How Spendesk built a sales and revenue model that eliminates churn
Head of US GTM
Today on the show we have Alfie Marsh, Head of US GTM at Spendesk.
In this episode, we talked about Alfie’s responsibilities as Head of US GTM, the differences between the go-to-market strategies launching in the US vs the UK, and the different ways their sales team contributes to retention.
We also discussed the positive impact on churn by knowing exactly who your ideal customer profile is when sourcing outbound leads, identifying and reaching out to outbound prospects and how product positioning has the power to transform your company.
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Andrew Michael: [00:00:41] Hey, Alfie welcome to the show.
Alfie Marsh: [00:01:32] Hey, thanks for having me.
Andrew Michael: [00:01:34] It's a pleasure for the listeners. If he is the head of us, go to market at Spendesk, the all-in-one spending solution for finance teams. Alfie started out as a sales development rep and worked his way up to head of us GTM through a time of explosive growth for Spendesk uh, prior to Spendesk Alfie was a Bloomberg working on global electronic trading sales on hedge funds in buy-side. So our first question for you Alfie is what are you responsible for at Spendesk? As the head of us GTM and maybe [00:02:00] also what. Global electronics, heading sales and hedge funds. And buy-side I had to read that a couple of times opening to the buyer.
Alfie Marsh: [00:02:07] Yeah. So isn't it. Um, well, the, the trades that we insure, uh, I used to sell trading solutions to banks and hedge funds. So, uh, instead of people picking up the phone and bringing their broker to buy in and sell stuff, they do it over, uh, Platforms and so used to sell these solutions. Um, and to, to the other question, what do I actually do as Spendesk in the U S it's a good question.
So historically I looked after the UK market in the kind of first couple of years of my time, at Spendesk, um, really launching that from the get-go. Uh, building the initial team and the initial revenue, uh, machine there. Um, and then about a year, year and a bit ago, I moved over to San Francisco to help launch Spendesk in the U S so very much from a similar perspective, uh, however, under quite different contexts.
No way four or five years [00:03:00] later into the market. There's a lot more competition. Spend management is a lot more evolved and mature in the market. And so my main responsibilities are to work with the sales, marketing product and engineering teams, uh, to have a successful go to market and get initial traction in the US.
Andrew Michael: [00:03:17] I think that's very interesting. And I'd like to touch on that a little bit more. So what you're saying as well as I can, yeah. As you start to Spendesk, like approaching the UK market was a slightly like immature market, less competition, less understanding of the space. So you had to adopt a certain strategy when it came to go to market.
And now moving to the U S you have to rethink that strategy going into more mature market, bigger players, uh, to try and make it in. What are some of the differences that you see in the two strategies now? Like how do they differ from that first time? Like launching up in the UK to now in the US?
Alfie Marsh: [00:03:51] Yeah, it's quite interesting. We've got, so we're a French company. So born and raised in Paris, France, uh, but pretty much almost from [00:04:00] day one, we started operating for the UK market and the German market. So I joined this when there was around 20 people in the company. So we were quite international from day one.
Now, when I look back at the kind of lessons learned and mistakes that we made in, in those mines, I would say that the inexperienced means that we didn't know how much of a product market fit we actually had at the time. So our biggest mistake was not being more aggressive in our expansion and, uh, you know, putting the foot on the gas, so to speak.
In the context now where, you know, spend management is more mature. It's also a lot more mature in the U S market. So we're coming to the, to the party in a different context. Uh, products and solutions are more mature. The market understands the context of spend management. Uh, the goal was a different of the customers here and so on and so forth.
So the product that we have. Needs a lot of adapting. In addition to that, unlike a product, for example, you take like an Intercom, which has a, quite a ubiquitous product market fit. It doesn't matter what country it is, [00:05:00] seven lines of code, and it works on your website. We've spent this, we are a financial technology company, which means that we have a big element of FinTech, uh, which changes in every country from regulations and so on and so forth.
So there's a big element of adaptation that we need to. Do to make sure that we have right, right. For the right debt. And so our go to market approach is slightly different in terms of, instead of just launching a sales and revenue machine, uh, we are also focusing on building out the product and developing the market right from the beginning
Andrew Michael: [00:05:33] yeah, that makes a lot of sense. And I think it was great that you mentioned the Intercom example because that was some of the questions that was coming to my mind was like, I'm pretty sure this regulatory, uh, like forms that you need to like comply with the different markets, the different needs, especially when you're dealing with FinTech.
So I can definitely see how that changes market by market and the challenges probably get greater or less depending on the region that you're entering. Um, and would you say there's. In terms of the overall go-to market [00:06:00] strategy, then like the way to acquire and approach customers, has anything changed between the two different markets have, has, have you had any learnings from the UK now that you're bringing to the us and your playbooks that you found effective work effective?
Alfie Marsh: [00:06:13] Well, Yeah. I mean, fundamentally we're, we're an outbound, uh, company. Uh, we're really driven by our sales team and outbound sales in particular. Uh, that's kind of good as from naught to 10 million phase of, of revenue. Um, but obviously as you, as you kind of get past your 10 million. Worth of ARR, you need to be able to diversify your channels so that you can then scale from 10 to 10 to a hundred.
So in our core markets, and we're more diversifying from our outbounds to have, uh, partnerships and other channel, uh, other channels, inbound marketing, we're having a lot more of our leads coming in from inbound as our brand building, so on and so forth. So in the U S it's interesting. We have w from starting from scratch, you kind of have all of these different [00:07:00] channels that are available to you.
Uh, and so you can test all of these different ones out. Um, so for one thing that we don't have when we come over to the U S is our strong brand, which is something that we do have in Europe and can rely on. So naturally you're not going to go straight into the market, having a lot of inbound leads. So you have to go out there again with the outbound focus in the early stage.
To get those conversations with customers and then start building your brand and building your connections within the industry. Um, I think that something that is quite interesting, interesting as a distinction between the two is the amount that you can acquire in terms of contract value size often tends to be much larger in the.
There's an element. with Spendesk that part of our pricing we've always run how much money people spend on the platform and just the average amount of money that people spend on things like SaaS tools in the U S is probably like 10 X where people spend in Europe. So there's naturally a big boost in there now that.
That has an interest in dynamic because it means that is, uh, a different, uh, lifetime value to cost of acquisition ratio. [00:08:00] Uh, and if you are able to have a higher lifetime value, it means you can get a bit more experimented, uh, experimental with your costs of acquisitions and therefore your different channels, which is something I think, you know, G Cabane who had done previously was talking about the difference with that, that, that play, uh, and it allows you to be, if you can be competitive in your acquiring costs.
Or your contract values. It allows you to actually have a different channel.
Andrew Michael: [00:08:24] And a competitive muscle there. Absolutely. Um, and that's something as well, like talking a little bit more to now is in terms of like working your way up and increasing their contract value. Um, do you have any specific payback period that you're always aiming for?
Irrespective of like how the LTV increases? Because I think at some point as well, Uh, you want to get that return on investment in like, is there any sort of set targets you set yourself? So it's because in my mind, like something like Spendesk, I think it feels like it's a enormously sticky product in the sense that once you've got a good fit customer in the door, like there's very few cases where they'll [00:09:00] actually want to churn because you, you end up like being the backbone to how they transact, uh, at least with the team.
So do you have anything like specific then in terms of like payback periods that you shoot a name for? Like, how are you measuring. Success then in this case,
Alfie Marsh: [00:09:15] Yeah, it's a really good question. I mean, you want your payback period to be as short as possible and really around like 12 months or less. I think that what's interesting is in that, uh, calculation of the lifetime value of your customer over the cost of acquire them, there's there's other elements which you can then play with.
So within the lifetime value of the customer, it's going to be, what's the amount of revenue. Per customer times how long they can actually stay for. And obviously hence with the, with the churn aspect, right. Um, becomes a really important part. Like you said, for Spendesk we have a ridiculously strong, um, churn number, uh, in terms of both the amount of companies actually have a leave spend.
This is super low compared to industry standard. And that's probably a big part to play around the quality of the product, but also the nature [00:10:00] or. Uh, ripping out something which is so at the heart of your business, around spending money, uh, is quite complicated and people just don't want to do it. Um, which is, which is great.
So people don't churn and that means that the lifetime value naturally increases. Um, and again, that's another aspect of how you can then get more creative with your acquisition channels because you have this dynamic, which other competitors, or other just vendors and different, it's just, they cannot play.
Andrew Michael: [00:10:25] Yeah. Uh, and then at some point as well, like you say, you can get so much more credit. You can pour money into different channels. You can run experiments because you know, ultimately that money's coming back, uh, and slowly over time you can work towards reducing the payback. Um, nice. So let's talk about that.
Look in the context then of churn and retention itself as well. And specifically now it's spending yeah. Where the idea of like having a customer that's always going to. You certainly to stick with you, like, what are some of the ways that sales is contributing to retention? And in my mind, like the most obvious comes is like [00:11:00] Net ARR retention is, uh, through upsells and expansion. And, uh, how much of a role like is the sales team like focusing on this? Is this more a sales driven initiative at Spendesk or is it a customer success driven initiative?
Alfie Marsh: [00:11:15] Yeah, I think for us, we, we work quite well across the entire funnel from the sales, from the marketing, the sales and the customer success process.
We have a handover with our sales team and our customers success during the onboarding. We have a natural period where there's quite a close relationship because we only bring on customers. They have to go through a KYC process before they get fully onboarded, uh, and the nature of us, uh, because again, we're a spend management platform.
We can actually take our billing. The funds that are on the client's platform itself. So effectively from again, from like a, a handover perspective, it's in the sales best interest that the customer is fully onboarded because it's the moment that there's funds on the platform that they're considered closed clients.
So there's, there's kind of, we, we naturally integrate [00:12:00] parts of the workflow to make it in the best interest for the sales and the customer success team to be alinged. Um, but also there's, there's many different ways that you can, uh, That you can align the two, I've seen this in other companies, for example, where sales teams part of their bonus will be determined on, uh, the number of customers that are there after three months, for example, and again, inSpendesk, one of the ways that we would count, for example, our new MRR, which is a part of the targets of the salespeople is in the first three months.
So for us, for example, part of our revenue is going to be based on usage. So when someone on board, you Spendesk, they're not going to be spending hundreds of thousands of dollars on Spendesk on day one that will increase over time. But the more that you can get that within the first three months, then the more that's going to contribute towards the sales rep.
And they'revariable. So there's a natural. Kind of ingrained incentive for the sales rep to help the customer success, understand what the success metrics are, what are all the blockers to [00:13:00] onboarding, setting up timelines. Uh, so that as soon as that, the customer success person takes the account, they're off to the races and they're running away from the account.
And so there's naturally going to be more spending and hacking in and usage earlier on. So we do that in a multitude of different.
Andrew Michael: [00:13:16] Yeah, I think this is so important when it comes to sales is like having good targets and goals that are aligned with long-term success because more often than not as well.
Uh, like if it's, if sales aren't given the rails with the own, given the incentives, like it's just like closing deals, bringing them. Uh, types of companies into the funnel, like sending them off to success and then ultimately churning down the line just because there aren't good fits. So I'm interested, like you mentioned the outbound strategy being really like core to your go go-to market strategy early days in UK.
And then now in the U S how much of like identifying your ideal customer profile comes into play when sourcing your outbound leads and what did that process look like? Like identifying them and how, how are you going about [00:14:00] reaching them?
Alfie Marsh: [00:14:01] Huge enormous. It's it's it's, um, one of the most critical parts, um, and is also one of the reasons why outbound is so effective, because if you do know your ICP and you can figure that out and there is strong repeatability, it means that you're going to go.
Uh, acquire customers that are really great fit and that has a direct relationship. So the amount of churn that you're going to have at the other end and their success on the platform, when you have inbound, you have less control necessarily. Who's going to come in. So your goal there is to more go through and sift through those different customers and then try and onboard the ones that are going to be the best fit.
But naturally, you're going to have people where. It's relatively low effort to onboard them. You're still getting revenue. There's an incentive for people to close these deals, but they're, you know, their, their NPS score is going to kind of be, Hmm, not too great, not too bad in the middle. And so there's a real danger of that [00:15:00] middle zone because.
Attractive to onboard them. There's there's not necessarily upfront costs, but having those kinds of customers is those a huge cost in the long run because they require more attention from support as well as customer success and that they do end up churning. Then it is very costly in terms of cost of acquisition.
Andrew Michael: [00:15:18] And not only that as well, I think it's like, you'd be getting a whole bunch of feedback from potentially bad fit customers and, uh, like causing confusion when it comes to product. Like what do we build next? And you have a whole bunch of requests coming in from a bad fit customers. Like ultimately you're getting mixed signals where, uh, like you say, focusing really on your ICP.
So I'm interested in as well, like in the outreach process when it comes to this, because obviously within your like ideal customer profile, Uh, you have specific buyer personas and those that are more likely to be the purchase of the software versus the user of the software. Even if you understand that what the company profile looks like.
Um, so how are you going about sort of identifying the buyer personas and then how are you actually reaching out to them in the early [00:16:00] days? Like, what are some of the ways that you're, uh, trying to get to them
Alfie Marsh: [00:16:05] yeah, I think so if we, if you kind of go, uh, like take a step back and look at the high level as well, when we're talking about the difference between the UK and European go-to markets versus the U S one of the reasons why outbound is so helpful for us is because we don't necessarily know who our ideal customer profile is and who our persona is at the beginning.
Now we've having four and a half years of experience in Europe. We've got a pretty good, like, you know, intuition, a good place to start with. But ultimately you got to take the approach that you could be completely wrong for multitude of reasons. So we really start off with a listing out a bunch of hypotheses and say, okay, we think that this type of client in this type of buyer in this position, in this type of company of this size, and this can, you know, this event has happened, uh, is going to be a good, a good fit for us.
And then, so. Go about validating that. And again, this is what outbound really works for us because we can be [00:17:00] very picky in who we speak to. And we want to validate those that segment and say, okay, this was correct or not. And then if it wasn't understand why, and then reshift and go to a different, a different segment and different potential ICP, um, in, in your, your other question was what was the different processes that we have around, uh, outreach in?
Or how do we look at the different buyer personas and know which one's the correct?
Andrew Michael: [00:17:21] Yes, that was it.
Alfie Marsh: [00:17:24] I think for us, we have a, in terms of the way that we outbound prospect, we have a multi channel approach through, uh, emails, calls, LinkedIn, uh, lots of different areas, different people like different channels in terms of being reached on.
Um, but in terms of the people that we speak to, like you said, the economic buyers, there's different users, there's decision makers, there's people that are quite far. And this also changes depending on the size of the company. So if I give you like a really concrete example, um, Spendesk, this is a really good fit for a finance team, which has a lot of generalist top.
[00:18:00] Meaning, if you take a pyramid of task at the top of super strategic and at the bottom are low value added manual tasks in a large corporation where there's 5, 6, 7, 8 finance people, all of those tasks along that pyramid are going to be specialized in one person will look after them in a generalist finance team.
You're going to have maybe one or two people that actually have to do all of the tasks across that pyramid. Now for us, there's a, that's a really good fit for us. Because we can automate those low value added tasks and then liberate their time so they can focus on the more strategic things. So there's a higher ROI for these people in automating those low value added tasks.
So what does that mean in terms of how would we think about, uh, outbound, uh, approach? We'd say, okay. In what scenarios are they going to be more generally as financed? We'd look at the size of the company. It's more likely to be between a 20 employee company and 200 employees. It's going to be the number of finance people per employees in the company as a [00:19:00] ratio.
So one finance person, one to two finance people per a hundred people is like a sweet spot for us, for example, but all of these things, um, we learn. Through having a hypothesis going out and contacting people and either falling on our face or managing to close deals. And then we take that and say, Hm, there's a, there's a trend here as to what works again.
If you use inbound in a go-to market, you have so much less control over who you speak to. And so it really can impact your learning.
Andrew Michael: [00:19:28] Yeah, uh, makes a lot of sense. And I think as well, like what next question I want to sauce from the back of the center is like, you're speaking to a lot of customers.
You're getting a lot of data points all the time. You're learning and you're evolving as you go along at the same time. I think marketing does their own bits, trying to understand, okay, who this ideal customer profile is, products doing their own components of it. Like, how are you. Sort of sharing these insights back within the team.
How are you then evolving the strategy and understanding if you have so many different agents speaking to different people? Like where are the signals coming in? How are you centralizing this [00:20:00] information for your team?
Alfie Marsh: [00:20:02] Yeah, it's a great question. So I think there's, um, the, the information or learnings comes in through the, the funding, right?
So there's information around which positioning, um, uh, actually works and resonates, and this is much more, uh, the SDRs and the account executives. They're going to have an, uh, an understanding of that. So this is more top of middle of the funnel. Then there's a K w where do we actually win versus other competences in the market?
And what closes, what type of companies actually goes through. And then there's on the other side. Okay. Once a company is. A customer of Spendesk, uh, what is their usage? How good is their usage? And is there indicators that their usage is poor and they might churn, or that they've got good sticky indicators that they'll stay with us.
So there's kind of all the way through the funnel, different types of feedback. Now we tend to split that into two. Groups, uh, customer facing feedback, uh, orientated group and then a product one. So we that's, and that's how we split our go to market teams as well, customer facing and product. [00:21:00] So I'll put it to the engineering is based in France and our customer facing teams here in San Francisco.
We have a weekly meeting with our executive committee for the U S go to market, which includes our CEO product Depot and so on. Um, and then one of those is going to be based around more of those learnings from customer facing and that side of things. And then others is going to be based around, uh, the products and therefore what the roadmap is.
So it's just super important that you have a very fluid feedback loop that continues, uh, all the time. Right. The, what we build in the product is going to feed how we're going to position and how we're going to pivot that positioning. And then the feedback we get there is then going to determine what the strategy is and what we prioritize in terms of our product roadmap.
Andrew Michael: [00:21:41] Yeah, because in my mind, I'm just thinking about all these conversations that are coming through. There's like great things like you're meant for positioning that customers might say in a call, it's like, oh, that's a great way to position the product. Obviously the best copy of you're going to get is like, from your customer's mouths.
And, uh, interesting, just to sort of see, like how you bringing that back in then, [00:22:00] uh, feeding that back in marketing, into products into the company. So people understand and can take advantage of it.
Alfie Marsh: [00:22:05] Yeah. I mean, in terms of just like operationally the best quickest and easiest way to do that is get a call recorder.
Whether it's, you know, gong, mojo in Europe or grain dot CO's just come out, which is great for taking that step it's that you can record them, take snippets out. And then perhaps we have created a chat in slack, which is for more like marketing inspiration, the words of the customers. And for us, that's like super powerful for the product marketers.
If, like you said, if you're using the words that are coming out of your customer's mouth, you're really speaking in that, in that terms. And that has really helped and impacted a lot of our pitches and positioning and, and how we, uh, talk about spend desk.
Andrew Michael: [00:22:45] Yeah. I love that. And you mentioned a few companies are, where does his notes in the show notes?
I'll check them out. I've also came across crane.co recently, uh, found it super interesting as well, and, uh, can see a huge value coming out of it. From the snippets alone from a copywriting perspective.
[00:23:00] Um, cool. So we chatted as well just before the show, in terms of like when it comes to having a heavy, outbound, uh, strategy, uh, sometimes you overlook like your existing customer base and the opportunity to upsell them to grow revenue from them.
Um, maybe you want to talk us through a little bit of your thinking on this and where you see missed opportunities and companies.
Alfie Marsh: [00:23:24] Yeah, I think there is a, a crazy thirst for acquiring new customers, which makes sense, because you want to capture market share. I think where the problem comes is not necessarily the first acquire new customers, but it's the strategy around pricing and monetizing those customers.
I think, obviously everyone's looking for that kind of top line revenue growth so that you can go to your next round of, uh, funds fundraising and get funds. Um, But monetizing or pricing for monetization and pricing for [00:24:00] increasing your revenue is not necessarily what you want to do in those first stages.
So not to 10 million of ARR, you want to acquire more of the market. There's um, I was reading a book, uh, it's called scaling the revenue engine. I think it's by Tom Moore, emo HR. We can put it in the notes after, um, where he discusses the, what is the cost to acquire $1 of revenue through different channels.
So I think, I think I've got it down here somewhere. So it's $1 18. It costs that much to acquire $1 of new revenue, if you're going to a new customer. So basically from an outbound sales perspective, it's going to cost you $1 18 to have $1 of revenue, which is expensive. However, if you were to get $1 of revenue from upselling to an existing client, that's going to cost you 28 cents.
And if you acquire $1 of revenue from a referral, it costs you 13. Which is ridiculous to cheap. It's like go and to that's. The point of a lot of the game is around [00:25:00] increasing your LTV and lowering your CAC. These are huge, uh, cost saving initiatives. Um, and when you, when you price at the front end or for revenue on your acquiring your new customers, I understand that because you're.
For these outbound reps, they are expensive. Uh, you, $1 room want to get $1 out, but really it's actually a lot cheaper to monetize your existing customers. So it's much better to price from acquisition of market share. I be competitive. It may be in the amount that you price or the way that your pricing is done, and then just focus on having that critical mass and then monetize it on the backend through upsells and through different products.
And I see that as being a strategy in those early stages as being critical. That is also very different. If you're post 10 million, for example, you're probably going to be more likely to want to have more efficiencies in, in the front loading of your price in the monetize.
Andrew Michael: [00:25:53] Yeah, I think pricing and packaging is like, it's a step change when it comes to companies like [00:26:00] it's that moment when you can sort of accelerate growth for them.
And I think, like you say, there's this huge undervalued segment of how we can grow. And I think. Uh, when you mentioned the, the stats as what I can remember, I think it might've been Jason Lemkin and one of his blog posts that I read, or one or someone like a VC, was that at some point in the sauce business's lifetime, uh, eventually around 40% or more of your revenue comes from referrals and word of mouth.
Uh, so it almost becomes like a dessert. Tipping point, it becomes the engine, uh, and spending time early on to really nail that strategy and how you're getting customers to refer and how you're getting, um, like expansion, uh, rolling with your existing customer base, like leads to a really, really healthy business overall with your, like a really, really strong Metamora retention.
Um, and. Spending like, you know that for every dollar, like if you don't do anything to business today, like your business is still going to be growing by next year, this time, if you have a really, really strong net tomorrow [00:27:00] retention, I think that in sauce is like the holy grail. Like when you can hit that point where you're growing, irrespective if you acquiring new customers or not, uh, that is the definition of a successful, soft SaaS business to me, I think, uh, yeah.
Alfie Marsh: [00:27:14] When you get the fly will go in and it takes care of itself. I mean, there's also an element in those early stages of, um, you know, there's multiple ways we've done this, that spend this, but, um, you want to really increase your exposure to learning early on. So for example, taking. The pricing. One is an example, because if you price for market acquisition, by nature, you're going to have more customers, more people that are exposed to products, more feedback, different segments, and you, you're going to expand your learning a lot quicker.
Um, you know, equally in spend this, we took a really unconventional strategy, which is to go international pretty early on, um, which is going to affect your impact to grow rapidly in any one market, because you're naturally, uh, diluting your resources across markets. Um, At the same time, there's a [00:28:00] huge pro of doing that, which is the amount of learnings you're getting from other markets.
And especially in international expansion, it's, it's really hard for us companies actually to come into, into Europe because they go from one big market to then have super fragmented market with different languages, different cultures, uh, you know, different product market fits. Uh, and it's really difficult.
Yeah, you spend, as we went quite large in France, UK, Germany, and Spain, things like this at first. And then, um, when, uh, when abroad, but we've got years worth of experience that would take your company, you know, five to 10 plus years to be able to get, just because we tried to increase our exposure to learn in there.
Andrew Michael: [00:28:39] Yeah. And I think like that exposure to learning early on is critical because a lot of the times, like in the beginning, you don't know yet who your ideal customer profile is that I think you like have a good understanding of the problem. And you've maybe do a little bit of research, like a hundred, 200 interviews, but really it's not enough to understand like which way the market's going to take the company and where [00:29:00] the biggest opportunity is.
And I think a lot of times as well, like, especially when it comes to go to market strategy, one of the lessons I learned while at Hotjar was. When you go out and you sit your initial, go to market strategy and you try and base it off your current customer base. So at some point, like you said, like 10 million ARR 20 million ARR, looking at your current customer base is not always the best place to look for the all go to market strategy because.
Your current customers are a direct result of the marketing and sales that you've done to date and not a direct result of where the biggest opportunity may lie for your company in which way the market is moving as well. So, uh, I think you have this opportunity for learning, but also at the same time, you've always gotta be learning and you've gotta be taking a step back and looking okay.
Which way is the market moving? Where's the opportunity going? Like, is it the direction we're moving in? And you've got to constantly question this, I think like a, and that's the thing that makes sauce and this types of businesses, so tricky is that like it's a constant moving target, that product market fit.
Alfie Marsh: [00:29:57] Yeah, it is. And you know, what you're referring to though [00:30:00] is like an element of survivorship bias, right? There's a story when, uh, I think it was in either world war one or world war two. Uh, there were planes that came back from the war, uh, and they had, they mapped out all the bullet holes on the planes and the military wanted to reinforce the planes where there was this massive flooded house.
And the statistician came along and said, hang on, guys. This is not actually what you want to do. What you want to do is reinforce the areas where there are no bullet holes. And they're like, okay, why? And they're like, well, the planes that have these bullet holes, you want to, you want to be enforceable.
And it's funny because the bullet holes where they weren't anybody, I was, were all around the engine where the seat and the pilot isn't so on and so forth, you know? And when you take that example and you put it into like, uh, W look at your client base, you can have like a super strong NPS score, low churn within like a given segment.
And you can be like, this is great. A product is amazing. And yeah, it is. But for that segment, like it's great for the ones that survived it. But if you [00:31:00] don't take a step back and say, okay, well, what are all the customers that never came to us? Because our positioning sucks or we not getting enough distribution and people want known about our product, or we are going after this sandwich, we're really good fit for, but there's a huge opportunity if we just tweaked our products a little bit and our positioning, we could go after this. Yeah. And so you always have to have that beginner's mindset. Yeah. Take that information from your existing customers, but don't take it as a, as a given fact, use it as a base to create a hypothesis for, but always be trying to be starting the page completely blank and reiterating your learnings as you go.
Andrew Michael: [00:31:35] Yeah, absolutely. I think. Maybe in my past, I underestimated the power of positioning itself. Like, uh, obviously like as previous, as well, working as a product marketer, I always liked found it extremely important, but this time, like now I'm starting my fourth company, uh, and like, Just seeing the product we've built today and how just changing slight tweaks [00:32:00] and positioning can like put you up against like a whole new market, a whole new trajectory.
And it's literally just like three or four words might change in the positioning statements and huge you're building a new business. Uh, although that the product itself might not change very much. And I love this as well, because I think this was like Freshworks. Did it like where they, they built. And they realize, okay, they was serving like whatever it was support.
And if they just tweaked it slightly, there could be supporting like DevOps and engineering. And they created a whole new product with exactly the same product, just changing a few words and the way they positioned the product to different market. And really like that's, uh, can be game changes again. And we open up these new opportunities, unlock new markets, like just by having a really a good understanding, like you said, like.
Taking a step back, looking at the survivorship bias. I love that analogy as well of the plan and the warships. And, uh, you can open up some really exciting opportunities for your business.
Alfie Marsh: [00:32:50] Huge. I mean, positioning is like, I can give you a personal example from spend desk. I mean, there's, I love, I love positioning.
There's so many examples. We could talk about, talk about this for hours, but one that [00:33:00] I've experienced personally, it's been, as we were a mix of like a a hundred. As well as a software platform, it's card and software, but the traditional Amex doesn't have all these processes to capture receipts and do all the geo code in a month.
End closing that. And then you have these tools like Expensify, for example, that are really just more software tools. And then you kind of have an external payment method, right? There's this kind of positioning thing. When we, when we built spend management tools, it was the first time this kind of existed.
So people like, what are you? Are you an expense tool or are you a credit card? And it was kind of like we had this positioning question and I think one of the important things of that is dependent. You, you need to have some store anchor, so a category or something that people already
understand so that they can categorize you, but you want to be in control of that narrative.
Um, and so for example, If you position yourself as like a card, every type of category comes with their own assumptions and associations. So if we position ourselves as a credit card, then [00:34:00] that means that people are going to think, okay, well there's credit. That means what are the insurance and guarantees on like payments on here.
Uh, what about rewards and cash back? And these sorts of things. That's really not a value proposition. Like we can do that sort of stuff, but it's not why you come to us. You come to us because of this operational process and efficiency that we built around it. And so you kind of have to just making those tweaks in the presentation of how you tell the story has a huge impact in terms of that top of the funnel.
And again, going back to your point about feedback loops into the product. Also really important because there are reasons that we may not close the deals at the top of the funnel, which had nothing to do with the actual products and their usage. Once they comes on board and you just have to have that feedback loop.
So you make sure you're making the right.
Andrew Michael: [00:34:43] Absolutely. Yeah. And I can see as well, like how that can go really one way or the other, just that example you mentioned, I was like, if you had gone heavy on the credit card side, you'd be getting people coming in requesting features for like credit lines and a recognition and discounts and things, and going to spend management side, then you'd have [00:35:00] those features around, like, how do I manage my expenses?
How do I get receipts in? Like, and then you start to have your product team focusing on one way or the other, and all that's really changed. Three or four words in your positioning statement and who you are in which category you're aligning with and people have different expectations.
Alfie Marsh: [00:35:14] So I mean, back back to the kind of topic for this podcast as well, and how does that link to actually churn satisfaction?
I mean, it's hugely important at the top of the funnel that you're positioning yourselves in the right way so that the right client knows, Hey, I'm the right customer for your, for your product. So that their expectations, when they come to a sales person, they're already aligned with the value proposition so that they know as long as you put it does what you say it does.
They're going to be happy. Whereas if that kind of Venn diagram of expectations versus reality, kind of, it doesn't overlap as much. That's when you get that frustration and you've got, gotta be really careful to proactively actually take those people out of the pipeline and to not qualify them, even if it feels like it's an easier thing at the beginning.
And then when you pass that over to a customer success, Setting those expectations and [00:36:00] being like these, this is what you want to achieve. And this is exactly how we can help you do it. And if we're successful, this should be the ROI that you're going to, you're going to look at, and these are the success metrics that we're going to track during your three months of onboarding, uh, to see whether.
It's been good or not, because also if you don't have that sort of, um, layout, when you come to the end of that onboarding period and the customer then says, and I'm not happy, I'm going to turn, uh, for whatever reason you, you don't really know because you've kind of said, well, hang on a minute, we didn't set any success metrics.
So I don't really know how to gauge whether this has been good for you or not. And then it's just, you know, by that time, the conversation's dead, you know, good luck on your learning. Uh, at least if you set those success metrics, which are linked to your position in and what they were expecting, you can say, hang on.
Yeah. We've achieved everything you wanted to from the beginning. So what, how, what have we missed out here? And that's when you get the real learning.
Andrew Michael: [00:36:51] Absolutely like listening to you talk as well, sort of reminded me of the concept of the butterfly effect. And I think like a place so true when it comes to churn, retention is like [00:37:00] small little details along the way of your user's journey.
Like can send them in one direction or the other. And it really starts like from the very, very beginning, the first time they see an ad that expectation that sits in their mind by the time they come to speak to sales team, what they're told, what they see, when they get into the product, how they experience it, the bugs they have, and like.
The experiences throughout their journey can really dictate. Like if somebody is going to stick around with you for longer and not send a really like the monitors of details that you might seem and think that are insignificant, can play a big part in like the ultimate success or failure of the business.
Alfie Marsh: [00:37:31] It, it it's so true. I remember there's a, a company born in Europe, a revenue, and it came out and it was, uh, had this huge virality. And I remember using the products and like the, the, the. Th the, the main proposition was to not pay FX fees. And at the time, I mean, you know, it's going on holiday, fine. You know, in the grand scheme of my life, how many FX fees was I pay?
And they're like, not that much that I really cared about, but everyone was loving this product. Right. And then I tried it out and it was kind of, it was funny because there were so many bugs and issues wrong with this product. [00:38:00] Um, but no one gets. Nope, no one cared, but because it was this kind of, they had a huge brand affinity because they position themselves as we're going up against the banks who are ripping you off or FX fees.
And, but, you know, was this a problem people really cared about, but they made it one and it was headed. Yeah. But they, I hated this narrative, that right at the top of the funnel, all the way through to people on board in that meant that even if they had a bad product experience, because the expectations were.
Hey, you're a scrappy startup with a big mission to go and score over the banks that are screwing me over. I'm going to support you. And it's kind of, that is the importance all the way through the fund. And what are the expectations? What's the affinity with your brand and how are you having that continuous conversation?
This is one of the negative sides of outbound is that if you don't have a good marketing to support that narrative, because you're a sales led company versus. It's in the company. Uh, it can make that difficult because you have to start from every conversation set in the scene and explain it [00:39:00] in that positioning from the, from beginning w when it becomes really synergetic is when you have them working together in a kind of beautiful synergy where that messaging resonates.
And as soon as they come to you, you're just taking them through the.
Andrew Michael: [00:39:12] All you need is a slack channel with, uh, snippets from your you of course, feeding the product marketers. Uh, cool. I want to, I want to save some time. We we're running out of time. Now, a question I ask every guest to joins the show. Um, let's imagine a hypothetical scenario that you join a new company.
churn and retention' is not doing great. The CEO comes to you and says, Hey Alfie, I'll like really need to turn things around. We've got 90 days to try and make a dent. You're in charge. What are you gonna do? The catch being, you're not going to tell us I'm going to go speak to customers, figure out what the biggest problem is and pick that you're going to run with some work for you in the past.
Uh, so you don't need to know about the company. You just kinda say, what would you do if you had 90 days and pick something that you've seen work in the past?
Alfie Marsh: [00:39:56] Yeah. I mean, that's tricky because I think the number one thing is to pick up [00:40:00] the phone and speak to all your customers. Uh, but if I, if I, if I had that tool taken away from me, uh, I would want to understand exactly in that list of customers, you are going to have some who do, uh, are retaining really well.
Don't churn and have great, great usage of your product. And then, you know, maybe it's just the majority that are churning. I would want to do a deep analysis of understanding, uh, all of the firmographics around that company. What makes them. What, what are the indicators of someone being a good, having good usage on the, on the platform and being a good customer, and then are there any trends?
And then I'd look to reverse engineer that and understand, okay, we have this 5% of our customers are crazy in love with us. They've got great usage. Uh, but on the sales end, these are not who we're targeting in a marketing, uh, fashion and our position and our, the way we're speaking and what we're trying to focus on, on who we're closing.
Then I would look to retro, um, engineer that the whole way through the funnel, we'll make sure that, Hey, we're targeting those [00:41:00] people or be that in the sales pipeline, those companies are being prioritized in terms of the amount of effort you put in to what you know, where you're deprioritized and all of those customers that are a lower fit that have lower retention.
I want to understand, is it a product? Yeah. Or is it really just, they're not the right fit for the product then if it isn't, if it's more a fit problem, I would train the reps to look for those indicators of a bad fit and then deprioritize them in the pipeline.
Andrew Michael: [00:41:25] Very nice. Uh, and I love as well. Like I always go back to your roots for sales and figuring out my cutesy close at the end of the day.
Definitely. I think that's like for me, uh, it's always like just the closest you can go to the first initial interaction and figure out what the problem is it's causing churn. Like the greatly impacted us because it has a compounding impact. The further you go up the funnel as resolve when it comes to churn and retention.
So last question, what's one thing, you know, today about general attention that you wish you knew when you got started with your.
Alfie Marsh: [00:41:56] Oh, wow. Um, [00:42:00] that's, that's a tough one. I think it kind of goes back to what I said in the previous answer. It fundamentally boils down to. Quality in quality out. If you're speaking to the right people, you're going to have success, whether it's a customer, whether it's, you know, for your own personal branding or who you're messaging out to on LinkedIn and making posts for.
The right content or the right product in front of the right person has a lot more traction than if it's in front of the wrong person. So there's always an element of, okay, can I change my audience or is the only thing I can change is my product. And sometimes it's a lot easier to just pivot your audience and then you can take off.
Andrew Michael: [00:42:39] quality versus quantity for sure. I love that. Um, cool. So Alfie, it's been a pleasure having you on the show today. I really enjoyed our chats is any final thoughts you want to leave the listeners with anything they should be aware of? Like how can they keep up to speed with your work?
Alfie Marsh: [00:42:52] Yeah, for sure. I mean, I'm pretty active on LinkedIn, so feel free to, uh, add me on LinkedIn. There's a link in my, [00:43:00] uh, description. That's got a link to. You could schedule a coffee with me. If you want to meet and chat with me, I'm really open to meet people in my community. Uh, I've got a newsletter that you can also access through there.
I write once a week, uh, called rocket GTM have really aimed around go-to market strategy for north of 10 million revenue startups. Uh, and just come and say hello. I, you know, I'd love to speak to the people that are listening to this.
Andrew Michael: [00:43:21] Very cool. Very cool. Yeah. We can definitely drop some notes as well in the show notes for the listeners.
If anybody wants to check that out too. Um, Alfie. Thanks a lot. It's been a pleasure having you today. I really enjoyed this discussion and I wish you best of luck going forward.
Alfie Marsh: [00:43:33] Thanks a lot. Have a good one.
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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.