How Refersion CEO Shibo Xu grew Refersion to $5.3M revenue and 5K customers in 2020.

just got done editing this interview you guys are gonna love it before i do that though i want you to know that i'm going to be in the comments for the next 30 minutes or so answering your questions if there's additional questions you want me to ask the ceo next time i interview them leave them below or if you're just loving the data points i get ceos to share click the thumbs up button below that's your way of telling me you're loving this stuff and i'll get you more of it additionally again i'll be in the comments answering any questions you have all right for 30 minutes enjoy the interview hello everyone my guest today is shibo zu he's the co-founder of refursion and grew the company from the two co-founders to a leading sas platform serving over seven thousand merchants across two offices before reversion he was a technology consultant partnering with fortune 500 enterprises to concept and build great digital products shiva you ready to take us to the top yeah all right so for people that haven't heard about version tell us what the company does and what's the business model is it pure play sas yeah so it's pure place sas what we do is help merchants figure out and attribute orders so uh let's say you're selling t-shirts online you have thousands of t-shirts orders and you're not sure which ones came from influencers or youtube people because you're commissioned on those we'll help you figure out which of those orders came from which influencer and calculate the commissions and help you pay that out and what tracking do you use is it cookie based does each influencer have to have a specific link or what's your tracking mechanism yeah we have a lot of different mechanisms so we use skus we use emails we use coupon codes we also have referral link tracking as well um we don't use cookies we actually use something called local storage which is similar uh but yeah we and sometimes the merch based on like the program or what they're trying to do we might mix and match a lot of different things so you might have like a referral link from one influencer and then track to a coupon code at another campaign and we help you analyze all that and figure out like what actually the roi was okay and how why are people using you over you know things like maybe embed get ambassador like other referral marketing programs yeah so i think our secret to success is that we really start an smb space and what that means is we really need to figure out how to take things from like zero to one uh and help merchants go from zero to one so in order to do that we built a lot of apps um that helped us do all the integration work so we would install the cookies into automatically we would kind of get the web hooks and order data automatically from all the e-commerce platforms so magento stripe and we figured out all these integration paths so all the merchant needs to do is click a few buttons get everything integrated and they're good to go okay now how are you monetizing those is the affiliate paying you or is the merchant paying you we take money from the advertisers or the merchants themselves um they pay a monthly fee like an 89 a month for the professional plan that's kind of just into the gate trying to start things out and then from there uh if you go into enterprise we actually switch over to percentage models i think the latest percentage is like 249 2.5 percent of affiliate sales so it's a 249 minimum uh that's our enterprise plan and then 249 a month yeah okay and then if let's say that because affiliate revenue is very spiky like this month maybe you signed up a really awesome influencer he drove thousands and thousands of orders um we'll take one point uh 2.5 of the total order value yeah from that influencer yep okay got it well generally speaking the people on your 249 a month plan do you have a cut off like they're all doing more than a hundred thousand dollars a year in sales through you that's the cut off yeah so typically like at some point it just starts making sense to to go on the 249. um i think it's somewhere between ten thousand to twenty thousand affiliate revenue it starts making sense tonight a year yeah okay no a month okay um and and i mean why do they move over in other words you have something that is restricted on your 89 a month plan that incentivizes the move what is restricted on 89 a month uh how many orders you can pay out to affiliates every month i and what is that number it's 130. i see so you only can do 130 payouts or pay out to 130 affiliates you can do 130 payouts got it so if you have one affiliate that you pay 100 you wouldn't do this but if you have one affiliate you pay 130 times you hit your max yeah pretty much so like what we actually track is the number of conversions so how many orders this affiliate drives so up to 130 orders and then on the 131st order you can't pay that out okay so regardless if it's one affiliate who drives 130 sales or 130 affiliates to drive one sale each it doesn't matter what combination at that point you're probably gonna move enterprise yeah yeah and it's really consistency so like excuse me so let's say that you had like 130 and then 135 this month next month you have like 20. um it's okay the next month will roll over and those 130 get unlocked so oh no yeah so it's really if you like consistently prove out this channel and it works really well shiba you're a nice sass founder you roll the credits over that's very sweet of you we try hi we work with smbs so why don't you be successful so so this is a great story put this on a timeline for me when you launch the company so we launched a company in i think officially as like 2014 the company was probably incorporated in 2015. okay and today how many merchants are you working with so we work with um somewhere between like total uh all merchants about 7 000 i think about 5 000 of so are our paid accounts yep uh yeah we started as premium how have you so the seven thousand total uh and the delta between how many are paying which is five thousand those two thousand are those just early early people that sign up on a free plan that you now don't have but you grandfather the men exactly why choose to grandfather them you know intercom they just automatically make you pay more doesn't matter if you've been paying them for a decade they make you pay more why not make those people pay yeah because we work with um smbs and like e-commerce and if you ever watch shark tank it's like their margins are thin compared to like sas you know i love how shark tanks your barometer for that yeah it's true though it's true they're successful merchants too they're successful retailers yeah um so it's it's tough on the retail side a lot of our customers are kind of retailers and their margins are tough so you know we try to make it successful for them and our whole thesis is like we really want to turn affiliate marketing to like a viable kind of channel for everybody just like facebook and google so the more we can kind of get into that fold the better and it doesn't matter to us if you are successful today or like five days from now yep this is great so you when did you turn on when did you so you launched in 2014 when did you turn off the freemium and turn on your first paid plan uh probably in 2015 um because in order for us to do our tracking how it works is that we need to look through every single order to figure out if this order belongs to an affiliate right we have data pieces and there's a data piece here we make a match we say hey this one is an affiliate order um so that hit us really hard on the server cost and we just could not kind of afford premium so we switched that off and turned into like paid only got it okay okay so and what was your first stab at the price point do you remember back in 2015 yeah yeah we started at 29 79 and then 179. 29 okay so if i was visiting your site in 2015 i saw 29 79 and 179 something like that yeah interesting okay and what what was your first like what did you price against did you price against 130 orders then two or did you change over time we changed over time we've had a lot of different pricing strategies over the years so like one of the things we did was you know um pricing against total number of affiliate sales so total number of like revenue driven by affiliates um and then a lot of merchants kind of complain that like our average order value is high i'm not getting many orders through this system and then we switch over to a percentage so it would we would like it was kind of like a grading scale so on the nineteen dollar plan we take two point two percent or like it was like six percent actually and then it goes down from there i think it goes to like two percent or two point five percent 89 and then it went to like 1.5 percent on the enterprise side but yeah i mean it looks like my research seems as good as back in march of 2015 you essentially had four plans zero all the way up to 139 dollars per month and the things that you listed below each pricing plan was like literally dollar volume affiliate sales number of visits and then all your plans had unlimited affiliates except your free plan which limited to 15. and then you also restricted on some feature-based upselling like skew level commission can and conversion triggers and phone support yep yeah so...