It’s been almost four years since I spoke with Adobe’s Kevin Lindsay about how companies focus the overwhelming majority of their marketing resources on customer acquisition activities vs. customer retention. And during this week’s Inbound Conference put on by HubSpot, it appears that this is still the case, according to Des Traynor, cofounder and Chief Strategy Officer of Intercom, a messaging platform that helps businesses connect with customers.
User Retention is Key to Success
Traynor’s session at Inbound on the importance of focusing marketing efforts more on retention is even more critical today than it was four years ago, as more products and services are bought via subscriptions – where companies have to deliver enough value each month to keep customers on board. And it’s that behavioral switch to subscribing vs outright purchasing which means retention takes on a whole new level of importance in your marketing efforts.
Below is an edited transcript of our conversation. To hear the full conversation click on one of the embedded players below.
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Small Business Trends: Unbelievably, there’s going to be 21,000 people at this event. I remember when it was just 200 the very first year, so it’s mind-blowing to me. But, anyway, I’m sitting here with Des Traynor who is the Chief Strategy Officer and Co-Founder of Intercom, who is one of the speakers here at Inbound. Des, thank you for joining me. Before we talk about the session you just had and some of the other things around Intercom, maybe you give us a little bit of your personal background.
Des Traynor: Sure, so I’m from Dublin, Ireland. I’ve been working in technology basically all my life. I started out being a computer science lecturer, which is where I think I got the appetite for public speaking. I started Intercom with three co-founders six years ago. We set out in this mission to make Internet business personal, and that’s what brings me places like here.
Small Business Trends: Very cool. What were you talking about at Inbound today?
Des Traynor: I gave a 35-minute presentation about the role of marketing in this new recurring revenue world. Just like subscription economy. The idea of bundling products together, shipping them on time. Shipping them in recurring periods.
So I think since we made that shift, both in software and in goods, like say Blue Apron or Dollar Shave Club, or whatever. Since we made that shift, I think the general role of marketing has changed massively, and I don’t think people have acknowledged this enough. It’s no longer enough to just get a customer to convert. Getting a customer to convert for, like, Dollar Shave Club means that you’re gonna get, like, $3 off them for their first set of blades, and then they’re gonna quit. Same with Blue Apron, they’ll get their $25 worth of ingredients, and then they’ll quit. Churn and retention are like the new conversion and deserves to be treated with as much priority.
So my session was really about how do we set customers up for success once we’ve got them in the door? Specifically in the world of software, distribution is much more of a solved problem than it used to be. We have app stores. We have things like Product Hunt. People find new tools all the time, that’s not the challenge. And sign-up is getting easier. On the consumer side, you sign-up through Facebook, sign-up through LinkedIn, whatever. Then on the B2B side it’s just been very well optimized. The landing pages, the white papers, all that sort-of stuff. People are really willing to put money into getting people to sign-up. It’s what happens after that. It’s like they just throw the customer over the wall and hope to God the business, sort-of, survives.
That’s what my talk was about. This idea of new-user experience and customer onboarding. How do we get them to the moment of success because when you sign-up for one of these subscription businesses, it’s not like the day 29 experience you’re signing up for. It’s the rest of your life, that’s how the economics work. That’s how you justify the high customer acquisition costs. You have to have a high LTV, right? So the talk was really about bringing somebody true to journey so that they actually experience all the moments of value, such that they’re really, really happy to stick around for the rest of their lives.
Small Business Trends: So what’s the biggest challenge that companies have making that switch from the more traditional business model of selling products … to this ongoing month-to-month, kind of, business relationship?
Des Traynor: It’s sort-of two-fold, one of it’s just resourcing. Most companies if you ask who owns the new user experience the answer is … you’ll hear crickets. It’s allegedly where marketing meets product, and it turns out they don’t meet that often. The other piece that, I think, happens a lot is people think this is a problem you solve once because when they initially launched the business they put a lot of thought into that sign-up flow, and they’re very happy with it. Two years later the product is totally different, but the sign-up flow is identical, and what you’re doing is you’re setting customers up for a product that no longer exists.
So the challenge there is, and what one of the core messages I was trying to drive home today, was somebody’s job should be test out what it means to be a new customer every single week because you’re changing your product every week. Everything’s changing every week. Make sure that everything from your help doc, your onboarding video, your emails that you’re sending them, they all still have to make sense all the time. It’s such an important thing to do that people tend to neglect because it doesn’t feel as valuable. Even at Intercom we’ve ran projects where we’ve seen the ROI be massive. We improved one step in the flow, like, 50% just by re-imagining it.
Small Business Trends: Wow.
Des Traynor: Realizing that we changed our product and changing the sign-up flow. That was massive, all variables of the company changed because of that. It’s something that people think is a lot more low ROI than it actually is, and yet, at the same time they’ll dump money into bringing people in, getting them to sign-up, and watching them puke out, and not actually chase down these crucial pieces.
Small Business Trends: So you also talk about the role that bots and chat can play in this. You gave me a phrase “augmented intelligence.” Maybe we can talk a little bit about that, and what role does that play in this marketing for recurring revenue you talk about?
Des Traynor: Intercom connects businesses and customers, and four weeks ago we launched a bot called Operator who basically sits in a conversation to help these conversations happen. Whenever a new visitor comes along and they say, “I would like to use your product.” Operator can jump in and say, “Okay, well let me just ask you a few quick questions.” We call it augmented intelligence because the idea is we’re not trying to replace anyone here. We’re just trying to inform a conversation that’s already happening, right? And it turns out that it’s actually more efficient for both parties to get the undifferentiated heavy-lifting in the conversation. So if you’re gonna talk to somebody as a salesperson, you generally need to know what’s your company, what’s your role, do you have a budget, what’s the team, what’s the use case? There’s a few bits and pieces that are gonna form this boilerplate of every conversation, and it’s undifferentiated. It doesn’t really vary customer to customer.
So what our Operator can do is it can augment the conversation by saying, “Hey, nice to meet you. I’ll get you set-up and find you the exact right person to talk to, but for now can we just run through a couple of questions?” And those questions, we present them in a UI. We don’t pretend Operator’s a human. It’s unapologetically a bot, and it gives us a couple of quick answers and it’ll say, “Okay, we’re gonna put you in-touch with Jenny. Jenny’s gonna follow-up in two days,” or “Jenny’s gonna follow-up right now,” or “You’re now in a live chat with Jenny right now.” Whatever the appropriate next step is. Now, behind the scenes Operator can go and create sale force entries, set follow-up tasks, all that sort-of stuff. But that’s not what the user cares about. The user’s like, “I want to be heard and prioritized appropriately. Let me tell you what I’m here to do.”
So that has always been our take on bots. They’re good for doing somethings and bad at other things, and I think the hype around bots initially was about pitching this idea of, “They’re gonna replace humans. They’re gonna take all our jobs.” All the usual stuff. I think everyone missed out on this bit. We’re like, “They can just make conversations better.” And maybe there will be efficiencies, and maybe those will result in some, down the line, repercussions, but for the moment it’s just plain useful to have somebody sitting in a conversation offering the necessary bits and pieces, clarifying questions, etc. as you need it.
Small Business Trends: So what role does that play in marketing and recurring revenue?
Des Traynor: If you think about what the new funnel looks like, people will come to a site. They might have some questions, but ultimately part of this shift has been going from “buy before you try” to “try before you buy.” What that means is people can now get started pretty quickly. Usually it’s credit card free and all that sort-of stuff. Where you really want to have some sort-of automated assistance—augmented intelligence, call it what you will—is to help make sure that the customers are getting through to the right moment of value.
So, as an example, if you sign-up for an expense tracking tool, and it’s been 11 days, and you’ve been in the product quite a bit, but you’ve yet to track a single expense. Or you haven’t installed the iPhone app, or you haven’t done whatever the necessary thing that we want you to do is, what the bot can do, again, is just be like, “Hey, I’m here. There’s also humans back there, but I’m here, and it looks like you haven’t had these conversations yet. Let’s start.” Or “It looks like you haven’t taken these steps. Let’s see if I can help you in any way, shape or form.” Operator can run off and search the help center and find you stuff if you ask it questions, or whatever.
As I said earlier, these business only work when the user gets to the moment of value. Intercom can identify people who are not yet at the moment of value. Operator can intelligently start those conversations, augment those conversations, get you talking to the right people, so actually the right outcome happens.
This is part of the One-on-One Interview series with thought leaders. The transcript has been edited for publication. If it's an audio or video interview, click on the embedded player above, or subscribe via iTunes or via Stitcher.