Mike: We didn’t make any mistakes.
[Laughter]
So it wraps up at 3:30. Thanks. Thanks for coming out folks. No, just kidding.
Seriously, Jeff, we’d probably need another hour to go over the mistakes that we made. So it’s been a good six or seven months, or whatever it’s been. I forget now. But how many months, Tom? Five?
Tom: Four.
[Laughter]
Mike: Okay, let me rattle off in no particular order. I’m going to tell you some of the things that come to mind. We did a lot of things right. We did a couple of things wrong.
Number one, my opinion, if you’re going to do any type of payment plan, don’t use PayPal. PayPal allows the user to go in and cancel their subscription which they can’t do with credit cards. So people that are like, “You know, I’m going to go and cancel my subscription. Then I’m going to go to the help desk.”
People can’t do that with their credit card. So the only way that somebody can cancel their subscription is by going to the help desk and saying, “This isn’t working,” or, “I didn’t get this,” or, “I’m not sure,” or whatever the case is. But you’re too much behind the eight ball.
When I tell you the amount of cancelled subscriptions we got, it was enormous, enormous, probably 15%, maybe more. What happens internationally is people don’t get their package, and we were on time.
“I ordered five days ago. Where’s my package?” “You live in Japan. You live in New Zealand. You ordered on a Saturday.”
“They didn’t get it until a Monday. We didn’t ship it till Tuesday. Today is the fifth day and it’s Wednesday and you just cancelled your subscription.”
“Oh, well I just wanted to make sure that you didn’t charge me again until I was sure that you shipped it.” So that’s one of the things.
The other mistake that we made was not getting a price of the course before we decided to come up with a price that we were going to sell it for. It happened very, very quickly. We were going to sell it just as a DVD course. That’s the way it was going to be.
With nine days to go we get on the phone with John Reese and he says, “You know I think your course is going to rock and I think it’s definitely, definitely worth $497. But can you do anything else?” And we were like, “What?”
“How about this?” And he comes up with this grand plan. If you do that, that will be great and that was like creating mind maps and all that type of stuff and we were like John, we just can’t. “It might be worth it. Push the launch off.” We don’t have the time.” He says, “How about transcribing everything?” I was like, “You know, that we can do.”
He was like, “Yeah. Just get all the DVDs over to a transcriptionist.” So we ended up getting that and then we had to get it printed and all that type of nonsense and that’s what made this crunch. However, what we didn’t realize is that our prediction cost for the DVD course was about $28. By the time we were done with two two-inch binders, two three-inch binders, I’m talking thud factor of the transcripts, our production costs went up to about $105 a unit.
Now keep this in mind, Jeff. In order for us to ship internationally, because, here’s another mistake we made, was not having gotten fulfillment houses in Australia and the UK and have orders for UK customers go to the UK, Australia customers and New Zealand and Malaysia go to that house, and domestic orders go for US and Canada and Mexico here. Because our final cost was about $155 to ship a course that heavy, because now that it got heavier to New Zealand, now you take into the fact that you get 3% of your merchant account, right?
So you take $490. Well we’ve got shipping and handling so let’s say we’ve got $524 minus 3% is $508. That’s what we got after the fees. Then we paid our affiliates $225. That left $283. And then it cost us $165 to ship. We only made $118 per course because 90% of our sales were made by our affiliates.
And now you take into consideration the guy that cancelled his payment but he got the course and our first payment was only $147 and it cost me $165 to send it to him. And we collected $147 on payment one and then I paid an affiliate $75. So now we’re in the hole. So that means I have to sell three products to make $118 three times just to break even on that one sale.
So we got hurt. We made money. But let me tell you something.