How do you validate your startup business on $20 a day?

Josh Ledgard: Hi everyone. Welcome to KickoffLabs on growth. I'm Josh Ledgard, and I'm one of the founders at KickoffLabs, a tool that lets you quickly and easily set up giveaways, sweepstakes, and product launches where fans earns points and rewards for referring friends and promoting your brand. Today we're going to talk through the process of validating your startup for $20 a day. This interview was done a while back as one of our live marketing chats, but was so chock-full of timeless advice, I couldn't help but share it on this podcast. During their KickoffLabs campaign, they captured thousands of email addresses at a 56% conversation rate with an 88% viral boost, meaning 88% of their leads came from KickoffLabs sharing tools. If you enjoy this episode, give us a shout-out on Apple Podcast or the listening service of your choice. You can also check out kickofflabs.com to set up your own contest campaign. Enjoy the show.

They captured thousands of email addresses at a 56% conversation rate with an 88% viral boost, meaning 88% of their leads came from KickoffLabs sharing tools.

Josh Ledgard: Our guest today comes from a company called Choco Rush. He is a co-founder at Choco Rush. And just to set the expectations upfront as a success quote, the quote we grabbed was "We used KickoffLabs to create a one-page contest and collected more than 2,500 leads. That's how we validated our business idea." And I love starting off with sort of a picture of what the end sort of result looks like and what success looks like because we're going to get into how exactly made that possible, and we're going to get into that with Chris Lacy. So, welcome Chris. Thanks for joining us.

Chris Lacy: Thanks so much.

Josh Ledgard: Chris, as I said, is the co-founder at Choco Rush. Could you give us a really brief overview of the business here?

We actually started with an idea of having a monthly subscription service, and we wanted to test different ideas to see which one would stick.

Chris Lacy: Yeah, of course. So, we actually started with an idea of having a monthly subscription service, and we wanted to test different ideas to see which one would stick, so we wanted to kind of get that individual feedback from people, and that's what we used KickoffLabs for. The service as it exists today is a monthly subscription service. We send out a box with four chocolates, premium bean-to-bar chocolate, so these are chocolate bars you can go to the store and pay seven dollars for, or eight dollars for, or more.

Josh Ledgard: So you know you're not talking about a Hershey kiss here? You're not talking about a standard Hershey bar subscription service?

Chris Lacy: Yeah, no, it's a very premium product, and actually we're expanding next month. So next month we're launching, or this month I guess now that it's September 1st... We're launching a full online store as well. So we're super excited to be expanding the business, and yeah KickoffLabs got us started. So I'm excited to chat about that today.

Josh Ledgard: Cool, and just a little bit more about the business. This is craft dark chocolate. Do you guys manufacture the chocolates, or do you do find various high-quality chocolate manufacturers around, and you kind of put those together as part of the subscription for your customers?

Chris Lacy: Sure, so we actually go and buy chocolate direct from chocolate makers and put those four bars together, package that together, and then ship those out every month.

Josh Ledgard: Awesome, and because it provides interesting context, I'm curious... I mean, you started out just talking about the chocolate. Did you guys just want to pick a subscription business, and you just randomly picked chocolate? Do some of you and that the company have a background in the food industry or chocolate industry, as it were? I'm curious about your background.

Chris Lacy: Yeah, awesome question. So my background is actually internet marketing. That's what I do "full-time." We do everything from Google AdWords to Facebook ads, all those fun things. And my co-founder was incredibly obsessed with dark bean-to-bar chocolate. That's how we got started. It was my co-founder's obsession with dark chocolate and... Yeah. So then we had this idea. We did our research. We felt that it was going to be a marketable idea. The competition was very low.

Josh Ledgard: Can you talk about how you did the research? We get this question a lot about how you know... Before you did the validation with customers, you did some of your own research. Can you talk about how you did that research?

Chris Lacy: Sure, so they are actually quite a few tools out there that help you figure out um how many people are searching for something, how much would it cost to advertise for a particular product or service. Google Trends, so it's a Google product that gives you a kind of monthly snapshot of search volume in any given area for what your idea is, is definitely the place to start. So, in our case, there were thousands upon thousands, tens of thousands, of searches that were going on centered around dark chocolate. There were also a good volume of searches centered around chocolate subscription services, chocolate gifts, things like that. So it's like, okay, there's obviously a market out there; now we have to figure out the way to capture that potential audience.

So our idea was to launch a contest for a free 12-month subscription of chocolate and capture as many email addresses as we possibly could so that we hit the ground running when our site launched.

Chris Lacy: So that moved into the social media piece and the part that we launched with KickoffLabs. So our idea was to launch a contest for a free 12-month subscription of chocolate and capture as many email addresses as we possibly could so that we hit the ground running when our site launched with a sizable list that we could then go market towards.

Chris Lacy: We did a contest page. We took the advice and asked a question, "Do you like good chocolate?" Of course everyone's going to say yes to that. After they say yes, then they type in their email address. They get entered to win a free year of chocolate. So we went through this particular startup phase, so to speak, for, boy, I think was about a month.



Josh Ledgard: Looks like you ran it for about a month and a half or so.

Chris Lacy: ... Yeah a month and a half before we launched the actual website where people could sign up.

Josh Ledgard: Mm-hmm (affirmative).

Chris Lacy: So at this point all we were doing was trying to prove whether or not there are enough people out there that were interested in this product that we're offering, which is really more of a service that we're offering because, like you said, we're buying this chocolate, packaging it, and then shipping it out to people. And we did that for a month and a half. We saw about, I'll call them, 2,500 good signups for the contest. There were quite a few duplicates, and there are always those contests chasers out there. So it's pretty easy to tell there were a hundred people that are all the same that entered within one minute, and I don't know how they do that.

We ran the contest. We collected leads. And we definitely turned that lead list into a profitable a channel for us later.

Chris Lacy: But we ran the contest. We collected leads. And we definitely turned that lead list into a profitable a channel for us later. We still continue to email and have conversations with a lot of these people, and it originally came from that contest.

Josh Ledgard: So for this campaign, now let's drill in a campaign specifically. So, to recap, you're running this contest, and you're giving away as the prize of the contest basically I think it was a year subscription of the box chocolate. So you're saying $350 of pure bean-to-bar chocolate delivered to your door, so I think you're giving them a year or six months worth of chocolate, right, for the winner?

Chris Lacy: Exactly.

Josh Ledgard: And then you have some specific advice that we were able to pull up from your site before. And so the first one that seems very true and uniform among people that are successful is the concept of tracking everything. And so what does that mean to you? Because there are so many different things you could be tracking in a contest like this. What were you looking for when you were tracking everything? What was really important to you?

The second part was what was the social sharing like? How viral did it go? And that's what KickoffLabs was great for because it automates that process.

Chris Lacy: Sure, so for the contest there are really two primary metrics that we look at. One was how many email addresses did we collect, which we quickly figured out that we did get multiple, so you have to be careful about that. The second part was what was the social sharing like? How viral did it go? And that's what the platform was great for because it automates that process. So someone fills in their email address, and now they can go share. We were looking at things like how many people were talking about us on Instagram or Twitter or Facebook, and it's kind of the basis of formation of a community about the product that you're thinking about launching.

Josh Ledgard: So what do you guys do to seed traffic to the contest?

Chris Lacy: Sure so Google Analytics, we live and die by Google Analytics. If you have a startup business, if you have any type of business ever, and you have any concern about website traffic, which you should, then Google Analytics is the one and only best free tool to figure out what type of traffic you're getting, what they're doing when they land on your website, setting up goals. You can track any touch point that it seems relevant through that buying process or...

Josh Ledgard: Okay, if you can separate Google Analytics for tracking, but can you tell me what tools you used for paid media versus owned media versus earned media, and what the distinction between the three and the tools used? And you can start with paid media during the campaign.

I can tell Facebook, okay, I want to advertise my... whatever it is. I want to advertise my contest to everyone who loves chocolate, and I want to target a specific demographic. So that was actually the only paid channel that we used...

Chris Lacy: Sure, so for paid, during the KickoffLabs campaign, the only paid channel that we used was Facebook. Facebook is incredibly inexpensive compared to other channels: Google AdWords, Bing or Yahoo advertising. And it's also a great way to target specific interests. So I can tell Facebook, okay, I want to advertise my... whatever it is. I want to advertise my contest to everyone who loves chocolate, and I want to target a specific demographic. So that was actually the only paid channel that we used during the promotion period because spending money on other channels where it's more expensive, we didn't have a gauge of whether or not over the long term that would pay.

So we spent $16 per day on average for the Facebook campaign... and our cost per lead was $1.20.

Chris Lacy: So we spent $16 per day on average for the Facebook campaign. From that spend, which was tracked through Google Analytics goal tracking as well as your spend coming out of Facebook directly; they tell you all that fun stuff. I'm just trying to get to the correct slide here. So we had 333,000 ad impressions, so 333,000 times our ad was shown to people. That doesn't necessarily mean 333,000 people, but the ad was shown 333,000 times. We received 224 contest entries direct from Facebook, and our cost per lead was $1.20. So everyone that signed up we paid $1.20 for them to sign up for the contest.

Chris Lacy: So it was actually 17 days that we ran the contest for on Facebook through our paid channel. We ran the campaign more and promoted it on social obviously separately, but the ads only ran for 17 days, $16 a day, with that ultimate cost per lead of $1.20. And anytime you're working with a paid channel, it doesn't matter new business, old business. Been around for 40 years. What really matters at the end of the day is either what that lead number is, the cost per lead which is what we were looking at, or how much money you're making in revenue compared to how much money you're spending, the return on ad spend, return on investment, whichever metric you want to use.

Josh Ledgard: Outside of just ad spending, what did you guys do on social to drive traffic?

We gained Twitter followers for example. We would follow and comment on other influencers in the space, be them actual chocolate makers themselves, popular bloggers.

Chris Lacy: So it was truly influencer marketing without paying for influencer marketing. We gained Twitter followers for example. We would follow and comment on other influencers in the space, be them actual chocolate makers themselves, popular bloggers. It takes time, but it doesn't take money unless you're valuing your time at something crazy. But in a start-up [crosstalk 00:13:19] lean as you possibly can.

Josh Ledgard: That's the sweat equity, right? I'm just gonna go out and talk to as many people as I can in as short amount of time as I can.

Chris Lacy: Yeah, we took a road trip. My co-founder did most of it, but I joined her for parts when I could. But her road trip went from, oh geez, I think she flew into Michigan somewhere, went up through Canada, came down the East Coast, and you know kind of fostering those relationships from the very beginning directly with chocolate makers. Now, they're tweeting about us. They're sharing our posts. We do blog posts on our own site, so we actually have a blog.chocorush.co. Every month we try to highlight and I mean really pay respect to all of these chocolate makers out there, whether they're brand new or have been around for a while. They're putting their blood, sweat, and tears into their products, and we're picking them for a reason. We sample them all. Every month we select the box. And making those personal connections with chocolate makers or those personal connections with bloggers in the space or just chocolate, foodie, awesome people really helped us grow a lot.

Josh Ledgard: Yeah I got to say this is really something I want to reiterate to people listening is we preach influencer marketing and reaching out to influencers all the time. But it's actually rare to see people take that step, which I think is really important to build the relationship, where you weren't just sending these chocolate makers emails saying, "Hey check out our product." You were building a relationship with each of them and then actually going and saying, "Hey I'm going to be in town." I mean maybe not you personally but your company and your co-founder were going, saying, "Hey I'm going to be in town. I'm doing this road trip. I'd love the tour your facility and learn more about what you guys do, sample your chocolate, and talk to you about Choco Rush."



Josh Ledgard: What did you guys do to optimize your campaign along the way both in terms of the ads you're running and the landing page? How'd come up with the copy, the design, et cetera?

Chris Lacy: Sure, so we actually have a lot of experience with landing page optimization. Like I said, we do internet marketing as a "full-time job," and this is a nice little side project for us. But we did tweak some of the language on the landing page, not too much, from a KickoffLabs perspective. From the paid search side on Facebook, we actually left that pretty consistent throughout that 17-day trial, because what you don't want to do, you don't want to make so many changes in a short period of time that you don't have the ability to have enough data to make a decision that's statistically significant. So for the 17-day trial period on Facebook, not a whole heck of a lot. We definitely tied in directly with the correct market, and Facebook's change quite a bit actually since we launched our campaign. So we were able to do some really fun targeting, people who like fill-in-the-blank, for example, whereas not necessarily all those options exist today. But you can still... If someone loves chocolate, I can still advertise to them anytime I want.

Josh Ledgard: Awesome. For people that were signing up in the campaign during this contest phase, how did you interact with them? Did they get an automatic reply email? Did you guys send out mail once a week to them? How were you interacting with the people who signed up and were saying they were interested?

So someone signs up; two days later they get an email; five days later they get an email. We actually took a proactive approach to email, so we were really manually sending them out constantly... to figure out what worked.

Chris Lacy: Sure, so we used the MailChimp integration. Super huge fans of MailChimp. If you're using any other email platform, you're probably doing it wrong, at least personally that's my advice. But yeah, no, and then you can create drip campaigns through MailChimp. So someone signs up; two days later they get an email; five days later they get an email. We actually took a proactive approach to email, so we were really manually sending them out constantly trying to figure out what worked, how many people were dropping off of our email list. We also kept track of how-

Josh Ledgard: Describe constantly, because people always have this question, "How often should I email my list, and what's effective?"

Chris Lacy: ... It definitely depends a bit on what it what product or service that you're trying to offer. Definitely once a week for sure as a baseline. If it's a product or service that people can easily understand, I would say once a week is really good, especially when you're working with a list like we were from... Trying to watch chat at the same time, too. Sorry. So especially when you were working with a list like we were, which were a bunch of people signing up for a contest, so the last thing we wanted to do was pay MailChimp a lot more money for all of these people who literally just signed up for a free year's worth of chocolate. So we would rather bombard the people with emails and then let them drop off if they're not interested.

Chris Lacy: So we would track things like open rates. How many people opened an email? Okay well if no one's opening our emails after 10 emails, then they're probably not a valuable member of our list anymore.

Josh Ledgard: Yep, that makes total sense. During the contest, what was the content? What sort of content were you sending people during the contest? I get that question, too, like what sort of content should I be sending people and, not just how often; you kind of answered that. But then what should I tell them about this product they can't buy yet?

Chris Lacy: Yeah so we kept people engaged. I'd say half of it was share, share, share. So education about bean-to-bar chocolate. Obviously updates about what we were launching so that everyone felt a part of it. We did solicit feedback. I know there was at least one email that was like, "Hey let us know what you like," to try to get them more engaged, build that community for Choco Rush and really kind of... It was really the beginning of the brand.

Josh Ledgard: Yeah, so it sounds like what I heard in your answer is that, during the contest, you were reminding people that hey there is a contest. Keep sharing because you want to win the contest. You were engaging people. You were asking them questions, you know, what kind of things do you like? You were making them feel like they were part of this event. And then you were letting them know specifically more about the product and the launch, so it was sort of a combination of those three things. And maybe you alternated. Maybe you put both two of the three in one email, and you were kind of rotating around those three sort of general concepts to get across to people the whole time.

Chris Lacy: Exactly.

Josh Ledgard: What is too long for a time for a pre-launch on KickoffLabs and too short amount of time? I'm launching an exclusive list. We have Bridal sample sales in major US cities, and is six weeks too long or too short for something with no physical product? So I'm curious to hear your answer, and then I will offer my perspective as well.

Chris Lacy: Yeah sure, so I think six weeks is perfect. I of course agree with my co-founder because she's amazing. I have to say that because she's a-

Josh Ledgard: Good choice! So if don't mind talking about it, so we get this question often, too, and it really varies for business and what people are charging and what people are selling. But of the 2,500 leads, did you track what percentage of them ended up converting and ultimately buying some sort of subscription to your service?

Chris Lacy: Mm-hmm (affirmative). So we had about a seven percent conversion rate, in general a seven percent conversion rate from signups once those emails were stripped that were duplicates because again with the contest you get contest hunters. But we saw about seven percent within 30 days, and I don't have a good number for you long term. I'm sure it's more than that. I mean still reach out to these people, but it was for sure 100%, no doubt we gave away $350 worth of chocolate, and we made that the first month.

Josh Ledgard: I suppose you'd say that the contests and KickoffLabs worked well for your campaign?

KickoffLabs was a perfect platform for us. he simplicity of the platform, the features of the platform were exactly what we needed.

Chris Lacy: Oh absolutely. I'm a strong believer in not reinventing the wheel. There's no reason to pay a developer all kinds of money to go out and custom do everything and anything that you want. KickoffLabs was a perfect platform for us. The simplicity of the platform, the features of the platform were exactly what we needed. And I would... I mean not that I'm here to pitch your product; I'm just here to chat with people. But I think it was perfect. I would recommend it to anyone especially if you are in a situation like ours where you're feeling confident but you don't really know. Should I take the plunge? Should I spend a lot of money? Should I bring product in? Anything like that. It was the perfect solution for us. It was very hands-off. The time required was minimal and strongly recommend it.

Josh Ledgard: Cool thanks. So I threw up on the screen share that I have your current page that you're... So if you want to do your best pitch for what you guys are giving away now and what people can get, I'd love to hear it.

Chris Lacy: Well of course, I can talk about this all day. How long do we have? No I'm just kidding. Yeah so Choco Rush truly is a bean-to-bar subscription service that we ship dark chocolate each and every month to your door. The value of the chocolate that we ship is more than the cost of your membership, so you're not only getting free shipping; you're also getting a curated selection of chocolate that myself and my co-founder, my co-founder mostly because she is a super taster if you know what that means, that she tastes. So you're getting varieties from all over the world. You're getting four different makers. So some subscription services... There aren't many. One of them does four different bars from the same maker every month, for example.

Josh Ledgard: Outstanding. So what final piece of advice might you have for somebody who's thinking about starting, maybe not a chocolate business, but somebody who is thinking about starting a similar online business or subscription service? What kind of things, if you had it to do over, would you change, or what would you tell somebody who is going to go down this path today?

Chris Lacy: Sure, so the number one piece of advice is before you start doing anything make sure that you can track everything that you decide to do. If you aren't tracking, and you don't have numbers, it's very difficult to gauge success if not impossible. So that's that's truly the first piece of advice I would give. The second piece of advice is like you had mentioned before, and we talked about: make sure you're engaging people that are involved in communities, whether it's you know bloggers or whatever those social channels are. Go out and engage those people and start to build your reputation right from day one.

Chris Lacy: Thirdly, if you do a contest like ours, don't hesitate to blast these people with emails all the time. We honestly probably spent twice as much as we should have for MailChimp because we didn't blast them enough. You pay based on how many subscribers are on your list, and it took us probably too long to cut those down.

Josh Ledgard: And that's something that people are often shy about too is that concept of reaching out to people. I know your co-founder posted if you've ever subscribed to Gap.com, they email once a day, as example. And so kind of following a lead, I mean that's a retail business. They're obviously tracking all the results. They would not email once per day if that was a bad investment of their time, like they would absolutely not do it if it drove people away and was a negative ROI for them. And so people are shy and think, "Well I don't want to bug people." But the reality is if somebody wants to get off your email list, they probably were not the best customer for you anyway. And if you're sending engaging content and making good offers and deals to people, they're going to stay on the list. They might ignore five of six emails, but that six one's going to get them to buy. And I think people often neglect that fact because they think, "Oh, I don't want to be too pushy because I hate getting some of these emails myself from services I weren't really interested in."

Josh Ledgard: But then that's the thing: you weren't really interested in that service, but your real fans are, and they're the ones that will build a network for you.

Chris Lacy: Oh exactly, and I mean that the thing about it is it doesn't matter how many people are on your email list. All that matters are the people on your email list that will actually end up buying your products.

Josh Ledgard: Absolutely.

Chris Lacy: I brought it up a ton of times, but from a website perspective, I want it to look pretty. And pretty doesn't matter. It really doesn't. I mean, yes, everyone wants their websites to be presentable. But a website that converts, which is why KickoffLabs exists, is so much more important than, "Oh I want this five pixels that way," or you know, "I want to be able to put a background image here," something-

Josh Ledgard: This is absolutely... Go ahead.

No one goes to Amazon.com and goes, "Oh this is a beautiful looking website," because it's not. But it works.

Chris Lacy: I always bring people back to Amazon.com. It is one of the ugliest websites, right? No one goes to Amazon.com and goes, "Oh this is a beautiful looking website," because it's not. But it works.

Josh Ledgard: No absolutely, and that's always been our goal is to make it super quick to put up high converting landing pages. And we get questions all the time like, "Oh but I want a video moving background." And we ask why, and they said, "Well I saw this other company do it." "Do you think it converts because I can actually tell you, when you test it against a page without a video background, the one without is going to convert better." [crosstalk 00:28:15]

Chris Lacy: All the time, too.

Josh Ledgard: Yeah, it was like I can tell you the answer. Now you don't even need to test it. We offer both, and I've seen the test run enough times that, 90% of the time, less distractions on the page are going to convert better. And the video moving in the background... Sorry, that was my pet peeve is whenever somebody emails and says, "I want the background to be moving, and I want this other animation on the page." Why? Do you want conversions or do you off the page to be glitzy?

Chris Lacy: Exactly. Yeah.

Josh Ledgard: So that's great to hear somebody else that shares that mentality. And I hadn't thought about the Amazon example. That's a great example. The homepage on Amazon is incredibly ugly, but I'm sure... I mean I know people that work there personally, and I know that they're just absolutely... Like you said, they measure absolutely every little bit of that, and none of it is by accident when you go to Amazon.

Chris Lacy: Oh yeah they run hundreds of tests if not thousands of tests each and every minute of every day.

Josh Ledgard: They have entire teams of people whose job it is to come up with different tests for the product pages, for the homepage, for category pages, and there's just teams of people coming up with a new test to run. So when you go to that page, you can leverage a lot of the things you learn from looking at bigger retailers and because you can have faith that they are probably testing this, because they are.

Chris Lacy: Exactly.

Josh Ledgard: Great, thanks for your time today, and this was a lot of fun. And I look forward to hearing any feedback that people have about the chat and about how we can improve going forward. Thanks everyone. Have a great day.

Chris Lacy: Thanks Josh.