Hiten tells us why we need to stop looking for shortcut answers, and instead do the hard work of finding our own solutions to growth. He also refocuses us on the user, and warns us that our growth hacks better be a benefit to them.
→ He is a co-founded Crazy Egg and KISSmetrics, two B-to-B analytics companies
→ He was an early proponent of growth hacking and helped popularize the term
→ He and his co-founder started a marketing company in 2003 and used analytics to help clients
→ He sees many companies make the mistake of not understanding the data they collect and not using it to make informed decisions
→ Companies tend to focus too much on the tools and not enough on the actual goals and needs of the business
→ The biggest mistake is focusing on the capabilities of the tools rather than the needs of the business
→ He recommends using both qualitative and quantitative data simultaneously and not relying on one or the other
→ Both qualitative and quantitative data are needed to figure out what to do next and to understand why people are doing or not doing certain things
→ A good process for using both effectively is necessary for successful growth
→ And a whole lot more
Bronson: Welcome to another episode of Growth Hacker TV. I’m Bronson Taylor and today I have a hidden Shaw with us. He’s thanks for coming on the program.
Hiten: Yeah, my pleasure.
Bronson: Yeah, you’re all over the place on the Internet. You do these kind of shows maybe as much as anyone. But it’s good because the advice you give is always super valuable. But let me tell people about you a little bit. You were one of the early proponents of growth hacking when it first kind of became a thing. You actually helped coined the term and popularized the term. And you’re the co-founder of two B-to-B analytics companies, Crazy Egg, which was Bootstrap, and then KISSmetrics, which was VC backed. So let’s start by talking about analytics, because you’re obviously drawn to analytics for some reason starting two companies in that space. So why are you drawn to analytics?
Hiten: Yeah, it’s a good question. You know, part of it is accidentally as many things start out. My co-founder and I had a marketing company helping other people do marketing that we started in 2003. We ended up having to use analytics to help them, whether it was implementing it all the way to helping people use it and understand it. And so, you know, we we actually tried building a lot of products at that company like that. We wanted to make our own products and sell. And we ended up just getting lucky with the analytics one, which happened to be crazy and lucky meeting people like this. And it’s one everyone gravitated towards. And this was before a lot of the strategies existed on growth and product development and things like that that are pretty popular now.
Bronson: Yeah. Now being that you run two analytics companies, you see the good and the bad. With analytics, you see companies implement their analytics, use their analytics, study their analytics. What are some of the biggest mistakes that you see companies make, maybe with Crazy Egg and KISSmetrics or maybe just with analytics in general? If you could just tell companies anything about the numbers, what would it be?
Hiten: Yeah, I’d say that there’s there’s generally and this is just with most software that B2B. The until you have experience buying the wrong software for your company, I don’t think you really figure this out or you get great advice, but basically people tend to focus too much on the tools. So it’s like it’s too much on the how am I going to get this done? Not enough time spent on the what am I actually trying to accomplish and why? Why is it important? And so the biggest mistake I just see is like everyone focuses on too, too much of the, like the tool itself and then also sometimes too much on the like what the what and what I mean is like a lot of times it’ll be a big feature list, right? And then you’re getting compared or they’re comparing tools based on features instead of based on actual needs that organization has and might have in the future and then making a very deliberate, you know, informed decision. So I think the biggest mistake is just focusing too much on the tools and the capabilities of the tools versus the needs of your of your business.
Bronson: No. Sounds like great advice. Let me ask you something else with analytics. You know, analytics is very much numbers driven in most cases. How do you balance the qualitative with quantitative? Is it a matter of kind of the phase of the company? At first you don’t have a lot of data, so it has to be qualitative and then you move into more quantitative. Or are they kind of just two things that need to be happening simultaneously all the time? How do you view that mix?
Hiten: Yeah. I my approach is always to do both at the same time, and my approach is always to recommend it. But knowing again, knowing what tactic you want to use. So analytics will tell you what’s happening, whether it’s just what’s happening in general with like, let’s say your customers or your users. And it’ll also tell you how impactful something is that you’ve done, like an AB test or a feature improvement or something like that, but it won’t really tell you. One analyst I’ve never seen analytics tell you what to do next. Like, just like it’s not analytics, it’s just data. It’s not designed to tell you what to do next and we can debate that. But in general, you have to think that a qualitative information helps you figure out what to do next. It also helps you figure out two categories of things. It helps you figure out why people are not doing things and helps you figure out why people are doing things. And so I’ve never seen a successful business grow without doing a combination of both. I don’t know if it’s a 5050 mix. I think it really depends on the company and how they think about things. But what I do know for sure is that it’s not. It’s stage agnostic. You always need both and you always have to have a good process of how you’re using both effectively.
Bronson: Yeah, something you just said, kind of a light bulb go off my head. I can imagine a situation where you have a lot of data and something bizarre is happening or something that you don’t want to happen is happening, but you’re not really sure why. And then one email from a customer complaining could make sense of a lot of data and be like, Oh, that’s what’s going through their mind. And that’s why these 500 people are not doing what I want. But the data alone was just data. The one anecdote might shed light on that data. Is that kind of situation you’re thinking about there?
Hiten: Yeah, I mean, it could be one anecdote. I tend to try to be very proactive about the qualitative stuff. So I think support channels, the way you describe it is definitely it’s in the lower stages of maturity as an organization around sort of optimization and growth and product development. But at the end of the day, if I get stuck and I see that the data shows one thing, but I really want the behavior to be something else. But it’s not. The customers aren’t doing that. I will really try to figure out why they’re not doing that, especially if it’s really critical to the business to get them to do that. So, you know, in a way, this is the difference between data driven and being data informed. It’s a data driven would be like I’m looking at the data, I see it and I accept it as true data and formed is more like, I know where we need to go, I know where we have to go. I know what’s important to the business. I know where if this if the customers don’t do this where we don’t have a business. And so I’m going to keep trying, you know, and kick out of a local maxima, if you want to call it that, and make it so that this actually works, which is where you start making continuous attempts at the same thing in different ways. And you can’t just do that with data. Yeah. Like, like quantitative data I should say.
Bronson: Yeah. And that’s where that idea of being proactive comes in that you just mentioned. So instead of just waiting for the complaint and customer support, you might go search out that particular segment of your user base and just ask them or talk to them or do something else more systematically. They just waiting for it to happen to make sense.
Hiten: Yeah, exactly.
Bronson: Yeah, that’s great. Now, like I said in the intro, you’ve experienced both bootstrapping and being a VC backed companies and in both cases are successful. And I think that’s kind of rare. We’ve had people that have been one or the other, but to have both Bootstrap and VC and both do well is pretty awesome. So I want to talk about financing a little bit. What’s the primary difference in those two approaches? What’s the primary difference from your point of view of having VC money and not having VC money?
Hiten: Yeah. Um, I like saying self-funded. Um. Okay. So there you go. Yeah, it’s a pet peeve.
Bronson: I don’t have a find. You. Why is it.
Hiten: You did not offend me at all? It’s just a pet peeve, so I try to get that in there every time. Uh huh. I don’t have boots and I don’t have straps on it, but, um. But yeah, it’s self-funded. Um, let’s see, I’m actually. I have both at the same time, so that’s what makes this really interesting. It takes a lot of discipline to do both, right? Either one? Mm hmm. If you’re self funded. You have a lot more constraints in resources or ability to get resources, especially early on. So I don’t want to say this, but like, I think this is a good way to describe it. If you’re self-funded, you always you figure out a way to fight for every penny. Right. If you’re venture backed, you have to figure out you’re not fighting for every penny. What you’re actually doing is, for lack of a better term. And again, this can get murky and there’s gray area, but you’re actually more interested in fighting for market share. Mm hmm. I’m not saying that you do it unprofitable or anything like that, but like you have to build a big business. If you take anyone’s money, especially anyone’s money, that’s an investor. That’s that’s what they signed up for. I hope you signed up for that, because if you did it, then you’re just doing it wrong. You might as well have a self-funded company. And in today’s world, you can do either one pretty successfully. I mean, it’s not. Yeah. I mean, in the self-funded company, we find different ways to grow. In the venture backed company, we find ways that self-funded companies do. But we also have the opportunity to use resources that investors gave us. But that comes at a cost. The cost is the way you think about it is not about fighting for every penny. Yeah, it’s the opposite of that.
Bronson: Yeah. Based on the answer. Should should market size be the primary reason why you do or don’t go after VC money? If it’s a huge market and you know, you can take a big chunk of it and, you know, you can basically make a lot of money. Does that mean. All right, let me think about VC, where if it’s a smaller market or a market that you don’t think you can capture, you just should avoid VC money. Is that the main thing that you kind of go into it thinking about?
Bronson: So what’s the main thing then? When should you seek it out?
Hiten: I don’t I don’t know anyone that knows how to determine market size anymore. Mm hmm. Because markets are created a lot of the time. Created, meaning you come in, you’re a wedge, your little tool, and then all of a sudden, you have, you know, I don’t know, what, a million bucks a month in revenue. Right. And then you’re it’s not so small, but it’s not huge yet. Right. And then you have to figure out how to grow it. And I really do believe everything big starts really small. So I don’t think it’s market size. I would say it’s more it’s more about thinking about as an entrepreneur, as somebody starting something. What what do you what do you see your future self being happy with? Mm hmm. And those two different paths lead to different types of businesses. For example, if my business Crazy Egg had investors, all the money we made every month would be poured back into the business. Mm hmm. I would not have a choice. I would get a very good market salary, you know, but it would be market, whatever the heck market means. And the way we made decisions would be focused on hypergrowth. Right. How do we grow as fast as possible? We have board meetings every month, quarter, depending on how it’s set up. And we’re asked about our plan and our growth. Right. I’m not saying it’s a bad thing, but that’s the future you’re looking into if your venture backs, if you’re self-funded. I believe. Well, one, I think you can make really critical business decisions really fast compared to venture back. Believe it or not, you might not be able to change the turn on a dime because you don’t have enough resources to make like bets that are like like for the next like like bets that play out in a year. Mm hmm. Sometimes it’s smarter, though, to be able to not have to think, not have to even entertain the idea of making a bet that plays out in a year. Instead of all your bets are playing out in 3 to 6 months or less, depending on your scale, as you grow, you’re more disciplined about I can make a bet that’s, you know, a year out in the self-funded side. Well, I think in venture back, you’re actually always trying to think more about the future, more about growth, and that that sometimes makes it harder to think about now and the next few months. And and so my my thought process would be what would you be happy with as a as a as a founder, as an entrepreneur? Is it something where you want to have an organization that has thousands of employees as fast as possible? And that’s how you view success for yourself? Or is it that you just want to make money? Mm hmm. Right. And you want to help people. B-to-B is always about helping people, helping other businesses in my from my viewpoint, because you’re solving problems for them. So is that just all you’re in it for? Which is like, help people make some money, you’re happy if you can feed your family and a few others, you know what I mean? And then some. And then these days I think, you know, it’s a B2C. You can start self-funded, but you end up having to get venture back just because you end up having to feel growth and and fund growth by growth. Actually, fund growth is the right way to put it. So, you know, it’s just about your future yourself, I would say, and how much you could predict about what would make you happy as a human being, as a person.
Bronson: Yeah, that sounds like awesome advice. Let me ask you, which has been most rewarding for you? Maybe. Maybe you can’t pick one for political reasons. I don’t know.
Hiten: But no, no, I’m not political. I don’t play politics. I don’t even really think about politics too much. So, yeah, I’m not. I’m not. Yeah, I’ll just say it like like I feel it. Both have their pros and cons and I’m really, really happy and I get a lot of pleasure in being able to execute on both. Mm hmm. Like, I wouldn’t have anything else at this moment. And what I would just say is, I coach a lot of entrepreneurs when they’re in that sort of crossroads. And help them think of it just the way I described it. And that’s why the best thing I can do. So me personally, I think I like both. I like having both. If I just had one, I’m not sure if I’d be as fulfilled.
Bronson: Okay, so maybe you’re a unique individual that kind of wants both in its own way.
Hiten: I like to learn. If I didn’t have a venture back company, I wouldn’t be able to personally learn about that. And I wouldn’t feel very good speaking, not just from experience, but being able to advise or mentor our coach. Somebody going through either one. Now I can do either one and it’s really exciting, to be honest, because it’s rare for someone to see both sides and be able to describe both sides in a very sort of thoughtful way. I haven’t even heard people describe this stuff that well, and I seek that out. The reason I seek that out is I like helping other people. This is one of the reasons I got into analytics in a way, is because it’s about helping them measure their business. So, you know, that extends to almost everything I do now.
Bronson: That’s great now because this is growth after TV. We have to talk about a recent slide deck that you put together that was called B2B distribution hacking. And in that slide deck, you kind of focus on five things that can be used for a B2B company to get distribution. So walk us through these real quick. You start with integrations. What do you mean by that?
Hiten: Yeah, let me let me add a caveat, which is I did that at this unsexy conference that’s run by 500 startups. I think last year I wanted to do something new, and I wanted to do something that I thought I didn’t read about. Mm hmm. And so that’s why I did that. I think there’s a lot on this topic, and I’m happy to go into it right now. Yeah. Um, but at the end of the day. The best distribution hacks are really aligned with your customer base and your product. And so I think they have a lot to do with either helping you get to scale and growth or helping even themselves get to product market fit for some reason. So I’ll start, she said. Integrations. I look at integrations like if somebody signed up for your product and then, you know, these days off is a big deal and all that. So if they authenticated with this third party service, can you make their experience better, faster, better or better, faster, which is two different things. What I mean by that is this integration allows you or your product to push information to the other system or pull information from the other system and make your product that much better faster. I keep saying faster because anybody that understands optimization and funnels and even growth hacking realizes that. The time it takes someone to do something is actually really critical. Or the time from one step to another step is critical for you and critical for the business or critical for the customer and the business. So integrations really should be about how can we make our product experience better? How can we also create stickiness by the integration stickiness, meaning people are more likely to stay because we’re integrated with the other things they use. So that’s what I that’s how I look at that. Yeah.
Bronson: And then the next one you talk about is work emails and like you said, you were trying to hit on new things. This is one I hadn’t really thought about until I went through your slide deck. So what do you mean by work? Emails?
Hiten: Yeah. So if you’re a company and you’re reliant on if you’re a product and your products are reliant on having as many people in a company use it. So the classic example is Yammer being a communication tool. They kind of created this idea, I think, and popularized it is you don’t ask for just an email, you specifically ask for the person’s work email. So you pull out the domain and you add them to their work group once they confirm their email from a link that you send them. Right, like a confirmation email. That’s the whole process of this. I didn’t see as many companies doing it at the time. I think there’s way more categories of B2B products that could do work email that don’t exist today. Another example would be and this is an integration and work email server sort of into one of integrating much more into Google apps and Google Apps. Marketplace sort of gets you both in one shot like you can. If someone authenticates Google Apps, you have access to other contacts if you want it. And if they give you that access. And Google hasn’t got really crazy about granularity there. So if the app asks for it, they can either decide to give it in five other permissions or or none. Right. And so most people tend to just go through it, even though, you know, some people complain. But at the end of the day, if they understand that you’re products valuable within an organization, they’ll do it. So working emails, essentially that idea.
Bronson: Yeah, I that’s great. Like I said, I hadn’t really thought about it. I mean, despite Amr doing it, I never really thought about the process of pulling out the domain, adding to a work group, and how seamless you can make that for the end user. And yet how powerful would be on the back end?
Bronson: That’s right. The third one is embeds. What do you mean by embeds?
Hiten: Yeah. Embeds are classic examples. Are YouTube plugging into MySpace and, you know, basically growing because of that. Another example, which is actually a shirt I’m wearing, is a SlideShare sort of thing.
Hiten: Yeah. Yeah. I am an advisor, actually. I still am. Even though they got bought by LinkedIn. And so the work email one I’m sorry, that embed one is the idea that a user create something or view something and feels compelled to embed it on their own site, on their own profile, depending on the context. I think SlideShare is B2B at the end of the day. Like that’s the people that use it the most are business people, even though consumers consume stuff from it, and they’re probably a classic embed strategy. One other example would be LinkedIn, the fact that they have sharing buttons. I would hit that right in the embed strategy. Mm hmm. So that’s the way I look at this.
Bronson: Yeah. And then the fourth one is powered by I’m sure we’ve all seen these in other little powered by widgets and things. Is that what you mean by that?
Hiten: Yeah. When you say it’s powered by something, right. That’s pretty simple. One example a lot of people might not think of, so I’ll give that one is how did a company like User Voice grow to be very large? You created essentially a subdomain on your site if you wanted to order a subdomain on their site. So it was like crazy. I got user voice dot com or you know, vote dot crazy dot com or some crap. You knew it was powered by user voice if you ever used it because they had a bottom right thing or something. A lot of the support companies, Zendesk, the desks they all use powered by when you put it on your support site, even if you’re paying them a decent amount of money, there is no white labeling.
Hiten: So powered by is huge.
Bronson: Yeah. I mean, that’s something to keep in mind for people listening as well is just because somebody’s paying doesn’t mean you have to remove all branding. They can pay a good amount and still put in branding because they may not mind and it may not matter. Right.
Hiten: Yeah. And I wouldn’t say they may not. They just don’t. And if you can make the experience better, like. Yeah, I’ve never. Yeah. Yeah. People are used to that. People are used to getting bad debts. Mm hmm.
Bronson: Because I think sometimes the approach marketing, if you’re a purist, you get some very weird ideas about what should and should not happen when people. Don’t care. Like you said. And so you might as well use it as distribution and not be on some high horse for no reason.
Hiten: Yep. I’ve been there, so. Yeah. Totally agree. Sometimes it just takes your own experience to realize that. Wait, we could grow faster if we let that thing stay on. Yeah, exactly.
Bronson: And then the other last one is free stuff. Yeah. Walk me through how this is a distribution hack and not just a gimmick. That doesn’t matter.
Hiten: Yeah. So, you know people smarter than me about growth. You know, I have said like basically the the biggest thing you can probably affect in growth. And again, this is you have to really see it to understand this but is top of funnel so is more traffic in that’s like the number one lever for growth, which is more traffic. And yes, you need a good product. Yes, it has to work well and all that crap. But at the end of the day, the biggest growth driver is top of funnel. So free stuff, especially B2B gets you top of funnel that you might not be thinking of because you might be. And I don’t even mean freemium. I think freemium is a B2B distribution. I don’t know if I like calling it a hack because I think it’s more embedded into the whole organization. If you do freemium, what I’m talking about is like greater e-comm. So the guys, the folks at HubSpot came up with this thing that’s a marketing grader. You put in your URL now you now actually they’ve iterate a little bit. You put in your URL and your email because they’re probably trying to grow emails, free emails and you get a grade of of your sites. You might even be able to get a grade of your site against your competitors. And because it’s marketing related, those numbers are always changing. So you always want to like, you know, if you’re if you’re a marketer, there’s a lot of vanity in your life. So you do always want to come back and look at that crap. So that’s probably one any marketer can understand when they look at it. That’s why I like giving that example. The folks at New Relic built like I think it’s called RSI or something, but it’s like a speed index for sites. They also did something interesting the other day where on a landing page, they they they put a game in on a landing page where you feel like squash bugs with a little spaceship or something. I didn’t really play it. I was on my phone. I wish it worked on mobile, but anyways, whatever, that’s their problem. That that’s just kind of stuff that you can use to increase top of funnel. There are a lot more examples, but that’s the general theory.
Bronson: When I read free stuff, I’m thinking a free t shirt, a white paper, but you’re thinking of like a tool that you might actually charge for you just having to make it free.
Hiten: I only care about products. Yeah, I don’t really. I think t shirts and shit are. Only good, I think t shirts and helicopters and stuff like that because there’s the company I just mentioned, New Relic, that gives them away. They are a great hack to get people to implement. And if you’re factoring it into your cost of acquisition, you’re fine. I’ve just seen people do it for the wrong reasons because New Relic does it and they don’t understand.
Bronson: So now thank you for that. Now, as I was going through your answers, I came across some of them that really kind of stood out and one of them was around email. And you listed off a number of things of advice around email marketing. And I want to go through this a little bit. One of the things you said on there is that the best open rates are you found is it’s 6 a.m. Eastern Standard Time. Any any more commentary around that? Do you know why that might be? Or is it just through testing? That’s what you found out. Any other thoughts on that?
Hiten: Yeah. Yeah. So I’m looking ahead a little bit. So you’ve got this question, you’ve got another question about pricing. Let me start with my disclaimer and then we can get into this. Everyone loves trying to. Learned something without doing it themselves. Hmm. And what I mean by that is they want to know the benchmark. Mm hmm. What should my home page sign up for AP? What time should I send my email? So it’s really great. And it gets a lot of attention. Like you found them. Both of them. If you talk about best practices. Mm hmm. These days, I would say there is no best practices and there are no standards. What really matters is how much you understand your customer and what works for you and what works for them. And so when I say the best opening rates are at 6 a.m. Eastern, it’s based on data that’s aggregate across a ton of businesses. And I can make it up for you why it works at 6 a.m. Eastern. So if I were to make it up. Right. Because you asked. Well, people are just waking up on the East Coast and it’s a safe time because you’re not missing the East Coast or you’re not missing people that would already be awake. And this is just us only just to entertain it. But the East Coasters are just waking up. The West Coasters will wake up in 3 to 5 hours. And so you don’t miss anybody? Mm hmm. That being said, if someone, the West Coast folks or more sort of west, I guess Western Hemisphere, western side of the US, wake up and you’ve sent it at 3 a.m. and other people had started sending it at 6 a.m. and stuff. You get kind of screwed. The bottom line is the right way to do that is figure out what works for your customers. But more importantly, how deep can you segment your user base? So at 6 a.m., no matter what what their what their time zone is, this is a shit I don’t see that makes me really upset at anyways. Makes me upset just because I’ve seen what happens when you add a little bit of this like segmentation in there or customizations. Oh it gets so good. So, you know, you’ve probably got more questions on the email crap, but at the end of the day, it’s micro segment. It’s small groups of users optimizing for those small groups. But across your whole user base, where you start really seeing a lot of benefit instead of this generic BS that someone like me might tell you just because you would like to hear it.
Bronson: Yeah, that’s great. I’m glad you’re being honest. I mean, that’s what this audience needs to hear. Yeah, well, I do have some more questions about email, and I’m going to ask them, even though you could make up, you know, commentary, that’s not totally accurate. But I’m going to ask the rest of them only because they’re not as specific as what time to send it. There’s general principles that are a little bit bigger for the rest of them. One of them is you say that the click through rate only drops slightly when you send more than four a month. Now obviously is the number for who knows, maybe it’s six, maybe it’s three, maybe it’s two. But there’s a principle there that click through rates don’t drop as drastically as we think they would when we increase the frequency. Is that something that people can learn about email marketing?
Hiten: Yeah. It really depends on your on what you’re sending and the quality of it. Mm hmm. So if you if it’s your birthday and you’re getting all these likes and you get an email for every, like, from Facebook, you’re probably like a not interesting. I’m not going to click it. Right. But if you’re getting, let’s say 100 people wish you happy birthday and they’re actually messages. Mm hmm. But then you start getting comments on them, or there’s some interesting ness that’s happening there, and you’re getting an email for all of those. You’re going to click on all of them and find all of them very valuable. So so that’s an analogy I would use here, which is like if the quality of the what you’re sending and the content is really high, you could send a ten times a day and and people would eat it up, so to speak. Mm hmm. So to me, it’s not a frequency issue. It’s more of a are we sending enough quality? The way I think of it in the way I describe it to people is are we sending enough quality emails that people are willing to open them and click on them? Mm hmm. And if we’re not, then we shouldn’t be sending that many email. If we think there are ways we can do that, we should test sending more email with some segments of our customer base to see if the C tr does drop. And so most of the advice on all this stuff is test it yourself, but I can help you think about it, at least with these questions on how you should think about it. No, that’s how I would think about it.
Bronson: I mean, you know what you said about quality, it changes the discussion now. It’s not about how many where’s the boundary should we cross it. It’s is there quality? And then let’s test it with quality as the primary kind of axiom and then decide what works best for our business based on that. So it changes the discussion which is which is what we want right now. Now, the other thing you say is that the best click the rates are with new subscribers. So again, they need to test to see if that’s true for their business. But assuming it is true, what would you do with that information knowing that click the rates are good with new subscribers?
Hiten: Yeah. So a lot of this has to do with the purpose of the email and the quality and the content, which is all related. So I would say that if I know that new users have a higher CTR, I might get them to click on more important stuff earlier in the lifecycle of their sort of membership. Mm hmm. You know, and so if I had a call to action and it comes in for a purchase of something like five emails, then I might consider making it three emails. And if I know CTAs are higher, I mean, that’s loose, because sometimes you have to, you know, when you’re doing one of those drip email campaigns and it’s to a purchase, you have to prime the pump, so to speak. And so if you prime the pump, then maybe that you’re doing it the right way. So it’s just really being about, you know, well, what do you what do you learn and what can you do with that learning? I think depending on the business, you might learn other things, like if click, the rates are higher when new subscribers come in first and it’s significant, then if I was a company like Groupon or LivingSocial, not that anyone talks about those guys anymore, unfortunately, but they send a ton of email and they have a ton of data on this. I might start with more expensive offers in the beginning to get my my short term value per customer higher in the beginning. But again, if you’re doing that and you’re not monitoring to the long term value of the customer, then you might just totally screw it up. Yeah.
Bronson: Now, that’s great. Thank you for that advice. Now, let me ask you about pricing a little bit. Same caveat stands. They need to test to learn their business. But I still think there’s some general principles here. Sure. First, when you say end with a nine, what’s your reasoning behind that, whether it holds for everyone or not?
Hiten: Yeah. That’s a great question. I don’t know. The truth is, I don’t know how much I believe. End with the name, okay. And with the seven. And with the nine. And with the five. And with three. I mean, you could go on, but usually it’s nine and seven that people talk about. And the reason is, back in the day, we did tests, we in SAS as well as Spock software, and we figured this out. My belief today is and with zero, to be honest. And the reason is I think people are numb to the are getting numb to a lot of the pricing psychology tricks, especially the ones that have to do with arbitrary numbers. Mm hmm. This is arbitrary. This has nothing to do with your business. Mm hmm. And it’s saying end with a nine. Mm hmm. Yeah, like, for sure. You should just end with a knife. Like, that’s a rule. I personally am an entrepreneur. I don’t really like rules, so it’s visceral to me now. But like, if someone wants to know what to try, I would try a nine, you know? I’d also probably try a zero. Mm hmm. I wouldn’t just try a nine. I would try a nine and a zero and see what happens. Yeah. Again, if you’re here’s the problem, here’s the psychology behind this one, in my mind, at least, is my theory. Mm hmm. You end with a nine, you’re signaling discount. Even if you don’t, you’re not giving a discount or you’re signaling that I’m trying to make it appear cheaper than it really is.
Hiten: You end with a zero, and you might be single signaling quality because you’re not trying to make it look cheaper than it is. And so depending on what you want your product to reflect or what it needs to reflect based on your competition in the market, you might want to be a little bit, you know, sort of a little bit more deliberate about the decision of nine or zero. But if I were to pick the two to try, I would try nine and zero. Just that seems to work in my experience. One of those two will work depending on what you want to communicate or what you need to communicate to your user.
Bronson: Yeah. And the next one, you say, you know, shorter prices look less expensive. Do you still agree with that? Taken out the commas don’t add the .00 and that kind of stuff. Is it still a good practice, in your opinion, to make price as possible?
Hiten: Yeah, that one I think makes more sense. I’m not sure if you’ll get statistically significant results with that either way though. So if you did $1,000 or or whatever and you had a comma versus no comma.
Bronson: It may not matter.
Hiten: May not matter. And I’m sure there’s studies you could do on like how fast can someone pass the number? That’s really what it boils down to when you’re looking at a lot of numbers and you don’t have commas. It’s very hard when you’re running, you’re looking at very few numbers and and you and you have a comma, it might actually make it harder. So so when there’s a lot of numbers, the commas help you pass the information because you have like 10,000, 15,000, 1000, 900 all in the same sort of data, data sort of table or whatever. In this case, you don’t have that many options usually. So, you know, it’s you know, again, I can argue it the other way, too. So it’s just one of those things. Yeah, yeah. It goes back to data. And also, is it important to test or not? I’m not sure. And the problem with some of this pricing stuff is that people just don’t know how to test pricing. Mm hmm. And it requires the ways people think about testing it require a lot of volume of traffic and people putting in the damn credit card.
Bronson: Yeah. Well, let me ask you about that, because, you know, you keep coming back to us testing instead of these, you know, cute little here’s the end result that everyone should do. How do you test price and tell us that then? Because in my mind, it’s it is hard because do you give two segments, different prices simultaneously? That almost seems, you know, disingenuous. Do you segment it out different phases, but now you’re dealing with different time cohorts and that’s hard. Is there something different in six months from six months ago? How do you test prices? Really?
Hiten: Yeah. Uh, I’ll start with something really stupid. Simple that that I that that I think was interesting to the folks who are roofers. I’ll probably butcher the test, but they popularized this test, which was I believe they charged it. They charge a certain price. They tested with the user base, but they always, when you went to actually get charged, would charge you the lowest price. So through the whole flow, they’re saying $9, $9, $9. And then when they actually charge and the charge appears, it’s actually seven.
Bronson: So that solves it right there. That’s perfect, right?
Hiten: A lot of test. Yeah. And they’re very they’re a very human company. They really care about the customer. Like like, you know, I’ve always been impressed, and so I’m not surprised they came up with something that elegant. Mm hmm. And I don’t think anyone would feel like that’s deceptive because you’re charging less and you won’t get the complaints people worry about. That being said, there’s a little bit of irrational fear that people have with this one. It’s like, Hey, I paid nine. My buddy paid seven to write someone emails. You know what it means? They care. Right. And there’s what’s preventing you from just saying, Oh, it’s cool. We’re going to charge you will charge you seven. Mm hmm. So I don’t know. Right. Who cares? You know, like that being said, I think their method is pretty elegant. You know, if it’s price testing you’re trying to do. Yeah. No.
Bronson: I’m glad I asked. Another thing to mention is anchoring your price, and that kind of goes back to pricing from way before even the internet is anchor on your price. But how does that work? What do you mean by that?
Hiten: Yeah. I don’t know if you’re one of the first at Crazy Egg, but I saw a lot more people do it. After we did it, we blew out one of the one of the.
Hiten: Columns in the grid. But we blew it out for a different reason. We had a really cool animation of sign up, so we we blew it out. So like someone hit sign up and in that one blow, whichever one you pick blows out and then slides over and then you get a sign up form there. That’s actually why we did it. We didn’t do it for the anchoring, but I think it’s become popular as anchoring like the middle line. Or you disingenuously say, that’s the most popular plan. I’ve never seen data that shows that the one I the one people see on the pricing grid is actually the most popular one. Mm hmm. It’s usually the one that makes them the most money per user is.
Bronson: Most popular internally because they make money. Yeah.
Hiten: It’s not the most popular one because every in every product I’ve seen, the most popular one is the cheapest one. Mm hmm. So that’s. Yeah, I hate that’s why I hate that. But that’s anchoring, essentially. You’re finding a way to and again, those are I went sideways on anchoring. The other type of anchoring is like you always put away air price as a third option so that people pick the middle and not the bottom one. Mm hmm. That’s really anchoring in that context. I think it’s a pricing trick. I think it’s one that will always work, but it’s surprising trick. Like it’s a psychological trick of, you know, I will get the highest, but I’ll get the middle one. Yeah. Because there’s this highest option that exists that I could get, but it’s too expensive for me. I think when you think about SAS and software, it’s not like box software. It’s not like one time software. So now I’ll give a caveat. The one place I’ve seen anchoring your pricing work like like magic is when you’re selling one time digital content, you’re selling an e-book and you’re. Not giving more than more than one option. You’re just not maximizing your revenue. Hmm. That’s where anchoring works like magic. You can. You can ask one of my friends, Nathan Barry. He’s really the expert in this, but. Wow. Like, he’s been teaching more and more people how to anchor entire pricing on eBooks and one time sales. So when it’s a one time sale, you’re not trying to make the product better. You’re not trying to get an upgrade necessarily. You’re just trying to sell. Mm hmm. Anchoring works really well there.
Bronson: No, that’s good. Let me ask you about the psychology of that, because when we talked about ending with the nine, you said that some people are, you know, getting numb to the psychology and they just want you to be honest and put a zero there because you’re actually charging the zero anyway. Do you think the same thing is true with anchoring? Because I see, you know, Buffer and now it’s just one flat rate and I see other company like starting to do it. Do you see kind of a trend going that way, maybe of just honesty, one package, you know, same sort of thing.
Hiten: I think anchoring for deceptive reasons makes no sense anchoring because you are truly you truly have a higher end plan that provides value for a certain segment of your customer base. Makes perfect sense. I gotcha. So that would be my answer, which is like that. It’s not called anchoring, it’s price segmentation, and it’s segmenting your audience and making them pay the right amount of them.
Bronson: Now, I’m glad you clarify that. Another thing you talk about is doubling your prices. Why do you still encourage people to try doubling their prices?
Hiten: Yeah. Over time, as you make more and more money and have more and more customers, your your trust with your customers and your brand grows. And so you can just charge more, period. That’s just nature of the beast. Now there’s competitive practices and other things that might prevent you from doubling your prices, but it really depends what you’re optimizing for. And this actually goes all the way back to Self-funding versus Venture Back, which is if you’re self-funded, you’ll double your prices because you’re trying to make money. In fact, you’d rather have 100 customers paying 50 bucks, right? Then, like ten customers paying 100. Well, sorry, then. Then more customers paying less money, essentially. Right. So 500 paying five or whatever or whatever the difference is. So I would say that if you’re in a high competitive battle and the other other company isn’t doubling, then you might you might not be able to double unless you have huge differentiation or target different customer segments. But if you are not competitive and just trying to increase revenue, doubling works and doubling is like you’re not going able to keep doubling, but you’ll be able to keep tuning and literally just price optimization. Now it actually goes back to packaging, plan, segmentation and all those things which really relate to doubling. Mm hmm. There’s many ways to double your price. You might just not be thinking of them. So one is upfront. You charge more. Another is you learn how to get people to, on average, pay you double by upgrading them. Right. Or upselling them. So there’s a lot of ways to go about double your prices.
Bronson: Yeah, that’s great. Well, heat and this has been a great interview. I have one final question for you, and it’s a vague question. It’s a high level question. There’s no way to know the specifics of their business. But what’s the best advice that you have for a startup is trying to grow?
Hiten: Yeah. If you’re a startup, you’re trying to grow and you already have some users or customers. The best advice I can tell you is always be learning and testing. So learn from who you already have learned why they’ve been successful. Learn why they’re doing the things that they should that you want them to do and learn why they’re not doing the things that you want them to. And so I think always be learning. If you already have a small user base, learn from them. Spend more time with the customers. Every everything about growth that I’ve seen that’s been like successful has to do with a deep understanding of the actual customer, the users, and what they need in context of your product and your business. And that’s where I see a lot of people fail, which is, you know, I was one of the companies I advised. It was a marketing meeting, but it’s really about growth and they’re trying to double their mirare in the next six months. And in the last 12 months they five exited. But it was small numbers and they presented this whole deck and at the end they wanted everyone to talk after. And that’s that’s fine. And I said that you guys have created a great shit list of things to do and that’s I see that a lot, which is it’s just a list of shit on growth because, you know, it’s like even the five ideas I have integrations, work, emails and all that. It’s better than a shit list because it’s like more product oriented and it’s not just like, Oh, we’re going to do a LinkedIn group or we’re going to do CRM or we’re going to do social media. Growth comes because you pick strategies that work for your customer and your business. It doesn’t come because you’re going through a shit list and just doing it. Mm hmm. So that would be my best advice, which is, you know, make a shorter list of things to do.
Bronson: Well, that’s great advice to end on heat. And thank you so much for coming on growth narrative and thank you for your honesty and transparency and really trying to help us and not just tell us what we want to hear.
Hiten: Yeah, I don’t know how to do that. So appreciate it. Thanks for the time.
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