undefined | Better HN

0 pointsgfodor12y ago0 comments

Yeah, the majority of my app's revenue is from bulk-credit orders, so people drop $20-40 at a time to buy in bulk. Most of them don't use all their credits actually, and I'd guess this is probably in my favor in the long run vs. getting them to keep coming back since that is essentially all profit. (If credits expire.)

Here's the thing though. If you assume that you need to give someone a free card, which I'm all but certain of, it doesn't really matter how easy your app is to use, how many features it has, or anything like that. All those things control is your conversion rate of people who get to the point of sending a free card. (In my case, I was getting about 33% conversion rate here, which I think is pretty great.) So, 1 in 3 people who downloaded the app got all the way to the point of sending a free card.

The catch is who comes back and spends money? It's this conversion rate that determines the fate of the business. You don't have a lot of wiggle room here. You can spam them. You can try to improve the design and fullfillment of the cards so they get positive feedback from the recipient. You can give the recipient a way to notify them they enjoyed the card. You can even get people who receive the cards to pay for credits for them. I did all this. But beyond that, what else can you really do to entice users to come back and spend money? This isn't about improving the flow of the app, the use cases, qr codes, or whatever, it's about taking someone who experienced the product for free to decide to pay for more. It's all about sales.

There aren't many levers here at this point in the funnel, and in my experience this conversion rate I was getting (about 1 out of 8 people) is so low it's fairly hopeless when you consider sunk costs for free cards and not to mention marketing costs. You've spent money to send 8 free cards, which came from 24 installs, and you have one person left who is paying you for more. Ballpark you spent about $15-20 to find this one person. The margin on this person's purchases needs to pay for this plus server costs, employees, support, etc. Depending on your pricing they'll need to send (or buy up front) probably around 10 postcards on average per paid user. You have like no margin of safety here.

You'd really need it to be more like 1 out of 2 or 3 for it to be worth the "lets raise $1m and get to the top of the App Store to reduce marketing costs to zero" case. Also don't forget I was in a highly vertical market where there is a real obvious need (grandparents receiving pictures of grandkids.) Good luck to those guys :) The only way I could see it working is if you are at the top of the app store and you leverage the fact that a large % of your credits go unspent, and you can realize this as a profit. This isn't a business though, it's a ponzi scheme. It might be how Postagram has stayed afloat while they try to make the product solvent.

0 comments

cehrnrooth12y ago

Assuming the marginal cost of printing an extra card is fairly small, have you considered sending a copy of the card to the sender?

Unless the recipient provides some sort of feedback the sender doesn't really get anything to show for it. This could also let the sender see the quality of product sent. You could limit it to just the first card sent to limit your cost increase.

gfodorOP12y ago

This is a pretty cool idea. I had considered it but not deeply enough in that it would likely increase the rate at which customers ended up returning which is the key metric. I might give it a shot, since it's easy.

The only reason I'm skeptical is that I'm already contacting people after a few days to follow up with them how their order went, so I'm unsure how much more upside there is to interacting with senders more post-free card.

The other two problems is you've now doubled your acquisition cost so it'd need to at least double your return rate to be worthwhile. Also you'd need to get people to enter their own address which will reduce your top-funnel conversion rate, but this isn't really a huge deal in the long run if you assume you can drive users cheaply to the app.

mhb12y ago

Probably doesn't work with the workflow, but you could send an electronic image of the postcard that was sent to the sender instead of a physical copy.

cehrnrooth12y ago

Additional thought, you could put a unique promo code on the senders copy (code tied to their account) where if they buy X credits they get Z free.

1 more reply

rickdale12y ago

Could you expand more on why its absolutely vital to give one out for free?

I sorta see two different customers here. One looking for a free postcard to send real quick (the non converters) and the others that are just out there searching for something like this and pay. Are the numbers that much worse not including a free postcard?

gfodorOP12y ago

Yes, in my experiments removing the free card basically killed the conversion funnel, so your marketing costs per paid user skyrocket. Not only that, but the people who did convert paid for a single postcard instead of bulk credits, obviously, since they wanted to try it out first before spending big bucks. Bulk credits are essential for the business to even have a chance since you need to get your paid users to send (or at least pay for) at least 10 or so postcards for you to break even as I mentioned above.

edit: The 10 postcard number here is more of a guess if you assume that by removing the free cards you've increased your overall marketing costs per paid user to offset that cost anyway. That said this model can work better if you assume marketing costs are zero, such as if you get to the top of the app store. In the real world they aren't but in theory Postagram (who is at the top) could turn off free cards and start eeking out a legitimate (read: not based upon credit expiration) but small profit.

sokoloff12y ago

What if you made the app cost $0.99 and that included the first postcard?

You get far, far fewer purchases, but each purchase is a far, far more qualified customer, plus, you can almost break-even on the one-and-dones, and you may make enough money on the breakage to make it tiny profitable.

I get that tiny profitable isn't a VC's goal, but for a side project that's dying anyway, this might make the runway infinite, which you could use to rattle around and maybe find a winning model, or just let it run and not cost you much.

1 more reply

sejje12y ago

What if you had a great product video/detail shots/testimonials about the quality of the print?

I'm a photographer, and so I'm picky about print quality, but I would be willing to roll the dice on some gift-type prints, and I could easily be won over by some nice shots of a quality print.

j / k navigate · click thread line to collapse

0 pointsgfodor12y ago0 comments

0 comments

cehrnrooth12y ago

Assuming the marginal cost of printing an extra card is fairly small, have you considered sending a copy of the card to the sender?

gfodorOP12y ago

mhb12y ago

Probably doesn't work with the workflow, but you could send an electronic image of the postcard that was sent to the sender instead of a physical copy.

cehrnrooth12y ago

Additional thought, you could put a unique promo code on the senders copy (code tied to their account) where if they buy X credits they get Z free.

1 more reply

rickdale12y ago

Could you expand more on why its absolutely vital to give one out for free?

gfodorOP12y ago

sokoloff12y ago

What if you made the app cost $0.99 and that included the first postcard?

1 more reply

sejje12y ago

What if you had a great product video/detail shots/testimonials about the quality of the print?

I'm a photographer, and so I'm picky about print quality, but I would be willing to roll the dice on some gift-type prints, and I could easily be won over by some nice shots of a quality print.

j / k navigate · click thread line to collapse