Mike Jackness is the co-founder of Colorit, a company that strives to make the best coloring books for adults on the market.
Learn how they used Amazon as a proving ground to build a $2.5 million business.
In this episode, we discuss:
How to use Amazon reviews to figure out how to improve on an existing product.
What is "consumerability" and why you want to sell a product that has it.
How they’re using the "free + shipping" model to get customers to make more profitable purchases later.
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Show notes:
Store: Colorit
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Recommended: JungleScout, Merchant Words, Klaviyo, Skubana, Yotpo, Gleam.io, TagTray, OptinMonk, Just Uno, Order Printer Templates, Receiptful, EcommerceFuel blog, EcomCrew blog
Transcription
Felix: Today, I’m joined by Mike Jackness from Colorit.com and ecomcrew.com. Colorit, strives to make the best coloring books for adults on the market with hardback covers, spiral bindings, artist quality paper and bonus blotters. It was started in 2015 and based out of San Diego, California. Welcome, Mike.
Mike: Hey, how’s it going?
Felix: Tell us a little bit more about your story and what are some of the most popular products.
Mike: Yes, Colorit got started after like an evolution like of a bunch of different E-commerce stuff that we’ve been doing. We had, treadmill.com was our first site, then we got into icewraps.com. We’ll talk about that here in a little bit but the idea basically was to create a product from the ground up. We kind of got over the whole buying other people’s products or doing drop shipping, and things of that nature. We had a whole bunch of different criteria, which we can, I don’t know if you want to get in to that but it was basically at a high level, things that are light, easy to ship, that are hard to break in shipping that don’t have a shelf life and things of that nature.
Colorit kind of fill all those different things and my cousin Erica actually is the one that brought me the idea and she knew that we were doing e-commerce and I was like, that’s something that I’m definitely interested in being a part of and that’s basically how it was born. In my approach to anything that I do is to kind of be an over achiever. I’m not the guy that goes on Alibaba and tries to buy 25 or 50 of something off Alibaba Express and just resell that on Amazon. My thought process was when we started ColorIt if we were going to do it, was to be able to create like a leap frog product.
I kind of think of the iPhone when it first came out, when everybody was kind of using quote, unquote smartphones, phones that were a flip phones and iPhone was just … it leaped to generation and that was kind of what we wanted to do with the coloring book market and so we innovated by adding hardback covers and putting a spiral binding on it so it can lay flat and using like true artistry paper, and putting a blotter in there and there is some other things that we kind of did and used, artist, real artist to draw the artwork and it seems like so truly all the … right now, because, a year later, looking back at it, there is a lot of people that have copied what we’ve done.
Up into that point, a coloring book basically was the same thing is if you were to buy a fiction novel off of the store at Barnes … a shelf, I mean off of Barnes and Noble which is crappy, quality paper and it was a paperback that would kind of collapse on itself as you were trying to color it, you’d be holding it with one hand and trying to color it. If you’re left handed, it’s even more frustrating. We’re basically, solo, our market out there that was doing quite well and wanted to improve upon it and that’s how we kind of came up with ColorIt.
Felix: That’s definitely very cool. You mentioned that you like to over achieve on everything, you don’t just buy products off of AliExpress or drop ship or takes something that already exist and just resell it, you improve upon it. How do you decide what you should focus on improving in a product?
Mike: Yeah, so I mean, the first thing we do is you look at the internet and Amazon is a great place to start and look at the negative reviews and see what other people are complaining about and all those things that aI mentioned, were the things people were complaining about but to wrap it up on a nutshell, the Reader’s Digest version, my feeling is that if, I wouldn’t leave a 5 star review myself, like a static 5 star review, like a 5 star plus review myself and be honest with myself then it’s not a product that I want to sell myself. That’s kind of the stand that we hold ourselves to.
Felix: You mentioned that a relative of yours brought this idea of adult coloring books to you. Tell us about the background of this. Is this an existing niche or market? How did you know that this would grow over time?
Mike: Yes, so when I look at Google Trends, and typed in adult coloring books and I saw this huge spike, like a hockey stick and unfortunately, I mean, looking back at it now, if you look at Google Trends, it’s kind of, turned out to be a mountain peak and we’re hoping that, it’s just a seasonal thing that in Christmas time, it will peak back up again at holiday season. At the same time, our sales continue to grow so I mean, I’m not too terribly concerned about it. I think that any market like that is going to have some shrinkage, it might be kind of a fatty thing but our hope is that long term, it consolidates a little bit but it’s always ahead of where it was before.
It’s something that hopefully have some staying power but it definitely concerns me that it could be a fatty thing and 3 years from now, nobody is talking about adult coloring which is one of the reasons why we do diversify. We have a bunch of other brands that we’re working on, that are, in the baby niche which I don’t think will ever change unless, if people stopped having babies, we’ll really be in trouble and then also the pet industry as well so where we can apply some of that, some unique factors that I was mentioning to, the products that exist out there, in those industry so yeah, it’s definitely a concern with coloring but at the time and still, I think there is still longevity.
Colored pencils and gel pens and markers and greeting cards and all these other things that were … we’ve been putting out with great success and the actuality is that, our profit margins and profitability as a company are a bit higher on some of the accessories rather than the coloring books which is not what we expected to begin with other gates.
Felix: I think Google Trends is definitely a place you should check if you’re determining if you should enter a market or not, for anyone out there that wants to use Google Trends to determine if a market is viable, what should they be looking at?
Mike: Yeah, exactly, I mean, if you type in … there is definitely some, like if you type in hula hoops or yo-yos or something like that, I think, things like this is off the fly but there is definitely a lot of industries where it’s just like a long slow decline in debt, right, that’s just kind of heading towards zero over a period, it’s sometimes 1, sometimes 5, sometimes 10 years or whatever and I don’t really want to be involved in that type of a business, we’ve actually been in that type of a business, we were … some of my background was actually doing online poker affiliate marketing, of all things, I was really in the, playing poker 15 years ago and started doing that.
That, if you type in the Google Trends, it’s the same thing, right and we were riding a wave up which was, it felt really great but then, it was a wave down and all they can do is try to catch a falling knife and it hurts, how do you try to catch a falling knife, right, so it’s something we try to stay away from.
Felix: If you were to open up Google Trends and you type in the keywords for your market, and you saw that it was declining or flatlining, would you say no to going into that market or could there still be an opportunity?
Mike: Yeah, declining I think is bad, right, I mean, if I were to open up Google Trends today and look at adult coloring, I’d be a little concerned quite frankly because it is now, a year later, it’s kind of … like it still looks like a mountain peak and we’re hoping that it’s just like a seasonal thing because the mountain peak was back in November, December. If there is no history, like if you have a 10 year old term you can look at it, you can see, okay, well, every December there is a peak in volumes. Right now, I would definitely be a little bit more in the concern side. Now, if it’s something that’s more established, I think that steady, a flatline is actually good, right.
I mean, I love to see some term of that, that has a flatline over 5 or 10 years. I think that that’s great and it’s a large market, sure, you can go to Google Keyword Planner and see how many times, a month, that they get searched. Now, if it’s a large number, and it’s been consistent for 5, 10 years, that’s great. Now, if you put down a slip going downwards and then, it’s just a declining market, over 5 or 10 years, that’s something I would definitely stay away from.
Felix: You mentioned earlier, the criteria you have when choosing products like seeing upwards or stable trends and you also mentioned for this particular product for ColorIt, you wanted to find a product that didn’t have a short shelf life, was easy to ship, won’t easily break in shipping or handling, anything else you make sure to check off the list when thinking about, introducing a new product, product line or even new business?
Mike: Definitely, and the reason that we came up with this list is actually stands off of doing treadmill.com to begin with, where the product wasn’t light and it wasn’t easy to ship and we’re actually doing drop shipping and it was just … we weren’t able to meet our customer’s expectation on delivery so that’s where the whole light, easy to ship thing comes from. The other thing is now, that we have our own warehouse, we’ve have one for a number of years now. Things that are larger just take up more room and they cost more money to store. That’s definitely a factor.
The other factor is. We don’t want it to ever be an oversized item at Amazon … Amazon qualifies oversized item, we’ve been using Amazon to help alleviate some of our fulfillment growing pains and we already have the inventory to Amazon anyway so we’ve just been letting them do fulfillment for us and anything that seem to be oversized cost a lot more money. It’s not something that’s a steadfast where we’ve actually been bringing in a couple of things that are small oversized items that just have really like profitability that we’re looking at but in general we want it to be relatively small. The big key that we’ve been looking for that we’ve added to our list, is some sort of consumability.
We don’t want to sell a product that is only going to be used, you’re going to sell it to them one time, like we have that problem with Ice Wraps. I mean, if we saw somebody, they have a shoulder injury or whatever, we sell them a shoulder ice wrap. That’s great we make some money off of that but they’re not going to come back and buy another one. The idea actually is you want to build a product that they don’t have to buy another one which is kind of bad, right? In the coloring space, I mean, we can design a really high quality product where it’s a consumable, there is 50 pages in each book. Our big fans are going to come back and buy more.
They’re going to use up our pencils, they’re going to use up gel pens and markers. I think that that’s really important. The thing that we’ve really learned over the last couple of years is, it cost a lot of money to acquire a customer. We’ve gotten really good customer acquisition, that’s something we can talk about on this Podcast. If you have a product that you only sell somebody something once, it all becomes a one dimensional math problem. You sell it to them for 100 bucks, you buy it for 50, it cost 15 to ship, you got $35 left over in profit. You want to make some money, you know, so you’re only going to be able to spend 10, maybe 15 dollars or whatever, to acquire a customer.
Now, if I can sell them over the course of a couple of years, the same hundred dollar item, use a round number again, over and over again, I could pay the full $35 to get the customer in the door, the first time and I know from doing email marketing and other retention marketing that we have a higher lifetime value of a customer, that stuff is really important. That’s one of the only things that we look at when determining new brands. That’s why the baby niche to me is great because we’re going to be doing some baby clothing and other products that obviously, a baby eventually isn’t a baby any longer but the whole time that they’re a baby, they grow really quickly and need new product non-stop.
I think that that, like once we get a fan, hopefully, we catch them early in the cycle where they’re zero to three months old, we can then sell them a 3 to 6 month and then a 6 to 12 month and then a 12 to 18, 18 to 24 and other products and toys and things of that nature. I think that that’s really important and the other thing that we look for is passion. Ice Wraps is another good example, we sell … we’ve been doing, our own white label ice wrap products and doing quite well at it and it’s lucrative but people just aren’t passionate about it. There is, we do get reviews and things like that but they’re not going to tell their friends, “Hey, check out this amazing ice pack that I got. It got really cold,” or whatever.
It’s just … it’s not that exciting but if you think of a coloring or babies or the pet industry, people are really passionate about their kids obviously. They’re really passionate about their pets. You can think of all the things, like interior design or maybe golfing or something where people are just super passionate about and they become your brand advocates for you. I think these things are really important. All the time, people tell me, “You got really lucky to find this niche with coloring and blah, blah, blah.” The reality was is, I wasn’t really lucky. I mean, we put down this criteria on paper. It’s been something that took us a couple of years to developed.
I can tell you all the stupid things we did beforehand which were treadmills and ice wraps to a smaller degree but it took learning that the hard way to figure out some of these criteria. I think that now, we have a really refined process and I’ve kind of have that aha moment of consumability and passion and then also, you still want things that are relatively light and then a good price point, good margin and all these other things that are important but some of these things you just can’t create, right. You can’t create passion, you can’t create consumability, so if you’re in an industry and a lot of masterminds and we do our own Podcast and blogging and stuff and talk to a lot of people in the industry.
There is certain things that you just can’t fix, right? Obviously, if you already have a store, I might say, just go scrap it and sell it or anything but if you’re at the point where you’re still evaluating what to get into, I think these are very important criteria.
Felix: Let’s review this really quickly again, consumability, passion, long shelf life, doesn’t break easily, were some of the criteria you mentioned. It obviously makes a lot of sense for an experienced entrepreneur like you. I do wonder though, can it be overwhelming for a first time entrepreneur when they’re trying to find something that hits on all of these points? Would you recommend the same approach with new entrepreneurs or would you give them an easier list of criteria to work with?
Mike: Yeah, I mean, it’s touchy subject. For me, I always recommend just getting started, right? I mean, you can be … you can have the whole analysis, paralysis thing. I just saw this a lot actually. I was at Steve Chou’s event before my wife quit her job. The seller summit where he brought me in as a mentor and a speaker for his VIP clients and the thing that I heard over and over again was, I’ve been evaluating this for XYZ time and it was usually a long period … and for me, like anything more than 2 days is a long time. Legitimately a long time, 6 months, a year, year and a half, 2 years and my thing was, look, when you land like go to Target and go to the clearance aisle and just buy something off the shelf and learn how to sell on Amazon. Learn how to create a store, learn how to do these things. By the time that you find the perfect products, you are in a position to … that you already know how to do all these things.
That’s why we’ve been able to be so successful with ColorIt so quickly. I mean, if it was our first store, we’d still be trying to figure out how to even launch it, right? I mean, we had already done all the hard work with treadmill and with cuttingboard.com, which is another one that we own and chopping blocks, icewraps.com. We had all these other things that we did first before we found the quote, unquote perfect thing and the other perfect things that we’re working on. That list continues to evolve and you learn, we’ll probably learn things from the coloring industry that we realized were mistakes and build on that. For me, I think that there is no time like the present to get started and go install Shopify, sell something, get it off at Alibaba.
Do the things I’m kind of telling you that aren’t the best things if you’re … but at least you’re getting started and you learn how to do a story. Learn how to do some PPC, some Facebook ads, some customer support, how to take credit card, how to do some design, even on marketing. I mean, there is a lot to it obviously and like I said, we had already kind of figure out all those things by the time we had launched ColorIt.
Felix: I totally agree because you need a product before you can have a store and you need a store before you can start learning and applying the things that you’re learning. If you’re stuck in this phase where you’re trying to decide the very first step, you’ll never start learning. To avoid this analysis paralysis, you got to just pick one, what is the most important criteria to hit on?
Mike: Yeah, I’m going to, have to go with 2 things. They’re kind of intertwined and I think the price point is incredibly important. I think from at least from my standpoint, anything that has lower $10 retail price is just a non-starter for us. The reason is, is we always use Amazon as a proven ground to launch any business and it’s really difficult to make even a penny on Amazon if you start selling products at 8.99, 7.99, et cetera. They have a floor pick and pack fee and a floor shipping fee that just eats up so much of your margin, which is the second part of it, which is you don’t want to just make 10% margin on things. You got to have enough meat left in it to make some money.
I never ever sacrificed, we don’t bring in products that are under 10 bucks. We sell quite a few things that we sell at 9.99, I think that’s a good level to start up but we don’t sell things at 7.99 and I think that that’s just something that, we have to be hard and fast on.
Felix: Pricing and what was the other one?
Mike: The margin, I mean, I think what I realized again over time, I mean, even if you’re at a high dollar value, it doesn’t make up from margin. I mean, treadmills are really good example of that. We were selling $2,000 machines and we were making 10 to 15 points on it and that sounds great. That’s 300 bucks or 200 bucks and that’s a lot of money per transactions and I equated that to kind of like a CPA back in the affiliate marketing days and it cost per acquisition type of fee. The reality is that your credit card transaction fee is still 2, 3 percent and you’re still going to pay some money for PPC and you’re still going to have to have some SAS applications to run your company.
All these things add up and a lot of them are percentage type based things and even just taking the credit card fee out of it, that’s 25% of your profit when you’re running at this day margin. For me, what we really realized is that there just has to be enough margin in the game. You had to be able to create enough perceived value with your product where you can afford to run ads and do all the things that are necessary to acquire the customer and treat them right and be able to get a 5 star product out there.
Felix: Is there a margin threshold that you definitely want to be above?
Mike: Yeah, and we always try to double our money. I mean, if we buy something for 50, we want to sell it at a hundred. That’s kind of our absolute bottom line. We kind of cheat that a little bit and sometimes do 80%. If we’re buying it for a hundred, we want to sell it for … I shouldn’t say sell it for a hundred, we want to get back from Amazon after all fees and everything, we want to get back a hundred. We look at total profitability of it and obviously we make more, only sell it through our own store but Amazon is obviously a large channel and again, we use that as a proven ground and that’s how we launch ColorIt actually, it would probably be a cool thing to talk about here in just a minute.
We always look at that as like our base for profitability. If we’re buying something landed here for 50 bucks, when we sell it after Amazon’s 15% fee and their pick, pack and ship fee and the returns and all these things that add up for Amazon, we want $100 back from them when they, they call it, deposit every 2 weeks.
Felix: Yeah, definitely want to talk about the whole, using Amazon as a proven grounds and I want to dive into that in a second but before we get there, you mentioned, Amazon reviews, Google Trends as a part of your market research. Are there any other tools or sites you checked before you decided to hit the go button and launch your new business or a new product?
Mike: Yeah, I mean, a lot of it, is just intuition at this point. Again, to estimate all this criteria I mentioned before, that the passion thing and consumability and all the other criteria that you want to keep going over them. A lot of it from there is you’re looking at is their sales volume, I guess would be the other thing and Amazon or Jungle Scout or some of these things are a good criteria. If you want to make sure there is like a depth to the market, it isn’t just one coloring book for instance that’s selling and the second guy behind is just nothing.
We want to make sure that it’s supreme, deep market and actually, people think I’m crazy but I actually think that the higher competition markets are better, because there is more sales volume and I want to … I rather have a small piece of a big pie than necessary a large piece of a smaller pie because there is only just so many sales out there that you can get. We look for, depth of market I think is really important and there weren’t really too many others tools that we use to make these determinations. I mean, there are other tools and things we look at when we’re looking at buying, existing websites, which we’ve done, when we buy icewraps.com.
That was a store that already existed but that’s a totally different animal but for determining brand new products and things that we’re getting into like the baby thing that we’re doing, a lot of it is just kind of common sense, right. There is a lot of babies being born, to replenish … the customer is going into the funnel, if you will, they’re being replenished continuously because there is always new kids and they’re always growing and then we looked at specific things that we wanted to sell through Amazon and look at the sales ranking with the Jungle Scout. Estimated daily sales and things of that nature and then made a determination that that was a niche that we wanted to get into and that’s kind of how it’s done and we do it pretty quickly.
I mean, I don’t ever get the whole analysis paralysis thing. I really believe in the whole like shotgun effect, threw things at the wall and see what sticks and if you lose a little money in the process, developing a product that doesn’t work or whatever it might be, then so be it, it’s just the cost of doing business. I think people get so caught up and worried about losing a couple of dollars on something that they’re developing new. I just don’t worry about that. I mean, I make educated decisions and I’ll just carelessly go out there and start buying stuff. Again, it was one of the things I kind of came up when I was at Seller Summit.
I mentioned, how much did you spend to come fly down here and how much did you spend for the conference itself and a hotel room. It’s like 2, 3 thousand dollars but yeah, people are embarrassed or whatever to say, I lost $5 on some new product that I was developing, it didn’t work out. It just seems crazy to me. We just … we continue to throw things at the wall and the ones that stick, stick really well a lot of times and we have a really good success rate. I mean, we actually haven’t even really developed a product yet that hasn’t work. There is one kind of exception where you develop this knee brace that I’m not too happy with.
I think it’s going to probably be our first true failure but out of 70 or 80 products we developed so far, so well. If I like literally, throw them in a thrash can and I think and not think a second thing of it, it’s a couple of thousand bucks and that’s that and you move on.
Felix: Yeah, I think a mutual friend and Podcaster of ours, Andrew Youderian, is somewhat to you, where it’s a logical and pragmatic approach to finding products and businesses to start. When Andrew was on the podcast, I asked him if you need to be passionate about the particular business or a category you’re in because there is this big push where you have to be passionate or maybe even be the target customer you’re looking for. What are your thoughts on this? Do you need to be passionate? I can’t imagine over 70 or 80 products that you sold, all of them are passions of yours or were they?
Mike: No, they’re not and I do agree that the truth, if I … if you can be passionate about it, I think it’s a major plus and I can tell you, when I was doing the poker thing, the online poker affiliate marketing stuff and we ran information sites about poker and that was like living and breathing and just everything poker. Losing poker, I had it in my pores at the time. I mean, I’m not really into that much anymore but at the time, I was just like consuming that, I love the game so much and the people on the sport and the winning and losing, all these different things and it really helped. It helped a lot and I can tell you that I don’t know the first thing about coloring.
I can tell a high quality product, one from the maximum and we’ve tested a lot of pencils and markers and paper. I can tell that it’s a high quality product. I mean, my passion is actually building things from nothing and turning it into something and making people really happy in the process. It’s the thing that drove me crazy about treadmill.com. I mean, I didn’t have any passion about treadmills but my passion was let’s build out a website that we already owned the domain name and let’s see what happens. The reason that we sold and I didn’t ultimately like it is because, I mean literally, I might be exaggerating here, like over 90% of our customers are pissed at us because we just couldn’t deliver products in a timely fashion.
We’re shipping them on, let’s call it LTL, less than truckload shipments. It’s not going UPS or FedEx, where it’s a guaranteed 2, 3, 4 days to get there but trucking companies, kind of decide to show up when they decide to show. It doesn’t matter that you took a half a day off at work and all these things, deliver it and then it shows up broken or they drove a forklift through it or they send someone out there to assemble it but doesn’t know what the heck they’re doing and all these different things and it was just really difficult for me. My passion, really, I mean truly lies in having happy customers, and if you go through and read the reviews on ColorIt, sometimes they actually make me slightly emotional, it’s … people say really amazing things about our product and it makes me feel really good.
Yeah, I mean, if it was something like and I’m really into playing tennis for instance and I looked, something I could possibly do in that industry or … it’s a tough industry to kind of break into when there is not a lot of product that you need. I mean, it’s plain and simple, you need a racket, you need some tennis balls and a bag and there isn’t really that consumability angle and all these other things. It just doesn’t work so the things that I just have a personal passion in, didn’t really align with the other criteria that I have for business. I mean, if you’re lucky enough to be able to find something that you do have a passion in.
I’ve done some consulting work for people where they’ve been lucky enough to find something that they just really have a passion in and it really does make a difference but unfortunately, like, I wasn’t able to check that thing off at least.
Felix: Would you include it in your list of criteria or is it more of a bonus?
Mike: I think it’s a big, big bonus. I mean, it’s just, again for us, those stars just didn’t align but I do adamantly agree that that’s a big bonus. I mean, it helps with product design. It helps with knowing if you’re kind of being misled or ripped off in a lot of ways. It helps with being able to write content or find other people that can help you with content. It helps with support and all these different … it helps from like basically, every angle. Luckily for me, I mean, like I said, I can tell high quality products, right? I mean, I can look at this stuff is being sold at Walmart and tell the difference between our product and I could read the reviews and make an educated determination on the things that had to be improved and that certainly helped and not everybody has that neck.
It also does help that, we go to China several times a year. We’re actually just getting ready to leave again and head over there in about 10 days and having direct relationships with people over there, make it a lot easier than trying to figure things out through Alibaba or email. There is definitely a lot of other things that kind of go anew but I do firmly believe that if you can find something that you have a passion in, it makes a big, big difference.
Felix: Yeah, I agree. I think when you have passion, it cuts down significantly on the learning curve or at least it makes it a lot more tolerable when you’re trying to understand everything and when you are passionate it makes it a lot easier to go through that learning curve phase. Let’s talk about using Amazon as a proven grounds and I guess then once you prove it on Amazon you can transition into your own site. Tell us more about this testing of proven ground period and what goes into it.
Mike: Yeah. I think that this is really super important. If you think back to 10 years ago and before Amazon really existed and if we wanted to launch a coloring book company, at that time, the capital required and the time required to do it, would have been exponentially higher. We would have had to probably spend mid 6 figures easily to launch a company like that. You would have to have a whole line of coloring books. You couldn’t just release 1 book and see what happens. You can’t go to somebody and say, “Hey, have this one coloring book like, are you interested in buying it?” You’d have to go to retail channels and probably run print ads and television ads and you might have your own website.
Websites did exist 10 years ago but, there wasn’t like a lot of online e-commerce stuff that was happening at that time. The lifecycle for development was just insane. It’s an unprecedented time in history here where you can take one product relatively small quantity and prove out a concept on Amazon and just see what happens. You could throw up, and that’s what we did. We launched 1 book, the timeline was a little bit longer than I would have liked, if we were do 5 or 10 books all at once or just really hit a full force but we developed 1 book, we threw it up there. We waited to see if people would agree with all of our hypothesis. The people actually care about hardback covers or spiral binding or the artist paper, are they willing to pay extra for all that?
Those are all questions that we didn’t know the answer to, right. Again, if we were to try to figure all that out without the Amazon, it would just take a fortune. We bought the name ColorIt because I had pretty good idea. I mean, we’re at a point where I have a lot of confidence in myself so I don’t kind of, why didn’t I think about the long term ahead of time so we bought ColorIt.com and make sure we got our trademark and everything in order. We launched just on Amazon.com. We didn’t launch ColorIt.com as an e-commerce store. I just put a ParkPage there it said, ColorIt is coming soon, if you want more information, here is … please give us your email address.
That was it. We put Google Analytics on there and I waited to see how many people are coming there and once we built up enough traffic and demand or what I felt was enough demand on ColorIt.com then we launched the website. That was a full 6 to 9 months after we launched on Amazon and at that point, we had already done, hundreds of thousands of dollars in sales on Amazon and I knew that we could then build ColorIt.com as it’s own stand alone property because we have the expertise but we had already proved out the whole thing by then and there is a lot of expenses to creating your own website and additional interference and you obviously had to deal with the fulfillment and more support and all these other things.
If you break it down to people that are just kind of getting started, if you’re using Amazon as that launching pad, it helps to get to market way, way quicker. Like I said, just a completely unprecedented time in history where you can take advantage of them. I always say, like they take advantage of you. I mean, I’m not doing anything mischievous or anything. I don’t try to, once we get our website up, I don’t try to take sales away from Amazon. In fact, I’ve become really a piece with the fact that an Amazon buyer is an Amazon buyer. There is all these people that talk about how can you eventually get people off Amazon and throwing inserts in. We do some of the stuff.
I mean, the reality is that, these are people that are in a certain age group, certain demographic, and they’re prime members, right, and they’re going to want to buy on Amazon anyway. They’re already … Amazon is the largest search engine for shopping anyway, so why not have your products there and then also capture all the other people that are doing Google searches or other searches so you have your own website. We look at Amazon as just the channel like long term, it’s just a channel and we want to not have all of our eggs in the Amazon basket but at the same time, we can still use them to our advantage to start, improve a product that that will make sense.
Felix: I really like the realization you came across that Amazon buyers will stay Amazon buyers. I want to talk through this process. Like you said, it’s a great way to start quickly so you put your product up on Amazon, are you driving traffic to it or you’re just waiting for the market place to organically discover your products on Amazon?
Mike: Yeah, we don’t drive Facebook Ads or Google AdWords or any of those types of things to Amazon. What we do is some of the giveaway stuff where we give a product away and a discount for your honest feedback, which I’m sensitive to because Amazon has definitely come out with some bulletins about getting in trouble with that but we do it on a small scale just to get some initial reviews and feedback but we use Amazon AdWords and we know how to build a listing with high quality photos and good bullet points and description and title, fill out all the keywords in the backend. I mean, all these things are actually incredibly important and all those things together seem to be more than enough to get a product springboarded on Amazon and we just kind of take the long term organic approach.
It does take 2 to 3 sometimes 4 months for a product to kind of see its full potential, to get the rankings up there and everything and I’m fine with that. We don’t necessarily want to rank number 1 overnight. I think the people that try to do, too much too quickly can get themselves in trouble and I don’t want to ever be in a position where Amazon comes down with a hammer like, Google has, to so many on the past. We’re just kind of slow and steady and like I said, we developed a product that naturally gets 5 star or 4 and a half star reviews at worst case scenario naturally. I think the people that get themselves in trouble are people that go to Alibaba.
They ship things in a polybag with no decent packaging and they do some giveaways and those people that do the giveaways, it’s kind of unwritten rule. You’re going to leave a 5 star review so all these 5 star reviews come in and the people start buying the product and it’s really a 2 star or a 3 star product and that’s where I think Amazon just really gets irritable and so, I don’t feel disingenuous when we get some initial reviews because it’s going to be a 5 star product anyway. I mean, very few people leave us less than a 5 star review. With ColorIt, it’s a little bit difficult sometimes because it’s artwork and it is subjective so we’ll get the occasional 1 star review, where people like I just absolutely hate this.
I don’t understand why somebody buys this. Nasty, like hateful people reviews, and a one star review obviously really hurts. That’s typically why we have a 4 and a half stars rankings across the board on most of our products, several of them do have a solid 5 star review though and I think that that part is important.
Felix: The idea behind launching in Amazon is you’re essentially waiting for reviews to come in, to hear the customer feedback on the product and to make sure the assumptions you’ve made or what is important to the customer, is actually what turns out to be important. Is that the goal?
Mike: Absolutely. Yeah, and I think it’s really … and we made some adjustment along the way. I mean, we got feedback through the review system of what people liked and didn’t like and we pivoted a little bit. I mean, it wasn’t anything major but we made some small changes along the way to our product and once we saw that the sales are strong and the comments are strong over a few month period of time and then we also saw some people that were starting to come to ColorIt.com. That’s when we launched ColorIt.com and that was December of 2015 and within just about 2 or 3 months we had sales at ColorIt actually exceeding Amazon. It’s because that opens up another whole world to you.
I mean you get Facebook Ads, which I think are the most powerful thing in e-commerce today, even over Amazon just because the targeting is so incredible. You can, for instance, with Coloring, there is actually an interest targeting of like 2.2 million people in the United States that have an interest in coloring. That’s just amazing that you can’t reproduce that in any other ad medium. Another unprecedented time in history, if you think about how television commercials are delivered and most of the people that are watching them, the ads is completely irrelevant to them.
I mean, if you think about it like a pie graph or something where there is only a small portion of people, that are seeing, that are watching some evening sitcom, the kids in the room certainly don’t need it and the grandparents don’t need it and the women don’t need it. It’s just one of these things where you’re advertising to a bunch of people that don’t care, a bunch of waste, yeah. Facebook, I’m putting an ad right in front of someone that I know likes Coloring book. That was another huge thing for us, that really propelled us. Yeah, I mean, the amazon thing is a great … that was a lot of work obviously, to get the website out and we really focus on conversions and having a really good looking website and all these things and I’m quite proud of all the product we have up there.
The website itself but there was no need to do all that to begin with, right, I mean, why not at least just try it on Amazon first, is kind of the thought process.
Felix: You could do this not just for brand new business but also for a product line that you’re launching underneath the same business. Would you turn Amazon to prove it out before launching on your own site or is the process different here?
Mike: Yeah, no, I mean, we’re the baby brand that were going to be launching here in the next couple of months. We’re going to do the same process so we’re going to … we already bought the domain name. We got the trademark. We started with that because we think our degree … or we’re going to have a high degree of success and we don’t want to just throw it up there as a non-brand name product and see if it does well and then have to go back and rebrand everything and find a different name and all that. We want to be able to continue with our momentum so we do take a little bit of risk upfront in buying a 4 or 5 figure domain name depending on what we’re looking to do to have a good … like ColorIt.com was, I think we pay like 2,500 for it.
We got a really good deal on it. I think that’s a good upfront investment and we also got the trademark. From there, with the baby stuff, what we’re going to be doing, we’ll throw the products up there with the brand name that we picked and we’ll see how it goes and that people leave us 5 star reviews and we see strong sales, then we’ll get it off the website.
Felix: You could do this, not just for a brand new business but also for a product line that you’re launching underneath the same business. Would you turn Amazon to prove it out before launching on your own site or is the process different here?
Mike: I mean, you hear the same things over and over again, I don’t know why people take this for granted so much. It’s just absolutely amazing to me and it’s really simple. I mean, you got to have a title that’s keyword rich and you can use something like merchant words or there is a similar products out there that help you do the keyword research but you got to have keyword rich title because that’s one of the things that Amazon uses for rankings. The titles is going to be written in a way that makes people want to click through. If you look at Amazon results, if you’re typing coloring books or whatever, and you look at the results, you get very real estate and see a whole ton of products and the title is, one of the things that’s going to help you with the click through rate.
People … or amazon ranks products based on the click through rates. A title that makes people want to click through and read your product and the same thing goes for the picture. I see so many low quality low pictures out there all the time and it just makes me shake my head. I mean, it’s good in a way when I’m looking to get into a market and if I see that, I see it as an opportunity but for people that are selling in Amazon, the photos are incredibly important. People are not in a store touching and feeling your product. They’re online and the only line they have to your product or the way to understand and get a feel for your product is the product photos.
We’ve actually gone and hired a professional photographer for that. We’re taking it to another complete level. We’ve always had good photography but we’re really going to kick it up even a notch higher and they give you 9 photos, use them all but the minimum is 6 and we found the threshold to be 6 if we have 4 photos, it doesn’t perform nearly as well as when we have 6. It seems kind of the magic number but we’re going back and putting all 9 photos in and then use all the real estate. You got bullet points and description. We use every single character that’s available to us.
We fill it up with not useless information and we don’t want to have a launch of filler crap in there but we try to write it in a way that answers people’s, the common question that you see coming in on Amazon answers and the things that people are talking about when they leave a negative review and that’s something we do early on. When we launch a product, you don’t really know what people are going to complain about. As soon as we see any complaint at all of any kind, we’ve put it in our description, saying, yeah, this product is not for people that are looking for XYZ or beware that the dimensions of this are XYZ or whatever it is, you don’t want people to buy the product, they’re going to be mad, right. You actually wanted to tear sales, in my opinion, and makes sure that the listing hits on all the things that will make them not want to buy, if they’re not going to ultimately want the product.
I think that that’s really important and then the other thing is the keyword fields in the back end of Amazon. It’s incredibly important to have all those, you get 5 fields of a thousand characters each. Make sure that those are all completely filled out. You don’t want to repeat words, you don’t need comas, or dashes or any of those types of things. Just fill it up with a bunch of words that’s related to your products or even competitors, or brand names even, you can in there. Then, we run ads, we run product ads. They do incredibly well. You can start out with automatic targeting to begin with and do some research on what’s working and what’s not.
Then, we go back and revise our listings later with better keywords and better or different places based on what keywords are going to be performing in PPC and then we’ll eventually switch our PPC in the manual and get them dialed in. Amazon PPC is a great way to get things kicked off and it’s still not, like Google PPC works. It’s … the margins are so thin on Google PPC these days because so many people are doing it. There is still room left in Amazon PPC to make some money. That’s kind of the strategy that we take with our Amazon listings and eventually, they start to rank organically and then you just … so it just all build on itself.
It’s all … It’s kind of a propulsion system, right, so as you get your first sale you’re … that seller ranking goes up and as you get your best seller ranking goes up, you start to rank a little bit better, as you rank a little bit better, you get a couple of more sales and it just kind of piles on each other and eventually, next thing you know you’re selling 50 units a day of a particular product and you have a great BSR in your ranking and life is good.
Felix: That’s awesome, you’ve already laid the blueprint for getting started very quickly on Amazon. Let’s talk about what to do when you actually have your own business, your own store, your own site. What channels do you focus on today to drive traffic and sales to your own website?
Mike: Yes, so Facebook Ads have been by far and away, the most profitable for us. We’ve tried Instagram and Twitter ads and Pinterest Ads and just not had, nearly as good at luck. Facebook just has such good targeting that it makes it just really amazing. To me, like I always use the analogy these days of e-commerce being kind of like 8 cylinder car engine and if you’re going on the highway with all these cylinders humming, you’re going to do great but if you have a spark plug that dies, you’re going to notice really quickly like performance degradation and if 2 spark plug goes out, you’re going to have to pipe hole over the side of the road and just give up. I think that there is a lot of moving parts to e-commerce, you got to be doing everything right.
From Facebook Ads to getting reviews, doing email marketing, having a good product, having … responding to all your social platforms and having a site that converts well and that’s doing SEO correctly and all this different things. If you aren’t, the guys that are doing all those things are going to come and eat your lunch. It can be a little overwhelming but I think one of reasons why we’ve been successful is because we’re kind of hitting on all the right things. I mean, it isn’t just the fact that we’re doing Facebook ads but I think the fact that are … we have a good looking website that we put a lot of effort into and thought process into the layout of … that converts really high, that allows us to …
I mean, one of the things you kind of ask me all the time, I’ll go back in here a little bit, our conversion rate on ColorIt is 3.65% over the last 30 days, which is on the higher end of e-commerce sites and if we had a site that converted at 1%, suddenly, instead of paying $10 to acquire our customer, we’re paying $36 to acquire our customer. It makes a huge difference so I think that having a site that converts well and does all these different things is really important and there is a lot that goes into that and we do a lot of social proof. As a part of our first time purchase sequence when someone buys, we ask them for a selfie with the product and we also have the, hashtag, mycolorit, so people can take a picture of their photo.
We use a product called Tagtree that integrates with Shopify and Yappo does this now as well so people can take a photo of the product and we have a live feed that’s on our website and just all this social proof that goes into why people want to buy our product and we put a lot of effort into our about us page and we thought a lot about like how our product page is laid out and put a lot of effort into showing all the details of what makes our product better and the idea is that by the time people get to the end of these pages, they just want to fill the money at you, kind of thing and obviously, that takes some work and some thought process so yeah.
I mean, I guess, the question you asked early on is how do we initially acquire customers and typically, at least right now, it’s all based off of Facebook to start with and then we put a lot of effort into email marketing once we’ve acquired the customer or got them to our site at least. I mean, and we don’t try to get necessary, a conversion, the first time someone hits our site. That’s another thing that’s really important these days. It’s really kind of flipped the world on its head. I mean, for us online marketers, I think back to 10 years ago or even just 9 months ago or 18 months ago, the whole philosophy have always been, you get people to your site and you convert X percentage of that audience, right or that traffic.
People talk about conversion rate, you got 2% conversion rate and pat yourself on the back, I think that’s pretty good or even if you have a 4% conversion rate, on Ice Wraps, we have a 3.8% conversion rate. I think that that’s amazing and you look at that and go, “Oh, well, that’s great.” It’s just kind of acceptably, you’re deemed to be successful at that point and not really need to put any extra effort into it but what we found is that by just getting people to our site, through Facebook Ads or whatever or other means, you can then do retargeting and then offer them something special. We have lead magnets and we’ve also started a free plus shipping offer to where we can actually get the product in people’s hands, that’s been doing phenomenal and we look at the life cycle of acquiring a customer instead of being one and done where someone comes to the website.
If you don’t get them right then and there, they’re leaving, you never see them again. We take a completely different approach to, it might take 3 months for them to convert into a customer, even 6 months of just us getting them on the email list and pestering them with offers and deals and amazing content and things of that nature until we finally convert them. We … that’s another reason why we’ve been successful also, is because we’ve been taking that approach.
Felix: No, I totally agree that there is way more mileage you can get out of just buying the ad or buying the visitor, it does more ways to stretch that out like retargeting, getting them onto an email list or just getting the product into their hands for the first time. I want to talk specifically about lead magnets and just explain to anyone out there that might not know what is a lead magnet. A lead magnet is just a way to get someone on your email list and exchange for some kind of incentive. How do you determine what lead magnet you should create?
Mike: Yeah, so this is something I think that’s really important as well is, people, I think they … that might listen to this Podcast and go, “Oh I need to make lead magnet,” and it’s kind of a catchy term and you go out, you pick one thing, you try and it doesn’t work and you’re like, “A lead magnet sucks.” The answer to the question is, we pick 10 lead magnets or 10 different pages or ideas or things and just like we do with a product and which ones are we going to develop and throw them all and see which one sticks. It’s the same thing with the lead magnet. We’ve developed a couple of different ones for ColorIt so far. I mean, each one does take time.
The ones that have been successful so far then contest which is a form of a lead magnet where people get something for free on a random drawing based on actions that they take and the more actions they take, the more points they get or lottery tickets in the fishbowl for instance. That’s actually kind of how we launched ColorIt to begin with. It worked phenomenally well for us and then it kind of, spot it out a little bit but it’s still something that we do every month and it still brings us lots of new business and intention and we post in social media everyday about like who’s won and like, it’s a good way to keep our channel active.
It’s done really well for us as a lead magnet. The other lead magnet that we’ve done is 10, or I’m sorry, 4 free downloadable coloring pages and to begin with, it kind of bombed like how I mentioned, you try it and it just doesn’t work and you’re kind of have just the flattish feeling. The reason that we eventually got it to work is because we just kept on trying different angles, we tried different ad copy. We tried different landing pages. We tried different, post lead magnets sign up funnels until the point where it become widely successful and profitable and we’ve acquired, I’m going off top of my head here, somewhere like 13 and 15 thousand email addresses through that one particular lead magnet at a cost of 24 and a half cents per lead.
Not per click, I mean, our cost per click was something like 17 cents because our conversion rate on that landing page is like 81%, which is just insane and again, to start with, it sucked. I mean, we had like, a 20% conversion rate and our cost per click was over a dollar and this was like a huge failure but you keep on trying different ad copy, different landing page copy and so we got it dialed in just right and then we like ran something like a 30 or 20 part, I think it’s like a 20 part post lead magnet sequence and email where we just, if we don’t give them all the drawings at once, we give it to them over a month a period and we alternate back and forth with, give them something for free, something of value.
Then, trying something that has some sales aspect to it or something at least about our company and then at the very end of that process that they still haven’t bought, that’s when we offer them a discount or a coupon so we don’t come after them with a very salesy approach, like right off the bat and then what we did is we like saw the success of that and we’re like, “Okay, well, the problem here is that even though our artwork, we think it’s special but it’s really not necessarily that special, even though it’s hand drawn and it’s neat artwork”.
The real differentiator with our product is actually our paper and we use like amazing artist quality paper so I was like, “How can we actually get the best quality of the product in someone’s hands and still do a lead magnet?” We did this free plus shipping offer, where we get people 10 pages that are printed out on our actual coloring book paper and mail them to them and we did that for free, they just have to pay shipping and the shipping charge that we charge covers the cost of the actual shipping and the production of the product and we get their email address and get to pester them as I say, after that shows up and we basically do a multi part email sequence of thank you for ordering, your thing showed up, what do you think about it?
Please share your stuff with us and et cetera, et cetera and then Eventually, we offer them a discount to order a book. If they … and that’s the neat thing about Klaviyo is you can …there is no reason to send someone a discount offer if they’ve already purchased. We just exclude those coupon offers if someone has already purchased it but if they haven’t maybe that’s a little kick in the butt that they need to make a purchase. That’s kind of the way that we would do it.
Felix: I really liked that idea of doing the free plus shipping to get customer to see their differentiator of your product but how do you know that was what people cared about that they cared about the paper itself? Was it just based on reviews, your own hunches? If someone wants to do something similar and they want to identify, what is it that they need people to experience, how do you identify that?
Mike: Yeah, I think it’s a combination of all those things. I look at our book or you can look at the reviews and just kind of get a feel … we were again looking at the comments of people that downloaded or we would send them an email at the end of the sequence, just saying where do we go wrong. I think that’s actually a great subject line for people, it uses a part of their email marketing strategy and we just asked them simply, where do we go wrong, you haven’t actually bought from us yet, how come? Then, they emailed us, and it’s like, “You know, I like the drawings but don’t really want to spent 15 bucks for a coloring book. I can’t buy one at the Dollar Store for 3 bucks.”
Of course we’re furious because it’s not the same thing as the thing at the Dollar Store for 3 bucks. How do you show them the difference and you got to get it in their hand, right, that’s how the whole thing kind of came together and the thing that was nice about the, just free download part is it allowed us to test the funnel of offering just a freebie lead magnet because it was something we hadn’t really done before and proven all the way through. It was all kind of building blocks, so we went from, having something that was successful to having something that was ultra successful because we made it even better and it kind of solved that problem that we’ve been having of trying to show people why our product is good as it is.
Felix: Yeah, I think that’s a great approach, specially when you are selling online when you have this touch field gap that exist because people can’t hold the product itself. If you can find a way that’s profitable or breakeven to get the product in their hands, you should definitely consider that approach. Speaking of that, do you pay close attention to the numbers? Do you try not to lose money on the free plus shipping or is it okay to lose some money? What are your thoughts on that?
Mike: To start with, we’re trying to not lose a lot of money or breakeven kind of, in that range because you don’t know like how the math is going to work out long term, right. At the beginning you’re a little skittish. I don’t want to … we’ve done a couple of thousand of these now then we … it’s been, there is a bunch in the pipeline and I think that we need to give it a few months to really see the long term benefit but our conversion rate so far has been about 6% so people that have purchased the free plus shipping offer have been going on and bought at least one other prod