Cracking the Funnel: How to Iterate Your Way to Product Market Fit
CEO & Co-Founder
Today on the show we have Caroline, the Co-Founder and CEO of Arcade, a platform that enables anyone to build powerful interactive experiences.
In this episode, Caroline shares her experience in venture capital and why she decided to start her own company. She discusses the challenges of building a product-led growth company and the importance of constantly experimenting and iterating.
Caroline also talks about the value of understanding customer behavior and how it can impact churn and retention.
Tune in to learn more about Caroline's journey and insights into building a successful startup.
[00:00:00] Caroline Clark: I think that experiments are simultaneously critical but also completely overrated and it depends, of course, on the stage you're at.
[00:00:18] Andrew Michael: This is Churn.FM, the podcast for subscription economy pros. Each week, we hear how the world's fastest growing companies are tackling churn and using retention to fuel their growth.
[00:00:31] VO: How do you build a habit-forming product?
[00:00:33] VO: We crossed over that magic threshold to negative churn.
[00:00:36] VO: You need to invest in customer success.
[00:00:39] VO: It always comes down to retention and engagement.
[00:00:42] VO: Completely bootstrap, profitable, and growing.
[00:00:44] Andrew Michael: Strategies, tactics, and ideas, both together to help your business thrive in the subscription economy. I'm your host, Andrew Michael, and here's today's episode. Hey, Caroline, welcome to the show.
[00:00:57] Caroline Clark: Yeah, I'm happy to be here. Thank you for having me.
[00:01:00] Andrew Michael: It's great to have you. For the listeners, Caroline Clark is the Co-Founder and CEO of Arcade, enabling anyone to build powerful interactive experiences. Caroline started her career as an associate at the Boston Consulting Group and then moved into product marketing in Hightail when she got bored of making Excel models and presentation decks. She then went on to Atlassian, where she was one of the first GTM team members for Jira Service Desk. Prior to founding Arcade, Caroline held roles at Lightspeed Venture Partners and Sequoia Capital. My first question for you, Caroline, is what drove you towards your move into venture capital and then away from it again to start your own company?
[00:01:40] Caroline Clark: Yeah, I spent most of my career in B2B software. As you know, I went to Atlassian right after BCG. I was one of the first product marketers on Jira Service Desk, which is like Jira but for IT teams. And at that time, it was a completely brand new product, so I learned a lot along the way, building that go-to-market and seeing how to distribute that within a larger company and I loved it. We, as you know, don't have traditional sales motions, so we're talking to customers all day. Then I had a moment where I was like, I'm really interested in the world out there, like what's on the other side, so to speak, of enabling software businesses to grow and provide that capital?
[00:02:23] Caroline Clark: I love technology, I love the B2B software, so I went to Stanford Business School. When I was there, I was lucky enough to intern briefly for Lightspeed and then work with Sequoia which were both amazing experiences. Brian Schlier is one of the best in the industry. He was on the board of Dropbox, and so he was very gracious to take a bet on me. Learned a ton. It was a really amazing time to be in venture capital, and not just venture capital, but also Sequoia. But what I really quickly realized is that, as interesting as it is to be experiencing founders who are raising capital for the businesses and learning about different problems, I really missed talking to the customer. I really missed building and thinking about products and innovating in different experiences.
[00:03:14] Caroline Clark: So that was one and then two is, I really saw an opportunity. There was a shift happening where a lot of these businesses that were pitching us, I noticed they were very different. Even a few years prior, many of them were product-led. Many of them were thinking about global distribution, and they were experiencing a big problem with not understanding their data like, who are the customers who are coming to the website, and how do you enable them to try the product out? So, yeah, it was a combination of two things, and it was also in the middle of the pandemic, which I could believe was the worst possible time to start a company. But in hindsight, it was the best time because it was really for us to focus on the fundamentals and getting in front of customers in any way. So, yeah, that's a little bit of my journey in venture capital and how we started Arcade.
[00:04:06] Andrew Michael: Very cool. I relate as well to sort of that need to be speaking to customers and tinkering and building. I think it's one of the aspects that I enjoy the most about startups is taking that zero to one and taking an idea conceptually and trying to meet and serve customers' pain points and problems. So, Arcade, you mentioned it enables people to build demos of their products very, very easily. I first came across it, I think, about a year ago. I was super impressed by how easy it really was and how simple the concept was, but yet effective as well. So, you're only talking about this today, we had a conversation just before this started that this is actually the first podcast you're on, and I'm honored as well for you, to host you today.
[00:04:51] Andrew Michael: The reason is because you feel you've hit an inflection point now where you're ready to start speaking about the product and today I'd be interested just to talk a little bit about your process and how you got to where you are today. Obviously, a fairly early stage startup as well, iterating your way towards product market fit and now it feels like you feel that you're at this moment in time. So, first of all, like, I'm interested just, what signal did you get that you feel like, hey, yes, now is the right time for us to go out and start talking about this product and widening up the top of funnel?
[00:05:22] Caroline Clark: Yeah, there's a lot of layers to it. I think that one is as frustrating as it sounds, it's just a feeling. You know, it's very qualitative but for me, I think the inflection point when I knew we had product market fit was when customers were just getting on the phone with me just to start using the product. You could tell they were in a hurry and they just didn't want to really talk to me. They were just like, because I was forcing them to do that before they tried to part out. And so that was the moment when I realized I was actually in the way of them to get to the product and that was such a shift for me six months prior, where people were like, you can tell they were really annoyed that they were talking to me. They just wanted to move on with the day. So that's my first qualitative moment but I think that as we were building the company, the classic question always is distribution or funnel?
[00:06:13] Caroline Clark: So do you just try to get as many people in the product as possible? And of course, you have to have some element of both because you don't learn anything unless you have people use it. But we've always been very conservative on top of funnel investments initially because we really wanted to crack the funnel MetricsFirst. So as you know, if you have a leaky bucket, there's no point in putting water in it. So the way we knew that our funnel was working is that we decided early on the product metric we really cared about, which is published demos.
[00:06:47] Caroline Clark: So when my co-founder and I first started the company, the very first week, we didn't really have much of a product and I remember they were leaving in front of a whiteboard and we were like, what is the most important MetricsFirst? What do we know? That's one thing that we should always measure and look at that indicates something is working with that product. And what we landed on is a published demo that is viewed by an external person outside the creator's domain. And the reason why that's a good MetricsFirst is that not only does it pressure test that someone has been able to build, to edit and then publish and analyze but…
[00:07:23] Caroline Clark: So they went through the entire product experience, but then they had enough confidence in it that someone else outside of the creator has viewed it, so that means that it was shared in some form. So the way we measure that funnel is we always look at what percent of signups have actually created a published demo that is viewed by, external domain. And when that got over 40%, we're like okay, something is valuable here, like we are seeing a really good activation metric and now it's just sitting there on top of funnel.
[00:07:52] Andrew Michael: Very cool and very interesting the process as well. I think the idea and concept of, like a key value metric has been discussed on the show before. I regularly mention one episode from GoDaddy with Heidi Gibson, but I think what you've also tapped into as well is like really focused on, why did the end user come to you in the beginning? And the reason was to enable people to get a demo of their product, so the only time your product really delivers value is when people actually view that demo.
[00:08:24] Andrew Michael: So it makes total sense that you pick that as your value metric but more often than not, early stage startups, like they'll have a hundred different metrics all under the sun looking in different directions, but there's only really one metric that matters and if you can measure the value that your product delivers your customer, I think like that's the only place you need to start from the beginning so very cool.
[00:08:44] Caroline Clark: Yeah.
[00:08:45] Andrew Michael: You're sitting on a whiteboard. You decide this is the metric, we're going for this now, let's figure this out. Where did you start when you first launched the product? What did that metric look like? Obviously, you mentioned today it's north of 40 percent. But what was it like on day one when you launched the product?
[00:08:57] Caroline Clark: Yeah, so we had different launch moments. You know, there was never like one day where it was like, you know, okay, officially live. I think that is funny when people ask me the question, how long have we been building this company? It's hard to pinpoint one moment. So I would say the very first week, the same week that we did that whiteboard exercise, we said, okay, we're just going to create a landing page and it was like the ugliest landing page. It had, like a beach ball and it was some tailwind template and we did some LinkedIn posts about it. They're like, hey, we're building this company, learn more about it. I mean, put the landing page there.
[00:09:33] Caroline Clark: And I remember it was such a scary moment. I was like, wow, like, no, this is really going out there and then when we posted that, I would say that's our first mini launch and we got about 100 signups on the waitlist. So that was basically how we got from one to 100. Those customers who signed up. And one of the things that I really got value from were the strangers. I think that, yes, friends are valuable and they'll tell you what you want to hear but the strangers are the ones who are going to tell you, the really hard feedback. Where they're like, you know what? This is awful. I don't like this product. But yeah, that's our first way of launching.
[00:10:12] Caroline Clark: Then in January of 2022, that's when we launched, we did a bigger launch moment. We put up a, it was still on a waitlist based launch and that's when we got to our first few thousand and then we launched self-service, meaning you can sign up for a free trial and start using, product without ever talking to us in September 2022. So different moments in time, different launches in time and that activation metric of the standard published demo was something we always looked at every single launch. Of course, when you started monetizing, that was something that we started measuring as well but yeah, that's kind of the progression of our launches and how we measure the metric along those launches.
[00:10:55] Andrew Michael: It's very, very interesting. I'm interested as well, going back to the very first landing page because getting a hundred signups from LinkedIn posts, obviously, like friends and say, as you mentioned, will support you, but also getting people that you didn't know. What do you think worked about that landing page? I think besides the obvious that you were hitting on a pain point that people had, what do you think you did well with that landing page and that message?
[00:11:23] Caroline Clark: Yeah. I mean, if you look at it, like way back machine, you can't even see it. But it was honestly super simple. There was a short description of what we were aiming to do. So I'm talking about build interactive experiences. And then we talked about maybe one or two use cases of done and put it inside your website, social media and blog posts. And I think that, we didn't even talk about value. Why would you do this? Which I would say is the best practice. So that, honestly, from a landing page standpoint, it was very, very simple, very descriptive, which actually, that leads me to my next thought, which is that this is a little bit of a controversial take. So there's a lot of companies that if you look at the websites, they're trying to describe some grand thing, right?
[00:12:14] Caroline Clark: Where they're like, okay, we are the next evolution of customer conversations and that is great, especially when you're at a certain stage, but if you're a small startup and it's struggling just to get anyone to use the product, be extremely explicit about what you do. Explain it to a [inaudible] for your grandma and if they don't understand it and they're two sentences, then you've already kind of lost the battle. So I think that's for a long time and I don't know when the point will be. Maybe we'll have to become multi-product but I want us to be super descriptive to the point where, like if you just land on Arcade.software, you understand within like five seconds what we do. I want to avoid the whole category creation mumbo jumbo as long as I can. It's probably… would be necessary, but I'm a little skeptical about that.
[00:13:03] Andrew Michael: Yeah, I think this is one of the lessons I learned very early in my days at Hotjar was David Darmanin, the CEO, as well previously used to work at Conversion Rate Experts. So he spent a lot of time writing copy for sites and optimizing conversion rate on pages and this was like his one thing he always used to drum into us, like keep things extremely simple and extremely descriptive, like get rid of all the fancy language. I was guilty of this previously in earlier startups and I think like, as you say, like you just straight to the point. What is your product? Like forget the category, forget sort of the overcomplicating.
[00:13:40] Andrew Michael: If you have a message and people have a pain and you have a solution to that problem, like just say it and the thing I found the most helpful and useful is actually just using their own language. And like in your case, how they describe the problem, how they describe the solution. If you had to describe our product to a friend or colleague, how would you describe it? And using that copy on the site and using that language, I think is, as you said, like one of the most powerful ways. Like forget the mumbo jumbo. Just like, talk to me like, I'm a person at the end of this screen and I'm viewing your site.
[00:14:14] Caroline Clark: That's how we came up with our headline, which is, you know, our customers describe the product as showing, not telling. So I agree completely, guys, like matching the language of the customer and then we also pay international and user base. So copy is something to take very, very seriously, potentially too seriously. So every single time we update the product, I hate, you know, any informational window in the product. If you have to describe in a paragraph, like what is happening, then there's a problem with the design in my mind, so.
[00:14:45] Caroline Clark: And I also, I care passionately about it because I am, as you may know, I'm hearing impaired. I have cochlear implants, so the world I grew up in, I learned language a little bit later than other people and so communicating in a very easy to understand way, having that world be more accessible is something that I've always paid a lot of attention to.
[00:15:04] Andrew Michael: Yeah. Honestly, I think that's a superpower, like in the software space and like, as you say, if something needs to be explained, it's probably a design issue more than a sort of a descriptive issue that words can solve. So you mentioned a few things as well. I want to go like, step by step as well, like on your way to writing towards this moment now where you are today, you started out landing page, pushed that out, got your first hundred users. You mentioned as well that you were doing an interview with users before you onboarded them. Obviously, we've had other guests previously on the show. Rahul Vohra was one of those guests who did something similar to this at Superhuman. Where did the inspiration come from? And then what were you trying to learn on these calls and how did they work with users as they were signing up?
[00:15:54] Caroline Clark: Yeah, I think there's the classic questions of understanding the users. So like, who are you? Why are you using that tool? What is your pinpoint? What is your alternatives? What have you been doing to solve that? And then probably most importantly, watching them use the product. You know, Hotjar is an amazing solution for this via users but there's something, nothing really replaces that extremely high quality, high touch moment. But you see them, for example, like there was this huge bug in our onboarding experience that I discovered after multiple users were, it was not really a bug. It was like they kept on going back because they were trying to go back to the previous step and we had this weird UX where our product basically erred out if you go backwards because it was always moving forward and assuming you're going the next step.
[00:16:45] Caroline Clark: So that was a very important and valuable moment. Yeah, so the reason why I had these phone calls was one, just quality research, two, really understanding how they were using the product and getting that fixed. And to be honest, I would say, you know, we are a PLG company, you can sign up for a free trial from the website. But having that high touch relationship is so, so critical and something that I hope you never, ever stop doing. And I always have that discipline of like, you know, I almost consider and this may be overkill, but I consider a day, you know, without talking to one customer or having some touch point a wasted day because you have to have your finger in the polls and there's always, you know, new problems every week. So that is almost the hardest part about being a PLG company, losing that high quality touch point. So, yeah, it's, that's why we did that.
[00:17:35] Andrew Michael: Nice. And so from these sort of sessions, you're learning a lot as well about the product, the pain point, the users, the use cases. This is being fed then into sort of your product's strategy and your iterations. You mentioned as well at the start before the show that you experimented your way to where you are today and I'm interested to hear a little bit about the experimentation that you've been running. And I think one of the things more interesting as well is because typically at early stage startups, we don't have the luxury or the data to be able to run, like efficient experiments that are, stick to single irreverence. So what were some of the things that you decided to experiment with on early on? Maybe what was like one experiment you were 100 percent sure was going to work and going to be a success and what is another one that just, like totally surprised you and really enabled you to unlock a new level of growth?
[00:18:31] Caroline Clark: Yeah, I mean, I think that experiments are simultaneously critical, but also completely overrated. And so, and it depends, of course, on the stage you're at. So I'm assuming you're a smaller company, you're growing and you're trying to find Product-Market Fit or you post Product-Market Fit and trying to reach a critical scale distribution and get into that next level, so it's not really what I would consider as relevant for like a large company if you're late of stage. So experiments are critical in the sense that the way you win as a company is that you just be constantly experimenting and learning from them like I would aim to do, like at least 10 a week. And I think that's actually a little bit on the low side. Things we experimented on were so many different ways.
[00:19:23] Caroline Clark: One is, ways that what do we do in the onboarding flow? So like we were asked a question about, like, who are you one time and then we removed that and didn't include that one time. The other thing we experimented a lot with is pricing, explain a little bit about how we experimented on that. We experimented with the value prop. So like talking about, why would you use, interactive demo? We experimented with, like, how that product actually worked. So like if you want to get certain things done, like publish a demo, sometimes we made it much more prominent to just do it right from the product or deeper in the funnel.
[00:20:04] Caroline Clark: The reason why I also say they're really overrated is that experiments can kill you like and what I mean by that is that if you think about best in class experiments, there's a method and there's a rigor to it. One is data collection. So as you know, like when you build a product, you have tracking a lot of times the afterthought. And so it, like scramble, it'd be like, okay, we actually didn't add the tracking. So how do we add that before we ship it? Yes, you should have that as a reference, but if you build a company aiming to reach statistical significance, like two months before you make a call on experiment, and if you do it in the most beautiful design where you have like, every single, like the A/B test [inaudible], you have like the, all of the infrastructure done. By the time you actually ship that feature is like game over, like there's no real, you've lost so much valuable time.
[00:20:57] Caroline Clark: So I would say the thing I care about, an experiment could be as small as like, you're on a sales call and the pricing moment question comes and you're like, and I would just do the thing which may horrify some other customers is that I would actually name a completely different price depending on like the time of day and like who they were. And all I wanted to know was, I would just, like what was the price point where I actually felt so deeply uncomfortable saying. And then they were like, oh, yeah, no problem and so that was one early experiment, is that I would just say random different numbers. I mean, I'm sure all founders know this, but I urge, on the side being really low. Like I think there's something about having built a product from ground up, you're a little bit, like, embarrassed to put a price on it. So I was like, okay. And then one day, I remember I was like, okay, it's 10,000. And then they're like, no problem, we'll talk to procurement.
[00:21:52] Caroline Clark: So I would say the thing I care about, an experiment could be as small as like, you're on a sales call and the pricing moment question comes and you're like, and I would just do the thing which may horrify some other customers is that I would actually name a completely different price depending on like the time of day and like who they were. And all I wanted to know was, I would just, like what was the price point where I actually felt so deeply uncomfortable saying. And then they were like, oh, yeah, no problem and so that was one early experiment, is that I would just say random different numbers. I mean, I'm sure all founders know this, but I urge, on the side being really low. Like I think there's something about having built a product from ground up, you're a little bit, like, embarrassed to put a price on it. So I was like, okay. And then one day, I remember I was like, okay, it's 10,000. And then they're like, no problem, we'll talk to procurement.
[00:22:22] Andrew Michael: Yeah, for sure. So you would say like your experiments that you're running are more like of a qualitative approach where, yes, you may have data, but it's also going on a bit of a feel and understanding of like the response that you're seeing and you're getting and you mentioned a lot of little tests that you can be running as well. Like you said, like some of the simple is, just saying a number on a sales call. Others might be microcopying your sites or different steps that you have in your onboarding and iterating really fast and trying to see and understand what works. I like that.
[00:22:53] Caroline Clark: Yeah, I mean, we're a pretty data driven organization like we have a lot of investment on that. We have so many dashboards and we have run experiments on a much more quantitative basis, but we, [you kind of] think about the MVP of the experiment and what's the shortest way you can do it that you learn the most.
[00:23:11] Andrew Michael: And also, I think like, at this stage, like micro changes aren't having, like much of a big difference. So I think that's where large organizations with robust experimentation programs, a slight change in conversion rates is going to make a huge impact on the bottom line. But in this case, you really need big swings to have a big impact if you're going to run it like a really focused program like that. Nice. So you've been iterating then, on all these various aspects, your main metric, as you mentioned, the value metric was demos viewed that were created through the platform, what was like…
[00:23:47] Andrew Michael: And you mentioned as well, I think this is what I'm sure was during the churn now was prior to it, that it's one of your biggest aspects of your flywheel as well where, and I'm assuming this is the case where people launch it, other people see it, they discover it. They think, oh, this is cool. We need this for our company and you sort of starting, to get a bit of reality going there. Is this something that you've invested a lot of time on as a business or this is something now that you're really starting to see is the right time to work on?
[00:24:14] Caroline Clark: Yeah, I think that distribution is, thinking about that flywheel from the get-go is so, [it’s been] critical and it was something that, early on, we focused on marketing, not only because they are getting value from a product and tend to be willing to pay for a product more than many other personas but as you said, it's a flywheel. So for one [Arcade] that's hosting a website, tens of thousands, if not hundreds of thousands can see it. So that's why we focus on the beginning, but I remember a little bit of an afterthought and we showed [Lenny], he's one of our angel masters, I don't know if you remember who he is but… and he was like, yeah, that looks great. And then he's like, why have you not branded this at all?
[00:24:57] Caroline Clark: And I was like, what do you mean? And he's like, oh, you need to add a watermark, that's so important. And I was like, it was such an obvious statement in retrospect, but that one thing has driven the majority of our signups to date. So having that watermark is super important. It's a hard one because when we look at the product, it's a tension between making sure people can discover your product and understand what it's powered by and having that drive new signups. But also thinking about the user experience, what we think about a lot internally is effortlessly beautiful. So effortlessly, meaning easy to create, but beautiful is super important. And beauty is really hard to quantify.
[00:25:46] Caroline Clark: People care about beauty and if you start going in a Yahoo direction, no offense to them. But the reason why Google won a lot of is because they actually paid attention to a really seamless and beautiful user experience that makes you excited to use the tool. So we don't want to get to a point where we just plaster every single demo. Every single moment it's like, budge in your face, this is the Arcade demo because it gets in the way, so it's a tension to constantly be thinking about that, but also really keeping yourself honest about what, is it getting away and actually hurting you more than helping you.
[00:26:23] Andrew Michael: Yeah, for sure. I think as well, like the viral loop there, there's quite a lot of companies that have successfully sort of created this huge growth loop and so things that come to mind is like Loom, Typeform. At Hotjar, we had something called incoming feedback. All of these, sort of places where you're either sharing something with somebody else and then they can discover through there, or like in your case where it's on your website and you may have tens of thousands of people visiting, and it becomes like a brand and a trademark that people recognize. I regularly visit sites and I'm like, oh, there's Hotjar's incoming feedback on the site and you recognize the brand.
[00:27:01] Andrew Michael: But also, funny, like you said, the user experience is something to think about because I remember like many times we would get like the weirdest, like feedback inside Hotjar's feedback. And it was because customers were clicking on the widget, thinking that it was the company's site. But in actuality, they were coming to our site and leaving us feedback and people would be scratching it up. What is this customer talking about? Like this makes no sense, what t-shirts like we send them, whatever, you know? And then people had to always explain to them, oh, this sometimes happens when…. but yeah, thinking about those, sort of interactions, experience is important, but definitely like it is a huge, huge opportunity.
[00:27:38] Caroline Clark: Yeah, I think one more thing on [inaudible] is that, you know, I push you to think about ways you can own the brand. So, for example, with Stripe, I don't know if you remember, but a long time, we knew a Stripe property because when you entered the card numbers, it flipped the card. And so just small details like that, that you're like, oh, this is a Stripe integration, but there's no Stripe anywhere. And so that's what we also think about is how do we own a brand and do design and very subtle cues that this is an [Arcade] property.
[00:28:08] Andrew Michael: I love that. I see we're running up on time, so I want to make sure I ask you a couple of questions I ask every guest. The first question is, let's imagine, hypothetical scenario. You join a new company, churn and retention is not doing great. The CEO says, Caroline, you're in charge. You have 90 days to turn things around. You're not allowed to speak to customers and none of that, your secret weapon and you can't look at the data. You're just going to take a tactic that you've seen work somewhere else and run with it blindly. What would it be?
[00:28:39] Caroline Clark: Well, I would say, first thing churn is a lagging metric. So it's something that is usually a product or something upstream. I feel, like, a little hand tied here because I think you should be able to talk to customers. That's probably, first line of defense. Also, you should be able to add in the churn experience some way of capturing why they're churning because that's something we've done. We've added that capability and that's something we learned pretty quickly, what is driving that. But there's a few tactics that you can do. You can do it in, pricing level. So adding more discounts for annual contracts and that tends to decrease churn. You can add pausing. Some customers are, depending on your product and not looking to continue using it for this month or the next month, but a lot of times they come back and they want to come, using it.
[00:29:31] Caroline Clark: So that's another quick one. The last thing is just really think about your product experience. Are they using it the way you want them to and are they actually not getting value from it? What we discovered with our churn customers is that they were logging back in and they were still editing their arcades. They were hosted, but they were not paying us anymore. They're still using our product. For now, we don't do anything with those customers because we want them to be happy. They're hosted, so it's a bad experience if we prevent them, using that.
[00:30:03] Caroline Clark: But I think the other thing I really encourage you to think, is really looking at the behavior of the churn customers. Are they truly churned and that they don't want you, [your] product anymore? Which is, I hate to say it's a big problem, but that means you have a deep problem where you might go [out of] business because nobody wants it. Or is it that you price the product in a way that they no longer need to pay for the way you price it, but they're still getting value in some form? That's a harder question to ask yourself. It's a great answer. Do I force them to pay because they're using some value? Or do you just know that but then consider changing the pricing model? So yeah, that's my initial thinking about churn.
[00:30:50] Andrew Michael: Yeah, I think the pricing one is very interesting, especially when you have a product that has viral nature. Because if you restrict growth, because of pricing, then you restrict the viral nature and you restrict it on the other end. But at the same time, increasing ASP has a profound impact and it can be a step change for the business. I think in businesses like yours, it's always very, very interesting to try and figure out what the right balance is between the price point that you give for conversion and then your ability to grow and the premium as well.
[00:31:26] Andrew Michael: We battled with this a lot at Hotjar, backwards and forwards, being a premium product, trying to understand, okay, what do we give away? At which point do we want to charge? And ultimately, like at the end, we just leaned and we said, okay, let's see how we can make the free as powerful as possible because we knew that it was viral by nature and we could then understand how we can charge our ICPs better and move a little bit more up markets.
[00:31:50] Caroline Clark: Yeah, we see very different behaviors depending on the customer and the price point. So it sounds pretty obvious, but if you have a lower price product, the churn will likely be higher because you're attracting a kind of customer who may not be a big company or they're much more price conscious. So therefore, they're going to be much more careful about when the next month bill will be. So when we sell to larger companies, the churn is way lower because the dollar isn't really their personal dollars, for one. Two is that they have a collaboration component, so they're all working together. So it's not a simple, you know, oh, we decided collectively that we don't like this product anymore, which is still a huge problem. But yeah, so say that, you know, it's so, so different depending on the customer base and the price point and plan. So I'm sure they're very different patterns inside each company.
[00:32:42] Andrew Michael: Yeah, absolutely. What's one thing that you know today about churn and retention that you wish you knew when you got started with your career?
[00:32:49] Caroline Clark: I would say it's, pay attention to it, but pay more attention to what happened before. So what I mean by that is that churn again is a lagging metric. So I remember for a while, I was like, oh, my gosh, churn. I really want to make this better or, you know, this is something I care a lot about and blah, blah, blah. And I think I spent so much time, like on the team's time on like no quick wins around the pause and stuff like the thing we talked to earlier. Yes, it's worthy of doing, but confront the really hard questions, which is like, you know, is your product really delivering value? Like if they're not paying for one month, what do you need to do from just a indispensability of workflow standpoint, product standpoint?
[00:33:43] Caroline Clark: That is where it has to be at, because I think a lot of times people get a little too fixated on, like what happens like 20 steps down the line when they really should be thinking about the hard problems. And I think that as a founder, everyone does this. I just had a call last week. It's easy to avoid the hard problems. You know, you just don't, you just want to go about your day and answer the email and do that quick experiment but confronting the existential questions, I think is how you stay in business and hopefully answer them or you don't, but at least you confront them. So I don't know if that's a little too existential and broad answer to that question, but I would say just really think about that.
[00:34:23] Andrew Michael: I love that. I think when you're in it and started, like there's just so much to get done all the time and like you said, like there's normally only ever like one or two things that really matter and just being, like hyper focused and understanding that.
[00:34:38] Caroline Clark: I have this, I actually have this ritual like in my calendar. I have a block, an hour every week and it just says, existential problem. And I think it's a reminder to myself to think about what is the one or two biggest failure modes that accompany and what can we do to start figuring out how to solve it? Because I think, again, if you brush it in the right, it can become bigger and bigger, so I block time for that.
[00:35:06] Andrew Michael: I love that. Nice. It's been a pleasure hosting you today, Caroline. Thank you so much. Is there any final thoughts you want to leave the listeners with? Anything they should be aware of? How can they connect with you?
[00:35:19] Caroline Clark: No, I think that we talked to a lot of different things. Yeah, I don't know. I think the point of building successful companies is talking to customers and shipping fast. And if you just do those two things in good shape, it's amazing how you can get so distracted with other things. Podcasts are worth it though.
[00:35:40] Andrew Michael: Podcasts are worth it. Nice. So for the listeners, we'll definitely leave everything we discussed today in the show notes. If you want to check out Arcade or anything else that we mentioned, you can find it there. Thanks again for joining us. It was a really pleasure chatting to you today and wish you the best of luck now going forward.
[00:35:57] Caroline Clark: Thank you. Thanks for the time.
[00:36:04] Andrew Michael: Cheers. And that's a wrap for the show today with me, Andrew Michael. I really hope you enjoyed it and you were able to pull out something valuable for your business. To keep up to date with Churn.FM and be notified about new episodes, blog posts and more, subscribe to our mailing list by visiting Churn.FM. Also, don't forget to subscribe to our show on iTunes, Google Play or wherever you listen to your podcasts. If you have any feedback, good or bad, I would love to hear from you. And you can provide your blunt, direct feedback by sending it to Andrew at Churn.FM. Lastly, but most importantly, if you enjoyed this episode, please share it and leave a review, as it really helps get the word out and grow the community. Thanks again for listening. See you again next week.
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My name is Andrew Michael and I started CHURN.FM, as I was tired of hearing stories about some magical silver bullet that solved churn for company X.
In this podcast, you will hear from founders and subscription economy pros working in product, marketing, customer success, support, and operations roles across different stages of company growth, who are taking a systematic approach to increase retention and engagement within their organizations.