Dan Schoenbaum, CEO, Redbooth
Like many startups, we have two goals: to build incredible technology that solves real-world problems and figure out how to sell our product.
At Redbooth, we worked hard to assemble a top-notch, aggressive and very capable sales team. Building the right sales model and team is a challenge that almost every company struggles with.
It takes time, it’s expensive, and it can often pull focus away from other key initiatives. I’m sharing this story here so that you can learn and apply some of these valuable lessons for your own business, whether it be a startup or more mature business.
Lesson #1: Empower your customers
Let your customers decide what they want…and how long of a commitment they want to make.
Naturally, our sales team went after one- and two-year deals. On the surface, this seemed like a good approach. As we learned, however, customers can easily be pressured into longer-term commitments with a financial incentive.
We found that that we often grew the size of transactions with promotions like “Buy three, get one free.” These deals accelerated growth, but as we learned, pressuring a customer to buy more than they really want will most often backfire.
The takeaway: Let your customer buy what they need and want, even if they start small with the option of growing later. The freedom to choose builds lasting loyalty.
Lesson #2: Be meticulous about alignment
You’ve got to align employee incentives with company goals — not just on the surface, but all the way to the core.
Our company goal was to build a thriving ecosystem of happy, lifelong customers. However, like many other companies, our sales compensation rewarded new revenue and sales growth.
The result was a significant amount of new customers, which seemed great at first. However, our team was paid to be aggressive. Their approach yielded many customers who may not have been a great fit and were often sold more licenses than they actually needed.
Starting off a relationship on the wrong foot is not a strategy for a lifelong relationship. Factor company goals into your team incentives, and don’t leave them out of your sales goals. Even if it means you grow a bit more slowly, starting with a good stable base of loyal customers is required to build a sustainable company.
These first two lessons were powerful and forced me to make the hardest, most difficult decision I’d ever made as a CEO. We eliminated our entire sales team and shifted our worldwide sales effort to online-only sales. While we still allocated resources to answer questions posed by prospects, we would not proactively “sell” our products.
This shift required some unexpected changes and brought some welcomed improvements. That’s where lessons #3, 4, and 5 came into play.
Lesson #3: Really listen to your customers
Information from customers is often filtered when it comes through a sales team. Customers would talk to sales, who would in turn relay information about the software to our product team.
This could be anything from new product requests to reports of missing features and other pieces of useful information.
However, the information was always skewed toward requirements for the “next big deal.” Removing this layer has helped our product owners, designers, and management team to have better, more direct and open relationships with our thriving base of customers.
Lesson #4: Create real opportunities for feedback
Give your customers a platform to communicate. This was the most profound difference with our new online-only model. Previously, we met with customers by video conference or in person. This was great, but it limited the number of people we could hear from.
With this shift, we decided to use technology to scale our ability to engage with thousands of customers. We implemented a product called User Echo (note that there are others, such as UserVoice). This has allowed our thousands of customers to suggest new features, share feedback directly with us, and vote on the most critical missing capabilities.
We also added satisfaction surveys — also known as Net Promoter Score surveys — inside of of our application, which enabled us to measure customer satisfaction on a daily basis – required information with the absence of personal interaction.
The information goes directly to our team in real time and has enabled us to quickly fix and address the most critical issues our customers were having. Before this technology was used, we were, at best, relying on occasional meetings, a small dataset, or worse: going by our gut and guessing.
Our customer satisfaction is now higher than ever, and our retention – the ability to keep customers as subscribers – has since gone up to an all-time high. This would not have been possible without online information-gathering.
Lesson #5: Test, test, and test
We test colors, words, placements of buttons, and the addition or reduction of features. We have learned so much, including some things that were not at all expected or intuitive. To our great surprise, we learned that reducing the number of features immediately available to users actually drove up sales by simplifying the product.
The bottom line is that you should never stop experimenting and fine-tuning. It may yield better results than the boatload of money you’re already spending to bring your leads into a sales experience that has room for improvement.
Reflecting back over the past 18 months, we as a team at Redbooth have made some difficult decisions. We’ve also said goodbye to some very dear friends and work colleagues.
At the same time, this experience has taught me and the whole team here some valuable lessons. We recognized the need to experiment with different business models. Once you develop your product, you aren’t finished. Sales and Marketing will always require constant tuning, and in our case, a substantial change.
Making that change was significant and, at times, painful. I probably should have made it sooner than I did. I’ve been reminded that, as leaders, we all need to make tough decisions quickly, and not delay — even if it hurts.
I encourage you to experiment with your own business, to be courageous with the changes you will need to make, and to remember — as my mentor suggested —there is always room for improvement.
About the Author
Dan Schoenbaum joined Redbooth as CEO in September 2011. He has 19 years of leadership with high-growth software companies. Prior to Redbooth, Dan was the COO and Chief Business Development Officer for Tripwire, a leader in the enterprise security market, where he helped triple revenues to $90M, file an S1 on the NASDAQ and sell the company. Dan was also the Chairman of Mergers & Acquisitions and VP, Strategy at Compuware (Nasdaq: CPWR) – a billion dollar enterprise software company and is credited with the creation of an $800M line of products at Mercury Interactive (acquired by HP for $4.6B). Dan is on the board of Evolven Software and was a First Sergeant and a sniper in the Israeli paratroopers.