Mike Arsenault

Failcon Talk

mikearsenault — Tue, 23 Oct 2012 11:25:00 -0400

Here are my slides from Failcon 2012 in San Francisco, October 22, 2012.

Product Videos for Bootstrapped Web Startups

mikearsenault — Thu, 17 Nov 2011 15:36:00 -0500

Explanatory videos that distill the story, essence and fundamental value of your product can do wonders for helping your potential customers convert.

In the last year, I’ve had the opportunity to work on explainer videos for two different products – Rejoiner (our current startup) and Spreadable (my last PM role).

For Spreadable, we started the process by setting up meetings with some well-known producers, but realized that we didn’t have the budget to outsource. Across script writing, design, and animation you’ll pay around $20,000 to produce a 2-and-a-half minute video. 50Grove is a great resource if you do have a larger budget. The reality is that working with a professional studio is not an option for most bootstrapped startups.

Using the framework below, we created the Rejoiner explainer for just over $300.

If you pay attention to product launches, you’ll notice that there are a few professional studios that manufacture great videos for startups. Like any good manufacturing process, I knew there had to be an established formula they used behind the scenes.

I found five animated explainers that I liked, transcribed the scripts to text, and spent some time looking for common patterns. Turns out, there was a pretty standard flow across all five video scripts. They also shared a common narration tone and visual style.

Style

Explainer videos come in a few different shapes and sizes. I’ve tried to break down your options across three dimensions: Cost, Tools, and Production Value. I’ve also provided an example of each to get you thinking.

Stop Motion

Cost: Low
Production Value: Medium
Tools: Sketchpad, Printer, Scissors, Camera, Editing Software
Example: Dropbox

Fully Animated

Cost: Medium
Production Value: High
Tools: Artwork, Animation, Editing Software
Example: Spreadable

Kinetic Typography

Cost: Medium
Production Value: High
Tools: Artwork, Animation, Editing Software
Example: Grasshopper

Full Motion

Cost: Very High
Production Value: High
Tools: Camera, Cast, Audio Equipment, Editing/Animation Software
Example: Nosh.me

Screencasts

Cost: Low
Production Value: High
Tools: Screenflow
Example: Mailchimp

Tone

These videos work because they take complex products and distill them into ideas and metaphors that anyone can understand. That being said, I’m a proponent of using a very conversational narration style. Figure out what kind of tone is right for your video early in the process. This decision will affect your script, narrator selection, and storyboards.

Script

The script is the backbone of your project. Before you start writing, make a list of important ideas, features and benefits you want to communicate. In terms of length, my personal opinion is that shorter videos are better. I’d shoot for a script between 200 and 225 words, as this length will equate to roughly 70-90 seconds of video.

I’ve taken the patterns from my initial video analysis and combined it with what’s worked well on some other projects. Hopefully this framework will give you a good starting point when you sit down to write your script:

Rapport

To start, you want to build rapport with the viewer. Show them you understand their pain and the challenges they face on a daily basis. Even better, show them you’ve faced those challenges yourself. Use phrases like “As {Your target market}, we {are trying to accomplish some goal}” or “You just {Reference an experience related to the pain your product solves}.”

Problem

Next, explore the problem that your target audience faces. Give colorful examples and try to bring some humor into the mix. Cakehealth’s explainer does a great job of framing the problem in an engaging way.

Build-up

Show the viewer that up until now, there hasn’t been a solution to the problem. Re-emphasize some of the pain points and explore ways that it makes their life difficult. This is where you want to build up suspense before the big reveal.

Epiphany

If you’ve done your job setting the stage, this is where potential customers associate your brand as the primary means to solve the problem defined above. Pull back the curtain, and show viewers how your product is the solution they’ve dreamt about. Use simple language to tell viewers exactly what your product does.

Reinforce

Reiterate how your product simplifies the viewer’s life. It’s easy to use, easy to sign up for, and makes a daunting task simple. Show them screenshots or illustrations of your application and help them experience what it would be like to be a customer.

Change

Show the viewer what they can do now vs. what wasn’t possible before. How has their life gotten better? Speak to the fact that your product helps them do their job more effectively.

The Ask

You want to close the video with an Ask. Ask them to sign up, to start a free trial, or provide some other call to action to get them to engage with you after watching.

Storyboards

Once your script is finalized, the next step is to storyboard each scene of the video and plan how you’ll communicate your story visually. I’ve used Powerpoint, Word and sketched scenes out by hand. The important thing here is that you’re thinking through how the video will flow and how the visuals will support your story.

Production

You’ll need to develop the artwork for each scene of the video yourself or work with a designer. Use Photoshop, Illustrator, or whatever design tool you’re comfortable with. To take advantage of HD, create all of your artwork at 1280x720.

When it comes time to animate, there are great tools out there like Screenflow, After Effects, and Final Cut. Personally, I prefer a combination of Screenflow and After Effects. There are entire books written on animation, but with a basic understanding of keyframes you can create something that gets the job done.

For narration, hire a professional voice talent from a service like Voices.com or record the voiceover yourself. If you take the do-it-yourself route, try to use a high quality microphone. Also take some time and look for good sound effects to make your video more engaging. Revostock.com and Audiojungle.net are two great sources.

Great explainers not only drive home your brand, but also force you to distill your product down to its very basic value proposition. It’s a great exercise and I hope it helps you build your business.

So that’s it. Get out there and tell your story! I’m happy to answer any questions you have so either shoot me an email or leave a comment.

How to Grok Competitive Analysis

mikearsenault — Wed, 28 Sep 2011 19:16:00 -0400

If you’re working on a new or existing product, it’s important to assess the competitive landscape for the market you’re entering. It can be a pain in the ass, but it’s a good idea to have an understanding of your market position and what differentiates you from your competition. I like to pull together a 1-pager on every competitor and build a portable deck for the team. This way, any new team members or stakeholders on a product can get up to speed quickly on where our product stands relative to the competition.

First, the tools of the trade:

Compete – Traffic Comparison
SpyFu – Paid Search Analysis
SEOmoz – Paid SEO Tools
SelfSEO – Free SEO Tools
Crunchbase – Team members, funding, descriptors, screenshots

Identifying the right set of competitors – If you’re entering a new market, it can be a challenging task to figure out which companies to pay attention to. Here’s a pretty simple system to get you close:

Competitors buy Adwords for your core keywords
Competitors show up in the top 30 organic search results for your core keywords
Competitors self-describe as being in your industry on Crunchbase

Competitive Dimensions to Explore – Now that you’ve got your initial list of companies to look into, what are the important things you should be paying attention to?

SEO/Content Strategy

Organic Search: Pick 10 keywords that best represent your offering and build a spreadsheet showing where competition ranks organically in Google. Look for opportunities to rank better than them for high volume keywords.

Meta Information/Title Tags: Meta information and title tags are usually a good indicator of what your competition is trying to rank for organically. Take note of these.

Paid Search Focus: Use the same 10 organic keywords and take a look at how your competitors are advertising on them. What benefits are they pushing? Take note of ad headlines & copy.

Paid Search Spend: Subscribe to a service like SpyFu and you can start to estimate what your competitors are spending on paid search. You can also reverse engineer PPC spend by using Google’s Traffic Estimator tool to estimate total spend.

Paid Ad Content: Use SpyFu to mine your competitor’s ads or do it manually. Watch how their ads change over time and note what terms they bid on consistently. Chances are, they’ve done a lot of the copywriting work for you already.

Social Presence: What’s does their social presence look like? Are they active on Twitter? Facebook? How are they pushing content through these channels and to whom? Are they aggregators or conversationalists?

Content Strategy: What kind of posts are they writing? Who are they trying to reach? Is their content being shared? Are they doing infographics? Editorial?

Search Footprint

# of Indexed Pages: SEOmoz has a great set of research tools for everything related to SEO analysis. There are other free services out there like SelfSEO but are less reliable. Moz will cover pretty much all of your SEO research. Being aware of your competitors’ content footprint in Google will help you gauge what you’re up against to rank for organic keywords.

# of Inbound Links: Again, this is part of understanding your competitors’ footprint in major search engines.

Traffic Estimates: Use Compete or Alexa to estimate traffic. Their estimates are usually off, but they are off for everyone so at least it’s consistent. You’ll get a good idea of relative traffic volume.

Marketing/Brand Strategy

Messaging: What are your competitor’s key selling points? What is the tone of the copywriting on their site?

Positioning: How do they differentiate themselves from others in the market? What is their unique value proposition?

Tactics: Keep an eye on what tactics your competition is using to market their product. Potential tactics could be TV (broadcast or cable), radio (satellite or terrestrial), banners (which networks?), PPC, Video, Social, or retargeting.

Target Market: Who are they selling to? Small business? Enterprise? What verticals do they focus on?

Sales Strategy: Is their product self serve or does it require an interaction with a salesperson? How is their pricing advertised/not advertised?

Brand Identity: Start to explore how competitors project themselves visually. Make a slide with all of their logos and take note of color palette, typography, and design language.

Product

Features: Explore your competitor’s featureset in depth. What is their core offering and how does it compare to others in the market? You’ll usually find a set of core features that are standard across all players. What is the minimum set of features that you need to compete?

Key Benefits: Identifying the key pain-points that features address is core to your sales offering. What pain points do your competitors say they solve?

Pricing Model: Having a clear understanding of what your competition is charging will help you position yourself correctly. Are they a subscription service? Flat rate? Tiered? Per user? License? Do they offer a free trial or money back guarantee?

Customer Count: If the company is public, they may include this number on their form 10-K. If not, go through press releases and company backgrounders as businesses will often reveal this data as social proof.

Key Customers: What brands do you recognize on their landing page?

Success Stories: Success stories reveal who a business believes is their ideal customer or use case. Look for presentations where your competitor co-presented with a customer and note case studies that are present on their marketing site.

Company

Team/Advisors/Key Employees: Take note of the company’s founding team and what relationships they have with advisors. Do they have any key employees that are thought leaders? Follow these guys on Twitter and keep an eye on the content they produce.

Partners: Look for any notable business development, technology, or marketing partnerships.

Financing: Have they taken outside funding? How much?

Pick Up the Phone - Some people may feel a little iffy about this one, but I have no problem hopping on a sales call with competitors. If you don’t feel comfortable doing it, get a friend who has a business and have them set up the call. You’ll learn a lot about how they position their product, what their compelling selling points are, and how they think about the market. Also, it’s possible that some of your competitors won’t list their pricing publicly; this is an important opportunity to get that data.

Also call customer service and ask them questions about pricing and features. Rate the experience and take note of how it could have been improved upon.

How to Present Your Findings – When you pull your team into a room, there’s nothing worse than slogging through a dense deck of competitors that are not all that differentiated from one another. My experience has been that a couple of competitors will bubble to the surface as the most important and that’s where you should focus.

A 3-slide deck usually does the trick. 1) List your competitors (highlight the 2 or 3 most important) 2) Summarize key differentiators 3) Explore opportunities to win.

Competitive Canvas

To make competitive analysis go faster, I put together an InDesign template that comes in pretty handy. It should be a good framework for you to start analyzing the competition in your market.

Download the canvas:  InDesign (right-click to Save) or PDF

How do you analyze your competition? Did I miss anything?

Check out my new startup that helps online businesses recover abandoned orders & increase conversion » Rejoiner

You should also follow us on Twitter

Liftoff.

mikearsenault — Tue, 20 Sep 2011 09:10:00 -0400

For the past few months, I’ve been working on a new side project with Chris & Nick. We’re launching the application today and it’s called Rejoiner.

We’re hoping to solve a big problem for online businesses: form abandonment. Every day, hundreds of thousands of people start the process of signing up for web services or checking out of ecommerce shops - but don’t finish.

Conventional web analytics simply don’t give business owners the data they need to follow up with these folks. The merchant knows the abandoned order occurred, but has no way to follow up with them. That’s where we come in.

Rejoiner sits on your sign up page or check out form and quietly “listens” for potential customers who abandon. If they enter a valid email address, we’ll track it for you - even if they don’t hit submit.

The most important part of the recovery process is how you follow up. Rejoiner helps merchants schedule automated follow up emails to get these folks to come back and purchase.

Our app gives online business owners access to an entirely new set of leads. It makes the top of the marketing funnel even wider and we bet it will help our merchants grow. As we grow our own business, we hope you’ll come along for the ride with us. Follow us on Twitter or drop us a note if you’re interested in beta testing.

FeeFighters Tour Feature

mikearsenault — Mon, 29 Aug 2011 13:15:00 -0400

I was recently checking out FeeFighters, a site that helps new businesses shop for the best rates on credit card processing. Both the app UI and signup flow are incredibly well designed.

Specifically, I love the tour feature they’ve built into their first-time user experience. After filling out some simple information about my business, FeeFighters presented me with 10 bids from different card processors.

Instead of leaving me to my own devices to figure out what’s important on the page, FeeFighters provides an in-line tour that new users can interact with. As people click through the tour, the important elements of the page are highlighted and explained in more detail. From an engagement standpoint, it made me stop and try to really understand the importance of each piece of information being presented.

It’s really well done and I’d love to know whether or not this kind of tour has impacted conversion for them.

Zerply is beautiful

mikearsenault — Sat, 27 Aug 2011 09:37:00 -0400

Zerply, a company fresh out of the latest 500startups batch, may be my new replacement for Linkedin.

They’ve done an awesome job with their first login experience and the app UI is beautifully done. I was able to migrate my entire Linkedin profile over with one click and had everything set up in about 10 minutes. Inside the app, I can connect with other people based on common skills, tags, location, or experience.

Zerply is also thinking differently about endorsements. They are working on some widget based extensions that allow people to embed “endorse” buttons anywhere on the web. Endorsing a person like this feels like its somewhere between a Facebook Like and actually writing a real recommendation. I think it will catch on.

The public profiles are also really well designed:

Check out my new Zerply profile here.

Mixergy Interview

mikearsenault — Mon, 06 Jun 2011 00:00:00 -0400

I was honored to have the opportunity to be interviewed by Andrew Warner on Mixergy last week. We talked Spreadable and lessons learned. Check it out here.

Spreadable Post Mortem

mikearsenault — Sun, 01 May 2011 10:53:00 -0400

It’s been a little over one month since we made the decision to stop investing in Spreadable, the third product launched by Grasshopper Group. The app will sit dormant until the end of the year and then we’re planning to shut it down completely on December 31st.

Many people have asked why we made this decision for what was seemingly a successful, growing application. My two goals for writing this post mortem analysis are 1) To crystalize my own thinking about what happened and 2) Help other entrepreneurs learn from our experiences and avoid some of the mistakes we made. Most startup advice is very situational in nature, so keep that in mind as you read on. This was our experience – yours will undoubtedly be different.

I spent a little over a year of my life working on the app in a couple of different roles. The most significant was as Product Manager. It became my responsibility to make sure we were building a product that people cared about, that solved a real business problem, and delivered on the promise to help our customers grow their businesses using word of mouth referrals.

Without question, working on Spreadable became much more than my job. I truly believed in the idea of the product. Most importantly, I truly believed we could solve a real problem for our customers while building a profitable business.
The experience was about as close as you could get to feeling the entrepreneurial rush. Anyone who’s been through it can tell you that it’s an incredible emotional roller coaster. I’ll never forget highs like the day we got our first paying customer, or lows like the day we pulled down our marketing site and told everyone internally that we were shutting down.

As I reflect on the last year, I know that our team learned valuable lessons about what it means to build great software and I’m grateful that I got to work with such an outstanding group of people. I’d especially like to thank our customers – many of whom stuck with us from the beginning just because they believed in us.

Our Vision

Spreadable was designed to allow business owners to harness the power of word of mouth generated by their happy customers. We were trying to solve three big problems: 1) People find it hard to ask satisfied customers for referrals 2) It’s hard to quantify the impact that referrals have on your business 3) Developing a referral program from scratch takes significant time and effort.

At the beginning, we envisioned our ideal customer to be a small to medium sized business who sold primarily through the web. Specifically, we saw SaaS and ecommerce companies as two very attractive target markets. There are obvious benefits in terms of measurement. It’s much easier to track an online conversion than an offline one and we had a better shot at measuring true conversions for customers who sold online.

Drew Houston, of Dropbox, has spoken quite a bit about the referral program responsible for much of their incredible growth. Our goal was to systemize a similar program and allow our customers to build a referral program with minimal technical investment.

The referral form that Spreadable allowed our customers to create was modeled after the one we had built for ourselves for the Grasshopper product the previous year. At Grasshopper, we had experimented with several different referral platforms before deciding that none of them really did what we wanted – so we built our own. It was a pretty typical “scratch your own itch” situation.

The vision was straightforward for the Grasshopper prototype – provide our happy customers with a vehicle to email or share an exclusive offer and encourage their friends to sign up. From a technical perspective, we’re talking about a simple email form and some API integrations with major social services.

We were inspired to build the app mainly because of the incredible success the Grasshopper referral program continues to have. We consistently see conversion rates north of 15% and the program generated 100K in additional revenue last year – all at a CPA that is much smaller than our other sales channels.

There were several enterprise players in the space, but their systems came with an enterprise price tag. We liked that fact that it was a niche category and believed the enterprise guys were ripe for disruption.

Team Structure & Alignment

Some may disagree with me, but I believe that most of the mistakes I’ll cover were a direct result of how our team was structured. There were three big problems:
First, the team didn’t have one person acting as the Founder of the business. By Founder, I mean the person who has responsibility for two key things: 1) Final decision making power for things like UX, design and marketing 2) Responsibility to adhere to a clearly defined budget. This torch was passed around several times throughout Spreadable’s life. With no Founder and no real financial constraints, we spent significant dollars with very little market validation to show for it.

We had no checks and balances in place to know when or even if we had validated/invalidated the assumptions we had about our business model. We also didn’t do a good job of documenting our initial assumptions or communicating how they changed over time. A Founder should have owned these things and reported back to our management team just like an entrepreneur would communicate to investors.

Second, because there was no Founder with sole decision making power, there were multiple instances where someone from within the organization would swoop in and shift the strategic focus of the business. These changes were based purely on intuition and until the end, had very little data to support them. There was also never a time when all of the decision makers within our organization got into a room and agreed upon a unified vision for the product. There was always finger pointing after the fact.

Third, the team was too big. The size of the team shifted over time from anywhere between four and seven contributing members. In terms of skillsets, we were strong in two areas: Ruby on Rails Development & Marketing. Our general mantra was that having more developers on the product would accelerate our path to success. In reality, adding more developers to the team was simply leading us down the wrong path, faster. We hadn’t done the upfront learning necessary to warrant the additional firepower.

Because of how we integrate into our customer’s web sites, Spreadable is a product that is fairly intricate on the front-end. We would have greatly benefited from a Javascript expert initially. We didn’t get that expertise until it was too late and it resulted in a lot of technical tail-chasing.

Looking back on it, we should have started smaller. One product and one technical person could have validated that a real problem existed. They also could have gathered enough data to determine whether or not there was an attractive market for the solution.

All the while, this small team should have been frequently communicating that learning back to people in the organization. Making the learning process transparent is especially important for making unified decisions about what that team should do next.

Every startup or new product needs a true Leader. With that comes ultimate decision making power for 1) UX, Design & Marketing Strategy 2) Responsibility to adhere to a budget or some other set of financial constraints
Start with a small team. Focus on learning and proving/disproving falsifiable hypotheses about the problem you are solving
We lacked real understanding of the technical challenges a product like ours would face. Once uncovered, the team wasn’t geared to overcome them until later on

Version 1.0

We assumed that because Grasshopper’s referral program worked so well, it would easily port over to the businesses of our customers. Therefore, simply recreating that referral platform appeared to be the most efficient route to getting an app launched.

We spent the first three months building in a black hole known as Basecamp (37signals project management software). It was not grounded in any real customer learning – just our own judgment calls based on internal debate. We didn’t get out of the building nor did we try to learn what real problems existed in the minds of our potential customers.

At the end of the first development cycle, members of the team didn’t believe the app fulfilled even part of what its future potential could be. We were embarrassed to show it to people.

In May of 2010, we scrapped the first iteration of Spreadable and started to rebuild the entire app from scratch, reusing pieces of development work where we could.
This reset was our first crucial mistake. Showing customers something we were embarrassed about would have been much better than not showing them anything at all. We would have learned more from people telling us the app sucked. Then at least we could have asked why.

Ship the first version of your product – no matter how embarrassing. We would have saved months of development time by seeing how people interacted with that first iteration.

Version 2.0

After another three months of design & development, the app was at a point where we were ready to show it to people. Up to this point, we hadn’t shown any UI to anyone which would come back to bite us.

Informed only by the experiences we’d had when building the Grasshopper referral program, we designed a severely over-featured product. The resulting experience was an over-complicated, feature-bloated UI that confused the heck out of our early customers. If this is the Spreadable Post Mortem, that redesign was the Cause of Death. The experience was bad and we ended up ripping out about 50% of the features in the end.

There are good things and bad things about the democratization of low-fidelity prototyping tools like Balsamiq and Omnigraffle. Non-designers now have ability to communicate their ideas visually, but actual UX work should be left to those trained to do UX. I know – because I take responsibility for much of the confusing UI we ended up incorporating into the app. Engaging a real UX designer would have paid back tenfold down the road.

To start getting feedback, we reached out to friendly first contacts and built a small group of people that we believed fit the criteria for early adopters. We conducted qualitative interviews and user testing sessions in parallel. I can’t say enough about these people. Their feedback was invaluable. Finally talking to customers allowed us to make decisions based on actual data vs. our own unfounded opinions.

We learned that the real pain for a lot of people was around thanking their best customers for making referrals. What they wanted was a very lightweight system to incentivize people to make referrals on their behalf. Customers wanted to reward their customers with small tokens of appreciation like gift cards or branded t-shirts.
The alternative that most customers had experimented with already was affiliate marketing. Our customers’ pain was that asking their best customers to sign up for an affiliate program just didn’t feel right. They also didn’t want to incentivize their best customers with cash. No value was added to their brand when they did that. Affiliate programs were too much of a hassle and they saw Spreadable as an alternative. Since we hadn’t learned this early on, Spreadable wasn’t equipped to solve this problem for people.

We paid for not having a professional UX designer involved early. It resulted in an experience that was confusing and overly-complicated
We ended up ripping out half of the features that were originally “must-haves” (Rodrigo & Jeff will never let me live this down)
We re-aligned once we started learning from customers and started focusing on building things that mattered to our customers, not just internal stakeholders

Premature Marketing Launch

When you’re working on something new, it’s hard to resist the urge to go out into the world and tell anyone who’ll listen. We made that mistake by focusing on a premature launch event and PR instead of continuing to learn from our customers. Everyone thought, “We need to build buzz.”

Planning and executing a marketing launch takes a ton of time and effort from people across your entire organization. If done at the wrong time in a product’s life, it ends up being more of a distraction than anything else.

Parties are a great way to get out there and meet people, but are they the right people? Are they your target customers? If you haven’t found product/market fit yet – how can you be sure? We were there pushing a demo, not learning from customers. Launching loudly had other negative side effects:

It created looming artificial deadlines for our development team. Saying “We need this feature for the launch party!” caused our development team a lot of unwarranted stress. It didn’t have to be that way. We could have just shown people mockups or screenshots. We didn’t need the entire feature to be done. We’ll think about ways to demo cheaply next time.

We also missed a significant opportunity to get a bunch of paying customers. When we threw the party, we weren’t even ready to accept credit cards. It sounds so crazy looking back on it.

If you’ve done your job building a small group of visionary customers, launch your product with those people first. They are the ones who will help you hone your product and your message.

Our Marketing Launch Party ended up being more of a distraction and it caused unnecessary stress for our team
Marketing launches are for when you’re ready to scale the business – not before then

Not Charging from Day 1

The advent of freemium has given many of us the idea that offering our products for free will build user numbers faster and result in more feedback. More sign ups = more feedback = better future iterations of your product, right? In my experience, that hasn’t been true.

When we initially launched Spreadable in “Beta”, we didn’t charge anything. Though it felt good to have a whole bunch of users, we were missing the opportunity to find out if what we had built could actually generate real revenue. Customers saying they will pay you money is very different then a customer writing you a check. There is no better form of validation than revenue. If you’ve got bugs, don’t worry about it. Customers who’ve paid you will be very prompt about letting you know.

When customers aren’t paying anything – they don’t feel as compelled to invest themselves in what you’re building. If a customer has paid you, feedback becomes pointed and immediate. It’s not always pleasant feedback – but it’s feedback you need to hear.

When you don’t charge something from day one, you don’t learn how much a new customer is worth to you. More importantly, you don’t learn if your free customers will ever feel compelled to pay you for your service. Ours didn’t.

Charge something from Day 1 and take payment information at minimum. It validates that you’re solving a real problem and whether or not your business will be sustainable
Charging from Day 1 also helps you understand three key metrics: (1) CPA (How much it costs you to acquire a new customer) (2) LTV (How much a customer is worth to you over their entire lifetime) (3)Payback (How long it takes to recover the cost of acquiring that customer)

Conversion Lessons Learned

When we started charging real dollars at the beginning of 2011, we launched with a fairly straightforward pricing model: Two plans, monthly and annual, $49 & $489, respectively. Conversion was unacceptable using this model, so began a barrage of experimentation to improve it.

From January 1-March 1, we churned through multiple marketing site mini-redesigns, a full redesign, a copywriting overhaul, seven different iterations of our sign up flow, five price changes, introduced a free trial, and produced a three minute video about the product.

We were making these changes in a relatively un-scientific way, opting for quicker iterations instead of incrementally rolling out changes in calculated tests. We chose speed over quantitative confidence and it was chaotic to say the least. The following is my best effort to highlight the key learning:

Anchor Pricing

Launching with two plans seemed like a simple way to present our product. We learned a lot about pricing strategy as our market invalidated that assumption. There were two big takeaways:

First, prominently displaying the annual plan at $489 on the first iteration of our pricing page deterred many new customers from signing up. $489 is a scary number for most folks and it wasn’t immediately clear that this was for a yearly subscription. The visual emphasis was in the wrong place.

Second, when we launched a pricing page with multiple plans, we saw a notable increase in conversion. In fact, the increase can be attributed to a theory called anchor pricing. The high level idea behind anchor pricing involves setting a potential customer’s “anchor” at a higher price point than what you actually want to charge them. In our case, we set our anchor at $199 for a monthly plan with some additional features. In reality, we didn’t expect anyone to sign up for it.

Not only did overall conversion increase, but we saw about half of customers signing up on the middle and top tier plans. Had we scaled the business and kept the same sign up mix, it would have meant a substantial increase in revenue over the old pricing model.

Throttling

Observing the change in sign up mix from the pricing model shift, I wanted to dig deeper into the thought process of people signing up on our more expensive plans. There were a couple of differentiators between each plan, but I wanted to find out what was motivating the people who signed up on the Grow or Max plans.
It turns out that the absence of certain features on the lower tier plans really wasn’t it. Instead, it was the fact that we were throttling the right key activity across the plan mix: Referrals.

By capping the number of referrals you could theoretically receive, people instinctively chose the plan where they believed they would never have to worry about missing out on receiving a referral. Since in most cases a referral was worth more than the $25 difference between Start and Grow, people felt more comfortable paying for that security.

The Power of Video (or lack thereof)

As we struggled to get conversion up to an acceptable place on the marketing site, we learned from many potential customers that it just wasn’t clear what Spreadable actually was. To remedy this, we made some significant copy changes to the site and hypothesized that a short video would go a long way in explaining our product. We looked into working with a couple of the well-known studios in the space, but quickly realized that price was going to be an issue. So, we started hacking a solution instead.

We used Mechanical Turk to transcribe the audio of four product videos we really liked and then dissected each script to find out what made them so good. We discovered that there was a pretty consistent framework used throughout all of them and set out to develop a script of our own.

When the script was done, we worked with an extremely talented motion graphics designer to bring the video to life. When it was done, the reaction we got from people was that they finally got Spreadable and the value it could create for their business.

Despite the reaction, the video didn’t have the effect on conversion that we expected. In fact, it had the opposite effect. After adding the video to our primary landing page, conversion went down. There are too many potential reasons to guess at why this occurred, but the key learning here is that people had a better understanding of our product and still didn’t sign up. This served as another red flag as to why this market may not have been right for us.

Fake It

Earlier I wrote about how impactful moving to a three plan mix was on conversion. Well, guess what? We didn’t actually have any of the features advertised on the more expensive plans. We were faking it.

While we were actively working on those features, putting the new pricing page out there was really a big experiment. As I explained earlier, we had hypotheses around the effectiveness of throttling and the plan mix itself. If we had launched the three plan pricing page and continued to see dismal conversion, we would have had a very different problem to solve in terms of our product offering. Instead, when we launched the new page conversion doubled.

I get some funny looks from people when I tell this story. In some ways, it feels a little bit dishonest to be selling something you don’t actually have. But imagine the alternative. You spend all of this time and money on a product that no one wants, when you could have simply created a pricing page to tell you if anyone would have bought it.

We didn’t actually take anyone’s money either. If a new customer signed up on either Grow or Max, I personally reached out to them and refunded their first month. I thanked for them choosing us and explained that I needed their help to shape our future offering. I enlisted them as an advisor and used their expertise to help us build a better product. I didn’t get one negative reaction from a customer.
In your experiments, you may not have such a forgiving customer base. In those cases, just apologize and make it right. There is only one thing a customer likes better than signing up for your product and having a great experience, and that’s being apologized to and having a situation rectified.

Guarantee vs. Trial

Our first pricing model launched with a 30 Day Money Back Guarantee for customers who weren’t happy with the product. If it was within 30 days of signup, we would refund people’s initial sign up fees with no questions asked. We heard inklings from potential customers that they would have liked to have had a free trial, but it wasn’t until we tested the change that we realized how impactful it could be.

Moving to the 30 Day Trial was our last big effort to increase conversion. It nearly tripled conversion rate on our marketing site. It’s important to note that these aren’t real conversions yet – but the number of people we were moving through the app increased significantly. We didn’t make it long enough to see how many of those leads became real paying customers, but my guess is that it would have been a significant improvement over conversion with the 30 Day Guarantee.

Anchor pricing strategy, where we set an anchor at a much higher price point than our target RPC, was a very effective means to increase conversion
Throttling plans by the right key activity (in our case referrals) drove more new sign ups to the more expensive plans
By faking our pricing page with features that weren’t finished yet, we were able to learn what the real demand
for our product was much sooner than if we had waited until the features were done
In our case, a 30 Day Free Trial was drastically more effective at converting site visitors than a 30 Day Money Back Guarantee. (I know. You’re not technically charging on Day 1 anymore but you are taking the customer’s payment information and authorizing the card.)

Implementation Issues

Right before we started taking paid accounts, we made a critical decision to change part of our core technical infrastructure. Our referral widget had historically been served in an iframe that would render when a customer of ours had implemented the Spreadable JavaScript snippet on their site. Serving our content in an iframe protected us from any malformed code on the customer side that would affect how our CSS rendered when a Spreadable button was clicked.

In order to allow our customers greater control over the visual styling of the referral form, we made the decision to get rid of the iframe and inject the HTML & CSS of the referral form directly into the document object model (DOM). This allowed our customers to directly manipulate the CSS of the form themselves.
This turned out to be our second big mistake.

Taking the referral form out of the iframe opened us up to all kinds of strange CSS conflicts that were not only difficult to diagnose, but were also isolated to specific customers. Every bug was different and equally bizarre.

Other scripts, Flash, and who knows what else caused our referral form to degrade to a level that was in many cases unusable. Despite re-architecting our CSS so that it was uniquely identified from existing styles on customers’ sites, we still had support issues come up daily. Many new customers simply couldn’t use the embeddable version of our widget at all.

For the first few months, we tried to triage conflict bugs and address them one by one. As our customer base grew, this became unsustainable. We simply couldn’t manage the number of isolated bugs that were resulting from outside factors impacting our code. So, we stopped trying to.

After the change, many new customers had a bad first experience and cancelled immediately. We had no choice but to go back to the iframe. We lost of lots of development time backtracking, rather than focusing on hardening our platform.

Re-architecting our product to appease power users turned into a technical disaster

Marketing Learning

The Grasshopper product has gotten to a place where we get a very predictable return relative to the number of marketing dollars we spend. With that mindset, we decided to experiment with some marketing dollars for Spreadable and see what resulted.

We experimented with various banner networks, PPC, and radio spends. Of any channel, radio was the most effective for new customer acquisitions. The problem was that it drove a customer that we weren’t prepared to support. The radio ads we ran were fairly high level in terms of what our offering was and focused heavily on the benefits of getting more referrals. More referrals = more business. Sounds great, right? When I reached out to these folks to see how their implementation was going, it seemed like many of them came to us without any idea of what the actual product was but bought purely on the benefits explained in the ad.

They also didn’t fit our original hypothesis for target market: small businesses who sold online. Most of the people that radio drove had businesses that were largely offline. In addition, they had little knowledge of HTML or how to implement our code snippet on their site. Not that these weren’t great people, but they required a level of support that we didn’t have the resources to supply. It was almost as if we had to sell Spreadable again after they had already signed up.

We also learned there is a threshold in terms of the number of customers a business needs to have in order for a referral program to be effective. If you’ve got a small number of customers, your business more than likely depends on less frequent, larger conversions. Using Spreadable to encourage those kinds of transactions just didn’t work as well as it did for more frequent, smaller, online transactions.

The important takeaway here is to be specific about your target market and be honest about how you intend to sell to them. If offline businesses were our target, it would have required us to sell and support them in a completely different way than we’re used to. Every business has strengths, and direct selling is definitely not one of ours.

Don’t spend big marketing dollars until you’ve identified the channels that drive the right kind of customer
Build low cost/no cost channels first, before spending any money on mass marketing channels. By building out a channel like content marketing, we could have pre-screened our potential customers to only those savvy enough to consume it
The type of selling that Spreadable required is not a core strength of Grasshopper

The Decision to Shut Down

One of Grasshopper Group’s core values is “Always Entrepreneurial”. What it boils down to is that everyone in our company is always looking for innovative ways to solve problems: whether it’s in our everyday work or launching a new business like Spreadable.

In terms of man hours and marketing, it cost us well over $500K to bring Spreadable to market. That number could have been far less if we’d built this product with a lean mentality.

Part of being an Entrepreneur is knowing when an investment, time or money, isn’t the right investment to make. There wasn’t one standalone reason why we made the decision, but a combination of many that led us to shut Spreadable down and refocus on our other products. In summary:

The market for a word of mouth marketing tool is significantly smaller than the markets our other products reside in
Spreadable was best sold in a way that is not a core strength of Grasshopper Group
Cost per acquisition and customer payback were too high to scale
There was little confidence that a large investment in Spreadable would have yielded a return equal to a similar investment in our other products.

What’s Next

The Spreadable team has been shifted around to other parts of the business. Of the core team of six, four of us are now working on Grasshopper related projects. We’re also got another product in the works, which we’re hoping changes the way you think about surveys. Stay tuned.

This was a team of A+ players and I consider myself incredibly lucky to have worked with them. I also feel equally lucky to have been given the opportunity to start and launch a new product from the ground up. It was thrilling to say the least.

We’re taking what we’ve learned and are applying it to building bigger and better products for Entrepreneurs. I’m willing to bet that the next one of these I write will have a very different ending.

I’d love to answer any questions, address concerns, and hear your thoughts. Please reach out in the comments.

Spreadable is shutting down.

mikearsenault — Fri, 01 Apr 2011 10:41:00 -0400

For last year I’ve been working on a referral marketing tool called Spreadable. As of April 1, 2011 we’ve decided not to invest further in the product. Here’s why.

Lean Startup Circle Slides - November 23, 2010

mikearsenault — Wed, 24 Nov 2010 00:00:00 -0500