Shifting to the Next Gear: Proven Strategies to Accelerate Growth with Intercom CEO Karen Peacock

[FOREIGN] [APPLAUSE] All right. Hello and welcome everyone. It's great to see you all here. This is my first in-person conference in the last 18 months. And raise your hand if this is your first in-person conference in the last year or so, something like that. Fantastic. I would say the majority of the audience here. And the last time that I was here at this location, I was watching a mini rodeo and riding a Ferris wheel, and I hope today will be just as fun for all of us. So, and I think back to 2 years ago, we would never, no one in this audience would have ever predicted, I don't think, that we would be doing SASTR outside at a county fairground. And, you know, life is all about surprises, and it's what you do with those surprises and with those twists and turns in the road and how you drive momentum and accelerate coming out of those changes and use those changes to accelerate you that define who you are as a leader and who you are as a company. So I'm Karen Peacock. I'm the CEO of Intercom. Intercom is a customer communications platform, and we help companies connect with their customers, build strong relationships, drive growth, and scale. We help sales teams, marketing teams, support teams at companies like Amazon, Lyft, Atlassian, Shopify, and about 25,000 other customers as well. And before Intercom, I was the SVP of small business at Intuit. Um, and at Intuit, I helped to build one of the world's largest SaaS product lines at $2.5 billion in revenue. I'm also on the board of Dropbox. So it's these experiences and more that have taught me everything that I know today, and what I want to share with you is my top ways and top advice for you for helping you find that next gear. How do you accelerate? How do you shift to that next gear? I think a good analogy is driving a race car. I've never been a race car driver, though, you know, I have gotten to do it on little mock horses, and I hope some of you have at times too. But the key when you're driving a race car is how you handle the curves. And if you're a race car driver and you're going, and you're going into a curve and you kind of slow down into the curve and you wait till you fully get out of the curve and when you're just going to be pointed straight ahead, then you step on the accelerator, you will have lost way too much momentum. You will never win the race at that point. The key The key is to accelerate at the right point in the curve, and that is at the apex of the curve, the curviest point of the curve. That is when you hit the gas. That is when you accelerate and win the race. So today, if you are here and your business is kind of hitting some bumps in the road, and, and a curve, this talk is for you to figure out how to navigate through that. Today, if your business is flying, this talk is also for you because it's about helping you figure out how to avoid the curves that you can avoid and how to make the most of the ones that you can. This is relevant today whether you're $1 million in revenue, $100 million, or a billion. Overall lessons apply. And so in general, when you're driving, you know when you're about to hit a corner. So the question is, in your business, how do you know when you're approaching a corner? And the first key thing here that I'm gonna talk about is you have to know your business. And if you know your business, I'm sure everyone here today knows the revenue of their business. And you know the growth of your business. And you have to go much, much deeper than that. Because the averages, those high-level numbers about your business, they hide the insights. Now for example, When Jeff Bezos walks into a bar with 100 people, the average net worth per person in that bar is now over $1 billion. Is that useful? No. That average just completely hid all of the insights underneath that. And so what you wanna go is go beneath the surface. And I'm gonna tell, tell you a story about how we did that at Intercom and the surprises that we found and how we use that to accelerate. Just a minute. And before we get into that, just want to set some baseline metrics for you guys. I'm sure everybody here knows their annual recurring revenue or ARR or monthly recurring revenue, that top-level revenue number. But the other two metrics that are just as critical, in fact, arguably more critical to know are your revenue health, specifically your gross revenue retention or GRR and your net revenue retention. Or NRR, and I'll tell you what those are if you're not familiar with them. So your gross revenue retention is a revenue that you have at the beginning of the period minus the revenue that you lose from customers who leave you during that period minus the revenue that you lose from customers who spend a little bit less with you at the end of the period versus the beginning. And that ratio is your gross revenue retention. And by definition, the maximum it can ever be is 100%. And no company's at 100%, so don't worry if you're not. Next key metric is your net revenue retention, which is exactly like your gross revenue retention, except that you get to add in credit for all of your expansion. And that is for all of the revenue that you make from customers now that you had at the beginning of the period where you've built your relationship. That's your net revenue retention. Now, why do these matter? These matter because companies with strong revenue health, with strong net revenue retention and gross revenue retention, build themselves beautiful businesses. They tend to look something like this, where you have all of your customers that you brought in last year and they're growing with you on net, and all of your customers that you're bringing with you, that you brought in this year, and they're growing with you on net, and then the year after and the year after, and the whole thing is this like beautiful growing business, which is what we all aspire to. And if you don't have strong revenue retention metrics, you have weak revenue health, you end up in a hamster wheel of a situation just trying to fight it out for every bit of growth with a linear or worse declining business. And that's why these revenue health metrics are so critical. They are how you see the turn in the road that's about to happen to you before it does. It's your crystal ball. Now you can look at your revenue health overall and that's good, but what's even more useful is to break that down by segment and to figure out your ARR and growth and importantly your net revenue retention, gross revenue retention by segment, by product, by type of customer. That could be your buyer type, could be your size of customer, your geography of customer, might be your sales motion. If you have a self-serve part of your business and a sales-led part of your business, might be your acquisition channel, break your business down into all of the ways that you see your customers having different experiences and get the insights there. And I'll tell you the story of Intercom and when we did this. We'd always done a pretty good job of understanding our total revenue, total revenue growth, our revenue health at an aggregate level. But it wasn't until a few years ago that we actually took that and broke that down by product and by customer segment. And what we realized when we did that was that we had one product that we were actually very excited about and was growing well that had much weaker revenue health metrics than the rest of our business. And in fact, the strength of our other products was hiding the weakness there. And similarly on the customer segment side, we had one customer segment where the revenue health wasn't nearly as strong as for all of the other segments and those health, —these segments were covering up for the segment that wasn't as strong. And so that gave us a huge insight. We focused on that product and that segment, made improvements to the product, to the overall end-to-end customer experience, to the go-to-market, to the pricing and packaging, focused and were able to significantly improve the health of those businesses such that the entire company accelerated coming out of that. That is the power of this. This, at a high level, just to summarize, you wanna look beyond the averages for insights. You wanna first focus on the products and segments with strong revenue health, double down there. And second, you wanna figure out, fix, and then get out, fix or get out of the parts of your business that are a leaky bucket. And at a minimum, you wanna make sure that those do not become an increasing percent of your business because if those start to grow faster than your other products and become become a larger and larger part of your business, that is going to erode the health of your entire business. And you're gonna move from that beautiful chart you saw on the left side of like ever-increasing prosperity to the one on the right side of like hamster wheel. So you gotta fix or get out of the places that aren't working for you. And this, this is literally a message from your future self from 2 years from now coming back and telling you today, psst, Segment the business. Figure out what parts are working and what isn't. This is your crystal ball and how you figure out how to drive a stronger and stronger business. Now some specific benchmarks that you can aim for or aim to beat, just so you have them in mind, and I'll credit Jason M. Lemkin here. And for those who are here, anyone who's not following Jason, I would encourage you to follow him on Twitter. Some of the things that we've seen in terms of benchmarks are for enterprise companies, so B2B SaaS companies, selling to the enterprise, you wanna have a net revenue retention of 120% or above. Oftentimes the best companies are way, way above this. If you're selling to mid-market, 110% or above. Small business, 100% or above. And for consumer, it can really vary. But the point is, know these for your business, know these for your segments, and figure out your insights from there. Great. So that's the first key thing that I wanna talk about. The second theme for us that I want to talk about today is that you have to know your customers. Your customers for your whole life as a company are your north star. If you are ever not sure what to do, spend time with your customers. So Forrester put together a really nice infographic just kind of laying out how technology shifts have happened over time, starting in 1900 of the age of manufacturing. Moving to the age of distribution, the age of information, and for the last 10 years plus, the age of the customer. And we're very much in the heart of that today, and every one of you knows that and is a part of that. And that's what SaaS businesses are all about, serving the customer, winning the customer over and over again. And in order to do that, you have to get to know your customers deeply. This is spending time with your customers, getting to know them one-on-one, understanding their hopes, their fears, and watching them use your product. Watching them use all the other things in their business too. Seeing how those things do or don't connect together. Seeing their pain and getting to work through it firsthand with them, and importantly, watching them. Which leads me to my next big takeaway. You have to watch what your customers do, not what they say. And I'll share with you a particular example that was very painful for me at the time, but it has like just emblazoned this in my, who I am as a leader today. And that was back a number of years ago when I was at Intuit. One of my early jobs there was as the head of product for QuickBooks. And I was so excited to do that job. And so I went out and spent time with customers and asked them what they wanted and needed. What did they most love about QuickBooks? What did they most hate about it? What did they wish for and asked if there was just one thing, one thing that you could have and it was anything in QuickBooks, what would you most wish for it to do? And they said, budgeting. Budgeting is the thing that we most want. And we said, fantastic, we would love to build you an amazing budgeting tool. And so we started doing mockups and prototypes and brought customers in and they were using our budgeting. And when they told us, Yes, this is a great budgeting tool. We built it, we shipped it, and you know what happened? Nobody used it. How come nobody used it? That's exactly the number one said thing they said they wanted. So how come they weren't using it? And so we went back to the North Star of our customers and we watched them. And what we saw was that there was no moment in the day that a small business customer actually sat down and did budgeting. Budgeting is tomorrow's problem, never something that they actually spent time on. So why were they asking for budgeting? What was the real thing going on there? What we, what we found out as we watched our customers more is that they did spend a lot of time looking either online or physically at bills they had to pay and invoices that they were hoping to receive in from customers and trying to match the two. And what we realized was that their key problem was, "I can't pay my bills." And so our aha was you must fall in love with the problem, not the solution. We had fallen in love with the solution idea of budgeting. The problem was, "I can't pay my bills." And when we focused on that problem, "I can't pay my bills," we built a simple cash management solution and a lending marketplace that was soon used by hundreds hundreds of thousands of small businesses. And so my takeaway here, and I share this with you all, fall in love with your customer's problem, not the solution. So that's the second key thing, really focusing on your customers as your true north, falling in love with the problem, not the solution. Now, the next thing that I wanna talk about today is the hardest thing in software that nobody really talks about or thinks about upfront. When you're starting your company or when you're in your early stages, you're kind of thinking about, how do I create a great product? How do I really understand my customers and solve their problems, right? We just talked about that. Or you think about, how do I build a great team? How do I hire all the right people who can do even so much more than I could possibly imagine, who can really inspire our customers and build something incredible? What you do not think about upfront is pricing and packaging, typically, right? So this is a little audience participation. Raise your hand if you think today that your pricing for your product or service is excellent. Raise your hand. Okay, we've got one person. One person, which is fantastic. And she's encouraging other people too at her company. So one company out of, you know, however many this is. Many hundreds. How many of you think your pricing could be better? Raise your hand if you think your pricing could be better. Yeah, it's pretty much everyone here thinks their pricing could be better. And that is because getting your pricing and packaging right is hard to do. And the fundamental principle that I would encourage you to think about as you're doing this is that you want to align your price to value. And what this means is spending time with customers and deeply understanding the value that your product is providing. and then figuring out how to price accordingly. So for customers who are getting more value, they'll be willing to pay a higher price. For customers who are getting less value, make sure you're not charging them too much. And you need to importantly make sure that the price you're charging is always less than the value that a customer is getting. So this is a principle that I use in general in pricing, and I think you can as well. However, it's still hard. So at, at Intercom, when we started, we had a very simple pricing metric, and we called it total people records. And that basically meant that we charged customers based on the number of contacts that they had in the Intercom database, which was your total people records, which was perfectly fine and good way to start. And it served us well at first, and then it stopped working well. And it stopped working well for us for two reasons. The first of which is customers found it hard to predict, and no one wants pricing that's hard to predict. And customers also found it to be not very differentiated. And we ended up in a place where we had some customers who were using the Intercom product really deeply and really well and were getting tremendous value, and where we weren't actually charging them very much, and where they would have been fine to pay significantly more because they were getting many, many, many times the value. So there are some customers that we were underpriced for, and then there were some customers that we were overpriced for. And that is where, um, there were smaller companies or using the product less where our pricing was actually more than the value that they're getting. And that's obviously not a place that you wanna be in at all. And so we did a, an overhaul, start from scratch, go back to the principle, um, really develop that principle of aligning price to value and came up with a pyramid. And I share this pyramid with you So it can be helpful for you in your pricing and packaging going forward. First layer and foundation of the pyramid is your pricing metrics. And the key here is to think about value. What is it that drives value for your customers? So it could be things like the number of seats of your product. It could be the amount of storage in your product, the amount of API calls, whatever it is. Think about what drives value. And use this as your pricing metric. If you think about like a movie theater, for example, you walk into a movie theater, how do you expect to be charged? You expect to pay per seat, right? Because you get value based on the number of people who get to see the movie. If a movie theater did pricing based on height, well, that is a metric that wouldn't make any sense at all because it doesn't drive anything about the value that a customer gets. And by the way, it would piss off all the tall people. Example, right? So you want to figure out your pricing metrics that align to the value that you provide your customers. And this is something that you don't want to change often. This is not something that like every year a new pricing metric. This is like think about it deeply and set it out and have it for years. Next key layer here is packaging. And your packaging is how you take what you build and turn it into what you sell. And what I like to think about here is your customer segments. And you want every customer to be clear, for me, what is the package or the solution that is right for me? So you wanna design your packaging based on your customer segments to figure out the key things that they need. And you can have different levels for your packaging. This is something you also don't wanna change very often, but you can change it a little more often than your pricing metrics. When you've got a new product or a new add-on or a new customer segment that you're going after, that's a great time to relook at your packaging. And the third key piece of this is your price. This is the actual dollar value or local currency value that you're charging. So what you wanna do here is you want to align your price to value by customer segment. So that's our key theme for the third area. Align that price to value by customer segment. And I would also say pricing and packaging is something that's never done. We've done a lot of work on this at Intercom, and there's still more that we think we can do and more that we want to, to continue to improve. So make sure you spend some ongoing time with customers thinking about the value that you provide and using that to keep getting better and better at your pricing and packaging. All right. The fourth and final theme that I want to talk about with you guys today is designing your end-to-end customer experience. We talked about this being the age of the customer. And, you know, while this started with B2C companies and, and consumers having these high expectations, every single one of your B2B buyers is a consumer in all of the other parts of their life. And so companies expect consumer-grade experiences. Consumers, of course, expect it, and all of your B2B buyers expect that as well. And a good litmus test that I like to think about in terms of the end-to-end customer experience is if your friend had this experience, how would you feel about it? If you would feel proud or happy, terrific. Put a check mark in the win column for that particular part of your customer experience. And keep testing it because every customer will have a little bit different experience. If you look at that and you think, oh, you know, really not so pleased about this, then you've got work to do, and that is totally fine. And the key is to think about it holistically from an end-to-end way. And I always like to start with the customer. So start with the customer. Think about what matters most to them and what their experience is with you. And think about lots of different types of customers. Think about it from the moment when they first hear about your company and your product and your brand Maybe it's from a friend or a peer. Maybe it's through some of your marketing. Maybe it's through an analyst. Think about how do they first learn about you and what are the expectations that they're starting to get set. What is the promise that you're making when they first come to your website and they learn about who you are and what you can do? What are they hoping for? What are you promising them you could do? If you have a sales process and they're talking to people on your sales team, what's your sales team telling them? Promising them, and then how do you make sure that you're delivering on that? When they first start using your product or service, what's that initial experience? How do, how quickly do that get, do they get that first moment of like, wow, and first moment of huge value? And what's their ongoing experience with you like? What do they, what happens when they have a problem? Who do they reach out to? What's the experience there? How do you set them up for success? And then how do you get them building a strong stronger and stronger relationship with you and get you able to deliver more and more value to them and they're doing more and more with you over time. And this is the flywheel that great companies and great entrepreneurs aim for. And we talked earlier about retention and how important that is. So a big question is, how do you drive strong retention, right? Well, the way you drive strong customer retention is to build strong customer relationships, and a delightful customer experience, and do that in a way that scales. And this is something we are super passionate about at Intercom and that we have dedicated ourselves and our whole products to, helping companies build personalized, in-context experiences that are also omnichannel and able to touch customers everywhere they want to be touched. Everywhere. That came out strange, didn't it? Able to work with customers everywhere those customers are. And so that means things like when a customer comes to your website, having a personalized way of interacting with that customer. When a customer first starts using your product, having personalized onboarding. I don't mean like an individual, I don't mean like a one-size-fits-all, here are the 5 steps to take. I mean based on who you are, what you have done, what you what you haven't done in the product, what you've checked out on the website, a personalized experience for you that is great. And then an ongoing way to get help, to find out about new things, and to succeed within the product or wherever you are in an omnichannel way. And what we find is that when companies do this, they see tremendous results. They see 82% on average higher conversion when they engage with prospects on their website. And from engaging with their customers actually in product, in the application, they see 3 to 4 times the engagement rate of email. This is not like 10% better or even 50% better. That's like 3 to 4x. That is huge. And the reason it is, it's just, it's actually very logical. When you reach out to a customer when they're already thinking about you, already working in your product, and suggest something helpful for them to do as a next step or to learn more about, of course they're much more likely to engage with you than if you send them an email 6 hours later or 3 days later when they're not even thinking about you at all. So really today, spam email sent out of context in a non-personalized way, what do you do with it? Like, I just go through and I clean it all out and I look for products that can help me clean that out better and better. So outgoing email like that, voice calls really are a thing of the past. Things like when you're asking your customers to fill out forms to tell you about who they are, that's a thing of the past. Gone are the days where you can expect your customers to submit some kind of support question, wait for some unknown period of time, get an email back when they're already doing something else. Which by the way says do not reply to this. Like, do not reply to this. I'm your customer, I want a relationship here. And so what we find is that when companies have this kind of in-context personalized relationship with customers and communicate to them where they want to, whether that's in product or outside, they see tremendous results. And I'll give you a few examples. These are a few of our customers, but the point is these are companies who are doing the end-to-end customer experience really well. So Atlassian, for example, does on-website engagement and in-app help and support. And what they find is doing that, they've been able to get to a less than 3-minute first response time, and that is their fastest channel to resolve issues. Unity, using on-site engagement, in-app engagement, in-app messaging, omnichannel support, has been able to increase their conversion rates by up 45% and they now see almost a third of their retention coming from real-time messaging. And you remember that chart of like that great big growing business and the difference between that and the kind of like flat hamster wheel of a business? Like they're attributing 32% of that difference to real-time messaging. Notion started doing this real-time in-app work just for support. And oftentimes that's a great way to start. Like pick an area, whether it's on sales or marketing or support, Try it out. And what they saw is it really worked. It drove significant improvements to their customer experience, and they started to roll it out then across their sales teams, their marketing teams, in addition to their support. And they've seen higher customer retention, satisfaction, and overall business growth. And the key to all of this is, is that customers expect consumer-grade experiences. We all here expect consumer-grade experiences, and that is a wonderful thing. Both for us as consumers but also for us as, as company leaders and product leaders because it gives us a high bar to shoot for and drives inspiration and breakthrough thinking. And what it drives is the aha that personalized, in-context, scalable experiences win. And when your customers win, you win. So now I'm gonna summarize everything that we just talked about for the last few minutes into one slide. One slide to rule them all. So number one, you need to know your business. You wanna go beyond the averages, dig in to understand the insights there, understand your revenue health by segment. You have to spend time deeply with your customers, watching what they do, not just what they say, and fall in love with the problem, not the solution. To figure out your pricing, which isn't easy, by aligning your price to value by customer segment. And really think deeply about designing your end-to-end experience. Make sure it's personalized, it's in context, it's scalable. These kind of experiences win. So hope this has been helpful for you today. We write a lot at Intercom. We like to really give back to the community because, uh, We've learned hard lessons along the way. You can find more at intercom.com and download our free growth handbook, as well as check out our Scale blog and Scale podcast where we share this type of thing and many more learning and insights. You can also follow me on Twitter @KarenPeacock. And I want to thank you and wish you all the best. Thanks, everyone.