet somewhere or talk somewhere or go sit down. Even when I sold my agency, everybody came out of the woodwork that wanted to start an agency and do the same stuff and say like, there’s not really all these secrets.
Today, when you’re telling me, this is helpful or not, it is. I think it’s easier to talk to someone else and get it out to someone else about an echo chamber of yourself when you’re a solo founder is extremely important. It’s been a privilege to even be on here and talk to you.
Rob: Yeah it’s been great and you know as a single founder, I would recommend, I’m sure you’ve heard me beating this drum for years, but mastermind group. Having two other founders who you talk to twice a month, who are in this essentially with you, even though they’re not your spouse, significant other or cofounder but they’re on that journey is something I really recommend for single founders, having been on that journey and felt the loneliness of that.
John: It was heavy in some days.
Rob: I know, I’ve been there. If folks want to keep up with you on Twitter, you are @useslingshot is your company and @howardcjohn and of course useslingshot.com, if they want to check out what you’re building. Thanks again for coming on.
John: I appreciate it. Thanks again.
Rob: Thanks again to John for coming on the show. After we recorded, he actually Slacked me. I believe it was the next day and he said, kind of random, but I was thinking about our conversation the other day and I do think a monthly fee could be at play if it adjusts their fulfillment cost. We charge $350 per item currently and if it allows them to set up unlimited events, since currently we charge $99 per event. It might be interesting to our higher volume clients. That’s the kind of thinking I was trying to get out with John, is there a benefit that you could give them in exchange to have some kind of monthly fee. I think that’s a great idea.
John, I hope you’re able to maybe test that out and certainly you can report back by writing in the questions at startupsfortherestofus.com. You can hit me directly in MicroConf Connect or maybe we’ll follow up with you in six months, bring you back on the show and see how things turned out. Thanks again for showing up this week, the last week of 2020. May 2020 soon be in our collective rear view mirrors, thanks for listening this year. I’ll talk to you next week.