Nathan Barry, CEO of ConvertKit on Word of Mouth, Email, and Crowded Markets

Nathan Barry, CEO of ConvertKit on Word of Mouth, Email, and Crowded Markets

Nathan Barry is the CEO and Founder of ConvertKit, an email marketing solution built specifically for the needs of professional content creators including bloggers, podcasters, online course creators, and more. He founded ConvertKit in Boise, Idaho in 2013 and has been growing the product ever since.

Nathan’s initial background in UX and UI turned him into a writer when he published his first book on designing mobile applications. After dramatically exceeded his goals and expectations, he published another book on designing web applications and discovered the need for an email marketing solution specifically for publishers and digital content creators.

Here are some of the topics discussed in this episode.

The Effect of Early Direct Sales

Direct sales are normally associated with consumer focused industries or long-sales cycle enterprise deals for B2B products. The right product and niche, however, might be conducive to direct outbound sales for specific target customers that can jumpstart your marketing funnel.

“We found that you could kind of hack that whole process by going out and hunting down these customers and doing all the hard work that doesn’t scale to get them to switch over. And then, as you did that, the word of mouth would start to kick in.”

When Nathan and his team got big-name bloggers to switch to ConvertKit from other email marketing programs, their affiliate channels, and organic referrals picked up tremendously.

Don’t Fear Crowded Markets

Too often have marketers and founders scrapped an idea because it’s already been done a million times. There’s obviously some truth to that, however, it’s important to consider the benefits of launching a product or new idea in a crowded space.

“One thing that helps there a lot is if you see a competitor that has a lot of market share. MailChimp has 8 million customers. Then you have to realize that they’re probably not serving all of those customers equally well.

If you could find a subset or a niche within their customer base that they’re not serving as well because they’ve had to make their product generic in order to serve millions of customers. You don’t have to worry about the core idea. You just have to worry about doing it better than the prominent competition. Often, that’s not hard to do. It’s a lot of work, but it’s a very achievable thing to do.

The validation that you get from an existing market and the opportunity you have to take an existing solution and improve it for a subset of the market share has the potential to be very profitable. Additionally, it provides an opportunity for you to create serious value for a more dedicated and value set of customers.

Create a Best-In-Class Product

With the variety of full-stack, one-stop-shop solutions available it’s easy to understand why marketers might be attracted to one product that is supposed to take care of all of their needs. There are certainly many use cases for such products, but it’s often that these products may not fit more customized or specific needs.

“We all see these products that are trying to be all things to all people, and there are a couple of things that you will notice in common about the successful products that do that. The first thing is they tend to be very expensive. They tend to be sold with a high-end, enterprise sales team, and they tend to have a lot of lock-in, like the only way to sign up is with an annual contract and things like that.

The reason is they get to the point where they are no longer executing well on product, so they’re not retaining customers through a great product and a great experience. They’re retaining customers through a sunk cost fallacy, or the person who is buying the product is different from the person who is using it, say at a larger organization.

In the same way, that you shouldn’t fear crowded markets, there’s no need to fear marketing your product into a specific use case or vertical. You’re likely to produce a product that we generate a greater response from your customers and elicit stronger loyalty and evangelism.

Transcript

Note: this transcript has been lightly edited for clarity.

Ander: It was just about a month ago, I was lucky enough to attend an awesome conference in Boise, Idaho. It was the Craft + Commerce Conference put on by ConvertKit, who we just launched an integration with. We’re super happy to have that integration here at Instapage, and I’m also super happy to be speaking to the CEO and Founder of ConvertKit right now, Nathan Barry.

Nathan, how are you doing?

Nathan: I’m doing well. Thanks for having me on.

Ander: Yeah. Thanks so much. I really appreciate all the work that you’re doing at ConvertKit. You also did an excellent job on the conference, by the way.

Even though I explained a bit in the introduction to this episode what ConvertKit is, and little bit about our integration, I think that the best place to start is hearing it in your words. It’ll probably sound a little bit better coming from you.

Nathan: ConvertKit is an email marketing service for creators of all kinds. That could be people who are bloggers, podcasters, content creators, or even SaaS companies who are finding a lot of value in inbound marketing, running their own podcasts or their own blogs to drive a lot of growth.

ConvertKit is built specifically for those content creators, and we’re a small team of about 27 people now, and a self-funded company.

Ander: Yeah, you guys are growing really quickly.

Nathan: Yeah, it’s always fun to have the kind of growth group that we have right now.

Ander: Yeah, you’ve got Barrett Brooks there, formerly at Fizzle—really great guy. I really enjoyed talking with everybody on your team.

So, Nathan, what’s the nutshell, the 60-second version or whatever of your professional journey that led you to create ConvertKit and that inspired this idea?

Nathan: My background is in software design. I worked as a UI/UX designer first for web applications and then got into designing iOS applications. Somewhere in that process, all my friends were asking me, “Hey, how do you design great iOS applications?” so I ended up writing a book about that and self-published it.

I launched it to a tiny audience that I had built up of an old pre-launch list of about 800 people, and my goal was to do $10,000 in sales for the book in the entire lifetime. I was like, “OK, if I could do that over 2 or 3 years, that would be amazing,” because I was trying to get more consulting gigs and everything.

Ander: Sure.

Nathan: It ended up doing $12,000 in sales in the first 24 hours, and then I went, “Oh boy.”

Ander: Wow.

Nathan: “There’s something to this whole audience thing.” Then I ended up writing another book called Designing Web Applications that launched to a now bigger audience. I doubled the revenue.

All throughout this time, email marketing was driving all of these conversions. I was learning these best practices, and I would go to implement them in MailChimp, and it was just like, “Wait, why do I have to fight with this tool just to implement a best practice, like a follow-up sequence or a content upgrade or all these other things?”

Then I thought, ok, my background is in design. It’s time to build an email marketing product with the best practices built in by default, not trying to serve all of “small business” but trying to serve all of these content creators. That’s how ConvertKit was born.

Ander: And there are so many content creators! That’s really cool. You guys do some interesting things with your product in the way that you direct leads when they come from a third-party platform, like Instapage, that’s a bit different than MailChimp. Why don’t you tell us a bit about that?

Nathan: Yeah. When leads come in from another platform, instead of just getting dropped into a generic list, like what would happen in MailChimp, they either go into a form or a tag. So, from the very beginning, that subscriber is always tied to the source that they came from. Without really doing any extra work, you can always tie them back to that one Instapage landing page or that particular campaign that you did, and you never run into the problems of duplicate subscribers or having a bunch of clunky lists because ConvertKit is set up to be subscriber-centric. With that, you just have one subscriber and all their tags and attributes on them. If they opt into multiple things, that all gets added to their one profile. It ends up being really easy to set up and really, really powerful at the same time.

Ander: Really cool.

It’s been a little while since then first launched ConvertKit, came up with this idea, and got the product built. At the time, what was your marketing philosophy? And, how has that evolved in the time that you have been growing ConvertKit as CEO?

Nathan: I started out with a big focus on content marketing because content marketing is how I’ve sold all of my books and courses before.I think I was pretty good at it, but it didn’t work for growing the SaaS company. The reason for that is getting people to switch email tools is a big deal, especially getting people to switch to a brand-new product.

Ander: Yeah, email is especially sticky. Once you’re using one, switching to another one can be a challenge.

Nathan: Right, so we didn’t have that traction. Using content marketing when you had no traction for a tough sell like that was challenging. We really had trouble getting traction for quite a while. Early on, it was “email marketing for people who have similar problems to Nathan,” You know? It was not good messaging.

Later on, we made a couple of changes, and this was about a year and a half or two years in. First was we narrowed down the messaging to email marketing for professional bloggers. We’ve since expanded that to include all creators, but early on, by picking that specific niche, we were able to let people know, “Hey, this is built exactly for you,” and then we knew who to go after and who to target.

The second thing that we did was we started direct sales. By doing direct sales, by reaching out to these bloggers, offering to migrate them over for free and have those conversations, then we started to get that initial pool of a couple hundred customers and more that that drove the infamous word of mouth. Everyone is like, “Hey, how did you grow?” and they’re like, “Oh, word of mouth!” and you’re like, “Oh, why don’t I try it out? Why don’t I just grow my product by word of mouth?” But that’s because it’s hard!

Ander: Yeah.

Nathan: You can’t grow a product that doesn’t exist yet or that doesn’t have customers.

Ander: Of course

Nathan: We found that you could kind of hack that whole process by going out and hunting down these customers and doing all the hard work that doesn’t scale to get them to switch over. And then, as you did that, the word of mouth would start to kick in.

It took us a long time to get that traction, but the direct sales really kicked into other things, and then it got the word of mouth going, got our affiliate program going, and then also got the influence going, where we could start to point to these bigger-name customers and say, “Well, Pat Flynn is using us,” or Tim Ferriss or people like that. Then they would say, “Oh, well, if it’s good enough for them, then it’s good enough for me.” Then it made it a lot easier for people to switch.

Ander: That’s interesting that you bring that up. Everyone talks about the Tim Ferriss effect, and it’s something that actually has not come up yet on this podcast. However, I’d love to know what that effect is. What was the effect when he started talking about your product?

Nathan: You know, he still doesn’t talk about it very much. He’s been on the platform for about 8 months, and we’re actually only recently allowed to talk about it and say that he’s on the platform.

Ander: Oh, interesting! OK.

Nathan: Yeah, he was very particular about that. He wanted to make sure it was a product that they could know and trust before we were able to share that, so it was only maybe in the last month or two that we’re able to publicly list him in the customer list. Hopefully, soon he’ll start talking about it as well, and then we’ll get to find out what that effect is.

Ander: Yeah, I’m really excited to see what comes of that.

Now, email marketing and email marketing products are obviously not a small space. I can think of many different products off the top of my head, including ConvertKit, and there obviously many more beyond that. What are some of the unique challenges that founders, marketers, or marketing teams face in marketing and email marketing product? I’m especially curious how ConvertKit has overcome those challenges. You talked about it a little bit, but I’d love to get some more detail.

Nathan: Yeah, you’re definitely right that there are a couple of other competitors out there. I think you and I could sit here and name off probably 25 major email marketing companies that have over, I don’t know, call it $10 million a year in revenue, and the big ones like MailChimp are, $400 million a year.

Ander: Right, and there are probably a hundred companies that we have never heard of and never will hear of, you know?

Nathan: Right, exactly. So, it’s a very crowded space. When I look at what to go into, I would never go into a space again that wasn’t crowded because I look at the crowded space, and I just see opportunity.

Ander: Interesting.

Nathan: I’m never having to convince someone that “Hey, you need email marketing!” or that email marketing is the next big thing because they already get that. You know? These are people who are making hundreds of thousands or millions of dollars a year off email marketing, so I have no convincing to do. I actually convince them that my product is better for them than MailChimp is, and that’s a sell I can make all day long.

One thing that helps there a lot is if you see a competitor that has a lot of market share—MailChimp has 8 million customers—then you have to realize that they’re probably not serving all of those customers equally well, so if you could find a subset or a niche within their customer base that they’re not serving as well because they’ve had to make their product generic in order to serve millions of customers, then we find that niche, like bloggers. MailChimp was popular for a lot of bloggers, but it’s not built for them. It’s built for more of the generic small business, so we’re able to carve off a subset of their customers, serve them way better than MailChimp can, and then we’re able to build up. We’re at $9 million a year in revenue now off of that tiny, little subset, so then we can start to expand from there.

I would say absolutely go after a crowded market, and then just pick your niche within that. Get a ton of traction, and then expand from there.

Ander: The other thing that going after a crowded market offers is that it’s clearly a validated space. You’re not doing something that is completely off the wall, that’s unheard of, and no one has considered before in terms of the core of what the product does.

Nathan: Yeah, absolutely. That validation is worth a ton because imagine spending a year just trying to get that very initial traction, and you just don’t even know if anyone wants to buy the thing that you’re going after. But yeah, email marketing or any of these spaces… I’m sure it’s the same with landing pages and other things. Yeah, marketers need landing pages. There’s no question about it.

You don’t have to worry about the core idea. you just have to worry about doing it better than the prominent competition—and often, that’s not hard to do. I mean, it’s a lot of work, but it’s a very achievable thing to do.

Ander: There’s another thing I really respect about what you guys are doing at ConvertKit—and this is actually something that you mentioned at the conference a few weeks ago when you were doing your keynote presentation. It’s this idea of the best-in-breed solutions.

ConvertKit certainly falls into that category for professional bloggers and for professional content creators, and here at Instapage that ours falls into that category for landing page creation and optimization. What are some more of your thoughts on the best-in-breed solution versus that one single full-stack product?

Nathan: Yeah. We all see these products that are trying to be all things to all people, and there are a couple of things that you will notice in common about the successful products that do that. The first thing is they tend to be very expensive. They tend to be sold with a high-end, enterprise sales team, and they tend to have a lot of lock-in, like the only way to sign up is with an annual contract and things like that.

The reason is they get to the point where they are no longer executing well on product, so they’re not retaining customers through a great product and a great experience. They’re retaining customers through a sunk cost fallacy, or the person who is buying the product is different from the person who is using it, say at a larger organization. One person buys, say, Infusionsoft or HubSpot, and then someone else has to use this, and they’re like, “Oh, I would have never bought this thing,” but their opinion doesn’t matter in the purchasing decision. Then, when that person wants to cancel or wants to switch out of it there’s a year contract, or there’s a many-thousand-dollar set-up fee that’s already been paid, so the sunk costs are there. so it’s like, “Let’s just figure this out even though it’s a pain.”

When you look at these monolithic companies that try to do everything and be all things to all people, they just don’t execute on that experience well.

Our approach—and maybe you can contrast it to Infusionsoft or something like that, which has a course platform, e-commerce, email, a CRM, and I don’t know if they have landing pages, but it wouldn’t surprise me. Our approach instead is “We could try to do all of that, but we wouldn’t do it well, and they don’t do it well.” Instead, I want to be absolutely the best at email marketing, and then I want to integrate with, like, SamCart and Gumroad and WooCommerce, and Shopify, who are fantastic at commerce.

Basically, where we ended up when we first started talking with you guys was asking… “Are we going to be the best at landing pages?” No, because we’re busy being the best at email marketing.

Ander: Well, you do have a landing page builder, to be fair.

Nathan: We do, but we’re trying to make that really easy for someone who wants
simple lead capture, you know?

Ander: Sure, sure.

Nathan: Like, “Hey, I’m on a podcast. Go here to get the free download.” Right? That’s something that you want to spin up really quickly to capture email addresses. But building out a true landing page or sales page? That’s not where we want to go.

Then we started this quest to find out who is the best at that. Trust me: I’m a little picky when it comes to user experience, so that’s why I reached out to the fine folks at Instapage, because it’s like, “We want to be the best in these core areas and then partner with everyone outside of that.”

Ander: Awesome. Well, thank you very much for the kind words—really, really appreciate that.

In the context of everything we’re talking about, where is marketing headed? What is the future of marketing? I’m especially curious how ConvertKit is preparing for this future, as well as how other marketers can prepare for this future.

Nathan: That’s obviously a big question, but I think it’s headed in a pretty clear direction that teaching and building trust is always the most effective thing, so do whatever you can do to grab that attention. Seth Godin would talk about “permission marketing.”

Ander: Yep.

Nathan: You’re getting not only someone’s attention but their permission, and that comes in the form of podcasts, blogs, and that training that’s being shared for free because that goes to build the trust.

I was just looking at our numbers for ConvertKit. We’ve got an email list of 80,000 people who have all said, “Hey, will you teach me about this online marketing stuff?” and we’re like, “Yeah, we would be happy to.” Then that builds the trust, and then when we say, “Hey, we have this product to sell,” they’re like, “Yeah, that looks great—let’s sign up!”

I don’t think that marketing is going in some amazing, revolutionary, new area; I think it’s just going to be more of delivering value for free. People will reward you with that with their attention, and then when you have that attention, you are able to promote products.

Ander: Awesome. I love that thinking. I completely agree.

And with that thinking, I’m very excited to see where you guys are going to continue to grow and serve professional content creators all over the world—and in all kinds of different spaces and niches. It’s really, really cool to see what’s going on over there. Nathan, it has been an absolute pleasure talking to you. I’m not sure if we got a chance to connect at the conference, but awesome talking to you, awesome connecting with you digitally today.

If people want to check out ConvertKit or our integration, what’s a good way for them to do that?

Nathan: Yeah, they should go to ConvertKit.com. There’s the “Integrations” page linked to you from there that will have more details on the integration. And then ConvertKit.com/Automation is going to have all of the details that we announced at the conference. It’s a lot of really fun stuff. We are kind of reimagining the product from the ground up, and it’s setting the stage for a lot of the future of email marketing, so we’re excited about that.

Ander: Awesome. Well, once again, Nathan, thank you for all of your hard work, thanks for putting on that great conference a few weeks ago, and thanks for working with us on this integration. We really appreciate it, and we will talk to you soon.

Nathan: Thanks.