00:00:00 Mohannad Ali: The pricing model is a very, very key component because if you have a

model that is incompatible with this journey, whether it's because it's untransparent and they have to speak to someone to know what the price is, or if it's too expensive that they would immediately bounce off your website, you've broken your go-to-market motion.

00:00:27 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. How do you build a habit-forming product?

00:00:40 VO: We crossed over that magic threshold to negative churn. You need to invest in customer success. It always comes down to retention and engagement. Completely bootstrap profitable and growing.

00:00:53 Andrew Michael: Strategies, tactics, and ideas brought together to help your business thrive in the subscription economy. I'm your host, Andrew Michael, and here's today's episode.

00:01:04 Andrew Michael: Hey Mo, welcome to the show.

00:01:06 Mohannad Ali: Hey Andrew, thank you. Thank you for having me excited to be here today.

00:01:08 Andrew Michael: It's great to have you. That had a nice ring to it. For the listeners, Mohannad is the CEO of Hotjar, equipping product teams with product experience insights, showing them how users behave and what they feel strongly about. So those teams can deliver real value. Prior to Hotjar, Mohannad was the VP of engineering at HelloFresh. So my first question for you today, Mo, is how much do you miss me?

00:01:29 Mohannad Ali: A lot, a lot. Yeah, I mean, for the listeners, they'll know like Andrew and I used to work together. But yeah, we miss you a lot. A lot has happened since you left, but it's been a great ride.

00:01:42 Andrew Michael: Yeah, definitely. I like it's been watching from the sidelines. It's incredible like how fast the company has grown and how it's expanded, it's like a completely different beast from when I was there. You've definitely been a huge part of that growth for the company. So excited to have you here today. The topic that I wanted to chat to you with the [mouse] about today as well, I think was this idea and the differences that you see between B2B and B2C companies. And when we think about the context of channel retention, because you have this unique background coming from HelloFresh serving B2C customers, the market dynamics are completely different there.

00:02:16 Andrew Michael: The way you evaluate and you look at churn and retention is different in those business. And then now at Hotjar where it's a B2B environment and in somewhat, maybe a little bit similar serving small businesses. So you have a little bit of that closer dynamic between B2B and B2C, but still very big differences. So I'm keen to hear first, before we talk about the differences, what would you say is like one of the most common things that applies in both businesses with respect to a B2B or B2C?

00:02:41 Mohannad Ali: I would say, one of the most common similarities that I would probably like to point out is that in any subscription business, you have to differentiate between early churn and late churn. Because I think there is a very different dynamic that you see in terms of what causes a customer to churn at different points in time. So for example, like if you would have, I think maybe a good framework we would use in this discussion thinking about like churn on B2C and B2B It's thinking of of go-to-market motions as a big spectrum So on one end you have B2C so like I would like to think of it as a continuous spectrum Not as two separate distinct things. So on one end you have like a B2C subscriptions.

00:03:28 Mohannad Ali: On the opposite end you have the high-end enterprise Software subscription. So the backdrop behind that spectrum is obviously the go-to-market motion and how you acquire customers and where did we come from and like the channel product fit, the channel model fit and all of that, the market model fit and all of these things and how that impacts your churn. So when you apply this go-to-market motion to the different segments or the different parts of that spectrum, you would realize that your go-to-market motion has a big impact on like your early churn and the value that you deliver has the bigger impact on the long tail of chair. But I'll stop here and we can double click if you'd like.

00:04:12 Andrew Michael: Yeah, no, absolutely. I think we need to double click into that. And before we do, like you're talking about the forfeits, I think from Brian Balfour has a great article on this. Yeah. Around the different forfeits basically to build a hundred million dollar business where he lays out like the market product fits. First you need, and then you have the product channel fits and then the channel model fits and then the model market fit. But I like sort of, as you mentioned, the spectrum starting on the one end, SMB going all the way, B2C going all the way up to the end and the go to market being it. So maybe let's double click on that and what do you mean by it?

00:04:48 Mohannad Ali: All right. So let's start on the B2C side of things, right? Usually when you look at these subscriptions, these are either weekly or monthly subscriptions with a lot of flexibility to pause, unpause, you know, cancel, reactivate, and so on. The average revenue per user is not extremely high. You're not selling subscriptions to, usually not premium, like luxury products, usually subscriptions for things like food, shavers, these kinds of things like small tickets. So basically, for you to have, when you have a low average revenue per customer, you're now bound by a marketing or customer acquisition motion that has to be low cost as well. Your customer acquisition cost has to be low enough so that you can make enough money on your customers' data.

00:05:33 Mohannad Ali: So to be able to deliver that, most of these businesses cast a very wide net. You usually see word of mouth as a very big customer acquisition channel. You see low cost paid, such as Google ads, Facebook, like other types of social, also playing a big part and so on. So when you cast this very wide net, the trade-off that you make is that you don't get to pick the best customers from the beginning. So this go-to-market motion has inherent in it very high churn in the early days because you acquire a lot of customers, but you lose a lot of the bad fit customers early on.

00:06:11 Mohannad Ali: So you have these deep, you know, retention curves in the first few months. And then you see a very long tail of the best customers. And if you deliver a great value, great value and great product to them, they stay with you for a long time. On the other end of the spectrum, if you look at enterprise B2B sales, you have very high ACVs. The average revenue per customer is really high, which affords you a much higher customer acquisition cost, which then allows you to go very targeted. You define who your ideal customer is and you actively go after them, either with outbound sales motions or even when you're doing marketing, whether it's like on-bus marketing field and so on, you can be very, very targeted. So you go after your best customers from early on.

00:06:59 Mohannad Ali: So you don't and usually also, when they land, they land on yearly or multi-year contracts. So it is very uncommon that you would see extremely high churn in the early parts of the cohort. But if your product does not deliver, and if you don't have the right engagement, and if you don't have the right value, you would see that retention fall off a cliff as soon as you reach the end of your contract term. So this is kind of like what I'm trying to explain in terms of how you go to market besides a lot of what happens in the early.

00:07:29 Mohannad Ali: This is not the only factor, just do not be reductionist. I think something that you talk a lot about with your guests on the podcast is also like the experience in the first few months or the first few days, or even the first few minutes for the products and how they get onboarded and how you activate these customers is also another big, big lever.

00:07:47 Andrew Michael: Big lever. Yeah. And it makes that lever itself is way more important, I'd say on the B2C side and the lower average selling price side, I think, whereas on the high enterprise level, you have a lot more one-to-one conversations with customers. You can handhold them, you can show them, and you can make sure they get to that value where on, on the lower end, as you say, like there really is that sort of steep drop off in the beginning.

00:08:10 Andrew Michael: And I think actually, this is one of the things that when I was at Hotjar, like I are maybe obsessed too much about like the steep drop off in the beginning and then later sort of changed my thing as well, working with you and with others sort of, you need, if like you want to build a bonfire, you need to have the twigs. So you can get the fire going so that you can get the logs running.

00:08:28 Andrew Michael: And in my mind, I sort of see them as sort of like the twigs to get the fire going and you get you fielding through the weeds so that you can actually build a strong, healthy fire that everybody can get around and get warm.

00:08:40 Mohannad Ali: Basically. A hundred percent. Yeah.

00:08:43 Andrew Michael: So I like sort of this analogy, definitely going to put together something for the post that we put out for this, and the visual as well, it was quite nice. At least it painted a good picture in my mind. That's one of the sorts of the differences now that we see as well is really this go-to-market motion, the pricing being a big factor in terms of churn and retention itself. What is one thing that's inherently different now that you'd say in the B2B environment that surprised you when you came to Hotjar perhaps like maybe something that you thought you had figured out at HelloFresh and then coming in with something maybe a little bit completely different.

00:09:20 Mohannad Ali: The difference that I saw, which I found super interesting and actually like very exciting, but at the same time, I think a bigger burden is that when in your, because in a business like HelloFresh, I think it's different from software businesses that have still like a prosumer, a pro-consumer kind of like angle to it or B2C angle to it. You're shipping a physical product at the end of the day. So as a technology professional, and even though the entire value chain of the product happens digitally, there is still a component of it in terms of the value that the customer sees in the physical product itself that you don't necessarily impact.

00:10:05 Mohannad Ali: As much, of course, like there is a lot of technology that also make like power a lot of the decisions in terms of what goes into the box and how we ship it and all of these things. But at the end of the day, a part of the experience is still disconnected from the digital experience because it happens in real life. When you're selling software, the technology is the product, the software is the product. And I think that in one hand is super empowering because it brings you so much closer to the customer, brings you so much closer to the business, you're all of a sudden, you're not just building like the engine, you're building the whole car.

00:10:38 Mohannad Ali: But at the same time, that puts on like a lot of responsibility on I think technology or teams working in companies like Hotjar, because you're now have a high level of accountability in terms of top line, bottom line, and just like how you deliver revenue growth in general. So I think that was like a change in mindset sort of outsource some of that accountability to your peers in a consumer business. Whereas in a software business, you're alone in that field and you have to make that decisions.

00:11:16 Andrew Michael: And it's all product. Yeah. And it's interesting as well. I think like in the environment, especially like the HelloFresh case, really like a large onus goes on to like the quality of the food. Cause like, if I'm not getting good quality food, I'm not going to stick around, whereas in the B2B environment, in our software specifically, like this is really about the quality of the product. If the product's not delivering me the value that I came to get, like I'm going to be churning. So like you said, there's a lot more weight to put on your shoulders as product leaders and working in software businesses.

00:11:46 Mohannad Ali: But you know what's interesting? Like I think what's interesting is that I always try to really distill down what is the customer buying, you know? What is it that they are paying money for? What? So, because let me maybe take a step back to look at like how the internet has done, right? Like when we, the rise of e-commerce, you know, with the Zappos, the Zalandos, the Amazons of the world and so on. Customers were paying for basically three things like selection, price and convenience. At the end of the day, you know, like the variations of this is what we sell in every business, right?

00:12:25 Mohannad Ali: If I look at Hotjar today, the technology is a big part, of course, like we do sell technology that does make something that is really valuable. But I think where the software keeps developing, software is getting more and more commoditized. Like the barrier to entering software is getting lower and lower. Like we've been seeing now with AI what people can do in like 10 minutes, you know? So that barrier to entry in technology is getting lower and lower. But then there is the component of the experience that you set. And then, you know, also the convenience that comes with that experience. I think really understanding what drives the customer to buy, I think helps us really build these products. And I think it's also a good way to think about the modes that you build, especially in a world right now where everything is getting super commoditized, as I was saying.

00:13:13 Andrew Michael: I think that the hyper commoditization of software is becoming more and more relevant. And it's definitely like myself personally, thinking about what I want to do next. Which having me for the show, let me guess, is it something in AI. And for me, like I almost got to a point when I was thinking about it, I was like, it's pointless building like a software product. I went through this like really dark space. I was like, why would I ever want to build a software product? But then I came to realization again, and it's like, anybody can build software, but not anybody can build great software. And it's that experience and that ease that you deliver that really distinguishes and differentiates you from what's in the market.

00:13:48 Andrew Michael: And it needs to be continuous. Like this work and like you can't build a great product overnight. It's like, it takes years to get to the point where you build that moat and that moat comes from that experimentation, that continuous evolution of the product to get to the point where it's just like, you don't need a tutorial on how to use our product, it just works and you understand it's in like, that's when the magic happens, I think.

00:14:07 Mohannad Ali: A hundred percent, you know, and I think that's, you know, since we're on a churn podcast, I think what a lot of people will see is there will be a lot of really high churn in the use cases that we see a lot right now. Because if we take a step back and just get away for a second from how breathtaking this whole AI revolution is, because really it is one of these hype cycles that have substance. There is real utility for the technology. But if we really look at what's happening, you see chat being a big thing, being the primary medium of communication with AI. It's extremely cumbersome. There is no way this continues to be like the primary medium of interaction. Right?

00:14:53 Mohannad Ali: The best AI is ubiquitous, you know, like it's happening. It's woven into the fabric of the technology itself. It's kind of like when you're on TikTok, every time you scroll, there is AI in the background, but the user doesn't see it. So I think that's one. Number two, there is the very primitive value of just like what a large language model can do. And that's a lot of like the use cases that you see people building. And then, but once Slack puts it in their app on Salesforce puts it in one zoom, zoom in, you know, like when they have the distribution, they have already like the customer base and so on. It's game over for a lot of these, these customers.

00:15:28 Mohannad Ali: But to your point, like if you're able to build a unique experience to make it so easy for customers to really use the value of AI. And through that usage, you have data that can also reinforce your model in a way that it's proprietary. That is not the same like everyone else. I think this is how you create, this is how you create your mode because I see now a lot of use cases also where the AI version of the feature is more cumbersome to use than the original way of doing it.  So I completely agree with what you're saying.

00:16:01 Andrew Michael: No, definitely. I see there's going to be a large amount of churn. I mean, I like, for example, I've just looked at different tools for podcasts, like how to edit them and stuff, and like, I just, there's so many claiming to be the next best thing to automate your life away and stuff. And then you go into them and she's like, this is like a crap experience. Like this is not going to work. And obviously the market being extremely small being the main point there. But I think I've been exploring and looking into different avenues. And it's actually the reason why I decided to shut down Avrio itself as well.

00:16:32 Andrew Michael: Because like, as you mentioned, like when Slack, when zoom, when all of these sorts of tools start to implement since their feature, like we decided early on that's a big different shadow for us was going to be automation and we're going to use AI and then chatGPT came along and we started seeing like all of these different tools emerging overnight. We went from like no comm like we had a small amount of competitors to like a hundred, like all doing the same thing. And I think that just gets it accelerates, but then it accelerates amount of crap in the markets.

00:16:53 Andrew Michael: It's funny that I actually mentioned this from this perspective as well, because I was looking yesterday or the day before at user interviews. I don't know if you've seen that every year they release this state of research. And I was surprised to see that Hotjar was the number one used tool, like where they, researchers use AI as part of their process. So like there's maybe 25 tools Hotjar was number one. Have you seen it?

00:17:22 Mohannad Ali: I haven't seen the report, but it's good to know. I'll find it and share it with the team. They'll be happy about that.

00:17:27 Andrew Michael: Yeah, you should. So I'm keen to hear a little bit about that. It's like, maybe we can just touch on like, what was the strategy going into it and thinking about it, obviously, like you have some thoughts on what is going to lead to churn in the space because of these experiences. How did the team sort of think about introducing AI into our job?

00:17:46 Mohannad Ali: So one of the tenets that we have in general in building experiences, like one of the things that differentiate Hotjar, and I think a lot of the Hotjar users know this, it's the simplicity is how intuitive it is, how very little friction there is in using the experience. So what we told the team is that whatever we build, we are working towards like one-click experience. You know, that's the true value in everything that we do, especially when you talk about AI, has to be like one-click. So we started exploring first the use cases for Hotjar Ask, which is probably the most immediate application of large language models, because this is our service product and this is where we get customer feedback. So it's a lot of text.

00:18:29 Mohannad Ali: So it's very easy to deploy LMS on it. And the first thing we thought, okay, as you create the survey, how can AI help you? So we found an easy way for you to tell the AI what is your goal from the survey or pick from preset goals that we have set for you so that you can click. And then the AI will just build a survey for you, like the questions, the different options, different question types, and so on. And then the other end of that user journey is that after you collect the feedback, you don't want to sift through the answers one by one, analyzing it and exporting it and so on.

00:19:05 Mohannad Ali: You want the AI to do the heavy lifting. And I'll tell you in a second about an interesting mental model that I used to think about AI. So we started by creating summary reports so you can have the AI read all through the responses, summarize the key points, give you codes to support the key summary points, but also make recommendations for what you should try based on the feedback that you receive to your customers. We're a few days away from releasing the second iteration of this. So by the time this podcast is live, this would have already been published, adding a layer of sentiment analysis and topic direction to this as well.

00:19:46 Mohannad Ali: So, we really can tell the customer what is the sentiment and the feedback that they get, what are the main themes that they're talking about and so on. To the mental model that I want to talk to you about, because I think it's really important for us to not treat this as a situation where if the only thing you have is a hammer, then everything is a nail. I think there needs to be some sort of understanding at which layer of the system architecture you want to deploy AI and also what value do you expect from it and what value would be very, very difficult to expect from it.

00:20:21 Mohannad Ali: So my base model before the last revolution of AI is that with machine learning and AI, the best thing you could do is having an infinite number of not very smart people or like not very experienced people. So let's say in a specific domain, this would be the equivalent of an intern, an infinite number of interns. So if you want people to read through things and just summarize or something like this, that would be great. You would have 1,000 agents doing this easy.

00:20:53 Mohannad Ali: I think what we're seeing right now is not an infinite number of people who don't have a lot to experience. It's an infinite number of people who have pretty good knowledge. They are not expert-level knowledge yet.  You know, they do not replace the experience of someone who has extremely deep domain expertise, but they're pretty good. If you would use a software engineering example, like they're pretty good, like junior developer. They're not someone who has no knowledge of software. I think the next step up, and this is what's very difficult for us to do right now, is to have the experience of an infinite number of even, or even just one person who is like an expert in a domain. So I'll give you an example of what kind of use case would this look like at Hotjar?

00:21:37 Mohannad Ali: So one of the things that we think about quite a lot is how do we apply AI to our observed product, which has our heat maps and session replays product. Some competitors they have done is that they haven't shared this implementation detail with me, but that's my assumption is that they would transcribe the events of a session replay. Let's say the user clicked this button that has this text, then navigated to this page and so on.

00:22:03 Mohannad Ali: And if you tell the large language model a story, they can create a summary of it. They can tell you what happened, right? Because it's language. But it's not very insightful. But it doesn't really, if you are someone like you, can look at the session replay and understand, you know what? Actually, there's a problem in that CTA. And that's why the user is doing that. They can't do this yet. If we think about heat maps, I can show you a picture of a heat map. And you will say, oh, I can see why this is happening because this navigation items the user is not clicking on them or something like this.

00:22:37 Mohannad Ali: This is not something we're able to tell the AI yet, because while the AI can interpret a lot of images today with multimodal iterations that we've seen recently, but they don't have the expertise of someone who's an expert on conversion rate optimization or someone who's an expert product manager. I think it's your role then as a Hotjar or any other player is to see how can I make the AI an expert in my domain by reinforced training and so on. And if you're able to do that, then you unlock the value that is a leap from where we are today.

00:23:10 Andrew Michael: Yeah, I think that's definitely going to be the exciting part. I think a couple of months back, VC firm shared a deck with me just to give some feedback on it and they were claiming basically to be able to give you immediate feedback on your design and tell you if it was going to convert or not. And basically what they'd done was taken screenshots of from some of the best websites in the world. And then they were trying to train a model to predict that. And I was like, this is not going to work. Like they don't have the core component, which is the actual data.

00:23:40 Andrew Michael: And I said, if any company is going to do something like this, it's going to be a Hotjar because they have the event tracking data so they can see when conversions are happening, they have all the HTML data on the pages and then they can start to detect, okay, what content goes, what length is like time on page, all of these sorts of data points that you can be feeding it and it becomes really smart. And then that gets to the point where you said sort of that moat of the amount of data, I think like, but you'll probably has, if they definitely had the most, and I'm pretty sure they still do the most websites using the product or service. So that becomes like this reinforcement learning loop and becomes extremely powerful.

00:24:13 Mohannad Ali: But is it enough? That's also like, that's another question, you know, like the amount of data it took for us to see these large language models is pretty massive. Right? So there's always the question of like, is it enough data to actually get to this level of accuracy?

00:24:29 Andrew Michael: Yeah. You'd hope at some point you get there. Nice. So we went off a little bit on a side tangent on AI, but it's definitely interesting to see how you think about it. So we appreciate the mental models that you bring to these sort of exercises as well. Going a little step forward then as well now, we're in B2B land as well. You touched a little bit on pricing and that differentiation. I'm keen to hear as well because Hotjar serves small businesses itself. How do you see similarities between the pricing at hot jar and something like a HelloFresh or a B2C product?

00:25:04 Mohannad Ali: I think the most common thing that you have to think about is that again, coming back to that go-to-market motion, right? Like casting this very wide net, high word of mouth and so on. You need to have accessible pricing. Right. You need to find the right exchange of value. And like, this is something that you and I worked together on when we were at a Hotjar together is really understanding the willingness to pay and understanding like how to create that fair exchange of value. I think that's super important and it has to be transparent pricing, not only just a good value for money, but it has to be transparent pricing.

00:25:40 Mohannad Ali: So customers, because the cycle that you want to create is that you have these customers coming from these customer acquisition channels. You want them to very quickly look and see, Hey, is this for me or not? Should I try it? Like you're not trying to get someone to commit long-term. You want them to start trying it, to buy that first HelloFresh box, to subscribe, to enter the trial, to start on a free-mail product for a Hotjar, you know, these kinds of things. So you want them to start trying, you want quick time to value. You want to broaden up value proposition that this works for a lot of people. You want that quick time to value because then you want them to go and tell someone else about it as well.

00:26:19 Mohannad Ali: So the pricing model is a very, very key component to enabling that. Because if you have a model that is incompatible with this journey, whether it's because it's untransparent and they have to speak to someone to know what the price is, or if it's like too expensive that they would immediately bounce off your website, you've broken your go-to-market motion.

00:26:39 Andrew Michael: Yeah. And you figure out. It's interesting. I had an interview quite a while back and I think it was with Carl Gold, I hope I got his name right. Carl, if I didn't, I apologize and I'll correct it later. But we were talking a little bit about mapping out your user base. And I think it's a really interesting exercise in terms of mapping out your user base on X axis, you can say the price they pay and the Y axis, the value that they receive. And just doing like a four by four matrix and sort of understanding where does your audience sits. And ideally what you want is top right, majority of your audience because they're getting a lot of value and they're paying you a lot of money.

00:27:16 Andrew Michael: And over time you go there, but I think it's an interesting notion as well in this context as well in the B2B and like serving small businesses is that the price and the value really needs to make a difference in this space. And people are say a lot more price sensitive at this point where like on the enterprise level, there's almost this inverse reaction where it's like if somebody pays more money, they're more likely to use your service because they feel like there's a greater ownership that they need to actually get value out of the product.

00:27:46 Mohannad Ali: So it is very true. You know, it's funny, like our Hotjar ask product, we were giving it away for free for many years, the day we started charging for it, retention improved, engagement improved, you know, just customers saw value in it.

00:28:03 Andrew Michael: Yeah. So pricing, like a big component of this, as you mentioned in these two types of businesses. And obviously it's pricing, I think a very important component in all types of business. And then going back to sort of the go-to market motion that you mentioned as well, the channels, I would imagine they're fairly similar in the case of the B2B and Hotjar as well. And you can remember wrong, but like you say, these high intent channels where you need to be able to acquire users and efficient costs because your LTV is typically lower than a large enterprise deal. Are there any other similarities that you see between the two when it comes to acquisition?

00:28:40 Mohannad Ali: I'll tell you something that is similar, but very different at the same time. So we talked about word of mouth and how that plays. Definitely word of mouth is very, very big, but a version of word of mouth is usually the referral programs. And I think the beauty of B2C is that you can really do so much with the referral programs. In B2B it is much, much harder to do this because in B2C, like the full programs, you can do something good for the customer. They get some money back, they get free products, they do the same for their friends and so on and it's easy.

00:29:15 Mohannad Ali: But very few users in a company or buyers in a company would care that much about trying to convince another company to buy a product so that they get some benefit like 10% of the company's bill. Which actually reminds me of another point that I wanted to tell you and I forgot and now I'll bring it up. Is that when we think about churn and when we were talking about the price, different price deals and the mapping of the value of the customer and so on. I think when you have turbulent times like we're in right now, and you know, a lot of uncertainty, customers cutting budgets, cutting teams, and so on.

00:29:50 Mohannad Ali: You really start seeing how the different buyers at different company sizes behave. I think on the top end, like the bigger customers are more rational buyers. So when we saw spikes in churn during this economic downturn, it was not as emphasized on the bigger customers because they could still do a calculated decision. Even if they're paying $1,000, $2,000 a month, they can make a calculated decision to say, you know what, I get way more value than the $2,000 I'm paying per month. But then you have a customer that's paying $39 a month, and cutting that $39 a month in a company's budget is immaterial. But you would see a lot of these users saying, Hey, I need to cut this because of budget cuts. But so you can see, it's not to say like a rational decision. It's more of maybe an emotional decision in terms of reacting to the circumstances that you had to cut everything and try to stay lean.

00:30:48 Andrew Michael: Yeah. I think that's an interesting point as well, because I think for myself, like running, let's say like the podcasts, I have quite a bit of expenses that stack up for the show and things like this. And like when I talk to friends and I tell them, I spend this much money on this tool and they're much. You're like, what are you crazy? Why are you spending this money or whatever? You could do that this way. I was like, my time is worth... First of all, way much more than the amount of money that I spend on these tools and rationally, I'm investing into this business and it's returning back to me. And it's like, I think a lot of smaller businesses might think, okay, what cost can we cut, let's just get rid of things, but they're not see the inverse value of what am I losing out from these gains, whereas as you said, like more sophisticated product teams and large organizations, they really like have this built-in radar that says, okay, like what is the ROI of the service or the product that I'm using?

00:31:38 Andrew Michael: And I think the larger you get in organizations, the more tuned and they're more sophisticated those processes become as well working. I think a lot of like conversations I've been chatting to CSM leaders, like customer success leaders and a lot of their conversations have been with the chief financial officers lately. And really needing to, it's gone to that level now where like every sort of budget line is being discussed, but there's a discussion. It's not like this irrational decision-making process.

00:32:03 Mohannad Ali: 100%. Like every buyer, every renewal that's happening right now is a down sell. You know, like it's a downgrade. Everyone is trying to cut their bills and you have like, I don't envy CSMs right now, because of success teams, because you spend so much time in defense that you can't really like grow these contracts. You can't like, you know, sell them new products and so on.

00:32:27 Andrew Michael: Yeah, it's definitely, it's been a tough year and it's going to be interesting. It doesn't look like there's any way out still at the moment. So it's going to be, at least I think for next couple of quarters, maybe continue to be challenging for other teams. How are you dealing with this yourself at this moment in time? I think it must be incredibly stressful. CEO of Hotjar, like a large growing organization as well. What are some of the things that you're thinking about at this point in time?

00:32:57 Mohannad Ali: We're luckier, I think, than most because Hotjar, for those who don't know, has been historically a bootstrapped company. So we have learned from day one to run this business in a capital efficient manner, in a profitable manner and so on. So we have a strong balance sheet. We don't have debt. We've been profitable. It's harder, of course, to stay profitable in this environment, but we can weather the storm. What's challenging is that we need to make sure that we continue our trajectory because what I think about is the following.

00:32:29 Mohannad Ali: As a CEO of a company trying to navigate this time, you're trying to create a delicate balance because on one end, you could easily just go very defensive and say, you know what, I will cut investment in a lot of different areas, we'll play defense and be conservative for a year and just weather the storm. But if you come outside on the other end week, your competition can do to you what the recession couldn't do to you. You know, they can really, you know, create a lot of pressure on your business.

00:34:01 Mohannad Ali: So you try to do the right balance of like, how do we stay lean? How do we manage our expenses? But how do we continue to deliver growth? How do you continue to innovate? How do we continue to strengthen our position in the market so that when the tailwinds start coming, we are the best position and the best position to ride them.

00:34:20 Andrew Michael: Yeah. I think it's like Mark Benioff with Hindsight, obviously it's easy to say this, but like his thing of the last recession was like he regretted not investing more and not going more aggressive in these times, because as you say, like there comes a time where everyone's reducing budgets, people are stopping spending and what this does is eventually like reduces the custom acquisition costs because these channels then become less competitive to go after. And so there is an upside, but then it's also that fine line of like, uh, you wanting to maintain that profitability and level that you're at and trying to understand, like it's a tight rope, I guess that you're navigating continuously now.  And I think for yourself as well, like a character, I know you like to grow, so I think it must also be like a little bit of a... you must be like itching at the feet.

00:35:08 Mohannad Ali: Yeah, it is tough. Yeah, definitely, definitely itching. Like you feel, you feel the gravity of the gravity as in not, I don't mean by it, like the magnitude, I mean, like the literal sense, like you feel like something pulling you back and you're trying to, it's like swimming in oil or, or like honey or something. It's like a lot of resistance.

00:35:30 Andrew Michael: Cause I think it's crazy. The growth at Hotjar went through in such a short space of time as well. Like after you joined, I joined Hotjar when there's like 20 something team members. I think I left when there's like something around a hundred. I'm not sure what is Hotjar today. How large is it?

00:35:43 Mohannad Ali: We're around 400 people today.

00:35:44 Andrew Michael: Wow. That's like being in the space of like three years, three and a half years.

00:35:50 Mohannad Ali: I think, yeah, I joined 2015. So four years, sorry, 2019. So four years.

00:35:57 Andrew Michael: Yeah. So it's grown incredibly fast and obviously like in terms of revenue and so forth and product lines, and now like, I think, as you said, like this feels like probably like the first time where it's not just Hotjar, the whole market, but I can imagine what it must feel like now. And I think that the analogy of gravity sums it up quite nice. I want to save time for a question. Ask every guest. What's one thing that you know today about churn or attention that you wish in you when you got started with your career?

00:36:23 Mohannad Ali: I think when people think about churn, they think always like value onboarding and so on. There is a component in churn that I like to call like the mechanical churn or like churn that they can solve mathematically or as an engineer, so as a product person. Engineer not as in by code, but as in systematically break it. So I'm talking about payment acceptance rate. I'm talking about subscription term optimization. I'm talking about whether you sell monthly or yearly, the impact of your pricing and packaging, all of these things. They have huge, huge, huge impact on your retention, but they're often an afterthought.

00:37:01 Andrew Michael: No, absolutely. And I think there's like some really great, like it's basic maths as well for a lot of these things that you can figure out and understand. I think one of the ones was like, we talk about is like credit card dunning, for example, is like if, if the average card expires every two years, roughly 45% of cards every month of your user base have an expiring card per month. That's something avoidable that you can deal with, but it's like you say it's, it's not, but yeah.

00:37:30 Andrew Michael: I think it's super interesting on the pricing and packaging side, how much work you can do and how people are very scared, I think, to experiment with pricing and packaging. I think this is the one good thing. I think at Hotjar is eventually like, we understood that it's a part of the product and it's not like a special thing. It's a taboo that we don't want to touch, but we really need to be experimenting and playing with it.

00:37:49 Mohannad Ali: A hundred percent. I mean, now we have dedicated teams actually working on these topics. We change our pricing and packaging in some way every six to 12 months now. So that's definitely something that we continue doing.

00:38:01 Andrew Michael: Well, Mo, it's been an absolute pleasure chatting today. I think we can continue for days chatting about this, but really, really appreciate the time and I wish you best of luck now. Is any, actually before we wrap up, is any final thoughts you want to leave the listeners with anything you want to share before we close off today?

00:38:17 Mohannad Ali: No, I just want to say thank you for having me today. I had a great time. This has been a fun conversation and I hope the listeners like you enjoyed it as well. And yeah, looking forward to maybe coming back in the future.

00:38:29 Andrew Michael: Amazing. Yeah, we'll definitely love to have you. So thanks for joining for the listeners. Everything we've discussed today will be in the show notes so you can pick those up there. And my wish you best of luck now going forward. Hopefully that gravity can lift a little bit and you can start to to run like you enjoy doing. So thanks for joining. Have a good one.

00:38:45 Mohannad Ali: Thank you, Andrew. Bye-bye.

00:38:46 Andrew Michael: Yes.

00:38:57 Andrew Michael: 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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