SM: What differentiated VistaPrint in such a crowded market?
RK: In retrospect, a couple of things differentiated VistaPrint and made us succeed. We didn’t try to apply the Internet just to the traditional printing industry. We came from a desktop publishing background and a manufacturing background. We first developed technology to automate desktop publishing and manufacturing. We then identified a market to apply that technology, and the only market that made sense to us were micro businesses, which we knew well from our desktop publishing catalogue days two or three years before.
In 1999 and 2000 everyone thought we should go after the big companies that were spending large amounts of money on printing. Our experience gave us confidence that there was a market with micro businesses. Other companies did not want to pursue them. Everyone else thought it was a horrible market. We happened to be in the right spot at the right time.
SM: How did you get to these people? They are not easy to get to.
RK: That is one of the reasons that a lot of people hated the market. We did it through direct marketing. Someone in the company came up with the idea of free business cards. In 1999 there was a lot of buzz around viral marketing. We knew that if we could get enough volume, our costs would plummet and it would not be that expensive to give cards away.
That became a runaway success. At the time, full-color business cards were selling online for $85 and $200-$300 at traditional printers. We gave them away free with a $5 shipping and handling fee. That offer was so successful in getting people to try us that it became an acquisition engine that drove our business. Our business model got to scale very quickly.
SM: How did this translate into sales volume?
RK: We have had over 17 million people individually purchase through VistaPrint. Last year alone over 6 million customers purchased from us.
SM: Did you give out a limited amount free and then have customers pay for more cards if they wanted them?
RK: We actually still have the offer today. You can order 250 business cards free of charge and pay only shipping and processing. You can order as many times as you want. That offer has allowed us to print over 4 billion cards. The cards are full-color as well.
Once our customers come back a second time, we have built up credibility with that free sample offer to have them buy other things. They may pay to have a different graphic design since our free offer is limited to about 40 graphic designs. The free offer has a three-week shipping tie. If customers want the cards faster they have to pay extra. Customers are more than happy to pay once they have tested our free business card offer. The offer truly is no strings attached.
SM: Is shipping a profit center?
RK: We don’t lose money on it. We have a company cost of goods sold of about 38%. Shipping is by far the biggest cost we have in cost of good sold. We help defray our costs with that shipping, but we mainly make money from all the customers who decide to buy other products and services.
SM: The campaign is done on a very large scale. Is the cost of customer acquisition covered by the shipping and handling charges?
RK: It is being covered, but I would not call it a profit center.