Podcast 14: How Michael Jackness Grew ColorIt.com to 7-Figures Off Niche Selection, Contesting and Facebook Marketing (A Million Dollar Case Study)

Drew:  Hey everybody, welcome to the Nerd Marketing podcast. This is Drew Sanocki and now we are talking with Michael Jackness, who’s one of my favorite e-commerce entrepreneurs. Micheal, welcome to the show.

Michael: Thank you and now I have a lot to live up to.

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Drew: Well, I’m just sort of fascinated by you because you’ve got, I mean your skills run the gamut. You’ve got a millions irons on the fire, you’re flipping domains, you’re starting e-commerce businesses, Amazon businesses, you’re going to China, you run a podcast. Did I miss anything?

Michael:  I’m a husband.

Drew: You’re a sumo wrestler.

Michael:  Yeah, as far as business goes that pretty much covers it but, yeah and I guess you could even argue that maybe I have too many irons in the fire. It’s something I’ve been working on a lot over the last two years. I think there’s that saying, if you chase two rabbits both will get away.

Drew:  Right.

Michael: We’ve really been focusing on e-commerce lately and really just doubling down on that and I’ve been basically living life with blinders on when it comes to e-commerce. Whether it’s running stores or running an e-commerce podcast and blog or going to events. Everything that I think about and dream about these days is in e-commerce world.

Drew: Dream about.

Michael: I’ve had dreams about it, nightmares I guess which actually came true here with one of our products, but, yeah I think when you’re so immersed in it, yeah, you can even have dreams about e-commerce, which is pretty sad.

Drew:  Yeah, I had a nice Shopify dream last night, it was great. The series I’m working on here is I’m talking to a lot of entrepreneurs who have bootstrapped companies up to seven figures in revenue. I say seven figures in a year but it doesn’t really matter, you’ve achieved some sort of rapid growth with an e-commerce store and I think that is really interesting. It appeals to a lot of people and it represents another alternative to all the venture backed companies we hear about all the time. That’s why you’re here as my guest and I would love to talk about Color It, but before we do, it’s nice to hear a little bit more about how you got here and maybe a little bit about your history in e-commerce, maybe you can talk about that for a sec.

Michael: Sure, so before we got into e-commerce, the story kind of starts there really because we were affiliate marketers and basically that means that you put links in your site and if someone clicks through them and buys or signs up or whatever the action they’re taking, you get a commission and you’re pretty much hands off once they click that link. It was a wonderful world to live in for eight to ten years that we were doing it because it was basically a cash business, we had barely any expenses and money just kind of fell out of the sky into our laps. It was probably something that will never be replicated in my life again, it was pretty awesome.

As we were doing more and more affiliate marketing we started getting into keyword domain investing. One of the keyword domains that we purchased was Treadmill.com and our intentions were to run it as an affiliate marketing site. In about 2010 or 2012 as Google started changing their algorithm, you know, penguin and panda and even before that, my partner Grant, that I own the domain with, and I sat down and were like, “Look, we need to reinvent ourselves.” I think affiliate marketing is going to be dead moving forward in the capacity that we were doing it in. You’re running these large keyword domains and trying to have the ability to rank for the word treadmill or something like that and beat out a Sports Authority or Amazon for that term was coming to an end.

Google had already said, we’re going to do everything we can to stop affiliate sites from ranking for these big terms and we’re going to have brands rank for these terms. Without selling something we couldn’t be a brand so that’s pretty much how we got in e-commerce, was like, “Okay, well if we can’t continue to win at the game we’re winning at now …” Even though we were still doing okay with it, we tend not to be reactive, try to be proactive. That’s actually how we got into e-commerce, was by owning that particular domain name and we made a decision one day that we’re going to launch the store and that was the first one.

Drew: Since then there have been three, four?

Michael: Yeah, so we transitioned from Treadmill.com, I can tell you some other reasons why we did that, but we did sell that last year and purchased IceWraps.com on the heals of that and in between that we actually launched a CuttingBoard.com and then most recently we have ColorIt.com. We have a couple other brands that are in the pipeline right now that we hope to launch this year or next year.

Drew: When I look at those lists of sites, I think, “Okay, your background’s in domain acquisition and selling.” I think, “Okay, so CuttingBoard.com, Treadmill.com, these come out of the domain world right? Like Michael knew what a good domain was, he went after it, he bought it, sort of makes sense what you’d sell there.” Color It’s a little bit different, right, that’s the first one that you kind of incubated?

Michael: Yeah.

Drew:  Maybe where the domain name doesn’t really convey what they site’s about.

Michael: I think that kind of just goes to branding. When we were doing Treadmill.com, we started CuttingBoard.com and we’ve kind of made a departure now as we were selling other company’s products and didn’t really … Our brand was having a site that sold treadmills or a site that sold cutting boards and with Color It, we’re making our own brand so it doesn’t make sense to have AdultColoringBooks.com and make that our brand. Because that’s kind of a weird brand name for a coloring book so, the domain’s still important to me so when we got a very short domain name, something that explains the product. It’s a coloring book or pencils or accessories for coloring books and I think Color It is a great brand name for that, but yeah, it doesn’t have that keyword, domain aspect to it. I think that we can still do well with organic search because we’re SEO experts at heart and I think over time we’ll still do well. It won’t be as easy as owning ColoringBooks.com or something like that.

Drew:  Yep. Are the days over for exact match domains or is it, sort of, they’re not as important as they used to be?

Michael: There’s a lot of controversy over this, depending on who you talk to, you’ll get different opinions and in my opinion, the premium keyword names are worth more than ever. Something like CuttingBoard.com, for instance, we rank number one for cutting board and I know how many backlinks we’ve got in to do that and I know that if we owned MikesBestCuttingBoards.com or something like that or MikesBestBoards.com we wouldn’t rank anywhere near the top for that. In my opinion the premium dot coms with no dashes that are an actual search term are still quite valuable

Drew: Yep. Could you focus in now on Color It and maybe tell the story of how you’ve grown that over seven figures in a year. Right?

Michael: Yeah, just under a year. It’s been a heck of a ride. Basically, we have taken all the things that we learned about e-commerce and put that into this business. Which would be first, product selection, we learned from doing Treadmill.com that we don’t want to be dealing with things that are really big and heavy and bulky and hard to deliver so we kind of developed this whole criteria for developing products. Basically we are looking for things that are light, easy to ship, that don’t have a shelf life, that are over ten dollars and really, ideally, closer to twenty five dollars, that have good profit margins, that aren’t really faddy which you can argue that the coloring book stuff might fit into that category. It does worry me a little bit but we have the accessory products like pencils and markers that I don’t think will be faddy.

Drew: Fatty, what do you mean, fatty?

Michael: Something that’s …

Drew: Take up a lot of volume?

Michael:  No, fad, like something that’s …

Drew: Oh, faddy?

Michael: Yeah, F-A-D. Yeah, sorry. Sorry about that. Yeah, but I do worry about that aspect of it, hopefully cutting boards aren’t today’s trend and gone tomorrow. The accessory products, I think, we won’t have that problem with. The other criteria that we look at is, is it consumable or at least somewhat consumable? Obviously, as you’re coloring, you’re using up the book. Are people passionate about it? Are people that buy the product going to be an ambassador for you? Using Ice Wraps as an example, we sell tons of these ice packs but no one’s going to tell their friend that they got this awesome pack that they put in the freezer and it stays cold, I mean, what a revolution that is.

Drew: That’d be a very boring person.

Michael: It’s a very boring product and only boring people would talk about it.

Drew: Right.

Michael: We’re looking for something like that and my cousin, of all people, was kind of an interesting story because when I was in New Jersey visiting family last year, I was talking to him about Amazon and what we were doing with Ice Wraps and some of our other products and introduced him to that stuff. Basically it was like, “Good luck to you and go sell some stuff on Amazon.” They would call me every now and then with some ideas and they were all actually really good, I’m like, “Yeah, go do that and you’ll do well with it.” One day they called me with the idea for the coloring books and I was like, “That’s something that I want to do.” We teamed up and got going with it pretty quickly.

Drew:  This cousin of yours, he or she?

Michael: It’s a she.

Drew:  Does she have any background in online marketing?

Michael: None.

Drew:  Wow.

Michael: Not at all. Which is probably why work so well together because she’s basically in charge of product development and the way that we have things set up is you make me a product that is top quality, that will get five stars and I’ll sell a lot of it. You’re responsible for making that product and getting it to market and I’m responsible for selling as many of them as we can. We have pretty clear lines there and it’s worked out incredibly well.

Drew:  That’s great. We should put a link to her site in the show notes if she has a site.

Michael: She has a profile on Color It, that’s about … She’s really not an online girl. Incredibly brilliant, she’s a great salesperson, she’s actually owned her own business before in the mortgage industry but not really an online person.

Drew: Right.

Michael: Not an online presence or personality.

Drew: You did here your product selection, your market research and that, maybe, all compressed took how long? A month?

Michael: You’d be surprised actually, it was more like a couple of days. I know it seems crazy but I have an ability, after being in business for myself for over twelve years, to evaluate things really quickly and when she called me with the idea, adult coloring books, at first my mind went towards the gutter. I was like, “Why would you want to draw a …” I don’t know if this is a family podcast so you can just extrapolate from what I’m thinking there. I was just like, “This is the stupidest idea ever.” She’s like, “No, coloring books that adults use.”

I did a quick search on Amazon and Google Trends and discovered that, something crazy like, eight out of the top twenty books selling on Amazon were adult coloring books on all books on Amazon. Then, I immediately started thinking of all the accessories and like the Google Trends and I could see an explosion in coloring for adults and I felt like it was something that would have staying power and immediately could apply all these filters that I just mentioned earlier over top of this industry and knew within really just a matter of a couple of days that this is something that would work really well at least in my mind, obviously you don’t always know until you know.

I felt like one of the big factors that I look at is can we differentiate ourselves in the marketplace? That’s always really tough when you’re looking at established businesses or established marketplaces like this but I was looking at all the coloring books on the market and they all sucked. They were basically publisher that were using the same process they use to print a book that you would read about fiction novel or something. The binding was in the center and the book would be closing on itself as you were trying to color and they were using this cheap paper and they didn’t have hardbacks and stuff.

I’m like, “Okay, so what can we do to improve upon this? We can make like an artist quality book that’s legitimately an adult coloring book. Not just something that’s got adult type designs but it’s a premium product, like the Mercedes Benz of coloring books.” It didn’t exist and that certainly has helped us. We use really high quality paper and we use a spiral binding so the book lays flat, we use hardback covers so people can color in their lap or on a bus or on a plane or something.

Those differentiating factors have really helped and we get reviews like … If I were to read some of our reviews, they actually, sometimes, choke me up because they’re just like, people are spazoid about our products. They love them so much. It’s a great feeling to have and that’s because we have something that is kind of like that leap frog product over anything else in the marketplace.

Drew: Wow. I imagine you can get into licensing and a whole bunch of other things.

Michael: Yeah, we’re actually looking at doing that now. We’ve had a lot of YouTube personalities or artist type personalities come to us, that have found our products and we’re looking at co-developing some products now.

Drew:  Wow. This sounds like your cousin gave you the perfect product.

Michael: Yeah, she’s definitely done an amazing job. I’m detail oriented but she’s even crazier than I am. I mean, she probably have gotten some our artists that we work with to darn near quit because she’s just like … There’s a dot out of place here, or this line doesn’t quite go in the right spot.

She’s very detail oriented which is, basically, what we talked about from the beginning. When you have a five star product, like a legitimate five star product, we are not paying for reviews or cutting corners or doing things that are kind of squirrelly to get five star reviews. You legitimately have a product that people love and it’s a five star product, it’s so much easier. You don’t have to worry about that aspect of your business. You just do good customer service on top of having a good product and you end up with the type of result that we’ve had which is, again, we have our own ambassadors out there. People telling other people about what we’re doing.

It’s the same philosophy we used in the affiliate market industry when we got started there. We were doing incentivized affiliate marketing, we were doing a similar thing where it had never been done before and we blew people away by getting their products to them quickly and delivering a high quality product. It’s the same philosophy that we’ve applied here.

Drew: Lesson number one, everybody needs to upgrade their cousins. Mine are terrible, they never give me any of these ideas. Right now, they just take, take, take.

Michael: I only have one cousin too, so I got lucky.

Drew: Mine suck. Okay, so you’ve got the idea and obviously building the site was not an issue for you guys, you’ve been in e-commerce before. You did take inventory, right? It’s a proprietary product?

Michael: Yeah. We always start with something like this that I call the minimal viable product, it’s obviously not something that term that I’ve coined or anything.

Drew: Maybe we could abbreviate it, MVP?

Michael: MVP, yeah.

Drew:  Okay, Michael Jackness’s MVP idea.

Michael: There’s MVP idea and multiple meanings of the word, right?

Drew:  Yeah.

Michael: It’s like, “Do we have something here? Are people willing to pay a premium price?” You have all these thoughts going through your head. “Is this even worthwhile?” kind of stuff. Let’s get all that stuff answered first. The way that we did that and what we’re doing with all the stuff that we’re developing now is we just throw it up on Amazon. It’s an unprecedented opportunity in history here where you can take advantage of them in a good way, I guess. They certainly take advantage of us with the amount of money they’re charging and fees and just being difficult to work with in some ways so why not take advantage of them to see if you have a viable product. If you were trying to launch a coloring book company twenty years ago, it would be a half a million dollar project.

Drew:  Sure.

Michael: You’d have to develop a whole line of products and probably print tens of thousands of each book. I can’t even begin to imagine how you would go about doing it, versus now, it’s like, “Okay, let’s just throw up a book on Amazon and see how it does.” Obviously, we have some Amazon experience that helps us do that quickly. We’ve been selling stuff on Amazon for quite a while, we’re selling seven figures of stuff on Amazon so we knew how to put the listing up and how to optimize it, et cetera. Then, we just threw the book up there. We made a thousand of them to begin with so we had five thousand dollars worth of inventory, approximately and just wanted to see what people were going to say and if it would sell. Within a few weeks we knew we had a hit, basically, is what it kind of came down to.

Drew:  Were you ever tested to … When I hear about e-commerce MVPs, Amazon’s one option and the other option is usually throwing up a landing page, driving some traffic at that page and seeing if people click the buy button. I guess the advantage of that second MVP might be that you don’t actually have to have the product, you can just direct people to a splash page after they click checkout and say, “Hey, you’re on our wait list.” You know?

Michael: Yeah, I’ve definitely heard that philosophy quite a bit too. I think this is where I’ve gotten a little bit cocky, quite frankly, I’m trying not to let it get to my head because I know if you get too cocky or too ego driven you can make some big mistakes but I feel like we can skip that step. That’s because of all the other things I’ve mentioned, the research that goes into it and I don’t second guess myself a lot. I’d rather spend that time and the five thousand dollars which is a lot of money, obviously, but it’s not a lot of money at the same time when you’re talking about the potential and the extrapolated difference of if I spent that two months developing a product and getting it out there and getting all the information and intelligence from that, is that worth it? To me it is. We skipped that step.

I think it’s a perfectly viable step if you’re a little bit scared to get the product out there and see if there’s even a market but we knew there was a market. Eight of the top books, like I said, on Amazon, were coloring books. It wasn’t like I’m worried that there’s a market. It was, is our particular book going to work? I think that it required getting it in people’s hands to know that for sure.

Drew: Right. Amazon really is the new Google, right? It’s the new SEO you can just go fishing there. That’s where you can find customers to get that initial traction.

Michael: Yep, exactly.

Drew: You validated your idea, you sold through your one thousand units, then did you shift to direct to consumer and build out your site?

Michael: We actually waited a little bit. We bought the Color It name first, I mean that was before we even developed our first book, we wanted to make sure that we had a brand name, we didn’t want to print a name on a book and then ended up having to get Color-It.info as our domain name. We bought ColorIt.com to begin with, right out of the gate. We got it for a good price. I know the domain market, I know that if I held onto it long enough I could resell it, if the thing was a dud, for what I paid for it. To me that was just a good upfront investment and I really liked the domain name and I really liked the brand name so we got that done first.

We had the site there and we basically just threw up a landing page that said, coming soon. It had, give us your email address or whatever and obviously analytics to see how many people were coming there. My thought process was that, as we started to build out our breadth of titles on Amazon, we got a second book and then a third book and we started selling some accessories like journals and sketchpads and we eventually got some pencils. I was like, “Okay, when I see the traffic hit a certain number on ColorIt.com that’s when it’s time to develop the website.”

We did all of our development off site to begin with because launching, even with our experience, it’s still a lot of work. To do it the way that we did, I mean, if you go to ColorIt.com, it’s a site that I’m incredibly proud of. Every pixel that’s on that site has been thought of, where everything is on the site, it converts incredibly well. We took all of what we learned from conversion rate optimization from Treadmill.com, from CuttingBoard.com, from IceWraps.com and applied it to this template. We put all the effort into it upfront and did it the right way, didn’t just throw up the default Shopify theme or something. It was quite a bit of work but it only really took, I guess, about six weeks all in all between the design and the coding once we set our mind to do it. We waited until we had enough traffic to make it make sense.

Drew: Yep. Then how did you get the initial traction through ColorIt.com?

Michael: We launched, like I said, on December 5th, was the day that we turned it on. We got our first sale the day we turned it on, which is always a good feeling. On January 1st, I actually was thinking about this basically on December 30th, so I basically had a day or two to plan. On January 1st, we launched a contest through, we used the platform Gleam.IO and I’m sure there’s plenty of other platforms but I just went into the Shopify app store and happened to find Gleam.IO and we just launched a contest that said, basically, “We’re going to give away a set of colored pencils everyday in the month of January. Come over here and sign up for your chance to win.”

We got thousands of email addresses by doing that and every action that someone took got them more entries so people would give us their email address, they would like us on Facebook, they would like us on Twitter, they’d retweet for us, they’d like a photo on Instagram, they did all kinds of different things for us. The thing that really drove sales for us was having people’s email addresses. We got, I think it was about eight thousand email addresses. I’ve actually done a podcast about this, specifically, because it was such a success. One of the actions that we had in there was placing an order which would get you a ton of extra entries and we had hundreds of people, over the course of the first month, place orders.

We’ve now been running the contest, we do a different contest each month but the contest is really what catapulted us. That was the very first thing that we did to really slingshot our growth and quite frankly, I didn’t really think that it was going to do much of anything for us except artificially inflate our numbers, our likes and our followers, which had value to me. I’m like, “Okay, well, these pencils cost us about ten bucks a set, we’re going to give away thirty sets of them, that’s three hundred dollars plus some ads. We might spend five, six hundred bucks on the product and running this contest and if I get a few thousand extra Facebook fans and Twitter followers and Pinterest followers and Instagram followers, that’s worth five or six hundred bucks to me.

It’s a semi organic and natural way to build those numbers because, again, with conversion rate optimization always in my head, when someone comes to a site and they look at your Facebook profile and you have thirty fans, it doesn’t look impressive and they leave. When you have twenty thousand fans like we do now, that’s impressive enough that they, that actually helps as a signal. We were looking mostly to do that but what ended up happening was we ended up with a ton of sales which was a great side effect. I guess a lot of great things in life happen by accident and that was one of those things for us.

Drew:  Yeah. There’s been a lot that’s been written about the power of viral contesting. I’ve read about it on the SumoMe blog because they push their King Sumo Giveaways product which I’ve used with mix results. It’s good to hear about a success story with Gleam and I don’t think it’s due to the software. I think it’s probably more due to your product selection where you chose a market that will share things. It’s a community that I think is built around enjoying art, right?

Michael:  Yep.

Drew:  If you throw up a viral contest and you’re not marketing to that tight-knit community, it’s going to fall on it’s face.

Michael:  I agree.

Drew:  Yeah.

Michael: I’m a member of eCommerce Fuel Forums as you are and this has come up over there quite a bit. People like, “I tried a contest, did exactly what you said on the forum and it failed.”

Drew:  Right, right and it sucked.

Michael: I’m like, well. I go over and look at their Facebook page and this contest was the first thing that they posted on their Facebook wall in like six weeks.

Drew:  Yeah.

Michael: They just don’t engage their community. A lot of times you see stuff on the forums about how can I quickly grow my business? Or what’s like the one click hit to success? The contest was successful because we’d been working hard at building our social media presence already so when we launched the contest, we had a bunch of engaged followers that were … Facebook promotes profiles that get the most clicks and views. It’s just like any other advertising platform or whatever, that’s how they do their business profiles. If it’s something that’s getting a lot of people naturally clicking through it, then they’re going to show more of it. What we were doing was engaging our audience by posting pictures that people would submit of people’s drawings. People loved this, obviously. Part of it is the community that we’re in. Again, if it was Ice Wraps, we would have a harder time getting traction. I do agree that part of it is the product but again, that was part of our product selection right from the beginning, right, none of that was by accident.

Drew:  I’m imagining logging into Facebook and my entire news feed is pictures of people’s ice wraps.

Michael: I can promise you it won’t work.

Drew: This contest sucks. What the hell happened here? The contest was really, did that take you all the way from zero to a million? Have you just …

Michael: No.

Drew:  Rode the contest thing?

Michael: No, no, no.

Drew:  What are some other top channels for you?

Michael:  The other thing that we did was Facebook ads. That’s really what propelled us like crazy was running Facebook ads. We didn’t have a lot of experience running Facebook ads previously, I had run some but didn’t really have a lot of success. For this brand, I really set my mind to, I’m like, “It fits all the criteria that I think are important.” The amazing thing is that there’s a two million person audience in the United States that has an interest in coloring books. I’m like, “If I can’t succeed there, then we’re really in trouble. Where like, Facebook ads will never work for anything.”

Drew: Sure.

Michael: What really had us take off, I’m a member of several mastermind groups about e-commerce and I ran my initial Facebook ads and, honestly, they weren’t very successful and one of the guys on my mastermind virtually smacked me around through Skype. He was like, “You’re not niching down enough, you’re not advertising to the right audience. That’s why it’s not working.” We did that. We actually used some software called AdEspresso which makes split testing and running a bunch of different combinations for Facebook ads manageable. If you’re trying to do it with your Power Editor, it’s basically impossible. AdEspresso’s worked quite well for us for that.

What we found over time by niching down and doing exactly what the guys on my mastermind told me, is that our audience is forty to sixty five year old women. If we’re advertising to twenty five year old men, that’s just completely waste of budget. By the time we niched everything down and found … We’ve been testing everything from location to, obviously, age and gender, to stacking audiences, so not that they only like coloring books but they like coloring books and they also like Ellen DeGeneres, maybe for instance. Or they might also like Prisma Color pencils or Copic markers, which are industry terms. They might own a home, they might be married, we’ve been split testing all this different stuff and using Facebook Insights to get more information about our customers. Then, obviously, all along we’ve had the Facebook pixel running on our site and now that we have thousands upon thousands of customers, our lookalike audience is …

Drew: Big enough.

Michael: Doing well. Yeah, it’s big enough. It’s not quite big enough to get us all the data that we want if we use our lookalike audience, our purchase lookalike audience, we have different lookalike audiences. We have people who have purchased, if I go into Facebook Insights I don’t get quite enough data to make assumptions but if I use people that have visited the category page, then I can get some pretty good information and we’re starting to be able to get close to using that information to basically expand our ad presence.

Drew: Great. Let’s see, was either AdWords or Instagram or Pinterest factors, or even SEO as far as acquisition channels?

Michael: SEO, definitely, is not a factor yet. We just launched in December and our SEO philosophy is eighteen to twenty four months. We do incredibly white hat, I guarantee we’ll never get banned or a penalty SEO philosophy because I’ve been there and it’s awful waking up one morning and typing in your brand name and not even be able to come up for that. We do incredibly white hat SEO at this point for cutting board, we’re ranked number one for Cutting Board and basically every term we’re looking for, same thing with Ice Wraps, we’re ranked number one. Number one, two and three actually for that. Then, every body part, like shoulder ice wrap, knee ice wrap, et cetera. It took us time but the things is we have , like I said, a long term philosophy for it. Same thing applies to Color It and we’re doing SEO already but yeah, the traffic is zero or virtually zero. You asked about Instagram and Pinterest …

Drew:  Yeah, I would just figure that they both seem like visual mediums where your products would play pretty well.

Michael: I would think so as well but to be quite frank we haven’t had success with Instagram or Pinterest ads. We have thousands of people following us on both of those and maybe there’s someone listening to this podcast that can reach out to me and show me what I’m missing but we haven’t had success in converting ads on those two platforms that our return on adspend make sense for us.

Drew: Yep, yep. Is that something that you’ve been running … This is bootstrapped and cash flow positive I assume.

Michael: Oh yeah. Well, we’re not cash flow positive as of right now because we just placed a quarter million dollar order for more pencils so cash flow is a problem, we are profitable. The IRS thinks that we owe them money but we don’t have the money to pay it. It’s always a fun position to be in. Luckily we have other things that support us to be able to make those tax payments and stuff. We’re definitely in that hypergrowth phase where it’s basically impossible to be cash flow positive but a year or maybe two down the road, we’ll turn that corner and there should be lots of cash flowing up in the business.

Drew: Right. When you run these ad campaigns, what kind of return on adspend do you typically shoot for?

Michael: We shoot for a minimum of three hundred percent. Which is enough to cover … We don’t have enough data yet to know what our … This is getting us into [inaudible 00:33:08] Drew Sanocki like, Nerd Marketing stuff here, we don’t really know our lifetime value of a customer yet and the number of orders that they’re going to place and what their frequency is and all these different things that you need to know.

Drew:  Ah, you don’t need to know that stuff.

Michael: Trivial stuff that most people don’t know anyway, right?

Drew: Right, right.

Michael: When we know the answers to that stuff, maybe we can pay, maybe we only need a fifty percent return on adspend. I mean, we don’t know what that number is yet but right now I’ve opted to, in a vacuum, let’s just make sure we aren’t losing money on a sale, on one relationship. That way we can’t get hurt. We already see a lot of repeat business, I mean, a lot of repeat business, which is great. We know that our lifetime value of a customer is going to be way higher than a single order. Unlike when we ran Treadmill.com where our lifetime value of a customer was like 1.01.

Drew:  Sure.

Michael: I think that we’re going to see five, six, seven, eight orders out of customers on average as we release new titles. We’ve already seen it. We released a new title and had it out for preorder and got hundreds and hundreds of orders for a preorder which was a great feeling. We only, at that point, even had just a few thousand customers so our preorder rate was really high. Once it was in stock we had an even better response because people don’t necessarily want to preorder, they want to actually order and have that instant gratification. My feeling is that we’re going to see some great lifetime value of customers.

Drew:  I think it’s a retention marketer’s dream. It just seems like you have so many different segments that must be reordering, whether it’s for the pencil, or just for the product itself and you could do so many interesting things as a marketer. Layering on customer co-creation, like, a thread list or even a marketplace element like Tattly does. I don’t know if you’re familiar with Tattly, but it’s a marketplace for tattoos, stick on tattoos for your kids.

Michael: Got you.

Drew: I think all those things, anything limited edition or limited release will keep people coming back and checking out the site which will reduce your cost of acquisition.

Michael: Yep. We’ve already seen it. We’re using Klayvio and we basically have a goal here to, we don’t hit this everyday, but we’re trying to release another email every other day basically as a part of some flow that we’re doing. Whether it’s a post purchase flow or we have a series where we give away some free drawings through Facebook ads or [inaudible 00:35:52] email or just some other email that we’re adding to our sequences every other day. Basically trying to do two or three more emails every week to these flows and of course, once you do them, they’re done. Right? They just keep making money forever.

What I’ve noticed is, and it’s amazing, every single email that we have makes us money. We have yet to add an email to a flow or send out a campaign or whatever that doesn’t make money. We actually just released our referral program yesterday. Here’s an example, we sent out to our list, “We’re excited that we have a referral program now, we’ll pay you five bucks for each customer that you can send us and they also get ten percent off their first order.” We ended up with, like, six orders off that email. It was just a text email that said come sign up for our referral program and it just went out yesterday so we’ll probably end up with more than six orders. Even that email makes money, like even that generates sales because people get your name brand in front of them and they’re like, “I don’t really care about their referral program, but I forgot I want to order another one of these books because they’re awesome.”

Drew:  Totally. I would love to have you back to talk just about email because I find the same thing. For those of you who don’t know Klayvio, it allows more email automation so they call it flows. You can set up these automated sequences that happen whenever a customer triggers an event on your e-commerce platform. What Michael’s describing is instead of coming up with a new blast email that goes to the whole list everyday, he is adding one email at a time to each of these different flows and there’s really no end to that. You can just build and build and build on top of these flows and they become more sophisticated over time and it sounds like it’s working.

Michael:  I’d love to come back and share about that. I’ll do some foreshadowing. Our best performing email out of all of our flows is a email that we have set up to go out the day after an items delivered. We use after ship and it has a trigger than integrates with the web hook in the Klayvio, so when someone’s order is delivered, we email them the next day and we have something like along the lines of, “Our handy shipping software tells us that your item was delivered yesterday and we just wanted to check in and make sure you were happy with it.” It goes on for a few sentences like that but that email actually makes us [inaudible 00:38:12] money. It’s just basically, we want to be in front of people’s eyes right when they’re thinking about us and they just got the product and they’re probably wowed by it and they’re like, “Yeah, man. I want more of these.” That one does the best for us so it’s something we’re implementing in all of our properties now.

Drew:  That’s great. As someone who’s sold businesses, I think, you probably realize that. Like, what you build, this is the stuff you sell like this kind of intelligence. Yes, you’re selling the front end that everybody sees and the product but this kind of customer intelligence on the back end, the knowledge of your customer data is what really adds a lot of value that your competitors can’t copy.

Michael: No. Yeah, I couldn’t agree more. It’s exactly what you’re saying. People worry about … Or I’ve had my wife or my partner talk about, “Aren’t you worried about people copying Color It or whatever.” I’m like, “No.” Because the reality is is that it’s really hard to do all these things right. You know what I mean?

Drew:  Mm-hmm (affirmative).

Michael: You have to not only make a great product but it isn’t like money just started, like I always say, like falling out of the sky in our lap for doing no work. There was a lot that went into all of this. I always equate it to, like, an eight cylinder engine, you’re driving down the highway and a spark plug goes out in your eight cylinder engine and you’re going really notice a performance degradation. The car almost becomes nondrivable with just one cylinder not working. You got two out and you’re putting the thing in neutral and coasting over to the shoulder and you’re dead in the water.

I think e-commerce is very much like that. It’s hard to have lots of sales if you don’t have a good product, if you don’t have a website that looks good and converts well. That deals with all these different issues I’m talking about where you’re dealing with social media and you have email marketing working properly and all these things compliment each other and work off of each other and if you try to just do one aspect of it and not deal with the others then you’re not doing any cross pollination.

Drew:  Sure, sure. Well, I feel like I could talk to you all day about this stuff because you’re just knocking the ball out of the park. I want to ask you about your personal life, I want to ask you about how much time you spend on your business. What’s a typical week look like? I’m always fascinated by people who can juggle a lot of different things so we’ll have to have you back on but unfortunately we’re out of time on this podcast because I set an arbitrary limit of an hour. What do you mean you’re out of time on the podcast? You can podcast as long as you want. Yeah, we’re out of time.

Michael: Fair enough. Yeah, it’s been awesome chatting with you and whenever you want to have me back I’d love to do it again.

Drew:  Well, Mike, what do you think, can you leave the five or six listeners with one actionable thing? Again, this series is about getting that rapid growth in your first year. Achieving that traction. For those aspiring entrepreneurs or e-commerce store owners who are listening to the podcast, what would be your one recommendation?

Michael: I’m going to do two.

Drew: Okay.

Michael: I’m an overachiever. The first one is get that Facebook pixel on your site. You hear that a lot and people just don’t do it, they end up starting to want to do Facebook ads or build lookalike audiences later and they don’t even have the pixel on there and they got to wait another three months or however long to gather that data. Even if you aren’t going to do it now, spend the five minutes and get the darn pixel on the site, that would be the first one.

The other one, just coming from personal experience, is going to be the email marketing piece of it. Quite frankly, it’s something that I neglected for a very long time. You hear people all the time, I listen to a lot of podcasts, I go to a lot of events, masterminds, et cetera, and just never really took advantage of email. I mean, for whatever reason and it is hard, there’s definitely a lot of up front work to it and then even when you finally do get over the hump and you’re like, “Okay, I’m finally going to send out a newsletter. I’m going to some email.” Just like I was talking about with the car analogy, with the engine, you send out one email and you don’t get much return out of it. It’s because you didn’t do all the other things right.

Obviously we could do a whole podcast about email marketing and all this stuff to get to that point but email marketing now is a huge portion of our business and it is that once you have it up and running and you set that stuff once, like you mentioned with the flows, it’s done. We can stop today and do no more expansion of that and just let the money roll in. We’ve sent a hundred and ten thousand emails in the last thirty days, I’m looking at my Clavio dashboard right now and again, this is a site that we launched on December 5th, we’re recording this in late March in 2016. We’ve been up and running about four months and we’ve been able to gather that many emails and then send that many emails and we have a thirty five percent open read which is also really important. We’re not just sending emails that are ending up in spam or in the black hole, they’re actually getting action taken on them and they’re generating revenue. That would be my biggest takeaway.

It’s something that was a hard personal lesson. We did e-commerce for almost three years without really, fully taking advantage of email. I mean, it’s embarrassing. It’s just one of those things, you can have people tell you all kinds of things like, “You should be investing, you really should be investing in your future. Put money away, put money away. Don’t get a credit card yet. Don’t do this …” Until you have a self realization on a lot of this stuff, you just don’t do it in life.

Drew: Right.

Michael: Hopefully, me telling you this will the last person you’ll need to hear push you before you actually start taking advantage of email.

Drew:  Ah, they’re not going to listen to you, Mike.

Michael: No …

Drew: I talk about email everyday in my blog and these guys aren’t listening to me.

Michael:  Well, you told me to talk about it … I’m kidding.

Drew: No, I couldn’t agree more. I mean, this is like I set you up or something.

I think about these two things as the same. I think about remarketing and email is like either way. In one case, people opt into your list and in the other case they don’t but you want to start from day one building up these audiences and in one case you’re going to hit them with the offer in the inbox and in the other case you’ll hit them with the offer when they’re on Facebook. The sooner you start, the sooner you can start increasing your conversion rate and getting repeat orders and really nurturing your business.

Michael: Yeah, I couldn’t agree more. As someone that’s been through it, myself now living that for the last year. Yeah, it took a lot of having that self realization and finally turning the corner.

Drew:  That’s great. Well, Mike, this is inspiring, thanks so much for coming on.

Michael: Of course, yeah, it was great.

Drew:  We’ll do it again in a couple weeks, months. We’ll talk about email, we’ll check in on Color It.

Michael: Awesome.

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Drew: Yeah, I look forward to that but thanks again for joining us and it’s really inspiring how quickly you built this one up.

Michael: Thanks very much, appreciate it.

Drew:  Great. Okay, everybody, in the show notes we’ll have links to Mike’s site and his podcast, it’s called Ecom Crew and he’s got a nice breakdown there of how they did get from zero to a million in case you don’t want to listen to this podcast. We’ll also link to Color It and Mike, anything else you want to add?

Michael: Go do email marketing and get that Facebook pixel on.

Drew: Great, well thanks a lot. Have a good day out there in San Diego and we’ll talk to you soon.

Michael:  Thanks, man.