Quick Overview

Artistic Threadworks proves that a mom-and-pop site can beat the big boys. Typical consumer sites get an average subscription lifetime of about six-to-eight months, but clients of Artistic Threadworks keep paying for an average of 30 months! Our Insider Case Study, based on an exclusive interview with co-founder Larry Pike, reveals some of the secrets behind their annual six-figure profits.

Target Market

Mainly women who are embroidery enthusiasts, in particular those who use sewing machines to create patterns on textiles at home for fun and pleasure. Site co-founder Holly Pike is a member of the target demographic herself, which is one of the reasons visitors find her photo on the homepage so appealing.

Content Model

The Pikes have focused on three different types of content – content that gets the initial subscription account, content that boosts lifetime value, and content that turns the site into an all-inclusive destination.

1. Embroidery designs get them on board “People join for the embroidery design library,” Pike admitted. But as soon as new members had downloaded “large chunks” of the library, they’d cancel and move on to other competitor sites … where they would do the same thing. To stop this, the Artistic Threadworks content team began to change the library, sometimes completely, each month. They filled the library with new designs and moved many past designs to the site’s store, where they could be purchased as one-off items.

2. Community keeps them on board “Women are our core customer base and women love to communicate,” Pike explained. “They’re caught by our discussion forums. That’s what people stick for. Some people live for the forums.”

Forums are only appealing if they’re very active and full. So the team ran giveaway contests offering $100 in embroidery software as a prize. Each forum post a member contributed was counted as an additional entry into the drawing. If you posted to the forum 100 times, you’d have 100 entries into the prize drawing. Now, after five years of steady promotions, the site’s forums boast nearly 350,000 postings.

Pike offered two tips:

– Don’t pester members who don’t login to come to the forums. Send them their regular newsletter and receipt and let the account lay as it is. Some people aren’t interested in getting involved but they’ll pay to keep the account running “just in case” they ever want to access it. Treat them with kid gloves.

– Start with one main forum and break it into smaller, niche forums once you have critical mass. But be forewarned that once you start a forum, you can never discontinue it even if response is very low – the cries of outrage can be deafening.

3. Extra content turns the site into an all-inclusive destination

Content quality is critical given how competitive the field is now. “At least 50 sites saw and copied us,” said Pike. “Only two or three have done a good job, most don’t have the tech savvy or the content isn’t good enough. However, the consumer sees all 50 and they don’t know what they are looking at. It’s difficult to evaluate. They join four, quit three, join two more, quit one…”

To give members a full, richer experience, the Pikes also included a review section for all the sewing machine models currently used by consumers for embroidery. This is completely user-generated content. Pike created an online survey that members can fill out giving their impressions of the sewing machine model they use. He then posts the results by make and model on the site.

In addition, the site includes how-to articles and tips, which are often inspired by the members themselves. “We automatically send all new members a survey that asks why they joined (a check box), how long were they reading our free newsletter before they joined, and what could we do to make the site better.”

Lastly, the site has a store offering one-off designs, equipment, and related software. Plus, the site offers third parties the option to run their own stores there as well. The goal is for the site to become a full-service embroidery shopping destination.

Revenue Streams

The site has four main revenue streams that add up (in our rough estimation) to gross annual revenues of more than a quarter of a million, with a healthy six-figure EBITDA profit.

1. Subscriptions The site currently has “several thousand members” paying either $19.95 for three months, with recurring billing, or $9.95 for month-to-month. Members continue for an average of 30 months – an extraordinary length of time in the subscription world.

2. One-Off Ecommerce Sales Pike said, “Some people are dead-set. They flat-out will not buy a subscription, but they’ll come in and spend $20 in the store for content they could have had free with their $19 subscription. Some are leery of auto-renewals, even though we tell them upfront it’s easy to cancel.”

The site has a wide range of products for sale, both real world, which must be delivered via postal mail and downloads and online content that are delivered virtually. Pike notes that some subscription site platform technology doesn’t allow for postal mailing labels, so you should ask about that if you need labels.

Some SKUs are fairly expensive, so the site offers Home Shopping Network-inspired installment plans. For example, a $500 product would be available in three payments of $175 each. “Cover your costs with the first payment,” Pike advised. Then, if the card fails the second time around, you’re not in trouble and if it works, the rest of the payments are nearly pure profit for you.

3. Third Party Ads and Storefronts Third party merchants can pay $25 a month to rent a storefront to sell their own embroidery patterns on the site’s “Main Street Boutiques” section. Storefronts include a photo gallery page with clickable thumbnails of the patterns offered. To process orders, the merchant hooks their storefront to their own PayPal account, so the main site isn’t responsible for billing, service, or fulfillment.

Pike has automated systems so when a merchant adds a new pattern to his or her storefront, that pattern is automatically included in the site’s next daily email newsletter, “Embroidery Daily News.” The newsletter includes a line of copy noting when a product is a third party offering, to reduce customer service confusions.

4. Brand Extensions The site’s owners are considering a range of brand extensions, such as their own custom embroidery software launches, as well as in-person embroidery seminars to be held in cities across America. They survey members as a market research measure before final launches. “When we asked if people wanted to be contacted if we did a seminar in their area, we got a list of thousands of people’s names, addresses, and phone numbers who wanted to come by city.”

Marketing Tactics

Search

57.7% of the site’s traffic is from organic links in Google’s natural search results. Pike posts all of the site’s newsletter issues online permanently, using blogging software as a content management system, and we suspect these issues cause a majority of the search traffic. (Newsletters only link to content, they don’t contain content themselves.)

Social

“We go mining Yahoo Groups. Some allow ads; most don’t. We try to bring people to the site for something free and then get them onto the email list.”

Affiliates

Although the site has hundreds of affiliates, most don’t send much traffic or sales. “We only have one really good one and one half good one,” Pike said. “Both came in during a special promo where we gave a 50% lifetime commission for all clients they generated from June -December 2009. Now our commissions are back to 20% lifetime.”

Offline

The Pikes tested exhibiting at a few trade shows for hobbiests. “Big mistake!” Pike exclaimed. “Waste of time, energy, money. It doesn’t work unless you’re a speaker at the show. Otherwise your booth is just one in a sea of booths.”

Conversion Process

When you visit the site, an overlay immediately appears asking if you’d like to sign up for a free newsletter. Often the offer is worded as a giveaway contest – enter for something and also get on the email list. The newsletter then promotes the benefits of membership, hoping to convert readers into trials.

The site publishes a daily newsletter featuring new products; an official weekly newsletter, “The Bobbin Buzz,” on Saturday mornings, which only features content (not offers); as well as interim newsletters on Tuesdays and Thursdays with updates and articles. So it’s a steady river of information.

Often Pike bundles a trial offer with a product sale from the store. So, if you buy X item, you get a 21-day trial, which then automatically converts to a paid membership using the credit card you ordered with. He noted, “Sometimes members complain it’s not fair that they pay for something trial members get for free. Tell them the actual cost the trial is paying: ‘You’re paying 21 cents per day and they’re paying 35 cents per day.’ They don’t want to feel stupid.”

Pike’s other advice on trial offers – don’t make a trial too long. He’s done 90-day trials, but reverted to the shorter 21-day trial. Also, don’t offer too many term/pricing choices. “Generally two term/prices is best for our site, such as $19.95 for three months or $9.95 for one. You put up four choices and they have to analyze and think … then they close the page.”

Technology and Vendors Used

MemberGate: Full-service membership site platform that powers the site. Pike called it “the BMW of subscription site software.”

http://www.membergate.com

aWeber: Email service provider the site uses to send newsletters

http://www.aweber.com

1ShoppingCart: Ecommerce cart the site uses for product orders offered with a fixed number of flat payments, and for orders that require a digital download screen, neither of which were available as options via Membergate when we interviewed Pike.

http://www.1shoppingcart.com

SurveyMonkey: Online surveying software that’s fairly easy to use. Pike uses it to collect new member surveys and user-generated sewing machine reviews.

http://www.surveymonkey.com

About Larry Pike

“We both used to have corporate jobs,” Pike says. “Back in 2001 I got fed up with not having enough control and my wife was very bored in her job.” So they decided to launch a subscription service based on a marketplace void that Holly Pike discovered as an embroidery enthusiast.

“This is not a Get Rich Quick thing. Anyone who tells you that wants to lure you in and take your money to tell you how to get rich,” warns Larry Pike.

“It’s a lifestyle. Now, I work seven days a week. My wife gets up at 9 am and works until 9, 10, 11 at night. I get up at 4 am and knock off earlier. You work a lot, but then you give yourself a break – go to lunch for three hours, play Frisbee with the dogs, or take in movie matinees. I’ve probably been to 100 Tuesday afternoon matinees in the past five years.”

Subscription Site Insider’s Quick Analysis

Artistic Threadworks has an exceptional retention rate and lifetime value that other membership sites can only dream of. (In fact, we urge other site executives to join the site and carefully study the tactics the Pikes use to engage and maintain member relations.) This tells us they know what they are doing with content and member value. But, it also means with this sort of payoff, they could get a lot more aggressive with acquisition marketing. In particular we’d recommend giving affiliates a 100% commission on the first month of new subscriber accounts, while cutting the lifetime commission completely. (Most affiliates are motivated by immediate cash rather than recurring streams.)

They should also go after co-marketing relationships with the dozens of competitors they’ve mentioned. Co-registration and affiliate offers would work here. Strong subscription marketers are always swapping lists and promotions with direct competitors – consumers who buy one site’s offering are the best prospect to buy from the other.

Lastly, perhaps it’s our judgment at fault, but we suspect many embroidery fans are aesthetically minded … it would be nice to see the site undergo a slight design upgrade, while still keeping the homey, personal touches that make it feel like a “real site run by real people.” For example, the Pikes could expand the page width to at least 960 pixels across and bump up the point-size on body copy to be more reader-friendly.

http://www.artisticthreadworks.com