How the Lob direct mail API grew by staying focused
Welcome to GET PUT POST, a newsletter all about APIs. Each edition features an interview with a startup about their API and ideas for developers to build on their platform.
This edition, I spoke with Shrav Mehta, Growth Engineer at Lob. The company programmatically lets you send physical mail via a scalable API. Beyond their amazing domain name, we discuss early growth lessons, direct mail ROI, and new app ideas for mail.
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What is Lob?
Lob is an API company. Our tools let businesses build powerful applications that use print and mail. Companies can send postcards, letters, or checks as easily as email.
We’re building a suite of APIs for businesses to solve tough operational problems. Stripe and Braintree make it really easy to do payment processing. Twilio and Nexmo build APIs in the communication space. Lob is doing the same for operations, starting with an API for direct mail.
It’s unlikely that I know all my customers’ addresses. How do you help with that problem?
Direct mail isn’t a fit for every company. To your point, a lot of businesses don’t have customer addresses, so we have other products to help with that.
First, we have a simple area mail product. You can send mail to all the businesses and residences in a zip code. Let’s say Caviar wanted to launch in a new city. They could enter a list of zip codes and make a custom postcard or mailer. The mailers could include a promo code like “CAVIAR94107” or they could list out familiar restaurants in the ZIP code.
Second, there are a lot of companies out there that provide direct mail lists. Mailers Haven is one of the main partners we recommend. They provide a list for anything. If you wanted to target all the Republicans in San Francisco or anyone who’s purchased a house in the Bay Area in the last 12 months, you could get a list of mailing addresses. We have a lot of real estate and financial service customers who get lists from Mailers Haven or Experian and use them with Lob.
Who are some example customers?
We segment our business into marketing customers and operations customers.
On the marketing side, real estate, finance, and e-commerce are a few of our big categories. We work with the top e-commerce company Amazon. They have tons of addresses from earlier shipments they can use to engage customers. For example, if someone abandons their shopping cart and are unsubscribed from Amazon emails, they could send a piece of direct mail to the last place they received a package. They also offer promotions via direct mail for new products like Amazon Fresh or Prime Now.
While many businesses use direct mail for marketing, there are also many operational challenges that we help companies overcome. These are companies sending things like parking tickets or bailing notices by mail. Another example is sending HIPAA compliant insurance and medical information. A lot of these are mandatory notices or compliance documents that can’t be shared online.
Another example on the operational side is address verification postcards. Companies like Couchsurfing.com use Lob to send a postcard when someone signs up to verify the address and that the person actually lives there.
Finally, we have a lot of people sending billing notices or invoices through Lob. Many companies prefer to send invoices via direct mail in addition to digital channels. They might also send follow-ups via direct mail since that’s a less-used channel.
With email, there are lot of tools and regulation to prevent spam. Is there an equivalent with direct mail?
There’s no true unsubscribe for direct mail that mirrors email, but I think people use it more cautiously. There’s a higher cost to using direct mail and also different expectations for the channel. Some companies with a high-value email newsletter might send one last piece of direct mail to re-engage someone who unsubscribed. They already know this is a touchy point for the customer.
What’s the most unexpected use case you’ve seen?
InMateAID is something I had never thought about. Many prisoners can’t communicate with their family. They made an app so that families could stay in touch with inmates by sending postcards or letters through Lob. They create messages online and they’re sent in the mail directly to the inmate in prison.
Also, there were a ton of different use cases around election time. I worked on a site called VotePlz and we used Lob to send mailers to help people register to vote. We had to deal with “wet signatures” — the person actually has to sign it. Managing the whole mail workflow for signatures would have been really difficult without a solution like Lob. Other organizations like Fight for the Future also used Lob to help people register to vote. I think that had a substantial impact, especially in states where people couldn’t register online.
How do you help your customers think through direct mail ROI?
When we talk to our customers, we tell them we’re an API company. We help solve the operational part and give you control of your direct mail. Think about AWS. They’re not going to tell you “You should be using this instance type over another.” Instead, they provide the building blocks you can pull together as needed.
We publish a lot of case studies and information about best practices, but the main value prop of Lob is direct mail you control via API. It’s up to you to determine how you want to implement it or how to calculate the ROI.
Typically your customer LTV is the most important factor. For example, direct mail makes a lot of sense for a jewelry business. If they make one $10,000 transaction online, that covers many $0.50 postcards. Of course you’re probably sending a couple thousand postcards to acquire the lead, but it pays for itself very quickly. Similarly, many people in real estate use direct mail. If you make $50,000 selling a house, you can do a lot of outreach.
For the operational use cases, there’s less of a question about pricing or ROI. Lob makes the process so much easier. You don’t have to build an internal team to handle this complicated workflow. As soon as someone signs up or at the end of the billing cycle, an automatic letter is fired out. The ROI comes from the future time, resources, and labor saved in support and management of the workflows.
How do you think about pricing?
Early on, we experimented with pricing that was similar to AWS reserved instances. Lob had a way to reserve 1,000 postcards or 100,000 postcards for a customer. This was a good model to start with because it really highlighted the on-demand nature of Lob’s mail platform. Since this was a new idea in the print and mail space, it helped to change the narrative for something traditionally heavy and rigid.
As many companies do, we evolved our pricing plans to better represent our target customers. In March 2016, we moved to a model similar to Mandrill or SendGrid. We have 5 or 6 self-service tiers and people can send a certain amount every month. Above 10,000 postcards, they talk to sales and negotiate a recurring agreement.
We are constantly thinking about pricing and even have a pricing strategy team that works with our sales and support teams to make sure our plans fit well with how customers are using Lob. At the end of the day we want to make it really easy to get started, whether you’re sending one piece of mail or a million.
How did the business get started?
Our founders Harry and Leore started the company and Dan joined a few months after they graduated from YC. They did all the mailing in-house. When Harry moved from Seattle to San Francisco, Leore told him “No, don’t bring your printer. Don’t bring your printer.” Harry brought it anyway and it ended up being the savior of the business at the time. When they got a larger order, they went to the local Kinko’s or FedEx store.
They created a mini assembly line to handle stuffing envelopes. This was the biggest pain and customers had issues with the paper being cut straight or folded properly. Once the order volume was large enough, they moved entirely to commercial print facilities
As we’ve grown, we’ve used APIs to connect existing print facilities across the country. We keep building real world infrastructure so that all the mail gets printed in the fastest, most efficient way possible. In a nutshell, we’re able to reroute traffic based on things such as cost and delivery speed.
There are plenty of scaling challenges since there are many nuances and complexities to commercial print around things like capacity, production capabilities, and USPS geographic behavior. Much like a CDN is a network of servers that distribute content efficiently, we are building a PDN (print delivery network) to serve the same purpose for physical mail.
What other features are you working on?
People often need help tracking direct mail. We built a tracking system with USPS to do this with their IMb tracing system. We’ve recently released webhooks so that we can notify people when mail is delivered. This is especially important for sensitive information that can only be sent in the mail.
One cool benefit is that we’re able to measure how fast our mail is getting delivered. Are we meeting the 4 to 6 business day mark? We can figure out what facility we should be sending mail from to improve delivery times. We’ll build products in the future that takes advantage of these abilities.
What are a few app ideas that you want people to build on Lob?
A lot of app ideas come straight from our customers. For example, they want people to build a CRM for Lob, like Marketo for direct mail. We don’t want to be in the business of building the CRM ourselves since we’re an API company. Someone needs to build the marketing workflow.
Another example is an easy way to upload a list from a mail broker. Maybe you could search and acquire lists through an integration with TowerData or Mailers Haven and then automatically use Lob to send out the mail.
You could also focus on a vertical and build something very targeted to real estate, for example. Some people have sent postcards where they have a picture on Google Street View of your house and text that says “We want to buy your home.” We’ve seen something similar for solar roofs. You could pull in data from the Google Sunroof Project and send marketing postcards with a real image of the house and the projected costs for solar.
How many people use the API?
Without revealing too many details here, our API products have been consumed by thousands of customers ranging from startups to enterprises. The beautiful thing about offering APIs, which are the fundamental building blocks of software, is that we can empower our customers to create applications that serves a wide variety of use-cases.
Instead of building software and creating out of the box GUI apps, we empower an ecosystem that serves the masses. Our thousands of customers create a network effect that leads to millions and millions of transactions and mail piece deliveries that could never be achieved by a single printer.
One of our most popular APIs is our address verification API that we offer for free. [My interview with Clearbit also touches on launching free products to grow an API]
What are some of the techniques you’ve used to grow the business and find new customers?
Growth has changed over time as we’ve focused more on the API. We’re focused heavily on developers and putting them first in the product and marketing. That means making the documentation easy to use. When people integrate our API, they should say “This just makes sense.” We don’t want someone to have to go through 100 pages of documentation like getting setup with the USPS.
We have libraries in all the popular languages and put out sample projects on our blog. The Integrations page is also important to show the different ways to get up and running with Lob. All these things drive virality because developers talk about it.
We always want to be where developers are hanging out. Lob actually found me at a hackathon. I had a great use case for another company and that’s how I stayed in touch with Lob.
We definitely believe in the bottoms-up strategy. When there’s a direct mail opportunity, developers should think of us first. Often we go to these events because we want to learn more about something we use internally and we also want to support anyone building with Lob.
One of the difficulties is our diverse customer base. Sometimes we’ll sell to a technical person like the CTO, but that’s not always the case. With bigger companies, it could be the marketing or operations team, or even IT procurement. Getting in touch with these groups is very different. We have to be at industry events like the top real estate or financial or health technology conference.
Some customers think they’re not ready for an API, but eventually they’ll feel the operational pain. One of our largest customers uses us for HIPAA-compliant letters. They initially thought they could build this themselves and said they weren’t interested. What’s great about more antiquated industries is that once you have one customer, others are willing to try it out. They want someone to test the waters beforehand.
Also, we dogfood our own products. We send thank you cards, especially around this time of year, to all of our customers. It generally works well with an omni-channel strategy where we’re targeting leads with paid ads, email, and direct mail. Then it’s our sales person’s responsibility to close them.
I once used Lob for business cards, but it doesn’t look like you offer that anymore. How do you stay focused?
Haha, that was a long time ago. Early on in Lob, we started adding products really quickly. We were still trying to figure things out and sold business cards, posters, and even mugs. We would ask our customers “If we added mugs, would you use that?” They’d say “Yeah, I’d order 1,000 mugs right now.” While that product worked functionally, it really didn’t fit with our product set for B2B solutions.
We realized that we needed to consolidate our products and really focus on the repeatable business. For us, it was letters, postcards, and checks. There’s also expansion within them like different sizes of letters and postcards.
We decided to focus on those three because that’s where we found the most operational use cases that people need every month. There are good consumer use cases for the other form factors within our production capabilities, but it will be a process of releasing those to the public.
We are always in pilots and betas with select customers to test new products. Our goal is to perfect these workflows across the entire supply chain before releasing them to the public.
When do you launch new products?
We launch product very opportunistically. Our launches range from existing product enhancements (such as webhooks and mail-tracing) to new APIs. Our product teams are always in customer development, talking to existing customers and potential customers about their pain points and challenges.
We also use new products internally before public launches just to ensure that they are very useful. For example, our operations and customer support teams were the first consumers of mail tracing. They needed visibility into the black boxes that are traditionally USPS and commercial printing.
After development, there’s a lot of testing and piloting to iron out the wrinkles and add missing functionality. We look for pilot customers that are willing to invest in that development and put skin in the game. This ensures that we build product that aligns with their genuine challenges.
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