The ONE Thing to Improve Retention
Your sales team is busy as bees, marketing is driving leads, and product is launching new features. Yet customers are churning. Retention is slipping. When all the metrics are seemingly met, why aren’t the customers happy?
Meet David Cancel: 5x founder, 2x CEO, and Justin Bieber fan. Not kidding, he admitted to it at the start of a presentation at OpenView Partners.
Pulling from his past experience as HubSpot’s Chief Product Officer, David explains how to improve retention with a single change.
The ONE Change
Align incentives is the ONE change to improve retention.
You have to align the external — pricing, product, promotion — and the internal — teams and employees — to promote customer retention.
To do this, you have to change behavior.
It’s a simple concept that many companies struggle to execute effectively.
“All the good lessons are simple but not easy to implement” — David Cancel
The Cognitive Bias
To change behavior, you can leverage cognitive bias. Focus on only one of the many biases: Reward and Punishment Super Response.
This bias is well summarized by good ol’ Ben Franklin: “If you would persuade, appeal to interest and not to reason.”
You have to change the incentives and disincentives to modify behavior.
Like David says: simple, not easy.
The Dark Side of Metrics
Especially in data-driven organizations, the metrics establish the goals. Humans tend to game the system. Traditionally, businesses incentivize revenue and disincentivize churn. Be wary of this.
Sales is concerned with short-term sales; they leave it to their future selves to deal with long-term churn. Marketing metrics lean too heavily on MQLs. Product teams rely on agile, focusing on story points and velocity.
These metrics are completely detached from customers.
It’s time to change that.
Realign Each Department
“Put the customer at the center of all of your metrics. Design your metrics around the kind of behavior that you want your company to exhibit.” - David Cancel
Design every team around incentivizing customer retention.
Sales incentives move back to the territory model. Although more common in enterprise-level sales and less common in mid-tier businesses, HubSpot adopted it. They had a mixed blessing to contend with — the leads felt never-ending. As a result, each lead received less attention because there would always be more. The territory model limits the supply of companies that salespeople have access to. The behavior changes so employees priotize sales, maintain relationships overtime, and optimize for upgrades.
Marketing metrics shift so customer success is taken into consideration. As a result, marketing is held more accountable for generating those qualified leads and happy customers.
The engineering and product teams are required to talk to customers regularly. Using a round-robin system, engineers are able to hear feedback directly from the users. As a result, they often take the initiative to implement the changes.
Regular user testing, issue tracking by the support team, and all-hands support enable HubSpot to scale this system up to at least 1,000 employees. All of these changes results in happier customers.
Align the Whole Company
Internally, HubSpot departments are better equipped to handle customer feedback.
On a regular basis, sales and success departments each compile their product recommendations into a singular list for the engineering team. It prevents a single person from saying they need a particular features to make a sale or save a customer, and suggestions become more manageable for the product team.
A monthly science fair is held with the intention of improving transparency about the product’s updates. It inadvertently creates an internal competition amongst engineers to prepare the best product for presentation. As the company grows, there is only time to present a handful of shipped features. Now the focus is on creating and showcasing the updates that most benefit the user.
Customer-Centric
There’s one more key to being customer-centric.
Assume everything you build is wrong.
It could be 10% or 100% wrong. Something about it is imperfect. Find out how wrong your assumptions are.
The first draft of technology is never perfect. Just like any form of art, it’s an iterative process.
PS: Eliminating Agile
Agile isn’t effective with software that can be shipped immediately and directly to the user. Removing this system also means no product roadmaps.
Gasp.
“Product roadmaps solve for the company, they don’t solve for the customer.” — David Cancel
This concept becomes easier to sell to the board when you have shared metrics and a couple of months to prove its effectiveness. To calm enterprise customers’ fears about changing software, give them a window of at least a year when they can opt into the new features.
It’s better to continuously deliver better products tailored to the customer’s wishes rather than adhere to a roadmap.
Making customers happy — now that’s something we can get excited about.
Related readings and podcasts:
