How to Build Relationships When Researching SaaS Product Ideas: With Robert Graham of Whitetail Software

Posted on February 20, 2012 by Dan

Edit: this post has made the front page of Hacker News, and a few requests have come in for the interview audio. It’s now live on the link below.

Click the link below to listen to or download the audio for this interview.

http://startah.wistia.com/m/RS3jig

This in-depth 60 minute interview and the transcript below features lessons learned about cold calling for customer development by Robert Graham of WhiteTail Software.

You will learn the specific tactics Robert uses including exact scripts that you can tweak for your cold calls when doing market research for your own SaaS product. We also discuss the importance of a ‘market first’ approach to SaaS entrepreneurship advocated by founders like Paras Chopra of Visual Website Optimizer. Finally, Robert shares how having the right mindset is crucial for creating and maintaining momentum for your SaaS venture.

Let’s dive right in to the interview.

==========

Dan:

I Initially heard about your through your Hacker News submission about your 100% conversion rate when cold calling prospects to do market research and learn about their pain points. I was quite intrigued by that. I checked out the article, read your ideas, and I think it’s a really smart way to approach market research, and finding out what your prospects pain points might be.

Robert:

It just kind of happened, honestly. It wasn’t something I expected. I’m sort of surprised about how much interest there has been in that particular blog post and that line of thinking. It has been so successful that I think I’m going to write an ebook about cold calling aimed at engineers and startups. It’s not a place I pictured myself. (laughter)

Dan:

This book about cold calling you mention, is that the one mentioned in the sidebar?

Robert:

Yeah, that’s the one. That web site has been up for a while, and I have seen enough conversions on that page and interest to merit creating the book.

Dan:

Cool! It sounds like it’s the perfect storm approach where you have some demonstrated demand, and no supply, so that’s a great ‘market first’ approach.

Robert:

Yeah. It’s another thing I just fell into. I really like Derek Siverss book where he talks about having hits, and sticking with the things that work and resonate. Sometimes it’s not what you expect or what you want. But if it works, it works.

Dan:

I heard that Sheryl Crow for one of her albums wrote 100 songs, and 20 were picked. I’ll bet she was in love with quite a few of those 100 songs, but the reality is it’s the dance floor and the concert floor that chooses which songs it likes.

I haven’t had the chance to read Derek’s book yet, but I have been in contact with him through email. Really great guy, really smart, and I’m looking forward to reading it for sure.

Robert:

It’s a good read for sure. He’s just so unbelieveably down to earth, really grounded.

Dan:

It’s very refreshing to see. It’s also refreshing to see that most of the proceeds from the sale of CD Baby went to charity.

Robert:

Yeah, it’s structured that way at least. A charitable trust.

Dan:

It’s refreshing to see that considering the feeding frenzy that the Valley can be sometimes.

Robert:

It’s a different perspective than you see from entrepreneurs.

Dan:

So I have prepare a list of questions, Mixergy style, to go into a deep dive about some of your lessons learned through experience. So we]ll just chat about it, and go from there.

Today I’m very pleased to be speaking with Robert Graham, the founder of Whitetail Software. I first heard about Robert through Hacker News about how he got a 100% conversion rate for his cold calling. Welcome Robert!

Robert:

Hi Dan, nice to be with you.

Dan:

Why don’t we start off by giving folks your background and bio.

Robert:

When I finished my bachelor’s I was really interested in academia and research, so I got into a PhD program. I spent some years there, and did some work with Google at some point, and decided that was way more fun than working on a dissertation. I got to the point where most of the interesting stuff, learning the course work at a fast pace, was over. I just needed to grind out the paper, and I decided that wasn’t worth the majority of my 20′s, and I decided to move on to other things. I found a job, and went down the road a lot of people go down, not really being satisfied with the experience of being an employee. I wanted to do my own thing, and eventually, after many years of talking about it, I actually went out and did something. That was about 2 or 3 years ago now.

Dan:

So that was Whitetail Software, or other projects?

Robert:

That was Whitetail Software. It was funny – I did projects that were aimed at the whitetail industry, but Whitetail was not conceived that way. The first thing I tried to do was a fitness app for mobile. I was really into cross fit at the time, and I still do that, but a bit less structured. I was into fitness, and I really wanted to help people track workouts, generate new workouts and track their progress. I didn’t know anything about marketing, I didn’t talk to anyone, I just went into a cave and started creating. The Whitetail Software name just came from thinking about what a regional “_______” software name would be. There’s a lot of deer around here, and people are familiar with it, so that’s what I went with.

Dan:

Awesome. I’m curious to know then – the turning point where you decided you really wanted to do something on your own, and have your own business - what were your first steps with getting the ball rolling for that goal?

Robert:

It’s hard to say. I spent a lot of years talking about starting something, or half starting something with friends from grad school or after work. I was reading stuff, whether it was Slashdot or Hacker News or Bob Walsh’s stuff. It was all really interesting, and good advice, I just didn’t act on it. It’s hard to say whether the first thing I went out and did was because of all that buildup or totally unrelated.

Dan:

Why don’t we start with the whitetail industry. How did you become aware of that market aside from the prevelance of deer in your area? How did you become aware of that market?

Robert:

I grew up in southeast Texas which is fairly rural. My dad is a big hunter, and I have hunted and fished all over the state. All sorts of things – ducks, geese, saltwater, freshwater, spinning, fly, deer, pretty much anything that lives in this state I have hunted. There’s a quirky story I tell sometimes to give people a picture. I was shooting a shotgun before I could really hold it right. I couldn’t walk through the marsh to get to where we needed to go to hunt the geese. Usually the fields are like a rice paddy that’s flooded. Then we take all the decoys in a mesh bag that would float because the decoy’s had to float. Then they put me on the bag and dragged me through the water. So I knew about it because I was one of those guys.

Dan:

So you had some insider knowledge of the industry, so to speak…

You decided on that industry because you could marry your passion for and knowledge of the whitetail deer industry. At what point did you decide you wanted to get into some nitty gritty market research? Why don’t you tell me how you actually did your market research?

Robert:

I think the first thing I did was simple market research. Looking at what people had done, and what people were selling to guys in the deer industry. If you do just a couple of Google searches you’ll find some very ugly software that does some of the same things. Some of it is cheap, some of it is not maintained anymore. That was my initial pass at market research. Oh, somebodys doing it, I think I could do it better, I’m going to go and start writing code.

Dan :

So the initial market research was realizing that there’s some sort of a market there because there were competing products out there clunky, or ugly, or hard to use, or expensive, and so you decided to take that proven market and just make something simpler and more elegant.

Robert:

Yeah, that was the strategy. There are really good things and bad things about that strategy. I think in some instances it pans out, and in others it doesn’t.

Dan:

So that was your first phase of market research, and your second phase of market research, according to the article, was going out and actually speaking with people. Why don’t you describe your first pass at speaking with prospects. I think you said that you pitched something, it didn’t go so well, and then you changed your pitch a bit on these cold calls, and then you got what you’re calling a 100% conversion rate. Let’s talk about that.

Robert:

(11:20)

I decided to start with connecting directly.

My first approach was to ‘cold email’ people. I had such a terrible response rate. Email is so tremendously easy to ignore that I completely gave up.

Dan:

Let’s get right into it – what did those emails look like? What was the subject header, and what was the content of the emal?

Robert:

That’s a qood question. I can actually search right now and look for them.

Dan:

Go for it! It sounds trivial, but these are the nitty-gritty tactics that I think are really important to know about, and how they performed.

Robert:

I remember desperately looking for content about this type of information.

Dan:

That’s what I love so much about Andrew Warner and what he does with Mixergy. When you’re looking for really nitty gritty, specific stuff, he just delivers.

Robert:

Yeah, so I have seen a couple of emails here, from early on. It looks like I spoke with a gentleman from Pennsylvania, and he runs his own wildlife biology consultancy.

The email subject line is: “Trail Cameras and Managing Whitetail”. It’s about a product I had called Whitetail census, and its purpose was to gather statistical information about the compositon of the herd, and there was some technology to figure that out.

I just mentioned to this gentleman (in the email) where I found his web site, and: “I’d love to speak with you about how you’re doing this”.

Dan:

So this is one of the early emails you sent out.

Robert:

This email has a link to the site which had a tour and some things already complete on it, and my name plus founder, Whitetail Software, and a cell phone number. This gentleman did actually get back to me eventually. After I had done some tradeshows, and he spoke to people who had met me along the way, he circled back almost a year later, and was interested.

Dan:

So plant a seed, and let it grow into a tree.

I would be curious to know – if you did those cold emails again, would you change your approach at all? I’m thinking – if you use some sort of an email marketing system such as Mailchimp or AWeber could you do some A/B testing of these subject lines? Maybe one would get an 80% open rate, and one gets 20%. Or is that just going too fine grained?

Robert:

I think A/B testing when you’re getting started is overkill. You probably don’t have anything that’s going to be statistically significant, and if you do, then I probably can’t help you.

Dan:

So you did some of these emails, and it sounds like they didn’t perform well as fast as you wanted, but that some of them did perform over time. So, you changed your tactics to do cold calling instead. Why don’t we discuss what you learned and how that peformed:

Robert:

I have a collection of scripts from different places. I should have brought these up already, but I’ll bring them up while we talk about it. I know that my initial scripts were extremely naive and more or less begging on the phone. As in: “Hey. I’m doing this project. Please talk to me about what you do for getting census information or tracking herd statistics”.

There was no sophistication whatsoever. I was just hoping someone would talk to me.

Dan:

Are you still making these calls? And if yes, are you positioning the calls differently? What is your script now? How is it different? How is it less desperate now?

Robert:

THe biggest thing that you realize, especially when you cold call someone, is that you can target better by selecting people more effectively. The first way to make the call ‘less cold’ is to pick people who are more likely to be interested. After you do that, you’ll realize that nobody really wants to hear about you at all, so the faster you can make the conversation about them, what they are doing, and what they are interested in, the better. The more effective you’ll be in having a conversation.

Some of those conversations are not going to be what you expected, or even what you wanted, but you’re going to have a much better experience making the calls, and you’re going to a get a lot more information than if you started out with a 5 or 6 sentence paragraph about yourself. If you do that, you won’t keep anyone on the phone.

Dan:

Those are some good insights. Do you have some of those scripts handy? Let’s hear them.

Robert:

In July, I was trying: “Hi, sir. I’m working on some projects in the deer and hunting industry. I’d like to understand the problems and successes you have had a bit better. I’m not trying to sell you anything, I would just like to hear your thoughts on a few things related to the industry. Do you have a few minutes to answer questions?

Dan:

So this is a cold calling script, and not a cold email script?

Robert:

That’s a call script.

Dan:

How did that one perform?

Robert:

I would say that was one 50% successful for getting people to answer questions and have a conversation. It might have been a little bit better than 50%. It gets jumbled up in terms of who rejected you, or who was just busy and didn’t get back to you. It looks like 50% of the people did talk to me.

Dan:

What was the next iteration of the script?

Robert:

I just tighted it up. So there’s less information directly about me. Did you see some of the examples in the 100% conversion rate article, and some of the examples on the version I wrote for Jason Cohen’s blog? I know there’s some other examples of the iterations and the thinking there.

Dan:

I have read both, and it’s really valuable stuff because when you connect the common themes that we’re hearing about here from Lean Startup, Customer Development and all these methodologies – they all depend on a deep understanding of the pain points of your customers. There’s ways to do that well, and ways to do that not so well. I just think it’s really valuable to hear lessons learned from people like you who have been making these calls in the trenches.

Robert:

We haven’t really touched on it, but when I started making these calls it was a really terrifying experience. My heart rate would go up. I knew, in my head, that the worst thing that would happen is that they might hang up, or say something mean. This is a person who I have never met, and it doesn’t affect me in any way, but for whatever reason it’s a really intimidating thing to do. It’s something that you have to do for a while before you’re comfortable with it.

Dan:

I have done it as well. It’s one of those things that you work up into being this monster, but once you start doing it, and get on a bit of a roll and you experience some small successes, that monster just disappears.

Robert:

It helps to have some success along the way.

Dan:

What would you suggest for folks who are a bit more introverted, and what they really love to do is code, but they really need to do this market research, but they don’t have a cofounder who is more marketing or sales oriented – what would you suggest for them in terms of getting pumped up to make these calls?

Robert:

There’s never a replacement for actually, doing it, but I think you could get geared up by – I had a great experience reaching out to people. You mentioned you had emailed back and forth with Derek Sivers.

There’s a lot of people in the community who have been successful in different ways, and are really willing to help.

You can just contact them, and say: ‘Hey, this is what I was thinking about using as a scrip – what do you think”? That’s one way to go. Another way would be to just get some friends to role play with you. Maybe that gets your confidence up a bit, maybe that gets your script to a slightly better place. Getting anybody else’s eyes on things you have written will improve on what you have. Beyond that, I think you just have to jump in a couple of times and absorb the hit of just doing it.

Dan:

We went over what a couple of your scripts were, and what the iteration was. We won’t read it verbatim now – if people want to see it they can go to your blog and check that out, and also your article on Jason Cohen’s blog.

Going back to your process – by this point you had spoken to a bunch of people and found out what their pain points were. How many calls, and how long do you think it actually took you to deeply understand what these pain points were?

Robert:

That’s a good question. I wrote an article last year about a different idea that I had done research for. I think the best bit of advice about knowing when you have done enough research about their pain points would be when you know what they are going to say before they say it, and there are no new surprises in the calls. That’s when you know.

Dan:

So you have an understanding of their psychology. As Ramit Sethi said, he talks about really understanding the emotion and psychology of the buyer or the prospect so that you can say what they would say, before they even say it, and inject that into your marketing copy and messaging.

Robert:

I’m a big fan of the deep psychology that Ramit goes into. It’s really interesting, and useful too.

You can say – talk to 10 people, talk to 20 people, but you might learn enough after talking to 5 people, or it may take 100 people. It depends a lot on yoru market, and how big you’re framing your market to be, and what kind of access you have to those people.

Dan:

Absolutely. So, it’s great if you are Ramit Sethi and you have thousands of people who respond to your surveys. For somebody just starting out who doesn’t have a big blog or an audience already for something who wants to find a market using this process to research it and understand prospect’s pain points, and the deep psychology and emotion around those pain points, how would you suggest they go about doing that? Should they try a combination of cold emails and cold calls? Do you have any specific tips for people who don’t have an existing platform to leverage?

Robert:

I think cold calls are a pretty good way to go. It’s pretty easy for people to ignore emails and blow you off, but because they are rejecting you personally or because they might not like your product. Usually they are just busy, and its the lowest priority email they have in their inbox. If it sits there for a couple of days and moves down the line it just gets lost in the shuffle.

You will find if you’re doing cold emails that if you are consistent, perhaps once a week, or once a month, whatever you feel like it needs to be, you will get an answer eventually. I just found that it’s harder to ignore a phone call, and it’s a little more urgent and more immediate to get that feedback.

You need to find exactly what you think your ideal customer is. I know a lot of different people talk about this. I read a book called the Ultimate Sales Machine by Chet Holmes that’s a really good book. He talks a lot about nailing down your ideal customer. Even if you can nail down 50 people who are perfect customers it’s good – just focus on them, and be consistent. The more you know about those people, the more you can get inside of their heads and present them with something compelling specifically for them .

Dan:

In your experience, have you found that when you frame these phone calls as wanting to speak to them or interview them about their business, have you had more success when you have framed the calls as an interview, or as you’re doing research? Any difference?

Robert:

The interviews have been the most successful format. In my original 100% cold calling conversion rate post I was talking about having a blog in the deer management industry, and I was offering writing an article about deer breeders, in exchange for visiting their premises, taking some photos, and talking to them about their operation so I could understand more about how to develop something that would interest them.

(27:45)

Dan:

I felt like, when I was interviewing them on site, I need to be asking them questions that were geared toward writing an interesting blog post, rather than the types questions I should have been asking to learn about their pain points. Some of those questions didn’t include things that I might be interested in. I had to strike a balance there.

As far as market research and getting the most raw information, I have had more success in the last 6 months with just talking to people about their business, and what their problems are. I think you should keep it pretty open ended.

I got some really good advice from Harry Hollander, he works at moreware. They do some really good business. Really active on Twitter, and they really have a handle on running their own software business, and he has been really helpful to me.

Harry basically said that the most valuable question they ask is just: “What is the biggest problem in your business”?

They don’t even start with: “We’re trying to solve some problem, what do you think”?
They’re just looking for what people are struggling with, and working from there.

Dan:

By taking that approach you’re almost positioning it as a value added experience where they get to vent a bit, perhaps their friends and family are sick of hearing about their business, and finally somebody is listening and enabling them to vent a bit, so that’s pretty cathartic.

When you position it as an interview – it’s kind of flattering to have someone want to interview you. I have done some of these cold calls as well, and when you position or frame it as an interview you seem to get a better response, for sure.

Robert:

An interview is by definition focused on them. They tend to open up a bit more, and you can start with easy questions to answer. Some of the people I spoke with in November and December gave me a lot of information I didn’t expect to get.

I started adding more and more questions to the tail end of the interview about their revenues, competitor’s pricing, and some other topics where I didn’t expect to get answers. For a while I was enabling people to pass on the question, but most people by that point in the interview were totally comfortable, and they were just talking business, and having fun.

Dan:

Are you publishing these interviews on your site, or are they just private?

Robert :

No, these were just for market research. I do have notes from some of the interviews, and maybe I should roll that into the book. I know I want to do some case studies as part of it.

Dan:

I wasn’t implying you should publish, I was just curious if you do.

Robert:

Honestly, I hadn’t thought about it. You just gave me the idea.

Dan:

Well, I quite enjoy doing these types of interviews, and in terms of content, you can use a transcription service like Andrew Warner does, and get them transcribed. If your prospect is comfortable with that, number one it’s a value add for your other customers, and number two it’s a bit of content for you that doesn’t take too long to get created.

I think SpeechPad is $1 or $1.50 per minute or something like that for the transcription service. If you are doing 10 – 15 minute interviews for market research anyway, it’s dirt cheap to turn that into some easy content for your blog – as long s your prospects are OK with it.

Robert:

That’s a pretty good idea, especially if you are doing interviews that are industry focused, or you have a customer centric blog. I know the other people in the industry would love to read that stuff. I actually only have notes, but even those might be valuable for people.

Dan:

It’s knowledge that’s in their heads, that may not be published anywhere. It may not be published in books, it may not be published on any other blogs, so you have some valuable knowledge there. And as long as your customers are comfortable with you sharing that knowledge it could be a value add for your other customers.

I would be curious to know what your overall marketing strategy. First of all, what are your products, and what are your overall marketing strategies for each of those products seperately, or together, or however you do it.

Robert:

I think the overarching theme with all the marketing I do these days is a combination of getting insider the customer’s heads as much as possible. People talk a lot about eating your own dog food or solving a problem you yourself might have. I think that’s a pretty good idea in some instances, but it just wasn’t something I wanted to do, which adds a bit of challenge.

To solve a problem for an industry that you are not familiar with it takes a lot of research to understand not just the high level of the fact that your customer wants to manage certain data in a certain way. They have some specific day to day things they do that are different than everyone else. That’s true comparing industry to industry and probably company to company as well. You have got to find out what the key pieces are there, and what really would improve their day to day work the most. What’s the biggest win. I think that’s the hardest part – to get inside an industry that you aren’t really a part of. It really just takes time. You have to engage with people, and that takes cold calls, industry events, and other things. I have heard some really good things recently about doing webinars with people in the industry – along the lines of what you just mentioned with transcripts. Basically doing your customer development, but doing it as a webinar, and just talking through things in the industry. I think that’s a great idea. I think that would also serve as an inbound way for people to get in touch with you so you can learn more from them.

Dan:

Let’s use as an example to illustrate. Let’s say you decided you wanted your market to be wedding photographers because you had some insider insight about their workflow or something. The way we could apply this, in terms of the customer development process, is to create a blog around the industry or business, and do perhaps 10 – 20 interviews with wedding photographers. You would need to be really well prepared for the interviews, get them transcribed, put them up there. So that way, you’re giving value first, and you’re positioning this research as interviews, and as value adds for these people. You are in essence giving value first.

Robert:

That’s a really key piece that I have done in the past. A lot of people in industries that are tightly connected by relationships, and most of them are, but some are more so than others. People in the tech community are far more comfortable with finding something online, buying it, and moving on. People in some other industries are a lot less comfortable with that. They would rather shake your hand, and know about what you’re interested in, and what you do in your spare time before they buy anything from you. It’s a little bit of a different challenge, and there are ways to meet that kind of a challenge online.

I think a key to getting in the door is just starting that relationship in a way that they are getting something out of it from day one. That’s what makes building a blog like that and then engaging those people so valuable – it just starts the relationship.

Dan:

It generates some great results for you as the entrepreneur, and also for these prospective customers it creates some value for them. if you think about the time input required for that, it doesn’t take that long to set up a simple WordPress blog. it could be a free blog on Blogger.com or WordPress, or you could set up a WordPress blog on your own domain. You could do a combination of cold interviews and cold calls to get some interviews scheduled, do the interviews, get them transcribed and then up on the blog, and boom! That would be an interesting way to do customer development.

Robert:

I think before you start doing interviews you have probably done enough research to make a post or two about the industry, and make the blog look like something. If someone asks you for a link, you’ve got something going, you can send them to something, and you have some trust markers there. Those are some key pieces. But yeah, something free, something simple, just get going.

Dan:

It sort of provides a mini platform so that when you make that 21st call to that 21st prospect they see, oh these people are serious about this, and you have proven that you are willing to create some value.

You mentioned that your target market may not be as comfortable going online. That suggests that, although SEO and SEM might be some channels that you do engage with, they might not be at the top of your list.

It sounds like tradeshows, and some of the more old-fashioned relationship building techniques are more important for you. So you mentioned tradeshows. Are there any other techniques you are using? Are you trying any direct response marketing techniques such as postcards or flyers or anything like that? How are you reaching your customers and acquiring them?

Robert:

I haven’t done mail yet. I don’t think those products would be suitable for mailings because they don’t have a high enough price tag to make that kind of marketing work. That’s one of the considerations you have to make when you’re picking what type of marketing you will be doing.

One of the problems I have with the Whitetail industry is reaching people in a cost effective way. That can be a challenge with markets that are not online. I have some other products that reach people a little more effectively online, but besides tradeshows – if there are local meetups, industry events, those are good. I did some research on a product for civil engineers, and there are a lot of different professional associations that these individuals are involved in weekly with 20-30 people at each of these events. The organizers are usually just dying to have speakers, so if you an scrape together some content that is interesting to your market then you can go give a talk and have an instant collection of people who might be really interested to talk with you.

Dan:

I would be curious to know if you have tried connecting with people that have an audience already, and who’s audience is your target market. Have you been able to leverage other people’s audiences at all?

Robert:

I try to reach out at tradeshows to some of the guys who were selling the herd tracking cameras. I have a product that is used to figure out statistically some of the information about the population. It’s pretty much automated, but you still had to have a certain number of cameras to make it effective.

We did a little bit of cross promotion by email, but the overlap in the market wasn’t really strong enough. This other company was trying to sell cameras to consumers, not the business customers we are trying to reach. I really needed a more targeted list of people that owned land, or had a hunting club. That was not something that I found at the tradeshows I went to. There wasn’t a business that had direct overlap, and who I could do cross promotions with, and try to leverage their audience.

Dan:

Ok so you mention two things there. It sounds like number one, you did some cross promotion, and number two, you mentioned that there wasn’t enough overlap, and so the targeting wasn’t strong enough.

What did the cross promotion look like? Did you guys plug each other to each other’s lists? What did that look like?

Robert:

We ended up sending out an email to their list, it was a really brief email> We just gave them a few sentences about what the product could do, how it tied in with their cameras, why their cameras were effective with it, and we put some links in there.

It also had some educational information about the method in general. There is a lot of research in the deer industry about how to use infrared remote to conduct a population census. The software just automates it. You can do it yourself if you wanted to. You could even do it with one camera on a small piece of property. We tried to reach out with that.

I’m a really big believer in educational marketing. I believe you need to offer value there as well. It makes it less of an interruption. Marketing is implicitly permission based, but a little less so when you do a cross promotion.

Dan:

Have you read the book “Permission Marketing” by Seth Godin?

Robert:

It’s on my bookshelf. I bought most of his books, and have read 5 or 6. I really like what he has to say, but I stopped short of permission marketing because it started repeating itself.

Dan:

I think the big idea in that book is the power of both having a list, and a great relationship with that list. Jason Fried also talks about this in Rework – he is the founder of 37 Signals with David Heinemeier Hanson, and he talks about how valuable it is to just have an audience who is eager to get your content. The channel is not super important, we’re talking about blogging, we’re talking about an email list.

Having access to a group of people who actually care what you have to say, and want to hear from you at some interval is one of the most valuable business assets you can have. What I hear you saying is that it can be tricky to do that in such a targeted, focused niche like the one you’re in.

Robert:

Even the overlap between vendors in the niche is not always there. It’s tough to find other vendors who reach our target audience, who we can do joint ventures with, and do an email cross promotion to each other’s lists. You need to be careful with that kind of stuff too because you can make people unhappy in a niche like that and really mess up some of your opportunities.

Dan:

Absolutely. So the strategy that 37 Signals uses on their Signal versus Noise blog, and in their talks of being brash, opinionated, and even a bit arrogant sounds like it wouldn’t be a smart strategy in your niche.

Robert:

My background was in software, and not wildlife biology, and it was sometimes tough to overcome objections. If I had an opinionated and arrogant tone I think a lot of industry people would just tune me out.

Dan:

Let’s apply some of your techniques to you now. What are some of the biggest problems in your business?

Robert:

That’s a good question. I would say – probably still the same old, same old. Some of the things that people told me in interviews such as finding quality help, you mentioned setting up a blog – something I have gotten into is outsourcing some of those tasks. I think it’s a challenge to do that. I know some people have had some success with it. I even ran an experiment where I tried to use Craigslist to outsource some of the phone calls I was making for customer development. It wasn’t a full outsourcing of the interview, but just setting up and coordinating times. A friend of mine, Ferris…..

Dan :

First name Ferris, or Tim Ferris?

Robert:

First name Ferris. He gave me this idea of outsourcing the interview set up and coordination. He had good success with it, and I had so so success with it. I found with a few people it worked well – they set up interviews, got them booked, and I saved a little bit of time, but I’m not sure that it was a huge win for me. I would say that’s one of my problems. The more I could outsource those little things, the more I could focus on those bigger challenges. Those bigger challenges are really fine tuning the message, marketing and language to exactly what is in the customer’s head. And that takes a long time to form those relationships, talk to people, and understand how they talk about the pain points, what parts of it are really important to them. They don’t always know.

47:00
(technical issues)

(Interview resumes)

Dan:

So two things that I heard you say there. The first challenge being delegation – outsourcing overseas is one approach, outsourcing domestically is another. I have personally tried outsourcing some things overseas via Odesk, and I have had mixed results depending on what the tasks were. it’s a major pain to speak to someone at 10 or 11pm at night when you’re wiped after a full day of work and they are just getting started and want guidance and direction.

The other thing I heard you mention is deep customer insights. So, really understanding the emotions and psychology of your target customer so that you can fine tune your messages and your marketing. For a niche like yours it can be tough to get enough qualitative and quantitative data to about people’s emotion and psychology. How are you approaching this not just from a market research perspective, but from a continual perspective in order to inform your marketing messages?

Robert:

A big part of it is just building relationships, and going back around to the people that I have spoken to already, or that i have more than a touchpoint online with. So circle back every once in a while, see how they are doing, see what they think about the product, see what new problems they might have in their business. I know as any business grows the types of problems it has tend to change a little bit. Or even if you have the same problem the character of it has probably shifted a little bit. I think just going back around is really important.

And anytime somebody gives you an opportunity – whether you get a support question or an unexpected inquiry – take the extra minute, really reach out, and try to start something there. Those have been pretty effective to me. I think most people are excited to tell their story if someone is ready to listen.

Dan:

It sounds like you can take either an inquiry, question or pain point that someone expresses to you, and you can try and answer that through multiple communication channels. You could even go so far as creating a blog post around it. I don’t know if your prospects are on Twitter, but you could tweet it out. You could even take a minute or two and go on YouTube to create a short video answer, and send them the link. You can engage with them in multiple channels so that they can consume it the way they want to consume it.

Where do you store your data and insights about all this stuff? Is it in your head, or do you have a wiki, or any kind of a system for it?

Robert:

I have lots of notes. The best system I have probably used is a really big text file that I have in Dropbox. That has probably been the most effective for me. You probably noticed me scrambling around when I was looking for some of my scripts. I have some in Highrise, I used that for a while, I have some Google Docs, it’s a little embarassing, but it’s a bit of a hodge podge.

Dan:

It makes me think – is that an actual pain point for you, or maybe that system actually works.

Robert:

I don’t think it’s a real pain point for me. I feel like there are a lot of solutions out there for this, but I just don’t think those tools fit where I am at.

Dan:

The way you’re approaching it – I’m sure you have tons of data points in your head – essentially, you are the guy creating the marketing messages, and it’s all going to come from your head.

What are some of the SaaS apps that you use and pay for Robert? You mentioned Highrise.

Robert:

I never paid for Highrise. I never needed to. But it was useful to organize prospects for a while. I kept a lot of notes in Highrise about when I called someone, what I said, what the script was and how effective parts of it were. That was pretty useful. I switched over to the end to just the text file and I just have an extremely long text file where I put in my scripts, and talk about what was said, and list out the questions – just a running brain dump. Even using command line stuff like Grep in the middle of writing some code and improving a feature you might just go back into the text file and say – oh – this is what that customer was talking about. There are a lot of tools for dealing with text so sometimes it’s nice. If you have a software background it’s just easy.

Dan:

What would your advice be to someone who knows they want to do something and start their own business. They are ready to go. They are starting to look at markets. What would your advice be?

Robert:

Advice on selecting a market?

Dan:

Yeah, advice on selecting a market, and the headspace required to actually act on that.

Robert:

That’s a really difficult question, and something I have thought a lot about in the last few years.

Dan:

Some people struggle to just get started, and to actually do it, and they endlessly read Hacker News, and they just can’t find it within themselves to just start, so that’s why I ask.

Robert:

I think the best answer I have come across so far is a really unsexy one. But it was in Derek Sivers’ book. He said the most important thing is to just get started.

Minimum viable product probably does not involve writing any code.

Dan:

Not even one line.

Robert:

It’s probably just calling one person, making a post on Craigslist, and doing a bit of consulting. If you want to change the world of education I think Derek Sivers example was – start a tutoring business and take it one step at a time.

Dan:

I really like what he said about creating a manual prototype first. So if you want to start a movie review service, then start manually emailing your friends about some new movies you have seen, and get them to forward your stuff to their friends.

There are ways to do these things that don’t require coding for 6 months only to find out nobody wants the product.

We hear it again and again from people like Derek, Eric Ries with Lean Startup, Steve Blank with Customer Development. In terms of my own lessons learned there’s no doubt that creating the right type of minimal viable product which in your case, in a very focused niche, it’s going to involve old school relationship building. Old school techniques. Shaking hands. Going to tradeshows. Going to events, forming relationships, and getting your prospects to know you.

We are coming up to 1 hour, so we are almost out of time.

Is there anything you would like to add that we didn’t discuss?

Robert:

Some of it is cliche, but I really think the most important thing you can do is get experience. You need to go out and do some things – whether its marketing or hiring a developer or just putting something out there, whether it’s consulting services or a product. The first product that I finished and launched, by the end of working on it – I had connected enough with the startup community and the market to know that it probably was not going to be very successful. But there was something in me that just said: ‘i have been down this road before, I’m going to finish it. It may not make me any money, it may not change my life in that way, but I just need to know for myself that I can put it out there and finish”. And there are things that you learn that you don’t expect to during the process of giving something 100%.

Dan:

We have gone over an hour here, and I can already think of 10 more questions I would like to ask you, but I think we should end it here. I just would like to thank you very much for your time, and for your insights.

Robert:

Thanks a lot for having me on Dan. It’s really fun to talk about this stuff.

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Harcore SaaS Conversion Rate Optimization Tips From Anne Holland of WhichTestWon

Posted on February 10, 2012 by Dan

This interview features hardcore SaaS conversion rate optimization (CRO) tips, tricks and strategies from a 25 year direct response advertising veteran. Anne Holland is a direct response marketing genius, and her ideas about optimizing your pages and campaigns for conversion are backed by tons of data, and might surprise you.

First, some background information about Anne Holland.

Anne is the publisher of WhichTestWon.com, a site that features A/B and multivariate testing case studies from over 170 real life A/B and multivariate tests conducted in a variety of niches and industries. Anne has over 25 years of experience in the paid content industry, and is a seasoned direct marketer with a keen sense of what works and what doesn’t with selling subscription content. Anne is also the publisher of SubscriptionSiteInsider.com, an online publication that aims to help executives grow subscription content profits.

Although Anne’s primary experience lies in marketing subscription content, the insights she shares in this in-depth and revealing 60 minute interview are directly applicable to SaaS executives and marketers who wish to increase traffic, conversion rates, retention and lifetime value while decreasing churn and payment processing issues.

So strap on your seatbelts and grab your pens - you’re about to walk away with a treasure vault of insights, strategies and tactics to increase conversion rates for your SaaS products.

Dan:

Hello Anne, it’s nice to meet you today.

Anne:

Hey Dan, great to meet you too.

Dan:

Let’s dive right in today. I’d like to talk to you about a bunch of things related to Subscription Site Insider, and also things like search engine optimization (SEO) and pay-per-click marketing (PPC) for people who might be interested in starting their own membership site.

So why don’t we get started by you discussing your background and bio, and how you started Subscription Site Insider.

Anne:

I’m lucky, I actually started out as a marketer for paid content back in the 80s, so I have actually been in the paid content industry for 25 years now. Back then we were all doing direct mail trying to get subscribers that way. I worked on business to consumer (B2C) and business to business (B2B) titles – everything you can imagine from literally the Economist magazine to the Oil Daily – all sorts of titles. Then in 1995, for the company I was working for at the time, I launched one of the world’s first PAID subscription sites – this was back when everyone was saying do we sell advertisements, do we sell content, what do we do? We were testing all these things pretty early. At that time we went to the National Press Club of the site, and we had to explain everything to them, such as: “What is a web site”?

In the year 2000 I decided to get out of corporate America and launch my own company. I was very inspired by all of the entrepreneurs back then. I started something called MarketingSherpa which was a research firm. We researched what worked in marketing. So, we did all sorts of benchmark reports and events, in person summits, and we ultimately launched a membership site as well. I sold that in 2007, took a little time off, and then I went nuts and started my next company. My next company also is a media company because that’s my industry, and it’s called Anne Holland Ventures – ‘deep creativity’ on that name (laughter). We also publish paid content. It’s always been my career and my love.

Dan:

Anne, I’m really curious to know something. You mentioned that you had started out doing direct mail marketing to sell different types of content. We have all gotten things like the Columbia House Record Club, America Online (AOL), and all these different mailers. What did the paid content industry look like in the very earliest days?

6:10

Anne:

There has been paid content since people sold newspapers 150 years ago. When I started in the 80′s it was a REALLY exciting time because the personal computer had just taken off, and there was suddenly something called “do-it-yourself” publishing where you could be a “self publisher”. That was brand new then. And what happened was the traditional media – Life magazine, Business Week magazine, and the newspapers were pretty much the only people publishing subscription content out there.

And suddenly, in the early 80′s, all these guys started publishing what they called subscription newsletters – literally out of their garages and second bedrooms. They were trying to sell subscriptions using direct mail pieces, trying to see if they could make money with it. And I worked for one of the guys who was one of the first people in that industry, his name is Tom Phillips. He started out with one little print subscription newsletter that he wrote himself, and he would send out direct mail pieces (mailers) hoping to sell subscriptions, and he built it up into a more than $250,000,000 empire. It was incredible! In the late 90′s when I was leaving he was divesting, and it was this huge giant thing. He had 60 different titles in every industry you could name. He owned everything from PR News to all these advisory and investment advisory newsletters, health advisory newsletters, Dr. Sinatra’s health letter, airport newsletters, and it was such a cool thing. So whe you talk about all these niche membership sites and niche subscription content that’s happening online on the web now there is a huge history from the self-publishing revolution, with the exact same thing happening in print, it just happened to be in print back then.

Dan:

That’s really interesting to hear. I wanted to dive into the nitty-gritty about where all that stuff started, My father is a financial planner and has been for 30 years, and he was subscribing to various investment newsletters and stock tip newsletters.

The next question I’d like to ask is: in these large universal niches such as weight loss, dieting, relationships, or personal finance we keep seeing certain unique spins, twists, and angles on the same old themes. Going forward do you think there’s still room for unique spins, twists and angles in these niches for potential membership site owners?

Anne:

Huge.

We used to say in the publishing world – health and wealth. If you can launch a product for health or wealth you’re gonna make money. It’s insane all those old newsletters you mentioned your father used to subscribe to, there are more than 1,000 subscription titles out there just for stock tips, trading tips – for consumers, and there’s hundreds more out there for professionals. It is insane. I’ve got friends, for example, who used to work with me at Phillips, who now work for companies like Forbes Online, Motley Fool, and places like those. If you go there you’ll see they’re constantly launching new newsletter titles that are online. It’s either online, or it’s delivered via PDF. There’s just a constant flow of new ones. The other cool thing to realize, and maybe this is something that you hadn’t realized, is that consumers who tend to buy content around a particular topic tend to buy more of it.

Your best email list, the people who are going to be most likely to buy your subscription product are your competitor’s customers. That doesn’t mean they are going to leave your competitor, it means they are going to buy your product also.

Dan:

That is an insight that sounds like it’s been backed by data in terms of your own experience. I would have never thought that.

Anne:

And of course anyone from the classic subscription world knows this, and that’s why when you go to conferences where they all hang out, you’ll see them all doing deals. No one’s listening to the speaker. They are all in the hallway, and they all say: “Ok, I will swap you 5,00 names, I’ll swap you 10,000 names”. They are doing list deals. They are doing cost marketing deals such as cost per action or cost per acquisition deals. They are all affiliates of each other.

Now one other industry that knows this is frankly the adult content industry. They are all affiliates of each other, because somebody who buys on one site is going to buy on another site. Content buyers are content buyers.

Dan:

Ok, so everybody’s doing deals, everybody’s cross marketing.

Anne:

Your competitor is your friend.

Dan:

So that just makes me think that growth by acquisition is, you are just growing the lifetime value of the customer if you have multiple purchase points for that customer.

Anne:

Once you do get a customer in some of the ways that you can grow that lifetime value include selling that customer additional content products. For example, let’s say I buy one newsletter from Motley Fool. They will try to cross promote (cross-sell) me to their other newsletters. So they are going to try to turn me into a multi-buyer. Or, a lot of membership sites will try to upsell you to a higher level. Maybe I joined at silver, and they will try to convince me to upgrade to gold. You could also go to a competitor and propose list swap or exchange deal where you offer to market their product to your list, and they will market your product to their list. This tactic gives you more leverage.

Dan: (12:40)

Obviously niche selection is something that’s very important. In the books I have read the experts mention that people tend to get niche selection wrong. You had just mentioned health and wealth. How does one reconcile passion versus profits. Let’s say you are passionate about skiing. Are you better off just going into the health and diet related subscription content product that you don’t really care about, or are you better off to stick with skiing. Do people have enough of an extreme passion to create a viable subscription content business around skiing where they can create a set of products and revenue streams that would make forming a lifetime relationship with a customer to be profitable, viable and sustainable?

Anne:

You actually have 2 questions there.

One of them is a psychological question as an entrepreneur. When you are launching a site or a product or a company it is going to eat up every single hour of your day and night. You are sooner or later going to get a little burned out by it. So if you launch into something that is your deepest passion in life, that can help because you don’t mind. You know, you love skiing so much you’re thrilled to create content. But, it can also burn you out on the topic of skiing, or ruin skiing for you for the rest of your life.

I have a personal passion for real estate. That’s my hobby. I love it. I would never launch in that niche though because I don’t want to get burned out with my hobby. I want to have that enjoyment for the rest of my life. I’m going to launch in different niches that I also love, but it’s less of a personal passion.

You do have to really enjoy the niche you’re in, otherwise you’re just not going to be able to do it. If you’re just doing it for the money people aren’t going to respond.

(14:05)

To answer the second half of your question, how do you know what angle? let’s say you decide to go for skiing, how do you know people are going to buy something, and that you can create products that will sell? To do this you actually have to turn your passion off and say: “I am me, I am not my prospect”.

It’s the biggest mistake that most people make. They think: “I’m crazy for skiing and I know what I would want in a subscription site, and they go out and build what they want to build. The problem is this – who knows if the marketplace wants that.

Research, research, research.

You can take a niche, or even take a couple of niches and do a hard hitting market research project before you launch anything. Talk to the actual prospects. Find out what their pain points are, find out what gets them excited, find out what doesn’t get them excited, find out how many of them there are. Don’t ask them how much they would pay – they don’t know. But do ask them what kind of content they are buying already. Are they spending money already on content, information, classes, courses or programs? They are not going to be able to tell you how much they would pay for your product – they cannot. You learn that later from price testing. But you are going to be able to learn if they routinely buy content or buy association memberships or subscribe to journals or magazines or go to conferences.

EVIDENCE FOR SPENDING
Do you get any magazines, newspapers or journals? Do you subscribe to any paid content sites? Do you belong to any clubs? Find out what you need to find out. We just literally came out of a 3 week market research process because we wanted to launch a new publication this year. We’re thinking about June. We now have an in-house staffer whose job it is to do this research on niches. He researched 3 completely different markets. One of them was veterenarians, one of them was doctors who own private practices in the US, one of them was internet entrepreneurs with companies that are worth $250,000 to $5,000,000. Those are really different markets. But we had an idea for a publication, we thought the markets were pretty good. He did in person interviews and sometimes phone interviews with the actual prospects themselves. He talked to consultants who serve those people who have a good overview of those people whether it’s a lawyer or an accountant or a business broker and he also did just a lot of general research into the finance and existing publications as well as internet usage and all of that. It was amazing because the market we though we were going to launch in ended up being a total loser. Now I can’t tell you which one we’re going to launch in, but the results of the research shocked me. I thought I knew what I was doing, and it’s always critical to do this research before you launch anything. Anything! It only took this employee a week per market to do the research. He made his calls, he talked to people. You also get your SEO work done then because through the conversations you learn about the words they use when they talk about themselves and their passion, and these words are often really different from what you would use.

Dan:

That’s very interesting to hear all that. I would be very curious to know, you have obviously been in business for a couple of years with Subscription Site Insider. I would be curious to know what you’re willing to reveal in terms of your overall sales funnel in terms of your front end, mid-level and backend – whatever you’re comfortable revealing. If nothing, then that’s fine.

Anne:

We have a classic sales funnel in that we’re always trying to generate that email name, but we want a name from that person who is the perfect qualified prospect for us. We tested out a bunch of different ways to get the word out to different demographics when we first launched. We tried everyone from folks like Stompernet to folks like the specialized information publishing association, so we really ran the gamut. Magazine publishers, we work with the Newspaper Association of America. We work with all different groups who are interested in paid content online. And we learned out of that not only the types of people that were going to convert, but then what types of people would stick. As a subscription publisher what you’re really interested in is lifetime value. We had to figure out who were the best ones, and that took about a year to figure out who was really, really, really the best out of real life. We also adjusted out pricing. And then we went out there and built a blog to attract them using keywords, and we began to build the marketing alliances with the people who are just in that niche. You’ll see a new homepage on our site in a week in a half. Adjusting the site to use verbiage and important branding messages that we would want. For example, right now it says on the web site: ‘Get information to help with your launch”. We learned that people who are planning on launching something make terrible subscribers because it’s just too much information for them, and they aren’t ready for that much information. They aren’t ready for the high level, amazing, detailed information about how to run their paid content business. They always get overwhelmed, and they’re not ready. They’re not in it yet. We learned that you really have to be in business for about a year to take advantage of what we offer, and to stick in our member forum. I mean, this is a community of peers (NETWORK EFFECT), and not a newbie community. We are really adjusting and tweaking, and we’re about to come up with some major marketing campaigns coming out. We have done direct mail campaigns by post, we have done telemarketing campaigns, very careful telemarketing, we’ve done a lot of speeches at in person conferences such as association conferences, top level publisher events, often in New York or Washington BC, we’ve done some webinars with some key vendors in the field. For example, I’m doing a webinar tomorrow with Vendicia. Vendicia is the payment backend of choice for most subscription sites that I know that are making at least $10,000,000 a year – the big guys. If we do something for them such as giving a speech for free they will tell all their clients about it, and there is an implied referral. All their clients are people we know have money because they are paying for Vendicia, and there’s Vendicia saying: “Wow, we’ve got Anne Holland. You’ve got to subscribe to her site”. Well, they’re going to take that seriously. So I really work with vendors helping them with their content marketing, maybe showing up at their user conferences, giving a keynote, things like that to get the word out to just the right people, the people that have money. We also do play nicely with competitors whenever possible, if they’re the type of people that play nicely back, all that sort of thing.

Dan:

Let’s say that there is an entrepreneur out there who wants to start their own membership site. Looking at the bigger picture, the membership site is one revenue stream in their business model where perhaps they’re thinking about also publishing some other information products such as an ebook or two, perhaps a book, and maybe selling some other products. Let’s say that this individual has 5 products in mind. When you take all the different possibilities in terms of purchase combinations on the backend of that, somebody might purchase only product one or only product two, and someone else might purchase product 1, 2 and 5 during the lifetime of their relationship with the company. When you multiply those all together, that ends up being quite a few different purchase possibilities within that person’s model. Is that how you tend to look at things in terms of the lifetime value of a customer? So you know that you have an email subscriber, and you know that 1% of your subscribers are going to buy product 1, 2, and 5. Is that how you set up your metrics on the backend?

Anne:
(22:31)
Gee, I’m not that complex. You’re making it harder than it needs to be. After a while you tend to get a gut feeling about how well each product will sell. For example, I do an annual benchmark report for Subscription Site Insider, and it’s a separate product, and it’s literally a book that you buy and we mail it to you. We have a fulfillment department. So every year we put together this amazing benchmark report. I know that I’m going to make $X,000 from that report. And I know that some of the people who buy the report are going to be my current customers, and we’re also going to get some new people buying the report. The great thing about having an additional product is it gives you the chance to go out and publicize and rent people’s lists or go out to your affiliates with a new message and try to convert some customers which is great. I also know in general out of my total opt-in email list, people who maybe come to my site and sign up for a free offer – we’ve got free offers, a free blog you can sign up for. We’ve got a free 7 step e-course, and all of these are ways that we are legitimately trying to capture your email address. I know that out of those different lists, I know that X% will ultimately convert to subscribers. I have a pretty good feeling of what to expect per product, how much to expect out of the total email list in particular – that’s generally my measurement. Worst case scenario – if I can’t get 7% – 10% of an email list to convert then I’m really in trouble – that would mean I had a dead site.

Dan:

On that note let’s dive right in to conversion rates. In your experience, what are the ranges of conversion rates that people can expect from pay-per-click traffic coming to a squeeze page. What is the ultra low end of what they can expect?

Anne:
(24:36)
Let’s say you’re a dating site – it’s going to be completely different than if you’re an investment site. Let’s say you’re a crappy pay per click marketer which a lot of people are. It all depends on how good you are, how good your landing page is, what your offer is, and how deep your conversion funnel is. A lot of people, especially for pay per click, you’re probably not doing a hard offer – a hard offer meaning pay up front, right away. Maybe you’re trying to get a free trial with a credit card number, or maybe you’re just trying to get an email address and hounding them on the backend. And then there’s conversion rates through each step of that. I can’t give a generalization – that’s too large of a generalization.

On the other hand, if you have an email list that is a true opt-in email list, and these are names that have joined within the last year, and you are routinely publishing good content to them, so they have a good brand relationship with you, they like the stuff, they tend to have a good email open rate – and by pretty good it had better be over 20%, possibly over 30% if it’s B2B, you’re gonna get – hopefully – between 5% – 10% conversion rates with a true opt in email list. Now, there are people who get much better conversion rates, but you also don’t know about their lifetime value. So just because they are getting a higher conversion rate doesn’t mean they have a more profitable business this year, or a higher business valuation in the long term. Some of them have high conversion rates but low lifetime value.

Dan:

so is that 5% – 10% over the lifetime of the relationship, or per email sent?

Anne:

The 5% – 10% conversion rate is over the lifetime of the customer relationship, however long that might be. If I have 1,000 opt-in email subscribers to my beloved newsletter, I would expect 5% – 10% of those people to buy. If my price point is right, if my offer wording is right, if I’ve got a pretty good paywall, if they like me – I mean, there’s a lot of “if’s”, but if I’m doing a half decent job that’s what I would expect.

Dan:

OK. So let’s move from pay per click to SEO. It sounds like you advocate some type of ‘soft offer’ up front, on the front end, for pay per click campaigns. In terms of SEO, let’s say someone wants to start a membership site around the business of wedding photography. How does the sales funnel differ for a prospect who came through SEO versus a prospect who came through a pay per click campaign? Do they differ at all?

Anne:

Hopefully an SEO prospect should convert a little bit better. I have seen that happen. That does mean that you better be looking at your backend and be very aware of the pages that SEO traffic is hitting. Because it probably is not hitting your home page. You know that, right? It’s probably not hitting your perfect landing page that you worked so hard on for pay per click. You need to be aware of the landing page that it IS hitting, and you need to optimize that page. I have seen people A/B testing their top SEO page templates and REALLY getting a better result. If it’s just a random page on your site and you haven’t really worked to make it into a conversion vehicle then it’s not going to do that well.

Dan:

Let’s move to design. We’ve all seen sites like Craigslist – just totally ugly – but it’s consistent, fast, and it gets the job done. Have you noticed any correllation between sites that are slightly ugly but consistent in terms of conversion rates? Do they convert better? Or perhaps the answer is ‘it just depends’ on the niche.

Anne:

Absolutely it depends on the niche, and it always blows me away. Because there are some butt ugly sites out there that I can’t believe are making money. And we’ve done case studies on them. Have you ever been to GanttHead.com? Hideous. It’s a hideous site but it converts highly. The guy who founded it is a friend of mine, I love those people, they’re amazing, they’re doing incredibly well – it is one of the scariest sites you’ll ever see if you’re a designer. But that community, he’s marketing to people who are usually loner tech people, IT people – it’s a particular type of IT person in corporate America who’s kind of lonely in their cube. And apparently, that kind of person LIKES a really ugly page. And I understand that because I’ve actually seen other A/B tests going out to the technology and IT community, and anything that smells like marketing they run from.

Dan:

So it’s the classic answer of ‘it depends’ – you know, let the data do the talking. Some balance between your gut feel and the data.

I read your SMS executive summary from 2009, a PDF that’s available online for folks that are interested in getting some hard data about subscription site statistics.

Anne:

Yes, our first benchmark report.

Dan:

In that report, you obviously don’t give everything away, but you do give away some very helpful and useful information. One of the top things you mentioned in terms of missed opportunities is A/B and multivariate testing. Going back to our ‘business of wedding photography’ membership site example, what are some accessible ways that new site owners can introduce some tests without having to a be a PHD in statistics?

Anne:

That’s a great question. After the first benchmark report we actually did a dating industry report for all the dating sites. Did you know that the average online dating site had DOUBLE the conversion rate of other types of paid content sites? It’s not like it’s not competitive in the online dating space. The paid dating sites are competing with free sites. There’s INSANE competition, and still they’re getting double the conversion rates. The reason is that they A/B test more. They A/B test their brains out. They A/B test every single page you can possibly imagine. Most subscription marketers don’t test at all, let alone nearly enough! It’s clear that it pays off, and yet only something like 30% of American marketers do any type of testing including A/B testing.

If you’re launching a new site you do need a certain amount of traffic to be able to A/B test. In fact, it’s not really about the traffic, it’s about the conversion action. All A/B testing is based on statistically conclusive results. You need a statistically conclusive result to be able to say “which test won”. To deem version A or B as a winner you generally need at least 100 conversions for the testing software to be able to figure out the statistics and data. That’s very rough math, and anyone with any background in statistics would cringe at that, but between you and me it’s at least 100 conversions you would need. However much traffic you would need to get 100 conversions.

(31:35)

Your conversion action might be someone filling in their email address in an opt-in form, or a full lead generation form, it might be a trial conversion, they converted to taking a free trial with credit card. It could just be they are clicking on a button, although I hope you’re tracking a little further down the conversion funnel. Whatever that conversion action is you’re going to need at least 100 people to convert to be able to tell which version of the conversion action works best. That’s only if you have 2 versions that you’re testing head to head. If you have more versions, you’ll need more conversion actions to get accurate data.

To be able to do the math about conversions used to be hell. We used to do this in direct postal mail. We A/B tested our brains out – all the time. Now it’s so much easier. All you do is get yourself a cute little piece of software. All the good A/B testing software is very cheap and/or free will do the math for you.

Dan:

Which resources can you recommend for people, Anne?

Anne:

WhichTestWon.com. You knew I was going to say that, right?

Dan:

I thought you were going to say Google Website Optimizer or something.

Anne:

No. Go to WhichTestWon.com. It actually is one of our publications. It is the #1 weekly on A/B and multivariate testing. Every single week we publish a new real life test. And we’ve got lots of them – subscription sites, ecommerce sites, lead generation sites, all sorts. We’ve done more than 170 of them now. We don’t do the tests. We’re reporters. We’re journalists, and we make paid content. We go out there, we talk to the people who are doing the tests in real companies.

Dan:

So that’s to understand conversion data and which test won, but I was referring to which specific tools people can use to do their A/B and/or multivariate testing.

Anne:

We’ve got a free directory on WhichTestWon that shows the 39 best testing tools. We have a profile of each and there’s even a list by client name. So you can look up who uses who.

Dan:

That sounds like an excellent resource.

Anne:

It’s really fun, and we show the pricing and everything. We also have a list of 80 consultancies and agencies who will do the work for you if that’s what you want. Again, you can see who uses whom, so you can see who their clients are.

Dan:

What are some the biggest mistakes you see with sales funnels and the backends of membership sites right now, and are there any opportunities we haven’t discussed yet that you consistently see being missed.

Anne:

Price testing.

Almost nobody except for the most sophisticated sites is doing price testing. A lot of marketers just think that if everyone is charging $19.95 that’s what they should charge as well. Such a waste. You could do some serious price testing. You may find that you need to lower your prices, and you may find you need to raise your price. I’ve seen a lot of tests where you actually had to raise your price, and you actually made more sales and made more money! So you should absolutely be price testing. You can use A/B testing for that.

Dan:

Absolutely. So would you say that’s one of the first ‘low hanging fruit’ places that people could start?

Anne:

Absolutely. Once you have optimized your site and emails just for conversions in general then you want to start testing prices. You also want to make sure you’re doing the best possible job you can with email. Email is far more important than social media in terms of trying to convert someone who has already been to your site once maybe, and trying to get them to come back and to buy.

A lot of sites make the mistake of putting these big social media icons all over their home page, and all over their landing page, like – “Please god, Facebook us, Twitter us”. That’s not going to get you the conversion. There’s lots of ways to convert people through email. Get the email address. Focus on getting the email address. Don’t focus on social media until later in the relationship. Once they have converted, then yes, ask them to join your Facebook page or whatever. But not until later in the relationship after they have converted. You can do Facebook and all those things on the backend, but don’t put it up front, because there’s not a reliable conversion funnel from there.

Dan:

I was thinking exactly that Anne. I have read a couple of great Internet Marketing books recently, and I went to the web site of a guy named Ramit Sethi who runs Iwillteachyoutoberich.com.

Anne:

I have heard of him, yeah.

Dan:

He founded and then sold PBWiki which was a venture backed startup, and I guess he wanted to get more into the list marketing end of things. He’s got a great system going on there. One thing I noticed about his is that he’s very conversion focused in that the goal of every page on his site is to get the email address. There were not 20 different things cluttering up the page, 20 different calls to action including social media icons. I see a lot of sites that have all these social media icons everywhere, and it makes me thing – that is NOT a single call to action! That’s 20 calls to action.

Anne:

When we first started WhichTestWon.com we had an option where you could join the email list, or the Twitter list. Most people joined Twitter. I literally removed the Twitter option off of that page because I realized that I was just losing email names to Twitter, and I didn’t have the knowledge or ability to really make Twitter the best possible conversion vehicle. After you have added me to Twitter, how often are you realistically going to look at my tweets? Will my tweets get lots among 1,000 other people who you follow? Are you somebody who is going to get a Twitter account, and only check it once a month?

That doesn’t mean I’m not on Twitter or that we don’t do well with Twitter. But it’s further down in the conversion funnel, further down in the site. Once your deep into the site, then we have all sorts of “tweet about us” type of options, and we get more than 100 tweets a week. We’ve got a lot of people tweeting about us, and it does drive traffic, and that’s fabulous. So we do have all sorts of Twitter activity. I’m just not making it my main conversion activity on the home page and web site template.

Dan:

That’s good to hear some validation for that theory. Let’s go through a scenario here. If you had your businesses stripped away, and you had to start a brand new membership site from scratch, something for consumers, and all you could use was pay per click and email marketing, and what niche do you think you would choose? Would it be viable if all you could use was pay per click and email?

Anne:

First of all I would never launch anything if all I could use was pay per click and email. You’re cutting off your feet with a strategy like that. To be able to market well you’ve got to surround the marketplace through EVERY medium. And I mean including things like postal mail, and SEO. Including things like Facebook and Twitter. Including affiliate marketing. Affiliate marketing should be at least 15% of your sales. Including “Tell a friend”. Referrals are a really good source of revenue.

(39:31)

Somebody like Audible.com – 15% of new Audible.com subscribers come through user referrals.

Why would I start a site if I was not going to be able to market it properly?

We just finished a big market research project looking into multiple B2B and B2C niches. The market that I picked as the winner ended up being the loser according to our market research. If I just picked one according to my gut I’m going to get it wrong.

Dan:

It sounds like the marketing approaches have to be pretty holistic, and like you said, SURROUND the marketplace. It also sounds like the B2B marketing strategies for a membership site are going to differ from a B2C membership site because in all cases the answer is ‘it depend on the niche – look at the data’.

Let’s move now toward someone who is actually thinking about starting a membership site in whichever niche they choose. Obviously, they are going to need some level of sophistication in terms of design skill, copywriting skill, doing some conversion testing, and setting up all these email marketing funnels and conversion funnels.

Let’s say someone is able to create the content, and put it up on the site. But maybe they don’t know HTML and CSS and Javascript and the whole technical side.

What amount of startup costs would someone expect to pay if they want to take a serious run at starting a membership site?

Anne:

Not including marketing? Because marketing is, you know, a completely different cost. You can get out-of-the-box software for very, very cheap. It’s pretty cheap.

You’re going to have to get your Authorize.net account for payment processing. Please GOD do not launch with Paypal.

Dan:

Why is that?

Anne:

Well, first of all, you can never sell your site if you launch with Paypal! You can’t sell a customer you acquired with Paypal. They will not let you hand that account over.

Dan:

That’s a pretty key insight – I didn’t know that.

Anne:

Ha ha ha.

Also, Paypal takes a big cut of everything. They are not a cheap payment processor at all. And, last but not least, they don’t hand over a lot of customer information to you. if you are planning on cross selling and upselling that customer, good luck if you plan to use Paypal. Not going to happen.

Dan:

So you’re recommending Authorize.net

Anne:

At the base level, use Authorize.net as your payment gateway. After you get more than a certain amount of money coming in, if it’s a major launch and you’ve got tens of thousands, hundreds of thousands of dollars coming in every month, you aren’t going to use Authorize.net. You’re going to go direct through Chase PaymentTech or work with somebody like Vendisia. For example, the folks at RollingStones.com, when they launched their membership site they went direct.

If you’re somebody that’s just starting out, get an Authorize.net account. You need a merchat account with a bank or with Costco, or wherever. That allows you to receive the money. You need a gateway account, and most people tend to use Authorize.net. I’m not saying they are the best, but we use them, and many people use them. You also need some type of cart that actually accepts the information. That cart could be as simple as FormStack. I literally am selling subscriptions on FormStack which is, what, $20/month. You just create a little form and then add a secure socket layer (SSL) and bang! You’re taking money. You don’t have to be fancy. Or, you could go through one of the pre-built membership site software. A lot of it is crappy. We have tried different ones. We’ve got one site that sells memberships, and it’s got several thousand members. It’s called AMemberPro.com. Subscription Site Insider is also using pre-built software by Membergate, and they also give you a content management system (CMS) so it’s all in one. Membergate’s #1 competitor I believe is SubHub. They power everything. If you’re really into WordPress you might end up going with WishList. but WishList just gives you the paywall and I think you also have to get a cart after that.

So it’s all different pieces that you’re going to stick together to create your subscription site. They are all pretty cheap, and you are going to want to customize. I tend to pick things where it’s a platform where I know there’s lots of good freelancers for. WordPress there’s a lot of good freelancers. Pick something that’s very popular, pick something that has lots of programmers who have lots of experience with the platform. If you’re planning on customizing I would not recommend MemberGate because it’s made with the Cold Fusion programming language, and it’s a nightmare to try to find qualified programmers with enough experience who have enough availability to do your work. Something like WishList, they’ve got 33,000 subscribers who use their software to run a membership site. They’ve got a whole bunch of authorized freelance programmers. Sub Hub has in-house freelance programmers. There’s something called AccessPass or WebAccess or something like that – MediaPass, actually. I heard through the GrapeVine that MediaPass is about to me named WordPress’s favored membership site plugin. There’s all sorts of good plugins out there. There’s digital access pass, there’s probably 100 different companies.

45:28

We have some reports on how to pick the right ones but you do need to be a member of our site to get at them.

Dan:

Through your Subscription Site Insider site are you targeting higher end B2B customers in terms of the paid content industry? What is your specific niche there so we can be clear about the types of people who might be interested?

Anne:

For Which Test Won which is of course about A/B and Multivariate Testing, we’re targeting anybody who is in ecommerce, or lead generation, or membership sites who is planning on doing some A/B testing and wants some inspiration or is trying to convince their boss to let them do it, and needs to show their boss evidence to get the budget to try it. It’s very cheap to subscribe to WhichTestWon, I think it’s like $40 a year or something. It’s nothing.

Subscription Site Insider, which is our site for people who membership sites, or paid content sites is targeting people who have been in the paid content industry, or publishing or media for at least a year. They have an ongoing company, or they’ve got enough experience that they’ve come from that background. For example, one of our subscribers has a launch right now that he has started, but he used to work for the Ladders, and before that he worked for Match.com, so he’s got a background – he’s perfect for us. We have newspapers, magazines, lots of little niche sites subscribe to us. You often have an existing business and they just want to learn how to deal with the credit card chargebacks, reduce the involuntary churn. If there’s a problem with the credit card you can lose up to 20% of your subscribers per month because you don’t know how to process their card properly. We help them figure out how to create their paywall so that it’s way more conversion oriented, how to optimize their email, how to optimize their financials. The people who are literally working in the field, in it, we make their lives easier.

Dan:

It sounds to me like the tests you have run throughout your career that there have been some pretty major surprises and some unexpected insights. Maybe we could just talk about a few of those.

Anne:

Make the button bigger.

No, really.

I always thought that as long as the button was visible, as long as it stuck out, it didn’t really matter how big it was. I have seen sites with gargantuan buttons that did better – that did A LOT better. So that always freaks me out.

Another thing to do is test the wording in your headline. In particular, if you’re under age 30. I have found that younger marketers tend to want to add elements like graphics, and images and videos and colors and things like that. And they don’t realize how important the copy is (the sales writing). Copy tests, especially headline tests, tend to have huge payback – way more than you would ever think. Often ones where you say: “I would have never picked that wording”. It’s shocking. And they are so easy to run, because you just have to type a different word on the page. It’s so simple – you don’t have to get the designer to do anything! So do a copy test, and especially for your offer copy.

So bigger buttons, do copy tests for your headline and offer, and either make the image bigger, or test removing the image entirely. If it’s a product image, you should make the product image bigger. If you just have a stock image of a pretty girl or a person sitting at a computer, that’s just a generic image, test removing it altogether. I have actually seen tests where it worked better without the image.

Dan:

Those are some excellent insights.

We are coming up on time here, so I would like to take a moment to thank you for speaking with me. It has been a very interesting chat.

Anne:

Sure! It has been great talking to you too.

Dan:

Is there anything you would like to add for people thinking about starting their own membership site?

Anne:

If you are someone who has some business experience and you’re not a raw newbie we have a private offer page. It’s at subscriptionsiteinsider.com/privateoffer, and you can go in there and get 10 days free. So enjoy! It’s not publicized anywhere else.

Dan:

Will send that out as an exclusive bonus, yeah.

One last thing. I find it so interesting speaking to mentors in business. I learn things from them that I wouldn’t learn anywhere else.

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