How Sonos Focuses on Digital 360 | Leading Through Change | Salesforce

We all have an idea what good sound is.

Smooth, light, flexible, honest, true.

It's human.

I think perhaps sound is just slightly less tangible.

And we're trying to break that by directly working with the creators to ensure.

That actually, when you're listening on a Sonos speaker, that is an accurate representation of what the art should be.

Whatever it is we're going for in the studios, we want every everyone to experience the same things we're trying to create. There's all sorts of parameters. Depth of field, its width, its height, its frequency range. When all those things collide, a great song, good production. It's magical.

This is our legacy as creators.

When it does come out of your speakers, it grabs you.

We both have the same goal.

It is the quality of the experience and the number of people that it can reach.

Smart, adaptive, software driven sound.

That's the future sound for us.

Y' all remember the days when we would actually leave our house and go to the store to buy something? I remember when it was like I got to go without the kids. It was like a mini vacation. Y' all remember those days? Yeah, me neither. Now our worlds are so digital and so are our businesses. I mean, for those of us sitting around at home wishing we had better speakers to play our favorite songs because as we know, music is so healing, especially now, or we need those better speakers for those outdoor backyard, social distancing parties, that means a solution now is one click away. And for Sonos, that means a focus on digital is a must. Good morning, I'm Lia McGowan Hare and welcome to another one of our live weekly conversations as part of our Leading Through Change series. A chance for you to hear from leaders around the world who are doing their best to navigate these challenging times and and support their community. Now, before we get started, I want to preview the next hour. We'll bring you a conversation between Adam Blitzer, EVP and GM of Digital at Salesforce with Patrick Spence, the CEO of Sonos, about how focusing on digital has spurred such great success at Sonos. We'll then dive into a live demo by my colleague Anna who showcasing a brand new commerce cloud feature that will help customers seamlessly integrate payments into their commerce experience. And after that, we will close with a very special performance from Elle King. So for those of you watching on Twitter, you know the drill. You're going to want to come on over to salesforce.com live to see that portion of the show. And as we do every week at Leading Through Change, we want to help those who need it. The most. Millions of people already rely on the United Nations World Food Program for food they need to survive and COVID 19 is making those conditions even worse. This pandemic could double the number of people suffering from severe hunger by the end of the year. Now to help prevent a hunger pandemic, the World Food Program is scaling up to Support and reach 138 million people across 83 countries with life saving support. Now if you can please go to salesforce.com wfp and join us in ensuring the world's most vulnerable have enough to eat. Now through September 30th, which is just this Wednesday, Salesforce will be matching donations up to $150,000. Once again, that's salesforce.com WFP now it is my pleasure to kick it over to a conversation with Adam Blitzer hosted with Sonos CEO Patrick Spence the other day. Please enjoy it.

Thanks so much Leah and thank you all for joining us today. Leading through change is all about how we can learn from each other to lead through challenging times. The world has of course changed. I heard a stat recently that 75% of Fortune 500 CEOs believe that 2020 has rapidly accelerated their digital transformation. But that stat seems pretty low to me. I talk to CMOs Chief Digital Officers, CIOs all the time at leading companies and they almost all tell me they're in a period of massive acceleration of their digital transformations. Now is the time to go digital or disappear. And that's why Salesforce created the Customer360, a platform that puts your customer at the center of everything you do, no matter what is changing. If you pivot back to your customer, if you design everything around the customer experience, you're going to be in a better position. From marketing to sales to support to analytics, everything. And we've now taken the customer360 and tailored it just for you. Digital trailblazers across marketing, commerce and experiences with the all new Salesforce Digital360. Salesforce Digital360 brings together product innovation from across our portfolio with the full power of Salesforce and implementation expertise, advisory services, a broad ecosystem of partners, and of course trailhead where your entire company can skill up on the future with free on demand training. Now our guest today, Sonos CEO Patrick Spence, knows all about the importance of being digital and being customer first. Patrick, great to see you. Thanks so much for being with us today.

Thanks for having me, Adam.

Absolutely. And I want to start off by saying I am a huge fan of Sonos. I've had a play bar and Subwoofer. I just got my arc this weekend. I'm super excited about it. So thanks so much for continuing to produce amazing products. For those viewers who aren't lucky enough to know about Sonos products or have them in their home. Can you share a little bit about your company and what you do?

Thank you. I think I probably have the best job in the world because we make products and software that allow you to play all the time, all the music that you love in any room or every room of your home. So as you can imagine, during this period, we've had the great honor of bringing joy to millions of people's homes while they're at work or just at play. So I think we feel very fortunate and I'm inspired by our mission every single day.

And I love that mission of bringing joy through sound, bringing joy through music, you know, to everybody's homes. And we are spending more time in our homes than ever. And you know, I want to dig in with you a little bit and just talk to you about how have your business operations changed since March? How have you either supported your employees? How have you made changes with how you work with customers to keep things on track and actually thrive during this period?

Yeah, it's been a challenging time for sure. And you know, along with, I think, pretty much everybody else around the world, it was early March we started working from home. Thankfully, we kind of know what we're doing in a distributed environment because we started the company actually simultaneously in both Santa Barbara and Boston. We've always had to work with tools across video and chat and email and that kind of thing. It's been amazing to see our people really step up during this time. And of course, our top priority was supporting our people, making sure that they're safe, healthy, have what they need during this period of time. But we really threw out the existing playbook and said, okay, the world has completely changed. What are we going to do differently now? And so we've really had to adjust because overnight we lost about 90% of our business in terms of just all the retail locations that we have. So it's been a really, really challenging time and really forced the team to adapt. And the perseverance has been incredible to see everybody really step up, adjust and be able to make sure that can still fulfill our customers needs and continue to drive the business forward.

Could you talk about the focus on digital and how that's really been an accelerant for you at this point where you might have retail locations through your own retail locations through Partners that have been closed down during shelter in place in various jurisdictions. Can you talk about how that focus on digital has really helped you thrive?

You bet. I mean, I think it's been absolutely critical to being able to work through this period and meet our customers needs. Our direct to consumer digital sales were up 300% year over year in the last quarter. And that's really helped because we had started Last year, only 10% of our sales came from Sonos.com, and so quickly when you see 90% of your sales basically evaporate overnight and you know they're not going to come back very quickly. We've had to adapt and we've been investing in DTC pretty heavily over the last couple of years, but we would have never expected an acceleration like this. Right. Or the team be put under the pressure that it has. And as you know, 300% year over year growth is something that really stresses everything in the system. Right. And it's a real challenge, especially when you're shipping physical goods as we are. So we've had to produce more, we've had to work through all of that. And the other thing that we've had to do is that we've relied on twice yearly physical events to launch our new products and services. And we actually had to shift to an actual digital event as well to launch new products that we had coming down the pipe. The arc that you mentioned, which was entirely new for us. And so that caused the team to have to flip everything that they were doing, everything we've done for the last 18 years to actually make it a digital event. And they pulled it off, which is absolutely incredible. So it's just been a complete change for everything we do in the business and we've been able to successfully navigate it, which again is a testament to our team and our partners just really stepping up during this time.

Well, you've built an amazing team and an amazing platform in terms of flexibility and being able to zig and zag as this massive black swan event that certainly, obviously none of us in any of our businesses were prepared for. And it's been amazing to see you adapt and to have that massive transformation in your direct to consumer business. And we're seeing consumer behavior change dramatically right now. Some by necessity, existing channels that consumers are used to are just either on hold right now or gone. And consumers are trying new things for the first time or new channels are emerging. How is consumer behavior, how has that change in consumer behavior impacted you at Sonos? And how do you think about it going forward are some of the biggest tailwinds for digital. Do you think they're going to be permanent or do you think eventually, as we come out of this, things go back to the way they were a little bit?

Yeah, I think we're going to find a new normal over time. So I don't believe it'll ever go back to the way that it was. New habits are being formed every day and one of the things that really to us was surprising was that we would see that kind of growth. And we're seeing a number of customers that are coming to sonos.com and purchasing Sonos without ever having heard it or seen the product as well. And so for our business, that kind of has been a conventional belief is that people will need to see and hear the product. But we've been able to overcome that and do it with products, our arc products, an $800 product. So these are not inexpensive products. Right. And so people are coming online and I think they're learning to trust brands. I think they're also directly engaging with brands. So the other thing is, as a number of more broad based e commerce companies ended up having to focus on a lot of the essentials, if you will, I think it gave a chance for a lot of brands like ours to actually engage directly with customers. So we completely changed our marketing strategy and launched an At Home with Sonos campaign which showed people how and which products to use in their home office for video streaming as well. So creating that home theater experience when you can't go out to the theaters. And so we've seen a real acceleration of people being willing to purchase those products online, which I think is here to stay. And I think we've made it with our partners something that's very easy now to go and purchase these products. And if there's an issue or something, you can easily return them as well. But we're not seeing that as we go through this. But I just think we've created something that does change buying behavior forever. And I think there will always be room for, for our Installed solutions channel, which is people that come to your house and install Sonos and we've seen them be able to persevere through this, which is great. It's been challenging for our physical retail partners, but there are also physical retail partners that have been adapting and doing click and collect and some of those things that I think they're figuring out where their place is. So it'll be a combination as we think of the future. Certainly this past quarter was One that was extremes. Right. A sense of extremes. With all the physical retail clothes, the kind of year over year digital growth we saw. But I do think that we've seen an acceleration of trends and that we've probably jumped ahead five, maybe seven, maybe 10 years in the course of a quarter, which is pretty incredible.

Yeah, the amount of digital transformation and acceleration that's being crammed into such a short period of time is amazing for both consumers and for businesses that need to respond to it. I love, you know, you talking about how consumers are becoming more and more comfortable making, you know, relatively large purchases without seeing the physical product in person, without listening to the physical product in person. Are there technologies or experiences you're taking advantage of where, you know, customers can sort of approximate how might something look in my room? How might something feel? I'd be interested to know just how you kind of, you know, imagine sort of the trial experience of the future.

Well, I think in a lot of cases, what we've seen as we've researched the new customers that have come on board is they've actually been relying on friends and family and kind of seeing it in the right environment. This has been a challenge for us from day one, which is our products live in the home and you want to see them in the home and you hear them in the home and you hear what it's like to play different music in different rooms or the same music across all of the rooms. And we could never actually convey that experience to people in a traditional retail environment. So we've done it through some of the things that we have for digital shopping online and trying to get people that feeling. But from what we've seen in our research, it's actually being able to witness it, friends and families, that has really set it apart. And so as you think about the next generation of physical and retail, there's some questions of like, can you actually use people's homes. Right. As venues for people to learn about new products and experiences? Because I think there are some things like ours where it's very difficult to really experience that amazing sound and what it's like and what it looks like in your home without actually physically having it there. But again, I would say I've been very pleased with the willingness of consumers to try it out. Right. And to actually take that leap without needing to see it in person or in our case, very importantly, hear it in person as well.

I'm interested in the expansion of your direct to consumer business. So you've certainly, you've had a direct to Consumer business for a long, long time. Right. But it's a careful balance. Right. Your direct to consumer business versus your other channels. We see in many industries, there's been a push to have more of a direct consumer business over the past few years as brands have become increasingly disintermediated from their customers. Your push into direct to consumers had so much acceleration in the past couple of quarters. You touched on this a little bit before in terms of manufacturing and supply chain, but what other things have you sort of learned as you've scaled the direct to consumer business so rapidly in such a compressed amount of time?

Yeah, I think it has challenged our pace and our ability to learn and adjust as we've gone. And so because, you know, for what we do, we'll spend a year, two years creating a product, and we want it to be perfect by the time it comes out. Right. These massive launch events, and then we launch it into the world. And it's super exciting to see what happens. Well, I think with what we've done on digital and having to learn in direct to consumer has been a lot more iterative, so we've had to learn, okay, is this working? Is this not a b. Testing all of those things and then how we tie the whole system together has been very important, and you learn a lot more about your customer in that situation. We've been very lucky that since the beginning, we've had a relationship with our customers because of our app. So we have an ongoing relationship with customers in a way that most brands don't. So that's been a benefit. But we also have about 35 to 40% of our sales every year that come from existing customers. They come back to Sonos and buy another product to add to their home. So we've also been trying to figure out how do you service them in the right way. So we've got new customers coming in, we've got existing, and those can't be the same messages either. As we think about those, we think about timing as well. And so some of the tools that come from Salesforce in terms of how we actually figure out our campaigns and our timing, our onboarding as well. So trying to bring people on board with Sonos and teach them about some of those things, because like most products, people are using kind of the core 20%, but there's a whole lot more there that we want people to be able to take advantage of. So as we've thought about the whole life cycle of our customers and we've kind of brought them through that digital is playing a bigger and bigger role there and allowing us to engage in a different way that I think is going to help us for the future. You talked about the fact that sometimes there's been tension as well with some of the retailers or other players that are out there. But I think it's been very interesting in the pandemic to see companies really trying to work together much more and share lessons back and forth. And so I would say we're closer with some of those partners than we were before. And actually the tension was kind of minimized through this period because everybody's just trying to figure it out and figure out the new normal. And so we've been sharing more, learning from each other and everybody's looking to figure out how to do business and what role they play really in this new world. So it's been a. It's been a really interesting time in that regard.

I love the idea of partners and businesses coming together. You know, we're sort of all in this together, we're all figuring it out. And you know, maybe you just touched on this a bit. We've been talking a lot about consumer behavior and how that's changed. But I'm interested in learning a little bit about the B2B side of your business. You know, how have things changed with all of those different B2B partners that you're working with?

It's been so important to be real time responsive in terms of understanding their needs and what's happening even as we go to supply chain and think about the products that they have or what they're going to need. Everybody when they got hit with the shock was trying to figure out what kind of position are we in, how do we position ourselves to meet our customer demands going forward but as well not overextend ourselves financially. So we've had to do a lot of that work. And luckily our work on the digital side has meant that we're able to know very quickly and very accurately the products that everybody has in each channel and understand that because every time a product registers we can see that. And so we understand and can help our partners with inventory management through this period. And then we've been helping them as well with the tools and what we're learning from direct to consumer and what's working with customers. And so I mentioned that at home with Sonos program, that campaign that we launched and that was as well for our partners so people would be able to go redeem there. People were going to BestBuy.com and then clicking and Collecting product as well. So if that was their preferred method of purchase. So we're trying a lot of things and we're trying to support our retailers as much as possible. But digital has played a big role there too, in making sure we understand what's happening in the business and. And how to best position our very valuable inventory too, to meet all of the customer demands.

Great. From speaking with different members of your team, one of the things I've heard is usage of the products is one of the best indicators of future purchases. So usage or net promoter score, what are some of the things that you're doing proactively to just drive increased usage, increased value from the products that customers have already purchased?

A lot of education. So we've actually seen usage up 40% year over year. And you could watch it in the course of the pandemic in terms of an immediate spike and finding kind of a new normal. We've seen the video streaming go up as well in our home theater products in a big way. So obviously a lot of people watching streaming content and really the way we're trying to support that is through education. So helping people understand how they can use the product. They can set alarms. So even if it's in the home office, so they could set an alarm and remember to get up and have lunch. Right. Or get up and have a little exercise as they go through their day. The other thing that we're doing is with our app is we continue to innovate on our app to try and make it an even better experience. So through this period, we introduced Sonos Radio as well, which gives people some curated stations and access to other content that they weren't getting before, which I think has helped customers just again, find a little more joy during this time and make life at home. Yeah, A little bit better as we all try to figure this whole situation out. So we're trying to do everything we can to help educate. And that's where, you know, as I talk about that life cycle and thinking about our customers, it's really important to be helpful with that education, but not annoying to some degree. Right. So we're trying to be very thoughtful about when we communicate, how we communicate, how we segment to do the communication as well. So those are the kind of things that we make sure we're doing to help our customers.

Great. And looking ahead to 2021 seems far away. We are eventually going to get to 2021. What are you prioritizing in the short term and then what about the medium and longer term and Then how do you balance those two things? So how do you balance what is urgent with what is coming longer term when you think about your digital investments?

Yeah, it's been so fascinating. Like I said, we threw out the playbook right when this hit and said, okay, what do we do now? And I do think in this period, and we're still in a period where we're all working from home, we're figuring out how to launch products, how to create new products in a distributed kind of way as well. And so there's a lot of being very adaptable right now. So that's been a big message like what is important now as we go through this. But we've always had that long, that long term plan too. And so what we've looked at, a great example would be something like ramping up our manufacturing outside of China as well. We know we needed to do that. We also needed more capacity right now. So as we do it, we do it with the long term in mind. So we have to take some short term changes to try and meet some short term demand. But it's done with that long term in mind. And the whole push around DTC and the acceleration we've done there campaign to support it is certainly to address the fact that overnight we lost 90% of our sales basically. But it's done with that long term in mind because our strategy has been to build that channel even more. And so I think it is leaning into what you need to do in the short term, but it has to be in sync with those long term ones. And this is a perfect opportunity for people because it really is jumping ahead five years.

Right.

So we're where did you think you were going to be five years from now? And what can you do today to position yourself to get to that spot that you want to be? And so we're leaning in heavily because we've seen a ton of momentum from our customers. We really feel like our products are helping people make it through this time. And so I'm extremely excited for 2021. But it's doing some things in the short term which are connected to where we see our business going, where we want to take it long term.

And what is the message you're giving to your employees right now? You know, as you think about resilience and you know, they're balancing work, they're balancing with things going on at home and sort of no matter how good or bad anyone's situation is, it's certainly worse than it used to be. And unfortunately we're still in it for quite a while. You know, how do you keep your team excited, motivated, but most of all sort of emotionally healthy as we're all going through this.

Yeah, this has been a huge challenge, I think, for people throughout. And, you know, one of the things that we introduced was something called care time. So we've given our people 10 hours a week that can use it take a full day or they can take two hours a day to help, you know, whether it's helping their kids with school or helping parents or neighbors that, you know, might need some assistance. And we've taken a care day. So we've given the company a holiday, you know, pretty much every month that we've been in this as well, because we, we have seen people again. It's just been, it's been amazing to watch people step up during this time and persevere in a way I could never have imagined if you had told me about this. But I do think it's coming at a cost, especially for people that are trying to manage again, kids or parents or those kind of situations. And so we've just tried to be as understanding and supportive as we can through this particular point in time, trying to encourage people to take vacation as well. Because I just saw recently that I think something like 75% of people haven't taken vacation over the last six months. And so we're really trying to encourage that. I'm trying to model that as my leadership team because we know we need that time to unplug. And it's been such an intense and adrenaline focused time. And we're gonna be in this for a while. Right. And so how do you do it in a sustaining way? We're trying to make sure that our pace is right. We've adjusted some of our roadmap items and looked at our business to be able to do that. And I think what's really important is are people working with their manager to make sure that the priorities are the right ones in the short term in terms of where it is and that they're getting help where they need it if things are a little bit busy as well. But we are going to be in this for a while. It's all about being able to adapt and be able to figure out how to work through it together. But again, I'm inspired by the way I'm seeing our people really rise to this challenge. And we just want to make sure we're thinking about it in a long term kind of mindset because certainly there's been a short term Sprint aspect. And now we're in maybe that middle ground where we need to be able to make sure that people are sustaining themselves.

Well, Patrick, you've given a lot of great ideas to me and I think to other leaders today. But I just want to ask, is there any other advice you would give to CEOs or business leaders as they think about their digital transformations?

Yeah, I would say get started now or accelerate in terms of where you are for sure. And I think partnering is the key. So you don't. The nice thing now, I would say is that you don't have to reinvent the wheel. Right. There's a lot of great practices out there. There's a lot of companies like Salesforce that can help you as well. And so I think this is a really, really good opportunity to actually go out and be able to do that. But you got to get going because we are accelerating, you know, five years ahead and if you don't, you're going to be left behind.

Great. Well, Patrick, thank you so much for being so generous with your time. We love the conversation that we had with you today and thanks so much. Stay safe and we hope to see you again soon.

Thanks, Adam. Appreciate it.

Thank you so much, Adam and Patrick, what a great conversation. I mean, companies like Sonos inspire us every day. I mean, they had to pivot so quickly, expanding their space and B2C balancing short term and long term goals as well as caring for their employees. Not only are we focusing on innovation to help companies like Sonos go faster, but we're also focusing on partnerships innovating at Salesforce both inside and out. And so I'm excited to hand it off to my colleague Anna to talk to you about what's on going possible with the power of innovation.

Thanks, Leah. Hi everyone. Today I am excited to share with you a new piece of innovation from the Digital360 to help companies and inspiring brands just like Sonos. And that is the brand new Commerce Cloud Payments. With Commerce Cloud Payments, you can embed out of the box payments functionality into your commerce experience. Experience with just a click. And it is all powered by Stripe. Now, for some time, we've given our customers the flexibility to use a variety of different payments capabilities. But now more than ever, you need to go so quickly and that is why this announcement is so exciting. So I'm going to show you in this demo how quickly you can embed payments and all the flexibility that you have to continue to grow and scale your business. So here we are in Commerce Cloud where Commerce Leaders can do a lot of great things. There's a lot of apps and functionality here. But today we are going to be embedding those payments. So we go ahead and go to administration, we select payments, we are then asked to select the country that is tied to this particular commerce account. And just like that, we tap next and we have stripe payments connected to this commerce experience. But you know what, that's not the end of the road. It's not quite that easy because the reality is every country is different. Consumers have different ways that they want to pay. And you can configure to those payment expectations right here. You go ahead and go to merchant tools and with just a few clicks you can select all the payment options you want to credit card sepa, which is relevant to our customers in Europe, Apple pay and of course you can use APIs to take advantage of Google Pay and other wallets. And as you click save. That's it, you're pretty much done. What used to take you weeks now takes you just a few minutes. And the consumer experience is exactly what you'd expect. It is modern, it is scalable, it is fraud free and fantastic. So with that, handing it back over to you, Leah.

Thank you Anna. That was great. And if you want to learn more and get hands on, check out trailhead.com, our free online learning platform. So now you all know the drill if you want to see this next segment and I'm telling you, you don't want to miss it with the one and only Elle King. It's time to come on over to Salesforce Live. So go on now, head to salesforce.comlive to see this performance will be waiting for you.