How This Company Stays Profitable While Giving Away Cars

Transcript

Felix: Today I’m joined by Justin Burnett, from Prime Driven. Prime Driven is a seven-figure business and one stop shop for Toyota car parts and was started in 2012 and based out of Stanhope, New Jersey.

Felix: Welcome Justin!

Justin: Thanks, Felix! Great to be here.

Felix: Yeah. So you told us that by the age of 26 you already owned over 20 cars of the type, which is one of the car parts that you help service, to Toyota MR2, and it was your frustration with the existing market that led you to start your business. So tell us about that frustration. What lead you to get frustrated enough to start a business around this?

Justin: Yeah so, great question. Yeah, the MR2, Toyota MR2 which is our specialty, a little tiny, two-seater, mid-engine Toyota, and, like most kind of very low volume old cars, which back then it was barely ten years old, the market is not big. There aren’t a lot of companies serving it, and if there are, they’re companies like us where it’s like, one guy, two guys, three guys, you know? Not anything really serious.

Justin: So it was very fragmented, customer service was to my standards, not there at all to the level with maybe the exception of one little company, and they just weren’t operating in a way that I thought should be happening.

Justin: And so, we basically took that, like many great small businesses, or just small businesses, took the frustration and said, “There’s got to be a better way.”

Felix: Mm-hmm (affirmative)-. Did you have experience before? Like, what made you think that you could do a better job than what was already out there?

Justin: Yeah, so my background is in customer service and sales. So, I used to be part of a small personal training gym in Bernardsville, New Jersey that I helped a friend of mine build up. I was in sales when I was younger, at Sears Hardware back when that was the thing. You know, cars, buying and selling cars, stuff like that. So, it was just, everybody has their way to like, do business. I love great customer service, I mean what my definition of it is, which is just attentive, informational. Not really pushy, but helping people where they clearly have a gap in their knowledge.

Felix: Right. Where there specific thing that you knew you wanted to come into the market when you started your business and do right away to really blow customers away when it came to customer service?

Justin: Yes, actually. That’s a great question, cause I can still remember, it was email response times. So back then, Facebook was around, but it wasn’t being utilized by my market. So it was all forums and email, and I would email companies, for years and years before that. A decade before we ever started the company. And I just wouldn’t hear back or I would hear back like, a week later. And then it would be like something not particularly useful as a response, or just not response.

Justin: And as a guy that was looking for help from an expert, I don’t know, I thought at a minimal I would get some kind of response. So yeah, that was really the main scenario that drove me. And what I made every effort to in the beginning, and obviously as we’ve gotten bigger, cause the volume of the emails and the Facebook messages, and Instagram DM’s and all the different platforms, it’s much more challenging now. But back then, my rule was to reply to an email within 24 hours worst case, best case, an hour or two.

Felix: Got it. So this customer service that you were applying, it wasn’t even for the type of business that your in today. You weren’t the typical e-commerce business when you first started out. Tell a little bit more about that. Where’d you begin with your business?

Justin: Yeah, so, great question cause it’s not at all how we are now. We started out, back then in 2012, even actually before that. We were building cars and helping guys build cars, fixing their MR2’s, going back well over ten years. But when it really became a business, we were building Toyota MR2’s for customers. So the way that we really kind of kicked it off with a bang, was the market had been very stale for a long time. There’s a very popular thing called engine swaps, in the car world where you take a newer engine out of the same or different car, and you put it in the older version, you put everything together, you make it work and then you have a better driving version of your cool, old car that you already have.

Justin: So, we took an engine that came out of a station wagon in Japan, that was never exported through the United States, and put it in the Toyota MR2 which is basically a 15 year newer engine. Same basic engine structure, it’s called the 3SGTE, that’s the designation of that engine, but this was a 15 year newer engine. So, just better everything. Much more reliable, younger, lower mileage, faster, more powerful, easier to work on. But we basically, my business partner figured out how to make it work in the car, and then, we went from there with basically giving our customers, here’s the newest, fastest, most reliable way to engine swap your MR2 and we’re going to make it really easy for you to have that done by us.

Felix: And how did that business go?

Justin: Not well financially. But well, in terms of branding. So, our kind of obsession with quality, my obsession with customer service, my business partner is the technical mastermind behind the car, so he is unrelenting in his desire for things to work, how we believe they should, which is basically like, [inaudible] it. So like the manufacturer. So like the ID of our cars is that, you would send the car to us, and back then most of our cars were shipped in and out of car carriers. They came from all over the country, cause there aren’t that many of those in the country. And we would tear them down, go through everything. Not just throw a motor in and send it back out the door which is what a lot of guys were doing back then, and I’m sure people still do now, but we would go through the entire car, give the customer a list of everything that needed to be done from a safety standpoint first, and then we’d go into fun performance stuff if they still had the budget and there was still time.

Justin: But that was four years of that. We built 50 cars a year, generally like, on average. We had two or three mechanics, full time, but this is in New Jersey where overhead and worker’s compensation and all that was just, hideously expensive, and these are not high dollar cars. These are $5,000 cars in most cases. So we were doing 5, 6, 7,000 dollar engine swaps on a car. Half the time they were spending more on the swap than they had spent on the car up to that point.

Justin: So, it’s just not enough, financial resources a lot of times for the customers to be able to do what needed to be done, or to the level that we did it. So, eventually we basically we build several hundred cars. Those customers were asking for support, meaning parts online. We had a very basic website back then, with no parts available. They were asking, so we started adding parts. And this was like on a Weebly website. It was not in commerce, but just had the ability to kind of create some parts and a payment process. So we started doing that, basically a handful of parts at a time. We’d sell the replacement parts of what we used on builds, which were whatever we had found was the highest quality, best value part at the time, and then over time that grew just by requests and then eventually we came to your platform.

Justin: Fast forward, 18 months, 12 months, then we came to Shopify and that was kind of when everything changed.

Felix: Got it. So this process, where customers are telling you that they want a parts, they want a way to get it, this was like a 18 month or year and half long transition from the [inaudible] building 50 cars a year, to now selling parts online?

Justin: Correct, correct. Yeah, it was like, most things longer than you think. But it was really, we never intended to become an e-commerce company. In fact it was a distraction for a long time and it was tough with managing inventory and resources cause we weren’t a big company, we didn’t have a lot of money, there wasn’t a lot of good cash flow in that model of building of building the cars.

Justin: So it was trying to keep everything on the shelf for when an order came in, and at the same time, we had three more cars that had to be built in the next three weeks. And not all those parts were readily available. A lot of them we order from Japan, or we have the manufacturer by other small companies. So it was very challenging in the beginning.

Felix: Yeah, it’s I think, what’s important here is that what you start off with is not where you ended up and it’s not easy to make this transition, this change because yeah, you’re still in the same industry, you’re probably dealing with similar or the customers, you’re still working with cars, a passion that I can see for the both of you. But you’re kind of going into uncomfortable territory, right? You going from working probably face to face with a lot of people while their cars, and now selling products and shipping them across the country and maybe across the world eventually. What were some of the kinds of growing pains or how did you guys address the problems? Because I think you mentioned inventory and resources. How did you guys get a handle on this early on.

Justin: Yeah so, it was a substantial challenge. My business partner and I had decided that we weren’t going to borrow any money to do anything, which I know that’s probably pretty common now with raising funding and all that kind of stuff, but we’ve always just run off our own personal money to build the company originally, and then basically what little cashflow we had. So we’ve never borrowed anything. We’ve never had a loan or investor or anything like that. So we basically prioritized during that 18 month transition of still building cars and starting to sell very parts on the website, my business partner is very good and very smart when it comes to managing multiple things in his head at the same time, and managing where to get inventory, where to get the best deals on the inventory’s since our mark-ups were very, very low. And still are on most of the parts, just there’s not that markup potential on a lot of these parts.

Justin: And also we want to bring the most value to our customers, so we have to be able to pay the bills and we want to grow, but, we want to have a customer for life and we want to bring them so much value, in terms of support and products that they feel like, I wouldn’t even look anywhere else for this stuff. Like, these guys are fantastic.

Felix: Got it. So you built this off of cash flow profits basically and the cash flow you’re getting in from the business. So I’m assuming there were some hard decisions along the way where you guys had to say no to opportunities, no to things because at that time, your cash flow might not have supported that investment. Can you give us some examples of that?

Justin: Yeah. That’s a great question because, now that you asked that question I’m thinking back to a number of scenarios. So back them, one of the things that we also did to try to generate a little bit more noise, little bit more awareness and a tiny bit of cash, when it went well, is we would buy broken MR2’s and then we would bring them back to life mechanically. We were not a paint and body shop, we didn’t have any restoration abilities cosmetically, but a really good detail and cleaning up and stuff and then a new motor, can take a dead, going to the scrapyard MR2 and put it back on the road for another 10 or 15 years.

Justin: So that was one of the other things we did. That sucked a lot of cash, cause, you spend all the money and you wait to sell it. And then you get that money back and then you go and do it again.

Justin: So that was a major challenge. And it worked well for branding, because people learned that our cars worked. Like our old philosophy was, our cars work, first, and then they’re fun and fast and exciting after that.

Felix: That’s a real good point I want to stop at. How did you know that that was the more important? Like, how did you know that was what your customers cared about first?

Justin: Well, it’s funny because no one ever asked for that really. That was basically my, business partners and I’s obsession with the quality part. Back then most guys, and still true today to an extent, but back then, most guys were daily driving their MR2’s at 20 plus years old. And because it’s Toyota and because it’s from the ’90’s and those are some of the most well built cars, in terms of just raw reliability engineering quality, it was, not unusual to see a guy daily driving that car with 200,000 miles on it and very little done to it, just cause they were built so freaking well.

Justin: And ultimately, we wanted to take a modern car performance, and then reliability of just something newer that has a lot more years left in it and put it into that old chassis, which was so well built and really over engineered from the factory.

Justin: So, yeah, we wanted them to work. That wasn’t what people were asking for. People always want more power, they want more exciting and it just so happened as a bonus, the motor we put in to make it work better and work reliably, happened to make more power, and drive better and be higher quality.

Felix: Got it. SO you mentioned that you were, at one point, you wanted to do scale this up, but at the time you couldn’t. You were taking these dead cars, like you were saying, you’d bring them back to life. It was great for branding, what were you doing with these cars? Like, were you selling them? Like, why were you reviving them? We you reviving them to just sell them? What was the end goal of each car that you guys were reviving?

Justin: Yeah, so we would buy them, we’d bring them back to life, and then we would sell them on, just to put them back on the road and give somebody a good value and a good quality build, for not big money. Whereas, the big problem with any old car, and any modified car, but things like ours when they were so low volume. I mean they made, from 1991 to 1995 they made 23 thousand of these things. There’s maybe 5,000 left in the country, like vaguely active on the road.

Justin: So finding nice ones on like Craigslist or Ebay, or back then the forums, was pretty slim pickings. So our cars became effectively, what I like to believe, cause that’s the reputation that we’d built at that point, is a by word for value. Like, I’m going to buy this product from Prime, it’s going to be 20 percent more, because they did work to it, then the on paper, or visually equivalent car online, or on Craigslist, but this car will work. And, if I have questions afterwards, which is another big thing when you’re dealing with old cars that no one really knows anything about and a very young audience. Because, it’s a very cheap car, at least the entry level ones are, so you can buy one when you’re in your teens. Certainly in your early 20’s and at not an insurmountable cost.

Justin: But the information is all over the place, lots of misinformation online, so people would buy basket cases, and then they would call us to help them and we’d be like, “Look. You don’t want to pay me to do the amount of work this car needs. Just sell it back to somebody else, and then here’s one of our cars. Buy this and I can tell you everything functionally works. It’s not perfect, it’s not brand new, it’s still a 20-plus-year-old car, but it goes, stops and turns, It’s going to start tomorrow, and if you have a problem or a question, you can call me.” Or back then, you could call me on the phone, now it’s email or Facebook message or what have you, and we’ll do everything we can to help you.

Justin: And, once or twice there were guys that six months down the road, they popped a motor or they’re friend took the car out and overheated it or something like that doing something silly. And we replaced our motor for free. And we didn’t have the money to do that. We’ve never really had the money to do that, at any particular scale, but it was just what we believed was right and ultimately we wanted to help the customers. Like, we’ve got to stay in business obviously, and if we’re always doing that for free, we’d go out of business.

Justin: But it was just kind of a core belief of myself and my business partner of how it should be. How we wished it was when we bought cars.

Felix: Mm-hmm (affirmative)-. Now when you guys made the switch form focusing primarily on reviving and building cars to selling parts, was there a moment where you and your business partner sat down and was like we got to make this switch and kind of go fully into selling parts online and start closing down the other side of the business or did this just happen gradually?

Justin: Yeah. Literally, it happened in one sit down meeting we had. It was December 2015, we were going over the books and for the last six months, cause we had started selling the Weebly stuff to existing people, I had started running Facebook ads in 2015, like all self-taught, very rudimentary, but back then Facebook ads were hilariously cheap. And there was nobody else in our industry that does Facebook ads. I mean there’s no other MR2 company running Facebook ads.

Justin: So I had started doing that, and we started getting a significant uptake in orders. So by the end of the year, we’re like, “I feel like we had more money in the bank, not a lot more, but a few thousand dollars in the bank that normally wouldn’t have been there or we would have been over-drafting at that time or something like that. Are we missing something or what was causing that?”

Justin: And then we look at all the books, and it turns out that not only was the website supplying supplemental, but actually when you ran the numbers on what it costs us for all of our expenses in New Jersey, with overhead and workers comp and payroll, what it costs us to build a car, we were actually losing money on every build.

Felix: Wow. Okay.

Justin: And literally we were like, we need to stop building cars. And then the next sentence was, how do we make it easier for our customers to build the cars themselves now, if we’re not going to do it, because we had 50, 60 people waiting to send cars in, and they’d been saving for years and we’d been talking to them and we didn’t want to let them down and then just be like, “Sorry!”

Justin: So that day, we created the DIY kits that we sell to this day, the do it yourself kits, of how to put this more modern motor, that we call a Gen 4 3SGTE into the Toyota MR2, a full blot in, plug in play scenario. And then we stopped taking in builds, and started doing that and obviously, you’re not taking in money for builds anymore, even on deposit, so the first six months of that were pretty interesting in terms of cashflow.

Justin: But that was literally a sit-down, December of 2016, and we had exactly that conversation.

Felix: Got it. And the six months, you said that that was interesting, the cash flow. Were you guys ever thinking, “oh, did we make the right decision,” or not?

Justin: Oh yeah. Many times.

Felix: What made you stick to your guns?

Justin: Yeah. At that point, I had started reading a lot, right around that time, I had started reading a lot in, start-up businesses and autobiographies of the titans of business industry and marketing and behavioral psychology and just anything you could think of in terms of psychology, business and management, sales and marketing. And I was following a lot of good people, I was reading a lot of good stuff, and my business partner trusted me, I trusted him.

Justin: So were there times? All the time. We were like, “maybe we should take just his one build, just to get a little cash.” But then we were like, “That’s going to be a slippery slope, and then somebody finds out we built a car for one guy and then they’re pissed because we said we weren’t building them anymore.”

Justin: So we just didn’t want that to happen, so we put all that energy into making the website at the time, better, relatively speaking. Adding more parts, adding more, I was spending a lot of time, at that time, it was starting on Facebook, like in the groups, on the forums in the groups, helping people, tech support. It was tough going, and we were not cash flow positive for a decent amount of time because of deleting the influxes of cash every time I would consult a build, and we would have a deposit on a build.

Felix: I think if can keep the lights on or you have a long enough runway, you should for the most part try to focus on doing things that are scalable or invest in your time investing the way you built the business, to where things are scalable. Which is the approach that you guys went with selling these parts online, and I like the idea that this transition period where you were selling these DYI kits. Are you still selling those?

Justin: Oh yeah! That’s still one of our big unique selling propositions between the three or four MR2 companies in the country, who are all basically one man shows or two man shows, are all tiny little businesses. But yeah, that’s still one of our big value things for our customers, besides our support. And then now, for the last 18 months, we’ve been which has been part of the journey with Shopify, is we now give away cars to our customers, as basically a way to give back and grow awareness for the company. Where otherwise, people don’t really care if you sell them or two parts, if they don’t have an MR2.

Justin: So, that was kind of where a lot of that transition came in as well.

Felix: Let’s just talk about that, this car giveaway. So you’re giving away a car, I think I saw that it was almost once every two months, right?

Justin: Yeah. Basically.

Felix: That’s awesome, so tell us about this. How do you set this up? Like how do you afford to give away a car? It’s just this idea of giving away a car every two months sounds, really out of reach for a lot of people. So tell us how you guys are able to do it.

Justin: Yeah. So, everybody generally has the same kind of response when we tell them we do that. They’re like, “I don’t understand how that works. Like, you can’t be doing that legitimately. It’s got to be some kind of angle or unlined, like everybody.” Think it’s a scam.

Justin: Like, I understand that. It seems crazy, right? Like, we’re not a big company. How do we do it. We do it through a lot of work. A lot of time, and frankly, we had done the first two with Weebley, and there were many problems because it wasn’t a purpose built commerce platform, and that was when we decided to make the shift to Shopify, and at that point I was rapping up my Facebook ads quite a bit during that year leading up to that.

Justin: And then this was September of 2017, yeah. We switched over to Shopify, in between giveaways, between number two and number three. At this point, it’s only MR2’s we’re giving away back then. Like the first eight giveaways we did, literally up until this year, the last give away was [inaudible] Evolution 9, but before that, we spent the previous 18 months giving away 8 Toyota MR2’s.

Justin: And once we moved to Shopify, the backend became massively easier. You know, all the ad integration that you guys have and the Facebook integration is huge for me with my dynamic product targeting ads. So that was really how we were able to do it.

Justin: The first two, we effectively broke even on. Like they’re not super expensive cars to build, but we’d build the nicest ones we could each time, and tried to do something new something new and interesting, or at least different for our customers each time, because there’s only so many different ways you can build the same car.

Justin: But the how we did it, was we knew that it was probably not going to make any money, cause it costs a lot to do it, even at relatively cheap car parts, but the customers were loving it and of all the years and hundreds of cars that we’ve built and over a thousand cars that we’ve repaired and worked on or helped somebody fix, we’ve never had so much positive feedback than when we did the first giveaway.

Justin: So that was basically to me, kind of like an addiction at that point. I was like, this is like bringing overwhelming value, is always been my kind of obsession and I always thought I did it with support and the quality of the builds and the parts, but it just blew up with positive feedback and comments and thank you for this opportunity and this is amazing and this would be life changing. And that was, that was very exciting for me, and very fulfilling.  Obviously great for the brand.

Justin: So that was kind of the beginning of how it worked, ultimately in terms of money at any given giveaway, cause we’re always going bigger and bigger. Like this Mitsubishi Evolution we just gave away, like that’s a 20 thousand dollar car. The MR2 before that, was anywhere between 10 and 15 thousand dollar cars. Like, would cost us to build.

Justin: So to jump to the Evo was big, and we had no presence, in the Mitsubishi Evolution market. Zero. And MR2 guys are very loyal to the MR2 and very often, not a big fan of any other car. You have to be hardcore to really want and own and keep an MR2.

Justin: So, each giveaway practically funds the next one. And now, with growing into some of the bigger cars, and having to run a lot of cold traffic ads that I run, to get these new eyeballs on people that want that car, it is very challenging, time consuming and exp endive, but again, this is a car that we had no reputation in with the Evo, and I don’t think we’ve ever had more positive feedback on ads. And these were two, not customers. These were just two cold traffic. And that was really super, exciting to me.

Felix: So the profitability, where does that come from? Like these are people entering the giveaway, they give their email address or something and then they end up buying a product from you later.

Felix: How do you measure whether a giveaway was successful in terms of profitability or not?

Justin: Yes, great question. Sorry. I kind of glossed all over that.

Felix: No worries.

Justin: I spend so much time in this everyday, that i don’t even thing about the 40,000-foot view here.

Justin: So yeah. So basically how it works is, a giveaway, or a sweepstakes, is different than a raffle, in that a raffle has to be a 501 C3 charity, or a governmental agency, and you’re just purchasing a chance. You’re purchasing a piece of paper, like a ticket, like a lottery, or like a raffle, like a 50, 50 at your local fire department steak dinner, or something like that. A sweepstakes or a giveaway means you’re exchanging value. So there, buying from me, either parts or now, with the cars that we don’t sell parts for, like the Evo, they’re buying shirts, hats, hoodies, coffee mugs, key chains, back packs, socks, just all kinds of like cool car themed stuff, some of which is specific to that actual car we’re giving away, where we take a bunch of photographs and stuff of it, and make stuff out of it.

Justin: But, then basically every dollar that you spend on the website, is automatically tracked by the website, and that’s one entry into the giveaway. So, that’s how we fund the giveaway, effectively.

Justin: But we have to obviously build the car, and do that work before, we ever launch it. So, we spend a lot of money up front, which is a really big challenge, as far as cash flow is concerned, and then you bring it in over the course of the next 6, 7, 8 weeks.

Justin: And then I spend a lot of money of Facebook ads, and Scrim ads, YouTube ads, Google Ads. We work with some YouTube influencers that have cool car channels, and that’s effectively how we do it.

Justin: But we’re always in growth mode, so I’m not playing the short game here, of like, the cooler cars we can do, the more attention we get, and also the cooler cars we get to give to people. And they love that, I love that. So that’s really been the long game here as, we just want to give away as much cool stuff as we can, and be able to just basically make our paychecks and grow so that we can give away more cool stuff.

Felix: That’s awesome. So you’re able to track all of the, how are you able to track that? This like, incremental revenue rather than like, a customer that would have maybe come across you anyway? Is there anyway to differentiate between the two? How do you attribute the revenue directly to the giveaway?

Justin: Yes, great question, so, that’s one of an endless list of the things that are so great about the Shopify platform is, on our dashboard, just when we log in each morning, it shows the number of visitors, number of orders, all that. But when we go into the analytics, obviously it shows percent of new customers, versus returning customers. And then obviously every time somebody orders, specifically on their information on their order page, on our back end, it shows us what number order it is. So when we see the number of returning customers, it’s almost the opposite of what a lot of companies want to see on growth. A lot of companies on growth want to see high returning customers, cause that means you’re not turning a lot, right? You’re not losing a lot of customers.

Felix: Mm-hmm (affirmative)-.

Justin: And then you’re getting some new. That’s how it used to be before we were doing giveaways.

Justin: Now, anytime during a giveaway, our returning customer rate will be extremely low, with these new cars because most of our existing MR2 customer’s don’t care about a car that is an MR2.

Felix: And this is as a percentage, right? The actual number of people that are returning isn’t going down, but as a percentage of all the purchases, is decreasing?

Justin: Correct.

Felix: Okay.

Justin: Correct, yeah. So yeah, all percentage based, yeah. Thank you for clarifying that.

Justin: So yeah, our existing MR2 customers ultimately, their going to order from us anyway. The MR2 giveaways was just a cool way to give back to them. Now we’re giving them a chance to own different cool cars, still as a bonus just for shopping with us when they’re buying the parts anyway.

Justin: The new customers, obviously are entering just for that. Or just cause a lot of them think some of our merch is cool. Like, we put a lot of work in. One of guys here, is our in house designer and he’s not like, educated as a designer or anything, he’s just a friend of ours. Cool guy, likes cars and he’s got a great creative flare.

Justin: But yeah, the backend, there’s an app on the website that basically tracks the number of entries that they have, which is basically like a loyalty tracking app, like there’s a million of, and that’s how we actually track the number of entries everybody has. And then we go and look at analytics to see what our percentage of new customers is, returning customers, what they’re spending, how many orders they’ve had, that kind of stuff.

Justin: Yeah. Then we can attribute to a very close approximation, how much revenue came in from new customers, and then what the net, net profit was on that. And then we see how well that one did relative to the previous one.

Felix: Got it. So when you are running this giveaway, you mentioned that you’re driving a lot of cold traffic on Facebook, and I got to believe that having an unbelievable product like a car that you’re going to giveaway, is going to help a lot with getting attention, getting people to be intrigued or curious enough to find out more.

Felix: But, tell us a little more about this strategy. How do get cold traffic from Facebook coming to your site to buy products, enter the giveaway. What’s the strategy, how do you set up? What do the ads even look like even?

Justin: Yeah, great question. Cause I test a lot, and I test all the time, so I’ll test things that I’m going to use a month or two from now, and then I’ll test stuff in real time during giveaways. But basically, the main cold traffic ads are going to be single video, conversion ads, with call to action and they’ll run to; I keep it very basic. When I do cold traffic I’ll just pick one interest. So in this case I’ll pick the car. So the last Mitsubishi Evo, was, I just targeted four different ways you could input that interest into Facebook when you go to punch in your targeting.

Justin: Mitsubishi Evolution people that were interested in it, and then I run the cold traffic ads to them, single video, conversion Shopnow call to action button, ad copy; very simple. You know, “Hey Mitsubishi Evo fan, how would you like to win this Evo 9 MR plus five grand cash? Shop now at PrimeDriven.com. Every dollar,” blah, blah, blah.

Justin: And then I’ll answer some of the common frequently asked questions, lower in the ad copy, where, frankly most people don’t click and read, but it’s there for the people that do want to click and read.

Felix: Got it. Now, when they’re coming, and you mentioned that you’re using this loyalty, giveaway app to track it. Do you know the name of it? What do you recommend people use if they want to do something similar?

Justin: Yes, so, it’s called, Bold Loyalty Points. And we had to have them make some modifications to it, +

Justin: sit to work in this way versus the normal, it’s just meant to kind of like, give you reward points versus just straight track number of dollars. So, we had to have them do a couple of little tweaks to it, but ultimately, it works great.

Justin: And on every single product page, on the add to cart button, is the number of points that that product earns you, which is obviously the same as the dollar amount.

Felix: Got it. So I like it, but before I get into this question, were you profitable with this from the very beginning? This giveaway approach?

Justin: That’s a great question, cause back then, the first two were on Weebly, and I guess they were kind of analytics, but they were not particularly useful and that was before a big QuickBooks overhaul we did in order to be able to track everything. So, at the end of the day, those first two were like, effectively all MR2 parts, and basically no march, because at that point we had like, four tee shirts that we were selling. Like, it was just for our customers. And people were complaining, well if I don’t need parts, give me something else.

Felix: Mm-hmm.

Justin: Because I still want to get entered, I want to potentially win the car, and that was when we started adding some more, kind of organically when we originally did at the beginning of the website for parts, we started adding more merch and some key chains and stuff like that, and some hats.

Justin: But yeah, in the beginning, I think by the time we got done with it, and then had to buy the next car and get that car ready, it was probably break even. Which I considered, frankly, a huge win. Because when we were first doing the first one, it had been mentioned to us by a long time customer and friend, like two years before that. So back in, 2013? No. ’14? Sorry. 17, 18’s when we did it. Back in 2015, 15ish, a customer was like, "Hey! I’ve seen some of these like big companies, like, huge companies, right? Like car [inaudible] are not new, these have been done since the beginning of cars. There just usually done by big huge companies or the actual car company themself, right?

Justin: So a friend of a customer was like, “Hey, you guys should do one of these! I’ve seen some Honda guys, like, do stuff.” And, we were like, "There’s no way we could sell enough product to be able to pay for, not just the product, and then restocking product, because obviously, every time we sell a product we’re restocking and it’s usually more than one because a lot of our parts are from Japan or manufactured by other small companies and we have to order them in quantity. I was like, I just don’t see how we can do it.

Justin: And over time we had parts on there and we had enough order volume that we were like, this could work and be great, or it could catastrophically fail and frankly, we’re used to that. Cause we had many failures like anybody whose built anything. And we try to learn from them and then get better, improve and don’t make that mistake again. But, it was very much the mentality of fell forward fast. Like, let’s just do it, and worst case scenario, we give an awesome car to one of our customers and we lose, the first car was probably a ten thousand dollar build, and then I ran and probably about two thousand dollars worth of ads, for maybe three weeks or something like that was the first one?

Justin: But it was all. All, all, all, car parts. And our margins are very low on those car parts.

Justin: So, I think we broke even on that first one, but we were; I remember being really, legitimately nervous, and I don’t get nervous or scared about stuff. Like we just do it and then see what happens. But yeah, it was, I actually remember tangibly feeling, nervous.

Felix: Got it. So do you think that someone could start off this way by, if they have the kind of inventory that is required, because I think you raised a good point, which is that if you are to set this up so that each purchase, each dollar they spend is considered an entry, you have to have things in your inventory that are just kind of like things that people might want. Not that they need, because if they need car parts, they’re not going to buy car parts to enter.But yeah merch, eventually which are things people just might want to buy and they don’t necessarily need it.

Felix: So, if they inventory like that set up, can they start up this way or are there certain things you feel like you had in place? Whether it be with the brand, or anything else you can think of that is required to be able to successfully build a business this way.

Justin: Yeah, that’s a great question, and that was one of the things that we were asking ourselves before that first one, and ultimately, the only way we were able to do it and not just lose all of the money, is that we had an existing customer base of about, maybe 1,500 customers around the country. And they were; a lot of our customers were very loyal. We tried to make it that way by giving them phenomenal service and great parts and good value.

Justin: But we could not have done it, at that time, with my knowledge and with the backend capabilities of the website, we could not have done it and been profitable on cold traffic. And we ran no cold traffic for the first, bunch of MR2 giveaways. It was just all the website we were targeting. That was it.

Felix: Why does it work now though? Why does cold traffic work today?

Justin: Cause we’re able to build off the back of, our retargeting, and existing, returning customers, who are still always buying MR2 parts.

Justin: So, every time we go to grow, even though we know they may not, and this is a major consideration with the Evo because, I mean, I’d never even driven a Mitsubishi Evolution before this. Now, I’m like, “Oh, this is an awesome car.”

Justin: But MR2 guys, are MR2 guys. So, we knew most of them were not going to just buy anything to get entered, but we knew that they still had to buy. Some of them had to buy parts at some time. These are 30 year old cars, they need stuff constantly.

Justin: So, it’s calculated risk, obviously, and we didn’t want our customers to feel like we were abandoning them or outgrowing them or something like that, so we make it a point to still be fanatical about our support.

Justin: But, at the end of the day we couldn’t grow anymore off the back of an MR2 giveaways, and the MR2’s had some bad reputation aspects to the uneducated car person, or non car person, in terms of it’s a mid engine turbo car, it’s rear wheel drive, it’s very to easy to swap ends, especially in stock form. Once we modify them their substantially better but still, it’s a handful of car. It can bite you.

Justin: And, so we got a lot of negative feedback on that from cold traffic. But yeah, cold traffic now, is like I said, very fundamentally basic targeting, just the interest targeting. And then we work with a couple of big YouTube channels, that have obviously the trust and the attention of their subscribers, and wouldn’t it be cool, you’re watching a YouTube channel and this car giveaway comes up, you go enter and you end up winning a car!

Justin: So yeah. It’s always our MR2 customers who will always be there, and we’re always trying to do more better stuff for them, but ultimately now, everything above that, above website retargeting, is cold traffic in a lot of instances.

Felix: Got it. So just to make sure I understand this, so when you first started off, you were able to successfully do this giveaway and be profitable because you were announcing the giveaway to your existing customer base? Is that right?

Justin: One hundred percent correct, yes.

Felix: Okay. And then -

Justin: Sorry I didn’t mean to jump on you there, but the thing that was so outstanding and sort of remarkable about that first one is that, it did extremely well and actually better than the following three, because no one thought we would do it again. Like, no one had ever seen that. No one had ever done that in our industry, not in these tiny little companies. Because of the huge amount of capital outlay, energy and work. And then having to have the back end that could even do it, which it really couldn’t back then. But we made it work.

Justin: But yeah. It was overwhelmingly positive, but then we were like, "Okay, this is a lot more work than we thought it was going to be. And it’s not that easy to pay for a car on the back of low margin part sells.

Felix: Got it. So when you moved, when you kind of grew past this phase of just launching to your existing customers and you were running cold traffic, you mentioned retargeting. So these are people that are familiar, at least a little bit with the brand, but maybe none of them have purchased before? Like how cold or how warm is this traffic that you’re getting from Facebook ads?

Justin: Yeah, so my website retargeting traffic, is going to be 180-day website retargeting audience, generated by Facebook dynamically. That’s going to be effectively, always my core customers. And obviously a bunch of random people that get there because of the giveaway or someone told them to go there, or they found us on Google or YouTube or what have you.

Justin: We put a lot of work into trying to be omnipresent, like on all platforms all the time, but obviously it’s only possible to a certain extent. But, that’s the website retargeting stuff. And then obviously emails, Facebook messenger, some of the MR2 groups on Facebook.That’s where a lot of our customers live.

Justin: But the cold traffic is cold. The definition of cold traffic.

Felix: Okay. Got it.

Justin: People who have never heard of us, they have never been to our website, it’s just straight single video, conversion, shop now, call to action, a little bit about the giveaway, an attention grabber headline, and that’s it.

Felix: Yeah.

Justin: And a cool video of the car. We make like this, big hero video. Like 60-second hero video of the car, basically, show sights and sounds and create some emotion and some excitement.

Felix: Got it. So why couldn’t someone do the same thing you did and just focus specifically on cold traffic, cause it worked for you, right? It not only, obviously the existing customers or retargeted customers, they are also helping to fund the giveaway, but sounds like the more scalable approach for you and maybe more desired result for you is to, get the cold traffic that have never heard of you before, coming, buying products, entering the giveaway. Couldn’t someone do this if they started with no customer base? Like what do you see that might still be missing?

Justin: Yeah, so that’s a great question. In fact, there are multiple people trying to do it right now. The challenge with it, is the cost, the barrier to entry, like, the very entry to e-commerce nowadays, especially with the Shopify, the amazing platform that you guys have, and all the amazing apps that are on it, the very entry to starting an e-commerce store is nothing now, right? It’s zero dollars. And really like, zero inventory, if you are doing drop shipping or something like that, right?

Justin: The reality of doing a car is that takes actually [inaudible] like Shopify website, has all these apps that allow you to kind of do all these things all at the same time. You would be able to track entries, you’re going to have, even a cheap car like there are a couple guys, a couple of pop up companies that are trying to capitalize on this, and I’m a small business owner. I’m a capitalist, this is the free market. There’s plenty of business out there. It’s not there’s an abundance of business out there. It’s not like it’s a scarcity kind of issue.

Justin: But the capital outlay and then manpower outlay to produce inventory, to stock inventory, ship inventory, create all the different ads that I run on all platforms, run and manage inventory and everything on the backend that my business partner does, design stuff like our designer does. And then answer questions, respond to stuff on social media, respond to emails, it’s a lot of money and manpower. And obviously, manpower costs money as well.

Justin: So, to me, there are two companies that are kind of trying to do it right now, and they have a long road ahead. Like if they're in it from the long game, and they’re willing to just hemorrhage money for like a year or two, then well executed, they could probably do it. But there’s nothing unique or interesting about them. So, the challenge there is they don’t have any differentiation. There’s one big company that started doing this in a big way on Facebook, four years ago, and they are the Mcdonalds of this. They’re a first mover, they have all the advantages, huge followings they built up on social media early on. And they give away phenomenally amazing cars, and a bunch of money and it’s, they’re the McDonald’s.

Felix: Got it.

Justin: These other guys are kind of coming in, but they’re only merch. All they sell is shirts and hats and a couple of detailing products I guess but like. We sell like tools, like battery tenders, like [inaudible] shirt or a hat if they don’t want to.

Justin: But [inaudible] basically trying to do the same thing, but with less interesting cars, less money, and less variety of merch, less different designs. Obviously this big company that’s been around for four years like at this point they have a pretty substantial catalog of [inaudible] stuff.

Justin: So, could you do it? Yeah, I mean if someone who’s really good at this, and knows cars, cause ultimately you still have to know what car to do and what the market wants. Like, our market and the guys who are trying to do it now, is Japanese cars called JDM cars. Japanese Domestic Market. These are mostly 90’s and early 2000’s tuner cars. Like the Fast and Furious kind of stuff. That’s my generation, that’s when I grew up, Fast and Furious was a game changer movie for our entire industry, like would I be sitting here if Fast and Furious didn’t come out?

Justin: And so these other guys are kind of trying to do something similar. We’ll see how it works. Ultimately I wish them all the best. I don’t view any of it as competition, I just view it as the free market.

Felix: Right. Because I guess the main point here is that I’m trying to get at is that if you’re not trying to give away a car, you’re in a different industry, this is potentially a very scalable way to start, right? To build a customer base to be able to become customers for the first time.

Felix: I think like you mentioned, the barriers of entry for giving away some products, 10, 20 thousand dollars, might be out of reach for a lot of people because again, you’re saying it’s going to cost you a lot up from to lay out that cash, to support a giveaway like this. But if you are giving away a much smaller product, you’re in a different industry, this might be an approach. Setting cold traffic to a giveaway, they answer by buying products, do people ever get confused on how to enter? They click on the link? Like where does it take them? Does them take them to a giveaway explanation page or something? How do they learn more about what they need to do to enter.

Justin: Yeah, good question. And in the beginning, there was a lot of confusion. Pre Shopify there was a lot of confusion. Cause it used be every [inaudible] one entry, and then people had to do math and it got complicated.

Justin: But yeah, ultimately yes to your first point. If you are not giving away something as massive and time consuming as a car, where like we have to buy it, build it and then film it, and then do all that. Yeah I mean like, I’m sure this exists, but I kind of wanted to try something myself to cold traffic, just cause I had the skill set where I could do that, and obviously we have your guys platform that can do all the backend.

Justin: But like giving away a set of coil overs, like suspension. Like, we were originally going to start like that. Let’s give away a suspension first, cause that’s not a big risk. And then we were like, that’s just not going to be interesting enough. In the world that we’re in where we build cars, people have cars, it’s just exciting to give away a car.

Justin: But yeah. I mean if you were going to give away any number of cool and interesting things that have a relatively broad market, but with us, because we’re so specialized, that it was interesting in the beginning and now we’re working on broadening that appeal and that market, after building on the back of our specialty. Our niche, our very, very small niche.

Justin: But yeah. I think it’s a great way to build a new brand, frankly. I think like most business owners, once they find something that’s working, I wish that I had two years earlier when our friend and customer recommended it. But frankly the website didn’t exist in the capacity that it could have even done that back then, so that was kind of why we didn’t do it.

Felix: How do you explain this. You land on this,

Justin: As far as confusion, to your point about not being sure what to do, all of our traffic gets driven to just our home page. And our home page is basically set up as a scrolling, it scrolls all the merch categories, it’s got video of the previous winner, and then the hero picture when you land is the car we’re giving away. Tells you what the car is, tells you how much the cash is on top of it, because obviously there’s going to be taxes when you win the car. You got to ship it back to your house, blah, blah, blah.

Justin: And then every page will say, “Every dollar spent is one entry,” and then every product page, individual product page you click on, will then say, “This product is worth,” or “this item earns you X number of entries.”

Justin: So that’s basically how we communicated it, and then we communicate it in the ads. Still, people ask, but to change it to one dollar, which was new for this last giveaway, it simplified a lot. The five dollar one entry thing was very confusing for a lot of people.

Felix: Got it.

Justin: But also, we’ve done nine now, so there’s a little bit more awareness, even with cold traffic where we’re not the only one’s doing this. There are much bigger companies that do these things. So people are a little bit more aware in general of how it works, within our kind of tiny, niche audience.

Felix: Got it. So yeah, I see on your home page the very top thing above the photo is explaining the giveaway. So I think that it’s very clear that all the traffic you drive, especially to the home page, is about getting someone to enter the giveaway. So I love that approach.

Felix: So thank you so much for your time, Justin. Anyone that wants to check it out go to primedriven.com to see what they got going on.

Felix: For you, what are you most excited for to come true this year? Like what is the one thing you can’t wait to happen for this year?

Justin: Yeah, so, that’s a great question, cause I write down and recite my goals everyday, and the one that’s actually not one there, but that is a big goal of ours as a company and myself personally, is I’m on the board of a charity, that works with wounded veterans and law enforcement officers, and my best friend actually founded it. And a lot of the money that I make just from my paychecks, which aren’t big? I’m not an anything aire, in terms of money. I’m just a guy.

Justin: But the ability to fund more of our projects. We do a lot of community outreach stuff, a lot of peer mentoring, helping veterans get back into fitness to help them kind of heal mentally, stuff like that. Specialty training for law enforcement, and then even working with kids in some of the more urban areas. That is basically my passion, in terms of my not pure business life.

Justin: So my business life is driven by that passion and by that amazing feeling of fulfillment and contribution of being able to help people who can’t help themselves at that time. That’s really been a big thing for me personally.

Justin: As a business, my goal is to double revenue every year. Obviously, that’s not sustainable at a certain period of time I guess. So, that’s the goal for this year, as well as it was last year and we’re going to giveaway, our next car coming up, giveaway number ten is going to be really, really cool. And then we’re going to try to ratch it up another notch for the one after that.

Justin: So we’re very excited about that and we’re hoping our customers will be very excited as well, cause I know if I were one of my customers I would be. Cause I don’t even own any of these cars personally. They’re just for the giveaway and then somebody else has them.

Felix: I got to start buying stuff man.

Justin: Yeah, yeah. So it’s very cool, it’s very exciting. The feedback is overwhelmingly positive with very little negative, just makes for a totally different business experience that I never would have expected out of this scenario.

Felix: Awesome good. Thank you so much for your time, Justin. Primedriven.com gain’s the website. Thank you so much for coming on and sharing your experience.

Justin: Thank you very much Felix. It was a pleasure.

Felix: Alright, so recording’s now off. What’d you think?

Justin: It was great. You’re great. I apologize for going off sometimes on extensions or tangents. It’s one of my great challenges in interviews.

Felix: No, no, no. You did an awesome job I think. I really wanted to dive deep into this giveaway thing, because I think I’ve never heard of someone doing it this way. I mean, I’ve seen people doing this way, but I never heard of someone almost building their entire business, like kind of the marketing engine behind this. And obviously it’s successful for you, and I think the big thing that I learned from talking to you is, you got to make the prize like, amazing, right? It can’t just be giving away a T-shirt or something. It has to be something where everyone want to talk about, like, “Can you believe it? Primedriven’s giving away a car?” Like, you want people to have that kind of conversation to really get that word of mouth out there to spread your giveaway. And that’s kind of a big thing for me.

Felix: Cause I’ve seen people do this, but it’s always kind of a secondary marketing channel for them and it’s never a prize that is hard to believe. And I think that’s important. Like you want to have a prize that’s hard to believe, otherwise people won’t talk about it.

Justin: Yeah, I mean that’s a great point you made there, and yeah, a hundred percent. And that was kind of our thinking when it was like, well we can just do what a lot of other car companies do, which is like you mentioned, and the easier way, parts, like a set of coil overs is a thousand dollars. Like, that’s a lot of money to a guy that has an MR2.

Felix: It doesn’t sound as good though. It doesn’t sound as good as giving away a car.

Justin: Right, and to your point, I don’t know if you study Seth Godin at all, but one of his books is called The Purple Cow, and the idea is you have to be remarkable in a world, there’s so much noise, and so many great marketers, and good or great products or [inaudible]

Justin: And yeah, the car does that. And part of the cost of that in terms of some of the cold traffic attention, and even some of our existing customers, their friends, [inaudible]

Justin: Can do with that is what we do. We work with [inaudible] where, they physically have the car. One of them is down in Florida, we ship him the car to help him do stuff with it, and then send it back. We fly the winners out, we take videos with them. People still think that’s fake. Ultimately I’m not concerned. One of the old marketing things is if you don’t have any haters you don’t matter, because that means not enough people know about you for someone to hate you for no reason.

Felix: Yeah.

Justin: But, so there is that. And like I have to closely monitor our ads, and [inaudible] it’s shocking, the amount of, the lack of effort anyone will do into something like that.

Justin: They just want to post. They want to feel important. They want to feel significant. Post their two cents and then leave and then never come back.

Justin: But yeah, being remarkable, one hundred percent. Every car we go for remarkable, and it’s fun. [inaudible]

Justin: But yeah I mean, obviously a lot of companies will use it as just a kind of small give back thing within their community, on their Instagram page, right? On their email list. Companies will use [inaudible] email list, right? With like Viper, is that one cool app with UIPER? They basically, it’s a whole sweepstakes giveaway app, but it’s really [inaudible] email or your Facebook messenger out there. Just to build a list. Not like, to, [crosstalk]

Felix: I like the way you do, cause you’re bringing buyers. You’re bringing people who are actually going to spend money. I think the way where you’re bringing people that are going to give their email, I think, you can track a lot of people that aren’t going to buy from you at all. Which is fine. Build your community, build your brand. But you’re not going to be able to tie that as closely to revenue. But you’re getting money upfront. It’s not like you’re getting their email and maybe they’ll buy something from you later. Which I thought initially was what you were doing, but when I heard you explain it, I really like this approach.

Justin: Yeah, and that’s exactly it. Yeah, like the bigger companies generally, they just want your attention and they want access to you, right? They want your permission to market to you, which was a Seth Goden book, Permission Marketing. And so they use giveaways as a way to get attention, be remarkable in some way, a little bit, right? Say, “Hey, look at me, and let me talk to you soon. And I’ll try to sell you something later.”

Justin: This, yeah. I’m direct response marketing.

Felix: Yeah. I think that’s important for small companies to do that, to focus on how can I bring in revenue ASAP. I don’t want to wait six months before I recoup my investment?

Justin: A hundred percent. And without, I mean I like to think I’d be creative enough to come up with another way, but the Facebook ads, if I didn’t come onto and teach myself Facebook ads three years ago, I don’t see any other way that I could do this. And that’s how that other bigger company built there’s as well. They built it off the back of Facebook ads. Because it’s such under priced attention.

Felix: Right, that makes sense.

Justin: Yeah [inaudible] that are all dynamically linked and populated [inaudible] it’s a perfect storm of things and so that’s why now I’m testing Google ads, YouTube ads, I’m going to start testing Snap Chat ads, which are much higher minimal daily spend. But, it’s still a relatively young market in terms of small companies advertising.

Justin: But yeah. It’s fun, it’s exciting, it’s a lot of work, it’s a lot of time, it’s a lot of money.

Felix: Yeah.

Justin: But it’s never been more exciting to be doing what we’re doing. Me and my business partner, everyday we’re like, it’s just crazy that this is so widely, positively received. Whereas, we really thought in the beginning, there’d be a lot more hate. And in the beginning, there were more, cause we hadn’t done one before. So there was no social proof. You had no previous winners, you were just trying to take my money.

Justin: Yeah. It’s cool. And he got the key’s to his car. It’s a weird fun, but it’s a weird experience, for me and for the winner a lot of times. You’re like, “This still doesn’t feel real.”

Felix: For sure. So Justin, thank you so much again for your time.