MBA897 Turn Your Ecommerce Store into a SaaS

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Hey O welcome. Welcome to the $100 MBA show, the business podcast that helps you become better at business with every single episode. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the $100 MBA and webinar Ninja. And if you're new to the show, this is the podcast that helps you become better at business with actual lessons. We give lessons on every episode. No banter, no backstories, no interviews. We've been doing this since 2014 with nearly 900 episodes and helped hundreds and thousands of people start their business with just the podcast Lessons. Speaking of lessons, today's lesson is about how to turn your e commerce store into a SaaS business. If you're unfamiliar with the term SaaS, it's software as a service. Now, you're not gonna turn your store of physical products into a software, but it's a term known as like a reoccurring membership model where a customer will pay a monthly fee or an annual fee and get benefits every single month or year. The reason why this is a good idea to turn an e commerce store into a SaaS business is that you get regular, predictable income. Every SaaS customer has a monthly fee or an annual fee so you know how much money you're gonna be making by the number of customers you have opposed to, you know, one off customers that buy product from your E commerce store and never come back. We all know how hard it is to secure a new customer. Let's secure them for a long term, let's secure them for some reoccurring char so that we can continue to give them great value. Now this is not some way to just make some money off your customers. This is actually a great way to offer your product in a more convenient way. The customers are actually going to love it. I'm going to give you great examples of this and for those of you who are new to the show, I used to have a pretty big E commerce store back in the early 2010 days. Wow, that's almost seven, eight years ago. Time flies. But I'm going to give you some of the insights I learned along the way as well as give you some really great examples of great businesses that have turned their, their ecommerce stores around and made it into SaaS. Businesses where people pay a monthly fee or an annual fee and it just works great for both the customer and the business. I'm going to give you the step by steps and the how tos. So let's get into it. Let's get down to business. I want to preface today's episode, today's lesson with the fact that not every single E commerce store is going to be conducive or be right for turning it into a SaaS business or having a SaaS component to the store. But a lot of them are and I'm going to give you some prime examples. Now you might be thinking, well I sell T shirts, I sell stickers, I sell coffee mugs, no problem. All of these products I just mentioned work perfectly in a SaaS model. You just gotta think a little creatively. Now one of my favorite examples when it comes to this model of selling physical products that you sell in an E commerce store and turning it on its head and becoming a SaaS product. Now one of my favorite examples when it comes to this example, it's coming to turning an E commerce store into a SaaS is is dollarshaveclub.com now Dollar Shave Club essentially is an E commerce store. They sell razor blades, they sell shaving cream, some other like accessories as well. But the point here is, is that they sell shaving products. They could have simply just sold their shaving products per unit shaving blade, 10 bucks, shaving cream, 6 bucks, whatever it is. But instead they said hey, people need these things on a regular Basis, let's put them on a membership model where they pay a few dollars a month and they're going to get new blades every month. I can add shaving creams to that every month, and my monthly payment will be a little bit more. But the point is, is that the main option is the program is the monthly reoccurring membership. There are ways to buy a la carte, but it's kind of like a part of your membership. So you got to be a member and then you can, like buy one shaving cream with your next order. But the point here is that people will see the value in getting something every month that they need and won't be too opposed to paying every single month, Especially if you're at that price point where people are paying less than $20 a month. I feel like under $20, you really don't feel the pinch when it comes to a monthly charge. This is why Netflix is under $20, is why Spotify is under $20. This is why Dollar Shave Club is under $20. The point here is that, you know, when you see that on your bill or your credit card statement, it's not a huge deal and you're getting a lot of value. You don't have to go out to the store to buy blades or buy cream, and that's time, and that's gas money, and that's all the headaches of going to the drugstore, all that stuff. And they highlight this in their marketing. So what about you? How can you take a look at your products and say, hey, how can I sass this out? How can I have a reoccurring membership model? Well, there's a few ways you can do this. Number one, take a look at what consumable items that you sell. What are some things that are not going to last a lifetime? Now, clothing is one of those things. People don't wear the same clothes that they wore 20 years ago. This used to be the case. Not that far ago. I remember, you know, growing up in the 80s, people wore clothes that, you know, they had for 10 years. And, yeah, maybe it would have been a little outdated, but some things are timeless. This is not the case anymore. People don't expect clothes to last that long. People want to change their clothes. They want to wear new things. So if you sell T shirts, for example, you could definitely have a T shirt of a month or a T shirt of the quarter. So every three months, they get a new T shirt in their wardrobe. So they have a new T shirt in the wardrobe to Wear. They have four new T shirts every year and you might be thinking a T shirt of the month, that might be overkill for some people. It's not. They love T shirts and they want to wear a new T shirt every month. So obviously if you're doing volume, you can cut a deal for your customers. So it's more attractive to go with the monthly model. So if a T shirt costs, let's say $35 in your e commerce store and you charge $120 for a quarterly T shirt program, so they get a new T shirt every three months. So they get four T shirts in the year, they're paying $30 versus 35. So they say $5 on every T shirt. And if you have a lot of selection, if you have different varieties, or they just love the style and they want a different color, it's definitely something you want to introduce to them. Some people build this in through their website. So if they have two of the same kind of product, like two T shirts in their cart, in their shopping cart, it prompts them and gives them a pop up. It says, hey, would you like to join our monthly program? You got two T shirts here, how about four? And you'll get a discount because again, you know, you're going with the bulk. You might be saying, hey, what if I don't have a product that people want to change up all the time? What if it's like a coffee mug? You know, it's one off, I got a coffee mug. How many coffee mugs you need? Well, if you have a really great product or they're really funny or they're unique, let's say, for example, you do sports figures and your coffee cups have, you know, sports celebrities on the mug. These make awesome gifts. And I've seen people do programs where they do best birthday gift programs. So what you do is that you could choose a package of mugs or a package of number of mugs throughout the year. So say, for example, you say four, five, six, let's say six mugs. You say, I want to buy six mugs throughout the year. You can plug in the birthdays of six people, six of your favorite people, and they'll ship it out as a birthday gift to those people. So never forget. This is a huge selling point. Hey, you'll never forget to send a birthday gift to these people. It's something that you know they'll love, you know that you love it. It's quirky. And again, volume discount, you're going to get a cheaper deal because you're getting, you know, that six mugs a year, and then you can change it up and, you know, next year you can choose six different people. So the gift giving idea is great for, you know, novelty items. Another great idea to turn your E Commerce store into a SaaS business is having limited edition items. This works in fashion, and this is something I did in my E Commerce store. I had a high end custom tailored men's clothing line. The Average price of one shirt was over $100, but people bought it because it was custom tailored. They had their measurements on file, and we would give them a custom tailored shirt. But we had sort of like a VIP club and it wasn't a lot of people. It was a little over 100 of our customers were on the VIP club and it cost them money to be in the VIP club. They had a membership fee. Part of the benefits of being part of the VIP club was they got to see, you know, the new sketches of the new designs coming out the next season. They kind of got an inside look of what's coming. They also got first access to the new designs. And when we ran the new design, we did a limited edition of a certain color. And after that limited edition, we never reproduced that color. So it was kind of a unique piece. This is something you could do with clothing, something you could do with jewelry, something you do with art, housewares. We did it with clothing, with our business, and it was really great. These VIPs loved our clothing. They loved what we stood for, and they loved being in the know and getting that special unique piece that no one else had. Hey, they asked, where'd you get that color? Like, I'm part of the VIP club. I get insights on the latest fashion and I get, you know, first dibs on this limited edition, you know, color of this new shirt. And they would actually get the shirt before anybody else about a couple months before it was released on our public site. In addition to all those benefits, they also had access to the founder. We had like a forum, and they got to ask questions and learn about what's coming up next and make recommendations. So when thinking about pricing this product, we're like, how much are people gonna pay to have access to these things? And we thought, hey, this is not our main part of our business. This is not where all our sales are gonna be made. So why don't we just price it at an exclusive price, not worry about the numbers, not worry how many of these memberships we're gonna sell. So we actually sold it for $95 a month. You might be thinking that's 100 bucks. That's a lot of money for not actually receiving anything physical for. But they got early access, they got, you know, a little bit high touch service. And we didn't have that many members. We had a little over 100 members. I think it was like 120 something members. But that equaled over $11,000 in monthly revenue. I mean those are not pennies. That's, that's a significant amount of money. But we made it exclusive. So I would recommend making it an exclusive. Don't go cheap because this is not going to be your money maker. This is not, your business is not going to be based on this. This is like a side thing you're doing in your E commerce store, the VIP club. Now you can definitely do something that's completely outside your products in order for you to have some sort of SaaS model in your E commerce store. And you don't have to look far. It's called Amazon. Amazon has Amazon prime, right? And you pay $99 a year or I think $10 a month. They have a monthly program as well. You don't get any free items but you do get free shipping, free two day shipping. So you get better service. Now you don't have to do shipping but you could do anything that's gon improve the experience of the customer. Whether it's follow up service or installation or free setup or free advice. Whether it's fashion advice or home decor advice. The point is, is that people are paying a membership fee for better service. Now Amazon throws in a whole bunch of other stuff like you know, with Amazon prime you also get free movies and TV shows on their, you know, Amazon prime channel. They have Prime Day where they have, you know, sales just for prime members. I think there's some free Kindle books you can have every month, certain select books that they choose every month and some other things that they keep experimenting with. But it's a great example of how you can use improving service as a SaaS model in your E commerce store. So if you're a boutique E commerce store, can you do free shipping on all orders for the year at a set fee? It doesn't have to be $100, it could be less than that, could be more than that. Depends on your products. Obviously shipping depends on, you know, the weight of your products, all that kind of stuff. Now I want to get a little bit practical about the finances of all this. What I recommend is trying to implement some aspect of SaaS in your E Comm store. Even if you don't overhaul the whole store and make it all SaaS. I think it's a good idea just to take a look at maybe improving the service like, you know, the Amazon model or doing a gift program or doing a VIP program or whatever you want to choose. But I like to try to make enough revenue where it covers some bulk of the expenses of my business. It may not take care of all my employees and things like that, but let's say I want to make enough so it takes care of all my hosting fees than let's say inventory fees. So it kind of takes care of your expenses, increasing the profits of your overall business. And that's what I did with the VIP program over in my clothing line back in the day. My whole goal is just to launch this thing so it can cover, you know, my web hosting and my email marketing. All these expenses that were soft, you know, software that I was using to run the business. Things were a lot more expensive back then than they are now. So I was happy to say that I was able to do that and then some. It's a good goal to have to say I want to launch this SaaS portion of my business to cover these expenses. And once you hit that goal, you can then move the target and say, hey, what else can I cover? What else can I do? And you might realize, hey, maybe this can be a driving point in my business. Maybe it could be a bigger part of the E commerce store.

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Now early in the show I mentioned how you can, you know, get a developer to help you program a pop up to say when somebody you know enters two of the same kind of product in your cart and say, hey, do you want to join our SaaS program, our membership program and get a better on this product since you like it so much. But there are other things you can do. One of the things that you can do that's super simple that you can do right now is that somewhere in the back end of your site you're going to see your top customers, right? People that have spent the most money on your website. I want you to email the top 10% of your clients. So if you have a thousand customers, the top 100 customers, and you're going to offer an exclusive chance to pilot your new program, you're going to say, hey, we know that you are a loyal customer, you're one of our best customers and because of that, I want to reward you by being the first to see our new program, to try our new program. This is what the program is all about. This is how much you're going to pay every month. This is what you're going to get every month. Make sure you explain all the benefits and how not only you're going to save money, but how it's going to be convenient, how it's going to help them and how it's going to make their experience so much better. Also, I would give them some sort of deal where it's like, hey, it's normally going to launch for this much, but I want to launch to this much amount, maybe some sort of discount, 15, 20% discount because you are such great customers. Now why do you want to do this? Because it's going to give you a chance to see the feedback. You're going to get to see people say what people think and to see if this thing really has legs. If your best customers are not interested in this and you don't see any traction, then you know you need to tweak things, change things, or maybe it's not right for your business. It's a good sample size. Now you might be thinking, well, how do I know what's success? Well, you got to take a look at how much this program will cost you to implement and how much you need to get an roi. When I first did this for me, If I got 5% of those top 10% customers to convert into my new VIP club, then it was worth my while. Then I know that if I can convert, you know, around 5% with, you know, consistent marketing, with my whole list, with all my clients, that this could be a pretty significant increase in revenue. So you got to take a look at your numbers, but you know, have a target, have a percentage of conversion you're looking for, but having that sample size and emailing them personally and letting them know, hey, for the next week, I'm opening this up only for our top customers. You're one of our top customers. This is what it's all about. And hey, don't be afraid to just go all in and create a video, get on your iPhone, get on your smartphone and say, hey, this is what this program is all about. Face to face. Introduce yourself. And as well as introduce them to the program, they'll love it. They'll feel like they're getting a piece of you as the founder of the company and they're getting a little bit of a special treatment. So this is tip number one for marketing your program. Tip number two, release to behavior. You have to have a way to recognize behavior in your e commerce store and I'm sure if you hire a freelancer, they could definitely help you out. It's not a huge deal to be able to track behavior on a site these days. And we mentioned this earlier with, you know, the pop up, if there's, you know, a couple items that are similar and you, you know, offer the program. But when there's direct benefit, just like in Amazon, when you check out and they give you the shipping total, they say, hey, your Shipping total is $65. How about you pay $99 and you'll get free shipping, two day shipping on every order for the whole year. You see the value immediately because that's the exact time I can see the value when I see my shipping total. I'm going to pay the shipping total right now. Actually, I remember when I first learned about prime, my shipping total was more than the price of prime. And I was like, this is a no brainer. I'm signing up for prime right now. Give me prime. So that's an easy way to convert people where they see the value just in time, right where they could see it in the checkout process or wherever they should see it, where they could see the value of the program. Lastly, make sure you focus on the benefits of your program. If you're going with a gift giving program where they can buy, you know, six gifts throughout the year and they get a discount because they're buying six, explain the pain points. Hey, buying gifts is a pain. You got to go out of your house, you got to shop, you got to think of ideas. You're not sure. Getting it personally delivered is a nice touch to get a nice gift in the mail. A lot of companies that do this program really do this. In around November, December, they start sending emails and talking about, oh, the pain of shopping for Christmas, the pain of shopping for holidays. Sign up for a program and we'll be able to take care of it for you. So you get the point. Sometimes we're not aware of the pain until we experience it or we were reminded of it. And it's your job to remind them, hey, this is not fun. We can solve this problem so you don't have to deal with it. This is why I launched this program in my e commerce store. Well, there you have it guys. I really recommend you start thinking and exploring and experimenting with introducing a membership model, a SaaS model in your E commerce store. It definitely helped me out big time when it came to my e commerce store back in the day and it made me think more creatively about how I offer my products and services. That's today's lesson, guys. Thank you so much for listening. I do want to remind you, if you have not checked out our free course on idea validation, if you're just getting started in business, you're listening to this podcast. You want to learn more. One of the first things you have to do is nail your business idea. Make sure that it's a viable business idea that you can actually make money from and you have a base of customers to serve. We have a free course on how to validate your business idea. All you got to do is go to100mba.net free course and you'll get access to a full video course with a workbook that people love because it's very practical for absolutely free. Nothing. All we're asking for is your name and email address so we can continue to give you great value. Alright, thank you so much again for listening. But before I go, I want to leave you with this. Implementing any change in your business, whether it's adding a SaaS portion to your e commerce store, or changing prices or changing policies. This is not something you have to dwell over and think about forever. You can experiment, just try it out, try it out. It takes, you know, really a few hours just to flesh out the details and make that decision and implement a new price, implement a new service, implement a new SaaS portion of your business. Try it out for a couple months. Does it work? Have you seen a difference? Track the results. And if you want to change it, you could change it. You can go back to way things were before. Businesses evolve, businesses change. Businesses try different things. It's not irreversible. So don't be afraid to try things out. All right, I'll check you guys in the next episode. I'll see you then. Take care. Of.

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