Mailchimp founder on weathering a crisis and the power of freemium
The man behind the world’s most popular email marketing platform says businesses need to stay in tune with customer needs and pivot accordingly to survive the pandemic.
It’s the 20-year-old start-up from Atlanta, Georgia that has bootstrapped its way to having over 11 million active customers and 800 employees.
But as co-founder and Chief Executive Officer Ben Chestnut told the SaaStr Annual 2020 conference last week, it was a pricing decision made in the wake of the global financial crisis that set MailChimp on the path to global domination.
“We were still reeling from the recession. People needed Mailchimp badly. Small businesses badly needed help,” remembers Chestnut who with co-founder Dan Kurzius made the call to introduce a free tier to MailChimp’s price plans.
The “freemium” model is well established now, but prior to 2009, MailChimp was resolutely against it.
“We didn’t even have a free trial before that you had to pay,” admits Chestnut.
Giving it away
The recession brought on by the collapse of US debt markets and housing foreclosures forced a change. Many businesses had to face sacrificing their email marketing subscription even as they needed it more than ever.
MailChimp introduced a free tier limited to 2,000 contacts with a daily send limit of 2,000 emails. It took off – massively.
“I mean, we went from tens of thousands of users to a million in the first year. And then it doubled and doubled and doubled after that. It’s been a crazy rocket ride from there,” says Chestnut.
Freemium introduced a wave of struggling small and medium-sized businesses to the Mailchimp platform for the first time and, weirdly, incentivized them to work to migrate to a paid plan.
“If they could get their audience to 2,000 they had to start paying,” explains Chestnut.
“It was less of like a forcing mechanism, more like a celebratory rite of passage. They felt proud of that. We saw tweets of people saying, I’m finally a paid MailChimp customer.”
But as Chestnut and his team moved away from website development for clients to a true software as a service (SaaS) model, they knew one thing for sure
“30 per cent of small businesses die in two years. 50 per cent die in five years,” says Chestnut.
The business plan had to allow for some businesses to remain free users for five years or longer as they grew their customer base. It also meant recessions were likely to impact Mailchimp’s paid subscription revenue, which passed US$700 million last year.
Business failure is something the Mailchimp founders have encountered in a very personal way.
“We both had entrepreneurial families and we both grew up in the kitchen, watching their businesses grow, and then ultimately fail,” says Chestnut.
“And that’s what drives us today. We really want to empower small businesses. That’s the DNA of Mailchimp, so that they don’t fail like our parents did.”
Business failure, he adds, can take a massive toll.
“It’s a person, it’s a family and it can linger for generations.”
With business failure on the increase in 2020, survival is on the mind of many Mailchimp customers, particularly those restaurants, bars and tourism operators hardest hit by lockdown and travel restrictions.
Time to build your brand
“Listen as hard as you can to customers and keep adapting crisis after crisis,” Chestnut advises.
Mailchimp is ultimately about connecting with customers, so the platform is fine-tuned for gathering feedback.
“It’s not time to kind of sit on your front porch and sip mint juleps, you know. Its time to build your business strong, build the roots strong.”
He advises focusing on developing your brand, which has been integral to the Mailchimp success story. The distinctive and playful branding of the company goes back to its roots in 2001.
Chestnut says the idea for the name Mailchimp, which is the trading name of the company Rocket Science Group, came watching Super Bowl commercials. The team realised that numerous adverts in the expensive half-time slot featured chimpanzees.
“We were like, people like chimps!”
The distinctive chimp logo has been a big success for the company, which is also known for building quirky Easter eggs into the software platform to amuse customers. While it is a digital platform, Mailchimp has achieved considerable success with outdoor billboard advertising. Chestnut recommends reaching beyond digital channels to build the success of a SaaS company.
“I guess the lesson is to care about your brand. Try to get it physical not just digital.”
And don’t be afraid to pivot if you have to. Mailchimp is in the midst of one right now, as a result of the pandemic.
“We were working on a big gigantic product around e-commerce and we said no, no, narrow it down.”
The new offering, which will be launched “real soon” is aimed at the small businesses trying to adapt to the icy economic conditions.
“Get all of these people who are, you know, who are unemployed right now and trying to sell grandma’s hot sauce recipe or their pilates class. Give them a domain name, help them build a landing page and put a buy button on there and help them make some money,” explains Chestnut of the new Mailchimp offering.
Mailchimp’s second act
It’s in line with where Mailchimp has been heading in what Chestnut calls “Act 2” of the company’s existence. It has seen Mailchimp move beyond its stronghold of email marketing where it has a staggering four billion email addresses in its system, to become a fully-fledged digital marketing platform for smaller businesses.
Artificial intelligence tools in the platform now learn from user’s behaviour generating newsletters and emails and can advise on design as well as automate the creation of social media posts.
Says Chestnut: “It speeds things up. It just allows small businesses to be everywhere at once when they have to be ‘on’ 24-7.”
Fundamentally though, the power of Mailchimp lies in maintaining a good contact list and offering up relevant and timely marketing emails. Many small businesses have flourished off the back of nurturing their email lists.
“They’re making hundreds of thousands or millions of dollars every time they hit send,” says Chestnut.
He’s ultimately philosophical about the current economic outlook.
“Everyone’s talking about 2020 is a dumpster fire and it really is,” he admits.
“And sometimes I asked people. what if it’s always been a dumpster fire? We’re just now noticing it. Entrepreneurialism is about one setback after another.”
The key is throwing everything at each challenge, moving fast, keeping customers in mind and being willing to adapt to meet the new reality.
Watch Ben Chestnut’s full SaaStr Annual talk here.