Episode #7 - Concept to Market in One Year with Allen Walton of SpyGuy.com [Part 1]

Episode #7 – Concept to Market in One Year with Allen Walton of SpyGuy.com [Part 1]

In this episode I’m speaking with hardware entrepreneur Allen Walton of SpyGuy.com. Allen successfully brought his new hardware product called the Scout to market in only about one year.

Allen has taken a rather unique path to market with his new product that has given him a big advantage. We’ll get into all of the details in my interview where we discuss all things from product validation, to development, to manufacturing, and to marketing and sales.

This is a value loaded interview. In fact, Allen had so much great information to share that our conversation lasted for nearly two hours. So my interview with Allen will actually be split into two episodes with part two releasing next week.

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Allen Walton, Founder of SpyGuy.com

Links mentioned in the show:
SpyGuy.com
AllenWalton.com
Follow Allen on Twitter
Knectiv.com
Common Thread Collective
TheHardwareAcademy.com

Podcast Transcript:

John Teel: Welcome to the Predictable Designs Podcast where we discuss all things related to developing, manufacturing, marketing, and selling successful new electronic hardware products.

I’m your host John Teel. This is episode #7. Today I’m speaking with hardware entrepreneur Allen Walton of SpyGuy.com. Allen successfully brought his new hardware product called the Scout to market in only about one year.

This is a value loaded interview. In fact, Allen had so much great information to share that our conversation lastest for nearly two hours. So my interview with Allen will actually be split into two episodes with part two releasing next week.

Before we get to my conversation with Allen, I would really appreciate it if you would take just a few moments to give me a positive rating or review on Apple Podcasts or wherever you prefer to listen to podcasts. I can’t stress how important this is to me and it really helps me to get the word out. So thank you!

Okay, let’s get started now with my conversation with Allen Walton. Welcome to the show Allen, it’s great to have you here.

Allen: Yes, definitely.

John: Let’s go ahead and start by just doing a quick introduction, telling us a little bit about your background and also about your company, SpyGuy.com.

Allen: Yes. My name’s Allen. I run a company called SpyGuy. It’s an online surveillance store or I guess you could say it’s an online spy shop. I’ve been in this industry since 2009, so it’s just over 10 years now that I’ve been doing surveillance equipment. The first several years, I was working for other people and then back in 2014, so almost six years ago, is when I decided that I wanted to go ahead and work for myself. I’d read The 4-Hour Workweek and I decided to use my skill-set to start my own online store. I guess I’ve been doing that ever since.

John: That’s awesome. I didn’t realize you had been doing it quite as long as you have and I didn’t realize it started with The 4-Hour Workweek by Tim Ferriss. I know you were on his podcast, so that must have been especially a big deal for you since that’s what started the whole process for you.

Allen: Yes. That was just over a year ago. He had me on as a 4-Hour Workweek case study. That was really amazing. It was really, really cool to meet with him, chat about how much his work has influenced me and just– I don’t know where I’d be– I’d probably be face-down in a ditch somewhere if I didn’t stumble across his work-

John: Wow.

Allen: -about 10 years ago. [laughs]

John: That’s quite a testament for him.

Allen: Exaggerating a little bit maybe. A little bit of an exaggeration, probably. Seriously, his work was very meaningful to me and a lot of other people too. There are a lot of people I’ve met over the years, all of them pretty much online, where they read this book and it inspired them to start a business. Really grateful for that.

John: I’ve heard that from countless entrepreneurs I think, so obviously he’s got a huge reach. I was going to ask you this later, but since we’re talking about it, did that open up any doors for you, from having that? Obviously, he has such a large audience.

Allen: Yes. He has a a really popular podcast, I’ll say that. I did get a lot of

John: I think he has a few more listeners than I do, but just a small amount though.

Allen: Yes, something like 500 million listens or something like that.

John: Yes.

Allen: 500 million downloads. Yes, a lot of really cool people have introduced themselves to me, had some business opportunities come my way. Somebody heard me moaning about how difficult manufacturing electronics was and I ended up going into business with them, which I think we’re about to talk about. That’s how I was–

John: Was that how you met– Is that how you connected up with Nick at Connective, which we’ll talk about later?

Allen: Yes, him and a bunch of other people heard me complaining about electronics on the Tim Ferriss podcast, so I had quite a few sourcing agents and electronics people reach out offering to help. I ended up meeting with Nick over a coffee. He’s down in Austin, I’m in Dallas. We got to talking over email and then on the phone. Then we met in person, decided to team up on some things and it’s been going pretty well ever since.

John: Absolutely. I obviously knew you guys were working together. He was on a recent podcast with me. I just didn’t realize that you had met through Tim Ferriss’ podcast, so that’s really awesome. People may be a little confused because we’ve mentioned SpyGuy, which is obviously an e-commerce site, but I haven’t mentioned yet that you also developed and manufactured and are selling your own product called the Scout. Can you tell us a little bit about the Scout?

Allen: Yes. Scout is the first product that I’ve ever launched, created, whatever word you want to use. I’d always had fantasies of creating my own proprietary product because over the last 10 years or so, I’ve only been a retailer. I’ve only been reselling other people’s items. In my space, there’s a lot of– How can I say this? There’s not a whole lot of innovation in my space. It’s a lot of products that are imported. You don’t really actually even know who makes them. There’s a lot of trading companies involved.

There’s no brand name spy equipment. A lot of the products– There are a lot of customers of mine who wanted certain things and they’re just not being manufactured. We’re on the phone all day long and doing emails and chats with customers who want certain things, and those products just don’t exist. They could exist. I’ve just developed this sixth sense for knowing what products our customers will like, and I’ve wanted to manufacture those products because my current suppliers weren’t willing to do that.

Scout is our first attempt. Originally, I wanted to do a new type of hidden camera. Then I looked at it for a little while, but it would have cost too much. It would have been too complex what with the cloud and building mobile apps, getting all that stuff secured. It just seemed like a really big hassle. Frankly, it cost a lot of money that I didn’t have.

Then I was like, “Okay. What about this other product?” Then there was a second product I thought of and that was too difficult, and so I’m like, “Okay, seriously, what’s the easiest thing I could possibly do for my first product?” It ended up being Scout, which is a hidden camera detector for people who are staying in Airbnbs or they’re traveling and they feel like somebody might be watching them, like in Airbnbs or hotels or– There are cameras found all the time in public restrooms, Starbucks, locker rooms, dorm rooms, all sorts of crazy places.

John: Yes, it’s pretty scary.

Allen: It is, yes. I get Google alerts all day long about it, so I’m very aware of how big of a problem it is.

John: Wow. First of all, I just want to congratulate you on starting your product development and your product idea from interaction with the customer. The best-case way, I think, to develop a product is one that’s based on customer feedback or just input that you get from your existing customers instead of just coming up with an idea in your own head, pursuing that for years and then eventually presenting it to the public, which is the worst way to do it. I love the way that you’ve done it. I love that you’ve started with an e-commerce website.

I’d even written a blog, as you well know, about you and this strategy of starting with an e-commerce website. I’ve not really seen anyone plan that as a hardware startup, as a strategy to start with an e-commerce site reselling products similar to the product that you want to develop. That just gives you so much insight. As you’ve already mentioned, you got to start with customer feedback and you have all this data on what customers want and what they don’t want. Would you agree that this has been really critical for you? Obviously, where you’ve ever done a product development is by having all this data. Would you agree that’s been really beneficial for you, having that insight?

Allen: It has. I don’t know how applicable this is to your audience though. I get the feeling, and I could be totally mistaken here, that a lot of people that are interested in manufacturing hardware products, probably they’re not running e-commerce stores. I don’t know that they’d necessarily have the skill-set either to do an e-commerce store because you got to know a lot about digital marketing, paid ads, managing inventory, and all of this other stuff. Plus you have to know where to source the products from. It just seems tremendously hard, the way that I’ve done it. I think I kind of lucked into it quite a bit.

John: That being said, all of the skills you’re mentioning for an e-commerce are things that you need to run a hardware startup as well.

Allen: That’s true.

John: I just feel there’s a–

Allen: I’m just doing it in the back

John: Yes, you’re doing it in a different way that I’ve not really seen anyone do. It’s not necessarily a strategy for everyone, but I think it’s a great strategy because it’s to start an e-commerce website or a business or any business is really difficult. Most of them are quite as complex or as expensive as a hardware startup. By starting with an e-commerce, that just gets your feet wet in all of those things that you’ve mentioned, online marketing and paid ads and inventory management. Those are all skills that you’re going to need to have, regardless. Obviously, I’m not saying it’s the-

Allen: I think so.

John: -best strategy for everyone, but I think it’s worked well for you.

Allen: Yes, I definitely agree with you on that. There have to be other people that are doing this too. I can’t think of any off the top of my head, but if I do between now and when the website– when you publish this, then I’ll send them over to you and maybe you could put it in the show note

John: Yes, and I’m sure– I think

Allen: I see this all the time and–

John: I’m sorry. Go ahead.

Allen: I was just going to say, I see this all the time in industries that are not related to hardware. Plenty of other industries like just soft goods, so clothing and bags and what have you, accessories and that sort of thing. I have friends that have done this before, where they sell other people’s product but then they manufacture their own based on customer feedback.

As far as electronics go, I can’t say that I know anyone up hand, that has done this before, but I’m almost certain that somebody has. Let me poke around on the internet, and I’ll send you anything I can find.

John: I have no doubts there are probably other people. I’m sure there’s someone that’s done this from the start. From my experience, what I probably see happening more often is people– their vision was the e-commerce store and then after doing that for a few years, then they realized there’s a demand for certain product and they develop the product at that point. Not necessarily someone that’s starting with, “I have an idea for a product, I want to develop it, but before I do that, I need to start an e-commerce so I can get to know the market and know what people want better than just guessing.”

I know that you’ve claimed this, by no means, was your grand strategy from the beginning. It’s not like you envisioned the Scout 5 years ago or 10 years ago and “I’m going to start an e-commerce and learn everything and then eventually get to the hardware.” I suspect there’s probably quite a few that have done the way you’ve done it. I’ve just never heard anyone doing this from the start as their strategy to develop their own product.

Allen: Got you, yes.

John: That’s what I feel is different. I think it has quite a few advantages. First of all, I don’t know e-commerce, but I know online business and I know they’re all difficult. I think you can probably get to generating some revenue and some profit with an e-commerce site quicker than you can developing your own product.

Allen: Yes, definitely.

John: It can be a good intermediate step if you’re wanting to not only get this data but if you have a job that you hate and you’re looking for a source of income to replace that, so you can focus on your product. I think that’s some of the benefits I see with it.

Allen: Yes. The data that we get from customers on what they want, that’s super helpful. The cash flow that we get from running the business, we can take some of that money, set it aside and use that for investing in our own manufacturing. Once that product launches, we can hit our existing customer base with it. It’s really nice.

John: Absolutely. That was the next point I was going to mention that not only do you have all this data, but you have an audience to sell the product to when it comes out, which is I think one of the best things that you can do. The whole, obviously, as you know, build it and they will come is a myth. It’s not going to happen. You have to get out and sell the product. I see so many entrepreneurs, they wait until they have the product ready to sell before they start trying to sell it. They underestimate how much work it is to build up an audience and to actually sell and market a product. By doing your e-commerce, you obviously get a head start on that.

Allen: I completely agree.

John: Switching gears a little bit away from the e-commerce, I know that you’re not an engineer, that you don’t have an engineering or product development background, but obviously you’ve now developed, manufactured, and sold hardware products. I’m curious, has that been a major roadblock for you, not being an engineer? Do you see or do you think it’s been beneficial, because engineers can get a little bit overly focused on development and not think about sales and marketing? Obviously, running an e-commerce successfully for so many years, you’ve developed a lot of skills with sales and marketing. How have those caused challenges for you?

Allen: There are definitely pros and cons to it. Let me hit on both of those. I’ll start with the cons first because those are the first things that come to mind when I think about me trying to develop hardware as somebody that doesn’t know anything about how electronics work. I don’t know how to program or anything like that. I know that hardware is completely different from software. I have plenty of friends who are both good at sales and marketing and they’re good at programming. They’ve been able to do successful software startups. They don’t need to pay an outside developer because they can do it themselves. They are the true bootstrappers. They can do it all themselves.

I’m always really envious of people that can program and build their own software because there’s certain software that I would love to build and I just don’t know how and I don’t have the time. I think I’m a little late on the coding game. I respect that a lot. Also because, man, software people have it really easy, is something else that I’ve learned. Hardware is just really hard. Hardware is hard, I think that’s a great saying.

John: There’s a reason for that expression. It is so true.

Allen: Yes. To get back to hardware, I don’t know anything about how electronics work. Apparently, you have the actual hardware that’s involved and we have this bill of materials. It’s always different components. I don’t know what any of these components do, really. I know an LED flashes light or whatever, but I don’t know how to get it to flash light. [laughs] I guess there’s firmware that’s installed on it and then a lot of other devices. If you’re making something that can connect to the internet, then that adds a layer of complexity, something that you can control from your phone. You run into all these different things.

I don’t know how any of this stuff is connected or how to even get started. Just getting started was tremendously difficult. Your blog, I stumbled across it one day. I was just like, “Oh, my gosh, I wish I’d found this like a year ago,” because there were a lot of articles that you’d written that were very broad and accessible enough for somebody like me who wanted to make a hardware product but doesn’t know how that stuff works. Your stuff really helped me get the grand scheme of things. Maybe I couldn’t do the nitty-gritty stuff, but I could at least know what direction I needed to take things in, based on the content that you’ve written. Thanks for that.

John: Thank you for saying that. I appreciate that. I’ve tried to always mix it up with both technical content because I have people in my audience that fit into your category, that are nontechnical and then there’s also technical. I try to do a mix of entrepreneurial versus more technical/engineering-type articles as well. Thanks for that. I appreciate it.

Allen: Of course. Then some other cons, so higher development costs. I’d have to find other people to actually make this thing happen. Plus they become like– A lot of the people that I found initially were busy. They had more work than they could handle. I just wasn’t a priority. I didn’t know anything about industrial design either and plastics engineering and all this other stuff. I felt like I had to learn a tremendous amount of stuff.

I went down many, many different paths trying to just get this product started. I wasted a lot of time as a result. I spent more time on it. I spent more money on it. I didn’t understand how this stuff works. I wasn’t even sure if I was getting screwed by the people that I was paying to help me with this sort of thing. I hit a lot of dead ends too. That wasn’t cool.

As far as pros go, one thing I’ve noticed about people who are engineering-minded, either hardware or– especially programmers, is they spend a lot of time perfecting things and just into the really into the– Let’s say they spend a lot of time doing things that either don’t really need to be done, like they’re just perfectionists, or they’re really neglecting the other things that are important to the success of the product or the business overall.

I have a lot of programmer friends, software startups and whatnot, and they spend a lot of time just working on the product itself and just taking forever and just spending time that would be better used– Maybe they should just outsource that stuff and work on the sales and marketing and the branding for the company because they are the company CEO, but they’re also like the CTO, and they spend all of the time just working on the actual product instead of making sure that they have sales and that they’re getting inbound traffic, and all of this other stuff. All these other duties, they tend to neglect them.

For me, not being technically minded, I’m able to see the big picture and work on these other things that I’m really good at, that I can’t hire for. It’s really hard to find somebody who’s good at SEO and actually knows what they’re talking about and know somebody who can manage paid ad campaigns and actually provide a real return on investment. I guess those are the pros and cons, is that it was really slow to get started, but now that things are humming, because I have a developer that I work with and I can count on, now I can focus on all the other stuff to make sure that the product that they come up with, I can do my best to get that out into the world and actually make money.

John: Those are some great points. That’s such a common dynamic that you’ve mentioned, especially with engineers or technical people, is they just focus entirely on the product development, because for most people that are the engineering type, that’s the fun stuff. The idea of sales and marketing is terrifying. Instead of facing that upfront, they typically will just ignore it and think that “I’ll worry about that later. That’s something I can deal with down the road or perhaps I can outsource marketing, hire public relations firm, et cetera, et cetera.” That almost never works out.

Allen: It doesn’t. You have to be the person that does this.

John: Absolutely.

Allen: Unless you have somebody that really knows their stuff and is sociable and likes building relationships and doing sales and marketing, unless you have somebody that you 100% trust, then you have to do it. Admittedly, that’s kind of me. I might not be technical at all, but I am incredibly introverted. Before I started my company, I was the guy– If anyone knows about traction or whatever. In businesses, there’s usually a visionary. They dream up the things and then you have the integrator, they’re the ones that are actually in the weeds, figuring everything out, fixing bugs, solving problems to grow the company on behalf of the visionary.

That used to be me, I used to be the integrator. I don’t want to talk to people. I don’t want to have to socialize and build relationships and do PR and figure out sales and marketing. I just was not interested in that. I just wanted to build the infrastructure or whatever of a company, but I had the morph and I had to figure that out. Now, I’m actually better at that than actually doing like infrastructure-related stuff in the company.

John: I can relate to that so well and I think probably a lot of people in my audience can relate to that. I suspect the introverts outnumber the extroverts by quite a bit.

Allen: I’m sure, yes.

John: I’m the same way. I’m extremely introverted. I lived in a small town in Alaska. Then from there, we moved to a really small town on a small island in Hawaii. I’m very much introverted as well, but my own product, I was forced to come out of that shell and it was very uncomfortable presenting my product to big buyers. I went to, I’ve mentioned this before, but I presented my product– The first big company I presented it to was Blockbuster Video.

Allen: I remember reading that.

John: Yes, at their headquarters in Dallas. I don’t remember what floor they were on, but they were near the top of a really tall skyscraper. It was all really intimidating and terrifying for me, but I did it and I was able to push through it and make it work. I think that’s what it requires. I feel that you’ve mentioned a lot of good points. I know it’s really overwhelming for a lot of people the idea of– the cost of outsourcing the product development is financially pretty scary. From my experience, that’s a lot easier to outsource than the sales and marketing or the market validation-

Allen: I completely agree.

John: -or the market research. I’ll have people ask me, “You know what, can I hire a public relations firm or hire someone to speak to customers?” I’m like, “No, you have to do that. You need to be the one on the ground getting feedback from customers,” because ultimately the one thing you can’t outsource is you can’t outsource the visionary part. To have the correct vision, you need to interact with your customers. Otherwise, you’re just building your own vision and not a vision that they share.

I think you’ve raised some really good points there, the pros and cons. Obviously, it’d be great if we had all those skills, but no one’s going to be really great at all of them. I excelled more at the engineering, but I was forced to do the sales and marketing up to a point. I don’t think you have to be the one to do the sales and marketing forever, but you’ve got to be the one to get all–

Allen: You got to be good enough to get it off the ground. You’ve got to be good enough to find somebody else

John: Get it off the ground, get all the big things figured out, the messaging and all of that. Once you have a system in place, then you can outsource it and go from there, which is what I did with the sales team. I had a team of independent sales reps that just worked on a commission basis, but I didn’t start that way. I was the one that was doing the selling initially and I continued it even after having a sales team because otherwise you’re just closing yourself off from the customer, aren’t you? You’re going to lose touch with what people want if you do.

Allen: Right. You have to have like a baseline level of– You have to really get a baseline understanding of how these things work, so like SEO, paid ads, how to calculate just finances in general. If you don’t have that baseline, then how are you going to find somebody who actually knows what they’re talking about? That’s how I’ve been able to find good marketing agencies and just other people to take over jobs that I was previously doing.

I just get books. I listen to podcasts. I watch YouTube videos and sometimes every now and then there’s a conference talk that’s actually good. Once you have a good understanding of how it works, then you’ll be able to vet people accurately, to know if they can actually do a good job and do a better job than you were doing. If you don’t have that understanding, then you’re in for a really bad time.

John: Absolutely. I commonly say you don’t need to know how to do everything yourself, but you need to know enough to be able to at least manage other people doing that task or to judge the quality of that work. If you don’t, then hire a third party that can help you in that regard. I commonly recommend to have a design review. No matter who designs your product, have another company review their work, if you don’t have the skills to judge the quality.

I’ve just seen too many cases where entrepreneurs will hire someone to develop their product and the person that developed it didn’t really know what they were doing. They were figuring things out as they went along and they get garbage for it. If you don’t have the skills to judge that, you’re going to lose a lot of money and a lot of time. Either learn that is or find other people that do have the skills, like I said, at least to be able to judge the work and manage the work of other people.

Allen: Yes.

John: I’ll switch gears a little bit. I’m curious what type of– We’ve touched on this a little bit already, but what kind of market validation did you do for the scout? Were you selling any other solutions through SpyGuy for finding hidden cameras or did you pull your audience or do field testing or what type of market validation did you do for the product?

Allen: I’ve been selling bug detectors, camera detectors since 2009. I had a good understanding of what the customer’s problems were, why they wanted something like this, all of the different models that were available over the years, what’s currently available, how much those are selling for, what are the costs on them, relationships with suppliers who were making these things, like bug detectors. I knew that I wanted to make my own product. I knew what the margins were going to be if I were able to successfully make this product.

I knew I could sell a lot of them just to my existing customer base, like previous customers, people who are on our mailing list, people who would find us after the product was done and I could sell it to them. I also thought there was a little bit of a viral component to it as well, just because it’s like a novel thing. This little device, when you check in your Airbnb, you make sure nobody’s filming you.

John: Yes, because it’s a solution to a creepy problem. I definitely see the viral aspect of it as well.

Allen: There’s stories in the news all day long about this sort of thing and whenever there are, we sell more than on a day where there’s nothing mentioned in the news about a hidden camera being found. Plus I thought that we had– Once we actually started developing it and we started seeing what this product was going to look like, that was one thing I thought we had an advantage on. Our industrial designer has really great taste, whereas most of the people manufacturing bug detectors, it just looks like a black rectangular box. It doesn’t look impressive at all.

We came up with this unique design and it was priced a lot lower than the other bug detectors that were being offered online. I thought we had some advantages in the design, in the price, in the way that it functioned, in the fact that we had a really great brand name. I’m biased, but I think SpyGuy is a great brand name. Most people couldn’t even tell you the brand– It’s like who makes a hidden camera? You probably can’t tell me, right?

John: No, of course.

Allen: Where would you get one? The internet or whatever, Amazon. There’s no brand names. This product was my attempt at making a DTC, a direct-to-consumer product. It’s a great brand name, great design.

John: It rhymes. It makes it really catchy to say, SpyGuy’s.

Allen: There is a really great book that that your listeners should read. It’s called Hello, My Name is Awesome. It’s all about coming up with a great name for your company.

John: Oh, okay. Had you read that book before SpyGuy?

Allen: I did– No, I actually read it after I’d started SpyGuy, like a couple years after. We used to be SpyGuy Security and then I was able to get the spyguy.com domain name. After I purchased the spyguy.com domain, I guess I found out about this book and I read it, and she’s got a SCRATCH or SMILE, those are acronyms. Basically, if I remember correctly, SCRATCH stands for– She lists out six different or seven– I don’t know how many letters are in the word SCRATCH.

John: I know what you mean.

Allen: She lists out a bunch of reasons why you should not name a product something. Then she also lists out several different reasons why you should name a product something. Alliteration was one of them, rhyming was one of them, if you know exactly what the product or service is based on just the name. If you could just say the name, then you know exactly what they’re selling or roughly what they’re selling and who their audience is. I went through the thing and I’m like, “SpyGuy makes sense.” I checked off all of the things. I got lucky.

John: That’s cool. It’s like if you get a really clever name for your product, that can be a really good, more affordable way to get some IP protection. It’s much cheaper to get a trademark than it is to patent. If you really get some brand recognition and you have a name that’s really catchy, couple hundred dollars you can get a trademark on that. That’s going to give you some level of protection different than a patent, but it’s also a lot cheaper than a patent.

Allen: Yes, and make sure you trademark outside the United States too if you have any desire to sell outside of the US. I think it’s called the Madrid system or Madrid Protocol. You can file with them and you can do your trademark in a ton of different countries.

John: Yes, I’ve looked into that. It’s been a long time ago. I’ve also looked into that for patents. I know international patents get to be ridiculously expensive.

John: Yes, I’m not even looking. I saw-

John: Probably $100,000.

Allen: -the cost and I’m like, “No, forget this.” I just did the trademark and then we did the design on the Scout camera finder as well. For the trademark, the only country that we– This is funny, a quick tangent, but the only trademark we weren’t able to get approved or SpyGuy trademarked at was China because they thought it would be detrimental to the Chinese society.

John: Oh, yes. They don’t like– that’s not really a good spying.

Allen: They thought it would be detrimental to the country to give us a trademark for SpyGuy,-

John: That’s interesting.

John: I meant to comment on this earlier, but one thing I really like about the Scout is the simplicity of it. Finding a hidden camera sounds like it would require a really complex solution, but I love– I think it’s just brilliant, the solution and the simplicity that you come up with for finding hidden cameras. Can you maybe just quickly explain the principles behind the Scout and how it works?

Allen: Basically, it’s this device and there’s a hole in the middle of it. I still need to come up with a better name than, “hole in the middle of it.” You could call it like a funnel or an aperture or something like that.

John: Viewing window or something like that.

Allen: Viewing window, view port. Basically, you hold it up to your eye, so your eye is looking right through it. Press it up against your eye, don’t hold it like two feet away, like I see a lot of customers do. Hold it right up to your eye, look through it. It’s got these flashing red LEDs, I guess they’re like amber. They have these flashing LEDs and they shoot directly in front of you. If there is a camera lens that has an infrared filter in front of it, which is most cameras, nearly all of them I would say, then the light bounces off of the infrared filter back at you, so it looks like somebody’s flashing a laser pointer on your eye.

John: That’s just really cool. Obviously, if the camera has an IR filter, it doesn’t want IR light to go through the lens to the camera, so it just ends up reflecting it and that’s what you’re using to detect them. That’s–

Allen: I wonder who figured that out.

John: Have you seen other products that do this or–?

Allen: Yes. Since I started in the industry, there were products that had done this. Many of them. no idea.

John: I figured . Not that I didn’t think you were bright enough to come up with this, but I was-

Allen: I’m not.

John: -like “Wow, that’s a really novel solution to a really complex problem.” I wasn’t sure if– I assumed you’d seen other products that worked on a similar type of

Allen: I had. A lot of generic Chinese hidden camera detectors out there use it. It’s so simple really, but it does work. It truly works. It was a great launching-off point for manufacturing products because it didn’t work with signals in any way, it didn’t have to connect to the internet, it didn’t need an app. It was really nice to get everything I needed in this one handheld product that wasn’t too expensive. I was able to sell it at a lower price than a lot of my competitors are able to for similar products. That’s how it works. It’s a little hard to explain. Hopefully, it made sense. If it didn’t, we have a video.

John: That definitely makes sense. I feel like it’s a pretty simple thing to understand. Once you’ve been explained how it works, I feel like it’s fairly simple.

Allen: You’re technical though, so you understand a little bit easier than the average person. A lot of times people ask me about it like, “How does it work?” I explain it as simple as I can, as I did to you just now and their eyes just glaze over. Then I show them a video and then the video kind of helps, but the thing is it doesn’t really catch well on camera. You can’t really tell. If you use it in person, then home run. If we can just get a customer to use it and– We actually included a pinhole lens in the box because we want customers to try this on an actual pinhole camera so that they can see that it actually works. Because once you’ve used it, then you’re completely sold.

John: I remember that in your video. I had watched your video and I recall that the reflection didn’t really show up very well on the camera.

Allen: It doesn’t.

John: I remember you mentioning that you include a pinhole camera lens or whatever to use for testing so you can understand how it works. I think that’s really good. You mentioned something I just want to comment on, that this wasn’t the first product of its type that this solution had been out there, but they weren’t really good solutions and there was no one that was dominating.

So many entrepreneurs are scared away by if they see competition, but in so many instances competition is a good thing. Being the first to market sometimes isn’t the best, sometimes it’s better to be second to market. By being that there was already competition out there, they were proving that there was a market demand for this, so all you had to do was come in and do a better job and create a better product and offer better service, better branding and everything.

Allen: Yes, a lot of value add there.

John: If you’re listening to this, don’t be immediately scared of competition. So many entrepreneurs, as soon as they see another product, that they’ll run across, that is remotely similar to theirs, then they just immediately panic and think that they have to scrap everything and that they’re not the first to market. I just wanted to mention that.

Allen: I’d like to say that if possible– looking back on all of this, especially for people who are not technically minded, it’s a lot easier to find a product that’s already 70%, 80%, 90% of the way that you want it and then just dragging it across the finish line by making up for that missing 10% to 30% than doing things from the ground up. If I could go back, then I– and I’m still telling myself that now, as I look at other products to make, just find something that’s largely the way that you want it and then just tweak it and give it a spin or some sort of value add.

It might be a new enclosure or if there’s a factory that’s already an OEM, a place that’s already overseas, ask them if they can do a tweak. Usually, there’ll be a minimum order quantity, an MOQ, that’s flexible. You can ask them to make some tweaks for you so that it suddenly becomes better than the product that it originally was.

John: That’s a great point. I will commonly have people reach out to me about a product and that’s exactly what I will tell them. I’m like, “This product is so similar to what’s already out there that you can purchase.” I would not probably start from scratch developing this on your own. I would instead find a manufacturer that produces something really similar. Just like you’ve mentioned, most manufacturers I found are more than happy to tweak or customize one of their existing designs for you if you’re going to purchase enough of them.

Allen: Yes.

John: I’m curious what type of– other than just SpyGuy and your audience and your email list, what type of marketing activities, if anything, have you done especially for the Scout?

Allen: Scout was actually the first real form of Facebook and Instagram advertising that we’ve done.

John: Interesting.

Allen: We get a lot of traffic from Google, both with paid ads, we spend a lot on paid ads, and we also get traffic from SEO. Then also I’m somewhat decent at like getting in the media. When that happens, depending on the kind of media at least, we can expect a surge in traffic and sales. For the Scout, we figured that this would be the first product that we could actually make successful with Facebook ads, because we tried it in the past, but it’s really hard to find people who need spy gear. Traditionally, with Facebook ads, you’re targeting based on interests and demographics, and so you can–

John: I’m sorry, go ahead.

Allen: Interests and demographics, which is great if you’re selling literally anything other than spy gear, because you know where people are hanging out, you know what Facebook pages and Facebook groups you want to advertise to just based on like, “Oh, I make like what’s something– what’s an interest.” I have a friend that makes physical products and supplements for children with autism. When he does Facebook advertising, he can find those communities of parents, all pages related to autism, or he can use his existing customer base, previous customers, that he’s acquired, and then import that client list into Facebook and build lookalike audiences.

He’s able to find his audience really amazing. With me though, there are all different types of reasons people want to buy equipment like, “I think my employees are stealing from me,” “I’m being harassed at work and I need proof,” “I think my kids are being abused,” I think my grandma is being abused in the Alzheimer’s home,” or “somebody’s spray painting my Trump sign or Clinton sign,” I don’t know. There’s all sorts of reasons why people need spy gear.

If there’s some sort of emotional or financial distress, they want to find out what’s going on. It’s really hard to find people on Facebook who are encountering those problems because we’ve looked at our demographics all over the board, we’ve looked at income levels all over the board, we’ve looked at male-female, it’s like a split. It’s really hard to find people who need a hidden camera or a bug detector.

John: Absolutely.

Allen: We just never had any success trying to sell a GPS tracker or whatever on Facebook. We were pretty much just limited to remarketing, which is basically where somebody visits our website and then we can show them ads on Facebook or Google or whatever. With Scout, we’re like, “Okay, we think that we have a better shot with this product because this product is meant for people who are staying in Airbnbs and people who travel, people who might be a little paranoid.

Believe it or not, we get quite a few people who are paranoid calling our company. We thought that it might be easier to target these people. We thought women would be more interested in Scout. This was the first product that we’ve been rolling out on– like actually spending meaningful money on Facebook ads. We’re still trying to figure it out. We haven’t cracked the code yet. I think we’re just in an inherently difficult space.

John: Facebook ads are definitely challenging. I’ve experienced a lot of the same challenges myself. I’ve experimented with them in the past for predictable designs, but similar to what you’re describing, people that want my services range all over the place from– although it is very male-dominated, I will say that. There’s plenty of women in my audience, but it’s definitely male-dominated. That’s one of the only things that I’ve been able to find. There’s not a demographic of people that have an idea for a product, so it became really difficult to try to find them.

Then you end up doing it so broad and, obviously, if you do something too broad with Facebook, then you’re going to pay really highly for any clicks or traffic or conversions that you get. From my experience as well, remarketing is really the only thing that I found that has been beneficial. It sounds like from your initial work with Facebook ads with the Scout or are you still feeling that this is going to be an exception compared to your other products as far as Facebook ads and you’re just a matter of fine-tuning your message, which takes a while with Facebook? It can be expensive to get everything right.

Allen: Yes, it can be. Also, if your product is more of a lifestyle thing or like a hobby thing, you’re going to have way more success because people are willing to spend money on their hobbies and, generally, they’re also a lot easier to target. With this product, it’s just not the case. You have to really, really almost believe that you need this product in order to buy it, so you’re either really super interested in it or you have zero interest in it.

I still think that we can figure out how to make this product successful on Facebook. Currently, it’s really not, but we have been doing a lot of testing. We see some promising– We see some good signs, it’s just not there yet. I also think that maybe we overpriced it, to be frank. It’s been out for a couple of months now and I think that maybe we overpriced it. Pricing is really, really difficult, I should say.

John: It is, it always is for everything. Software, hardware, anything, it’s always difficult to come up with a price.

Allen: Right now, we’re AB testing pricing on Facebook. We’re taking several different prices, sending them to similar pages and finding out which one converts the best.

John: Are you trying to hone in because there’s so many use cases, like you mentioned someone, that company worried about theft versus someone going to a hotel and worrying about hidden cameras. Are you focusing specifically on any of those niches for your Facebook advertising or you just playing around and see?

Allen: Originally, we were targeting people who travel. That’s a thing that you can do in Facebook. It’s how we target international travelers.

John: Okay, that’s what was my thought there.

Allen: I want to target international travelers. I want to target people who stay in Airbnbs, who check into airports, who follow Airbnb’s Facebook page. We tried that. It didn’t really super work. We have learned some other things though. Now we know the actual demographic that is buying this product, which wasn’t a demographic that we originally thought at all. We also know roughly how much it’s costing to convert somebody. Since we’re AB testing the price, we can find out like, “Hey, we have it at price A and price B, and price B is lower, but we’re able to sell more of them. As a result, so maybe we’re selling two units instead of one, but we’re actually making more profit at the lower price point.”

That’s the stuff that we’re currently learning and we have opened up the targeting as well too. I’m still uncertain on this. I think part of me is a conspiracy theorist because of the industry I’m in now and I see how awful people can be. The thing Facebook marketers, media buyers– I love how they call themselves media buyers now. It just used to be like, “I’m a Facebook ads guy,” but now they call themselves media buyers.

John: Sounds more sophisticated.

Allen: It does. They say, “Oh, just let Facebook figure it out. Just throw it up on there, create an ad on the landing page or say “Facebook, figure it out”. That sounds great in theory. In practice, it actually can work too, but I would imagine that you’re spending a lot more money as a result of Facebook, like giving them free rein to figure things out.

John: Yes, that sounds pretty dangerous.

Allen: Yes.

John: It definitely can be expensive to figure out what works with Facebook.

Allen: Right. Plus everybody knows if you trust Google with that and to spend all of your money, your entire budget even if it doesn’t convert in sales. Anyone with the slightest bit of Google ads knowledge knows that, but with Facebook it’s just like, “Oh, let’s let them do it”.

Apparently, they get the benefit of the doubt. However, I do have people that have done that and it seems to have worked. I can think of one presentation in particular. If people want to learn more about Facebook ads that– Can I give a recommendation on somebody to follow on here?

John: Oh, of course. Absolutely.

Allen: There’s a company called a Common Thread company. They’re an agency, but they also offer this product called The Admission. It’s like a recurrent monthly charge or whatever, but you get access to a ton of video training on Facebook ads, like a slack group and they have office hours where you can ask their agency questions about like, “Where is my Facebook stuff not working?”

I remember there was a girl there who gave a presentation and talked about how they were launching this product. They were being really specific with who they were targeting.

This is a product meant for women. Specifically, they thought that their client was women, ages so and so, with interests in this, this, this. I can’t remember what the product was off the top of my head. Basically, they were looking at a pretty, not narrow, but they thought they knew who their customer was.

Then they AB tested that with telling Facebook, “Just target women. Figure it out.” It turned out that the more specific targeting did not perform as well as just telling Facebook, “Just go after women.” Literally, just targeting women resulted in more sales, more clicks, lower acquisition cost than targeting the group of customers that they thought that they wanted, that subset of women demographic that they wanted.

John: I feel like you’ve hit on a big topic there as far as the assumptions that you have, whether that be your demographic or what your customer wants or who’s going to buy the product. That those assumptions may or may not be right and odds are they’re not going to be exactly right and the only way to know is to test. That’s exactly what

Allen: I would love to give an example on an assumption that I made with Scout that I ended up being wrong.

John: Absolutely, yes, please share that.

Allen: The deal with Scout is that it– Most bug detectors they come with the ability to detect a signal. Usually, it’s like 1 megahertz to 6 gigahertz, because that’s frequently what’s used in a wireless bug or whatever. It also adds a layer of complexity to the product. There’s an actual antenna on there and then there are a lot of bug detectors out there that just go wild even if there’s no signal around. They just stink.

Also, I was thinking specifically about what I wanted this product to do. I wanted it to find hidden cameras. Most of the hidden cameras that are sold online, they don’t transmit a signal. They don’t have WiFi, they’re recorded onto an SD card, so they’re not transmitting a signal.

Therefore, there is a lens, but it’s not transmitting a signal, so why not just do a lens detector? Which is what Scout is. Why not do that and just forget the antenna on it, so it can’t detect a signal.

I’m like, “That’s cool. We can sell that at a lower price. It will be a lower cost for us. Sounds good.” I ended up being wrong because our customer, they don’t really care. [laughs] What I mean by that is they’re not into the technical specifications.

These are just regular people and they don’t want to be spied on. When they hear the phrase bug detector, they expect it to have an RF detector built in or they imagine that the camera is transmitting a signal over WiFi even if it’s not necessarily doing that. It’s just a misconception.

They believe that this thing is hooked up to WiFi and somebody is viewing them in real-time or maybe if it’s like a wireless bug– like an audio bug, then it’s transmitting it across the street to a van that says florist on the outside but really the FBI is hanging out inside listening to my conversation.

That’s what they think about. I feel like we made a mistake. I don’t feel like we made a mistake, I’m pretty sure we did make a mistake by not including that signal detector because now we’re selling a product that doesn’t have a signal detector versus a ton of other products that do, even though they’re more money. I think that we’d sell more of them if we had included that signal detector.

John: I’m curious, is Scout– do you advertise it as a bug detector or a hidden camera detector?

Allen: We call it hidden camera detector. I wouldn’t have felt right doing a bug detector because usually when I think of a bug detector, I think of like an audio bug. This thing doesn’t have anything related to audio.

John: I guess I’m a little confused why people would think that something that’s a hidden camera detector, why they would just assume that it’s going to be a signal detector?

Allen: Well, somebody might find this useful, but there are a lot of phrases people use that– like in my industry means something completely different, but to my customer means something different. The easiest one that comes to my mind is wireless camera. What do you think of when you think of wireless camera?

John: I think it probably is something that’s a WiFi camera that’s transmitting a video through WiFi.

Allen: Exactly. Most of my customers, when they think of a wireless camera, they think of a camera that literally has no wires sticking out to plug into power. They don’t want any wires sticking.

They want a wireless hidden camera. It doesn’t necessarily mean that they want to hook up to WiFi because a lot of times there’s no WiFi around to hook it up to. They just wanted a hidden camera that doesn’t have a wire coming out of it, but it records onto itself.

That’s a problem that we have, is that people say, “I want a wireless camera.” We’re like, “Okay, well, we have these wireless cameras that can connect to the WiFi and you can view them over your phone.” They’re like, “No, this is in a remote location. There’s no WiFi. I just want a wireless camera that doesn’t have any wires sticking out of it.” It’s like wireless camera has two meanings.

John: Yes, that’s why I think that’s a great example why you have to communicate and know your customer because they have their own language that they use and you have to use that same language.

That’s something that I’ve even struggled with, for instance, the hardware product. A lot of people that aren’t really into electronics, they just think of it as a physical product, not a hardware product. Then or they’ll think hardware is like a product that you buy at a hardware store.

You have to be always be figuring out what are the words that your customers use because there can be a lot of confusion just like this case that you shared.

Obviously, you have the data and you have the visibility to know, but I would be a little hesitant to judge yourself and say that you made a mistake. It may have improved your sales to some extent, but that would’ve been such a more complicated product to develop.

Allen: It would have been.

John: I think in so many ways you made the right choice to develop the simplest solution to the problem. If you want to call that a minimal viable product or whatever, but it’s just such a common thing that people want.

They want every conceivable feature and then that may be fine, but now the product is too expensive, no one wants it or takes you five years to develop it and then no one wants it because no one cares five years later. There’s always pros and cons to either strategy.

Allen: I agree. There were other times where we were already halfway through development or something like that and I would think about new features that I want to add to it, like “Maybe we should include the RF detector” or “Maybe we should have decided against triple-A batteries and gone with the rechargeable” or “Maybe we should have done this, that.” Like I learned on your website and then I think there were two hardware books that I read, you really need to figure everything out upfront as best as you possibly can. When you think you’ve figured it out upfront, you need to think about it even more-

John: Absolutely.

Allen: -to make sure because every feature that you need to go back and add or every problem that I have to go back and fix, like adds time and adds money.

John: Yes, that’s commonly called feature creep-

Allen: Feature creep, yes.

John: -where you just keep creeping more features in and in and that’s I think–

Allen: It happens with software too.

John: Yes, it does.

Allen: I think for software people it’s significantly easier.

John: Yes, those features don’t take you so much time and money and aren’t as challenging for software as they are for hardware, so it’s even more important to really fine-tune the critical features that you have and not try to be everything to everyone, especially at least with your first product.

To be successful, you’re going to eventually have to do more than one product, so try to maybe include some of those features in future products and not try to make your first product all-inclusive of everything. As you’ve learned, developing a hardware product is hard and then that gets exponentially harder as the product gets more complex.

John: Something like a smartphone, we’ll have people want to develop a new smartphone or a new tablet. I’m like, “That’s way too much for an entrepreneur.”

If you want to, like you mentioned earlier, find a manufacturer that sells this already and have them modify the design, but you do not want to develop a smartphone or a tablet from the ground up on your own. You got to leave that for the big players that have millions of dollars to spend.

John: Okay, I’m going to stop there for today. I hope you’ve found this podcast to be helpful. This was only part 1 of my interview with Allen Walton, and part 2 will be released next week in episode 8.

Again, I just want say how much I would really appreciate it if you would take just a few moments to give this podcast a positive rating wherever you prefer to listen to podcasts.

Okay, that’s it for today. Be sure to tune in next week for another episode of the Predictable Designs Podcast.