Kalzumeus Software

I presented on selling your software to businesses at last year’s Twilio conference.  (I’ll let you in on a little secret: while this presentation is applicable to Twilio-powered applications, it’s 99.95% applicable to B2B SaaS companies which don’t have anything to do with Twilio.)  Alexis Finch did a Sketchnote on it, which inspired me to get the whole speech transcribed.  (n.b. I received permission to post it here, and by “received” I mean “paid for” because I feel very strongly that professionals should not work for businesses for free.)

Video, sketchnote, slides, and transcript below.

You’ll want to read/watch this if you’re interested in:

• Ways to transition customers from paying $X00 a month from your four-column-SaaS-pricing-grid to paying $X,000 or $X0,000 for Enterprise software contracts.
• Ways to optimize that four-column-SaaS-pricing-grid to increase your revenue without meaningfully decreasing conversions.
• A few tricks for using email to sell software. (Yeah, I write about that a lot these days. Why? A combination of “It’s easy to do, easy to describe, and high-impact advice for people attending a conference” and “It’s just been an automatic I-win button every time I try it, for consulting clients, friends, and myself.” If you’d like to hear me delve into it in a lot more detail, that’s something you can buy.)

Video

Sketchnote

Click to enlarge (but note: 14 MB).

Slides

Transcript

Selling Your Twilio‑powered Products to Businesses

Patrick McKenzie:  Hi, everybody. I’m Patrick McKenzie. We’re going to do a little bit of audience participation in this, so just to give me a feel for who’s out here. Can you raise your hand if, like me, you’re a developer? OK. Folks who are in marketing, sales, business, et cetera?

Audience member:  Yeah.

Patrick:  One more show of hands. Who here has a Twilio app that’s in production that you’re selling to customers right now? Last year, I talked mostly to developers. This year, it’s mostly going to be to the business stuff, although developers can make the things we’re going to talk about in this presentation to generate the sales.

Brief background of the business that I run these days. My business is called “Appointment Reminder.” It makes appointment‑reminding phone calls to the customers of professional‑services businesses, like, say, a doctor’s office or an HVAC installer, to tell them, “Hey, your appointment is at 2:00. Please remember to come to it. Press 1 if you can come in. Press 5 if you can’t.”

Then, if they can’t come in, rather than that person just disappearing off the schedule and the doctor losing the revenue for that slot, we can quickly rebook a different person into the slot and save them revenue.

This is not really a presentation about me. It’s a presentation about you and your businesses, how you can make more money with them by learning how to do sales a little better.

Low-Touch, High-Touch, And Hybrid Sales Models

There’s two prevailing models of sales. One is called low‑touch sales ‑‑ you have a website, people come to it, they sign up, they use the free trial, they pay you on their credit card a month later, largely without talking to you. Then there’s the high‑touch sales, where we’re dealing with big freaking enterprises, steak and various entertainment budgets, and then a chicken gets sacrificed and six months later, a PO gets issued.

I’ve actually done both of these. I’m an engineer, I’m, by default, not really great at either of them, but I’ve learned a few things over the years. We’re going to talk about how you can improve both your low‑touch sales and your high‑touch sales.

One interesting thing in the software industry these days is that there is a hybrid model. One of the most important things that happened with the SaaS model for software is that because you can get up to $500 a month of revenue from a SaaS service ‑‑ and customers will frequently be on your service for a year, two years, four years ‑‑ that brings in four‑figure to low five‑figure lifetime values into the zone that you could possibly attack with the low‑touch sales model, where that was never possible before.

The canonical essay on this is Joel Spolsky’s “Camels and Rubber Duckies.” Just Google that. [Patrick notes: I'll save you two seconds.] It’s great. When he wrote it, he said, “There’s no software that’s priced between $400 and $75,000, because $400 is about the most you can budget on a credit card and 75,000 is about the least that it takes to send somebody to a location with the account manager and sales engineer, have the steak dinners at various high‑end restaurants and sacrifice the chickens and have the high‑touch sales work.”  [Patrick notes: Hmm, it seems Joel actually quoted $1k as the minimum price.  My memory is swiss-cheese, sorry.]

Hybrid sales is one of the very interesting spaces, and I don’t think that we’re taking enough advantage of it, so much of this presentation is going to be showing you how you can make hybrid sales work better. You can also use the hybrid sales approach to have the customer start out with the low‑touch sales, like many of you might’ve started out with Twilio ‑‑ just sign up on their website, give them a credit card, you get $30 of free credit.

Then that person becomes an infection vector into their enterprise ‑‑ that’s a bad way to put it, maybe a “brand advocate” into their enterprise ‑‑ so that when the enterprise says, “Hey, we have needs. We need a service‑level agreement and you need to have HIPAA compliance,” that’s an excellent opportunity for them to talk to the sales team and maybe we can get a steak ordered.

A Brief Primer On Pricing SaaS

Price based on customer perceived value. Don’t price based on cost. This is a severe temptation for people who are building Twilio apps because we know that, OK, a phone call costs me two cents a minute, so if I bill it out to my customer at three cents a minute, that’s a great outcome. That is a terrible outcome for you.

Great outcome for your customers, because you are ridiculously undercharging your software that way. Your customers do not perceive the value of your applications as being dumb telephone pipes. If they wanted dumb telephone pipes, they could get them from AT&T for like $14 a month. They value the business logic and the business results that your applications can provide.

Let me give you an example from one of my customers. He runs an HVAC company. He sends out a van of three guys to somebody’s house. If they can’t get into the house because the homeowner forgot that they needed their water heater replaced today, then they lose about $300 worth of salary upfront. Because your home water heater being broken is typically an emergency for the customer, the customer will often get home from work, realize that water heater is still broken and call somebody else from the phone book, so they lose a $2,000 to $5,000 sale.

This customer has emailed me and said that I’m putting his daughter through Harvard because of the amount of money just automated phone calls are saving him every month. Now, he doesn’t know this, but I’ll tell all you guys. It cost me $1.96 to make those phone calls for him for last month, but I’m putting his daughter through Harvard.

Clearly, an equitable arrangement is not charging him four dollars a month, based on cost plus pricing. It’s charging him a portion of the value his business is generating. I charge him about $200 a month, and he tells me he would pay 10 times as much.

Segment to capture customer value. You will have customer who have things about them, either their use of the software or particular features that they need, which describe that you are creating much more value for their business than other customers might be receiving.

One way to segment is ‑‑ you’ve all used SaaS before and it has that lovely little four‑column chart? The four‑column chart is becoming a standard in the SaaS industry because it’s widely superior to a lot of other methods. If you just had one monthly price for the software, I will tell you, 99‑percent probability, I could write out three columns, knowing almost nothing of your business, and your revenue would go up the next month.

Similarly, if you have an overly complicated pricing grid, sales tend to go down. This is something that I’ve tested out with a bunch of my consulting clients.

Another thing. For low‑touch SaaS, metered billing is an anti‑pattern ‑‑ metered billing being when you are charged linearly with respect to usage. Why? Your customers’ usage is typically very low, like the guy who needs a buck‑96 a month worth of usage. Customers have a high perceived cost associated with uncertainty.

If they don’t know whether it’s going to be $25 a month or $55 a month, as a small business that might matter. It might be worthwhile to them paying 40 bucks a month, and always 40 bucks a month, just so they never get a month that’s 55, even if 40 bucks a month for a year costs them more than metered billing for a year.  [Patrick notes:  Want to blow your mind?  There are many, many businesses which have an easier time paying $99 a month than they have paying rand($40 ~$55) per month.  This is partially because there is a time-cost associated with doing the bookkeeping/requisitions/etc monthly and partly because people hate uncertainty so much that they will overpay to never have to worry about it.]

Give the customer what they ask for, which is predictability and being able to buy a solution that works for their needs, and then charge them for that.

Also, for selling to businesses, always remember this. You are not taking your customer’s money. You are taking the business’s money. No customer feels a pain in their life. They don’t have to hold out on going on a date with their wife just because they paid you $20 more or $100 more. Typically, they’re not compensated based on shaving of $100 a month from their business expenses, because on business scales, $100 a month, it doesn’t move the needle for most businesses.

Don’t aggressively price your products. Price them according to value, such that you have a nice business and they have nice value created by using your stuff.

Let’s do a pricing‑page tear‑down. Here’s the pricing page for Appointment Reminder. I could show you some consulting clients and the various changes I made to their things, but that gets into NDA territory, and I can spill on my own stuff. Let’s show you the important things.

This thing at the top, the headline, “Pays for itself in one saved appointment,” that’s called an anchor. We’re anchoring the price of this solution to the business value that the customer is receiving from it. Notice that we’re not using the anchor, “A phone call costs two cents. You can make 100 phone calls for only two dollars.” No, we anchor it to the business value.

The way I chose these numbers for ‑‑ you might not be able to read it. It’s Professional, Small Business, Office. 29, 79, and 199. It turns out that there’s industries in which $29 is a common price point for an appointment, like, say, mid‑end hair salon. $79 might be a common price point at a, say, high‑end spa. Then 199 is a common price point for something where people drive to your house, like an exterminator.

One of the things that customers do is they auto‑select into, “My appointments are worth about $100 bucks, so I should be going into the $79 plan,” even if their usage ‑‑ which was way lower on the thing ‑‑ would only put them in the $29 plan.

Also, take a look at plan names. Many SaaS businesses go for fanciful plan names, like, “You should buy Bronze. You should buy Silver.” That’s typically not optimal. You want plan names which convince your customers to upgrade themselves into the higher plans because they feel that they need them.

True story. I used to work at a big freaking mega‑corp, and I needed to use a SaaS. I think it was Crazy Egg. I wrote out the requisition request for my boss, said, “I’ve run the numbers, boss. We need a hobbyist plan that’s nine dollars a month.” He opens up their pricing page, scratches out “hobbyist” in red ink, writes “enterprise,” scratches out nine dollars, writes 4.99, sends it back to me for approval.

I’m like, “Wait, boss. No, I’ve run the numbers. We only need the nine‑dollar hobbyist plan.” He said ‑‑ quotable ‑‑ “If I’m going to submit this to my boss and it says ‘hobbyist,’ we’re an enterprise. We need the enterprise plan.”

Crazy Egg got $490 of extra enterprise revenue. Sadly, my boss would not pay me my enterprise salary.

Most actionable tip you’re going to hear today. If you don’t already offer annual billing, you’re going to start. This tip is going to pay for your trip to Twilio because there’s a specific way that you can offer annual billing that your customers will massively uptake, and it will make you ungodly amounts of money.

Why do we like annual billing? Because getting money upfront is better than getting money over time, all of the time. Because doing annual billing will decrease the turn rate for your customers and turn kills SaaS businesses. If you want the full math on that, ask me later. I’m a math geek.

And because this often solves pain points for your customers. They have to fill out a requisition every month when that credit card charge comes in, and they’re a little annoyed by that. It’s not their money, but it’s their time every month filling out that requisition form. Solve a problem for your customer by getting all that money in one little itty bitty requisition form upfront.

How are you going to offer annual billing? You’re going to offer annual billing in an email sent to your established customers, people who have already been using the monthly plan for a month or three months or six months. So they know, “Yeah. This software is valuable. I’m getting value out of it.”

You’re going to say, “Hey, thank you for being a loyal customer. In return for you being a loyal customer, I will give you an exclusive deal. If you switch to annual billing, I will give you the next month of the software free. So you only pay 11 months rather than 12 months. It cost $200 a month. Rather than being 2,400 for the year it’s 2,200.”

The combination of that discount plus the exclusivity plus the perceived risk that the offer will go away, because you’re only offering it to them once, will mean that instead of like one or two percent of your customers upgrading 10 percent, or in one of my client’s cases 25 percent of customers upgrade, 25 percent times 11 months of revenue upfront is a big whack of cash flow when you send this email.

I have done this at several customers. The first time we send the email to a list of…say there are hundreds of thousands of customers, we ended up receiving hundreds of thousands of dollars of revenue the same day the email was sent. Seriously, implementing this will take you less than 30 minutes. It should be the first thing you do when you get back to your businesses.

Other low‑touch stuff that works. You all have websites, and you use AdWords, SEO, OneUp. Those are very deep topics, and I’ve talked about them 100 times. I won’t be talking about them now. Here’s a quick win for you. If you don’t already have Olark or some sort of live chat widget on your website, put it there.

Have people be in it during common business hours. That has doubled sales at some of my customers just by doing that because some people just feel that they need to talk to a real person behind the counter to actually trust a business. This is particularly common in less‑techy niches.

Fully functional free trials, many of you probably already have that, or you have first month free with a credit card sign up. We’re going to be talking about specific ways to optimize them in a few minutes. Email, email, email. We’re going to talk about that a lot, too.

Let’s talk about product tours. What is a product tour? A product tour is a first‑use experience, so we take someone through either their first time using the software or early in their life with the software to expose them to the richness of the software and to make them feel awesome.

Why do we do this? Because if you just have the common free trial that someone gets into, sees their dashboard, 40 to 60 percent of those users will close out of that application, and they will never come back. If you’re spending $10,000 a month on Google AdWords ads, you’re setting $5,000 or so on fire because they see the app once and never come back.

We have to make that first‑use experience of the software totally rock. Dropping people in dashboards doesn’t rock. Giving people customization screens doesn’t rock, so we’re going to show them the fun bits and make them feel the experience of becoming awesome through using your software immediately. How are we going to do that?

First, we are going to demonstrate one awesome improvement that the app has already made in their life in the first five minutes of using the software. Second, we’re going to establish a reason why they should come back to it later. Third, if there’s any social component, like if any of you do productivity apps where the entire team has to be in the application, we’re going to request that they invite the rest of the team into the application.

That is a major, major win. Literally increased sales by about 30 percent at one customer of mine when we just started asking them explicitly to invite your team in at the end of a three‑minute trial.

Appointment Reminder. I didn’t launch with a product tour. I started it about two months after launch when I realized that there was this problem. My typical customer behavior was that people were signing up for the free trial of the service. But they scheduled appointments about four to six weeks before the appointment was actually supposed to take place. The free trial is 30 days.

At the time where they’re making the go or no‑go decision on Appointment Reminder, it hadn’t actually called anybody, and why would you pay for something that calls people if it never actually calls people? Many people made the decision, “I’m not really getting value out of it. I don’t want my card charged for 200 bucks. I’m gone.” Similarly, 60 percent of people were abandoning the product on the first day and never coming back.

I changed up the application to give people the experience of this app being awesome on the first day. How did I do it? First, when customers get into the application, I ask them for their phone number and say, “We’re going to give you a quick little demo call.” Make a semi demo call just like they were getting a call like their customers would get a call.

They see, “This is real. It’s not just some scam on the Internet. The software does actually work.” Then we teach them how to schedule appointments in under 30 seconds, then teach them how to manipulate [laughs] appointments in under 30 seconds. Then we tell them what they should do next.

This would be a great opportunity for selling the benefits that’s going to make for their organization, but I just haven’t implemented that yet because I’m stupid.

This is actually ugly as sin. It’s just JavaScript and elbow grease. It took me about two weeks to code, but it is the highest ROI on any code I have ever written for my own business. Similarly, I did a two‑week project at a consulting client of mine to implement a tour like this. Again, JavaScript and elbow grease increased sales by 30 percent. That’s a company with millions of dollars of revenue. Two weeks is worth 30 percent extra in sales.

Best thing that you can do in the tour. There are features in your app that are especially sticky. If you look in your old data, there’s something or if you have a feel of what the happy customers look like, you can identify certain features as being positively correlated with the happiest customers, the ones that are getting the most value out of it.

Introduce those features right away. Don’t hide them in the third screen after customization. You will see a major uptake in those features and hopefully an uptake in your customer metrics after that.

How many people sent less than, say, five emails a month to customers in their first month of the software? Raise your hand. Yeah, hands up? You all should be emailing people more than you do. Ask them for their permission to do it, but many of your customers will receive a lot of value from you if they trusted you enough to give you their credit card or to sign up for a free trial.

Wlk them through that free trial. Make them have the successful first experience with that trial. How can we do that? Why would we want to do this? Conversion to paying sign‑ups straight off a website is very low. One percent. If you optimize it like heck, you can get it at two percent. But if you offer people a free incentive in exchange for their email address, you can get 20 to 40 percent conversion rates to that.

Having their email address gives you the opportunity to sell them over time, and then you will get vastly higher than one percent to two percent conversions off sales to that email list. One way you can do this is by setting up a drip campaign, a sequence of six to eight emails delivered over the course of a month. The pitch to the customer might be, “We’re going to give you a free one‑month course on this topic that you’re interested in written by our experts.”

Many people can’t say no to that. In the course of that drip campaign, you first educate them on things in your problem space. You persuade them that you are an expert on this problem space and that you are a credible individual and a credible company. Only then you try selling them. When you try selling them, many of them will be happy to buy at price points which they would never have considered two weeks ago before they knew you.

I’ll show you an example of something I did for a client, and the client told me I could talk about this. This is WPension. They give you a little free inspection of your website that will tell you, “Hey, it’s loading at 4.6 seconds. It could load faster if you do some things. Here’s how to do that.” They’re a hosting company.

It offers on the page where you get this free inspection, “Hey, click this box. We’ll give you a free one‑month course on improving the security uptime, et cetera, of your WordPress site. Many people opt into this box.” Then what we do, we hit them with a sequence of emails over the month to demonstrate credibility.

It starts. They were interested in a diagnostic on their website’s performance, so we send them the next day, “Here are three action tips for improving your website’s performance,” and a lot of people open that. A few days later, “Let’s talk about scalability. Scalability is a little different than the performance for any one user. Here are some tips for improving it.”

Obviously, WPension are experts at this, so they have very compelling educational content in these emails. They have almost no sales message whatsoever. Next time, they talk about the WordPress security background. “WordPress security is kind of iffy. You can do stuff with files permissions that will make it less likely that your site gets owned.”

Then the fourth email is, “How hosting matters for your business,” and this is where they start selling. They say, “Look. If your website goes down in the middle of you being on the Oprah Winfrey show, you’re going to lose tens of thousands of dollars. That five‑dollar‑a‑month WordPress hosting that you’re on that goes down and gets virus infected every month doesn’t look so cheap anymore, does it?

“We have an option managed by the WordPress experts, and it only costs $200 a month, which is honestly nothing next to the business value created by your website.” That email and the subsequent emails in this sequence absolutely prints money.

More advanced uses of email. So you can use someone’s interaction with your applications to drive targeted emails specific to that person and to their situation. One example is when they start using the software, obviously they sign up instantly and get a thing from the website with a link to log in and their email and password. Well, don’t put their password in there, but tell them they can reset it if they go to this page.

Maybe you want to just automatically send an email delayed a little bit and say, “Hey, this is just a personal welcome from the CEO.” This is something that we don’t do nearly enough as small businesses. We’re afraid of being compared to Oracle and IBM and need to seem bigger than we are. Why don’t we use the smallness as a strength?

Say, “Hey, I’m the CEO. I built this product. If you have a problem with it, I want to hear from you. I will to fix it.” We should throw our little itty bitty weight around. If the customer looks like they’re going to cancel because they signed in for Appointment Reminder three weeks ago and they haven’t sent a single appointment, they’re probably not getting much value out of it.

Send them a rescue email. Say, “Hey, the computer said that you haven’t scheduled an appointment yet. I want to know what went wrong. Was it too hard to get started on it?” Or “I run a small business myself. I know people get busy. If you just need more time and the trial is out, send me an email. I can extend your trial by a month.”

Trials that expire without giving you money are worth absolutely nothing to your business. So giving them a trial extension is almost free to you. Maybe it costs a buck a month extra to provision that folio thing will print money for the business. If the client doesn’t use one of those sticky features that you know is a sticky feature, send them a getting started guide or a case study on how some other customer of yours used that feature to a great extent in their business.

Then maybe at the bottom of that say, “Do you want to get started with this but don’t know how? Send me an email. I love talking to my customers.” As the client is getting to a decision point about the software, like are they going to make that renewal decision or do they need to upgrade with a credit card? Provide them the ROI calculation for that.

Here’s something that somebody else does. Planscope is software for freelancers. It helps people make more money like most business applications. They will literally send you every week an email which said, “This week you made $2,000 in your freelancing business. Congrats! By the way, did you know that Planscope has these extra features you aren’t using yet?”

People love getting this email every week because who doesn’t like hearing, “Yeah, I made $6,000, which is 4,000 more than last week.” They love getting this email. It creates actual value for them, and it creates another touch point for him. Say, “Hey, you want to keep getting these emails from Planscope? We need your credit card details.” That works out great for all involved.

Transitioning from low‑touch sales, where you’re not really talking to the customer so much, into high‑touch sales. The biggest problem that many engineers like myself have with getting ready to do high‑touch sales is they think, “I’m an engineer. I’m a bit of an introvert. I’m not a sales guy. I don’t even know what kind of steak to order.” You can do sales. Let me tell you about…

There is an eight billion pound gorilla in the room for appointment reminding services and they and nine other similar firms plus myself were selected by a particular American hospital. It wasn’t St. Jude, but let’s call it St. Jude anyhow just for the sake of illustration. St. Jude needed a wee little itty bitty project done. They needed appointment reminding for it.

They came up with a list of 10 people after searching for them on Google, and then they went out to each of the 10 of them and said, “We’ve got some questions.” A sales guy looking at his calculation from a sale that might only be $100 or $200 is like, “Well, that won’t buy me a cup of coffee.” They sent out a brochure, and then they go working  on their more important accounts.

But I really wanted to have St. Jude as a client, so I hopped on a phone call with them. I talked for an hour with their decision‑maker. Then after the phone call, I sent about three‑page email recapping everything we had said on the phone call and said, “Could you please forward this to anyone else who’s involved in this decision?”

They had a down-select, which means they got rid of many of the people who were in the first run of the competition and it came down to the 800‑pound gorilla and myself. Then they had a little debate about it internally, and the debate went something like this.

One of the guys said, “It’s either the 800‑pound gorilla, which we know is the safe choice. Or we could go with this one‑man operation headquartered out of Japan, which has been in business less than six months.” The nurse I had been talking to for this whole time said, “You don’t understand. It’s his baby. You take care of your baby. If we ever have a problem with it, we know who we’re going to be talking to.”

I won that sale, and I parlayed that sale into 8 of the top 10 hospitals in the United States [Patrick notes: I used to quote this a lot but I'm unsure whether it is literally accurate given that I have a fuzzy definition of who constitutes the Top 10.] from Bumble in Japan. So you totally can do sales. Let’s talk about some ways to do it. Remember. You are not being bought by the person who is using the software. There are other people in the organization whose opinions you need to influence, so make that a priority for yourself.

Customers can request a high‑touch sales process when they start in a low‑touch thing, like saying, “Hey, I’m on the $29‑a‑month plan, but what’s your auditing story? I need full access to server logs.” “That’s totally something we can do. Talk to the sales team right now” The expectation for things are very different. We’ll talk about how to manage those expectations and use them to transition people into more valuable relationships with your business.

I don’t even love this slide, so I’m going to skip it. You will eventually be passed over to a purchasing department after you have agreement in principle with someone in the organization that they should be using you. Purchasing departments and their users have an adversarial relationship. The user wants to get their work done. They know you’re the guy to do it.

The purchasing department theoretically needs to get that bought. They get scored on buying it for the lowest price possible. They don’t want to have the blowback from saying, “You can’t buy that.” But they don’t really have an incentive to getting this deal done because it doesn’t make their life better either way.

This is the little sales cycle at the bottom. The real places that you can hack it are at the formal quote stage and invoicing. Let’s talk about how.

Purchasing has a checklist of things that they must have to be able to OK a deal. You need to offer this, and you need to make it obvious that you offer this. Service level agreements, SLAs, support maintenance contracts, which can automatically cost 10 percent of the price of the software. It doesn’t even have to be anything other than “we have active developers working on this.” You might think, “We already had that, so why charge 10 percent extra?”

But they need to buy that. They need to be able to buy that to be able to buy your thing, so sell them that. Industry‑specific buzz words. “What’s your HIPAA compliance story?” You can charge through the nose for these because they are a large business, top eight hospitals in the United States. Figure out how much health care they sell. Health care is really expensive. They have money.

These are various things that you can offer a large business in the sales cycle, which will increase the size of the account to you without meaningfully causing more resistance from the purchasing department.

Things that you can anchor your prices against when you’re charging to enterprises. By the way, when you’re charging enterprises, it’s like four to five figures a month. You’re no longer talking about a couple hundred bucks that you can put on a credit card.

The fully loaded cost of one employee is a good anchor.  The fully loaded cost of a developer in Silicon Valley is $20,000 a month. You save him 20 minutes a day. Do the math and it turns out into a real amount of money. If they’ve got 50 developers at the organization, hoo ha. Cut off something in them in that so that they feel like they got a win out of it, and then it’s a big win.

Truck rolls are an incredibly good anchor for pricing, if you can decrease them. The guy who I put his daughter through Harvard was primarily concerned about the number of wasted truck rolls he had where he sent three guys out in a van to a house. Had to pay their salary, but they weren’t actually able to get into the house. Truck rolls have a huge cost which is known in industries that actually have fleets of trucks.

High value employees. It’s easy to calculate the value for your time. Low value employees not so much. If they don’t measure the cost of, say, the office manager, then they’ll discount your value to the company. But if they do measure the cost, like in a call center environment, then 80 low‑value employees who save X amount of time that they know that they track, that produces a lot of value that you can take to the business and sell it on.

Lost business, missing revenues, et cetera, also things that you can sell against.

Let’s have a quick role‑playing exercise for how you answer any question that you don’t know how to answer about pricing. The answer is, “I can do that with a one‑year commitment.” Everybody repeat after me, “I can do that with a one‑year commitment.” Everybody?

Audience member:  I can do that with a one‑year commitment.

Patrick:  ”Do you have Google Calendar integration?” I can do that with a one‑year commitment. “I need 60‑day net pricing terms. Can you do that?” I can do that with a one‑year commitment. “My legal department has some custom language that they need to run past you. Can you do that?” I can do that with a one‑year commitment. “We need you to fly out to Omaha and give an in‑service training activity for our team. Can you do that?” I can do that with a one‑year commitment.

This greatly increases customer lifetime value, it provides massive value to their business, and it will make your sales conversations easier.

The one question that you cannot answer with “I can do that with a one‑year commitment” is “Can you give me a break on the price?” No. Never give people a break on the unit price, because the purchasing department is only scored against whether they get the purchase in at lower than the best unit price that they have ever seen or gotten from you.  [Patrick notes: This is why Enterprise software companies don't put pricing on the website, typically.]

If you ever give them a break on the price per call, like if you say, “It’s usually five cents a call. For you, I like you. I can do it four cents this one time,” you will never get that penny back, and next year, they will ask for three.

Rather than giving them a break on per‑unit prices, the thing to offer in exchange for a one‑year commitment is something like, “Look, we can give you a five percent of the deal pre‑pay discount or something like that,” or “It’s normally 10,000 bucks to ship me out to Omaha to do an in‑service presentation, but because we like you, it’s only $8,000 for you, and still five cents a call.”

You’ll make most of your money on the call, but the purchasing guy will be able to get his next promotion because he shaved $2,000 off that thing he wasn’t really going to buy anyhow.

Finally, unfortunate fact of life. If you’re selling to big freaking enterprises, you absolutely need to have the corporate structure to shield your own house from something blowing up at a company. You should probably have insurance. Talk to your insurance agency about it. It’s usually called errors‑and‑omissions insurance in the United States. You want a lawyer to go through all of these contracts.

Final stuff. I talked a little about email earlier. I can actually talk about it substantially more. If you go to lifecycleemails.com, there’s a little five‑hour course from me that you can do about that. Customers tell me that it’s produced a lot of value for them. I have a blog with six years of posts, mostly talking about low‑touch sales. [Patrick notes: You are reading it].  I encourage you to try it out.

My email is patrick@ any domain I own (including this one) and I’m @patio11 on Twitter. I love talking about this stuff. Feel free to talk to me at any time.

We have a second for questions.

Audience member:  Are these slides anywhere?

Patrick:  They’re not yet, but I’m going to be putting them up on my blog later.  [Patrick notes: Yep!  Scroll up.] Thanks very much for your attention, guys.

For the last six years or so, I’ve blogged, participated in online watering holes like Hacker News and the Business of Software boards, tweeted, spoken at conferences, and been very public about what I’ve learned about making and marketing software. Folks tell me that my advice has made their lives and businesses better, which is enormously motivational to me. Also, all this online participation has a variety of helpful side-effects for my business: more consulting leads, link juice to help my SEO out for the product businesses, reputation/credibility enhancement, yadda yadda.

One medium I’ve never made much use of personally is email. This is objectively suboptimal, because email is the best broadcast channel ever invented for business purposes. There’s no time to fix that like the present, so a) I created a mailing list, you should probably sign up and b) I would like to explain why your business should probably send more email than it is right now.

The Thirty Second Sales Pitch

Give me your email address and I’ll send you things that you’ll enjoy. For example, immediately after you confirm your email address, I’ll send you a link to watch a free 45 minute training video on improving the first run experience of your software. Why would you care about that? Because you’ll learn stuff like:

• how two hours of work lets me sell $10,000 extra of Bingo Card Creator a year
• how I more-than-doubled customer lifetime value on Appointment Reminder by implementing a product tour
• why some software companies that you’ve heard of pay a fair bit of money for similar advice
• tactics that two folks have already reported made their businesses more successful after implementation

In addition to that video, I’ll periodically send you other stuff you might be interested in. For example, last Friday I sent the mailing list a very well-received, in-depth look at how to price SaaS plans. Twenty people wrote me back and said they found it useful and would implement at least one recommendation in their own business. (Didn’t see it? If you’re on the list, send me an email.  If you’re not, sign up, you’ll get it automatically tomorrow.)  That’s a specific example, in generalities you’ll get:

• exclusive looks at software/marketing topics which for whatever reason aren’t right for this blog
• announcements when I produce something of particular interest to you (like e.g. my Business of Software presentation, which is the smartest/funniest I’ve ever been in 7.5 minutes)
• announcements of new product offerings, should I ever decide to make anything that I think you’ll find interesting

Email: Geeks Ignore The Best Marketing Channel Ever

A long time ago, I used to be an anti-spam researcher. I was very, passionately committed to getting 95% less email in people’s inboxes. This lead me to have an enormous psychological block against collecting and sending emails for my businesses. My perceptions were that:

• users bucket email into “tolerably annoying” and “hated with passion unmatched by a thousand burning suns”
• email marketing is universally kind of seedy
• asking for email addresses would damage customer confidence
• other methods of communication made email obsolete
• ethical use of email is economically marginal for the business

These perceptions were catastrophically wrong. If you are currently where I was six years ago, let’s have an intervention.  You should start collecting emails from people interested in your topic of expertise and periodically dusting off their inboxes, too.  Here’s why:

Presentation Of Content Influences Perception of Value

I try to avoid the word “content” because I think that “content” auto-commoditizes the value of whatever it is you are offering. Shakespearean plays would sound like terrible wastes of time if they were described as “content.” Regardless, I’m going to use “content” illustratively for the next few paragraphs.

Have you ever heard the phrase “You can’t judge a book by its cover”? It’s the worst kind of horsepuckey. In addition to the fact that it is trivially possible to judge a book by its cover, it is an empirically observable fact that most people, when presented with a book, will judge it by its cover.

Content gets judged by it’s cover.

• Visual presentation is treated as a proxy for content quality and is provably dominated by first impressions formed in 3 seconds or less (see “Blink”).
• Content which bears social proof (including e.g. visual elements suggesting endorsement by news media, tastemakers, or one’s peer group) will, in A/B tests, often ROFLstomp absolutely equivalent content lacking social proof.
• Content appearing next to things which suggest high value will tend to inherit that high value. (This is the entire justification for the NYT’s rate card.) Content appearing next to things which suggest low value will tend to inherit that value.
• Content has perceived value accutely dependent on what you describe it as. Novels are valuable, text files are not, even text files which are bitwise equivalent to novels. Reports are valuable, white papers are less valuable, PDFs are virtually valueless. (Seriously — A/B test this on a lead capture form.)

Here’s a concrete example for you: 37signals recently offered to give away free copies of their best-selling book Getting Real in return for mailing list signups. The positioning for it was, unfortunately, as a “free PDF.” Some members of HN proceeded to question the value of the give-away, including by interpreting the positioning for it as “a PDF file full of content that was published years ago to the Internet.” That’s painful. For what it’s worth, Getting Real is a great book with good advice in it, some of which is very actionable.

Given that reading Getting Real is a win for the reader and a win for 37signals, as a marketer, you want to convince people that reading it is in their interest. This begins with positioning it in such a way that people perceive value out of it. For example, rather than calling it a “PDF file”, which is begging to get valued based on the price of bits by people who think all bits deserve to be free, you can call it a best-selling business manifesto written by beloved industry experts. (That’s certainly marketing but, crucially, not a word is false. If you believe that cynical Internet-types would be less likely to download it if it were phrased that way, you could hypothetically A/B test that, and you would hypothetically lose.)

What Does That Have To Do With Email?

Consider this blog post (we’ll walk it back to email in a second). How are you reading it right now? Statistically speaking, you’re probably reading it either through a feedreader or on an aggregator like Hacker News. It is sandwiched somewhere in the middle of 30 other posts, all presented with the same visual weight. You will spend, statistically, an average of under three minutes on it. You will, statistically, not read all of it. This is a shame, because this post is orders-of-magnitude more important than a lot of the dross it is located next to.  However, because humans are humans, you (statistically) are going to associate it with dross because that is where you found it.

I’m not immune to this: my feedreader has over 1,000 items which I’ll never get to. Here’s what I see on those rare occasions when I open it:

Don’t look at this from my perspective.  Look at it from Aaron Wall’s perspective.  He’s one of the savviest SEOs alive and has a SEO training business which he would like to promote to people.  (Disclosure: I used to pay him $300 a month for it.  I spent waaaay too much time on his forums and answered so many questions that he made me a moderator and comped my subscription, demonstrating further that given the opportunity and a text input field I pretty much can’t help myself.)

Anyhow, Aaron is competing with thousands of unread items which are all presented as being approximately equivalent in value to his offering.  They’re not!  Egads, they’re not!  As much as I love with keeping up with the news coming from commentators about World of Warcraft, SEOBook is a bazillion times more valuable to me.  But I’m still probably not going to read that article!

Now let’s compare this to my inbox:

See those twelve unread messages?  How many of them do you think I’m going to read today?

That’s right, I’m going to read all messages in my inbox, because like most white collar professionals reading and responding to email is my effing job.  If Aaron Wall had hypothetically sent me his actionable tactics on how to market my business online, then that would get a halo effect from being in my inbox.  It wouldn’t be competing with the news about the Diablo 3 launch, it be in my workflow right between answering a question about the software I sell and re-sending a five figure invoice to a client.  I read and pay attention to my email, whereas blog posts get skimmed or dismissed outright.

Emails Get Opened And Change Behavior

Having done this for six years, I have good horse-sense with regards to the anatomy of blog posts and where links go on a page.  For example, if I put a link like “If you do nothing else to improve your copywriting go take a look at CopyHackers” I can tell you that, at this point in the post, maaaaaybe 1% of readers are going to actually click on that.  (The rest of y’all are missing out, seriously.  I could practically justify my consulting rates just doing dramatic readings of that for the web teams at my clients.  Application of the advice therein has made tens of thousands of dollars.  This personal recommendation may get that click through rate up to 3%.)

Now, if you’re an email-skeptic, you’re going to say “Well sure, but that’s got to be better than email, right?”   Wrong!

I soft-launched my training email list a few weeks ago, and have some seven hundred odd subscribers on it.  When I sent them an email last Friday about SaaS pricing, fully sixty percent of them read it.  (Sidenote: Folks thought I was going to get an email list full of mailinator.com or throwaway email addresses, since I was giving an incentive for signing up to the mail list.  cough  Not so much, no.  Folks scamming you for the incentive are a — cheap — cost of doing business.)

Roughly 25% of folks who read the first email (or a full 15% of the mail list) clicked on a link with approximately similar prominence to that one.  (It was to Ruben Gamez’s writeup on how and why he changed pricing for BidSketch.  Seriously worth a read.)

Changing behavior can be substantially more lucrative than just getting a link clicked on.  For example, if you’re not just publishing anonymous “content” but rather trying to reactivate users of an application (lifecycle emails) or educate-them-to-the-point-where-they-want-to-buy-something (drip marketing), a little nudge in behavior could result in adding thousands of dollars of customer LTV.  One of my consulting clients could trivially afford to include a ten dollar bill with every email.  (You’re already thinking of mails hitting spam filters, mails not getting read, and mails not getting acted on.  Yep.  You’re overestimating all of those numbers, but yep.  A few percent survive all those hurdles and result in thousands of dollars of sales at the margin.  Email is a numbers game and the numbers are very motivational indeed.)

Blog posts are very poor at changing actual behavior.  Here’s a “conversion” I’d like to get out of everyone in our space: I want you to start A/B testing, because it will make you a substantial amount of money.  I’ve beaten that drum so many times that folks identify A/B testing with me and ask me for my opinions about it.  I have probably told a hundred anecdotes like “I just did an A/B test and increased software sales by 70% with 99% statistical confidence.  The change was a two-character configuration tweak that I dismissed on a hunch six years ago.”  (That totally happened this May.  Ask me for details later.)  My consulting clients frequently tell me they’ve read my things on A/B testing for years, been very intrigued, and yet no amount of saying “This is worth millions of dollars” has ever convinced them to have one of their twenty employees spend 15 minutes implementing an A/B test.  It was downright surreal for me the first half-dozen (!) times this happened: folks who have followed me for years and could, in many cases, literally quote from my writing on this subject had never acted on it.

(Speaking of presentation changing perceived value: If you pay nothing for expert advise you will value it at epsilon more than nothing, if you pay five figures for it you will clear your schedule and implement recommendations within the day.  In addition to this being one of consulting’s worst-kept secrets, it suggests persuasive reasons why you should probably extract a commitment out of software customers prior to giving them access for the software.  Doing this will automatically make people value your software more.)

People — Including Geeks — Actually Like Getting Email!

I always thought I really hated getting email.  It turns out that I was not a good reporter of my own actual behavior, which is something you’ll hear quite a bit if you follow psychological research.  (For example, something like 75% of Americans will report they voted for President Obama, which disagrees quite a bit with the ballot box.  They do this partially because they misremember their own behavior and partially because they like to been seen as the type of person who voted for the winner.  99% of geeks will report never having bought anything as a result of an email.  They do this because they misremember their own behavior and partially because they believe that buying stuff from “spam” is something that people with AOL email addresses do, and hence admitting that they, too, can be marketed to will cause them to lose status.  The AppSumo sumo would be a good deal skinnier if that were actually the case, but geeks were all people before they were geeks, and people are statistically speaking terrible at introspection.)

For example, when I started going back through my inbox and memory to find emails that had really struck a chord with me, I remembered that two onboarding emails from Twilio had been particularly good.  I mean, sure, “I hate email”, but when Jeff Lawson sent me a note asking how Twilio was doing I read it.  (Subject line: “RE: Welcome to Twilio”  This is the point where geeks point out that they hate when evil marketers hack their brains and make them click on the message to open it and discover that Jeff Lawson didn’t write it to me personally.  Trust me on this one: I not only was not pissed off at that — I didn’t remember it until I opened it again just now — I went on to build an entire business on top of Twilio, with the first step largely being prodded by a well-executed series of email which kept bringing them back to mind over a few weeks.)

I assume you can probably see a similar mail sequence if you sign up for Twilio right now, so go do that.

My first business, Bingo Card Creator, makes extraordinarily light use of email.  I send out a newsletter on every month with a major holiday, telling people to make $HOLIDAY bingo cards with Bingo Card Creator.  The newsletters practically write themselves off the usual template, with slightly different graphics and a find/replace for the name of the holiday and tracking codes.  If I forget to send one of these newsletters real customers actually find my email and complain.  That blew my mind the first three times it happened — probably because part of me thought the newsletters were not really delivering value.  In hindsight, that was stupid.  People pay money for Thanksgiving bingo cards.  Of course they want to hear about them when go out of their way to check “I’d like to get a newsletter about new bingo activities, about once a month.”

Permission And Trust Are Worth Money

I had the Rails request log opened with tail -f e it when I launched my email list.  (Geek-to-English translation: I was watching who signed up in real time.)  Sixty seconds later, a particular email address caught my eye when it was confirmed.  Let’s call it Totally Not Mark Zuckerberg (TNMZ) since it wasn’t Mark Zuckerberg but was a person who I wanted to make the acquaintance of.

TNMZ has apparently been reading my blog for years.  I never knew that (d’oh!) and would have never presumed to contact TNMZ because I assumed that TNMZ would have better things to do than read email from me.  Explicitly asking for email from me makes that worry seem sort of silly.  The ability to reach out to TNMZ and know that contact would be welcomed is worth meaningful amounts of money to my business, even if nothing ever came from the mails sent by the actual mailing list.

Similarly, if you sell SaaS, and get say a hundred prospects to give you their email addresses, you can do motivational things for your business just by sending out 10 “Hey I saw you signed up.  I’m the CEO.  What questions can I answer for you?” mails to the people who look like the most promising prospects.

This is an ability that you don’t get with blog posts and largely won’t get with other broadcast methods like e.g. Twitter.

There are, of course, other companies which make scads of money from carefully curated email lists.  DailyCandy sold for nine figures.  Groupon is an email marketing company, growing to billions of dollars of sales on exploiting an arbitrage between “It’s comparatively cheap to get young, professional women to sign up for an email list” and “After they’re on the email list, they spend motivational amounts of money at its direction, and we get half of gross.”  (P.S. That arbitrage opportunity is now fished to heck and gone.)

Almost every first-class e-commerce company treats their house email campaigns like they are the goose that lays the golden eggs, chiefly because they are.  For companies which have repeat-purchase models, direct response to emails can represent half or more of customer lifetime value.

One of the largely-unsung secrets to Facebook having such an insanely high user retention rate is that they use activity from your friends to give you highly personalized emails designed to bring you back to the site and post stuff.  (A detail I really like: you can reply to email and then post things on Facebook without even visiting it.  Facebook will then, predictably, hit your friend with an email and use social pressure from you to bring them back in.)  Many social startups are extraordinarily aggressive with this early in their lifecycle (I’m looking at you, Quora) and gradually back it off over time.

Some folks might think I’m saying Build Trust With X, Monetize Trust With Email Sales Pitches, but it can work in exactly the opposite fashion, too.  For example, I wrote a drip marketing campaign (a series of emails scripted to go out at particular intervals) for WPEngine.  They sell high-end WordPress hosting, and every sale requires a strong commitment to change on the part of the customer — migrating your blog is not easy or fun for most people.  They also charge multiples of what the typical WordPress host charges, because they’re not the typical WordPress host, so it is imperative to educate the customer on the difference.  Many customers will not sit down and read 10,000 words of your marketing copy just because your face is pretty, but if you pitch them something like e.g. a course on how to improve their own WordPress installation, they’ll happily sign up for email from you.  (Really.)  You can then spend, e.g., eight emails over the course of a month educating them on what happens to WordPress under load and how to improve that, what WordPress’ security record is like and how to lock it down, and how browsers fetch and display content with reference to how to optimize one’s site to take advantage of it.  As you gradually build up trust as a respected provider of optimization advice that your customers (if they are diligent) can see working for themselves week in and week out, you can get more aggressive with “So we talked about X and Y and Z, and you’ve implemented some of it and not implemented some of the rest yet.  We could talk your ears off about this, but tell you what, if you switch to our service you’ll get it all because we breathe this stuff.”)

This type of approach demonstrably works well at selling software, even software which you might expect would require high-touch consultative sales processes.  Indeed, this is a way to scale the initial parts of the high-touch sales funnel while simultaneously passively collecting information about customers to help you do lead qualification for the really intensive portions, like say webinars or live sales presentations.  It also scales down beautifully to low-touch self-service sales approaches, too.

Email Keeps Your Audience Warmed Up

You might have heard the old advertising saw that someone needs to hear about your brand seven times before they buy.  I personally think that one is poorly sourced industry lore.  In place of it, let me cite something which is verifiably true: the probable value of a prospect goes down over time, the provable value of a customer goes up over time.  (The predicted future value of a customer is an odd duck for many SaaS companies.  I’ll sketch out the shape of the curve some time.  It’s a weird snake that requires a bit of explanation.)

You can break out the numbers in your own CRM to see this: your likelihood of getting an order from a prospect goes down sharply the longer they’ve been in the CRM, largely because the “lead gets cold.”  (Indeed, in a lot of fields you can lose up to 90% of the predicted value of the lead within the hour.  Crikey.)  Software businesses will see a similar effect in their own sales: for example, Bingo Card Creator trials (which are not time-limited) will lose 90% of their expected value after the first day (i.e. 90% of purchases happen in the first day), another 90% in the first week, and another 90% in the first month.  (i.e. Only one out of about a thousand sales happens more than one month after the trial starts.  That’s actually an old stat — it went waaaay up when I started emailing folks who opted-in on approximately a monthly basis.  Every time I blast out an email I get a few hundred bucks.)

Regularly getting in contact with customers or otherwise getting on their radar keeps leads warm.  Some of my more successful clients and confidants successfully get orders from people who’ve been in their company “ecosystem” (fan of the blog, trialed a product four years ago, signed up for email list, etc etc) for literally years.  And not “An order here and and order there” either, no, this is a repeatable process that they put in place because it works.  They plan out email campaigns with more sophistication than many of us would plan out actual product launches.

Email Helps Get Marginal Revenue Out Of Existing Customers For Almost Nothing

This worked on me, recently: I signed up for the Blue Nile mailing list back in October when I ordered my engagement ring, and they have sent me approximately 45 newsletters (I counted) since then.  I think I opened maybe two of them…  but sure enough, when I remembered I needed wedding rings too, they were sitting at the top of my inbox.  Guess who got the order?

You can do so, so much more with emails than the typical SaaS company does.  Here’s two stupidly simple things you can do to celebrate a customer’s first year anniversary with your service:

• offer them a month free if they pay for a year of their current plan in advance
• offer them a substantial discount (say, 25%) if they upgrade to the next higher plan level  (optionally, if they do it for a year in advance)

Does This Email List Mean You Going To Stop Blogging?

One might reasonably ask where I’m going with this private email list.  Good question!  I’m not entirely sure — I have a feeling that I’ll write a mix of free material for it and, eventually, produce something which will add a lot of value for software companies.  That offering will be priced commensurate with value.

The amount of effort I put into my blog waxes and wanes with where I am in life at any given time. Some folks have recently noticed that I haven’t been posting as much as I used to. I plead “upcoming wedding” with the extenuating circumstance of “business is on fire (in a good way).”  Going forward, if I have something which makes a good fit for the blog, I intend to write it up as life permits.

Have a topic which you’d like to hear about?  Drop me a comment or email.

P.S. To save you a scroll-back-to-the-top, if you’re looking for the signup link for emails from me, it is here.

Happy Halloween!  Everyone’s favorite secular American holiday where kids are in school is invariably the best month of the year for Bingo Card Creator.  This year, it ended up being a very happy Halloween indeed.  I ended up selling $6,024.45 worth of software after returns, beating my previous record (set last Halloween) by about 30%.  Bingo Card Creator has now sold over $100,000 worth of software (now that is spooky) and is on target to hit $45,000 in sales in 2010.

I did a bit of extra work getting the Halloween promotion to work this year, and also automating/systemizing so that I’ll be able to exploit similar opportunities without needing to take time off to do custom coding.  Some parts of the strategy worked very, very well.  Other parts lagged expectations.  And, naturally, I managed to make a critical CSS error and cost myself a few thousand dollars in sales… again.

Timing A Seasonal Promotion

The best time to start preparing for Halloween is in September… preferably, a September many years ago.  This is because there is a huge, huge surge of Halloween-related queries on Google starting at about October 15th or so, and if you wait you won’t have your site ranking in time to ride the tidal wave.

[Halloween costumes], [Halloween parties], [Halloween ideas], etc etc, all follow almost the same distribution.  Most importantly for my business, so does [Halloween bingo cards].

A brief digression to understand why this is important: teachers want to play a game on Halloween because t is a children-centered holiday.  Halloween is a much more festive occasion in American schools than many other holidays, because kids are not given any time off for it and it is secular.  To make a long story short, there is a wide cultural rift in US education about the proper place of religion in public schools, and that makes celebrating e.g. Easter with a rousing game of bingo not exactly a career-enhancing move.  Despite Halloween being theoretically based on All Hallow’s Eve, in standard American practice it is totally secular in character.

Anyhow, to make a long story short, upwards of a hundred thousand people will go to the Googles and search for [Halloween bingo cards] and a passel of related terms in October.  For the last few years I’ve really wanted to be #1 for that.  This year, I was — my mini-site, established in September 2008 or so, finally hit the big time.

Halloween Bingo Cards is what SEOs call a mini-site.  It has one mission in life: for two weeks out of the year, it is supposed to be the best, most focused site on the Internet for, well, Halloween bingo cards.  Between on-page optimization, a handful of inlinks, the exact match domain bonus (it is a .net, which along with .com and .org receives a huge bonus to rankings if the domain name exact matches the query), and a bit of age, it finally edged out the competition.  The extra traffic I got was, well, a little underwhelming.

Why was I underwhelmed by 27,000 visits?  Well, the site was designed to generate trial signups of Bingo Card Creator, and most of the obvious candidates for action on the site linked people directly to a trial signup form.  Conversion rates were unspectacular, in part due to a technical failure describe later and and in part because a combination of design issues and just overall low traffic quality meant fairly few people clicked off Halloween Bingo Cards in the first place.

So:

• 27,000 people saw the Halloween mini-site
• 3,500 (only about 13%) clicked to the main site (and the signup form)
• 1,300 (37%) signed up for the free trial (that is actually extraordinarily good — normally I top out at about 28 ~ 30% for scalable traffic sources)

So of those 1,300 people, how many do you think actually signed up for BCC?  Well, since I finally have end-to-end analytics running (through a combination of KissMetrics/Mixpanel and a bit of glue code I wrote myself), I can get away from half-accurate Google Analytics reports and give concrete numbers on this.  So I know, with certainty, that that answer is 15 sales directly attributable to this page.  At about 1.2% conversion that isn’t that much to write home about — for the right audiences, BCC gets about 2%+.  (It should be noted that Halloween traffic is almost always going to be the wrong audience, because most searchers are parents but most of my customers are teachers: parents have their needs 100% met by the free trial.)

So What Worked Better Then?

Email.  Holy cow, email.  This has been a blindspot of mine for years since I used to be an anti-spam researcher, do not really send or read mail that regularly outside of doing customer support, and hate newsletters with a passion.  Big mistake: my customers empirically do not feel the same way.

Halfway through last year I signed up for MailChimp with the intention of doing great things with it, but I struggled to get it to work out right.  I would lose interest for several months at a time and not send email to the list, which causes people to forget who you are and then get very peevish when they receive mail from you.  About the only thing that worked very well for me was my auto-responder, which automatically mails people 1 and 6 days after they sign up for it with hints and tricks, to basically remind them that I am still here.  (A huge percentage of BCC users never sign in after their first day, and anything I can do to remind them of my existence is worth serious money.)

Sadly, I got an automated notice from MailChimp several months ago about excessive unsubscribes from my autoresponder — about 1% (they’re serious about list quality at MailChimp), and paused it while editing to make it obvious who I was and why they were getting email from me.  (The phrase “because you went out of your way, twice, to ask for it” may have been in an initial draft.)  And then I left the autoresponder paused for several months.  sigh So I wrote a new alert for my dashboard about that, since I’m serious about making mistakes only once.

Anyhow: Rob Walling had an amazing presentation at the Business of Software conference about using email to sell more software, and I was so inspired I decided to get serious about it this year.

• I used MailChimp filters to go down from the 8,000 or so people on my list to only the 800 signing up since June, figuring they would still remember me.  (In hindsight, I should have cut further, and I will make a point about absolutely, positively keeping the list “fresh” from here on out.)
• I tweaked my from address from “Bingo Card Creator” to be “Patrick McKenzie (Bingo Card Creator)”, at Rob’s suggestion.
• I mulled over reasons why teachers might open the mail, and settled on “A Halloween Activity (And Discount) From Your Friends at Bingo Card Creator”

The time-limited discount was repeatedly stressed in Rob’s presentation and in his book about selling software.  (He gave me a free copy.  You should buy it just for the email chapter.)  So I spent a few hours tweaking my shopping cart so it could use discounts, and then polished until the experience of receiving them was totally transparent to the user — they never have to fumble for a code, all they have to do is click a link in their email and they’re in.

This discount was extraordinarily effective at motivating sales, relative to many things I have tried.

• 775 mails sent.
• 170 (23%) opened
• Of those, 6 people bought.

At a little less than 1% conversion from an email to a sale, I’m absolutely giddy about the future potential for email marketing.  I got perhaps excessively giddy and sent another email two weeks later to people who didn’t open the first one.  At least, that was my intention: I actually hit the button for sending it to people who didn’t open last year’s Halloween newsletter (i.e. essentially everyone who had just been mailed two weeks prior).  Doh.

One person did not appreciate getting two newsletters in one month after not getting them for several months.  I got a handful of spam complaints for that (four from the first send, one from the second).  Since MailChimp is hypersensitive to spam complaints and I likewise care about my reputation, I’m going to be more careful in the future.  I anticipate the best thing to do to keep them down is to just email people early and often to keep myself in their mind, which is almost the opposite of my natural inclination.

Anyhow, the two campaigns together:

• 1,600 emails (total cost: $32 of MailChimp credits)
• 60 reactivated accounts
• 15 sales (~ $370 in revenue)

Very little I have done has scalable 1,000% ROIs on marketing spends.  You can bet I will be doing more of this in the future.  (Granted, this doesn’t count approximately 3 hours of effort upgrading my shopping cart and site to do discounts, but I can amortize that over every time I use them from here on out.  The newsletter was the 2009 Halloween newsletter with about 5 minutes of editing.)

Speaking Of Discounts

So after having huge results early in the month with the emailed discount offer, I thought “Hey, why not extend that to everybody?  I’m getting crazy 10% conversion rates on reactivated accounts — if I got 10% conversion rates on new accounts I would be making hats out of money.”  Out of an abundance of caution, I A/B tested that for the last two weeks.  Surprisingly, discounts failed to make a dent in sales numbers in the general (non-email) population.  Roughly 2.08% of people seeing the discount converted, and 1.87% converted without seeing the discount.  That is despite prominent notices on the first screen after you log in, plus the pricing page, and the exploding nature of the discount (act now or you won’t get it).  Not only is that difference below the floor of statistical significance, when you factor in the fact that I make $5 less for every discounted copy, the full-price version did better for me.

Things to try next time:

• Only give the discount to people who I’m reactivating — their accounts are writeoffs if they don’t sign back in, after all.
• Pick the cutoff date for the discount better.  I gave people to November 1st, because Halloween is the 31st and I wanted to be generous.  However, that diminishes the perceived urgency of the sale — on Thursday night, they still have “3 days left!” That was stupid of me because I know, from doing this for several years, that my window of opportunity for Halloween sales closes as soon as she goes to sleep on Thursday.  I should have had the Halloween sale go until Thursday night, which makes it a pretty cruddy “Halloween” sale but would almost certainly have goosed sales.

That said, that was a pretty good day for me — Wednesday before Halloween was my best day ever, right until Thursday smashed that record.  Last Halloween I was beginning to pull weeks upon weeks of crunch, and I think I probably made less in a 70 hour workweek than I did in those two days… while sleeping.  I love self-employment.

Google Enjoyed Halloween, Too

While I was #1 on Google for [Halloween bingo cards], [Halloween bingo] and a thousand words on the long tail also receive significant traffic, and many of them are sewn up by about.com, eHow, etc etc.  Luckily, most of the content mills run AdSense ads, and the guy at the front of the auction screaming “Pick me pick me!” was yours truly. I spent $1,764.84 on AdWords ads in October.  Sadly, much of it got wasted.

Why?  Well, I made one extraordinarily poor decision and followed it up with a mistake: when FireSheep (the sniff-your-credentials Firefox plugin) was announced, I immediately bumped SSL support from “something I’d eventually like Bingo Card Creator to have” to “must be done today”.  If I had had any sense, I would have let that wait until November.  Enabling SSL took about a day, but I missed some edge cases which came back to cut me: in particular, I had the registration form throwing SSL errors for about 6 hours (painful, particularly since it was during an email delivery window) and, even more painfully, I had the AdWords landing page throwing errors for 48 hours (not fun when you’re spending $150 a day driving people to it).

But the worst thing was keeping the freaking AdWords conversion code on HTTP, which caused some browsers to not load it from an SSL page, and cut my conversion rate in half.  Since I use Conversion Optimizer, this caused Google’s algorithms to think “Hmm, Patrick must really not want this flood of traffic we’re sending him since it apparently converts like crap.  Oh well.  I guess we’ll just send it somewhere else instead.”  Between money that I essentially set fire to, an AdWords campaign thrown into disarray (I still haven’t recovered my previous conversion rates, since the bots are in a bit of confusion and haven’t replaced me on my best performing sites yet), and missed opportunities, that mistake probably cost me a few thousand dollars.  Ouch.

Still, I generally try to see things as half-full rather than half-empty, and my jack o’lantern is overflowing at the moment: previous sales records smashed, a new scalable marketing tactic which actually works, infrastructure ready to go for Thanksgiving, Christmas, and Valentine’s Day (and a few hundred more email addresses to send to), and the SSL issues now mostly under control.  (I still am not transitioned to 100% SSL, which ironically means that the effective increase in security was minimal.  sigh)

Mini-update on Appointment Reminder

I was very busy with ongoing improvements to Bingo Card Creator, consulting, travel, and non-business life for the first six months of being self-employed.  Since midway through October I’ve refocused to get Appointment Reminder out the door (really — most of the Halloween campaign was taking advantage of things which already existed), and since previous experience has taught me that artificial deadlines really work for me, I have joined up with a bunch of Hacker Newsies to make November the Get Your Startup Accomplished month.  After some fumbling around with jQuery and other infrastructural issues, I feel like I really hit my stride today, and if I keep it up I should launch right around the end of the month.

If you’d be interested in hearing about this on a regular basis, leave me a comment — if folks care, I will post regular updates to the blog.

The prototypical customer of Bingo Card Creator is a woman between the ages of 30 to 50 who plays bingo with her classroom. I like to think of her as Martha.  However, unlike most statements I make here about my business, this is far more a guess than it is a fact substantiated by data.

I can substantiate, for example, that in excess of 90% of BCC customers are female.  (A quick Ruby script checking names on credit cards against a dictionary of common American names reports 90%+ are female.)

They generally seem to be on the older side, too.  Sidenote: If you grew up in America you probably have the accurate impression that someone named Ethyl is likely not 18 years old.  You might not know that most names go through ups and downs in popularity.  I’m going to bet that over a few thousand customers I can probably reconstruct the average age just by inspection of first names, but that is an experiment for another day.  The US  Social Security Administration will give you name popularity data, by the by.

However, the bit about Martha being a schoolteacher?  Yeah, that is just a guess.  An educated guess, but still a guess.

Why Not Knowing These Things Matters

Prior to releasing Bingo Card Creator the core customer I had in mind was an elementary schoolteacher, and the software and site was built with that assumption.  I wrote my copy so that I would sound like a sympathetic colleague (as opposed to, say, a twenty-something WoW raid leader, or a Japanese salaryman, either of which would have been equally as true).  I concentrated the lion’s share of my content creation on the needs of schoolteachers.  I even picked designs for the website and software that looked like something a schoolteacher would like, as opposed to the “That button doesn’t have a glossy finish, reflection, and drop shadow yet, but we’ll fix that!” Web 2.0 aesthetic that I prefer.

Roughly contemporaneous with launch I changed a bit of the copy to address both parents and teachers, but parents were a nice bonus audience I could satisfy with the free trial (and get links from) while trying to separate teachers from their money.

That was my customer hypothesis, to use a buzzword much remarked on lately, and 3.5 years later I’m still not really sure if it is accurate.  On the one hand, I have received email from many, many teachers.  On the other hand, sometimes I get empirical evidence that I’ve been myopic: for example, I put Baby Shower bingo on the back burner for years before realizing that the top 25 words used by customers were all baby related.

So should I be making a massive overhaul to my copy to target a wider audience than teachers?  Or should I mostly keep doing what I’m doing?  Well, time to supplement my intuition and non-representative guesstimate based on support requests: I need to run a survey.

HTML Forms: Not Quite As Bad As Visiting An Ill-Tempered Nazi Dentist

I generally work from the hard parts first, and the hard part of doing a customer survey is:

• figuring out what questions to ask
• getting customers to actually take it
• analyzing results
• writing HTML forms.

I am very, very bad at writing HTML forms.  The input markup I can handle, but making them not look insanely ugly takes me literally days.  (Visual design is not my baliwick and what little talent I have for it gets vaporized when it meets the harsh reality of CSS.)  However, I don’t want to have to book my designer for a day just to get a few multiple choice questions coded up.

Enter Wufoo, one of my favorite SaaS providers.  They do one thing really, really well: create web forms for people who would otherwise need to pay somebody with an expensive degree to do it.  I have a Wufoo account lying around since I bought it for my younger brother, who wanted to survey readers of his superhero writing blog (my family loves niche subjects, what can I say).

It only took me about half an hour to mock up a quick survey.

What I Asked

Since users get less likely to complete forms with length, I kept it fairly short:

• Gender  (I’m pretty sure I know the answer to this one, but if half my users are men and 90% of my customers are women that would be a very important thing to know.)
• Age  (<20, 20 ~ 29, …, 60+)  (Here I’m much less certain.  Normally distributed with an average of 40ish, maybe?)
• Who they expect to play bingo with  (“My children”, “My (adult) family”, “My coworkers”, “My class (elementary)”, etc etc)
• Whether they feel “comfortable with computers”  (For years I have presumed that the answer to this is a resounding “no”, and it drives development choices.  For example, I can’t offer picture bingo — my #1 requested feature — if users cannot routinely succeed with finding an image file on their machine and cropping it.  If most users report facility with computers, I might consider moving picture bingo off the “To be implemented after Chinese democracy” list.)
• Whether they find BCC easy to use or not (I prefer data on task success to subjective sentiment, but I can’t afford to ignore sentiment if the sentiment is negative.)
• “What is your favorite thing about BCC?”  (Free response.  I figure it might tell me something I don’t know, and probably will elicit testimonial-worthy quotes.)
• “How can we make BCC better?”  (A nice open-ended way to get users to complain without making them feel like they are complaining.)

Clever Survey Integration

There are a couple of ways to ask people to take a survey.

• Put a discrete link on your site that no one will click.
• Use a pop-up window, because you spend entirely too much on bandwidth and need to drive some users away.
• Email your mailing list, offering an interruption that doesn’t improve their day.

I wanted to do something a bit trickier: integrate the survey intelligently into my site, such that users would want to take it.

• Offer users a freebie just for taking the survey.
• Let users dismiss the message if they want to.
• Stop bothering users after they take it.
• A/B test the effects of the survey on sales.
• A/B test the effects of the freebie on survey taking.

A note on incentivizing users: Programmers live in a world where data is available in infinite abundance, and hence we often assume that data is valueless.  (If you doubt this, try asking a programmer for opinions on software pricing.  Yes, I am talking to you, Mr. Three Dollars Is Too Much For A Game On My Six Hundred Dollar Phone.)  We sometimes forget that users live in a world of scarcity, where data has definite value.  For example, you and I know that it makes no difference whatsoever to me whether Martha can print out 15 cards or 20 cards during her free trial: the marginal bits are too cheap to even calculate the cost of.  However, Martha definitely does not perceive things that way: 20 cards is 33% more of something she wants, of course that is a good thing!

This means I can give Martha something she wants, very easily, at no marginal cost to me.  That is a good carrot to use in a lot of marketing activities, from incentivizing people to take surveys to incentivizing them to link to you.

Implementation Details

This turned out to be pretty easy to do with Rails, my A/B testing framework, and MemcacheDB.  (I could have persisted survey state in the MySQL database with most of my user-specific data.  However, I really hate having to migrate my user model just to accomodate a feature that I may well rip out in two weeks, so a key/value store makes an excellent choice.  If I no longer care about the data, all I have to do is stop requesting it and bam it is like it never existed in the first place.)

First I adjusted my users’ dashboards (the main page that they are sent to right after logging in) to include an inducement to take the survey.  I set it to ask all paying customers to take the survey.  My reasoning for this was it is free for me and, if they don’t want to, it costs a maximum of one click to dismiss permanently.  However, giving trial users the survey potentially costs money through lost conversions, so I set up an A/B test to see if offering a survey is very expensive.  This could affect my desire to do them in the future.

Additionally, for trial users, I set up an A/B test on the call to action text: half are given altruism as the reason to take the survey, the other half are offered the aforementioned freebie.  (All survey takers will actually be given the freebie whether promised it or not — it is just as easy to implement either way, but I tend to default to being generous to my users unless I have a darn good reason otherwise, and I don’t here.)  I’m doing this mostly for my own curiosity.

Wufoo has a setting where you can redirect folks to a URL after taking the survey.  I set this to an action which performs housekeeping (setting the user’s survey status to “Completed”, tracking results of the A/B test, setting a thank you message, and redirecting to the dashboard).  If the user bails from the survey with the back button rather than completing it, they’ll be right back at the dashboard and nothing will have changed.

I also added a quick link to hide the survey (it sets their survey status to “Declined”, which will surpress the survey call to action forever), on the theory that users should be able to have an uncluttered experience if they wish to.  This could have been done with AJAX and link_to_remote fairly easily, but doing it the old fashioned way worked fine and only took two lines of code, so I did it that way.

Finally, implementing the freebie took a bit of surgery to some validation code.  It wasn’t very difficult at all — I copy/pasted my existing validator, added “has taken the survey” to the :unless clause to disable it, and pasted in a new copy with the higher limit.  I love the way Rails tends to make minor logical tweaks like this easy.

The total change it took to implement this intelligent, incentivized survey (plus two A/B tests) was ~20 lines of code and ~20 lines of HTML for three alternatives in the view.  It was actually quicker to write and test the code than it was to make the survey in Wufoo’s drag and drop interface.  At no time did I have to waste a week nudging CSS files around to get something that wasn’t horrendous.

Incidentally, I think this is a good demonstration of how Rails, crafty application of cheap software, and the related bag of tricks let you be more nimble than you would be if you were e.g. running on enterprise Java.  I’ve implemented surveys for the universities who are clients of my day job, and surveys of roughly comparable complexity typically require planning meetings so that we can add them to the schedule and eventually detail an engineer or two to get them started.  There’s a place for that in the world, don’t get me wrong, but I’m already collecting data.

Pictures of Implementation

Here’s the variant for trial users which offers the incentive for taking the survey:

If I had a bone of artistic ability in my body there would be a box around that with a red X in the top right corner to dismiss in addition to the textual link, but oh well.

A Possibly Controversial Note On User Privacy

Normal users don’t really want privacy.  There, I said it.

Users will say they want privacy, if you phrase the question the right way.  (“Do you want multinational corporations to put data on your machine that will let them track your visits to sites on the Internet?”  “Oh my good heavens, no!  That’s monstrous!”  “That is necessary to implement things you take for granted, like ‘Remember me’ .”  “That’s totally not the same thing!”  “Google gives you personalized search results the same way, and sells ads against what you searched for early this morning.”  “Well I like Google!”) Given the choice between privacy and convenience, they’ll choose convenience every single time, and if you prioritize their privacy over their convenience it is your problem.

I said the usual pieties about the survey being totally anonymous.  This is literally true and yet says less than what you might think it says.  Consistent with my privacy policy (that no one reads because no one cares about privacy), I will make no particular attempt to link users with their answers.  However, I can work backwords from a copy of the survey to personally identifying information (an email address, if they’ve provided it).  And that is a good thing:

The above is a slightly anonymized composite of actual support requests I have gotten over the years.  (I try my level best to satisfy people, but you can’t win every time.)  If that user submits the survey and I can’t identify who he is, I’ve essentially stolen from him, because I promised him a refund any time any time he asks for it and I have not delivered on the promise.  Granted, he didn’t ask for it in a very technically savvy fashion, but I try to make it as easy as possible for my users to succeed at the things they clearly intended to do.  Even if their clear intent is to ask for a refund.

If you think this example is far fetched: Google Checkout will, some time after the transaction has happened, mail your customers to request that they write a review of your product.  Reviews are posted in an electronic Siberia and no notification is sent to the merchant when they happen.  However, because it has a text box and is occuring in the context of a commercial relationship, customers assume you are hanging on their every word.  They’ll use the “review” to communicate time-sensitive information like “Oh by the way I need this shipped to …” or “It has been two weeks and my CD hasn’t arrived.”

My theory for why Google didn’t anticipate this failure mode is that Google assumes you care about your customers about as much as Google cares about its customers, and at Google forwarding customer complaints to Siberia would double the likelihood they were actually read.  (Do I sound bitter?)

Anyhow, the EFF can burn me in effigy if they want to, but given the choice between giving customers ironclad privacy and giving them what their actions demonstrate they actually want, I’ll give them what they actually want.

Analyzing Results

Since I started writing this post it appears that a user has taken the survey.  Take that, planning meeting.

After I have a bit more data, I’ll grab it from Wufoo, segment it by user type (trial user vs. customer, etc), and started asking the data questions to guide the further development and marketing efforts.  If I find anything interesting, I’ll post about it.

Since all of the users of BCC online give their email addresses to sign up, I thought I would start with some email marketing.  I’m using MailChimp, chiefly because their website is pretty and I had heard good things about their API.  With the help of the hominid gem it has only taken me about 4 hours to get up and running with my first email.

Emails I’ll be sending:

• Transactional stuff (lost passwords, purchase confirmations, etc — pretty boring, not through MailChimp)
• Monthly-ish newsletters, to the people who request them.  Since an absolutely ginormous portion of my business is seasonal, this will let me get in touch with the thousands of users who will sign up before Halloween again at Halloween, and remind them that they can have a great activity ready for only $30.
• Hints & Tricks: customers who request it will receive a pair of emails, 1 one day after signup and 1 six days after signup.  The first covers basic how-to-use instructions and is just to jog people’s memory that they signed up.  The 2nd is to show some of the more advanced features of BCC and it will probably include a strong suggestion that they buy it… maybe a coupon, too.

The emails run me 2 cents apiece, so I’ll be looking to see if they generate enough marginal business (about 1 sale per every thousand) to justify.  I’m fairly sure I can do at least that well, but we’ll see.  One more lever to optimize…