Chapter 22: Gimmicks & Promos

Every day that we spent not improving our product was a wasted day.

Joel Spolsky

Here’s the scenario. Your application is just getting off the ground. You’ve bootstrapped it. You’re short on time and money, and you need the business to grow to pay your salary. You can’t afford to pay for significant advertising campaigns, and you don’t have time to blog, let alone wait for the blogging to create an audience of potential customers.

That’s when you may start to think that a promotion or a discount on your application could be great because there’s no upfront cost — you’d only have to pay for the new customers. It may sound enticing because it doesn’t seem to cost you anything, but if you look at the bigger picture, you’ll find that the long-term costs and side effects probably outweigh the short-term benefits.

I’ve heard that some businesses have had short-term success with promotions or discounts, but they’re a poor strategy to try to help your business grow sustainably. We regularly receive offers to include Sifter in steeply discounted promotions or bundles — ostensibly to help promote Sifter to a new audience. Those offers can be tempting at times, but we invariably pass; these days we don’t even give them a second thought.

Discounts or bundles may seem harmless enough on the surface — and therein lies the temptation. But selling your software for a discount can create more problems than it solves. If it takes a gimmick to get people to sign up, that likely means that the discount or promotion is masking their underlying gripes with the product. You’re better off spending your time improving your product to make your existing customers happy.

If you’re using a promotion or bundle to reach new customers, you’re mostly just reaching an audience unified primarily by their desire for a good deal — they don’t necessarily share a common interest in the problem that your application solves. And they’re less likely to be interested in ever paying full price.

Since price — and not fit — is such a significant factor in their decision you may end up with entire batches of customers that shouldn’t really be using your product because it’s not right for them. And they may end up filing a boatload of feature requests as they try to shoehorn your product to meet their needs. At best they can be a distraction, at the worst, they can pull your vision in the wrong direction. You’re much better off in the long term if your customers choose your product on its merits rather than on its price.

Discounts and promotions may also come across as unfair to current customers who are paying full price — they might feel like second-class citizens because they’re now paying more than the people who got the discount. If you gain too many customers too quickly — without any immediate profit behind those customers — you may find yourself with more customers to support but without the cash flow to expand your support team. I love getting new customers but not if it’s at the expense of our existing customers.

I’ve found that customers generate their highest support load during their first month while they become familiar with the product and ask questions about it. And if there’s a massive influx of new customers, that can throw your support team for a loop — and that hurts your old and new customers alike.

Promotions and discounts devalue your product. It’s an unfortunate truth that people associate price with value, but something with a lower price is often considered less valuable. If you deeply discount your product or bundle it with other products, people will think less of it.

Affiliate Programs

Affiliate program aren’t quite discounts or promotions, but they’re worth addressing since they’re in the same realm. In our early days, we regularly received emails asking whether we offered an affiliate program. We also spoke with a few companies that wanted to recommend our product if we offered an affiliate program. I can’t be sure whether we made the right decision, but we decided not to offer an affiliate program.

The biggest strike against affiliate programs is that they require development time to run effectively. Every development hour spent on marketing rather than improving your product is a development hour that’s not going toward the parts of your business that really matter. Simply put, affiliate programs take time away from more important things. Sure, you could set up an affiliate program with a third party, but that will cost money. Or you could try to build one yourself, but then you’d need to process payments and approve accounts — and you’d probably have to deal with fraud and other hazards as well.

You’ll meet plenty of people who want to partner with you to promote your service, and they’ll ask about an affiliate program. This may seem awfully tempting, but it shouldn’t even be on your radar in those first few years. I’m inclined to argue that it shouldn’t ever be on your radar, but I’ve heard of some companies that have had modest success with affiliate programs. I still don’t believe that the risks are worth it.

If someone needs a kickback to promote your product, then either they care more about the kickback than your product, or they don’t love your product enough to promote it without kickbacks. At this stage of the game, you’re better off focusing on your product rather than trying to spend money to acquire customers. Customers come and go, but product improvements last forever.

Affiliate programs create questionable motivation — if someone’s being paid to recommend something, it’s difficult to know if they like the product or if they’re just trying to make some money. On the other hand, if someone were to recommend a tool because it made their life better — and not just because they were trying make a buck — their recommendation would carry a lot more weight to it.

Continue to Chapter 23: Alpha & Beta

This is a chapter from the first edition of Starting + Sustaining, a book about bootstrapping a successful hosted web application business. The second edition, a massive update, will be out in Spring of 2017. You can subscribe here to be notified when it launches.