Growth Hacker

Sean Ellis knows customer acquisition funnels. The man who coined the term growth hacker was formerly the head of marketing at LogMeIn and Uproar from launch to IPO, and led marketing initially at Dropbox, Lookout, and Xobni. These days, as the founder and CEO of Qualaroo, he’s building tools to help website owners better understand, interact with, and ultimately convert their site visitors into customers.

After acquiring Kiss Insights in June 2012, Ellis and his team have spent the subsequent 12 months rebuilding the Web-based marketing platform from the ground up to, hopefully, broaden its functionality and improve its effectiveness. Today, the company is releasing the fruits of that labor in its new call-to-action product, Convert, which complements its much-improved survey tool, Insights.

“When we made the acquisition, the company had 1,000 paying customers and was growing revenue 5 percent month over month. Then we intentionally broke it,” Ellis said. “We felt that the product was just too limited. It had no branching logic for example – if people answer this way, give them this follow up option. The ultimate idea is to effectively qualify people and direct them to the product or collect a lead.”

Qualaroo helps website owners understand why people are making decisions they are on their sites, and then to strategically guide these visitors through the conversion funnel from prospect to customer. Within 15 seconds of a visitor landing on the site, an interactive “Nudge” is served consisting of a pre-qualifying survey. The responses to this survey then call on built-in branching logic to drive the site visitor to various pieces of content such as lead capture forms, landing pages, live chat, etc., or deliver targeted offers and calls to action.

Earlier this week, the company delivered its 1 billionth Nudge for clients including Amazon, Intuit, Groupon, Shopify, UserTesting.com, US News & World Report, and Putman Media.

“Convert is a natural extension of our product line. It lets site owners collect data and then act on it in real time to improve marketing performance,” Ellis says. “Now marketers can create and optimize conversion funnels on any page of their site, based on the business rules that matter most to them. Without having to repeatedly deploy code or landing pages, insights driven testing becomes a real-time possibility.”

Both Insights and Convert are paid products, and the company no longer offers a free version. Ellis explains, “We realized that our free product didn’t accelerate growth, but just cut into sales. We also realized that our market was less price sensitive than we originally thought. So we eliminated free, and increased the price significantly.”

The company is targeting customers with a minimum of $1 million in revenue and has accomplished the majority of its customer acquisition via the “Powered by Qualaroo” link on existing clients’ websites. The company will grow paid subscribers by 100 percent this month, according to Ellis, and in the process recover all of the ground lost over the last 12 months during the product redesign process.

Since launching a redesign of the Insights product in February, the company’s three month customer retention rate has been 90 percent, up from 60 previously. One company generated 25,000 leads in first month after the redesign, Ellis says, while another generated $12,000 in sales within the first week. Without more context, it’s difficult to assess these figures, but the increase in retention rates suggest that most people are happy with the changes.

Qualaroo has grown to 11 employees split between a sales, marketing, and operations team in its Orange County headquarters and a product and engineering team in Burlingame. The company raised $5.5 million in financing in January 2011 (then named CatchFree) from Polaris Ventures, True Ventures, Index Ventures, First Round Capital, and 500 Startups. Ellis doesn’t anticipating needing to raise more capital, and instead expects to reach cashflow positive with seven figures still in bank. The company has also turned down several “serious acquisition offers” in the CEO’s words.

Online marketing is more of an art than a science making it hard to productize the secret sauce that has led to the runaway success of Dropbox and other products. In Qualaroo, Ellis hopes to deliver a variety of tools and and a logic framework that allows each company to create their own funnel strategy. It’s can also be tricky to actively market to and engage with site visitors without being too interruptive and delivering a negative experiences. Based on early feedback, it would appear that Qualaroo struck this balance well. Now it’s all about something that Ellis knows extremely well: acquiring more customers.