How Mailchimp bootstrapped to 140 Million customers and $800 Million in revenue – Part 2

Author – Abhishek A Agrawal

Founder at Integrately – Easiest integration platform

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Growth Strategies: Not by the books

These choices were very uncommon back when MailChimp started off.

But it led to new growth hacks that work for us even today!

Tinker framework

Bootstrapping their business for 20 years, MailChimp faced several startup challenges:

• Limited resources
• Scalability
• Little room for error

But Ben, MailChimp CEO, handled them very effectively with what he calls tinkering and describes it as:

`Make small bets, fail fast and recalibrate, do not aim for moonshots as they are expensive!`

The customer has been their first and foremost source for tinkering.

Right from the start, they actively:

• Conducted customer feedback surveys
• Sorted out to prioritize the most requested features
• Implemented and released them quickly (they have even launched multiple versions in a year)

For example, they kept tinkering with features like:

• Templates: When Mailchimp hit 3,000 template downloads, they recognized the demand. So they came up with ‘built-in templates,’ saving users the need to download them separately. This simple yet impactful change led to a 50% increase in free sign-ups within two weeks
  

  

• Automatic Email A/B Testing: They tinkered with the Email A/B testing process by adding automation to it. This gained them 5K customers in just 2 months, as opposed to the 10K userbase they had built over 7 years.
  

  

• Social Pro: Got 1 million queries on average during its launch. But tinkering with its promotion as `free for limited time’, spiked the queries to 50M in just 2 weeks.
  

  

• RSS to email:  Launched in 2008, this feature didn’t instantly make waves. Continuous tinkering, however, boosted the stats. By 2010, major publications were sending 70,000 daily RSS to Email campaigns.

Tinkering with Pricing – The Freemium Wave

Mailchimp’s move to a freemium pricing model was a big game-changer. The numbers say it all:

But Mailchimp didn’t suddenly wake up one day and decide to offer free plans to the world. It wasn’t a spur-of-the-moment choice, but a result of continuous tinkering with the pricing.

Learning from the Past: Years of Experimentation

Mailchimp made a carefully calculated move shaped by 

• Years of trial and error, 
• Pricing experimentation, and 
• A keen understanding of their business.

They experimented with various plans at different pricing points, from pay-as-you-go to monthly subscriptions.

After each experiment, they gathered a wealth of data on factors like

• Profitability
• Order volume
• Customer downgrades
• Refund rates

This data was crucial in shaping Mailchimp’s approach to Freemium. After the success of the Freemium campaign, they strategically increased the subscriber count on the free plan twice. Results 🤯 👇

The 10:1 Ratio – A Wake-Up Call for New Startups

So should you launch a free plan right away? No!

Before diving into freemium, you must take note of Mailchimp’s 10:1 ratio –

This ratio is a sobering reality for startups considering freemium. Because it means that a majority of your users may not contribute directly to your revenue for a considerable period.

But you still need that revenue to keep the lights on, pay your team, and let you stash some cash for the future.

This is why going freemium before having a solid paying customer base is risky. You might end up in a situation where you need to borrow money just to keep the lights on. All this, while you work on figuring out how to make money from your free users.

So, if your 1 paid customer cannot bear the cost of 10 free users yet, you must reconsider the Freemium model.

Promoting Freemium: The ‘Power to People’ Way

Freemium being their biggest move, Mailchimp wanted to make the most out of it. 

So they launched the ‘Power to People’ campaign✊, wherein they distributed 1000 free t-shirts & goodies using social media. 

This was a calculated move since:

• Giving away free goodies in the past had tripled (3X) the customer survey participation in just a single year
• Social media was on the rise with Facebook hitting 300 million users during Freemium launch, and
• Their Twitter was growing so rapidly that they already had a full-time Chief Twitter Officer.

The `Power to People` campaign helped them in multiple ways:

• Promoting Brand Mission: Using the phrase ‘Power to People’ promoted Mailchimp as a brand that has empathy towards users. It also encouraged their mission to empower smaller businesses.
• Growing Email List: Mailchimp collected emails from people who wanted a free T-shirt
• Creating Social Media Buzz:  Users shared Mailchimp-branded goodies on social media sparking the buzz.
• Community Building: The buzz created a lively community of Mailchimp fans on FB and Twitter.

Even Ben testifies their use of API as a user magnet

Well, that’s not all!

API has also served as MailChimp’s customer retention channel.  How?

• Initially, as customers’ mailing lists grew, the increasing costs associated with MailChimp led them to explore other platforms
• However, these alternatives often fell short in delivering MailChimp’s value.
• So introducing API was a smart move to bring back such customers:
  • It served their evolving needs,
  • Helped them scale, and
  • Offering a cost-effective solution.

• Prioritize customer feedback in development
• Make small bets, fail fast and recalibrate
• Do not proceed with the Freemium model without considering the 10:1 rule
• Effectively use APIs as a marketing channel