Before we start, look at this article about how Dave McClure raised $30 million to invest in startups. What’s the first thing that he did afterwards? According to the article, he went to 99designs to buy a new logo. Investors who put money in companies like yours, they get their logos from 99designs. Scrappy startups and big brands, they have their websites redesigned on 99designs. I have used 99designs.
99designs is the largest marketplace for crowd-source graphic design. When you use 99designs, you won’t get just get one or two designs. You’ll be flooded with designs from designers all over the world, and you only pay for what you love. 99designs.com.
Here’s an email that I got from a viewer about my next sponsor, Scott Walker of Walker Corporate Law. “Quick note. I was looking for a lawyer to do an update of terms of service agreement for our product. Long story short, I had a hell of a time finding one who was charging reasonable rates and who was in the tech space. I ended up seeing Walker Corporate Law, your sponsor. They were fantastic and have great rates.’ So, there it is. Walker Corporate Law is the firm you turn to when you’re raising money or when you’re selling your company. But, as you can see from this letter, they’re even there in the early days to help you out. Walker Corporate Law.
Finally, check out PicClick. It’s a bootstrap startup by my buddy, Ryan, in San Diego, and Ryan is already profitable. I don’t know why he hasn’t done a Mixergy interview yet, but I’m working on it.
PicClick is a visual way to search eBay, Etsy, and other sites. Try it and if you know anyone who buys anything online, please send them to PicClick.com. Ryan is a viewer like you, and I want to support him. So, PicClick.com is where you send your friends. Check them out yourself, too.
Here’s the program.
Andrew Warner: Hey, everyone, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart. You guys know what we do here. I bring a different entrepreneur on every day to talk about how he or she built their business, talk about what they learned along the way and to, most importantly, bring back the best ideas for you so you can go out there and build an incredible company. And, hopefully, do what today’s guest is going to do, which is spend about an hour with me, teaching other people what you learned.
So, today’s big question is how do you generate paid memberships online. And joining me to help answer that question is Dmitry Buterin. He is the founder of Wild Apricot. His company sells a subscription-based platform for creating membership websites. He has about 3,000 paid subscribers and a run rate of about $2 million.
Dmitry, welcome to Mixergy.
Dmitry: Hello, Andrew. Good to see you here. Hello, everybody. Yep.
Andrew: So, in addition to getting members yourself for your software, you’re also creating a platform that helps non-profits get members for their organization.
Dmitry: Exactly.
Andrew: The rock star organizations, the ones who are really champions who we especially want to learn from, how many members do they have?
Dmitry: I would say they typically have between one and three thousand members.
Andrew: OK. One thousand and three thousand members is what they have.
Dmitry: Yeah.
Andrew: So, my goal is to find out how do they do it. In a world where there is Facebook and Twitter and I’m already involved in so many communities and everyone is, how do these guys who are rock stars get anybody, let alone 1,000 to 3,000 people to join their organization? And how did you get 3,000 people to join and pay for your software?
But, let’s find out a little bit more about who you are. Before you launched this business, what did you do?
Dmitry: We actually used to run this business as a custom software development shop, and we did a lot of work for small companies, big companies as big as Microsoft, and also a lot of small non-profits.
Over time, we realized that you know what, every time we would do work for some kind of non-profit organization, I saw that there were lots of things we could do for them, but they never had enough budget by far. And we always really wanted to help and to do that, but it was very hard.
So, at the end of the day, we’d done a lot of thinking. We always wanted to become a software company versus a service company. And at some point we just decided, you know what, guys, it’s time. We have built enough experience, and we have some money accumulated over the last few years. And we just decided to make this transition.
Andrew: I see that a lot where companies do consulting business. They do consulting to bring in some money, to build up some expertise, and to get people on the team. And then, they transition to software.
Dmitry: Yeah.
Andrew: But what I see even more often, outside of these interviews anyway, is companies that try to do that and they fail because it takes too much time, because it’s too distracting for other reasons. What were some of the challenges that you had as you transitioned?
Dmitry: I’ve seen lots of people who tried to do that. We actually tried to do that before Wild Apricot. We tried to launch our own CMS, and in retrospect, it was a stupid idea, like, how many CMS systems are there on the market.
But, the two most common things I see, first of all, people don’t follow through because what happens is you have a service business and this is your life blood. It generates your revenue, and you keep running it. And then you start this software on the side, and you are always driven by your service business.
So, unless you make a very hard decision to pretty much stop your service business, which is what we did, it’s hard to do it because you always have clients coming to you. You always want money to keep running the engine, to build your software business.
And unless you make this transition in a very short time frame, it’s hard because you will always end up directing lots of resources to your service business, and then your software business will just be there unless you invest into building up your software and you don’t immerse yourself in the other stuff, you’re never going to be successful.
Andrew: So, how dramatic was your cut? Did you say, no customers at all. We’re even were you going to stop past business?
Dmitry: Yes. What we did is we made our decision in March, 2006, a conceptual decision, and basically by the end of the year we transitioned out all the old customers. So, we stopped taking new customers right away, and I would say probably within six months we were pretty much out of every customer we had.
Andrew: You said that the first product that you tried to launch was a CMS, Content Management System, kind of like WordPress, which I use to run my website.
Dmitry: Right.
Andrew: Were you fully focused on that, or was that a project that you worked on on the side while you were still managing customers’ business?
Dmitry: Yeah. That was while we were still running the service business, and we tried to launch our product. And because we were running it on the side, we never really succeeded because it was this product, but, you know what, it required a lot of implementation. That was fine because implementation was draining money from us and all that stuff.
So, when we made our decision, our final decision to launch Wild Apricot and just stop our service business, we knew that we just have to have this clean transition. And we said, you know what, even for a software product we’re not going to provide any service whatsoever.
Andrew: Oh, even for your own software, you said we’re not going to do any service?
Dmitry: Yes. We’re going to build a totally full, self-service model.
Andrew: I see. OK. And then no help, contact information, no support at Wild Apricot, none of that even?
Dmitry: Well, no, we do have our customer service and our support team, but that’s free of charge. So, we do provide people with free technical support because they do want that, they do need that. But what we saw, what we didn’t want to do is we didn’t want to go into this whole situation when you have to provide people with some implementation services and you spend a lot of time doing proposals and project management and all of that stuff because that stuff takes a lot of effort to manage. A lot of attention goes into this. If you keep doing this, it’s very hard to build a product at the same time.
Andrew: And I know this is a divergence from the main goal of the interview, but I’ve got to ask about the CMS, about what happened there. What were you envisioning for it? It wasn’t going to be a blogging platform, was it?
Dmitry: No, not really. You know what? In a lot of ways it was a very naive project, because as many software projects coming out of service companies, it was like, you know what, we would have created this project anyway and we’re using it in our projects. So, let’s now productize it and launch it as a licensed software. That was the idea, but the thing is that it was created just following the needs of a number of customers. It was a very specific need without even thinking what’s the overall market, what’s the focus, what’s the position of this software.
So, it was just a byproduct of running a service business, and as such it was really not going anywhere. After a while, while we kept running the service business and also trying to do something with the software, we realized, you know what, we’re not succeeding with the software, so we just shut it down.
Andrew: You know what though? When I asked Jason Fried of 37signals, who has been really outspoken about how to create software online, he said, ‘Create what you need.” And I see that you did create what you needed. You specifically created just what you needed and what your customers needed. Why the discrepancy between what he says and your experience?
Dmitry: Well, I respect a lot 37signals. I think when he says that what he means is that a creative product which if you can be your own customer, if you will, if the product you’re building, you can be the customer. So, you know really perfectly well what are the requirements, and this is what 37signals had been doing, right? Because they have created a project management platform and they’re a service company, so they have created a product to project manage their projects, and that’s perfect.
But, I don’t think it’s feasible for many other companies because otherwise their list of potential products service companies can create is really very limited. Yes, you need bidding software, product management software and a few other things, but that’s it. And you cannot have 1,000 different product management pieces of software.
So, you see the thing was that we are not our end customer. We have created this CMS software for the needs of some specific clients, but not for ourselves. And we kind of understood their requirements, but to a much more limited degree than if you create a product for yourself. So, it’s ideal, yeah.
Andrew: You’re saying there’s only so much that you yourself need. If I look around at the software that I live with and I’m really into technology and I’m really into the latest software, it might be five, ten different apps, five, ten different programs in general. If we all work on the same five or ten, we’re not going to get anywhere. We’ll all going to be competing with each other.
So, you thought why don’t we look at what our customers need. You launched the first version of that. You launched the CMS. That didn’t work because it was too specific to them. When I’m looking though at Wild Apricot, that’s also satisfying your customers’ needs. Why did that one work? Why did that one fit their needs and a broader audience’s, a broader customer base’s needs?
Dmitry: Well, I think that the main factor was the decision we made, that, you know what, this is what we’re doing, and we have to succeed with the software. This is all that we’re doing now. This is our only focus. And if you have the mindset, you kind of burn your bridges, and there is no other direction you can go to.
And also, we’re big proponents of general methodology. So, we knew that our product is not going to be perfect. And our goal was not to spend one year or two years to build a perfect product. We launched our first release of the product after three months, and, you know what, it was very basic. But, at least, we put it out there. We started getting some feedback. We started having dialogue with clients, and then we kept evolving the product.
Andrew: I see. When you say that you burn the bridges, I can see the value of that. Do you have an example though to illustrate it, maybe a time when if you didn’t burn your bridges, if you did have customers, the Wild Apricot product was so shaky that you would have run back to your customers and distracted yourself, instead of keeping at it. Did you have a time when burning your bridges really helped you stay focused?
Dmitry: Well, yes, absolutely. For example, we had one great customer. We’d been working with them for a couple years, and we were building a great custom product for them, which was a software to manage the energy efficiency of office buildings. They were a great customer. They were generating a good revenue on a monthly basis for us and source of income. But, you know what, when we made this decision, we came to them and we said, “Hey, guys, we’re going to support you. We know that you need us for some time being, but you need to find a new service provider to handle that.” We actually helped them to find a new service provider. We didn’t play any games like, you know, you have to pay this license fee, whatever.
We said, “We built the software for you. Now, our goal is we’re going in this direction. So, our only goal is to have you guys up and running and transition you as quickly as possible to another provider.” Once we’ve done that, there was no way to go back because they are there and now the company is servicing them. We cannot go back to that.
And you know what, we were not tempted but later on as we started in the direction with the product, of course, we always keep thinking, you know what, we no longer have this nice revenue from our service customers. But since we’ve done this transition, there was just no way for us to change that.
Andrew: All right. I can see how that’s really burning your bridges, really burning your boats before baiting. But once you’re there, once you’re on the other side on land, was there a time when things weren’t going well and you would have been tempted to get out of the business to stop focusing on Wild Apricot, if you had something else to concentrate on?
Dmitry: No, I wouldn’t say that because we knew, we felt on the intuitive level that we made the right decision. We knew that it was not going to be an easy road. It took us longer and it was much harder than we expected.
But, that’s very normal because I’ve been involved in other businesses, and I definitely know that when you have your projections you always kind of have to take your revenue projections, cut them in half and you have to take your costs and double them. And then, this is closer to what you will actually see.
Andrew: OK. So, what I’m hearing is that because you burned your bridges, because you focused just on this, it forced you to spend as much time and to iterate as much as you needed in order to make this into a successful product.
Dmitry: Absolutely. And I’ll give you another example. When you transition from being a service company to a software company, you have different skill sets. For example, in a service company you need sales people. You need project management people. You need development people and so on.
In a product company, you still need development people, but, for example, you need a totally different level of Q/A. So, that had to be a new department. You don’t really need project managers. You don’t really need sales people. You do need customer service people.
So, we actually had to let go a number of people, and we had to build some new departments in the company to manage the transition. And again, that was another bridge which we couldn’t go back to.
Andrew: Wow. OK. So, you’re fully focused on this thing. What’s the first version that you launched?
Dmitry: Well, it was a Wild Apricot version, and we launched it on July 1st.
Andrew: What did it look like. What were the features that you launched with?
Dmitry: It was really basic. People couldn’t even have paid membership subscriptions. They could do some really basic stuff. Basically, our system, it’s a combination of web-based CMS plus membership stuff plus fundraising plus vendor registration, because those are the functions which are typically used by many of the small organizations, non-profits, charities, and so on.
So we had, if you will, a prototype product. We had all of those features but on a very superficial level. For example, vendor registration, you could not customize the registration form. It was a very simple registration page and kind of RSVP. So, there was no way for you to take money. But, again, it was a way for us to put it out there and start getting feedback from people. And that’s exactly what happened, yeah.
Andrew: I saw that. In fact, it’s funny that you should bring that issue specifically. When I did research, I saw an old blog post about your launch with criticisms specifically about that, that people wanted to be able to collect money for the events that they were organizing.
Dmitry: Absolutely. I mean, we knew that. We weren’t going to hit the bull’s eye with the first version, but it’s extremely important not to spend the time internally because you have lots of smart people. You have a lot of great ideas, and then you end up going in a certain direction.
But, the best way to learn is by actually putting it out there and making an effort to promote it, to sell it, to engage with your customers, to talk to them, which is also very hard to do with an online product because it’s not like you’re going and talking to somebody. You’re putting it out there online, and then you wait for people to come to your website and register.
Andrew: So, what about this, though? You launch it. People see that it doesn’t have the features they want or that it’s not fully baked where they really care. They say this Wild Apricot isn’t the right solution for us and they move on, and then they don’t come back and reconsider.
Dmitry: Yes. Well, we did add features to handle payments and some other things which were considered essential pretty quickly. I think we launched the first version, if I’m not mistaken, around June 3rd, and then we launched a version with payments and some other important stuff by early September. But even with our first beta version, we knew there’s some people out there who can use just that system because we knew, again looking at our market, we know that there are small non-profits that are just struggling to have a basic website up and running to post a schedule of events. So, we knew that there are some people who can still use what we had in our very first version.
Andrew: How long did it take you to build that first version?
Dmitry: I believe the very first version, it was a three-month cycle to do that.
Andrew: Oh, not bad. The CMS program that you first launched, how long was that one?
Dmitry: The CMS?
Andrew: The previous project?
Dmitry: The previous project, because it was not as well defined, we probably spent a few months as well, but it was not a dedicated effort. It was more like, OK, you know what, let’s take a couple of people on the side while they all participate in the client projects, they have to take this product which we already have, this platform. And every software service company has a platform, right? And they have to create more of a package from that. So, that was kind of taking that package versus creating a new thing from scratch.
Andrew: OK. It’s been three months, you launched the thing. How do you get customers? How do you get people to even look at it?
Dmitry: There are several answers to this question, meaning that to get your first customers, you have to do whatever you have to do. Meaning that you have to do cold calling. You have to use your Rolodex. You go to your old contacts. You talk to them because they’re really critical for your product to get going. Because unless you have your initial customers and you start talking to them when you get better and better at understanding their needs, it’s very hard to keep improving your product.
So, that’s pretty much what we did because we also had our long-term strategy, and we had a bunch of other things. But, all in all, it was going back to my Rolodex, going back to some old clients and doing some research online and trying to send some emails, whatever. It was pretty random, but we didn’t need . . . of course, we wanted to get thousands of clients, but really we needed to get a handful of them to get going.
Andrew: How many’s a handful? How many do you think you needed in order to get meaningful feedback?
Dmitry: It depends on the product, but I would say that you definitely want, at least, a few dozen clients. Then, you can start seeing some trends. You can engage with some people because some people just use it and they will never give you any feedback. They’re too busy or whatever. That’s not their approach to life, but it you have, at least, a few dozen clients and you can definitely engage with them. I would say if you can engage with five to ten customers and start talking to them, then you can do that. I think . . .
Andrew: Go ahead.
Dmitry: I wanted to say that the essential aspect of when we launched the product, at the same time we launched our discussion forums, which we used for customer support and we used for, if you will, extraction there, feedback from our clients, not just answering questions or solving problems but understanding what are the needs that the problem is not solving. What do we need to give them?
Andrew: So, all you need when you’re launching, you think, is 24 to 36 users. Some of them will use it hard core. Many of them will try it and then just go on with their lives and not give you any meaningful feedback. Or, maybe, I could go broader. Maybe I could say less than a hundred people, fewer than a hundred people.
Dmitry: Yeah. I would say that, yeah, definitely. I think with fewer than a hundred people, maybe 36. I would say if you can get anything between 50 to 100 people to start engaging with your product and you make it very easy for them to do that. I see the mistake that a lot of companies make, at least, I think it’s a mistake, it’s that they come up with really complicated forms people have to fill out to try out your product. I understand where they’re coming from.
Of course, they want to know your telephone number so that they can call you and help you and follow up. Of course, they want to know where you live so that they can understand where the people are coming from, all that stuff. But, you know what, I’m a big believer that every field you add to your signup form, you basically have people, percentages of people dropping off increasing very drastically.
So, when we launched and we still had that, our signup form is extremely simple. We’re basically asking, “OK, what’s your name? What’s your email so that we can send you the password information and all that stuff?” We asked in the form, “What’s your organization name?” It’s not a mandatory field. And we ask what kind of organization are you. So, it’s an extremely simple form and people can go in.
Andrew: The fewer than a hundred people who first signed up, did you charge them or were they all free users?
Dmitry: It was free because, you know what, the way we built the product, we first built the product where there was no concept of any kind of payment. Then, we added the concept of payment in terms of our clients could use the payments to charge for events and membership. And then, we actually added our own payment system. So, that was added a bit later.
Andrew: I see, OK. And do you have specific examples of how you got the first users? Tell me a story about how you called someone or you reached out to someone or how you ended up with a customer? I want to give people a specific example.
Dmitry: Right. I have to admit it’s a bit hard to remember because it was four years ago. Let me think for a second. Oh, you know what? OK. So, I was a member of the Toastmasters Club, which is a great organization. I’m a big fan of them because they help people to learn public speaking skills. And I knew it was a huge pain for them to not have a website because every Toastmasters Club is pretty small. Typically, they have between 20 members to 50, 60 members, and there’s a huge turnover because people join and then they drop off and people move, whatever.
In our club, they always wanted to have a website. They came to me because I was one of the members, and I was probably one of the most technically advanced members. So, they asked me, “Hey, Dmitry, we want to build a website.” And I told them, “Hey, guys, it’s not really about building a website. It’s about what you do with the website after that.”
Four years ago, especially for small organizations, the typical route would be go to some designer and, maybe, it’s somebody who you know, whatever. And then, those people build a website for you, maybe, pro bono. Maybe it’s a nice looking website, but the problem is that you don’t have the tools to maintain your website. Then, it sits there. It becomes old and outdated and nobody uses that.
So, I came back to my Toastmasters group and said, “Hey, guys, I’m giving you this tool for free because I really believe that it will help you. And this is a tool which will give you a website and which will give you tools so that you can update it. You can post a schedule of your meetings and all that stuff.” And they’re still using that.
Actually, I have just met them. They attended our annual party here at Wild Apricot, and they were telling me that having that website made them one of the most successful Toastmasters Clubs in Toronto because, again, it’s out there. Most small clubs don’t have it. They have it. They update it. Anyway, that’s how I got one of our first customers.
Andrew: What a great example. I’m also a member of Toastmasters, and you’re right. They don’t know how to use websites or how to build one. They don’t have much of an interest in doing it. But for new members who are trying to check out a club and try to figure out which Toastmasters Club to belong to, they want a website.
Dmitry: You go to Google, right?
Andrew: Yeah.
Dmitry: You go to Google. You do a search and then you find a few clubs. And then, you find the Toastmasters International anyway.
Andrew: Yeah. You want to see the website, and you also want to see the website maybe as you drive over. You look at it on your iPhone or something just to see where I’m supposed to go exactly.
Dmitry: Right.
Andrew: Toastmasters teaches you how to . . . it’s a public speaking group, and I’ve been a member for a long time.
How about feedback? You said that you wanted feedback from your early members, and we talked about one way that you got a member. What kind of feedback did you get? Do you have a specific example of the feedback that you got?
Dmitry: Well, I think one important thing is to give people the instrument for the feedback. For us, the instrument was discussion forums and not only give people the tool but, more importantly, engage with people through that tool because, again, I’ve seen people who try to collect feedback through all kinds of forums, discussion forums. But a very frequent mistake is that people don’t engage with their customers, meaning that somebody posts a peice of feedback and it just sits there. If you’re a client and you posted a piece of feedback and you don’t really know what’s going on. Has somebody read it? Does somebody care about this? Is anything going to be done about this?
So, I spent a lot of my time engaging with clients. Every post they would post on the discussion forums, I would read. I would reply to them. We would look into this, and we would take this and we would map it against our product roadmap. And I still do a lot of that. For me, it’s not really important what was the specific point of feedback. I mean, I can go back to discussion forums and still find them. They’re still out there.
But, most importantly, is that the top people in the company, at least, people who are in the marketing roles and public management roles, they have to be there. They have to listen to their clients, especially for web-based software.
Andrew: Why do you use forums?
Dmitry: Well, there are really not that many ways you can do that, and the discussion forums, what I like about them is that it’s very transparent. It’s out there. Most people have been using discussion forums for a long time, so they know how to use them. And it’s transparent in the way that you can see who posted what and this is the replies. So, it’s out there versus, for example, email. When you engage with one customer and if you collect feedback through email, then people send you emails. You reply to them, but you know what, other people cannot join in the discussion.
So, I just found the discussion forums are extremely useful for that, and we still do that. Our actual customer service for technical support, we now have email by system, and people can do online questions, whatnot. But we still use discussion forums to facilitate our roadmap for the product development.
Andrew: Did you guys build your own forums, or is this an off-the-shelf program?
Dmitry: We used an off-the-shelf program. It’s called Community Server.
Andrew: Okay.
Dmitry: But there are many other discussion forums that you can use, from free ones, whatever. Again, the point is that you have to use that.
Andrew: So, here’s what I’ve got so far. You launch, first of all. You burn the ships. You focused on just creating your own product. You launched bare bones, didn’t even have a way for people to pay for events. You got users by going out one-on-one, in many cases, recruiting users. You told us the story of Toastmasters. You gave people a way for them to give you feedback so that you can improve the product. You added the features that asked you for, including payment services so they can charge for their events.
Now, let’s get to the meat of it. How did you get money? How did you implement the payment system?
Dmitry: Well, when we launched our bare bones first version of the product, it’s not like we said, you know what, this is what we launched and that’s it. We knew that the way we were going to work on the product is we’re going to do frequent releases. And actually for a long time, we used to do releases every three weeks, every month or so.
After a while, it became much more difficult because the product has become so much more complicated, comprehensive. And these days we do releases more like every two or three months. But for the first, I think at least for the first 12 months, probably longer, we were doing very frequent releases.
So, we already had this mechanism for doing those improvements, and then we had, if you will, our all own initial list of things we want to do. And we were using it weekly collaboration. And then as we were talking to our clients and they were saying, “You know what, we really need this. This is extremely important,” that would go into the ongoing prioritization of the list.
Sorry, I kind of strayed a little bit away from the topic.
Andrew: When did you start charging for it?
Dmitry: Basically, when we launched the product, we said, you know what, this is going to be a paid product. There’s no question about this because this is the model. And people who sign up for our beta product, they are going to have it free, I forgot whatever was their timeline we gave them, but I think like about maybe five months. But then, it’s going to become a paid product.
We spent a lot of time thinking about the pricing because there are different pricing models, and we also looked at an ad-based model. And you know what, now looking back, one important decision we made and we hesitated about this decision, we decided our main revenue source is going to be subscription.
So, our business model is driven by what people are paying for it versus creating free sites with advertising and whatnot, because right now with our run rate, that you mentioned, we also do offer free accounts. We have thousands more people using our free accounts for all kinds of purposes, but all of our revenue from those accounts . . . I just got a check from Google AdSense today, and that check was for $334.
Andrew: $334 for over how much time?
Dmitry: Well, for one month. 10,000 free accounts, I’m sorry, 10,000 free accounts.
Andrew: For 10,000 free accounts versus 3,000 paid accounts, which are bringing in $2 million dollars.
Dmitry: On an annual basis.
Andrew: On an annual basis. It’s give or take. We’re not giving the exact number we agreed before this interview.
Dmitry: Yeah.
Andrew: OK. So, wow. That shows the importance of charging directly.
Dmitry: Yes.
Andrew: Was there any pushback at all when you started charging?
Dmitry: There was some because, as you know, again on the Internet, especially a few years ago, there was a lot of thinking, you can have this free service, which is just ad supported. And also, open source was already making big inroads. But when we looked at this and we said, you know what, we know that to deliver what we want to deliver, it will take a lot of investment into product development. It’s going to take a lot of investment into customer service and all that stuff. And the only way we can make this business model work is we have to do this.
So, yes, there was some pushback and some people were saying, “Hey, guys, you know, I don’t want to use you because you charge for this, and I can use blah, blah, blah which is free.” And you know what, we watched a bunch of free software products just go away in six months, one year or whatever. And we’re still here and we’re still growing.
Andrew: I learn things from stories, which is why I took you through this narrative of how you got here. I know a lot of people in the audience learn from tips. So maybe you can give us a handful of tips that you have that you’ve learned from selling online, from selling memberships specifically?
Dmitry: Right. Well, I can tell you that, for example, for us right now the three main sources of new clients — pay per click, search engines, and client referrals. So, we can actually talk about them as they’re three separate topics, all kinds of different stuff.
For search engine optimization, what a lot of people, I think, misunderstand they think it’s mechanical stuff. Well, mechanical stuff is easy. You can add page titles. You can do meta tags. Anyway you can do all kinds of other stuff. But most importantly, you have to have good content that people are searching for. When we were thinking about this, our discussion forums where we’re engaging with our clients, that’s also, if you will, our search engine optimization tool because through dialogue with clients and having it out there in the open, people are searching for key words. They’re come into our forums. They find out about the product, and they come in to us.
Another example is we have created online help, which is pretty comprehensive. Again, the primary purpose of that is to provide online implementation for clients but also because it’s dense with the proper key words, that’s an excellent source of people searching for it rather than key words.
Finally, I’m a big believer that the way to be successful in any industry is not by just providing a specific set of tools, but then you have to go beyond that and you have to give people help and knowledge and best practices how to use the tool, how to use other tools. And that’s what we’ve been using.
We’ve been doing different things, but one of the more successful efforts in this area was our blog. So, we have Wild Apricot non-profit technology blog. So, if you go to Google and you search for non-profit technology, our blog will typically come up in the top five. Usually, it’s number one and number two after Wikipedia. It took us a while to get there.
And that blog, it’s not about Wild Apricot. It’s not a blog where we write how great our software is, but it’s a blog for people in the non-profit industry. It’s a blog where we tell them about the new developments in event registration software or how to use Facebook for fundraising, how to do this and that.
We do talk about our own product sometimes, but it may be only 10 percent of the blog because we have this resource, and we’ve been investing into building up this knowledge database. It’s become very popular, and it’s a big source for incoming traffic from search engines. When people search for information and answers, they find that and that’s also part of our strategy, if you will.
Andrew: Do you have one person who writes this, or does everybody write it? How do you get the content created?
Dmitry: We do have one main person, who is our main writer for that. So, she produces probably 90-95 percent of the content in there, yes.
Andrew: All right. So, that’s search engine optimization.
Dmitry: Right.
Andrew: What about pay per click?
Dmitry: Yes.
Andrew: How effective is that? Is that a major way of getting traffic?
Dmitry: Yes. One thing I would say about pay per click, it’s not static, meaning that it’s not a thing you can set up and just forget about it. It’ll keep generating your new clients. You have to monitor that very closely, and we’ve been lucky in that we found a very good provider, a company that has been working with us, who is actually helping us with our search engine optimization as well as pay per click.
This is a very involved process. So on a weekly basis we talk to them. On a monthly basis we have meetings when look very closely at all of the things that are going on at pay per click. Because of that, we’ve been going through phases. When we started off and it was kind of hard to find the right key words, to find those key words that would generate enough volume to us. Then, we found them and we were coasting along just fine.
After a while, our cost per click just kept creeping up, creeping up, creeping up. Okay. Then, we had done some hard thinking, and we made a lot of effort and we revised it and it went down a bit. And then, after a while, again, it started going back up. So, I see this as a never-ending process, and we’re always doing learning.
In fact, even though we’ve been doing pay per click for four years and a little bit, just in the last three months we found some new strategies in pay per click which have helped us to generate, by investing a little bit more, like 20 percent more into pay per click, we have generated 50 percent more new trial accounts for profit.
Andrew: What were you doing? Can you give me an example?
Dmitry: Yes. What we were doing is we have really targeted long tail key words. So, to give you a simple example, it’s sort of official but instead of targeting the words “membership software” which is very expensive and so on, maybe we would target, like, chamber of commerce membership software in Nebraska. Very long and because those phrases, you have to come up with lots and lots of them, and you have to do a lot of analysis of your search logs and a lot of thinking to do that because each one of them will generate a little bit. But if you do that, then your actual cost per click will end up way, way lower than if you just go after one big phrase.
Andrew: So, if I’m understanding you right, over time, whatever key words you pick, the price starts to go up.
Dmitry: It’s very common.
Andrew: And if profit goes up, because you end up getting more competition for those words, other people are bidding them up in Google, and so you have to go even further down the tail to even more long-term terms.
Dmitry: Absolutely. In most industries, it’s a known fact that your cost per click has gone up a lot in the last few years, and that’s not going to stop because there are still lots of people who don’t do online advertising. So, that’s just what you have to plan for.
Andrew: Mike in the audience is asking, “Doesn’t it cost more since bidding on chamber of commerce and membership software, since you’re bidding on membership software and chamber of commerce combined?” But, no, there’s less bidding on those four words together to use that as an example.
Dmitry: Yes.
Andrew: So, you’re not competing with other people for that key word.
Dmitry: Yeah, there’s a lot of technical stuff there. In a nutshell, when you’re bidding for a specific phrase and there are other people who bid on, like, some sub-set of key words, it will still show up in results. But because we bid on those longer key phrases, we can bid lower and we can still be included in results.
Andrew: What about referrals? What do you do to increase referrals?
Dmitry: Well, in a nutshell, first and foremost, you have to serve your clients. You have to keep your clients happy, meaning that you have to provide them with a good product. You have to service them. So, it’s not anything people don’t know, but most people don’t realize how important is that.
By engaging that and what we have also been doing for quite a while now, in addition to those discussion forums, twice a year we’ve been doing client surveys when we send out questionnaires to all the paid clients and ask them, “OK, what do you like about the product, and what do you hate about the products? Would you refer us to others? How would your rate us on this 10 point scale versus I hate it at zero to I recommend it to everybody I meet.” And we always track that.
What happens when we do those client surveys is that the last one we received 345 answers, and I actually went through each one of them and replied personally to every person who had specified their email. This created this connection with people, and they are willing to go an extra mile for you. So, that’s one thing.
I’m also a big believer in that you have to remind people that you’re out there, which means that you have to find a way to connect with them, a way which is not too intrusive to them. But, you have to give them reasons to think of you and remind you that you exist and also keep asking that. You have to do that.
So, one example is we have this fan page on Facebook, and this is where we have a lot of our clients signed up and we post, maybe, once a day to three, four times a day, little things about what’s going on, maybe about some case studies, about clients and about some new things going on in the product and so on.
And this gives people reason to, “Oh, yeah, Wild Apricot. It was on my Facebook stream.” So it reminds them. “Oh, yeah, you know what, I was just talking to John and he’s doing this, and you know what, I should mention Wild Apricot to them.” So, it gives them reasons.
Andrew: Okay. I saw that as I did the research for today, and it helped me find your website. For some reason, I don’t know why, I ended up on Facebook before I ended up on your website. It was a big help. I know why, because you have it in the sig file of your email.
Dmitry: Right.
Andrew: And it’s a bigger link, in fact, than a link to your website.
Dmitry: Right.
Andrew: Why? Why does the sig file of your email have a bigger link to your Facebook page than your own personal company page?
Dmitry: I would say it’s still experimenting. If you looked at my signature a few months ago, it would be something different. It may be my Twitter account. It may be something else. All in all, my personal signature is not a big marketing tool, but we do find that being active on Facebook. And right now, we’re actually doing more and more stuff on LinkedIn. We just started there, but we’re seeing that those two tools are an essential part of our marketing strategy, doing outreach through those websites and communities.
Andrew: I’ve got a couple questions here from the audience. First one from Andrew S.G. He’s asking, “What’s your conversion rate like from Google Ads? Twenty-five clicks equal one subscription, or is there another ratio?”
Dmitry: The way we look at this is we know from all our different channels, we know what’s our average cost to acquire a trial account. So, basically, we take our marketing budget for the month. We look at how many trial accounts we have. This is our benchmark. One of our targets is to always keep bringing down that cost of a trial account.
And on pay per click basis, what we do is we say, some people pay per click and then our conversion is such and such. So, then we calculate what’s the conversion to trial account from our ads and we do that because for some key words, which are more relevant, like, let’s see, membership management or association management, our cost per click might be, I don’t know, $10.
But then, a lot of those people do convert into trial accounts. And on some other things like non-profit website builder or even things like free non-profit website, our cost per click might be pretty low, 50 cents, but the conversion to trial accounts is much lower.
So, we actually look at cost per trial account. Actually, in recent months, we try to go even further. What we do is that we now know our average conversion rate from trial accounts. Well, we’ve known it for a while, our conversion rate from trial accounts to paid accounts. Then we try to calculate what’s our acquisition cost per paid customer.
And, of course, it makes it even more complicated because then it’s not the same for different key words, for people coming through different sources, like pay per click and the search engines and client referrals. And then, you have to factor all of that in. But, then when you can do that, when you can calculate what is your current average customer acquisition cost, and then you benchmark all your marketing efforts against that, this is the best way to go.
Andrew: I talked to the founder of Webs.com, and he said that he had to create his own analytics, his own conversion funnel just so he can keep track of where people are coming from, how they convert into trial account users, and at what point they end up buying and how much they end up buying. He wants to know all of that and tie it all back to each source of traffic.
Next question comes from Anthony Serra. He says, “Do you track conversions from Facebook?”
Dmitry: We do. We do track visits from Facebook because we have been doing this for, maybe, a few months. We don’t have a lot of traffic yet, so in terms of conversion to trial accounts, they’re really a handful. And also what happens, we’ve seen that a lot that people mention us to somebody. And the way we see a lot of client referral traffic is that they show up in our search analytics as people searching for Wild Apricot.
And you know what, when we see the people came to our website, they’ve been searching for Wild Apricot with things like Apricot software, we know that somebody told them because if you’re looking for membership management, then we distinguish the traffic between what we call non-branded SEO and branded SEO. Branded SEO is mostly, basically, all kinds of referrals.
Andrew: Let’s see. One last question here. How did you choose your name? Why Wild Apricot?
Dmitry: On the Internet, it’s extremely important to have a good domain name and make it easy for people to find you online. And we looked at a bunch of people doing some similar stuff. A lot of them, they had very similar sounding names. The names, like, Membership Management blah, blah, blah, Super Membership Management. And after you look at five of them and you try to recall which one you looked at, it’s impossible.
So, we said, “You know what? We want to use a different name. Yes, it will not have anything to do with our industry, but we want a name which will be easy to remember, which people will be able to just type into the search engine and get right to our website. We won’t have a lot of confusion and so on.”
Andrew: I see. All right. And that’s better than having a descriptive name.
Dmitry: I think it’s easier to do that with a different name.
Andrew: OK. I started off this interview saying that you have some customers who I call rock stars. People are tired of hearing the name rock star used to describe super stars. It’s used to describe leaders. But regardless, these people who are the ones who have the most members, who get the most signed up. How do they do it? What are some keys that you’ve learned from them?
Dmitry: I think that the people who have people dedicated to follow up and who are not just waiting for people to come to their website, but people who are proactive. People who try out different strategies. Some people use an affiliate networks. Some people focus on search engine optimization.
But most importantly it’s that you have some people who are in charge of, who are responsible for driving that to your website, who are responsible for handholding new members, who are responsible for engaging with them so that they can start using your website and become an actual part of your organization so that they renew in the future and all that stuff. So, for me it’s not about the tool, but it’s more about the process and about people who are in charge and lead the process.
Andrew: Do you have someone who does this especially well, who you can talk about here?
Dmitry: Yes. I think I would mention one of our clients, Tera McHugh. She runs an organization called, I forgot the exact name, but it’s an organization of women entrepreneurs. So, she’s building a community of women engaged in their own businesses and building their own businesses. And she runs a business, a membership business, with multiple chapters which help those women. It’s basically like a support group and community for them.
Yeah, we actually have recorded a webinar with her recently, and it can be found on our website when she talks about some specific strategies she’s using to find new members to engage with her members.
Andrew: Do you give an example of one thing that she does that you can talk about here?
Dmitry: Not from the top of my head, sir, no.
Andrew: All right, fair enough. Webinar, I see that on your website and I saw it in the Google search results for your company name. How effective is it?
Dmitry: Well, I think it’s effective, and I think it’s going to be more and more important for us because, again, in web software space we have to rely on self-service. It means that people come to us, and some people contact us and say, “Hey, guys, this isn’t our field. We want to do a presentation for our board of directors.”
And most of the times, we have to say, “Guys, we love you. But, you really have this trial account. You have this whole line of communication. You have these recorded videos, and that’s pretty much it.” We have to deal with lots of people. For example, on a monthly basis, last month we had 1,500 trial accounts, and it’s not really feasible for us from our business model perspective to do that.
So webinars, it’s a way for us to explain the product and talk to all of the people at the same time. We’ve been doing them on a monthly basis for some time, but we are going to great increase the volume of webinars we’re putting out in basically the next few months.
Andrew: How are webinars more effective than just having a video online or just writing a series of blog posts or even creating some PDF that people can download or the tour? Why? Why something so high touch?
Dmitry: It’s a good question because, initially, we thought we have online help. We have the recorded videos, so that should be enough. But when we talked to our clients, we found a lot of people who said, “Well, I want to listen, and I want to be able to ask questions, and I just want that, if you will, experience of listening to somebody and having to feel that this is a personal interaction.” I will say that there is a portion of people that want that, and you have to give that to them.
Andrew: Okay, I see. Yeah. There are some people who, even though they can buy the products online a little bit cheaper and have the convenience of having it delivered, still prefer to go out to the store, touch it and talk to somebody about it.
So, when somebody signs up for a trial membership, they get added to your database, and you then go back to your database and you say we’re going to have this webinar. If you want to join, come watch us live or download it and record it afterwards. That’s the way you bring people in.
Dmitry: What happens and when people sign up for trial accounts, they receive a number of emails from us when we highlight all the things that we have that can help them to make actual use of the trial account and, hopefully, convert to a paid account. It’s a series of emails, and we talk about our free customer support. We talk about all the videos, about online help, about webinars, so all the things and tools we have. We try to build this funnel to engage and convert them.
Andrew: I see someone from Fresh Apricot is in the chatroom here on Mixergy and is saying the person who we talked about, her name is Tera and she’s with the Association of Women Entrepreneurs.
Dmitry: Right.
Andrew: All right. So, I think we got a lot of information here. Is there anything that I missed, anything that I should have asked about?
Dmitry: Well, I think that for web-based software, one thing I want to mention is that basically you have to focus on the user experience, and I think the success of people, like 37signals, is a big testament to this fact. It’s that in the old world, you had software and then you had sales people who would sell it and push it down your throat and convince you, by any kinds of means, that yes, this is the software you need.
And people who would buy the software would not be necessarily the sort of people who would use the software. With web-based software, you have buyers who have direct access to your software, to many other pieces of software. So, the user experience delivered by your software and also by your team, by the overall user experience around your software, is a critically important factor.
So, the easier you can make it for people to sign up, try your product, use your product, talk to you, engage with you, the higher your chances are to be successful and get them as a client.
Andrew: All right, well said. Jordy in the audience is asking, “Did you closed down the service business?”
Dmitry: Yeah, absolutely. We closed it down within six months, pretty much.
Andrew: Okay. All right. Well, thank you for doing the interview. Anyone who wants to check out the website can go to . . .
Dmitry: WildApricot.com.
Andrew: WildApricot.com. They’ve got tons of videos. So, you don’t even have to create an account. You can just watch the videos and see how to create an account. You can tape a webinar. You can see the tour. You can see the blog posts. I’m trying to think of all the different ways that you explain the product, tons of different ways which was helpful for me when I was doing the research quickly.
So, thanks for doing the interview.
Dmitry: Thank you, Andrew. Good talking to you.
Andrew: Cool. Everybody out there, go and use some of these ideas and come back and tell me what you’ve done with them. I love getting feedback from people who say they got one little idea from an interview, that they used it in their business. And then tell me what happened to it. So, come back and tell me that.
I’m Andrew, and I’ll look for your email. Bye everyone.
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