Transcript
Transcript of Video Excerpts
clv is going to become the single most important kpi um even more than just uh kind of Revenue generation. Hey everyone, Stu here, welcome to the Flow State podcast. My guest today is the voice you just heard, Jennifer Arnold, and this is the first of two, maybe three parts, talking about customers: do we need to listen to them? Are they always right? Stay tuned to find out. Welcome to the show, Jen. We’re going to talk retention of customers, expanding customer accounts, voice of customer, all things customers, basically. I think just by way of a quick intro, obviously this is very much your area of expertise, right Jen? Just kind of highlighting the importance of the customers’s voice and what we can learn from them in business. And I think from my perspective that’s something that often gets lost in the, you know, day-to-day of running around doing marketing, doing sales, doing your day-to-day job. So diving into retention first, what just by way of a quick kind of intro and overview, why do you think it’s so important to think about retention as an exercise within the context of marketing and and what do you think people should be should be thinking about when they think about customer attention, if that’s not too big a place to start?
It is a big place to start, but it’s an important place to start. I think there are number of reasons why marketers are are much more getting pulled into not just the acquisition of customers, but also the retention of them. I think one important one is that customers are hard won. Customers are very picky these days; there are a lot of options in the market. Particularly in the B2B space, where you’re talking about larger deal sizes, long-term procurement cycles, etc., customers do not come easily and they’re very costly to acquire. So it’s very important for the customers that you do get on board that you’re able to keep them. But then, particularly as business models move toward a subscription focus, this is on on both the B2C and the B2B space, particularly in areas such as Software as a Service (SaaS), then that retention and that cross-sell upsell on an ongoing basis is absolutely critical to the business survival but also growth.
Yeah, yeah, okay. I think like, there’s a couple of interesting things you touched on there actually because obviously in the last series we talked a lot about AI. And the, at the time, the many promises and the dreams that were were being discussed back at roughly the same time in 2023. So like on that note, do you feel like the sort of customer relationship side of things is kind of being automated away a little bit? And like to give you an example, like I know from my own experience working with and running SaaS companies, like there’s there’s a kind of idea that you know you can just sort of measure everything and then the tools will just tell you stuff that you need to know and you know everything’s done. I feel like, you know, Meta can shoulder a lot of the blame for this. Like just just look at how people are using your stuff and then that will help you retain them, right? Whereas I feel like that sort of misses a lot of what you’re talking about, which is the crucial actual, you know, human opinion side of how it’s working. And like, do you feel like you’re getting value out of the thing that you’re paying for? Like, is that is that accurate from your point of view or do you feel like, you know, we can just look at all the we can just look at the metrics and go from that?
I think there are two parts of that. One is yes, you are seeing a lot more automation start to come into customer life cycle management. A lot of that is because there is such pressure on headcounts and budgets and the cost to service customers on an ongoing basis. And I think it definitely is beneficial in some areas. I mean, it certainly can reduce costs and it certainly can make it faster for responses. I think like chat bots, and where they add value, where you’ve got a customer coming in and asking frequently asked questions and almost getting immediate responses—that are either being prompted from what a human is inputed there or through an AI chat bot that’s learning as you go and and feeding information back. So there, and and also there’s a lot that’s happening in that kind of self-help area. So if you’re in a product, you’re having a problem, something will pop up to help guide you through, which gives a better customer experience when you’re using a product or a service. Or again, that you can go in and find self-help materials and work your way through. I think customers are becoming a lot more comfortable doing that. Also makes it available 24/7 where a call center can’t necessarily be that.
However, I think it also, and this is part two of that, is it can work against you in some ways because for for some brands, for some types of services, customers really, really value that personal human touch—for a number of reasons. One, yeah, it’s a lot more empathetic. So particularly if you’re trying to work through something very difficult, if you’re trying to work through something where they’re heightened emotions coming out, then having that personal touch can really, really help speaking with another human being who can empathize with the issue that you’re having. The other is sometimes it just does make it simpler to work through this process.
I was working with a client that has a very complicated software program. And to activate the product, to get the licenses ready for users to use is quite a complicated process—to hook it up to accounts and get the right permissions and things like that. They actually had a team that that called the customer and stepped them through that process and the customers really, really valued that. And one of the things that I was working with them on was was looking at that customer experience and saying, well for the cost it would be to one, put the automation in place, and two, but have the team there to do it, is that really going to provide you that much more value? Or are you actually just kicking the problem down the road where they try to self-help through, they try to activate it themselves, it just ends up creating a problem because they’re not being stepped through it, they can’t figure it out themselves, and then they end up calling customer support anyway? So, you know, and they have a bad experience that leaves a bad taste in their mouth. So it’s it’s kind of really understanding what does your customer value and if it is that very high touch, personalized service, you have to wonder, is automation actually going to benefit you long term in the way that you hope?
Yeah, I think that’s a super interesting point actually because there’s, you know, back to your point about like, the obviously a lot’s driven by SaaS thinking at the moment, particularly in the areas that sort of we’ve spoken about. And the yeah, the idea that it’s often very easy to buy like these products. Well, I’ll caveat that by saying like, it’s easy to buy like, you know, most SaaS type products because they focus a lot on conversion. But then, as as you mentioned, that post-conversion experience is often where it falls down, right? Where like, you know, you might sign up for something, you get a free trial, you’re like, “oh, this seems really easy,” you know, there’s a nice wizard or whatever. But then, to your point about then retaining people, you’re like, “okay, what is that next step? How do I actually start to use this? How do I wrap it into like my own process or role? Like how does it fit into your own, you know, text stack?”. It’s all those sort of slightly more complex questions that start to arise after the, you know, honeymoon phase of being like, “oh, I’ve bought something that was exciting”. That that’s often where the challenge is. So I think obviously there’s a big distinction between complicated sort of software and technology and the more simple stuff. But is there a is there a way you’ve seen people handle that that’s like, you know, the kind of gold standard that’s really amazing or do you think everyone’s just doing a pretty sort of average to poor job on that like kind of next stage of like, you bought it, you’ve gone through the trial, what next?
I’ve seen it done well and I’ve seen it done poorly. And I’ve seen it done poorly again in the, in companies where they they aren’t getting that customer feedback. They aren’t understanding the impact on customer. They are more cost driven. And, you know, some they may be happy with that if if they’re if they have high churn built into their business model then it’s not so much of a concern for them. Like if there isn’t much opportunity for cross selling and upselling and and CLV and it’s kind of one of those kind of one-off usage sort of products then, you know, is it is it really that much of a concern? But you know, for a product where you want the customer to hang around for a while and you want them to spend even more with with you, and you were talking about ones where you get free products, you know, kind of the big idea with a lot of these is get them hooked on the free product and then eventually upsell upsell and and get them into a paid product and sell more products and services around that. We see that if they have a bad first impression, if that onboarding experience is really poor for them, they’re not going to stick around. Again, there are many options out in the market now for a lot of solutions. And and if they’re easy to acquire, it’s easy to hop from one to another. So, you know, “we’ll try this one, it’s not working great, I didn’t have a great first impression with them, they haven’t made it easy for me at the start, I’m just going to swap over and try another one and start again”.
And do you, like, do you see a lot of that happening at the moment because I think that point you made about high churn being kind of baked into some business models is an interesting one? Because that, you know, like it seems quite counterintuitive but then I guess you can always be, you know, pushing new price options, you know, kind of testing new models of engaging people, right? So, while on paper it sort of seems like it would be kind of stupid to lose people all the time, I guess you can then constantly be hooking them back in. So like, do do you see any sort of patterns or, you know, have you noticed any examples of that where people are like, “okay great, well they’ve got that model going on, they just like bring people in, lose them quickly, win them back again,” or is everyone more focused on the longer range, you know, kind of retain and expand model that I think we all the she people should be focused on?
I work more in the B2B space and I I see it a lot more in the B2B space that they’re trying to hook them and keep them for a longer period a time. Startup startup companies are more focused on customer acquisition in their initial phases, right? To be able to get next levels of funding and they need to be able to show that they’re building up a customer base. But as they get further down the path, the customer retention becomes more and more important to ongoing like stabilizing their growth, showing a revenue stream. And then as you you work away even higher up into that B2B space as well, again, it’s so hard fought to get those customers that, you know, the cost of acquisition can be very high and the sales process can be very lengthy. So you can you can lose a lot of time if you’re bidding for work and you’re not winning it. So it’s it’s definitely something that they don’t want to see churn.
But it’s also important even in that kind of Enterprise B2B space, there are going to be some customers that you’re okay if they churn, right? If they’re costing you a lot of money to service, if they’re not moving in the area. If you’ve got if they’re happy to stay on your your legacy platform and they don’t want to move into your newer product sets and they become more and more costly to maintain and to support and to and to keep around, then in some cases you’re going to be very happy for them to churn. And as a marketer in the sales space, in the CX space, you you need to understand that because you want to put your effort into the customers that are going to grow with you and are going to help you expand as a business and are going to become good advocates for you, and not pour money and pour effort into those customers that probably are going to eventually churn anyway.
Yeah, no I think that’s a really good point actually because I’ve seen—I’d be interested to hear your thoughts on this—I’ve seen a couple of examples recently where this has been handled, you know, one was a good change that was handled in my opinion kind of badly, and the other one was a change that just wasn’t handled at all. Where like, one of the tools we use, I won’t name names, but one one’s like a, you know, sort of behind the sceny tool that we use. And they changed all their plans to probably a worse model but the sort of output for us was our plan would have been cheaper if they actually shifted as off the legacy model. But they obviously didn’t bother because we were paying more for like three or four months. And it’s only because I’m like, you know, sifting through our Opex costs or the time that I noticed this and was like, “why why are we paying?”. Like, it wasn’t much, it was like, you know, $ 30 or $40 a month or something, but obviously over the course of a, you know, like a year, two years or whatever that starts to add up. And if we were on a higher tier plan, that would have been magnified. So that was like, you know, I know it’s pretty standard practice, but sort of left a bit of a bad taste in my mouth about it because I was like, you know, worse plan, more expensive, you guys just obviously are happy to just keep raking in the cash—either because you don’t manage it properly, you know, because to your point, nobody’s keeping an eye on it, or because you know that most people don’t check basically and you’re just happy for, you know, that to carry on.
I think that’s a good point. I think it’s you see that all the time particularly in subscription type areas where people just forget that they’ve signed up for something and they’re just paying on a recurring monthly basis and and it doesn’t twig for a while that that’s where that money is going, right? And and I think but more and more, I think particularly as as a small medium business, I think in this economy people are keeping a much closer eye on all of these recurring costs that are coming in and the value that they’re getting from them. And reducing the number of licenses they have or downgrading the plans that they have. Or like I said, maybe, you know, in many areas it’s easy to switch. If they’re not a really sticky product and there are other options there on the market and there more and more options to coming to market all the time, it’s getting harder and harder to retain people and retain customers.
Yeah, and look, I think where I feel like there’s a sort of certain arrogance to, you know, some elements of the particularly the software industry around that as well because to give you an opposite example of that, there’s a couple of pieces of software that we use that we, you know, we use all the time and we really like. So like Miro is one of them, and they like do things really well in my opinion. Like they obviously put a lot of time into this, but they obviously have a lot they’ve obviously got a lot of money as well at the moment. But like they they send—because we’re like an annual subscription with them, we’re not big customer, we only got like one or two licenses. But they sent an email out like probably like two weeks in advance of the renewal coming up and we’re like, “oh, your renewal’s coming up, you know, you you might want to log in, check your licenses, you know, see what’s going on”. And we’re like—I think we ended up taking one away because someone wasn’t using it. But, you know, they also give good discounts for paying upfront which I like because obviously it’s beneficial for them and for us. So that was really good. And, you know, there was some other discount that I don’t think that even mentioned which which was on the invoice when it renewed. So I was like, you know, that to me is like how you look after people. So like give them some notice, tell them what’s happening, just make sure that you still want to use it. Obviously with a 12 month subscription, it’s more significant. But they just seem to recognize that obviously for them to bill us and then us to suddenly realize and have the classic bill shock and then want to refund is way more hassle and more expensive. And just getting on the front foot.
Whereas, yeah, a couple of the others renewals have just been a bit more like, yeah, you get an automated email saying bills coming up and this everything else is a bit kind of on the down low. You know, the fact that it’s things have changed, things are more expensive, whatever. So it’s, as you say, I think if you’re not keeping on top of it, it’s very easy for that just to sort of slide through and your costs to kind of increase quite significantly if you’re paying for big licenses or a lot of seats. That’s an easy area where automation does come into play, right? Because it it is very easy to say, “okay, we can we in our system we can see you’re a month out from renewal coming up” and just have an automated note going out that says, you know, “just a reminder that this is coming up and, you know, these are new prices”. That can be easily automated. But this is also a great area for for personalization. And again, where AI I think it’s going to be coming more and more built in, which it’s it’s going to be more along the lines of, “you know, hey Stuart, not only is your license coming up for renewal, but we can also see you’ve got one user who hasn’t been using your license,” right?
So it’s it’s getting into can see product usage, they can see logins, they can see support calls, they can see all of that information. All of that is there in their systems and what they have to do is tap into that data, bring it into one place and and say, “okay, well this is,” and it’s kind of like a, you know, if then, “if I see, you know, Stuart’s account is doing this, then I offer him these services or I offer him a discount on this,” right? So so that’s where automation can be highly beneficial particularly in a small business. Now if you were a huge Enterprise and you had 10,000 licenses, that’s probably going to be a more personalized discussion and also, you know, much bigger opportunity for upsell, so you’re probably going to have a person involved in that discussion. But, you know, for somebody has one or two to seat license, it’s not worth their while. But absolutely can be automated and personalized in that way.
Yeah, look, I think that’s like a super important point as well. It’s like you don’t need, going back to the old, kind of 10% personalization is usually enough, you know, when you’re running kind of scaled marketing approach. Like it doesn’t exactly as you said, it doesn’t need to be not expected to be, you know, taking out for dinner for buying one, one license from, you know, like some global piece of software, right, because we’re we’re a small customer. But as you said, like it’s just the, you know, the handholding at the right points is what’s important. And understanding the commercial reality. Which is like, I think, to your point, like I use so much software, like I really don’t care like what the logo is. You most of time there’s like tiny handful that stand out to me usually of like, these are really good and I actually really like the business. But mostly like, you know, a virtual whiteboard is a virtual whiteboard. Like they’re available almost everywhere. It’s said because I particularly like the one that we use now that we’re still with it.
So yeah, I think that that to me is what makes quite a big difference, what gets lost a lot, which, you know, back to the point around your sort of retention strategy. I feel like there was there’s a lot of misalignment between where people are focused and the actual kind of, you know, customer relationship that you’re building. In a lot of, obviously, it’s particularly a SaaS issue, I think, just because they obviously don’t want to invest a huge amount in having big teams of people because that’s expensive, right? And like the, it’s hard to track, which is not to say it shouldn’t be done, I just think people can’t be bothered.
Yeah, I I think you’re right. And I think this is where again we’ll probably see a lot of consolidation in the market happening. You’re already seeing that happening in the SaaS industry as well, because there’s a lot of competition coming out, right? And it is easy for people to turn and the ones who don’t deliver the good service are going to be losing their customers and be left behind. We saw it in, you know, kind of TV streaming. Any any of those ones that’s moving into a subscription model that can’t hang on to their customers, right, either either fizzle out or get acquired by another player.
I do you know what, it’s I found that the streaming ones been particularly amusing. Having, you know, been here since the early days of like Netflix being a post you DVDs service, where like they’ve all, it’s taken them like what, 15, 20 years or whatever, but they’ve all now realized that the way that TV networks make money is actually the only way to make money if you’re going to produce content, which is to advertise. Like, you know, charge charge a fee, a license fee or whatever, and then also have advertisers because making good content is really expensive and time consuming, which has been quite funny to watch. But then, you know, them to me again is a classic example of doing it all wrong. Where like Netflix in particular, like I don’t think the value exchange now at the point we’re at now is anywhere near worth like the amount of money we have to pay to like access the stuff they have because they just seem to have like, you know, they don’t have like the Disney Library, so you’re like, “yeah, okay, great”. They seem to be very like, you know, hit or miss now. It’s like one in 10 things they produce might be really good, the rest is like, you know, sit and have it on in the background type stuff that you can easily get from almost anyone else. So I don’t know, I feel like they’ve establish themselves well, but they may well struggle to kind of be here forever. I think based on where they’re at at the moment. Like I can’t see them sort of, you know, they’ve ridden the wave of disruption not long gone, but where are they going now? They’re just like another streaming service amongst many.
That’s, and that goes back to that kind of expecting some customer return. I would not be surprised at all if have built into their business model this this idea of of regular customer churn but then bringing them back. Because, you know, I do the same thing. I’ve been laughing because I I I swap between my streaming services. I have one on for six months, watch everything I want to, off, turn it off, get the other one, right? So I turned off Stan for a while because I’d watched everything. And I was considering turning them back on because they had good Olympics coverage. But I’ve been getting emails from them saying, you know, if you come back you get, you know, $10 off your first month. So it makes me think they they do have some of that churn built into their business model. They know that the customer behavior is to turn it on, turn it off, and then going, “please come back”. They’re promoting their their new content to me. So I’m assuming, you know, but again, I think previously they just had a set forget mentality. They just assume you sign up for it, you know, small monthly fee, people won’t notice, they’ll forgot what, you know, that they had it on and that that was part of their business model. But now they’re having to work to get keep people and and get people back because I see them advertising a lot more about new series coming out, new content, you know, what’s been added to the library.
Yeah, it’s a funny one, hey? Well, I think you’re probably right. Like, I think there’s I assume they’ have some really interesting statistics about, you know, how how often that pattern reoccurs and, you know, what their what their lifetime value looks like. Because, as you said, previously it was probably a consistent like, you know, get 12 or 18 months out of somebody and then maybe they get bored. Whereas now it might only be, you know, six months, three months, whatever. Especially after they crack down on the, you know, password sharing and stuff a couple of years ago. But yeah, it’s definitely an interesting one. Because I think they, I mean again to me, like I don’t think they deliver a great customer experience. I think they’re sort of they’ve all become very complacent with the exception potentially of Disney because I think they’re in kind of a unique position just due to their catalog. But everybody else just seems to be a bit like, yeah, you know, “well, you need us because of insert one thing that you want to watch that’s not anywhere else” and you’re kind of forced back as opposed to really wanting to go back. Which I guess is fine. But I wouldn’t say it was like an aspirational state to be in as a business where you’re like, “well, you know, they can’t get it anywhere else so they’re gonna have to come to us”. And you’re like, “yeah, it’s not great, is it?” Not a great reflection on the brand.
Also, specialized, right? So now you’ve got ones that are just sport streaming and just focused on that. You’ve got other ones that are, you know, really focusing on their own custom content. You’ve got other ones that are focused just on, you know, kind of movies. So I think that’s that’s another thing if you apply that across different areas as well. I think it’s defining your value proposition clearly, understanding who your customer customers are and what they want. Understanding where there’s a gap in the market that you can play. Because the ones that are more generic, I mean, I think this is the reason like Foxel is getting sold again. Murdoch’s looking to to offload Fox. It’s become a quite a generic platform. But, you know, they they’re now saying it’s the way to access all the other platforms. It becomes more just a doorway into the other ones. So their whole value prop is changing around what they’re doing. I don’t think they’re producing anywhere near as much as their own content as opposed to just helping people access other people’s content, becoming that conduit.
Yeah, they’re an interesting one. Hey, ‘cuz you’ve got, you know, I’m obviously not a just on a personal level, not huge Murdoch fan. And like if you look at like what’s happening to, you know, him, his family, like that whole business, like I think they’re, yeah, they’re in a bit of a tail spin at the moment. Where, you know, obviously kind of nailing the whole right-wing news angle which is like fine, you know, some people want that. If you enjoy that then whatever, it’s not really my sort of cup of tea, but I think it’s has its place, you know. But, yeah, the rest of it you’re like, you know, if they’re going to go down that whole access route, you’re like, “well, I know, not that I would ever do this because obviously it’s allegedly illegal, but it’s quite easy to, you know, get an Amazon Fire Stick or whatever and just do some things to that and be able to access whatever content you want for like almost no money.” So why would you pay Fox for like, I don’t know what however much it is, like a grand a year to access it through a proprietary box that is no use to anyone? It’s just I I feel like they’re definitely a bit behind the behind the times on that side of. So that capability is being built straight into TVs. Oh, yeah, exactly. Yeah, a basic Android TV you can get almost anything you like on there with a, you know, with not very much technical knowledge now, to be fair.
Yeah, that’s right. No, I think it’s it’s definitely interesting. And I think going back to your point about sort of retention and, you know, the the lifetime value. Like, is there a, you know, without getting too distracted about wiring about the, you know, the right-wing media, what, because I know I know obviously Customer Lifetime Value (CLV) has been a classic like lighthouse sort of kpi for a lot of people, or at least it should have been, to understand the value of the relationships you’re building. But are there any other are there any sort of kpis or any other ways of measuring these relationships that you think are really important that anyone should be looking at, either B2B or B2C?
I think that’s that’s an interesting one. Because I think up until somewhat recently marketers themselves have not been necessarily focused on the CLV, the Customer Lifetime Value. You know, they were more about acquisition: so how many leads do we bring in, how many of those leads convert, what’s the the pipeline that we’re generating, what’s the revenue that we’re converting? Or again, as as with this focus more from customer acquisition onto also customer retention, they’ve had to focus more on that CLV. And in fact, there’s a there’s a piece of research that we’ll we’ll share the reference to, but MI3, Australian Marketing Institute, Qualtrics, and Tumbler Turn did, which said the B2B marketers are predicting that CLV is going to become the single most important kpi even more than just kind of revenue generation. So it’s not it’s not just about acquisition, it’s about how long you keep that customer.
So I think you’re looking at things like retention percentages. How many of those customers do you retain? Again, keeping an eye on which ones absolutely want to retain versus ones that you want to have a steady churn. That whole cross-sell upsell, so not just initial revenue, but how much can you grow an account once that you get it, is a really important one. And then kind of going into the advocacy as well. You know, are they not just a customer, but will they remain loyal to us? But will they actually be a reference for us as well?
So I think all of those is areas of focus are becom more and more central to what marketers have to think about. And I think why they also are becoming greater owners of the overall customer experience. Because they are now responsible for keeping an eye on, you know, what is that onboarding experience, what’s the ongoing support experience, how are we continuing to educate our customers about the new products and features that we’re bringing to market and how they get value out of those? So the marketer remit is really expanding and with that the number of kpis that they have also expanding. On that remit expanding bombshell, we will have to leave it there, friends. Thank you very much for listening. Join us next time when we continue the conversation with Jen and continue to deep dive into our relationships with our customers.