Crush churn by defining your product category and taking ownership.
Co-founder & Chief Customer Officer
Today on the show we have Harrison Rose, co-founder and Chief Customer Officer at Paddle.
In this episode, we talked about what it was like for Harrison to just finish school and dive straight into building a hyper growth company. We then chatted about category creation and how Paddle is defining their Revenue Delivery Platform that they are taking ownership of and working towards creating and becoming the category leader.
We also discussed the million dollar SaaS metric, how Paddle helps its customers with their retention challenges and helps untangle their Frankenstein revenue management stack. Harrison also shares some churn trends in the market and tips on how to deal with involuntary churn.
As usual, I'm excited to hear what you think of this episode, and if you have any feedback, I would love to hear from you. You can email me directly on Andrew@churn.fm. Don't forget to follow us on Twitter.
Andrew Michael: [00:00:00] Hey, it's Andrew. And today on the show, we have Harrison Rose co-founder and chief customer officer at pedal. In this episode, we talked about what it was like for Harrison to just finish school. And I've straightened to building a hyper-growth company. We then chatted about category creation and how pedal is defining their revenue delivery platform that they are taking ownership of and working towards creating and becoming the category leader.
We also discussed the million dollar SAS metric, how peddle helps its customers with their retention challenges. And helps untangle the Frankenstein revenue management stack. Harrison also shares some churn trends in the market and tips on how to deal with involuntary churn as usual. I'm excited to hear what you think of this episode, and if you have any feedback, I would love to hear from you.
You can email me directly on Andrew at . Don't forget to follow us on Twitter and enjoy the episode.
How do you basically solve these and these different just gun for revenue in the door? This is churned out FM, the podcast for subscription economy pros each [00:01:00] week. We hear how the world's fastest growing companies are tackling churn from using retention to fuel their growth. How do you build a habit forming products?
We crossed over that. Magic thresholds to negative churn. If you need to invest in customer success, it's always comes down to retention and engagement. It's bootstrapped, profitable, and growing 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.
Andrew Michael: Hey, Harrison. Welcome to the show.
Harrison Rose: [00:01:52] Andrew. Thanks so much for having me on
Andrew Michael: [00:01:55] it's a pleasure. It's great to have you for the listeners. which we can ask you about in a bit, but they've also raised over [00:02:00] $90 million and on the same growth trajectory prior to pedal Harrison was studying. So it's pretty much the soil and I'll ask you now as well, but so my first question for you actually is like, what's it been like straight out of school, straight. Out study into hypergrowth. We don't hear this often on the show as well. Like how has this learning curve been for you?
Harrison Rose: [00:02:18] Yeah, it's been phenomenal really.
People ask me about this a lot. And the truth is it's all I've ever known, to be honest with you. It's not like I have some other experience to compare it to. So for pretty much my entire adult working life, I've been working on Paddle, we're living and breathing it. So yeah it's a pretty intense but yeah, I wouldn't change it for the world.
Andrew Michael: [00:02:38] Yeah, absolutely. I think in terms of learning and experience, like there's no better way than doing, I'm interested as well though, in this course of the last five years or so what's been one thing that you thought when you got started was true.
That you've learned today. That's false. And what's been like one of your big perception changes, like over time.
Harrison Rose: [00:02:54] I think it's probably important that those perceptions and those assumptions are [00:03:00] constantly challenged. I think that's probably the big learning or the biggest thing to consider.
Like we're very fortunate to be working in an industry that's huge and an ever growing and incredibly disruptive. And even in itself, like there's undercurrents of it, wanting to disrupt and challenge the status quo. So I think pretty much everything I feel I knew, which was very little at the staff is probably wrong today.
And things change and evolve constantly say if there's one thing that I encourage everyone to do, it's almost to proactively seek out to challenge those assumptions, learn and evolve. The big statement I delivered to the executive team and the entire organization. To the extent necessary comparing actually is that you should be looking back at yourself six months ago.
And if you don't think or consider, what on earth was I doing and why was I ever operating in that way six months ago? You're probably not learning quick enough to keep up with their right, which SaaS is growing. So challenge everything that you know, and keep evolving. Otherwise you'll probably get left behind.
Andrew Michael: [00:03:56] Yeah, I love that. And I think especially like in fostering [00:04:00] organizations, like some people can keep up with the pace and they can learn and they can adapt to, because a company like five people is a different company at 20th of different 50, it's different, a hundred and so forth. And as you keep growing, if you're not adapting and you're not learning new skills to adapt and survive in the environment you're not going to be able to survive there.
I think one of the, like the greatest quotes I've always enjoyed hearing was shared with me. Like when I went through an accelerator program about eight to 10 years ago was like in startup life, you need to learn to embrace uncertainty. And it is that mode where like things always uncertain.
And if you don't get stressed out about by constant change, but you can adapt and you can mold and you can like become effective in those environments. And that's when you can like really become successful. I think. So I love that point. You make, so talk us a little bit about Paddle, . Give us a little more detail, like what is a revenue delivery platform? How do you help your customers?
Harrison Rose: [00:04:46] Yeah exactly that, so we're a revenue delivery platform for SaaS businesses. We handle checkout payments, recurring billing, invoices, taxes, and law, or for software companies. We've been going for about eight years. We're 150 folks mainly based [00:05:00] in London.
Currently building out a number of other hubs, which is interesting. But in terms of why we exist and what revenue delivery is, which is perhaps some useful context for folks whether a self-like company recognizes it yet or not. Revenue delivery exists as a part of their organization.
And this is something we're really trying to elevate the conversation around at the moment in, in the industry and revenue delivery really is the kind of systems, tools, people, and processes that software companies cobbled together in order to sell that products. So on the tooling side, it could be things that you recognize, like Stripe, PayPal, power, curly, Avalara, these things make up revenue delivery coupled together, but then there's also like the people managing and integrating those tools or the folks pulling the data among them to understand performance or fall, the taxes, these things make up your kind of revenue delivery.
The thing that we recognize that puddle though, is that. software companies are often held back by their revenue delivery. We spend so much time and there's so much content out there on how to form like a go-to market strategy, congruent with a product [00:06:00] strategy, but too many software companies. And in our opinion, they're failing because they aren't thinking about revenue delivery or their revenue delivery requirements.
W what does my revenue delivery need to look like in order to support that go-to market or product strategy that I've spent so long on? And when they neglect it, they do things like fail to acquire that the right or failed to acquire customers as effectively as possible with the right currencies or payment methods or linked to the topic of this show.
And voluntary churn is too high due to poor infrastructure, for example. So without thinking about revenue delivery, acquisition retention, which is a topic that's today, and expansion photo. Yeah. So paddle exists to replace their fragmented incoherent kind of revenue delivery. That's just evolved and adapted in their organization without any real ownership.
And we're there to try and offer software companies best in cost revenue delivery from day one. So they can grow as effectively as possible and succeed on the merits break, basically, as opposed to how well they've coupled this, these sets of people and tools together.
[00:07:00] Andrew Michael: [00:07:00] Yeah. It makes a lot of sense. And it, you do see it like.
W without starting from day one with a solution like that, you end up having a, like a group and a patch of tools come together. And at some point things start to break. It becomes very difficult to get metrics on analytics because you're using one sort of accounting software that you're charging individual customers.
And then you have your recurring customers and none of the bill and Okay. As you see the vest start to grow and scale and having a streamlined system and process around there being effective. It also sounds like you're really in the process now of trying to put together a category defining product, if correct me, if I'm wrong.
And I dunno if you following any sort of playbook, so you've read in a good material on the subject, but it's interesting now, like listening to you talk this through and just like how you're going about defining this. What does, what did that process look like internally? Like how did the team like.
Gather around to decide, okay, this is the direction we want to take. This is where the category we believe we need to be owning and defining because it is the problem that our solution is solving.
Harrison Rose: [00:07:56] All so great question. And it's relatively recent. So that, that's my excuse. If [00:08:00] any of my kind of revenue delivery execution that wasn't quite on point, but I think we've known for a long time.
We're solving a big Parry problem. And for years, honestly, for the past seven years of say we've struggled to really concisely. Describe what it is that. But we're doing well, even describe things like competition because revenue delivery within an organization looks so different in every organization.
You talk to that been using different tools that a couple of them together in different way, there's different areas of ownership. And it was actually in recognizing our ability or inability to concisely talk about competition or the problem that we're solving that, that led us to believe that actually.
Th the problem exists because we've got thousands of customers at this point have been growing very fast eight years, let's say, but we needed a common set of language to be able to describe what it is that we're trying to solve to even educate the market around it. And so it was really that understanding was shorted us to think about category creation like how to think about puddle.
We went through the process of getting there. Like insanely quickly on the [00:09:00] almost we engage with an outside firmer consultancy to help us talk through how we were describing Paddle today. A lot of the problems that we're solving, they interviewed a ton of customers, a number of members of the executive team.
And it was incredibly cross-functional effort to describe what is it we're doing the problems is that we're solving and how customers in the market talk about this stuff to, to build out both. Yeah, the language and the narrative around revenue delivery.
Andrew Michael: [00:09:25] Very interesting. It sounds as well. Like a book I read recently played bigger as well.
That's a firm. They have their own methodology around it, but I noticed what, like four or four years, it wasn't this Sunday, like segment struggled a bit with they had this amazing tool that helps you create a, an amazing data stack and data integrity, but they couldn't really quite define it.
And for them it took a long and setting until they settled on. A CDP like customer data platform. And I think that's now with the amount of work and energy, they've put into that, the thought leadership, the content it's really started to take off and people are starting to adopt this terminology.
So [00:10:00] it definitely, I think is an advantage to start this model earlier in the process. They're not, but it's interesting. Like you mentioned, like you, you did this really fast. You got through it and I think that's also an important part of the process because you could always end up debating this stuff forever,
Harrison Rose: [00:10:12] yeah. Yeah. The things you talk about segment, there are a great measure of its success. It's like you start to track mentions of revenue delivery and revenue delivery platforms across the web. And how many folks are saying that back to you during your sales conversations, we've actually been looking at gong, a tool we use for call recording.
To see how many times our own reps mentioned revenue delivery during the cools and what impact that has on win rates and all sorts of things. So there's some really cool metrics that you can think about to see this stuff is resonating and actually working. And that Salesforce is probably the early folks with CRM, but segment are a great example with the customer data platform as
Andrew Michael: [00:10:48] well.
Yeah, Salesforce with the no software campaign, I think is interesting. I think in the context of churn and retention, this is a really interesting topic. And I know we discussed before the show, like Paddle has had very [00:11:00] little churn just due to the nature of the product. You, once you get embedded into somebody's infrastructure and workflow, it's very difficult to pull out.
But I think as specifically in the book, what I was reading is in terms of like category leaders, Tend to typically own the markets. And when it comes to retention, when it comes to everything, they just ended up being stickier as a result because you're the go-to person in the market. You've created this picture and painted it for your audience.
So it is really powerful. Like you mentioned a couple of ways now, the team's rolling this out now that you've got this platform internally that you've got some alignment what are some of the ways you're thinking about taking ownership now of this category? As you defined it,
Harrison Rose: [00:11:35] Yeah, that's huge amount in that I'm doing.
And again, this is really across your entire organization. So your product and product marketing team needs to be thinking about is a product where building actually driving revenue delivery forward and helping people form a coherent product. Revenue delivery strategy and using a revenue delivery platform, your sales team need to start using this narrative around the [00:12:00] problem of revenue delivery and taking them on that story out during the sales process.
And then the decks that they're delivering marketing needs to get us to start talking about this stuff in events and announcing revenue delivery as a problem that we have to solve in 2021 events are going to, so it really is a company-wide effort. And one of the big things that we're doing, which we're quite excited about.
No idea if I should be talking about this, Andrew. So you might be getting some scoops here. But we want to really write the book on revenue delivery, which I think is something that the likes of segment and I think, look at it in the beer space, perhaps. As you say, really established ourselves as the leader in this space and the person who understands it the best, so that people come to you for advice and help ultimately around this problem that you're trying to solve.
So that's the next big piece for us, right? In the book on revenue delivery.
Andrew Michael: [00:12:43] Yeah, very cool. I think obviously, like you mentioned, there's total alignment across the organ. I think that's absolutely critical in order to make this work. So when you think about from a product perspective, what are we building?
What are we prioritizing like from marketing, everything very cool and interesting like that. You're going through this sort of phase. [00:13:00] Now. What year are you in the company? Six,
Harrison Rose: [00:13:02] Yeah between seven and eight, seven and terrible and dates. I think we're doing seven and eight. It's not like a lifetime.
Andrew Michael: [00:13:09] Cool. Yeah. So yeah, it's interesting as well. Like the different stages, I think even Sigma is probably a similar stage to this as well when they first started working on this and others probably Salesforce too. But yeah, it's interesting. Like when is the right time for this? I don't think they ever is the right time, but when you feel like you say, you've never really been able to describe your product as effective as you would like to, but you realize.
That is a big pain that you're solving because you're getting more and more customers. It probably is a good proof point. You need to really lock it down and make it easy to understand. So this wasn't actually what we planned to discuss today a little bit. It was just interesting that you brought it up.
The thing I was also interested in, like maybe you can talk us through a scenario now, like a new startup. Getting started. They're about to start charging their first customers. They want to get their billing and infrastructure set up. They want to get their revenue delivery platform working and running.
What are the typical steps? Like you work with companies advise that [00:14:00] what are the first things they need to be putting into place? How do they going? And how does your tool then help with retaining customers?
Harrison Rose: [00:14:06] Yeah, no that's a great question. And interestingly, more often than not, we're actually speaking to folks that you described right at the start of the podcast who have already been done and they've already bought together and it's Frank and stack of tools that nobody does touch.
Cause they don't even know how they work together. And they're just terrified of this beast that's living within their organization. It tends to be at that point, that folks come to us. But as you're thinking about this stuff right at the start, it's going to be even better because you're not going to have to do a record number of clients and more important than your growth.
Isn't going to get slowed down as you have this kind of lagging effect of constantly having to tack stuff on to try and just enable what it is you're trying to do. But the way in which I encourage people to think about this is. Once you determine the growth strategy for the kind of business.
It's important whether you're going down the product led route or the almost the sales lead route it's at that point that this stuff starts to become a lot clearer. And then you're [00:15:00] obviously going to build a product strategy alongside that by what is the product we have to build in order to service this mass set of customers.
If we're going down the product led group route or the maybe the larger enterprise, if we're going down a sales lead route. You've started to form a go-to market strategy that you know what your product is, what it's going to have to do and what it's got to look like in order to service those customers.
It's at that point that across acquisition renewals and expansion, you should start thinking about what your product requirements are going to be. So if you're a product led company, you probably want them to spread that net as wide as you possibly can, for example. So you might want to start thinking about, okay, in order to do that, what geographies am I going to operate in?
When you start trying to fix a churn problem, because your customers from South America are chatting you. I don't understand why it's the same on the South side. Exactly. Yeah, exactly. On the South side, you might be [00:16:00] thinking about invoicing structure and revenue recognition and things of that nature.
But. Once you started to form any basic go-to-market or product strategy, and you can start thinking about how your revenue delivery requirements aligned to those things and actually support and enable them.
Andrew Michael: [00:16:13] Nice. Yeah. Cause I think that's what you mentioned, like the idea South America sort of markets.
I think this is one thing that I found a little bit surprising on the show, but it's definitely proven true. Speaking to quite a few companies is that typically like a large percentage of churn when you having like high volume SAS business across countries just tends to be like banks, not accepting payments because of the cross jurisdiction and like something as simple as having like a processor in the markets where you're in can reduce churn drastically, but.
Typically like an early stage, you don't really have the resources or the understanding to even know that this is going to be a problem or that it affects you. That's interesting. And then, so you say you typically working with customers that have been burnt, like there a need to now the Frankenstein parts and put in a revenue delivery platform.
What does that look like then? What does that process, how are you helping [00:17:00] customers navigate that? Because I think by this point they've already created this big gigantic mess. They have something for billing, they have something for their pricing and packaging. They have something for the invoicing.
And I think you also do things like revenue recognition, like St. Complaint. And if that's correct, but. What would a typical like project like this entail?
Harrison Rose: [00:17:20] People are normally coming to us for one or two reasons, right? So either just the sheer operational complexity, our servicing that the markets and the customers they have today is getting so large that they're focusing too much time on just trying to stay afloat and service their customers and actually acquiring new ones or building products.
Maybe they're servicing so many different markets or regions right now that even just things like tax compliance globally are just costing them tens of thousands or spending they're spending too much time on it. And they want to stop that. Or maybe they've got a home grown, recurring billing solution that they've got 10 engineers on that they call special projects, which is something I've heard about five times.
And they want to actually direct their engineers at something that's meaningful and going to build [00:18:00] upon that value prop. So they might come to us for that reason but more and more commonly. People are having an issue with a metric actually across one acquisition, we knew it was an expansion because often companies in SAS companies grow in very traditional ways.
They start by acquiring customers. Then they think about how they can retain them as effectively as possible. Then at some point, most of that growth starts coming from how do they expand that existing customer base more effectively? And this is a normal story that we've all heard loads of times.
And at some point a software company is going to decide that they're not doing one of those three things as effectively as they should. And it's at that point that they come to puddle. Either one to the customer, more effectively at the point of acquisition or Jason involuntary churn figure, for example.
So it's, at that point, we talked to them how that lack of best in class revenue delivery is impacting that particular metric, but how this is actually a much broader problem for them. And this is where the actual cash regression really comes into play. Like rather being seen as a tat school. Solution to a problem.
These people are having you talk about how we're a solution to the problem they're having, but the problem they're actually having is this [00:19:00] holistic revenue delivery issue that they have, not just involuntary Jen. So we talked them through how we're going to solve that map out what their end to end tax that looks like today and talk about where we're going to fit into that and replace it.
It's quite heavy, high touch sales process. But it shows their need to map. People are scared about. Billing and payments as they should be. It's a kind of core of their business and the things that pays the bills. And so we need to make them very comfortable in, in their migration to puddle, but it's the fastest way in which we've grown and are growing.
So that gives them some confidence. Nice.
Andrew Michael: [00:19:26] Yeah, I think that's a concept of build versus buy is a really important one to measure, especially when it comes to billing. Cause a lot of times our companies, until you will end up spending time building the infrastructure and ultimately, like you said, end up having special projects and special teams like five to 10 engineers.
Working on billing, which is not your core competency. And for me, this has always baffled me a bit. I try to advocate for it quite a lot at our church. And we slowly started and looking into different solutions and I ended up picking a provider, I think, but ultimately If you're spending so much time and energy building something, that's not your core competency, your customers are losing out on [00:20:00] features and things that you could be doing to improve your actual product.
For me, I'm a big fan of 5s built. For sure. It's interesting. You mentioned that as well. Cause I've seen that play out like a few times, all the interviews and people mentioned similar problems as well now.
Harrison Rose: [00:20:12] Yeah. Yeah. And a real meth people thing they have is that even in trying to build themselves, I think they get better customizability or better optionality control all this stuff.
And as a myth that we tell ourselves, because what actually happens is that we build something entirely and then we just leave it. And it just sits there for years, because as you say, it's not the core competency of the business. And then what happens is where you think you're going to get optionality to allow you to build best in class.
You actually just get left behind. Whereas if you're buying from these companies whose core competency is one of these problems, they're constantly iterating on it because it is what it is that they do. But yeah, it's interesting.
Andrew Michael: [00:20:47] For sure. And then let's talk about retention a little bit in the context of the show.
So talk us through like how paddle is helping customers with their attention. What are some of the interesting maybe trends you're seeing in the markets as well? Because you're [00:21:00] dealing with a lot of companies, a lot of data on general retention as well. I assume so.
Harrison Rose: [00:21:04] Yeah. Yeah. Yeah. So we're fortunate enough to work with that.
Thousands of stocks, businesses selling into different industries and in different markets all over the world and different ACVs. And when advising that seller base, we encourage them to think about chair and a two by two matrix. I'm not sure this is something I have to talk about in a podcast, a lot of visual aid, but let's see how this goes.
But there's one part of that matrix, which we start to call the million dollar SAS metric. Now I'll get to that. I think folks in neglecting and people should really start thinking about more. And that basically you want to build out retention strategies that cover this full matrix. And on one access, you have the type of churn.
So you think about military chat and those calling up and canceling or jumping into an account error and canceling a subscription sometimes called active churn. So that's one, one piece there's also involuntary voluntary chat. And typically it's 20 to 40% of your churn. This is the inability to charge a customer passive chair, and I'm telling the people think so they probably already know.
So that's one access. But the other thing to [00:22:00] think about when tackling churn. Is when the churning, when the churn is happening do I need to be trying to think about a preacher and strategy? Do I need to be implementing stuff which is going to stop churn happening in the first place? Or should I be thinking about some of the lagging stuff and building out post Chan strategies because you're going to build different things and adopt different tooling and a different systems to to tackle in voluntary, involuntary churn in different ways, both pre and post chair and.
So just to give you some examples around that some preacher and strategies across voluntary and involuntary churn would be on the voluntary side. It's all about user activation, all by happy, all by engaged. There's a direct correlation between onboarding experience and retention. And so if we give our customers a great onboarding experience, we're more likely to retain them.
But on the involuntary churn side, what can we do before they chat and actually mitigates the risk of that happening in the first place and what we want folks to start thinking about? There is payment acceptance. So this is basically preventing failed payments happening in [00:23:00] the first place.
It's looking at the number of successful charges you've made compared to the attempts. Now we call this the million dollar SAS metric because based on the benchmark we've done across our seller base, those optimize it. Optimizing for payment, acceptance has the biggest dollar impact on your revenue retention, if any of the initiatives and the strategies that you can implement, but folks don't measure it.
They don't optimize for it, and they don't even know what it is and all the time. And perhaps we can touch on that a little bit more later, but just to finish the kind of analogy. On the share and strategy side, you then cut it again in terms of voluntary and involuntary on the voluntary slide side, we won't be talking to people about deflection campaigns or user surveys and offers on the involuntary side.
People tend to think about Dunning and smart Dunning. So when I'm talking to a seller about churn, I'm trying to identify where in the matrix. So they have the biggest problem right now, or the biggest gap. Is it pre or post? Is it voluntary or involuntary? And then I'm thinking about which strategies should I be employing by some web?
That biggest problem is in that two by two grid. You want to [00:24:00] actually cover the full set, if that makes sense.
Andrew Michael: [00:24:03] Yep. Makes total sense. And I think, like you said, you start out from the activation side, I think that's a really as well where you see the biggest compounding effects, but when you get to the other side of the matrix where it's the pre Turner post churn and involuntary versus voluntary some of those things you mentioned as well, definitely around being preemptive around cancellations, like a few things like credit card expiring that before somebody is about to churn, that's something, I think you can easily automate with something like paddle I'm assuming and other services as well.
And definitely that is typically begins to be one of the low hanging fruits as well. It's relatively easy to implement a solution for, and the dividends are really powerful at the end of the day. Yeah, interesting. That's like the approach. And then that would be typically like work with the customer.
You would work through like the sales cycle I'm assuming, and then understand, okay. These are the areas where we're going to be able to make an impact on their business fast and get them up to speed. Cool. So what are some of the things ways that you're dealing with let's pick sort of involuntary churn?
Cause I think it's [00:25:00] one of the more easier ones to automate. It's like. What would, in your opinion would you describe as the ideal scenario to tackle involuntary churn? And maybe we can even just pick like failed card payments? Is there.
Harrison Rose: [00:25:12] Yeah. Yeah, no, for sure. And this is a topic that we're already trying to talk about a lot, as we say, we think fixing, ah, is one of the problems that's overlooked within SAS companies today, yet based on our data that I can touch on just a second would probably yield some of the biggest results for the software companies who do optimize for it.
So it's the first and foremost you're right. Like when we're thinking about and voluntary Chen too often, people think about. Touchdown activities I can do. I think about Dunning and retrying, some of those fail cards and to try and recover the revenue. But what people don't think about, I back to first principles over is if I could just stop the payments failing in the first place, like free jet, which seems really obvious when you say it out loud, but nobody does it.
And I think the reason nobody talks about it is that. If I'm honest, a lot of the education we all get as founders in the [00:26:00] SAS market. It's based on the content that a lot of the tools and a lot of the influence that jeez for us, but are actually very few tools out there on the market that helping you with payment acceptance, which is the big kind of preach and activity you can think about just to stop in voluntary chat happening in the first place.
But yeah, if we can stop churn happening before before it does, you don't even have a problem.
Andrew Michael: [00:26:20] Prevention is better than churn, yeah.
Harrison Rose: [00:26:22] Thanks. Yeah. And the way that the I'd encourage you to think about this, and we got a ton of resources on it, on our blog about payment acceptance, which is the big driver here.
And I'd love to share is you basically want to. Be as successful as possible charging your customers because if you're able to successfully charge them, they never run into these Dunning flows or all these retried kind of flows. And the things that influenced that payment acceptance figure, and you can break down in two or three.
So one of the things you to think about is actually the way in which your customers are paying. Payment methods with what we call a direct source of funds tend to perform way better from a payment acceptance perspective than [00:27:00] call payments, as you mentioned. So things like digital wallets, we see that the proportion of failed card transactions compared with PayPal, for example so encouraging customers to use payment methods with better attention and better payment acceptance is something to think about, but maybe some of you don't have a lot of control over.
So it's really not one of the most commonly used. You mentioned updating existing cards, pretty much every payment variety you have out there is going to tell you the expiry date on a card that you've charged. And if you're going to try and match. So after that date for the college, you go and follow it doesn't make any sense.
And so exactly email emailing the customer to update that in advance is a great idea, but some of the card networks even tell you these days the new card details called that issued after expiring. So if you can work with a provider that automates that, it's again, going to help you again, the stat we have is like one in 36 cards, a SAS company has on file is just expired which is crazy.
Yeah, but th the biggest and the most impactful thing that you can do to increase your likelihood of being able to charge a customer and [00:28:00] avoid that involuntary churn in the first place is by routing payments through kind of local providers or local acquirers, which is what you alluded to right at the start of the show.
So in between your bank and your customer, you want to set up these local acquiring relationships. So rather than using your us company to charge UK customers, you're going to have more success. If you use a UK based acquire, for example,
Andrew Michael: [00:28:23] Yeah, that's a huge difference. I think what you mentioned as well about the expirys like somebody was having a chat to from, I couldn't remember who it was exactly, but just, if you think about it logically, like if you're a SaaS businesses been operating for more than two years, but the average expiry date and the Cod being 24 months by default, like at any given point in time, at least like 45% of your entire base of cards that you haven't followed is probably expiring at some point.
Yeah. Just having that in mind, you're already seeing 45% of your transactions I'd risk without doing anything like and that obviously compounds it, people in their sign up. It doesn't assume that they have two years on their thing. It's not a brand new credit [00:29:00] card that everyone's signing up with.
So it's an interesting area. I think, where you say where there are a lot of low hanging fruits, like some of the solutions you mentioned are amazing, to tech can solve that, but what's even better is having something that. Automates this for you and gets things done and has things set up so very cool.
I see we're running up on time. Let me say, I have two questions. Ask every guest that joins the show. First question is, let's imagine a hypothetical scenario now. You joined a new company. You arrived general. Attention's not doing great. The CEO turns to you and says Harrison, we really need to turn things around.
We have 90 days to show some results for ourselves. You're in charge. What are you going to do?
Harrison Rose: [00:29:37] I guess, use a matrix, right? It's undecided is the chat involuntary and voluntary. Then understand what are the root causes behind that voluntary involuntary chat and what strategies can we apply?
Employ both pre and post, to avoid that. Is it constellation surveys? Is it better onboarding of the right customers in the first place or is it optimizing some of our infrastructure to, to avoid them in a involuntary chat in the first [00:30:00] place?
Andrew Michael: [00:30:01] Nice. Yeah. Straightforward to the point. And obviously you've used this model many times.
Next question. What's one thing that you know about churn and retention today that you wish you knew when you got started with your career.
Harrison Rose: [00:30:13] Yeah, that's a great question. And it's really interesting because we think about chat and retention very differently than some of our sellers do. But I think it's probably around the importance of metrics like net revenue retention.
So rather than just looking at your pure churn metric across voluntary or involuntary, it's actually looking at that. The broader picture. So net revenue retention obviously takes into account both your expansion, MRR your attention to customers compared basically with the amount of revenue you're losing through to cancellations and downgrades.
And I think that sometimes that's an equally helpful, more holistic picture of business health, and cause your NRR has to be above a hundred percent. Basically, otherwise you probably shouldn't be focused on acquiring customers because they're just going to churn out the deal. And so making sure you're looking at this from a far enough step back to know where you should be optimizing, I think would be quite helpful for [00:31:00] folks to think about.
Andrew Michael: [00:31:02] Absolutely. Yes. A good grasp of a net revenue retention apps. And I think like in SaaS businesses specifically like that net negative retention is the Holy grail. Like when you know you're onto something and you need to double down until then, like you need to be figuring out how do you retain more customers to get there?
How can you be expanding more revenue to increase the likelihood of getting there and Yeah, very cool. Nice Harrison. And it's been really a pleasure having you on the show today. Is there any final thoughts you want to leave the listeners with? Anything they should be aware of? What you're working on or what's coming up next?
I don't think
Harrison Rose: [00:31:34] I think w we're announcing a bunch of events and content on how to tackle things like churn, if that's what you guys are interested in across the, all the different types. So I would really encourage you guys to check out the blogs and the content, and we have an offer. If it's a topic that you're interested in.
Andrew Michael: [00:31:48] Thanks so much for joining me today. It's really been a pleasure having, great chatting and best of luck now going forward in 2021.
Harrison Rose: [00:31:54] Thanks Andrew. It's been great.
[00:32:00] And that's a wrap for the show today with me, Andrew, Michael, I really hope you enjoyed it. And you're 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.
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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.