Adwords for SaaS: the Unique Challenges

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At some stage, all SaaS businesses will start using AdWords to acquire customers.

As of today, if I type in ‘team messaging’ into Google, I see an ad for Slack:

Even viral products such as Slack turn to Adwords at some stage.

It makes sense that advertising on relevant keywords such as ‘team messaging’ will bring customers for Slack.

As BJ Fogg says, you most easily change behavior by putting “hot triggers in the path of people who are motivated to respond to those triggers”.

People are motivated enough to search for team messaging. These people will be likely to be successful with Slack.

Therefore, Slack advertises as we see above.

So far, so good.

If you want to learn how to best use Adwords itself, there are many, many books and courses and agencies that will help you with that. I won’t focus on how best to tweak the settings to squeeze the most performance out of Adwords in this article.

Instead, I’ll focus on the particular challenges that SaaS presents when using Adwords:

  • You need to be able to track how well your cohorts of sign ups to your SaaS trial are converting into paying customers. You can’t easily see this in Adwords, so you have to get the data from your transactional database, a CRM or an analytics service such as Mixpanel.
  • Secondly, you need to spend quite a bit to get enough data to make decisions on optimizations. If you have fairly low conversion rates along the various stages of the funnel, you’ll need 100s of trials and 10s of conversions for each campaign to get reliable data. That takes time and money.
  • Even if you do the above, it’s very hard impossible to “close” the loop entirely in SaaS marketing and attribute every conversion to a particular campaign. The buying cycle is just too messy for that, especially for SaaS products that a large number of people will use.

Secondly, once you’ve mitigated these problems, you’ll be able to find out whether:
1. the math works out;
2. the math keeps working out when you expand and scale;

We’ll look at various approaches for using Adwords for you SaaS product, depending on your sales/marketing setup:
1. Low touch self-service SaaS
2. High touch sales-driven SaaS
3. Adwords as a Testing Channel

We’ll look at how to best monitor your performance over time and some criteria on whether Adwords is worth investing into right now.

Making Sure the Math Works Out

If you already have some data on your SaaS sales & marketing funnel, you can calculate whether the math works out:

Cost of Acquisition (CAC) = Cost per Click / (% of visitors signing up for the free trial * % of trials turning into customers)

Say you are paying 2 dollars for a click, 7.5% of visitors sign up for a free trial and 5% of those trials turn into customers, you’ll be on track for a cost of acquisition of $533.34.

You’re “paying” $533.34 for a customer.

I’d point out that you never actually “pay” for a customer. You pay N dollars for advertising and marketing, which later result in X customers. This is a very subtle difference that is really important to understand.

The result of this entire exercise is that you may well learn that Adwords is just not profitable for you. Famously, Dropbox found out that they were paying $233-$388 for a $99 product.

Particularly early stage startups will struggle to compete against established players in the Adwords game because they haven’t yet nailed a niche, don’t have an optimized marketing funnel and they don’t have deep enough pockets to pay steep customer acquisition costs upfront.

The Math isn’t as Clear Cut as It Sounds Above

The second issue is that all the variables in the above equation are very neat and simple. The assumption is that your conversion rates from signing up to the trial to becoming a paying customer will be constant, no matter the campaign.

But you’ll quickly find that these variables change. For example, ‘team chat’ might be a profitable keyword, but then you see an opportunity to get more sign ups by bidding on ‘group chat’ and the 100 trials from this keyword don’t convert at nearly the same rate into paying customers.

Most Adwords operators optimize for variables such as Cost per Click, Cost per Thousand Impressions or Cost per Trial or Lead, mainly because they are visible within Adwords.

However, these are intermediary objectives that often don’t correlate well with business goals.

For example, you may well find that a certain Adword Campaign delivers a lot of leads at a very low price per lead, but the leads never convert. Conversely, you might find that a source that delivers leads that seem quite expensive but convert well, so they’re still profitable.

A problem is that the sales cycle for SaaS is longer than in e-commerce. A 30-day trial period (considered very short compared to enterprise software) means you need to wait to find out the conversion rate for a particular Adwords campaign.

The problem is further compounded by the fact that you’ll need a certain amount of volume of leads or trial sign ups to accurately find out the conversion rate. For example, if you’d be happy with a 5% conversion rate, a 100 sign-ups will not be enough to give you an accurate read. The result is that you spend months waiting for enough data to come in.

Contrast this to e-commerce, where you can see sales almost instantly, and you can tweak the variables in Adwords to get more sales. The feedback loop is much tighter with e-commerce than with SaaS, the result being that Adwords for SaaS takes more time and money to optimize.

Common SaaS Playbooks for Adwords

I’ve seen two broad approaches to Adwords for Saas.

The first is a keyword optimized landing page leading directly into the product for low-touch software (think more basic email marketing software):


The second is offering an incentive such as a white paper or guide that provides context for the marketer on the topic (think more advanced software such as marketing automation). Once you give your email in return for the guide, the marketing funnel kicks in. You’re scored as a lead based on your subsequent actions on their site and your behavior. If you rank high, a sales rep may reach out to you and schedule a call.

Adwords as a Testing Channel

Adwords can play a role in testing your product-market fit and testing SEO plays.

Product Demo Recruitment

For example, if you feel that your chat service might be a great fit for customer support people, you could spend a limited amount of money to get the emails of a cohort of people looking for customer support solutions.

Then, you can schedule product demos for those people to find out whether your product will fit their needs.

Buy Before You Build

Secondly, if you want to rank high for competitive search terms, these days you need to invest a lot into high-quality content and then spend even more on promoting that content until it ranks. It’s a big investment, especially if you’re not 100% sure it will pay off. Adwords lets you ‘buy’ the top spot before you make the decision to ‘build’ in SEO.

Monitoring Your Performance

As I mentioned above, you can’t see the performance of your ads within Adwords easily, because you can’t easily track a conversion to paying customer within Adwords.

Therefore, you need to pull data from your transactional database, sales CRM or analytics tool such as Mixpanel to see the performance of each Adword campaign in terms of actual paying customers.

A dashboard overview with key KPIs across the funnel is very helpful.

Ideally, you break it down by campaign, because there can be significant differences between campaigns (branded versus non-branded keyword to give one example).

Deciding Whether to Start Using Adwords

For SaaS businesses, you can obviously get more business with Adwords, but it’s important to nail the analytics side of things, so you know what’s working and what isn’t. As we mentioned above, you need a certain scale before you can get enough data, so it’s not something that you can just spend 500 euros on and hope to get some answers.

For bootstrapped companies, Adwords can be a great way to acquire new customers within a large upfront investment so long as you carefully screen the sign ups (perhaps scheduling calls with them) to make sure they’re a good fit

For venture-backed SaaS, the picture is a little different. Investors don’t like being told that Adwords will solve the distribution of the product. It’s a sign in their eyes that the product isn’t a 10X improvement over the competitors. Therefore, like Slack above, Adwords will be a secondary channel at best.


Growth Workshop in Paris with Andrew Chen

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Andrew Chen currently works at Uber on acquiring users, and he organized a workshop in Paris on growth.

I went.

As a side-note, it was held in the Family HQ in Paris. The Family has a slightly zany cat-meme focused approach to decor and a cult-like feel to it. They have an excellent selection of books, which is a good sign. Peter Thiel in Zero to One advocates recruiting “a tribe of like-minded people fiercely devoted to the company’s mission”. I think The Family is aiming to do that in Paris.

What is Growth and Where Does It Sit in the Organization?

These days, you’ll find a lot of people donning the title of growth on Linkedin. I sure do.

Chen commented that you’ll see three different types of growth people:

  1. Product-led growth teams
  2. Marketing-led growth teams
  3. Sales-led growth teams

But ultimately, most growth teams are product-led. You can tweak ad campaigns, update landing pages and write content, but you need to alter the product itself if you want to unlock growth.

Interestingly, Chen pointed out that there are only a handful of large-scale growth teams globally with more than 100 members, mainly at companies such as Pinterest, Uber, and Facebook.

In the rest of the world, growth teams tend to be a single 7 +-2 scrum team focused on growth.

There are only a handful of ways to grow exponentially

Chen argues that there are only a couple of ways to scale users or revenue to hundreds of millions:

  1. Paid acquisition: existing campaigns pay for a larger amount of future campaigns
  2. Virality: each existing user refers more than 1 new user
  3. SEO: users generate content that attracts more people that generate more content.
  4. Sales: each additional sales agent generates a multiple of the revenue of they are paid, so you can hire even more sales agents.

He also cites there being the occasional sui generis way that will help, such as a partnership with a massive company, but they are rare.

These four growth loops are self-reinforcing, so they can scale companies incredibly quickly if the conditions are right.

Growth Loop Micro-optimization is Critical

Marketing techniques of PR, content marketing, partnerships, and app store features only get you so far. They’re great for bootstrapping your user base from zero to tens of thousands or even millions, but they aren’t self-reinforcing loops. They are linear in terms of results.

Because systems such as referrals are self-reinforcing, relatively small changes in conversions can have an outsized impact when played out over multiple levels of referrals.

Product teams tend to focus on the onboarding, the referrals systems, and the landing pages once early in a startup’s cycle and then they move on to more advanced features. The core product team will always want to focus on how to make a better and better product.

But you can end up in the product death spiral:

A great product doesn’t necessarily distribute itself.

That’s where the growth team comes in, focusing on endlessly optimizing each step in the chain, so you get the maximum amount of new users from each user.

It’s hard to pull off – a moonshot in Chen’s words – but the reward is exponential growth.

Growth Opportunities

Whereas new growth loops don’t come along very often, new platforms and channels are constantly emerging.

There is a window of opportunity with many of these channels before they close again. Facebook allowed many game developers to grow almost overnight into billion dollar companies such as Zynga. Facebook clamped down on games such as Farmersville, but Zynga still has a valuation of roughly 3 billion dollars as of today (although some argue that Zynga is more of a REIT with a game business on the side).

It’s all well and good to talk about past successful channels such as Facebook, but what about the future? What are the platforms and channels that show growth potential today?

Chen pointed out two platforms that both have more than a billion users each, today:

  1. Chrome
  2. Android

Chrome has won the browser. Mozilla’s former CTO admits as much.

Grammarly recently raised 110 million dollars as essentially a Chrome extension. One of the investors, Jules Maltz, stated that the company is growing faster than anything they normally see in San Francisco.

Personally, I love Grammarly, because it sits in the background when I’m writing in Messager, Gmail or WordPress, giving me value when I (frequently) mistype something.

Particularly for B2B SaaS companies browser extensions can be a powerful way to embed your product into the day-to-day of your user work.

Android has a remarkable level of penetration across devices from high-end to very basic devices. Whereas Apple tightly controls what you can do with iOS apps, you have much more free reign to build apps on Android that are deeply integrated into the underlying operating system.

Product Design and Growth

One topic that was touched on that’s particularly interesting to me is how the growth team impacts the product design.

When you’re constantly testing out new ideas in your product, you can run the risk of turning it into Las Vegas at night.

For example, Facebook’s current efforts to add “stories” to all its products feels in some cases quite disconnected from the rest of the product. In Whats App it feels to me that they’ve just slapped Stories into the product:

In many cases, Chen says, this is unavoidable when you are trying to grow a product exponentially. When I think of beautifully crafted products that shine with perfection, I’m generally thinking of products that have been around for a long time and have reached the plateau of productivity: Porsche cars, Rolex Watches, Italian suits.

However, one interesting idea I heard was the idea of designing your product to bemore modular so you can test individual aspects.

The example Chen gave was Amazon:

Each band of recommendations is separate, allowing Amazon to test different ideas for recommendations against each other thanks to the design flexibility.

Oh, and when I was in Paris I had a falafel in L’As du Fallafel. Highly recommended!


Pricing for SaaS products

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You can grow your SaaS business in three ways:
1. get more customers;
2. get customers to stay longer; or
3. get customers to pay more.

I believe that the last one, pricing, is an underrated lever of growth. We tend to focus on acquisition and, to a lesser extent, retention.

But get pricing right, and you’ll grow revenue and even increase customer satisfaction.

Pricing is a function of your marketing, meaning it reflects your product, your value proposition and your positioning. Your pricing sets the stage for the rest of your strategy.

I’ve worked at several SaaS companies over the years, and I’ve tested both terrible approaches to pricing and other approaches that worked really well.

Here, we’ll take a journey through the process of optimizing the price of your SaaS product.

Finding Your Price

Software is not about figuring out the cost of manufacturing the software, slapping on your margin and coming out with your price.

The whole point of getting into software is that you may start with a very low or negative margins, but over time your gross margin can increase to fantastical levels as you get more and more customers.

So, you focus instead on the value that the software provides, and you set the price accordingly.

The result of this is that your price comes from your customers, not from a spreadsheet.

You can talk to them, you can read their emails and you can go through customer support requests.

Their language, the words they use and how they describe your service will give you an idea of how they see you in terms of pricing.

For example a customer left this review of Planio on Trustpilot:

As you can see, this person certainly sees Planio as more than reasonable, describing it as “super cheap”. That’s an indicator that the pricing of Planio is low for this particular customer.

And what if you don’t have many customers yet? Well, Steli at Close.io tells a story on his website about how he found the “right” price for a new product while talking to new prospects.

When the person would ask about the price, he’d give them a price that was 5% higher than he’d quoted to the previous person.

Once he got to the stage where 20% of the customers were balking at the price, he felt he had reached an optimum level of pricing.

The Optimized Pricing Action Plan

You’ll read that pricing is a process. That pricing is something that you won’t get right the first time. That you just have to test.

Well, that’s true and it’s also pretty vague. Especially so if you’re the one responsible for doing something about your pricing.

It’s tough to tell the entire company that the hundreds of angry Tweets, emails and phone calls about your new pricing is just the “result of a test”.

So, where do you start and what, exactly, should you do?

Step 1: Gather Existing Data on Pricing

First off, if you have customers, I’d look at what they are saying in support tickets, emails or on review sites. That’s your first source of data on how they’re talking about your pricing.

They’ll give hints about where they put on you in terms of price and value.

If you don’t have any customers, I’d start looking at the same data for your nearest competitors.

This is the most basic step, however, and I think most people do this step.

Step 2: Set Up Calls with at least 10 Customers

It’s always amazing how little people talk to users and customers, despite that being a core part of the job of product managers, product designers and product marketers.

In my experience, people often get into the software business in the hope that they’ll avoid talking to customers.

However, the best software-as-a-service businesses talk relentless to customers in the stage from 0 – 1 million in ARR. The reason is that you need a rock solid understanding of your customers if you want to scale to 10, 20 or even 100 million.

It starts with talking to them on the phone. Talking to 10 people can lead to talking to even more. I went into detail on how you can go about this on a guest post over on GrowandConvert.com.

Step 3: Ask Them Questions about Pricing and Value

Usually, product designers and UX researchers use customer interviews to figure out how customers think and behave.

What never occurred to me until recently was that you can also use these calls to figure out what they think about your pricing.

Obviously, you can’t ask them straight up: what’s the most you’d actually pay for this software?

But you can ask questions that will reveal how they value your product.

On a webinar by PriceIntelligently.com, they gave me these three questions for pricing:

  1. At what price point would our product become expensive, but you’d still consider buying it?
  2. At what price point would our product become good value?
  3. At what price point would our product become so cheap that you’d start to question the quality of it?

Step 4: Change Your Existing Pricing

At this stage, you’ve gathered some data on your customers. You’ve learned some nuances on how they think about your pricing. And you’ve decided to change your pricing.

You can change your pricing in a variety of ways:

  1. Simply increase the price of your existing plans;
  2. change the amount of the core value metric each plan gets – i.e. the cheapest plan gets less seats;
  3. change your core value metric for your product – i.e. change from number of seats to number of projects for a project management app.

So, there’s more than one way of changing your pricing. It’s not just about increasing the dollar amount.

For example, at Planio, we changed the amount of users and the projects you get in each plan, rather than the amount charged.

Step 5: The Power of Grandfathering Your Existing Customers.

Grandfathering means that you don’t impose your new pricing on your existing customers. They get to stay on the old plan, often indefinitely, until they want to upgrade.

This drastically reduces the risks of trying out a new pricing model.

You’ll avoid a backlash from your customer base. In fact, in my experience, you’ll get emails from existing customers thanking you for letting them keep their old plans.

You’ll also reduce the risk if your new pricing model turns out to be disastrous. Imagine if you introduce a new core value metric, and you find out that your customers are behaving very different to what you expected – perhaps in a way that reduces, not increases, revenue.

You’ll be able to ‘reverse’ your pricing change with only a few months of customers on the failed pricing model, rather than your entire customer base.

Pricing as the Underutilized Tool

Much of the SaaS case studies online focus on acquisition of new customers.

I think this makes sense, because the wider audience is interested in starting a SaaS company. Not very many people actually have a SaaS product that has enough traction to start optimizing the pricing.

At the same time, if you’re in the lucky position of having a successful SaaS product, you’ll find that pricing will be a place where you get outsized returns.

In a webinar for Kissmetrics, Lars Lofgren mentions a case study involving a company called Bidsketch where they doubled average revenue per account via a new pricing model.

Amy Hoy tells about how she’s increased the price of her time tracking app four or five times with revenue going up every time.

So, once you’ve gotten to a certain point in your SaaS business, say 500 customers, I think it makes sense to start putting time into optimizing your pricing.

And I’d like to help you do that. If you click below, I’ll send you my top 10 SaaS pricing Resources I use.


The “Market-Marketing” Fit

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New startups or small bootstrapped companies find marketing excruciating.

I’ve talked to founders who’ve built an entire product, but they’re stumped at getting the first 100 paying customers.

Jason Lemkin at SaaStr comments that the first 10 unaffiliated paying customers is hardest thing you’ll do with as a software company.

The reason is that if you can get 10, you can get 100 and you can get to 1,000. The first 10 will be similar to the thousandth customer.

But back to our frustrated founders.

I often get the feeling that they’re exhausted by marketing.

They spend a week writing a blog post, only to see a few people read it.

They spend hours of precious dev time integrating with another app only to see a handful of new sign ups.

They create an affiliate program, but they haven’t gotten a single sale via the affiliates.

It just all feels very… tough. You’re putting in countless hours, and you could just put that time into the product, and surely the customer will come.

I think there is a concept that nascent businesses should bear in mind.

I’m calling it the “Market-Marketing fit”.

The basic idea is that for each new SaaS product there will be a certain approach to marketing a product that will win.

The fit will be more precise than merely channels such as blogging or affiliate marketing or inside sales.

And your early efforts at marketing should be focused on zeroing in on your market-marketing fit.

I’ll give you a few examples based on bootstrapped businesses around the web. I choose them because 1) they’re fairly relatable and 2) they’re quite open.

Big companies such as AirBnB don’t actually reveal how they grew. For example, I’ve heard that AirBnB grew in Europe via the brute force efforts of massive inside sales teams. But in most write ups of AirBnB’s success you’d think it was all down to some growth hack based on data analysis.

Note: this is just me observing from the outside. I know nothing of what actually goes on at these companies.

Baremetrics

Baremetrics is an analytics product for SaaS businesses using Stripe.

And the founder came up with an ingenious method of generating a flow of qualified prospects to Baremetric’s site.

Imagine you’re the CEO of a SaaS company.

You love seeing the key metrics for other SaaS companies, and Josh Pigford provided an open view of Baremetrics for Baremetrics itself.

I don’t even run a SaaS company, and I found it fascinating.

In addition, I imagine that showing these metrics for the world to see meant that Josh Pigford had to spend less time in the early days giving demonstrations.

ConvertKit

ConvertKit started out targeting authors. The problem is that author are generally terrible at marketing, so they don’t have big email lists (if they have one at all).

ConvertKit adjusted their positioning to professional bloggers and they used inside sale tactics to get those bloggers on board.

The benefit was that professional bloggers have huge email lists and they LOVE affiliate marketing, so ConvertKit could, in turn, offer them 30% of recurring revenue for new customers.

Nathan Barry got bloggers such as Leo Babauta from Zen Habits and Pat Flynn onboard as ConvertKit customers. There’s a big difference between landing a big customer who requires a confidentiality clause and landing a professional blogger who’s favourite thing to do is writing about whatever new software she’s using.

Those early customers probably had a very high virality coefficient – way above 1.

What I mean is that landing 1 big professional blogger as a customer potentially gets ConvertKit hundreds of new customers via affiliate and word-of-mouth sales, because that professional tells her list of 50,000 subscribers about ConvertKit.

When you land one big customer that doesn’t broadcast to a large audience for a living, your amount of new customers might be zero or close to that.

Bingo Card Creator

Patrick McKenzie came to Hacker News fame as a software developer trapped as a salaryman in a Japanese MegaCorp who found freedom via a bingo card creator.

I imagine they’ll make a movie about him one day.

Now, one of his marketing tactics takes a leaf out of the travel industry book.

Try this: type in “flights from #{insert any small town} and Rome” into Google. You’ll get a wall of results from travel companies even if that small town doesn’t have an airport.

The travel companies generate millions of landing pages around every conceivable combination of towns. It’s all done without human interaction, so Google likes it less and less these days, because the value to people is often low.

Patrick adopted and improved on this tactic for Bingo Cards. He had writers create articles for 10-30 dollars for keywords around “Christmas Bingo Cards” via a custom CMS built for this purpose.

He found that he could put money into these pages and get revenue in return in a similar manner to Google Adwords or paid advertising.

Now, the reason why he was probably successful was that at the time Google didn’t look down on such content as much and, secondly, Google didn’t have much other content around Christmas bingo cards to offer, so his content was the best.

Because he used writers meant that the content was probably much better than the travel industry’s automatically generated content.

If you have a niche market a wide variety of search keywords (“educational bingo cards”, “christmas bingo cards”) clustered around a common solution (“The Bingo Card Creator”), then this approach still works, particularly if the content is good enough to solve your target audience’s problem.

Buffer

Buffer is a great example of a company using content marketing as a tool to drive to 6 million/year in recurring revenue.

There’s is a couple things about Buffer’s success, however.

First off, content was in their founder’s DNA. Joel wrote about taking the first steps towards creating Buffer. He wrote about every step along the way. They constantly took challenges such as figuring out what to pay people and turned those challenges into content pieces. The most famous example is their salary spreadsheet that listed the salary of everyone in the company as part of “radical transparency”. It’s hard to achieve Buffer-like levels of success with content marketing if the founder team aren’t hardcore about writing and publishing content themselves.

Cheap customer acquisition for a company in its beginning from content marketing isn’t something that you can just strap on with a few interns or outsource to an agency.

Buffer’s price point of 10 dollars/month means that the only way to survive was to have super cheap acquisition costs. Buffer simply wouldn’t exist if they didn’t have that channel. Another competition called MeetEdgar comes in with a starting price point of 50 dollars a month, and they rocketed past 100k in MMR in record time. According to their founder Laura Roeder, they’ve been acquiring a lot of customers via Facebook ads. Admittedly, Laura Roeder also had a ready-to-go marketing channel in the form of her huge email list for her newsletter “Get the Dash”.

Still, I think it’s a good example of how having a premium price point allows you to more flexibility in acquiring customers.

Okay – that’s a few examples of the “market-marketing” fit in action.

I think it’s helpful to dig deeper than just the standard approach of thinking in terms of “blogging”.

You have to think in terms of what specific types of posts are going to be a good fit for your business.

If you have a new technology idea in AdTech that you want to ultimately sell to one of the big AdTech players, it might make sense to write high level thought piece articles or get some industry leaders in on your blog.

On the other hand, if you’re sell a 10 dollar/month social media tool, you’ll need meaty, practical “how-to” guides that social media managers will want to share with their fellow social media managers.

They’ll care far less about the state of social media in 10 years from some industry prophet.

And it’s entirely possible that you won’t find an approach to content marketing that works in your business. That’s fine, because you can focus on what does work – be that inside sales, Google AdWords or partnerships.

The key is to find that fit as fast as possible.


What I learned validating my first product idea on an email list of 268 people while living in Paris

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Last summer I was living in a tiny, 16-square meter apartment in Paris near Strasbourg-Saint Denis. The weather in July was HOT. I’d stick my chair on the desk and work at a makeshift standing desk with the window open.

As inner-city Paris goes, Strasbourg-Saint Denis is pretty damn ghetto, so all sorts of streets noises wafted up to us on the 5th floor.

And, amongst the prostitutes and street hustlers, my girlfriend and I validated a business idea we had.

I think this account will be valuable to someone who wants to develop and ship a first product. That said, I’d use the same exact techniques if I was working for a SaaS company.

Ready? Here’s how it went down.

My girlfriend had a blog with about 4,000 monthly visits and an email list of about 250 people.

That’s frickin’ miniscule!

Your grandmother’s knitting blog probably does better than that.

My initial reaction was, “Wait until your email list gets to 3,000 people, and then we can start thinking about doing something with it”.

And then I thought about.

Based on human psychology, she’d be very unlikely to keep churning out blog posts, pitching guest posts and promoting her stuff online without seeing anything that looks like success.

And by success, I mean money (if that wasn’t clear). I was living in a TINY apartment in Paris

So, we decided to think about selling an informational product. Now, you’ll probably think that’s pretty scammy and/or lame.

Fair enough. Here’s my take: online video courses are pretty cheap to produce, so long as you have the necessary knowledge yourself, and they can deliver a lot of value to the students, assuming they learn a valuable new skill.

It’s actually a fairly common path for many tech industry titans.

As Amy Hoy points out, 37signals’ first product was an e-commerce search report for 79 dollars.

My takeaway is this: solving someone’s problem should come first, not the tool you use to solve it, such as software, a video or an ebook.

So, an online course it was.

The few people on the list had written in saying they’d love to start their own little freelancing business.

Top tip: when people subscribe to your list, make sure the confirmation email invites them to email you. This will be a fantastic source of information on your audience.

We’d been freelancers for the last two years. We weren’t rich, but we knew enough to help people go from zero to their first few paying clients.

And my girlfriend had done some one-on-one coaching with readers of the blog with great results.

So, let’s recap:

We had a business idea: an online course on getting your first few clients as a freelancer, and we had a tiny audience of 268 people on an email list in MailChimp.

The next step was to put our pitch for our *non-existent* product in front of our list of 268 subscribers, and see what they thought.

I wrote an email that described what freelancing had allowed us to do: go snowboarding in the Alps on a Monday, go surfing in the afternoons in Guadeloupe in the Caribbean and so forth.

Put simply, I sold the dream.

Then, I said who this course was PERFECT for (and who it wasn’t for). Obviously, it wasn’t for anyone who’d already had some success at freelancing, and it wasn’t for someone who wanted to create a product, for example.

I gave a high-level overview of what the course would entail, why they should follow it (and not another course).

Then, the call-to-action.

My call-to-action wasn’t a fancy tracked-link back to a sales page kicking off a sales funnel.

Nope, it just asked them to click reply and say if they were interested (I even wrote what they had to write) and, optionally, to say why they wanted to freelance.

“Just reply “I’m interested”

A ghetto sales setup for an Irish guy living in Paris’s finest ghetto. Perfect!

Are you interested in writing a sales email?

Here’s the breakdown of the one I wrote:

  1. Sell a dream or make a promise.
  2. Say who this is for and who this is not for. The more you exclude, the better the included feel.
  3. State what the offer is about. What will they get specifically? (in this case it was 12 twenty minute videos).
  4. Give them an idea of how the experience will feel like: will they feel pampered like as the Four Seasons? Crushed like ants like at an introductory CrossFit WOD? In this case, they’d be focused on taking small, specific steps every week towards getting a paying client.
  5. Ask them for some sign of interest.

Are you worried that this will mean an overly long email?

The short and simple answer is don’t worry about length; worry about making your email persuasive for the minority of people who will end up buying.

“Long emails won’t get read by most people, just the ones that end up buying” – bastardized version of a quote of a Very Famous Direct Response Marketer.

Here’s a screenshot from the campaign results in MailChimp:

And what happened next?

13 people said,” YES I’m interested”. Count me in.

The Three Emails Sales Series: When You Sell, Sell!

And so on we went on our business idea validation. It was time to find out if they’d be willing to pay the princely sum of 97 euro for this course.

So, I stood up at my desk, and I wrote three emails.

The first one was long and brutally honest. I said, listen, it’s going to be tough to find your first few gigs, especially if you’ve never done this before and you’re not a Ruby on Rails Dev or some wildly in-demand hipster.

But I asked this question: “Imagine yourself three months from now, 12 months from now, and you’ve successfully gotten your first couple of clients. How would you feel? Empowered?

And what would happen if you didn’t do it? What would have changed?

This technique is subtle and wide-spread. Sales people might refer to it as the puppy-dog trick:

I can understand you’re not sure about whether you want to buy this delightful puppy. Listen, here’s what I’ll do: I’ll leave the puppy with you in two weeks, and if you don’t want it when I come back, I’ll take it off your hands”.

Give him an inch, and you’ll end up looking after a dog for more than a decade. Credit: Jerry

Or put it this way, once you’ve thought about having something valuable in your life, it’s tough to think about going back to life without that valuable thing: be it a fixie bike, a sweet apartment or, in this case, an online course that teaches you how to freelance.

The next part was to go into detail about what each video would offer. I wrote little snippets of the crispy benefits each video would offer.

Finally, I stacked up this course against the other options: hiring a coach for 2,000 euro +, going to business school and so forth.

Only at that point did I provide a link to the paypal page where people could pay, and I let them know that the link would expire at the end of the week.

The next two emails were short and to the point: here’s the benefits to joining the course and here’s the link. The last email went out on the day the course closed.

Out of the 13 people who said they were interested, 6 people decided to buy.

In total, my first product launch had brought in 582 euro or about 600 dollars.

Now, we just had to build the f**cking thing!

The 150 euro Product investment (or was it 4150 euro?)

As I said earlier, online courses are fairly easy to produce compared to a SaaS product or a physical product.

Here’s the tools we used:

  • Google docs for writing
  • Camtasia for screen capture
  • PowerPoint
  • Wistia for video hosting (free up to 10 GB)
  • Password-protected WordPress page template for delivering the course
  • Samson Meteor Mic
  • Sketch 3 for illustrations
  • Mailchimp for sending out weekly emails

My girlfriend and I wrote out the script for each video, created a powerpoint presentation to go with it, and she’d go through the script and presentation while recording her screen using Camtasia.

Obviously, the big investment here was our time. Conservatively, I’d imagine we put in 200 hours in writing the scripts, creating the presentations, recording the screencasts, editing and uploading the videos.

Bill those hours out at just 20 euro an hour, and you’re looking at 4,000 euro investment in time, alone.

And this brings us to what I think is an important point about validating and launching your first product idea: you really can’t think in terms of a return on investment at this early stage.

I believe the value in having marketed, sold and created the first product outweighed the fact that we spent about 4150 euro, at a minimum, and brought in 582 euro maximum (assuming nobody refunded).

Truth be told, it was tough to ship a video, transcript, presentation and write up an email to send to the six students every week for 12 weeks. We were both working for a tech company in Berlin, and some days I’d have to come home after working all day and sit down to edit the video and upload it to Wistia.

But the fact that the students prepaid for the course and were impatiently awaiting the next “episode” meant that we felt 100% obligated to deliver each week.

In fact, one time we were at my parents house in Ireland, and we were trying to upload the video to Wistia on the crappy DSL line in the middle of the countryside, and one of the students sent an email demanding to know where her weekly video was!

The advantage of building the product in weekly intervals also meant that we could improve the product every week based on what we’d learned the week before.

My girlfriend got more confident speaking on the mic, and the powerpoint presentations were more and more polished.

How to Make Your Product Amazing for your First Customers

Now, when you launch an online course, it’s easy to lose your students, as they often will interest, become bored and forget about you.

It’s in your interest that your students succeed and get results from your course. Obviously, successful students are less likely to refund.

But honestly, that’s not the main reason.

Fundamentally, you need people to get value from your product, be it SaaS, an online course or a funny t-shirt.

Call the “Time-to-Value” metric or your value proposition, if you want.

How did we make 100% sure that our first 6 students got value from the course?

Well, we put in time to make sure this was the best course it could be. My girlfriend had tested the framework in one-on-one coaching. She’d tweaking aspects to improve it, and she’d gotten great results for her students.

It wasn’t some half-assed collection of ideas that she mumbled into the microphone.

But we also offered what the vast majority of online courses don’t offer: personalized attention via email.

Every week we’d send out an email with the link to the latest course video, but then a few days later we’d follow up with an email asking how it had gone and asking them to send their homework back to us if they were comfortable with that.

And when they did send us an email, my girlfriend and I would sit around a table with coffee discussing how we’d approach their problem. We’d research on the internet to find different approaches, and we’d send back thoughtful advice.

The Minow’s Advantage: You can be personal and thoughtful

That’s an advantage you have when you’re just starting out: you can really get inside your customers’ problems and find solutions for them (even if it’s not always exactly your problem).

And it pays off in the long term: Jason Lemkin at SaaSstr pointed out that your first customer may be or is likely to be just like your 1000th customer.

Therefore, if we sold this course 1,000 times, the 1000th customer would likely have the same problems, expectations and needs as this very first set of 6 customers.

The Most Terrifying Thing We Did: “Was it as good for you as it was for me?”

After three months, our first batch of customers had finished their course, and it was time to do something that terrified me: ask their feedback on their experience and areas we could improve on.

I really didn’t want to do this. I didn’t want to hear the truth! It’s a pattern I’ve also seen in Series A startups: they often don’t want to collect data because the truth might hurt, a lot!

The method of getting feedback was using a survey on Survey Monkey.

The approach I used for getting feedback was to look for qualitative feedback. I don’t care whether it’s “statistically significant”. We’re talking about a pool of six people here.

I just want, in their words, how they felt about the experience of taking the course, what they got from the course and how it could be improved.

Therefore, the questionnaire was four questions long, rather than 40 spread over 4 pages.

The result was that 3 people, or half of ‘em, gave detailed, qualitative feedback, which I find much more useful than pages and pages of multiple choice answers.

What would I have done differently?

In hindsight, the product itself was far too big. It took 3 months of weekly work on it to ship the entire product. And my girlfriend already had a one-on-one coaching version of it that she could adapt.

Amy Hoy recommends that your first product should be a tiny product such as a short e-book or online course.

So, I’d do a 4-video course instead over 4 weeks.

Secondly, I’d make the course even more interactive. I think you can’t spend enough time emailing and talking with your first few customers, so I’d set up Google hangouts with them on a weekly basis.

Depending on your situation, you could even make the course tinier still: Pat Maddox over at RubySteps had a 48-hour product challenge and he charged 11 dollars for his ebook. I bought it, and really enjoyed it!

After Validating the Product Idea, the Fun Just Begins!

We’ve since worked on the product even further. Being the nerd I am, I built a custom wordpress site with a sales page, checkout, payments via PayPal, logins for students, a link-up to an automated series of course emails via MailChimp once people signup and automatic drip-feeding of content.

That was all possible because I knew we had validated our product idea. I could invest more time in it. Recently, we re-opened the course on the new system with a price point at 497 euro or three times 197 euro, and we got 5 students for a total income of about 2,500 euro on a list that was 620 people.

That’s almost four times the revenue the first time around, just by increasing the price and building a better delivery method.

I’m reasonably confident that we can now invest the time to grow the email list to 6,000 people and we’ll have a business that could bring in 50,000 euro a year just within this one course opening twice a year.

And we’ll help a boatload of people have fun in the process!

Let’s Have a Chat!

If you’ve gotten this far, you’ve either had the patience of a monk, or you’re really interested in making your first product.

I love talking to people who also want to make products.

So, if you have an idea you’d love to discuss, let’s schedule a call here. We’ll chat about your idea, how you could validate following a lean model and next steps. And you can tell me what’s worked for you in the past. I think we’ll both learn!

We might even become friends 🙂 Bear in mind that I’m in Europe, so if you’re in the US, the morning will work better for the timezone difference.

I’m trying out Bookmore, as it makes finding a mutual time easier: Schedule a Call


Get Over “The Locked Room” Copywriting Fallacy

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Thomas Carney  -  
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You’re writing the copy for a startup website. You have a new idea, or your old idea is undergoing a bit of a pivot.

You need to explain your idea on your website.

You need copy. Snappy, persuasive copy that will make people want MORE.

More signups, more shares, more investors.

Your concept is great, so you want your website to drive home the concept of a bacon subscription service so nobody can deny its inherent, bacon-y goodness.

What do you do?

Why, open a Google doc, and start writing out the value prop of your bacon-as-a-service business.

“Succulent, thick slices of grass-reared bacon hand-delivered by men with mustaches and gentile manners every Friday in time for the weekend”

There it is in all its glory. A sentence that grabs what you do and puts it out there for the world.

But then some says that the men-with-mustaches gives the wrong vibe, and the sentence is far too long, anyway. People don’t read on the web, DUH!

Now, you have go back and start writing again.

“Bacon-as-a-service. Home Delivery. Delicious.”

Hurrray! It’s short, snappy and everything copy should be.

Right? Time to publish!

Wait, what’s wrong here?

The assumption that people don’t read on the web.

That’s just plain wrong.

People don’t read things that don’t speak deeply to them. When I use general, generic words to describe a highly specific THING, you aren’t going to be interested.

But when you deeply understand your audience, when you know them better than they know themselves and when you know how they speak and think, you can write copy so targeted that they can’t help but pay attention, clicks and cash.

Hell, if I saw that grass-fed bacon hand-delivered by hipsters was on the cards, I’d be sticking my credit card into Google so fast my French banque would be having a heart-attack.

But here’s the rub: startups are generally characterized by not having a great understanding of your audience. You barely have any customers, and your own grasp on your own product is thin, at best. And you might change the entire concept radically overnight.

Something as simple as changing your “Go to Market” strategy might mean you’re talking to a whole new audience.

Oh, and the usual time-frame for a website is, “Up by yesterday would be great, if you can stretch on it”.

So, if you’re in the position where you need to write copy fast, and you don’t have the time or even ability to talk to existing or potential customers, mull over their words and generally soak up the vocab of your target audience, whadda ya do??

Cry? Yeah, go do that.

Here’s a harsh truth for you. Your copy will probably suck.

No amount of hours of thinking about how to say the heading succinctly will make it better.

You don’t have to be a great writer to write great copy. You just have to understand the hopes, fears and dreams of your target audience.

But if you need a website fast, you’d be best to write it fast, give it a fairly superficial edit to make sure it reflects your value proposition as you currently understand and put it live in a very simple (think: cheap) design.

Hell, keep the copy short if you want.

Now, your website is live. The big launch is DONE.

Just ship the fucking thing.

The real work can now begin. Listen, it takes time to convince your target audience to get on the phone for a chat, so you can start understanding them. Putting up a survey on your site will take some time as well to gather responses. Building up a picture of how they talk and think isn’t going to happen overnight.

The software world gets this. They ship their minimum viable product. Something so small its value is almost nothing. And then they get over the fear of shipping, and they keep shipping every day, refining and expanding until it’s a full-blown work of art.

You should do the same.

Ship your message, and refine it weekly.

That’s how you write copy for your startup.

Now, you just have to convince the boss that this is a good idea. Start by sharing this article with the boss.


Losers have Goals. Winners have Systems.

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Thomas Carney  -  
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Tommy “Needs a System” Carney

I’ve been studying copywriting. Every evening, I sit down with a pot of Chamomile tea and write out an advertisement by hand for an hour. Yup, my life is all rock-star living.

A few days ago I was writing out a classic ad for a subscription to the Wall Street Journal. The ad starts with the story of two guys who had similar starts in life, both graduating from the same college and both starting in the same company. 40 years later, one was running the company while the other was a line manager. What made the difference? – reading the WSJ, apparently.

I beg to differ. The difference between extraordinarily effective people and most people is in their systems.

This is how a good system works: I hate to exercise. It’s not my fault; it’s in my DNA not to expend energy on pointless activities. So, instead, I just show up to CrossFit three times a week.

The good people over at CrossFit have come up with another system that is startling effective at getting people to work out really, really hard. In fact, they work out so hard that the most common criticism of CrossFit is that people injure themselves from working out too hard.

Why does this system work? For one, I don’t have to think about anything. My job is to show up and do what I’m told. Contrast that to most gyms where you have to show up, figure out what you’re going to do, then do it, hope you’re doing it right and then wonder when you can stop.

The result is that most people get confused and just run for 30 minutes on the treadmill and never see any results.

The point of this is that CrossFit is a system, whereas messing around on the treadmill without a plan is not a system.
Once you start seeing your life in terms of systems, you have a set of tools to optimise and change your life.

You want to find a job? There’s a system for that (and you probably aren’t using it). You want to lose weight? There are millions of effective system for that. You want to become a juggler? There’s a GREAT system for that!

You can simple select a system for the result you want and take advantage of YEARS of trial and error of others.

Unfortunately, humans don’t seem to “get” systems very well at all. It’s taken me years to truly appreciate systems. Before that, I just thought I’d have to “work harder” and “try to figure it out”. The problem is the willpower is an exhaustible resource, and trial and error is a slow way for any one person to learn.

So, I’ve compiled a list of the systems I use, split out over different categories:

1. Health Systems

2. Organisational Systems

  • Google calendar (set reminders that are sent to your phone, plan reviews)
  • Evernote (never forget an idea again)
  • Dropbox (backup and internal file sharing)
  • To-Do lists
  • Check Lists

3. Communication Systems

  • Gmail (set up with multiple email addresses)
  • SMS alerts sent to iPhone when emails from important clients are received
  • WordPress blog for networking, spreading ideas and keeping up contact
  • Skype (I really want a better alternative!)

4. Finances Systems

5. Productivity Systems

  • Accountability partner (my surrogate boss)
  • The PomoDoro Technique
  • Weekly reviews/plans
  • Evening planning for following day
  • The “Just Showing Up” system (for tough items, I’ll count just showing up as a victory)

6. Wardrobe System

  • I systematised my wardrobe so I can travel for extended periods with a 20 litre backpack that weighs about 7kg.

7. Meeting New People

So, that’s an overview of my more important systems that run my life. Not all systems work for everyone. But most people will benefit from implementing some of the above systems to make their life run more smoothly, achieve goals and not have to work so damn hard.


The secret for a more interesting life: take more risks

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Thomas Carney  -  
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Me destroying my fears of free weights

I’ve been trying to take more risks. It’s why I gave up 2500 euro a month in income. That steady stream of cash was stopping me from pursuing other sources of income with any sense of urgency. It’s also why I tried Karaoke for the first time last Saturday, singing a duet of “I’ve had the time of my life” with my brother-in-law. And it’s why I’m spending three months looking after my awesome one-year-old nephew.

It’s not longer just a question of your investments. Risk taking has become so important for everybody because there isn’t much in the way of a roadmap for many careers. My friend Jon is a data journalist. That’s a pretty new area, so he’ll be part of figuring out what the career of a data journalist looks like. And to do that, he’ll have to try different stuff.

But trying new stuff is tough. For a long time, I though about risks in terms of probability. Now, I realise that risk is really emotional for most people. The real reason I don’t write for my blog is that I worry people will think I’m an idiot. For years I went to the gym and avoided the free weights because I didn’t want to do something stupid like drop the weights and get kicked out the gym (Then I started CrossFit where dropping weights is what it’s all about). My brother won’t go to CrossFit because he’s worried that he’ll have to do pullups and he can’t do pullups, so he’ll look like a weakling, and so he doesn’t go.

1. If you enjoy the process, it’s probably a risk worth taking

One way to look at whether you should take a risk is whether you’ll enjoy the whole experience of it. Jumping out of a plane is hardly going to be a great risk to take if you don’t enjoy the experience at some level.

For example, I’ve been learning web development over the last few months. I find it fun to play around with code, so the risk that it won’t pan out for me is reduced. At least I’ll have spent some time geeking out on things I enjoy, even if I don’t make a cent off it.

On the other hand, working in a job I hate for 40 years just to have a shot at a nice retirement seems a horrible risk to take because that’s 40 years of misery.

2. It gets harder to take risk as you get older

I’m 25, I have zero commitments, debt or long-term contracts of any nature whatsoever. My income travels with me. I don’t even rent a house. I sleep very well at night. I could join a band of roving gypies tomorrow.

But, looking around me, it’s obvious that as I get older, the commitments start building up: cars, houses, boats and whatnot. It’s also easier to live on beans and tuna fish when you’re in your twenties. That’s entirely normal. But when you get to your thirties and your friends are jetting around to different resorts, buying houses and new cars, it’s harder to live like a monk.

Therefore, I’m trying to be far more aggressive with taking risks when I’m in my twenties, because I might not get the chance later on.

3. No matter what happens, you’ll be happy as you always were

My biggest takeway from Daniel Gilbert’s Stumbling on Happiness was that people who’ve suffered terrible loss – decades of wrongful imprisonment, political disgrace or paralysis – often view such experiences very positively. In the long-term their level of happiness rebounds to its previous level or even slightly higher.

Therefore, no matter how things turn out, you’ll probably be stuck with your own personal level of happiness (which you can choose to influence).

So, that’s how I look at risk taking.

Here’s my mini-challenge: Try to take some small personal risk this week – think Karoke or dancing lessons rather than FOREX trading. I don’t want to be responsible for any bankruptcies!


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