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Yes, customer success should be a profit center. But for many companies, it's just not.
In this episode, we discuss why that's the case - and why it's not just a quick fix. We do share some tips to make it a profit center though.
In this episode, we discuss why that's the case - and why it's not just a quick fix. We do share some tips to make it a profit center though.
- (00:00) - Introduction
- (03:01) - Challenges in Customer Success
- (05:18) - The Reality of Upselling
- (08:22) - Cultural Differences in Sales
- (11:37) - Strategies for Effective Upselling
- (14:37) - Do you have GTM fit?
- (24:13) - Real examples
***
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Creators & Guests
What is The Revenue Formula?
This podcast is about scaling tech startups.
Hosted by Toni Hohlbein & Mikkel Plaehn, together they look at the full funnel.
With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.
If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.
[00:00:00] Toni: Hey everyone, this is Toni Holbein. You are listening to the revenue formula with Mikkel and Toni. In today's episode, we are discussing why Sears is not a profit center and why there might not be a quick fix. Enjoy.
[00:00:19] Mikkel: Great intro. That was a perfect intro though. So for the,
[00:00:25] Toni: I don't think I have it in
[00:00:26] Mikkel: so for the dear listener, Someone forgot to push a button.
[00:00:30] Toni: That person isn't called Toni.
[00:00:32] Mikkel: this might be the first person ever who forgot to push a button and we're just even talking about how it was on a pip.
[00:00:39] So, you know, it's kind of funny.
[00:00:41] Toni: I'm just going to take another, there's another strike here on your out list. But actually
[00:00:48] Mikkel: actually, just to recap, We just spoke about the fact that we had a summer party. Yes. And what I was really looking forward to was getting out on some boats
[00:00:57] Toni: Where you're actually, honestly, where you're looking forward to
[00:00:59] Mikkel: Yeah. I actually was, because we had a nice,
[00:01:01] Toni: a boat
[00:01:02] Mikkel: We had had a, we had had a nice lunch, we went to a cafe to play board games.
[00:01:06] Weather was kind of Okay. It wasn't bad or anything.
[00:01:09] Toni: Oh, by the way, yes, we went to a cafe here to play board games with a company.
[00:01:13] Isn't that insane? Yeah. I think it's insane.
[00:01:15] Mikkel: And then we played a pop quiz and some random guy just joined the pop quiz because it's that's the culture there
[00:01:20] Toni: I felt it was like Olafur's older brother or
[00:01:23] Mikkel: Yeah Just Irish
[00:01:24] Toni: Yeah, exactly.
[00:01:26] Mikkel: so anyway, we go down to the pier and all of a sudden it starts heavy raining heavy wind and We were just talking about how you could see the boats literally with I think it would take maybe A couple of minutes to go, what, two kilometers down with the tailwind, but then watching the go boats try and return and make it back safely against the wind.
[00:01:48] And those boats, they don't have a lot of power because anyone can sail them. They're electric. That was the point where like, not, not doing that. So
[00:01:56] Toni: so literally, I kind of still remember there was a, like an image in my head, right? So the, the, the wind is gusting like crazy. The boats are basically, you know, not moving because the engine is so super fucking weak. And you know, someone was trying to come under the bridge, like it's a proper bridge with like cars on top and everything.
[00:02:12] And they were basically kind of clawing along on the wall
[00:02:15] Mikkel: Yeah.
[00:02:15] Toni: with their hands. to try and kind of move the, move the boat forward. But yeah, that didn't work. So then we skipped on that and instead we went and had beers.
[00:02:26] Mikkel: Exactly like any sane person would
[00:02:28] Toni: Like, like any normal summer
[00:02:30] Mikkel: Yeah, and where do we have the beers outside because Now the weather was kind of okay again. It's like and now it was done. That was done. So actually We had a perfect Segway and maybe you want to take the perfect Segway
[00:02:42] Toni: I forgot. I mean, you're just, you're just the Segway guy. Literally Mikkel, this is your only qualification for this job here is you being able to, you know, sometimes not all the time, create great Segways.
[00:02:53] Mikkel: I mean, maybe it's fair to say they didn't probably turn a lot of profit that day because I think they got a lot of cancellations. They got a lot of cancellations, right?
[00:03:01] So what we want to talk a bit about today. Yeah,
[00:03:03] Toni: what we
[00:03:04] Mikkel: talking about, want to talk a bit about today is CS.
[00:03:08] isn't really a profit center. We wanted to talk about why CS is a profit center, how to do that. But I think you and I are talking for like 10 minutes. Yeah, it is recording. You are good. You and I talking for like 10 minutes, we kind of realized that it's.
[00:03:22] actually
[00:03:23] Toni: wasn't recording. That's, that's what we realized.
[00:03:25] Mikkel: quite often, it's not a profit center.
[00:03:28] And that's what we're going to want to get into.
[00:03:29] Toni: You know, some of the things that we were about to kind of prepare an episode on like, Hey, you know, the right side of the boat and all this revenue there, it's so important.
[00:03:37] And, you know, why are people not focusing on this and you should, and you just need to tweak this one thing just a little bit, just a little bit compound interest, boom, hockey stick, right, right there.
[00:03:45] Mikkel: Trillion dollar.
[00:03:46] Toni: and then the thing is, right. So, I mean, you know, I've been a CEO myself twice and guess where I didn't invest.
[00:03:52] And to the CS side, you know, all that much. If you were to talk to to my VP CS, she would tell you exactly that story. She was like, Toni, you were kind of terrible with this. And today we, instead of, you know, doing another rally for CS and how I need to get
[00:04:07] Mikkel: gotta prove that old VP wrong. gonna,
[00:04:10] Toni: going to talk about at least what made me hesitate, which I also think is what makes a lot of other folks hesitate.
[00:04:18] To pour a lot of money into the CS team. And you know, maybe this reverse way of talking about it might help some people to be like, you know what, actually this one problem, I think we can fix it like this. And then you go off and hopefully kind of improve your business in any other situation. At least you can go, you know, to bed at night and be like, you know what?
[00:04:36] It's fine. I don't, you know. Other people are also not investing money into the CSM. It's okay. It's okay.
[00:04:41] Mikkel: so Winning by Design has an old research paper on C, it's literally called CS as a Profit Center. And in it, they outline some of the, let's say the challenges that occur in a company. And one of the classics is, you know, CEO, CFO, they need to cut costs.
[00:04:55] Our CSMs, they can carry like a third more accounts. They can, we can totally distribute more. And that means, We can cut the team and it's all gonna trickle down to the bottom line. It's beautiful efficiency, right? But there is a reason, I think, some of the folks think like that, that's not being addressed.
[00:05:15] And we're gonna get into some of that now.
[00:05:18] I think one of the first points you also made was like, well, how many deals upsell here?
[00:05:25] Toni: I think the first thing, right. And I think it for those thought experiments here which we're all kind of doing sometimes without knowing it, it's really interesting to kind of look at it from the extremes. Yeah. So let's just say you have a hundred customers, a thousand, I don't know, whatever the number is.
[00:05:45] And you're able to upsell 10%. Like every year, whatever really the thinking here needs to be, okay, if I never change that number, if I, you know, it's always going to be a hundred accounts, like always how long will I actually be able to upsell 10%? Like how long will that be able to kind of keep going?
[00:06:03] Because, because at some point you know, it's, you know, thinking about it, at some point you will have reached the account potential of every single of those customers. Right. So very clearly you can't do 10 percent into infinity with this thing, kind of, there's, there's a reason behind this. Right.
[00:06:22] So, and then trying to understand, well, if they're diminishing returns, Right, because maybe you can upsell one account once. Maybe you can do it twice, but can you do it five or six times? I just don't believe that. Unless it's a, Oh, you know, we you know, one of our customers was Uber in 2008. Or Snowflake in 2011 or something like that. Yes, sure, you can keep up and you know, don't, don't get me wrong, but in reality, most organizations, most accounts don't necessarily grow like that, right? Yes, you have some situations where you are not wall to wall and you can jump through different departments, but trust me, this is not easy either.
[00:07:05] Right? So there are kind of some reasons. So kind of the first thing is that, you know, when you think about it, like, Well, how many deals will there actually be in the account base that we have? Right. So, and then kind of pouring more resources or it might kind of feel like not the, not the right thing actually to do.
[00:07:18] Yeah.
[00:07:19] Mikkel: I think the other thing also we had was Dan Steinman
[00:07:23] Toni: Steinman
[00:07:23] Mikkel: on the show, Godfather of CS, and he was very adamant that, you know, CSMs should act as SDRs.
[00:07:30] But I think, going back to a summer party scenario, when I've interacted with a CSM versus a SDR, Very different profiles, very different approach. And I can see lots of cases where the CSM is like, man, do I want to take some chips off the relationships table now by asking, you know, do you, do you want to, do you maybe want to buy one more user?
[00:07:55] Toni: So the, what Dan Steeman just kind of to protect his legacy what he said was yes, CSMs need to act more like sellers and SDRs, but they also need to be great CSMs and great AMs and great everything. So there's like a, there's a lot of expectation built kind of, he said, a CSM is doing their job.
[00:08:13] If they're kind of renewing customers really well. But if you want to get promoted, you need to be upselling customers really well. I kind of, he was pretty clear about this.
[00:08:22] And the thing is, and I think there's also a little bit of a cultural divide. I think in, in Europe in general, sales is not seen as a honorable
[00:08:31] Mikkel: there's no
[00:08:35] Toni: there's no one coming out of, you know, a college in Germany and be like, Ooh. I want to be sales. Like no one is doing that. And so it says really bad reputation. Right. So, I think there are many people actively trying to mold their careers, not to ever be in any kind of a, Ooh, I'm selling something situation.
[00:08:53] Right. So, and I think that bleeds into you know, for example, CSMs that are customer facing. But shows that path specifically because they didn't want to do any selling. And then if you then come to them, it's like, well, I need you to do, do sales now, then they're going to be like, no, I actually really don't want
[00:09:13] Mikkel: Did I pick the right career track? Yeah.
[00:09:15] Toni: And the next thing on top of this, which is, and by the way, the reason I'm saying this, this is different in the U. S. You have like people coming out of really good colleges. Sure. Some of them go into finance and consulting, but. Actually, there's a bit of a culture of like, Hey it's a good, you know, base education to understand how to sell stuff.
[00:09:34] Right. Because I think Americans looking at this, well, in reality, you know, when are you not selling?
[00:09:39] Mikkel: Yeah. Yeah.
[00:09:40] Toni: Like really, when are you not, even in your private life, when are we, when are you not selling kind of an idea, not necessarily you know, a product or something, but when do you want to get your point across?
[00:09:49] You're kind of
[00:09:50] Mikkel: it's like, honey, if, if I clean up the kitchen, can, can we open a bottle of wine, please? It's like, yeah, you're always doing. And I read about a company, funny enough, where part of the onboarding who, whatever department you were in, you had to close two deals in two weeks. That was like part of it. And I was like, Dang, that's intense.
[00:10:11] But honestly, I think even if you're sitting in in marketing, so this is like going off script here, but even if you sit in marketing, you just got to realize how much you're going to learn from just running one deal. Try running one deal, see how much pain, how much struggle, how hard mentally that job is, and also see what happens in the process.
[00:10:31] It's going to change a lot for you. But, but speaking of kind of the sales side, I think you had another interesting point, which was like, wow, We have whatever expansion we have. Now imagine that you 10x the amount of CSMs you have.
[00:10:43] Toni: Mm hmm.
[00:10:44] Mikkel: Are you, are you going to get more expansion out of it?
[00:10:47] Toni: So that's kind of the other thought experiment. I actually kind of want people to kind of think through, it's like, okay, let's just forget about the fact of reducing your CSM team.
[00:10:58] Let's forget about that fact. Let's just go in the opposite direction. What would happen if you 10x'd What would happen if you suddenly had a hundred CSMs for 100
[00:11:07] accounts?
[00:11:10] Mikkel: Yeah, they would get pretty bored, probably.
[00:11:11] Toni: Sure, no, but almost to my point. What, you know, would they, would they really get more upsells out?
[00:11:17] Like, that's really the question to ask you. And obviously, sure, you know, oh, Toni, obviously not 10x, but, so, but just as a thought experiment. If, if every single account had their own CSM, would they get more money out of these accounts? And some enthusiasts will say, yes, for sure. And, and I think that's probably true.
[00:11:33] But is that, is that going to be in proportion at all to anything? Right.
[00:11:37] And that actually leads me to, you know, the next thing here, which is, I think in order to solve this puzzle a little bit for yourself you kind of need to figure out where is, where's upsells, where are they actually coming from?
[00:11:54] How does that thing actually work? Like, and really in a, in a bottom up fashion, right? I think number one, yes, you need to help customers to achieve the upsell. And you probably want to do that by way of having the CSM do a great coverage, them getting a lot of success from the product, maybe having the CSMs in a level of like, you know, teach them some sales skills, like selling, not in the sense of, yeah, you need to sign on this thing now, but selling in the sense of doing discovery questions.
[00:12:25] That's, I think,
[00:12:26] Mikkel: And even pitching, actually, because they're going to have interaction with
[00:12:29] Toni: no, but it's like, it's, it's almost like a, you know, you have a series of discovery questions, first level, second level, third level, kind of figuring out, okay, this is what you're doing. And just this working out for, you know, and then you can always say as a CSM without this being a pitch, like, Hey, did you actually know?
[00:12:45] And we can also help you with
[00:12:46] Mikkel: with
[00:12:47] Toni: And we're doing it like this and like that. And, you know, a bunch of our customers really love it. Do you want to do you want to check it out? I kind of, you can do it in an extremely soft way, right? Kind of those skills need to be taught to those CSMs. And so then this is kind of the facilitating part of trying to achieve the upsell.
[00:13:02] Then there's the other part of like, where's that stuff actually coming from? Right. And, and I think you know, the, the way I think people should be thinking about this, number one, Is there something to upsell here?
[00:13:15] Mikkel: Yeah,
[00:13:16] Toni: Like, have you, have you, do you have pricing that lends itself? to, to, you know, upsell anything.
[00:13:24] And you know, sometimes that's true. Sometimes not. Kind of in, in some of our cases, they were just like, Oh, you can have another user or two for a team that never has more than three people anyway. So the company needs to expand a lot, like a lot.
[00:13:37] Mikkel: Yeah. Or just two license per user.
[00:13:40] Toni: um, So, and, and then it's kind of really difficult to generate those upsells.
[00:13:45] Even if, if some of the usage expands, right. And I think the, the whole pricing and packaging piece is obviously kind of extremely important here. Another one is like, well, are you selling wall to wall or do you sell to one department and can branch out from there? And if, you know, if you go through this whole list and really think through You know, in your cases, you know, how, how do you actually sitting there?
[00:14:08] You might actually come to the realization that like, geez, I don't think there's that much to upsell here. Like, I'm, I'm sorry. There just isn't.
[00:14:14] Mikkel: And I think that's probably also an issue even before that.
[00:14:16] Like, have you instrumented the right stuff to monitor and manage that side of the funnel? Have you really, do you really have the insight like you do on the sales side to manage that side? I would also question in some cases whether that's actually happening.
[00:14:30] Regardless of all these wonderful issues and brain teasers we've now done, that's actually not the biggest problem though.
[00:14:37] Toni: No I think and this is, this is the question that my VP of CS hated the most. Which is really,
[00:14:45] I asked
[00:14:46] her literally, give me like a, give me a reasonable way.
[00:14:51] You know let's just forget about CAC Payback. But give me a reasonable way How I can convince myself that it would be better to hire a CSM versus hiring an SDR versus adding more money to ad spend versus, I don't know, doing something else on the Nubis side. Give me, give me like a reasonable way for me to believe that, right? And it's, it's, it's shitty because it's extremely difficult for the CS side to prove this thing, which is kind of also proving that they are kind of a little bit further away from, from the money at the end of the day, right?
[00:15:21] Kind of, it's difficult, right? And you know, all of these things together you know, if you, if you take all of these little problems that we just mentioned, right? And if you, if you were to apply that problem set to the left side of the bowtie. Yeah. To to your go to market, to the acquisition, like sales or marketing, people would immediately go, Oh, you don't have go to market fit.
[00:15:42] Mikkel: Yeah. No, they would, or even worse, product market fit.
[00:15:47] Toni: Yes, exactly. Yes. But what, what I think we want to bring up here and just make this clear for people to kind of realize this, because this is very clearly a multidimensional puzzle, right? If you tweak a little bit, you're like, Oop, this other thing doesn't work anymore.
[00:16:00] And kind of, you need to figure out how to put those pieces together. And let's remember what was the definition of go to market fit while it needs to be, you know, done scalably, you know, you need to do more, more, more of it, it needs to be done repeatedly. Okay. Like you need to be able to, you know, create an opportunity repeatedly and close it repeatedly.
[00:16:18] And you need to be able to do it sustainably. Meaning you know, your CAC Payback or CAC to CLT or whatever needs to be in the green, whatever green
[00:16:24] Mikkel: So not one account per
[00:16:26] Toni: For example, for
[00:16:28] Mikkel: No, I just wanted to make
[00:16:28] Toni: um, And and what I think is simply true and most, if not all of those organizations of which they are 99%, by the way, those, us, basically all of us organizations are struggling with the upsell side.
[00:16:43] I would basically say, folks, we probably don't have upsell go to market fit.
[00:16:48] Mikkel: Yeah.
[00:16:49] Toni: We probably don't have it. We probably not. We, we don't know where to spend another dollar to gonna get another dollar out. We don't understand, you know, is this, does it mean more CSMs? Does it mean more ams? Does it mean more product?
[00:17:02] Yeah. Do we need build more? You know, do we need to expand our thinking and actually putting, you know, our CAC dollars into product instead and not to get more revenue? It's like, we honestly don't know, we don't have a fucking clue. And you know, we have a little bit of a clue maybe on the, you know, the, the sales and marketing side.
[00:17:17] And I think why is this? Well, there might be some lesser, you know, there's just fewer brain cells being focused on this problem. I think there's also a company focus issue, kind of what is most important to you and so forth, right? Don't want to kind of, you know, diminish this. But ultimately It's it's a really difficult problem that needs to be figured out.
[00:17:38] And once it's figured out, I think then you will see wonderful net retention rate. If you kind of land at the point of like, Oh, actually, You might figure this out and land on the point where you can't upsell. Like there's, you know, it cannot be done. We would need to do all of those changes and maybe then execute them.
[00:17:55] But you can also arrive at a point where you, you know, you finally see the matrix, you kind of, you get it and you know, exactly this, this, and this is what we need to kind of invest in for this thing to go up. Right. And I think getting there, some really successful companies have achieved this. I think is ultra difficult.
[00:18:12] Mikkel: Yeah,
[00:18:13] it is, but it's also very compelling from a business case perspective that you know, you initial deal value is X, but it ends up being Y just from a, being able to go and raise your competitiveness on the new best side.
[00:18:29] There's a bunch of upside. Let's talk a bit about how would we go about finding go to market fit, because it's, you know, it's easy for you and I to sit back in our ivory tower and say, well, it has to be repeatable durable. Just go do that, right? How would we actually go about it, right? I think my hunch is definitely if, if you don't have go to market fit on the expansion retention side at the moment.
[00:18:51] Then forget about durability in the short run, right? That's, that's not the problem to solve first. There is something around the repeatability, probably, that you have some level of predictability that you know, hey, if we create this amount of ops in this amount of time, it becomes expansion MR.
[00:19:11] Toni: And honestly, folks, we haven't figured this
[00:19:14] Mikkel: out.
[00:19:14] No, no,
[00:19:15] Toni: is not like, Oh, you know, well, we are the experts apparently, but like this, this is one of these issues that is extremely difficult. Right. And, and,
[00:19:23] Mikkel: Even on the Nubis side.
[00:19:24] Toni: and, and yeah, of course. And, but just the inverse is, is also kind of difficult. Just, just figuring out why people are churning. Right. Kind of, this is an individual project you need to kind of do in your company to figure out what's going wrong.
[00:19:36] Right. And I think lots of people have invested lots of money in trying to figure out what is you know, why, why is a customer churning? Right. And, and what, what happens there usually is you start with a list of, You know, snowflake reasons, like everyone has their own reason why they're leaving sometimes they're lying about it.
[00:19:54] Sometimes they're honest about it. And once you kind of wiggle this down, you kind of figure out, Hey, there's like a cluster of reasons and the cluster it's not true for every customer. It's actually, you can. You can start seeing that, I don't know, price is too high for the SMB. And you can see like customization options is like the reason for the, for the bigger ones and so forth.
[00:20:15] And, but one, this is, this is your, your way towards trying to kind of correct the code, right? And instead of doing this in a negative way, I would encourage people to do it in a positive way. So why are those customers successful? Like this is, this is now the retention side basically. And then you can, you know, also ask yourself, well, what would need to be true for them to buy more?
[00:20:40] Yeah. Going about it in this way. And then, you know, it can be like, Oh, see there, they weren't aware that we had this offering. It's like, Oh, okay. The CSMs need to be more, you know, proactive about telling them what's going on, or there needs to be some marketing resources for the CS side or whatever.
[00:20:55] It could be that you know, the, the, the person in the account that is aware of you has zero interest in the other problems you can solve for maybe his colleagues or the other
[00:21:07] Mikkel: Yeah.
[00:21:08] Toni: So what's the answer to that? Well, it's probably more of like an account management, SDR kind of job to start multi threatening into the account and, you know, talk to the other department because very rarely in big organizations will you have the the ability to just ask your champion to like, Oh, can you introduce me to those 20 people in the audience?
[00:21:29] No, they're probably not, you know, it's the reputation on the line and blah, blah, blah. They're probably not going to do that. So you need to do that proactively around them, maybe with their consent, maybe not, you need to figure this out. But, you know, that could be another way how to kind of bridge this, right?
[00:21:42] And then ultimately and this goes back to pricing and packaging. Can you connect them using the product more to charging more? And, and the issue here is if you're only doing this on a seat basis, that works fantastically for, you know, the high volume roles. Like your SDRs, your AEs, your CSMs, AM stuff, developers, kind of high volume roles.
[00:22:11] Where, Oh yeah, I need to log into Salesforce and I have five more sellers, you know, and now I need to have five more seats. Right. The kind of, that's the thing. If you're in a, in a different ballgame where it's not really volume of, of the role that makes sense, but something else you would need to attach yourself to a different, you know, people say it's a value metric and And ideally this will make them pay more over time.
[00:22:32] And sometimes, you know what, it's just not possible. It's like, it's just, no, I'm not going to have like a flexible thing going on here. I want to pay in this, in that way. And, and you know what, if that's true, then that, that upsell door is kind of closed for you, right? And that's, that's how we'd, you know, start trying to break the whole thing down.
[00:22:51] Mikkel: down. I think the other reflection going around in my head is also the PMF side.
[00:22:56] Do you actually have additional solutions that they need and want? Honestly there's lots of companies that have some add ons and additional product you can buy. But it's just totally uninteresting, either because the price is out of whack, or it's like, oh no, it's enterprise and that's just not what we need.
[00:23:13] We don't need that SOC 2 and a dedicated C, like, we don't need it, right? So the TAM is super narrow. Versus if you look at, let's just say, accounting software. You know, people will buy that to invoice and manage their bookkeeping and stuff. But at one point they need to do the annual report. Easy upsell.
[00:23:32] They need to do it anyway. They probably go elsewhere to get it done. For us on basically producing this podcast, we have a software we use to cut the episode and run all the post production. They also sell a live studio for you to record guests now. Natural, like we would, I mean, we are using another solution to be honest, but we could have used that one as well.
[00:23:51] That would be a natural upsell, right? So the question is also really whether folks think a bit about, well, sure, we can do a big pricing and packaging exercise. We could do like Toni and Mikkel said, like do a you know, expedited service tier at additional cost or something. But you could also just ask yourself whether you have product on the shelf that has product market fit that people then want to go and buy.
[00:24:13] Toni: And so two, two maybe anecdotes and stories. So a good friend of ours, Jesus he was also on the show actually. And this was, you know, we were just chatting about one of his previous gigs the other day, which was Algolia, I think. And whatever they do, it doesn't matter actually right now, but when he joined they were kind of doing 20, 30 k kind of tickets were kind of good.
[00:24:32] Sharon was kind of not in the right direction. And then they just started. laser focusing on only their accounts where they have Like what is it that separates them? You know, why, why are they paying us 50k and why are they happy through the roof? And what else can we do for them? Right. So what they then achieved is that they took those accounts from 50K to
[00:24:52] Like over a fairly short period of time.
[00:24:55] And, you know, while they understood now, you know, as, as the, the value basically for them increased and kind of, they basically built new products for them to then adopt and buy and kind of made their happy customers, even crazier happy, then on the flip side you know, because who's kind of a marketing guy, actually kind of used those insights to try and actually.
[00:25:14] basically only acquire those kinds of customers. So they went from having, you know, 20 ish K ish kind of deals like la di da to actually kind of getting these things in 50K and then tripling the value kind of over two or three years time. Right. So the, the code can be totally cracked, right? There are many ways to kind of get there.
[00:25:33] And I don't think everyone can repeat this Algolia kind of way of doing it, but it can totally be done. Right. So this is. This is anecdote number one. Anecdote number two is actually when Mikkel and I were working at Falcon IO, Falcon Social, now Brandwatch. So the thing is actually, You know, we were looking at the, you know, gross retention, net retention side.
[00:25:55] We were never really great at this thing. You know, our gross retention was not in the right spot where it needs to be. Our net retention never got above a hundred, right? Kind of, that's just what it was. And uh, we were looking at this like, yeah, well, it's just because. This social media management thing and these marketers, they're just flaky as F and that's just what it is, you know, cost of doing business, can't really do anything about it.
[00:26:21] And then those Sprout social guys went public. And as, as they go public, they also need to disclose some of their metrics. And we saw that they had 150 percent net retention. And we're like, how does? How are they doing that? Because they actually were way more SMB. Usually you say like, the more SMB you're going, the more churn you will have, but they were, you know, we were mid market, they were SMB and they had better net retention numbers than we have.
[00:26:45] Now we all know how you can, you know, fudge those numbers a little bit, and we took it all with a grain of salt, but ultimately we had to recognize that They had figured something out that we hadn't, like they had figured something out. And and this goes to show us like you, you might be sitting there and the management team is like, yup, can't do it.
[00:27:03] Impossible. Laws of physics, you know, laws of nature can't do anything. The cost of doing business. But it might also be true that one of your competitors is right now figuring this out. And, and that's gonna, that's gonna screw you really hard, you know, Sprout Social IPO, and I think they're like I don't know, a billion or two in market cap.
[00:27:21] I'm not sure where they are. You know, if that would have happened to Falcon, I would be sitting here right now, you know,
[00:27:26] Mikkel: You'd be on the beach,
[00:27:27] Toni: I would be somewhere else. Yes.
[00:27:28] Mikkel: So I think actually maybe this is too.
[00:27:30] Bring it down to the dumbest level I can. What we're
[00:27:34] Toni: shouldn't be, that
[00:27:35] Mikkel: that should be the hard. What we're saying is basically either you have a problem with what to sell. This is the product market fit. All you have a problem with how to sell it to go to market fit. And you can go and look into those areas to kind of figure out, Hey, where's the problem?
[00:27:51] What can we do to kind of figure these out? And that, that was the whole idea to kind of provide just a different way to look at this whole area.
[00:27:59] Toni: Really think about it as a go to market fit issue for the CS side. And when you talk to like Revenue Architect, DieHards and Jacco and stuff, they will say, that's obviously included in the go to market fit definition whatsoever anyway, kind of to have both of these things figured out.
[00:28:17] And yes, you know, they're all right, but I'm just saying, kind of look at the upsell issue from a lens of. We just haven't figured this out yet. And there's a go to market fit issue that we need to address here in order to kind of get what we want to upsell to do that repeatedly, scalably and profitably.
[00:28:34] Right. And I, and it probably can be done. and the, the thorn that should be in the back of your hat all the time, it's like, well, just because we haven't figured out doesn't mean that our competitors will.
[00:28:45] Mikkel: Yeah.
[00:28:46] Toni: Thank you so much for listening everyone and hit like, subscribe, love, share
[00:28:51] um,
[00:28:53] Mikkel: text your mom, wife
[00:28:55] Toni: your, your, your, your boyfriend or, you know, whoever.
[00:28:59] And that's kind of, you know, keep growing this mission here. Thanks everyone for listening. Bye bye.
[00:29:03] Mikkel: Bye