“I wanted a trampoline for my daughter. My wife said they were too dangerous. So I invented my own.” Dr. Keith Alexander, founder of Springfree, dedicated himself to creating the safest trampoline and elevating trampoline safety worldwide.
David Young:
Welcome to the Empire Builders podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector and storyteller. I’m Steven’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is… Well, it’s us. But we’re highlighting ads we’ve written and produced for our clients, so here’s one of those.
[Ozarks Remodeling Ad]
David Young:
Stephen, I’ve always felt like I was a bad dad, because I’m the guy that never got his kids a trampoline. We just didn’t have one.
You might feel better after this.
David Young:
Well, maybe. My mom was a PE major in college back in the odd some things. I don’t know.
Stephen Semple:
You don’t want to take yourself.
David Young:
She always warned us about how dangerous trampolines were, right? And then we had all these round ones and now there’s a really cool story from a company called Springfree.
Stephen Semple:
Yeah. Springfree Trampolines. And the goal of Springfree Trampolines was to build the world’s safest backyard trampoline. And they started back in 2004. And to give you an idea of their success, today… Now, they’re a private company, so it’s hard to find really good data, but the best I can tell is they sell around 30,000 trampolines a year and the price point of their trampolines run anywhere from $1,000 to $2,500 a trampoline.
Stephen Semple:
They’re doing really, really well. They have three stores in Canada, five stores in the United States, and plus they deal through a number of dealers. And the thing I love is a Canadian company, but there’s a Kiwi connection here.
David Young:
Oh, okay.
Stephen Semple:
The inventor of Springfree Trampoline is a Kiwi from New Zealand, Keith Alexander and Keith’s dad was an engineer. And growing up, Keith joined the New Zealand version of the Peace Corps. And he also taught for a while. And then he went back to school for engineering in Christchurch. He went to Canterbury University and he found he loved it.
Stephen Semple:
He did a masters and then he did a PhD. And he was one of those guys who was always in the shed in the backyard or the garage, tinkering away at things. And when he graduated, he joined an engineering consulting firm and he hated it, because what he found was he was working on the things that other people wanted him to work on.
Stephen Semple:
And it was about billable and all this other stuff and he would come home at night and he was constantly finding problems and trying to solve it. And when he was a kid, he loved trampolines. He just loved the freedom of bouncing on a trampoline. And [crosstalk 00:03:22] one at school and he remembers you get to do those two or three jumps and then he’d have to get off and he wanted to have one.
Stephen Semple:
And he started noticing them being sold in shops. They had for their children, and he said, “You know what? I’m going to go out and get a trampoline.” And his wife, Katie said, “You’re not getting a trampoline. They’re simply not safe. She titled in her inner Dave and said, no.
David Young:
She must have known my mom.
Stephen Semple:
That’s it. That’s it. But Keith said, “I’m not going to be deterred. I’m an engineer. I’m going to research this. I’m going to prove her wrong.” [crosstalk 00:03:58]
David Young:
I can keep my kids safe on a trampoline, sure.
Stephen Semple:
So he looked at the research and guess what he figured out? They’re not safe.
David Young:
They’re not, no.
Stephen Semple:
They really aren’t.
David Young:
[crosstalk 00:04:07]. Well, when I was a kid, they weren’t. I mean, you think about that you were… You only really ever got to jump on them in PE class, because then nobody in their right mind had one at home. Those big rectangular ones that folded up like a trap. And you had to have a whole bunch of other school children standing around it to hopefully push you back on if you miscalculated. Somebody always ended up falling through the springs though.
Stephen Semple:
Yeah. And keep in mind, this was also back in the era where we didn’t have seat belts in cars. So safe wasn’t actually a big, high concern.
David Young:
True. Oh, yeah. Break your neck, we’ll make another kid.
Stephen Semple:
But he’s an engineer who likes a tinker with things, right? PhD, masters, all that other stuff, who loves trampolines 101 for his kids just learned his wife Katie’s right. So his challenge accepted [crosstalk 00:04:58].
David Young:
Well, and to even be fair, this was in the era past the ones I’m talking about. This is when round trampolines with little fences around them actually did exist. They’re still dangerous though.
Stephen Semple:
Yeah. Because what he found was, there was these steel bars in the gaps in the Springs. That’s what needed to be eliminated. Now, at this point he had actually returned to university and was teaching as a professor and he decided to make this a project. He said, “This would be a great project to give to the students to solve.” So he worked with the students and they actually created a prototype. And we have a picture of the final design on the website.
Stephen Semple:
At the same time, the university had created this program for trying to take ideas that the university was creating and take them out to the marketplace to create income for the universities. Because we’ve seen lots of, especially in the technology space, universities do that. So the university looked at it and they said… He was all excited. He took it to the university and said, “Let’s take this to market.”
Stephen Semple:
The university looked at it and said, “Yeah, dude. This is not even close to ready, this prototype.” And they figured you’re going to need at least another $50,000 to create a proper prototype. So at that point, Keith thought… Well, the dream died. And then one day the university says, “Hey, we found a person in Canada who might be interested in investing.”
Stephen Semple:
So somehow the university came across Steve Holmes, a Canadian businessman. Steve had been involved in a number of small businesses and had sold a few businesses and had some capital and said, “Yeah. I might be interested in this.” And he basically came up with some money and they had the trampoline shipped. They shipped him a trampoline from New Zealand to Canada and he set it up in the backyard and the kids loved it.
Stephen Semple:
And every kid in the neighborhood loved it, right? So he said, “Hmm, there’s something here.” So in 2002, he secured the patent on it. So basically Steve negotiated with the university on patent rights to have the patent out for this trampoline. And he decided that he really wanted to promote this and test out the marketplace.
Stephen Semple:
So he went to the Supershow in Vegas in 2003, which is a big show where all the retailers come to. And he took a super prominent spot. He hired dancers. He brought his kids and neighborhood kids. And basically they set up the springfree trampoline because they wanted to test what’s the size of the marketplace. And he came to the conclusion that the market was a five to $600 million a year market. And initially his first design actually didn’t have an enclosure.
David Young:
Oh, really? Okay.
Stephen Semple:
Yeah. And what he learned at this was there needed to be an enclosure around it for a whole host of reasons. And in fact, he had several people came up to him and they were told it would need enclosure. And he realized there was no way retailers would carry it without one. But then he had another person come up to him and said, “Hey, hey, you need an enclosure. I have the patents on enclosure. So you’ll never be able to sell this.”
Stephen Semple:
Now, he also had a CEO from a large sporting good retailer come up to him and say, “This is amazing.” So from that they decided they needed to do some research. And the first thing that they decided was many retailers in America decide trampolines were so dangerous they would not carry it. So their goal was trying to figure out the big retailer who’s the most resistant to it and could they get them to carry it.
David Young:
There you go. Right for the big guy.
Stephen Semple:
Right for the big guy. And they decided that was Costco.
David Young:
Okay. Yeah. Pretty conservative.
Stephen Semple:
Yeah. And at the time the President of Costco was Jim Sinegal and he said he would never sell a trampoline, right? So now their challenge was they needed to create an enclosure that didn’t infringe on the existing patents. And they wanted to show this again in 2004. So they had this deadline of making all this happen. So now they go back to the shame show in 2004 and they become a Product of The Year finalist.
David Young:
[crosstalk 00:09:10].
Stephen Semple:
So they become really center stage, all this extra publicity and guess what happens?
David Young:
Was Sinegal there?
Stephen Semple:
Sinegal was not there-
David Young:
Oh, okay.
Stephen Semple:
… but Costco Canada was.
David Young:
All right.
Stephen Semple:
Costco Canada bought 400 springfree trampoline units for trial.
David Young:
Nice.
Stephen Semple:
Now they’re in Costco. So Costco Canada gets 400 units on trial. They set the price at $1,000 and basically Springfree lost money on this, and they knew they would. It’s that classic, we’re starting up [crosstalk 00:09:43].
David Young:
We’ll see if people buy this.
Stephen Semple:
Yeah. But we wanted to see whether people would buy this because price point at that time, $1,000 for a springfree trampoline was by far the highest price. But what they also offered was this long warranty, a 10 year warranty on everything, they’re proving that it was safe. And really what they wanted to see is, is there a market with these 400 units sold?
David Young:
Right.
Stephen Semple:
Boom. Sold out like crazy. Now, what they needed to do was basically gear up to selling to Costco, but they also knew they needed to drop the price like their manufacturing costs because they had this idea, this $1,000 price point is where they needed to be. So they found a person to do some manufacturing in China and they protected some real key IP pieces such as the rods and nets.
Stephen Semple:
They continued to make those in New Zealand and then just basically had them assembled in China. So 2005 ends up becoming the next big order and they’re still burning cash at this point. The spring of ’05, Costco orders 3,265 pieces, right? Still not profitable, but the concept is getting proven. And from Costco, Canada, they go to the UK and they go to Japan. And then in 2007, Costco has their trampoline online.
Stephen Semple:
And this online part ends up becoming really quite significant for them. But, 90% of their distribution at this point is now Costco. So in 2008 they built a factory in China in order to serve Costco and Costco Canada, Costco UK, Costco Online, they are all loving this product. You remember Jim? Remember we talked about Jim [crosstalk 00:11:32].
David Young:
Yeah. Yeah. The CEO that wouldn’t sell a trampoline.
Stephen Semple:
Yeah. So one of the things Jim did, when a new store opened, Jim attended every new store opening in person. So when the Halifax store opened, the buyers were so proud of this trampoline that they put it center stage on the store opening. They made it a highlight of the opening. This was May 13th, 2009. And Jim Sinegal walked in and lost his unholy mind.
David Young:
He didn’t know about it?
Stephen Semple:
He had no idea. This had been flying under the radar. He had no idea. And he basically turned to the buyers and said, “We’re never selling another trampoline.”
David Young:
Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.
[Empire Builders Program Ad]
David Young:
Let’s pick up our story where we left off and trust me, you haven’t missed a thing.
Stephen Semple:
Steve and Keith were told by Costco, “We’re done.” They had been flying under the radar up until that time. Now, Jim had a one-on-one telephone conversation with Steve and explained his position and said, “Look, we will honor all of our POs up to the end of the month. So we’re not going to screw you over on orders. Any orders we put in by the end of the month, we will honor those.” So the first thing Steve had to do… Remember, 90% of their business.
David Young:
Yeah.
Stephen Semple:
The first thing he had to do is scramble to get as many orders as he can. He had 14 days-
David Young:
Wow.
Stephen Semple:
… to secure as many POS as he possibly could. Now, here’s the funny thing is this ended up becoming great for them. Even though they just invested a bunch of money in building a factory in China, 90% of their business was Costco. Imagine how they feel.
David Young:
That’s a hopeless thing, right? You could be dead in the water.
Stephen Semple:
Yeah. Now, here’s what they knew. They knew their product was safe and fun. They knew their customers loved the product, but they had this little secret asset that they were able to leverage. Remember I said, we’re going to come back to the fact that they sold a bunch of stuff online?
David Young:
Yeah.
Stephen Semple:
When they were selling online, they were actually the ones fulfilling the order, not Costco. So they basically knew where all their existing customers lived.
David Young:
Oh, okay.
Stephen Semple:
So they were able to create a map and they’re able to see clusters of their customers. And what they identified from that is their best marketing was to existing customers. And so they could sell to those neighborhoods.
David Young:
Right.
Stephen Semple:
And so they decided to open up their own store. Guess where the first store was?
David Young:
Wherever the biggest cluster was.
Stephen Semple:
Yeah. But guess where that biggest cluster was. That biggest cluster was right at the off-ramp to the Costco headquarters.
David Young:
Oh, that’s fantastic.
Stephen Semple:
So late 2009, they opened this store and it’s super successful. They blow the doors off and on top of that, because they’re now selling directly to the consumer, massive margins, not the little in Costco margin. They were now getting full margins. And they suddenly went from being a business that was struggling with profitability, to being highly profitable.
David Young:
Nice.
Stephen Semple:
And they also used this knowledge of where the customers were to establish a dealer network. They were able to completely leverage that, and they kept Keith on as the face of the organization. Because he could talk about the safety and the quality. And in late 2010, two years after Costco pulled out, they grew to 400 employees.
David Young:
Oh, that’s amazing.
Stephen Semple:
Yeah. 2000, 2013 amazing years. And in fact Springfree even created a product that had $2,400 price point. And the stats now are, is that they’ve removed 90% of product-related injuries. They’ve made videos on safety. They came up with this idea of zero maintenance, zero support for 10 years. So you buy one, you don’t have to do anything for 10 years. They’ll take care of it and they’re now selling 30,000. So they’re a 40 to a $50 million business.
David Young:
That’s fantastic. I think, to me, one of the big lessons is the idea of getting your product somewhere where you can see if people will buy it, right? Will they just try it? And whether they made money at Costco or not, that taught them that people wanted this product and liked it. And then they were able to at least stay there long enough that they got some valuable data as well.
Stephen Semple:
Yeah. It’s absolutely… And that’s a really big deal. We see a lot of times businesses launching and they have a new product and they don’t have a methodology for really… They’re like, “I know this product’s going to work and people are going to love it.” Well, until you put it into your customers hands, you really don’t know.
David Young:
Yeah.
Stephen Semple:
But they even did learning. Before Springfree were ready to sell the product, they took it to a show and they learned, you need an enclosure, even though [crosstalk 00:17:47] wasn’t required, and they went, “Okay.” And then they learned about the patent problem with the enclosure. So they dealt with that problem. Then they got it into a place where they could see a test and it sold out.
Stephen Semple:
Awesome. But the thing that really made Springfree the success they are today, and you’ve heard me say this on other podcasts is, the power is with the person who owns the customer. They couldn’t make much money under Costco because Costco had the customer relationship. Springfree actually truly became successful when they started dealing directly with the customer.
David Young:
It’s fortunate that Springfree were drop-shipping for Costco’s order, right? If they hadn’t been doing that, they wouldn’t have had that data.
Stephen Semple:
Springfree would not have had that data. They would’ve been blind on actually where their customers were. That was the saving grace for them. They were able to go, “Here’s where clusters of customers are,” and what we know is if there’s one in the neighborhood, somebody in the neighborhood’s more likely to buy because the kids in the neighborhood love it, so we’re going to market to those places.
Stephen Semple:
We’re going to put stores in those locations. And we’re going to also use that to be able to talk to distributors, ‘Hey here there’s already lots of people who have got the product in the area.'” And when the pandemic came along, they doubled and sold out because of course [crosstalk 00:19:05] looking for more things to do at home.
Stephen Semple:
But the key to them was they were forced into direct the consumer market. The best thing ever happened to them was Costco stopped buying from Springfree. But they did a lot of hard work, they did a lot of learning and listening to the customers, they have a superior product and the direct to consumer market. Those are the things that have made them successful.
David Young:
And they didn’t give up at any of those pain points.
Stephen Semple:
No. They-
David Young:
Those places where some people would’ve just thrown in the towel.
Stephen Semple:
Yeah. No, Springfree really believed in the future of the business. What they knew was, kids loved it and if you could make it safe and if you could prove to the parents it’s safe, they would purchase it. And that’s what they believed in and that’s what Springfree made happen and that’s what they continue to work at. So it really is a really neat success story. And they’ve sold over half a million of these trampolines worldwide. So it really is this neat Canadian Kiwi success story.
David Young:
Thanks for listening to the podcast. Please share us. Subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review at Apple Podcast. And if you’d like to schedule your own 90-minute Empire Building session.
