Competing in a Crowded Space with Omnisend's Rytis Lauris
Rytis Lauris (00:02):
Now we are even cheaper; but for anyone who does sell online, we really have a way better value proposition. We know that ROI with us is way greater due to best practices with shop built-in developed product, and really allow anyone to sell more by using Omnisend.
Peep Laja (00:24):
I'm Peep Laja. I don't do fluff. I don't do filler. I don't do emojis. What I do is study winners in B2B SaaS, because I want to know how much is strategy, how much is luck and how do they win. This week Rytis Lauris, co-founder and CEO of Omnisend, all in one eCommerce marketing automation platform, based out of Lithuania. Omnisend was founded in 2014, but experienced a big boom over the last couple of years. They now sit at around 30 million in ARR, have 190 employees located all around the world and have more than 60,000 customers. In this episode, we discussed how Omnisend competes in a crowded space, the importance of timing and how they built their brand through content. Let's get into it.
Rytis Lauris (01:09):
Omnisend is a spinoff from digital marketing agency. So back in the days, we were serving mainly developing and doing creative stuff, digital marketing for our customers, developing Facebook apps. And we had certain customers who were selling online. So that's what, where we spotted the opportunity, that back in those days, everyone who was selling online, they were somehow exceptional. And there were no tools who were serving them specifically.
Rytis Lauris (01:38):
And up until today, those who do have fully online businesses, we have this luxury to have entire customer journey happening online. So there are a lot of breadcrumbs and there's a lot of data with based on that, on which, on that data, you can automate your marketing activities. So that's opportunity, we saw that, like eCommerce is not served specifically, although this segment has specific abilities and needs to run their retention marketing. Now we have email, we do have SMS messages, we'd have web push notifications, ability to sync with Google and Facebook ads in order to run lookalike audiences or retargeting campaigns, the focus on eCommerce or online retail, however you call it, has never, ever changed since the launch.
Peep Laja (02:26):
So back at the start, that space wasn't very crowded yet, whereas today there's a bunch of very big players.
Rytis Lauris (02:35):
Yes and no. So that space was already crowded and like a lot of people and we are bootstrapped, but to be honest, at the early days we were trying to fundraise, but like investors were looking at us, "Come on, email? Leather shoes? What could be a mall school?" There is no innovation and wise was it, so because the market was already extremely crowded with, let's say old school, one size fits all solutions, which you do, or general email service providers if we call them. So they do exist up until those days, but what is happening since event? So marketing and marketing automation tools, we are going into niches, specifically eCommerce market was not crowded, although it was already filled in because everyone was using generic email service providers, which were already giant and they are still up until today, they are massive like huge companies.
Peep Laja (03:36):
This is a classic story of so many B2B companies, they spot an emerging category or an opportunity. And there's very little direct competition around at a time the market is amateur. Customers in the market are not aware of options. So they'll go with whoever solves the problem. Table stakes features will make a big difference. Typically, there's a lot of companies often quite similar in their capabilities, that are trying to win the market in its nascent phase. Whoever manages to get big first and position themselves inside the mind of the customer first, wins.
Peep Laja (04:11):
To win, you need speed, speed of execution, speed of shipping product, building awareness, generating pipeline. This is why raising VC money is an attractive play for emerging market players. You can pump that money into growth and not worry about profitability in the short term. This is exactly what many, now huge companies did, from Amazon to HubSpot.
Peep Laja (04:33):
Once you have the largest market share, you reap the benefits. Companies who are number one or two in their category, just make so much more money than anyone else. In the beginning, your main point of view for how you're going to win is that, we're going to build a dedicated solution for eCommerce email marketing. Let's say the first version of the product you were in the market, then how did your product strategy evolve?
Rytis Lauris (05:00):
Yeah, so initially, two things we changed the most. So it's, one is channels, which we were serving. So that was basic solution, email service tool, just basic email campaigns, or like bulk or email blasts, however you call it. We started from that. So campaigns to automation, so basically data driven automated campaigns, which are initiated by Omnisend based on the customer behavior. So that's was a first in round involvement.
Rytis Lauris (05:30):
Second involvement was really to like multiple channels and we added text messages, we added web push notifications, we added Facebook Messenger, WhatsApp and Viber, and we deprecated Facebook messenger, WhatsApp and Viber because those channels didn't prove themself as being effective for our customers, those who do sell online. And we stayed with email, SMS and web push notifications for now. And definitely there are always emerging channels, which if they start proving themselves as being effective as the marketing channels, to communicate with your existing customer base, we will definitely add them in the future.
Peep Laja (06:09):
How did you get your first 100, 1000 customers? What kind of channels worked for you and how that changed over this last few years?
Rytis Lauris (06:20):
So the first 100, 1000 customers, the first integration we launched was on Tictail, well, listeners, and you might remember, might not, there used to be a very promising Swedish startup eCommerce platform, so that was our first integration, which we launched, which made us believe that there is a potentially the need of our service in the market. And we really had a good traction there.
Rytis Lauris (06:49):
Then we made exactly the same own Shopify and Shopify app store, so that was initial traction, which we got. Currently those days, it's definitely like way larger mix of different channels, still platforms and their app stores, or their ecosystems important for us. We do have agency partnerships who drive as a business. There are affiliates working exclusively or not exclusively, that's focusing on Shopify and BigCommerce and Woocommerce, which is a part of WordPress, so definitely brings a massive community there.
Peep Laja (07:23):
A lot of SaaS companies have tried to set up agency programs, but usually it doesn't really go anywhere, it's not a significant source of revenue. How did you make it work?
Rytis Lauris (07:35):
So it's not the biggest source for us by far, but let's say it's double digit in percentage of overall new business revenue, which is coming to us. So there are a couple of things and there are great large agencies, which are serving a large customers. And definitely, it's not that easy to get into relationship with such agencies because usually we either have partners and in our case, there are a lot of like small agencies, freelancers in eCommerce space, who do develop, who do run marketing for all those, who do sell online.
Rytis Lauris (08:16):
So we basically took a long-tail of agencies and we apply it. Omnisend is a completely product-led business. We are product-led business, so we do apply the same tactics to the product, we do apply similar tactics to our agency program as well. It's a lot of self service. We do have partner portal where our small partners, if you bring us two leads per year, we appreciate that a lot. So you do it in a self service way, we pay you out in a self service way, et cetera, et cetera. So it just simplified for both our partners and us and yeah, we are going after long-tail partners.
Peep Laja (08:51):
A successful agency partner program can be hard to pull off. It's an easy place to sync a lot of time and the resources into without seeing much return. Those who can pull it off, however, have the opportunity to see rapid growth through their partner channel. Success starts with understanding the mindset of your potential agency partners. Peter Caputa, CEO of Databox, and the man responsible for building HubSpot's agency program to 100 million, explains what agencies are looking for.
Peter Caputa (09:23):
Most agencies look at it and say, is this a piece of software we need? Is it a piece of software that my clients need? And then the next question is, what's the margin? If I were running an agency right now, the first thing I would do is go look at all the partner programs and see which ones have the most generous commission plan.
Peter Caputa (09:40):
But I think most agencies are not in that frame of mind. Most of them are very much looking at it as like, "Here's the services I get, I'm selling. And I'm selling a 5 or 10 or $20,000 a month engagement to these clients. And there's certain amount of software I need in order to execute on these services". So they're still looking at it as mailbox money, as opposed to building a business on it. It's not how I would look at it. I think there's an opportunity to literally build a massive annuity business, if you are willing to hustle and partner with a bunch of software companies.
Peep Laja (10:12):
What's the number one channel that works for you, is it the SEO content or paid?
Rytis Lauris (10:17):
SEO content. So there are two, I would say, main areas which are working for us the most. So it's, first one is really collaboration with listicles or dedicated articles, which are dedicated to how to start your eCommerce business, how to improve, how to drive more sales, how to improve relationship with your customers, et cetera, et cetera. So usually we do it in cooperation with someone, who has already trusted resources, I mean portals, whatever blocks who have traffic.
Rytis Lauris (10:53):
And we in cooperation, we do provide the quality content for them. It's one and then the second is our own blog and our own content, which is a lot based on quality researches, which we do, produce a lot of researches first, like party data, which is owned by us. And it's not just a generic article. Oh, and to start your email marketing campaign, you have to think about a good subject line. Yes, we do have such articles, but what is a good subject line? We have a research and we can quote ourselves in that, based on our customer data. And that really works a lot and good for us. And even now competitors are quoting us when we need certain data to prove it and that's how we get backlinks from Mailchimp.
Peep Laja (11:42):
Content marketers have ruined so much of online content. Most of the staff that ranks for whatever keyword is written by a non expert, with the only goal to rank high, it's mostly rehashing content from other blog posts, with little original thought, experience or research. Anyone can write a blog post, but doing original research is hard.
Peep Laja (12:04):
It costs money and time, that being said, doing a single original research study does very little for you. Doing a ton over the years will build your reputation and help you become the go-to source. None of these things will get you the quarterly quota, but it will help you build your brand. Here's Michele Linn, co-founder and chief strategy officer of Mantis Research, explaining the benefits of original research and content and how it can help in growing your content visibility and credibility.
Michele Linn (12:36):
At the end of the day, research is really key because it helps you lead the conversation. Original research solidifies your position as a thought leader. It's content no one else will have, but everyone else will want to share. And that second part is so very important. It is content that no one else will have, everybody will want to share. And because you're leading the conversation, what happens is that you're earning backlinks.
Michele Linn (13:00):
It's increasingly difficult to get attention and to get links and original research and reference content are the two types of content that get links. So what happens is you get links, you get people coming to your site, you build an audience that especially if you do this in a wise way, you have all of these related assets to your research and you build an audience that wants to hear from you. It's beautiful. And then last thing, original research helps you win new customers. If you guys know Andrea Fryrear, she's just all about agile marketing. She actually found that there was a clear correlation between reading a report and customer is ready to make a purchase. So it works on so many levels.
Peep Laja (13:38):
On your product strategy front, it sounds like that in the beginning, you were trying to get to, let's say, a complete product. Today when competition is intense and really all the top players have all the features, how are you thinking about competing and winning today?
Rytis Lauris (13:56):
Our position in the market... As we're serving small and medium sized business as SMB, so there are kind of two main rules while we are building the product. First one, our learning curve has to be as flat as possible. So anyone who just starts using Omnisend, we have to get to the value as fast as we can make it. Values usually orders and the revenue, which they start getting through us. And it's the first part.
Rytis Lauris (14:25):
And the second part is usually, again, it's the same with easiness of use and the results, so our main or ideal customers are those, who either it's kind of few people in the company who have a lot of spinning plates, or even if there is a marketing department, we are limiting our ideal customers, before there is a data analyst in the marketing team. So our aim is to help our customers by investing 10% of the time to accomplish 80% of the goals. With our competitors to accomplish 80% of the goal, you have to invest 80% of the time.
Rytis Lauris (15:05):
Yes, Omnisend has certain limitations, and maybe you cannot accomplish 100% of your robust goals, but I mean, when you go to competitors and when you invest 100% of the time to accomplish that, so that's our USP, that's where we... Let's say this is our unique selling proposition in compare to direct competitors, those who are in eCommerce space.
Rytis Lauris (15:29):
Still, there are a lot of our prospects or potential customers who are still using generic email service providers like Mailchimp, let's say. So if you're using Mailchimp, so it's really straightforward. We used to be the same price, now MailChimp increased their price. So now we are even cheaper, but for anyone who does sell online, we really have way better value proposition. We know that ROI with us is way greater due to seamless integration, due to benchmarks, which will provide you to templates, which are in place and best practices, which are built-in developed product and really allow anyone to sell more by using Omnisend.
Peep Laja (16:12):
You mentioned that you're affordable and even cheaper than Mailchimp. Well, tell me more about your pricing strategy here. Are you intentionally trying to be the affordable option?
Rytis Lauris (16:24):
So we don't have an intent to be like the cheap solution. And we are not thinking, we currently became cheaper because Mailchimp increased their price. So that's just what organically happened. But Mailchimp itself is not a cheap solution and we are not... We have no intent to be the cost saving solution or so a cheap solution.
Rytis Lauris (16:44):
And now our aim is really to create more value for our customers than they pay for us. And for anyone who's really running proper online business, we pay off and ROI is really great and we know it. If the business is not going and also anything above zero is to expense, we are kind of premium solution in that category, not the cheapest that's for sure, but creating the most value for the particular customer cohort, which are eCommerce customers, if you are a book club or offline cafe store, so definitely there are way cheaper solutions for you in the market.
Peep Laja (17:33):
People like products with high prices, expensive communicates it's the best, it's high quality. Sometimes it's a heuristic for making a decision. I just want the best. People also like cheap, the thrill of bargains, rationale of saving. It's the middle ground, that seems meh! Omnisend is about 50% cheaper than their biggest competitor. While on the surface, having a matching feature set, you can totally make a rational case of why pay more? In this space, there have been also many companies that tried to do the exact same thing that you're doing, but failed, what do you think made you succeed where are others did not?
Rytis Lauris (18:15):
Resilience, resilience.
Peep Laja (18:18):
What's an example of that?
Rytis Lauris (18:20):
Yeah, one word and up until today, we're bootstrapped and we call it customer funded. A lot of the competitors, which... I mean, once we launched, we were not smart even than a lot of other people. And the same opportunity was overseen by a lot of folks globally. And there were definitely a lot of products launched at the same time, or like very, very close dates as we did. So, and vast majority of them raised VC money, we did not.
Peep Laja (18:53):
I mentioned that VC money is a way to get big, fast in an emerging category, but there's a downside. If you dramatically increase your spend, but the revenue growth is not catching up, you're going to be dealing with negative operating cash flow. VC money comes to the company, dev cost skyrocket, all expenses go up, but often revenues are not growing as fast as you wanted.
Peep Laja (19:16):
If you raise money before you have a fundamental growth motion in place, that will be very stressful. A negative operating cash flow is not something that investors like to see and can mean that you are in a death trap. To get out of this death trap, founders usually have two options. First one is decreasing costs, so like you fire people or sell off parts of your company's assets. This can make your business look unstable. You lose public trust, you lose employee's trust. Second option is that you find investors who are ready to invest more money in your business. However, if your growth has stalled, you'll have a hard time doing that.
Rytis Lauris (19:53):
At the beginning, that was a smart thing, not to fundraise and not to try to accelerate your marketing and sales therefore too much because the market was not ready yet to transform into... Ditch generic email service providers, which email, even at that time, it worked, just you send the bulk dumb campaigns and it works. Why should I invest more in automations and multi sequences segment, something I just sent, like almost spray and pray communication type of email blasts and it works for me? Yeah, so probably it's one of the factors which were important, especially in comparison to competition. And then, at a certain scale, we got our brand and recognition. We're all in our position in those ecosystems, which are important for us. And then it's not that easy for newcomers to catch up and...
Peep Laja (20:56):
When you enter an already saturated market as a newcomer, there aren't a stacked against you. Everyone already knows all the top CRMs or email marketing tools. How would they ever find out about you and seriously consider choosing you over other more familiar options? I used to think that you need to be better to win.
Peep Laja (21:14):
And then I thought it's too hard to be better. So it's more important to be different. Now I'm convinced you need to be better and different, objectively better at creating winning customer value for a particular set of customers and clearly different, focused on a particular, maybe even unique job to be done, to make it obvious, why choose you? When I look at your revenue growth chart, it seems like before 2020, you are somewhere at like 6.5 million in revenue and then massive rapid growth in the last two years. What was behind that growth in these last years?
Rytis Lauris (21:55):
Couple of things, it's COVID a lot. So it accelerated the growth of entire eCommerce that's for sure, that was first factor. Second factor was a conflict between Shopify and Mailchimp, and then Mailchimp being acquired by Intuit, which again, made some turbulence in the market. And still vast majority of our customers were migrating Thomas and they're migrating from MailChimp. So the more things are happening on MailChimp and they kind of like, we fought their strategy. They were focusing on eCommerce for a while, but then they made a decision to become one stop shop for anyone who wants to run small business online.
Rytis Lauris (22:36):
So they introduced their landing pages. We introduced their shopping cart, Facebook, Google, and Google ads management, et cetera, et cetera. So, that was a second thing. So basically the leader, the leader in the market, the elephant went out of the room, I mean, stayed but not fully stayed. Yeah, so that's a little bit of more fresh air and space for you to conquer. Yeah, so probably those and the third factor, probably, again, it's a compounding effectors or a snowball a little bit, so if you're doing something right in the market, it starts pay off after certain times, it's branding recognition and overall in the market partners program and all other smaller details, which start showing in finally the snowball effect.
Peep Laja (23:29):
Yeah, it's that law of double jeopardy, like once you get big enough in your category, then everything that you do will have an amplifier on your results. And whereas if you are like the 23rd entrant to the market that nobody knows about you, you can do five times better marketing, it still get nowhere, right?
Rytis Lauris (23:50):
Yeah, that's very good rule. And we are not the leader in the market. What we see when looking at the number 23 in the market, that definitely things are way easier for us. But at the same time, we are jealous when we look at the leaders of the market, things are way easier for them as well. So if we bring any news about our product updates, still we already have a community of around tens of thousands of our customers and the agencies, et cetera. So there is like, there are people who already talking about us, but if the market leaders bringing the same message, there are way more people who are talking about that, so completely agree to what you said. Yeah.
Peep Laja (24:33):
Who has more, gets more. The more known your brand, the more known it will get. It's how category leaders keep winning. It's how inferior VHS beat Betamax because more people had bought VHS early on. The law of double jeopardy is legit. Being a well known brand gives your advertising and marketing up to 18X effectiveness boost, just because people know you. The game is rigged in the favor of big companies, larger companies can underspend their competition and still grow. Other factors matter to you, like strong creative, but nothing beats brand size. One of the first theorists noticed and named this trend, was Paul Dyson from Data2Decisions. Here he is with a case study and how brand size can affect the success of your marketing campaigns.
Paul Dyson (25:20):
I worked with an alcohol company last year and they wanted to test Facebook for one of their alcohol free brands. It's a relatively new brand and they tested it and they found that the ROI was an 0.2. So their conclusion was that Facebook doesn't really produce a good ROI, but the point was that this was just a 50 million brand at the moment. And based on brand size, the ROI you'd expect for a small brand like that would be between 0.2 And 0.4. So it was performing exactly where you thought it would perform or from my perspective, because it was a small brand and it wasn't that Facebook wasn't working, it was just that those are the sorts of ROIs you would need to get. So it's understanding these things in order to assess whether your test has worked or not.
Peep Laja (26:05):
I talked to Morgan Brown from Shopify, and he said, well, it's still the early days of eCommerce.
Morgan Brown (26:12):
We're the leader of a category that's still pretty small and still very early. In the last year, the eCommerce category grew as much as it had in the previous, depending on who you believe, 5 to 10 years. Right? And so it's still very, very early days and I don't think anyone here at Shopify thinks that the job is done. It's still very, very early.
Peep Laja (26:34):
There's no slowing down, it still keeps on going. You guys probably intend to be around also 10 years from now and then maybe longer. So what kind of modes are you intentionally building, if any?
Rytis Lauris (26:47):
Yeah, so I would agree that those are in early days, the largest modes here are really the data, which the more data we have about our customers, enables us to provide a better solution for that. So, basically migration to any of other platforms would become more and more painful in the short term. Of course, in the long term, neither us, none any of our competitors has any strategic advantage or natural effect or some things like that.
Peep Laja (27:20):
How does somebody in this... Let's call it broadly, marketing automation in eCommerce space, what is the recipe for winning here? So what do you need to get right in terms of product and marketing to win in this space?
Rytis Lauris (27:32):
So I think it's not different to any other space. So constantly look for and listen to your customer and their needs, and those needs are changing that's for sure. And you have to adopt, you have to change constantly and it's evolving like market and the ever evolving needs. So anyone would know that the silver bullet does not exist, there is nothing which you can patent, there are no kind of scientific innovations here, or things like that, you just do your job, you do as good as you can, you listen, you reflect your customers needs, and you just do that stuff. And I don't have a silver bullet.
Peep Laja (28:15):
So what three key strategies have contributed to Omnisend's success? One, they choose to focus on an underserved niche in a bigger market.
Rytis Lauris (28:25):
So because the market was already extremely crowded with, let's say, old school, one size fits all solutions. We are going into niches. Specifically eCommerce market was not crowded, although it was already filled in because everyone was using generic service providers.
Peep Laja (28:42):
Two, they focused on content marketing to drive traffic and signups.
Rytis Lauris (28:47):
It's not just a generic article. We have a research and we can quote ourselves, that based on our customer data. And that really works a lot and good for us. And even now competitors quoting us. And that's how we get backlinks from Mailchimp.
Peep Laja (29:03):
Three, they offer a more of affordable product with a winning value proposition against the category leader.
Rytis Lauris (29:09):
We know that ROI with us is way greater due to best practices, with shop built-in developed product and really allow anyone to sell more by using Omnisend.
Peep Laja (29:23):
One last takeaway from Rytis.
Rytis Lauris (29:25):
If we bring any news about our product updates, we already have a community around tens of thousands of our customers and agencies, et cetera. So there are people who already talking about us.
Peep Laja (29:37):
And that's how you win. I'm Peep Laja, for more tips on how to win, follow me on LinkedIn or Twitter. Thanks for listening.