INBOUND 2018: HubSpot Co-Founders Brian Halligan & Dharmesh Shah Spotlight

Ram.

Sam. Please welcome Hot spots founder and CEO Brian Halligan.

Okay. Welcome. Inbound 19.

Just kidding.

Okay. I have been thinking a lot, a lot about how do you grow your business in 2019 and 2020? I've come up with a whole new model for describing how you grow. And the model is based a lot in physics. You see, when I was in university, I spent a tremendous amount of time following the Grateful Dead around. In between Grateful Dead concerts, I squeezed in an electrical engineering degree. When you take electrical engineering, you take a ton of physics. Physics was my favorite class in college. I love physics. I love physicists. Physicists. What's cool about them is they love models. No, no, not those kind of models. These kind of models. Now, what physicists do, that's super cool, they study our world. They study it very carefully, and they'll come up with a model to describe the way it works and a bunch of math to back that model up. Then they'll publish it out into the wild. When they publish it, the physics community will study it. They'll test it, they'll put the bright light on it, and they'll look for cracks in the model. If they find a crack, they'll publish a new model that better describes how our world works. Like in these cases. Now, all of us in the inbound community, we're kind of like growth physicists. And we've all got a model we've been using our whole careers. We have a model. I call it Ye olde funnel Clap if you've ever used the funnel. Of course you have. Of course you have. Now, I've been using the funnel for 28 years, my whole career, and I'm starting to see a couple cracks in ye olde funnel. I want to talk about those cracks. There's two. I want to share them with you. Maybe you're seeing the same cracks. Let's talk about the first one you see. Once a week, my dog Romeo and I, we have a very good habit that we've gotten into. Once a week, we interview a HubSpot customer. And Romeo, he's like a dog on a bone. In these interviews and during the interviews, what Romeo is trying to get at is what is the. What's the most influential voice in your head when you make the decision to buy HubSpot? And here's how the conversation goes. Romeo will say, well, what was the most influential voice in your head when you bought HubSpot? And the answer will be, well, Romeo, that's a good question. There's a couple things we were subscribed to your blog and liked your content. And then we were talking to your sales rep. He was very helpful. And we decided to buy HubSpot. And that's the answer we've been getting for 10 years that we've been doing this. The same answer. And that tells me that inbound marketing and selling is working as advertised. Marketing and sales are in their head when they're making the decision. But the last two years, the answer's changed dramatically. And here's how the Q and A works. Romeo will say, well, why'd you buy HubSpot? And the customer will say, well, that's a good question. You know, as our friend Meredith talked us into it. You see Meredith, she's been using HubSpot her whole career. She started her career. Where was she working? Bubba Gump Shrimp. And then she left. Bubba Gump Shrimp. She used HubSpot there and she went to a new company. What was the name of that company she worked at? Dunder Mifflin. I love HubSpot at Dunder Mifflin. And she talked us into it. You see, the answers changed. It went from being sales and marketing being the loudest voice in their head to being word of mouth being the loudest voice voice in her head. It strikes me that's a sign of the times these days. Whether we all like it or not, trust in sales and marketing is at an all time low. It's about 5% on the trust index. Now there is some good news for all of us sales and marketers in.

The room.

Two pieces of good news. The first piece of good news is we get those goddamn politicians beat, don't we? The second piece of good news is when they put the trusted index together this year, they didn't include CEOs on there. Perfect. Okay. This is a sign of the times. Nobody trusts anybody anymore. They don't trust marketers, sellers, vendors. They don't trust the government for sure. They don't trust media, social media. Who do they trust? They trust your customers. That's the only people they trust these days. And that's at sort of the end of the buying process. Romay and I were interested in what happened at the beginning of the buying process. How did our best customers find us in the first place? Once again, it was word of mouth. Word of mouth is becoming a more powerful channel, whether I like it or not, than sales and marketing. And here's the thing, for you sales and marketers out there, I don't think this is the end for sales and marketing. I have some Ideas on how we can tweak, how we market and sell to really make this happen for all of our businesses. This, my friends, this is the first crack, of course, in the funnel. The funnel shows customers as an output when we all know that customers are actually an input to our business in today's day and age. Okay, the second crack. Well, I want to tell you a story about an old boss of mine. She was a great boss. She ran marketing for a company I worked in back in 2001, 2002. And she had an expression. What she would say to me is, brian, the sun rises and sets on the quarter. And what she meant was, by the end of the quarter, she had wrung every ounce of energy out of marketing. And you start the next quarter on the first day from a standstill with no momentum and no leverage. Right. I don't think that's true anymore. All of you are doing a fabulous job of inbound marketing. You have assets, you have content, you have links into your site, you have social media followings, you have keyword rankings. You have all these assets, and you have momentum that swings from quarter to quarter. So the funnel, my friends, I think, is a broken metaphor that we're using. Everybody with me, okay? I've been wallowing a bit of misery over this, And I talked to Romeo about it, and we're very upset about it. And I go to a lot of meetings at HubSpot, as you might imagine, probably 30 a week. And every meeting I go in, there's funnels. There's funnels on the whiteboard, funnels on the slides, with customers, with partners, with employees, funnels. And it's frustrating because I know the funnel is a broken way, an old way to look at the way growth really happens. But I was frustrated because I couldn't think of a better way to describe how growth actually happens in 2018. And then I saw a great presentation by somebody who knows a lot about growth, a guy named Jeff Bezos. The way Jeff Bezos described growth was fascinating. He said, the way we grow is we increase the selection. The more selection we have, the better the customer experience. Of course, the better the customer experience, the more traffic and word of mouth. The more traffic in word of mouth, the more sellers and so forth and so on. What really impressed me the most about this presentation, he went through the entire thing. He didn't drop a single F bomb. He didn't say the word funnel. Once. He had a new word, a new F word. Very clever one. He referred to this thing as a fly word. Excuse me. As a flywheel. Now, why would he call it a flywheel? It's a circle, it's a loop. Why create some fancy word for it? I don't know about you guys, but I didn't know what a flywheel was, so I googled it. What a flywheel is, is an invention by a guy named James Watt 200 years ago. He was a physicist, and he invented this machine that was very good at capturing energy, storing energy, and releasing energy. And this flywheel was the key part that enabled the steam engine to happen, which enabled the whole industrial revolution to happen. So it turns out Bezos picked a very, very cool word for describing the way a modern business in 20, 18, 19, and 20 really grows. I like this a lot. And I think we, the inbounders, the inbound community, ought to embrace this new metaphor, this new model, the flywheel. I like it so much, I made my own flywheel model. You want to see it? I love that thing. Okay, we have some business to take up. We're going to talk a lot about the flywheel today. How to apply it to your business and get your business growing fast in 20, 18, 19, and 20. But before we do that, let's. The Funnel. The Funnel has done terrific work for all of us his whole career. Let's throw him a great retirement party. Let's get him the gold watch. Let's get him the new clubs. He's retiring down in Naples for Florida. Please join me in congratulating the Funnel on his permanent retirement from the sales and marketing business. You're a good sports. Okay, this right here on the screen, this is HubSpot's flywheel. This is how we run HubSpot, and we've retired the Funnel. And by the way, during this presentation, I'm going to weave in and out a couple of times stories about HubSpot. I hope you'll grant me that privilege today. The reason I do it is HubSpot's got lots of smart people. I learn from lots of smart partners and customers, and it's like a laboratory for new ideas. So I'm going to talk about HubSpot here, and I'm going to talk about our flywheel. But before I talk about our flywheel, I want to show you the impact it's had on me and my life and HubSpot. And to do that, I have to wind the clock back to when I was a little boy. I was six years old. Now, when I was six years old, I was one of those kids that repeated kindergarten. I had A hell of a time tracing those letters and numbers. Those clay snakes were vexing. Couldn't get those stinks. Roll those. You know what I mean, right? The only good part about staying back in kindergarten is when you're 16 years old, you're first in line to get your license. Freedom. And all your friends are counting on you to get your license. So I'm 16 years old, right? On my birthday, I show up for my learner's permit test, right? I take the written test and I do very well. And then I go and I do the eye test, and I put my head in the thing, and the woman says to me, oh, Brian, can you read the bottom line? I can't read the top line. Okay? So I failed my test. I went to the optometrist, and he gave me a full workup, and he said, you know, Brian, you're a very tricky case. You're right on the edge. You're right on the border. On the one hand, I could give you a pair of glasses. On the other hand, I could give you Seeing Eye Dog. I was blind as a bat. Well, I ordered some glasses. Two weeks later they came. Oh, my God. Blades of grass, Birds in the trees, the basketball rim.

I finally.

That's how I feel about the Flywheel. Really like our Flywheel at HubSpot. There's a couple things I like about it way better than the funnel. First, it's got customers on there, and it's got our happy customers, our promoters on there. And it's a circle. They're inputs to our new customers. The second thing I really like about it is it doesn't just give us credit for what's going on in a given month or quarter. It's got all our leads, all our customers, all our promoters on there. It's got a sense of leverage and momentum. I really like this Flywheel. There's a customer that Romeo and I interviewed a couple months ago that's got this Flywheel thing nailed, and it's a company called Airstream. Let's have a look at the video. These guys are awesome.

Purchasing an Airstream can be a lifelong dream for some people.

We affectionately call people who own Airstreams, streamers and that don't own an Airstream today. Dreamers.

Having a large database allows us to build a community that gets us to conversations around the campfire, connecting that digital space with the real world and using Airstream Dreamers to promote the brand for free.

I have yet to meet someone who owns an Airstream who doesn't want to talk about it or tell you their story. And in my past, I had to pay people for those stories or I had to go out and not make them up. But you had to work a lot harder to try to get people to.

Interact, even if they may never buy one, because they're all influencers. For us, that would cost us millions to reproduce if we did it in a more traditional way.

Okay, the Airstream folks are here. Let's give them a big hand. All right. They're fantastic. Okay. Every time in college I had a physics lecture, the professor would give me a back breaking set of problems. Today, you're sitting through a bit of a physics lecture, and I'm going to give you a back massagingly easy set of problems. Here we go. Here's your first problem. There'll be three. The first little exercise I'd like you to do is just like these two folks in the video. During the break, when you're back in the office, draw your flywheel. Take elements from your funnel, add all your customers and promoters in there, include all your leads, everything you've ever sort of created, all your asset there, and go ahead and draw it on the board. If you'd like me to grade your homework, I put a hashtag on there, rflywheel. Go ahead and post it on Instagram or Twitter. I spend way too much time on those platforms. Take a look, give you a grade, give you some feedback. The person who does the best job on their homework, I'll give two free VIP tickets to inbound next year. Okay, you don't have a funnel. You've got a flywheel.

How do we put that flywheel to.

Work for you folks? How do we think about your business differently? Where do we invest in 19 and 20? How do we really grow? Well, to build a flywheel? James Watt, the physicist, would say there's three important things. The first is you need, of course, to apply a force to your flywheel. Very simple idea. Apply a force to the flywheel and it spins. The more force you apply, the faster it spins. The more place along the flywheel you apply a force, the faster it spins. Now, one of the things I find most fascinating about selling and marketing these days is where the best return on investment is. Where should you apply your force in your business to get the biggest return? Because I think it's shifting a lot and it impacts everybody in this room. When I started my career, the best place to invest the biggest return on force was in the engage stage. That's where the sales reps come into play. And you rack mounted sales reps. Now, why did that make sense back then in the 1990s? My theory is back in the 1990s, customer or sales reps had a lot of information. Customers had relatively little. And the sales reps leveraged that information gap to create a lot of trust. So it made a ton of sense to hire sales reps back then. The reason we started HubSpot is we saw this shifting back in 2005, 2006, and it shifted, of course, to attract to marketing. Now why did it shift? It shifted because the sales rep and the prospect had the same information at the same time. And so it behooved you as a marketer to create as much information as possible and pull people in with that. Well, what about today? Well, it's shifting again, right? Of course, today the loudest channel in the market is delight. Now, I'm going to talk a little bit about how you increase delight in your business. But this is where the biggest return on your investment is today. Now, there's a company that I love that's doing this really well that my son Luke educated me about. And I want to tell you about it a little bit. This is Luke and I. We were horsing around in New York City one day, and it was getting dark. As you can see, the picture is getting dark. We didn't have jackets on. And Luke said to me, it's getting cold, dad. We should get some jackets. And I said, luke, I am your father. You're right. Jacket. There's a Gap right around the corner. Luke. Perfect. And Luke gave me one of these emojis, no emoji. And I said, what's wrong with the Gap? He said, the Gap's fine, but we got to go to Patagonia. What's the big whoop about Patagonia? He said, patagonia's fabulous. I got a Patagonia jacket two Christmases ago. I trash all my clothes. You cannot rip this jacket. I beat it to shreds. It is a tank. It's so comfortable. It's the most comfortable piece of clothing I own. And by the way, if I ever did rip it, the zipper breaks. Anything happens to the jacket? You know what, dad? No. Do you bring it back to the store? They give you a brand new one for free. Okay, let's see what Patagonia has. We're not going to patagonia. It's a 30 minute Lyft ride. Luke, we're not going to Patagonia. Here's Luke with his new Pataguchi jacket. You see, Patagonia's got it right? They've got all of their force on delight, right? They've got it all here. They're not trying to close Luke. They're trying to delight Luke. All their forces, their quality policy, their return policy, their ads, everything are designed around delight. And what they want to do and they're succeeding is they want to turn Luke into a walking, talking Patagonia flywheel. Right? They've done a nice job of that. Okay, this is what HubSpot's flywheel looked like in 2015. For better or worse, HubSpot is very much a reflection of its CEO, probably similar to your company. And I'm a sales and marketing person. I grew up in sales and marketing. I'm passionate about sales and marketing, and we really focused on this. All of our energy at HubSpot was sales and marketing, really wanted to close as many customers as possible. And frankly, delight was an afterthought. But I've been influenced. I've been influenced by Romeo, by Patagonia, by Luke, by Airstream, and I've come to see the light. And so what we're trying to do is shift our center of gravity and shift our forces from down here to up here. And we're making progress. We're by no means perfect. We're making mistakes, but we're on our way to creating a flywheel that looks more like this. Okay, now I've made some mistakes along the way. One mistake I made along the way is I just said, hey, we're gonna be a delight company. And it was lip service. And no one listened to me. The second mistake I made was I assigned this to the service department. I said, the service department, you gotta fix this problem. We need to delight our customers. Neither of those things work. What really works is getting your whole darn organization behind it. And the most important part of your organization to get behind it is sales and marketing. Let me give you an example of how sales and marketing can shift its focus from down here and closing. Sorry, that thing spins really well. Hello, up there. To Delight. It's our commission plan, of all things. So our commission plan in 2015 was very simple. If you're a sales rep, you get commission on everything that closed. We made two important tweaks to it. We added a carrot and a stick. The stick was very unpopular. What the stick was, if a sales rep closed a new account and that account canceled within eight months, well, the company would claw back that commission. Painful but useful. The carrot, also useful. The sales Reps who do the best job at setting expectations and have the highest retention rates and the happiest customers, well, they get paid. Paid at a kicker, a higher rate. That carrot in the stick has moved that force from sales over to delight. And our sales reps now are focused not on closing customers, but on delighting customers. This is the key, by the way, to growing your business. This is the key in sales, marketing. Sales and marketing. Want to continue to invest in it. But how do you get your sales and marketing focused on enclosing, but on delighting. That's the key to growing your business in 2019 and beyond. Okay, two more small homework assignments. Really easy, just like these folks in the video. Take that flywheel you built and draw your forces on it. Put your commission plan. Where does that really sit? Put your best people on there. Put your pricing plan. Is your pricing plan designed to close or to delight? Do your customers pay you as they gain more value or do they pay up front? Put everything on there, all the forces you can think of, and then redraw the darn thing with your forces up in the top, right, like HubSpot's trying to do. Again, the person who does the best job. Two VIP tickets to Inbound. I'll look at all of them that are submitted on Twitter and Instagram and give you some feedback. I'm really looking forward to seeing what you come up with. Okay, now, if you ask James Watt how to build that flywheel, first thing is force. What's the second thing? Watt would say Watt was a smart guy. He would say, you want to put a force on it, but you really want to lower the friction in your flywheel so that if you just barely touch it, it spins and spins and spins. You get a big return on investment. What I want to tell you about is my low friction morning. I had a very low friction morning. I woke up on my new mattress I bought from Purple, and then I put my Warby Parker glasses on. You all know I'm blind. And then I picked up my phone and I put on Spotify and I put my favorite Grateful Dead song on the wheel. Danced my way into the bathroom. I shaved with my Dollar Shave Club razor. And then I went in my closet and I got my new outfit from Trunk Club. Now, by the way, I'll give you a little non sequitur before we do this big presentation in front of all you. We do a dry run inside of HubSpot with about 30 people, and 29 of the people gave substance feedback. But one person decided to give me style feedback. And so the remark, it was from someone named Andy. Oh, I really like the presentation this here. Da, da, da, da. He said, but the problem you're going to have is you're wearing dad jeans. He said, the problem you've got is your jeans are too wide at the bottom. He said, what you need are skinny jeans when you're up there on stage. So what do you think of my new skinny jeans? I love them.

I love.

And then I got in the lift and I came over here. These six companies have woven their way into my daily life and a lot of yours.

Fascinating companies.

They're all startups. They're all less than 10 years. They're all younger than HubSpot. They all sell commodities, relatively undifferentiated products. You can get skinny jeans at the Gap in Patagonia and anywhere these days. And they're all growing like a weed.

How'd they do it?

What's the secret? Modern 2018 handshake. It's friction. They took all the friction out of their flywheel entirely. Removed the friction from their flywheel, and they've reimagined their industries now. Let me give you an example of what I'm talking about. Two months ago, I bought that purple mattress. Zero friction in the process. Didn't talk to a single human. It was fabulous. Everything worked great. Two years ago, my previous mattress I bought from a store called Bernie and Phil's. Clap, if you've heard of Bernie and Phil's. Okay. A lot of people. The best thing Bernie and Phil's has going for it is its jingle burning and fills, quality, comfort, and price. That's nice. The worst thing they have going for it is they're stuck with a very high friction model. Right. It's full service, but full service means humans, means handoffs between humans and means haggling. And by the way, I want to try the mattress. I want to try it at home. Romeo wants to give it a go, too. We want to give it a try. And so you need to move your model. The key these days all of a sudden, seems to be friction everywhere I look. Companies taking the friction out of the. Why is that? What the heck is happening on the Internet in the world that frictions all of a sudden? The secret handshake. I blame the iPhone. This is my iPhone. Before I use the iPhone. I had the patience of a saint. Now I have the patience of a squirrel on its second espresso. That's my favorite part right there. I can go home now. I love the Squirrel. Okay. All the examples I've given you so far, they're B to C. Their glasses, their music, their things like that. If you're in the B2C industry, the train is about to leave the station. You need to get 90% of the friction out of your model or you're going to be in trouble. You got to move. If you're in B2B, the train's parked at the station, but it's leaving soon. You want to gain competitive advantage against your competitors. You want to disrupt incumbents, you disrupt it using this low friction play. Now, I had a great professor in business school and she said this mantra over and over again. Hey, Brian, if you want to build a great company someday, your product has got to be 10 times better than the competition. I think that's terrible advice now. I think it's dated. If you want to build a Great Co. In 2018, your customer experience has to be 10 times lighter than the competition. The rules are really changing.

Oh, thank you.

It used to be the best product won. Now it's the best customer experience wins. It used to be what you sold really mattered, and now it's how you sell. Right under our feet. Today, everything's changing. It feels to me like 2006 all over again. Everything's shifting under our feet. There's a big opportunity for those of you who want to take advantage of this to build big companies and really grow. Now I want to give all of you three tips you can take back with you to your headquarters. And they're going to be actionable tips. And I think these are the three most important things I have to say. The first thing I want you to think about when you go back to get the friction out is your company Today, most likely 80% of the touches with your customers and prospects, well, they happen with your employees and your humans. And I love humans and I love employees. But employees mean friction. And friction is the new enemy. In the future, 80% of your customer interactions have to be self service in 20% with the humans. You need to turn it upside down and turn your model on its head. How do you do it? Today, 80% of your IT resources are invested in making those frontline employees more efficient. In the future, 80% of your IT investment should go to to making your customers more efficient. Turn it on its head, what else? One more. Today when you grow, you add humans. And what tends to happen is those humans get specialized. You go from having a sales rep to you have a BDR and a hunter and a farmer and an account rep and, and all kinds of different roles. And I love specialists, but specialists mean you're getting handed off between them if you're a customer. If you're getting handed off, you're feeling friction. And friction is the enemy. In the future, 80% of this is going to be done with automation. Your humans are going to handle the more complicated cases, the exceptions. Your employees will have to change too. Today your employees are what some people call eye shaped. Very deep in what they know. The BDR is the world's best bdr. In the future, we're going to have to train our employees a little differently so we can avoid the friction. So you have somebody who's very deep like a bdr, but they're T shaped and they have other expertise and they can do more things to avoid those handoffs. Okay, I want to show you a video of a customer of ours that really rocks and it's headed on the right path. Please pay attention close to this video. These guys are awesome. Let's have a look.

On the Rock and Roll hall of Fame's Facebook page. We have a lot of fan interaction. I knew that Facebook messenger would be a very busy channel for us. I really believe in one to one engagement. Automation does things to prioritize your workflow. But with chat in particular, people are really looking for that answer to their question or that direct interaction at the moment that they're reaching out. You have to be able to deliver the information and respond. Otherwise it's just setting someone up to be disappointed. And that's absolutely what we want to avoid.

Void.

With any pre visitor experience, we were prioritizing conversations and able to balance automation and a real person interaction and conversation. What we found was that there was a lot of common visitor facing questions and we built the first menu to get their answers as they needed them as fast as possible. The fan questions that come in, a lot of them are about the people in the hall of Fame. You can tell that these people are really passionate about these artists. The Rock hall just wants to give these fans a voice. That's why we do what we do and why this organization exists. And we just want everyone to feel like they're part of the conversation with us.

Okay, Rock and Roll hall of Fame's in the house.

Let's give them a hand.

Great job. Rock and Roll hall of Fame. Okay. I wanted to give them a test, right? I wanted to go to their Facebook page and have a little chat with their bot and see how that went. And so the other day I went to their Facebook page, and I had a little chat with the bot. And here's how the conversation went. Is the Grateful Dead in the hall of fame? The bot said yes. Is Aretha Franklin in the hall of Fame? Yes. Go, Aretha. Is fish in the hall of Fame? Yes. Are the Allman brothers in the hall of Fame? Yes. Are the flywheels in the hall of Fame? No. Wtf? How could the flywheels not be in.

The hall of Fame?

I love the flywheels. They're the best. Man, what kind of idiot is working over there? What's wrong with you? My inner squirrel brain took over for a minute there. Fortunately, 30% of the customer interactions on their bot are taken over by humans. The more complicated cases like myself and I was rotated to Ellie from the video. And my sense of Ellie is she had handled a few flywheel fanatics in her past. She talked me right off the ledge. Ellie is T shaped. Ellie is a content marketer, as you saw in the video, but she is very good at customer service. These guys are fantastic. Now, this was an important chapter, so I'm going to summarize. We're moving. We're in a big era shift. It's similar to the shift that I saw when we first started HubSpot. The Internet has really shifted under our feet. We're moving for an era where the best product almost always won to an era where the best customer experience almost always wins. We're moving from an era where we created a funnel and filled that darn funnel with friction to an era. If you want to win and have a light customer experience, you need to build a flywheel and free it of friction. This is where the world is going, folks, and it's an exciting opportunity for all of us. Okay, one last thing that James Watt would say. If you want to build a high growth flywheel inside your business, he would say, if you're putting force on your flywheel and you've got low friction, it's going to spin. It's going to spin really fast. If it spins really fast, it will break. You need to build your flywheel of very high quality, scalable materials. Now, I've got some experience with scalable materials, and I want to tell you about these two. That's my mom and my dad back. My mom's here back in the 1980s, and they're on the back deck at our house. And 99% of the time, they were happy with each other, touching each other, smiling. 1% of the time, they fought like absolute banshees. It was always the same issue. They fought about, constantly arguing, never stopped. It was exhausting. The ants. Here's how it went. You'd be sitting on the back deck with mom and dad, and my mom's got a very thick Boston accent. I don't do it justice. He's sitting on the deck. And sure enough, there'd be ants crawling around. And my mother would say, bob, I got ants crawling up and down my leg. You're so cheap. When are you going to get an exterminator around here? We got a wicked problem. So they're very happy here in the 99%. Bam. The ants put them right in the 1%. My dad would say, he's heard this before. He'd go down to Costco and he'd get the giant pack of ant hotels. You know those ant hotels, and they'd be on the deck and putting the hotels down. And so many ant hotels. It was like an ant monopoly board up there. Back to the 99% settled down. And then a couple weeks later, my mom had a good idea. She said, why don't we have a potty on the deck?

Cool.

My dad said, sure. And so two weeks later, we. We had a potty and we had about 20 people up on the deck. We were having a great time, drinking beers, listening to music. It turns out as we were having a potty on the top of the deck, the ants were having a potty down underneath the deck. And about halfway through the potty, the whole damn deck just went boom and crashed. We didn't have scalable materials. We had pine. And it wasn't pressure. Treated all of you these days well. You're building flywheels. Flywheels have humans in them. They have automation, they have software, and they need to scale. What we're working on in HubSpot is trying to build all of you a scalable platform. Let me tell you a little bit about that journey we're on. If you looked at HubSpot 12 months ago on this stage, we had about 44% of your flywheel built. We had three marketing applications and we had one sales starter app. Our toe in the wire there. We've had a huge year. Now. The first way we're scaling is we've got a full flywheel. We've come out with a bunch of new products to really help you grow and build one of these awesome customer experiences. Pretty cool, huh? The second way we've scaled is we're relatively well known for working with entrepreneurs and working with startups and small Companies and we love doing that. But we don't just want to work with you as a start, we want to scale up with you. And so today was a big day for us. We came up with a brand new sales enterprise product. That's awesome. We came out with a brand new service enterprise product.

That's awesome.

We took our marketing enterprise product and it had a big step function improvement in it. And so today we can work with you when you're two people in a garage all the way up to a giant company. Really proud of that, really psyched about that. The other thing we're psyched about is HubSpot started as an app, really, and.

We moved to a suite and we're.

Starting to move to be more of a platform. A year ago, there were 80 companies, software companies, that integrated into our product. Today there's over 200 really cool ones like Slack and Stripe and Shopify. Lots of other ones that began with S2. Okay. If you're interested in HubSpot, and by no means, you don't have to, this isn't a HubSpot conference. It's an inbound event. Come to Christopher O' Donnell's presentation. He's the one after Dharmesh. There's a little break, but he'll be presenting here. He's going to show demos. He's going to be awesome. Now I think about myself and my personal journey with HubSpot. We started 12 years ago. There was a window of opportunity that the two of us saw. And the window was create content, pull people in. The Internet created this arbitrage opportunity for all of us. And it's been great. The shade's down a hair on that window, but it's still a pretty good window. On the marketing side, it's changed and there's a sliding door new opportunity for all of us to create one of these killer new great customer experiences. That's the business we're in now. We want to help you do that. That's what we're up to at HubSpot. So I'm really excited about that. Okay, one final thought. At the beginning of the presentation, you might remember this slide of famous physicists. Some of these physicists were better at branding than others. Isaac Newton's pretty good branding, right? Every classroom around the world, Albert Einstein. Every university physics class, you talk about Albert Einstein, but who is quantum? Who's atomic? You have to go deep into the bowels of Wikipedia to find these guys. I've learned my lesson. I'm going to end on Halligan's growth model. So what's my growth model? Of course, my growth model is a flywheel. Throw out your old concept of the funnel, embrace the flywheel. And then my flywheel behaves according to this equation. The equation looks complicated, but it's actually quite simple. The numerator at the top says, keep investing in sales, keep investing in marketing. But boy, the investments you make in delighted customers, you get a bigger return on investment. I would also say that take your sales and marketing resources and see if you can move them slightly to not just focusing on closing customers, but delighting customers. A lot of power in the numerator. The denominator, of course, is delight. Sorry. The denominator, of course, is friction. Get the friction out. The lower the friction in your model, the faster you're gonna grow. If you like this kind of stuff, we built a new site for you, rflywheel.com. check it out. Really cool stuff. If you want some help with your homework, go on there. Dharmesh will be up in a minute. I want to thank you all. You've met a great crowd. Thank you very much.

Sa Sam.

Sa.

Sam. Please welcome HubSpot founder and CTO Dharmesh Shah. Thank you. Greetings, everyone. We all want to grow better. The question is, how do you grow better? This is the question I've been obsessed with. Now, we've already looked at the physics of growing better. We've looked at flywheels and force and friction. And I think it's also useful to. To look at the philosophy of growing better. Now, I've had two major milestones in my life that have kind of helped me explore this idea of growing better. This is my son, Sohan. I introduced him to y'. All. I've lived in the south for 10 years. I'm allowed to say y'. All. I introduced him to y' all seven years ago from the inbound stage. And so, yes, this is a photo of him projected on the inbound screen. So next year, what I'm going to do is I'm going to have a photo of me with the photo in the back screen. It'll be like an Inception thing or Modern Family opening credits based on your preference. So when Sohan was born, I was overwhelmed with emotion. All the emotions, fear, anxiety, excitement, and joy. Uncomfortable. Joy. Uncomfortable. Because imposter syndrome. I wasn't sure I was ready, wasn't sure if I was deserving of that kind of joy. Many parents in the room, I think, have experienced this. Now, when a child is born, you're never really sure what they're going to be like. Sohon got lucky. He's more like his mom. But he and I do have some similarities. We have some traits in common. He too is more indoorsy than outdoorsy. He too is musically inclined, which in our family means he too knows how to create a Spotify playlist. And he too is a technology geek. This is a photo of Sohun when he's two. He's making some money on the side as a freelance mobile app tester. Now, I know some of the parents are thinking, is that really age appropriate? Dharmesh, don't worry. It's okay. He only accepted payment in bitcoin. It's all right. Sohan's long cryptocurrency for those keeping score. By the way, if you have young children in the family and they're not making money on the side, you're missing on a big opportunity. It's the gig economy, I'm telling you. You heard it here. So Sohan is seven now. So he just graduated first grade. And this summer he went to coding camp, as one does now. He's written more code this summer than I have. It's not a competition. I mumble to myself. It's not a competition. But if it had been a competition, I could have imposed his screen time limits and I could have won. I'm just saying, could have won. So Sohan's my younger one. My older one also had a milestone this summer. My older one turned 12. And by my older one, I mean HubSpot. Or as my wife likes to say, your actual firstborn. Now, this is a photo of an early HubSpot birthday party. I'm going to make note of a couple of things. Number one, I'm wearing a HubSpot T shirt. Shocking, I know. Shocking. Like the odds were 100%. That was my entire wardrobe back then. But what's noteworthy is I'm wearing a large HubSpot T shirt. It was too big. I didn't need a large HubSpot T shirt. Every T shirt I bought was a large HubSpot T shirt. Why? Because I had vision. I had foresight. And as we heard from Beth Comstock, vision doesn't matter unless you act on it. You have to execute. So I will make note. In this photo, I am holding a slice of pizza. No one else in the photo is holding a slice of pizza. And while holding this slice of pizza, I am simultaneously eyeing the cake with serious intent. I didn't have vision. I executed on the vision. I executed a lot, by the way. With all due respect to skinny jeans, I am very comfortable in my dad jeans. Just so everyone knows. Also wearing dad jeans in the photo years before I was a dad. Vision, people, vision. Okay, so I got to thinking, okay, I've helped out growing a tiny human. I've helped grow a company. Are there similarities? Are there lessons to be learned from the two? So I got together with my wife and the answer is, yes, there are similarities. And so we made a list. What does growing a human and growing a company have in common? Both involve a moment of passion followed by years of hard work. Neither one will make money. For the first couple of years.

People.

Will find you insufferable because it's all you can talk about at parties. It's not as easy as your friends make it look on Instagram. It's not that easy. Around year two, you decide to never, ever do this ever again. All the wrong people are eager to give you advice. And finally, there will be days you want to sell them, but you shouldn't. You shouldn't. The overall lesson here is that you start out being completely clueless. Startup kid, same thing. And as time goes, you become slightly less clueless over time. So let's dig into the growing a company part. We'll save the deep conversations on kids for when there are grown up beverages available, which is the appropriate thing to do. So this is a photo of HubSpot in the early years. It's the three of us, and by three of us, it's Brian, myself, and an office plant that my wife gave us as a present. The plant is named Duo because it's the second one, Uno. The first one. Well, we don't talk about Uno. It's not important. So in the photo we're shown in ascending order of socialness, from less social to somewhat more social. This might explain why Duo, the office plant, got invited to more after work parties than I did. I probably wouldn't have gone, but it's nice to be invited sometimes. Okay, so in these early years, Brian joined a CEO group. So he would get together with several other CEOs of high tech companies in the Boston area. They would meet quarterly to talk about their companies, talk about growth. And I'm not really sure where they had their meetings, but I always pictured it like this. No, it's not important. So in the photo, we're shown in ascending order of socialness, from less social to somewhat more social. This might explain why Duo, the office plant, got invited to more after work parties than I did. I probably wouldn't have Gone. But it's nice to be invited sometimes. Okay, so in these early years, Brian joined a CEO group. So he would get together with several other CEOs of high tech companies in the Boston area. They would meet quarterly to talk about their companies, talk about growth. And I'm not really sure where they had their meetings, but I always pictured it like this. Now, Brian has repeatedly assured me that they did not meet out in the wheat fields. But to this day, Brian has never provided photographic evidence to the contrary. So my theory still holds. And as far as I know, they met like this. So they would sit in a corner and they would talk about their CEO dreams. They would confess their CEO problems. They would sing CEO songs. And at one of these meetings, a very pivotal meeting, the key topic was culture. Culture. And now we were in the early stages of HubSpot. We hadn't talked about culture a whole lot. As far as I knew, culture was that stuff you put in yogurt or make yogurt with. Or is that gluten? I don't know. Anyway, and so as this conversation is progressing with his CEO buddies, Brian's like, oh, yeah, you folks are further along. Like, we have product to build. We have content to write. We have growth to generate. Like, we'll deal with culture later. But his CEO buddies were insistent. They're like, brian, no, you don't understand. Culture is critical. It defines the destiny of a company. Brian was like, okay. So the next day, Brian stops him, like, dharmesh, Dharmesh. I learned something super important at my CEO group meeting. Okay, lay it on me. Culture is critical. It defines the destiny of a company. Okay, Brian. So I waited for him to finish his dramatic pause. That's the role of a co founder. He would do the same for me. And he went on to say, you know what would be great is if we could dig into this culture stuff. Now, when he said we, he did not mean the royal we. He meant the very unroyal me. What he meant was dharmesh. It would be great if you could dig in to this culture stuff. And my reaction was this. And I remember thinking, dude, like, we went to grad school. We've been co founders for years. I've spent more time with you in those years than I have my wife, who I love. Do you not know me at all? You see, I'm not a people person. And from what I know of culture, what little I know, there are people involved. I'm an introvert. I'm not a cultural anthropologist. I'm an introverted. Technologist. Otherwise known as a technologist. And so after a few weeks of anxiety, I finally sent to Brian this email nine years ago this week. Exactly this week, nine years ago. And I apologize for a couple of the typos. This was a late night email. Brian. Not sure how I wound up being the guy to lead the discussion on culture. It's freaking hard. Eventually we need to give this to someone that actually likes humans. Now, this is a bit of a misrepresentation because it's not that I don't like humans, I just don't like being around them a whole lot, especially in large groups, which I define as being like three or more, including me. But I did some deep breathing, I did an unguided meditation. Best I had at the time. And then I had. I scheduled a one on one with Duo, the office plant, which I know it sounds. It's not weird. Duo was head of HR at the time. It's all we could afford. But then I'm like, okay, this is a. So I did what engineers do. I got distracted on Reddit for a few hours. But then right after that, I started collecting some data for weeks and months, connected some dots, found some patterns, made some observations, and I took all the lessons learned and put it in an internal document called the Culture Code. Now, I know the Culture Code sounds like a Dan Brown novel. I know, but it's a slide deck. It's a slide deck that explores the. The relationship between people and the companies they work for in the modern world. What do people want from the companies they work for? Because this was the idea. We wanted to create a modern company at HubSpot. And so we later published this deck, shared it with the world, all 128 slides got some traction. Well received. And now a few of you are wondering, Dharmesh, why are you telling us this? Is it just to vent? Is it just to do a not so humble brag that you got 4 million views on a slide deck? And my response is, well, no, it's not just that. I mean, it's that. It's not just that. The reason is the biggest lesson I've learned in my career about growing better came from an idea in the Culture Code deck. And it's this slide. Solve for the customer patterns, made some observations, and I took all the lessons learned and put it in an internal document called the Culture Code. Solve for their success, Put the customer first. Now, I know the Culture Code sounds like a Dan Brown novel. I know, but it says slide. If I had to get rid of all the other slides and keep only one of the 128 slides in the culture code deck, this is the one I would keep. And the lesson here is that to grow better, you need a culture that puts the customer first. If you do not have a customer focused culture, it's not like friction in your flywheel. It's like a full metric ton weight sitting on top of the flywheel. You need to start with a culture where people care about the customer. Makes everything else easier. Now there's a problem. It's the trendy versus true deck. It's a slide deck that explores the relationship between people and the companies they work for. In the modern world, what do people want from the companies they work for? Because this was the idea, we wanted to create a modern company at HubSpot. And so we later published this deck, shared it with the world with the problem. It's trendy to say we're customer obsessed. Customer obsessed. Truth is, companies are often self obsessed. It's trendy to say we're customer centric. Truth is, companies are often customer. Circumfric. Circumfric is a word that I made up three weeks ago. I don't expect it to get added to the Miriam dictionary anytime soon. But you know a word that did get added? This all 128 slides got some traction. Well received. And now a few of you are wondering, Dharmesh, like why are you telling us this? Is it just to vent? Is it just to do a not so humble brag that you got 4 million views on a slide deck? And my response is this year. This year, Chiweenie 2018, the word Chiweenie was officially added to the dictionary. A chiweenie is a breed of dog that's the intersection of a chihuahua and a wiener dog. Also known as a dachshund. Chihuini, chiweenie, Circumfric. Never know it's trendy to say we're a customer first company. Truth is, many companies are customer. Eventually we'll get around to some of our customer stuff. Now when I say companies have this problem, I'm not talking about all those other companies. HubSpot isn't without fault. We at culpa too. Over our 12 years, we've made decisions that weren't always customer first, despite our best intentions. And over those 12 years, we've accrued some bad habits. And so for the last several years, Brian and I have been working on a new season of breaking bad habits. I know this is a dated reference, but I just Binge watched all five seasons of Breaking Bad and I worked on this slide too long not to sneak it in somewhere. So Brian once said. Well, actually he just said minutes ago, you. Well, no, it's not just that. I mean, it's that. It's not just that. The reason is the biggest lesson I've learned in my career. Don't need to make your product 10 times better, you need to make your experience 10 times lighter. I would add improving. I am going to add like right now, improving your experience 10x much easier. About growing better came from an idea in the culture code deck and it's this slide. Solve for the customer, solve for their success. Put the customer first. If I had to get rid of all the other slides and keep only one of the 128 slides, that improving your product 10x, which is good news. But you. Because as we know, how you sell is as important as what you sell. Now, speaking of what you sell, what does Starbucks sell? We're going to do a quick economics review. If you were selling coffee beans.

You.

Would have little price differentiation and as a result, relatively little price leverage. It's a commodity. Literally a commodity. I'm using the word literally. Like, literally a commodity. If you took those coffee beans and you put them in a bag in the culture code deck, this is the one I would keep. And the lesson here is that to grow better, you need a culture that puts the customer first. If you do not have a customer focused culture, it's not like now you have a product, not a commodity, more differentiation, more price leverage. If you brew the coffee and served it in a cup at a McDonald's or a waffle House, now you have a service. Yet more differentiation, yet more price leverage. If you kept going and you opened a coffee shop and you put in comfy lounge seating and you created a Spotify playlist every week of mediocre lounge music, which Starbucks does, by the way. Every week you can look it up, they create a new Spotify playlist. It's not random. Then you have an experience friction in your flywheel. It's like a full metric ton weight sitting on top of the flywheel. The question really isn't what does Starbucks sell? Because for some it's like, okay, well, they sell a cup of coffee and a place to charge my phone. For some, it's a cup of coffee and beginner Italian lessons. For me, Starbucks is a global network of restrooms. You need to start with a culture where people care about the customer. Makes everything else easier. Now there's A problem. It's the trendy versus truthy problem. It's trendy to say we're customer where the price of admission is the price of a muffin. $2.95. And also you get a muffin. Awesome. So the question isn't what does Starbucks sell? The question is what does Starbucks offer? And what Starbucks offer offers is the experience of relaxing and recharging. The coffee is somewhat incidental. What Does Amazon sell 20 years ago? Easy answer. Sells books. Amazon sells books 20 years later. Today you could say obsessed. Customer obsessed. Truth is, companies are often self obsessed. It's trendy to say you could say that Amazon sells whatever Jeff Bezos wants because nobody puts Bezos in the corner, especially now that we know he's been Vin Diesel this whole time. This whole time. So the question isn't what does Amazon sell? What does Amazon offer? What Amazon offers is the ability to look up product ratings and reviews, put your order in, maniacally track the package all the way through as it goes through. Smack and sauce, Smack over Arkansas. We're customer centric. Truth is companies are often customer circumfric, which is the place and like winds up at your doorstep. It doesn't matter what Amazon sells. What they offer is the experience of buying things. That's what Amazon offers. What does HubSpot sell? Easy answer. We sell software, or more specifically software as a Service. But what HubSpot offers is success as a service. Yes, we invest tens of million. Circumflex is a word that I made up three weeks ago. I don't expect it to get added to the Miriam dictionary anytime soon. But you know a word that did get added? Visions of dollars in R and D. I could not be more proud of the product team at HubSpot. But we also spend millions of dollars on training and education and community and hosting events like inbound. So what HubSpot offers is the experience of growing better. That's our mission. The lesson here is to grow better. You need to offer a delight year this year. Chiweenie. Full differentiated experience that customers love. That's the key. So let's look at that phrase, customer experience. The natural way to think about the customer experience is, okay, well it starts when somebody buys and then stops when they stop buying or they cancel. That's the customer experience. That's the way I thought about it for a long time. I think there's a crack in that thinking there's a crack in that model. I think the right way to think about it is it starts the very first moment someone encounters your company or your brand and ends never. That entire time is the customer experience. And that's what we should 2018 the word Chiweenie was officially added to the dictionary. A chiweenie is a breed of dog that's the intersection of a chihuahua and a wiener dog, also known as a dachshund. Chiweenie, Chiweenie. Circumflex could be thinking about and optimizing. So the question is okay, what do customers want from their experience? What do they want? This is a lot like the question the culture code tried to answer, only this time it's the relationship between people and the companies they buy from. What do people in the modern world look for? What do they want from that relationship and what do they not want from that relationship? So I did what engineers do. I watched episode 4, 5 and 6 of Star wars to get Jar Jar. Never know it's trendy to say we're a customer out of my mind. Personal problem. It's not an issue. But right after that I started collecting data. I started with a focused longitremer first company. Truth is many constitutional study on the customer experience. And by focused I mean n equals 1 and by n equals 1 I mean n equals me. Now before these statist, before the statistics people get all judgy companies are customer. Eventually we'll get around to some of our customer stuff. Now when I say companies have this problem, I'm not talking about all those other companies. I'm a customer. I buy things. It's not just pizza and large T shirts and exercise equipment that folds conveniently and goes under your bed never to be seen ever again. I buy lots of things. And all modesty aside, I thought I provided myself brilliantly insightful feedback. But I acknowledge, I acknowledge my critics that say well, that might have been too limited a sample to be useful. It may not represent the larger population. Okay, I'll concede that maybe so I doubled the survey and surveyed my wife. Now this just didn't improve the sample size. Now it's much more reflective of the overall population because unlike me, my wife Kirsten is normal. Expanded the audience again went to social media which is awesome for anti social people like me went to Twitter. HubSpot isn't without fault. We a culpa too over our Facebook LinkedIn stories and anecdotes and experiences started flowing in. With 12 years we've made decisions that weren't always customer first despite our best intentions. And over those 12 years we've accrued some bad habits and so for the last several years, Brian and I have been working on Customer first and Customer Friction. I didn't use Instagram for the study, and the reason is it's really hard to get unfiltered feedback on Instagram. I know, sorry, sorry. I know that was cheesy. But for like, a new season of Breaking Bad Habits, I know this is a dated reference, but I just binge watched all five seasons of Breaking Bad. The three of you that found that clever and witty, we just became BFFs, just so you know. So stories and anecdotes are great, but the plural of anecdote is not data. It's also not anecdote. And I worked on this slide too long not to sneak it in somewhere. Die. What I needed was some. So Brian once said. Well, actually, he just said minutes ago. Use quantitative information, something I could analyze. So I had the HubSpot research team go out and survey thousands of actual people in a statistically valid survey and came back with a bunch of data. So I'm excited to share with you the patterns that we discovered from all those stories, all those anecdotes and all that data. It's the first time I'm sharing it and I'm super excited. I am this excited about what I'm about to share. I'm as excited as a labradoodle on a lawn. Now, I know some of you, the more astute amongst you, don't need to make your product 10 times better. You need to make your experience. You're like, well, that looks an awful lot like Brian's dog, romeo. Well, Romeo's 10 times lighter. I would add Romeo's a minor celebrity now. That's his stunt double. Romeo's back in the Airstream, relaxing and curled up in a Patagonia fleece. By the way, labradoodle, officially in the dictionary, it's a real word. Improving. I am going to add, like, right now. Improving your experience 10x is much easier, Circumfric. Okay. There were a bunch of insights and observations that came back from this study and from this research. I'm going to share the top five with you. The things that I think would be most impactful for you to take back to your business and grow better. Number one, earn my attention. Don't steal it. Give me something I value before you take something I value, like my time. Now that improving your product 10x, which is good news because as we know, how you sell is as important as what you sell, people have pushed back on this use of the Word stealing because it's a little harsh. But it's like, okay, well what word would you use when someone takes something that you value from you without your permission and doesn't give you anything in return? And you have to admit some of these kind of permission free outreaches can be somewhat inconvenient. Now, speaking of what you sell, what does Starbucks sell? We're going to do a quick economics review. It's like, then when would be a good time to tell you about our special offer? The data backs this up. When we surveyed people, 85% said they think less of a company that reaches out to them without getting permission. 11% said, eh, unchanged. And 4% said their opinion went up. I don't know, maybe they were just happy to get some attention, I don't know. But the point here is the worst case scenario is not, oh well, we did that and it didn't work and we got zero return. That's not the worst case scenario. The worst case scenario is you damage your brand. You dig yourself into a hole and companies that may have bought from you in the future are now less likely to do so. So when you do this, permission free out. If you were selling coffee beans, you would have little price differentiation and as a result, relatively little price leverage. Outreach. It's like applying force to the flywheel, but in the wrong direction. Number two, solve for my success, not your system. It's a commodity. Literally a commodity. I'm using the word literally like literally a commodity. If you took those coffee beans and you put them in a bag, don't make your process my problem. Now we've all tried to buy some things and experienced this. Thank you for your interest. Let me take you through our sales process. Now I understand some of you have beautiful handcrafted artis. Now you have a product, not a commodity. More differentiation, more price, less processes made with only the freshest organic steps. I get it. But if a customer wants to skip some of those steps, let them. If a customer wants to skip all the steps and just give you money, let them. Do not impose your process on your customers. It adds friction. And just like you shouldn't impose your process, you also shouldn't expose your org structure to your customers. It's embarrassing and it's unsafe. They don't care that you have a customer success team and an account management team and a customer support. If you brew the coffee and served it in a cup team and they all report to different people who may or may not like each other. Customers don't care. They want their question answered and they want their problems solved. Making customers deal with like your departments and their dysfunctions is friction in the flywheel. Number three, own your screw ups. We all make mistakes. Just say sorry at a McDonald's or a waffle House. Now you have a service, yet more differentiation, yet more price leverage. If you kept going and you opened a be sorry and make it better. So I'm going to share with you an email from a fictional coffee shop and you put in comfy lounge seating, a company that had a fictional outage. But the email itself is very, very real. Now I've changed the name of the to protect the innocent and buy the innocent. And you created a Spotify playlist every week of mediocre lounge music. I mean me. Now what I'm going to do is I'm going to read through parts of this email and I'm going to put my brain on speakerphone so you can kind of hear what I was thinking as a customer of this company. Here's what I was thinking. So we're aware that you may have lost connection to your Internet. May have lost connection. I've been a customer, which Starbucks does, by the way. Every week. You can look it up. They create a new Spotify playlist. It's not random. Then you have an experience. So the question really isn't what does Starbucks sell? Because for Some it's for 14 years. You know, I live on the Internet. You have the data and like, like the Internet goes down, all we have is each other. Like people. The horror. They go on to say there were major cuts to the fiber provided by third parties. Like, okay, well they sell a cup of coffee and a place to charge my phone for some partners. Blah, blah, blah, blah, blah. I don't care about your third party partnerships. For all I know, fiber is the thing that my doctor keeps telling me I need more of in my diet. But here's the most egregious problem with this message. Nowhere in the entire message, it goes on for two more paragraphs, I'll spare you. Nowhere in the entire message does the word sorry apologize or any of its synonyms. It's a cup of coffee and beginner Italian lessons. For me, Starbucks is a global network of restrooms where the price of admission is the price of a muffin. Two items appear nowhere in the message. That is not how you own your screw ups. Now let me tell you about another company that screwed up. Kentucky Fried Chicken. Kentucky Fried Chicken earlier this year had an issue. They ran out of what many would consider A critical component of their offering. They ran out of chicken. And as it turns out, KFC alone just doesn't cut it. Like the C is important. And so what did they do? They didn't say, oh well, this will be five. And also you get a muffin. Awesome. We'll get over it. It'll be fine. We'll brush it aside. They took a full page ad out. Let me repeat this. They paid for a full page ad to broadcast their screw up. Here's the ad. So the question isn't what does Starbucks sell? The question is what does Starbucks offer? And what Starbucks offers is the experience. Now there are several things that are noteworthy in this ad. The first is just like the playfulness, they didn't take themselves too seriously. The second is of relaxing and recharging the coffee is somewhat incidental. The headline of the ad are the two words we're sorry. Those are the what Does Amazon sell? 20 years. Perfect words to use. Not if we happen to have interrupted your culinary behavior and habits. For that we sincerely apologize. No, we're sorry. I love the first line. A chicken restaurant without any chicken. It's not ideal. I love KFC for this. Right? And this is from a lifelong vegetarian. I've never been to a kfc and I love this, love this. The data substantiates this. 96% of the people, if you acknowledge a mistake and fix it, 96% of the customers will not leave. You just own your screw up. So when you own. Easy answer. Sells books. Amazon sells books. 20 years later today you could say, you could say that Amazon sells whatever. Jeff Bezos your screw up. You save yourself from a possible slowdown in your flywheel number four. I don't mind paying, but I do mind being played. Make your pricing open, make it clear and make it fair. Kept coming back from customers, kept coming back on the data. So let's start with being open. If I visit your company's website looking for pricing information, it's like, hello, no, I'm not seeking the Holy Grail, just some pricing information. And the response is, go away, you son of a silly person, or I shall taunt you a second time. Swans. Because nobody puts Bezos in the corner. Especially now that we know he's been Vin Diesel this whole time. That was just me doing an audience survey of how many people watch Monty Python. That's not important. Don't guard your pricing information this whole time. So the question isn't what does Amazon sell? What does. Like, it's a treasure. Now I know some of you are thinking, well, Dharmesh, we're B2B. We're in a very niche industry. Every one of our prospective customers is a special Amazon offer. What Amazon offers is the ability to look up product ratings and reviews. Put your or little snowflake and we create special little price quotes for each individual one. I get it. Not every industry is the same. But that doesn't mean you can't provide some guidance around your pricing. We charge by the hour, we charge by the project and it starts from $25,000 and goes up to $75,000. Give them some idea. And the reality is it's out there anyway. People can find this stuff. There's this thing called the Internet. The data substantiates this. Again, we asked people, if a company doesn't have pricing information, what do you do? 75% of the people said they would look for an alternative. So unless you're working at a monopoly where there are no alternatives, the order in maniacally track the package all the way through as it goes through Smackover, Arkansas which is the place and winds up at your doorstep. It doesn't matter what Amazon sells. What they offer is the experience of buying things. That's what Amazon absence of pricing information is friction in your flywheel. We've talked about open pricing. Let's talk about clear pricing. Customers should not need a math degree to understand what they're going to pay for the product or service. Mere mortals should be able to understand it now. I showed this cartoon to Brad Coffee, who's the head of strategy at HubSpot. Also one of the smartest people I know. And as expected, he was confused and he's like Dharmesh. So what part of Sigma over the first derivative did people not understand? Like what was confusing here? Data once again says if you have confusing pricing, no one offers. What does HubSpot sell? Easy. We sell software. Or more specifically software as a service. But what HubSpot offers, people don't buy as often. 69% said, yes, I would leave as a result of confusing pricing. So we've talked about open pricing, we've talked about clear pricing. Let's talk about fair pricing. Which brings me to block is success as a service. Yes, we invest tens of millions of dollars in R and D. I could not be more proud of the product team at HubSpot. But we also spend millions of dollars on training and education and community and hosting events like inbound. So what HubSpot offers is the experience of growing better. That's our mission buster. So Blockbuster for those of you that are under 30 is like Netflix in a little plastic box, except you have to get out of your pajamas, you totally can't chill, and then like an idiot, you go. The lesson here is to grow better. You need to offer a delight to the store and like browse shelves for a movie. And there's negative selection bias because the only movies there are the ones nobody wanted to rent, including Chad who works there, right? So you go home with your movie and you put it in this device that's like the size of 20 iPads and you watch it. And then like a caveman, you rewind the thing and then you have to repeat the process to return the movie when you're done. So in 2004, differentiated experience that customers loved. 2004, there were 4,500 of these non pajama friendly locations that Blockbuster had. Today, they are down to exactly one, this one in Bend, Oregon. That's the key. So let's look at that phrase, customer experience. The natural way to think about the customer experience is, okay, well, it starts when somebody buys now, when the analysts and the media dug into the reasons behind the fall of Blockbuster and then stops when they stop buying or they cancel. That's the most commonly cited customer complaint was what Blockbuster called the extended viewing fee, otherwise known as a late fee. Extended viewing fee. That's like, oh, well, I know you had elf for 43 days. I hope you really enjoyed it. Here's $200 tab, right? It's like, no. Because even though they called it the extended viewing fee, customers perceived it as a you're lazy and we're greedy and we're going to charge you fee. One of the critical pieces of the Blockbuster downfall. So here's an actual takeaway for you. The customer experience. That's the way I thought about it for a long time. I think there's a crack in that thinking there's a crack in that model. I think the right way to think about it is it starts when you get back to the office, pick 10 random receipts or invoices that you have sent to customers recently and read it as if you were the customer. Does every item on that invoice, does it sound reasonable? Does it sound fair? How would you react if you got that invoice? Now, there are two parts to being fair. There's the charge that's proportional to the value received, but there's also the charge me the same price that you charge other customers that are like me. Pricing should be programmatic. Don't make customers Negotiate, they will, reluctantly, if they have to, but you should not make them. Now, some of you are thinking, well, he's not suggesting we do away with discounts. No, you can have discounts. They just need to be programmatic. So you can say we're running a promotion for the holiday, or it's a full moon, or this is a repeat customer, or this customer bought multiple products. All those are great reasons to offer a discount. Just don't offer different discounts to different people at the same point in time. If they have a similar profile in the future, that's a first moment someone encounters your company or your brand and ends never. That entire time is the customer experience. And that's what we should be thinking about and optimizing. So the question is, okay, what do customers want from their experience? What do they want? This is a lot like the question the culture code tried to answer, only this time it's the relationship between people. A recipe in my mind for discrimination. There's going to be a time where people pay a higher price simply because over their farmer what they look like, that's just bad. It's just bad business. So charge them fairly. Last one, number five. Don't block the exit. You made it so easy to buy. Don't make it so hard to cancel. In the companies they buy from, what do people in the modern world look for? What do they want from that relationship and what do they not want from that relationship? So I did what engineers do. It's like customers buy with the best intent. We wanted it to work out. I watched episode 4, 5 and 6 of Star wars to get Jar Jar. Sometimes things don't work out. Relationships just don't work. We don't always know why. It doesn't have to be awkward. I didn't leave clothes at your headquarters. We can still remain friends. We might get back together someday. Out of my mind. Personal problem. It's not an issue. But right after that, don't block the exit. Don't be that person, because we've all had this. Okay, well, to cancel service, you'll need a letter from your doctor notarized by the Dalai Lama and filed at the end of that rainbow. We've had variations of this experience, kept coming back in the surveys and the anecdotes. Once again, I started collecting data. I started with a focused launch. Data says if you make it easier to break up with you, more people buy on the customer experience. And by focused, this is not counterintuitive. If you make cancellations, I mean n equals 1 and by n 1 easy. It adds fluidity to your flywheel. Which brings me to an idea. We've all seen this button. It's the Buy now with one click. Brilliant. We've all seen it, we've all used it. Here's the idea. What if we started putting up a cancel now with one click button. Do we think that if our I mean N equals me now, before these statist companies built a reputation for being easy to break up with, easy to cancel, that more people, before the statistics people get all judgy, would buy from us? I think so. There's precedent in the retail sector. Zappos, Nordstrom. I'm a customer. I buy things. It's not just pizza and large. It's like if you make it easy for people to refund or cancel, you get more sales. I think that works. So those are the five biggest insights and lessons drawn from the research and drawn from the data. There are more. You do not need to speed read all of these T shirts and exercise equipment that folds conveniently and goes under your bed. We have kindly and conveniently put all of them into a new slide deck that we creatively named the customer code. By the way, I sneakily took that slide off just so you. No, I'm kidding. I'm not that diabolical. Well, I am, but that's not why I did it. It's called the customer code. It's at CustomerCode.com launches, never to be seen ever again. I buy lots of things. And all modesty aside, today it has all the tenants, the lessons we've learned, more data, more fun cartoons. And at the end of the deck is an email that comes straight to me. An email address. But more importantly, there's this report card. I thought I provided myself brilliantly insightful feedback, but I acknowledge, I acknowledge my critics that say, well, that might have been too limited a sample to be useful. It may not represent the larger population. Okay, so you can do a self assessment of yourself. It's always of yourself. A self assessment. And give yourself a score from 0 to 10 against all the things that your customers, my customers, people want from the relationship with you. Give yourself a score from 0 to 10 just to see. Now some people are cringing and succeed that maybe. So I doubled the survey and surveyed my wife squirming a little bit. It's like I'm not sure how my company would do on these things. It sounds like it could be painful and possibly embarrassing. And you're right, it is painful. It is embarrassing. I know this because now this just didn't improve the sample size. Now it's much HubSpot went through the exercise. I went through the exercise. The one thing that's more reflective of the overall population because unlike me, my wife Kirsten. More painful and embarrassing than going through the exercise is taking the results and putting them on a 50 foot screen and sharing it with the Internet. This is HubSpot's 2018 report card. As honest as I could be is normal. Expanded the audience. Again, not great. We have work to do. Went to social media, which is awesome for anti social people like me. Went to Twitter. So we are as we speak working on getting this score to like an 8 or an 8.5 over the next year. I encourage you go through the exercise. It will be revealing for you. It'll be useful. This is Domino's Vape sell pizza, which I love perhaps a little bit too much. Facebook LinkedIn stories and anecdotes and experiences started flowing in. I've probably had a thousand Domino's pizzas in my life. I've almost never been to a Domino's store because Domino's doesn't just sell pizza, they offer a pizza buying experience. Domino's has the pizza builder on their website. So instead of talking to someone and trying to push hashtag customer first and customer friction, I didn't use Instagram for the study. And the reason is it's plain. The exact configuration of the pizza you want, you build it online. Okay. It's like I want a really hard to get unfiltered feedback on Instagram. Large pizza, hand tossed crust and the whole thing. I want green peppers and on half I want black olives because I married an alien. Like who put. I know, sorry, sorry. I know that was cheesy. But for like black olives on a pizza, there's very few ways to mess up a pizza. Black olives is one of those ways. Okay, so I'm no culinary expert. I do know black olives, but I know culinary. Here's what pizza is. You start with a bunch of bread and then you use tomato sauce and cheese to cleverly. The three of you that found that clever and witty, we just became BFFs just so you know. So stories and anecdotes are great. He disguised the bread so people feel less guilty. I'm not an expert, but I think that's basically what pizza is. And so when I go to check out and I see this page on the Domino's website, it bothers me a little bit. It's like, okay, well we know you just ordered a bunch of bread cleverly disguised. Would you like some more bread? Have you considered. But the plural of anecdote is not data. It's also not anecdote. More bread. Perhaps you should think about some more bread. Now, I'm okay with this. I'm okay with it, but at least make it a fair fight. You're trying to die. What I needed was some, some hub sell me so that you have these big green buttons. And the thing I have to click on, find and click on is this like no, go to checkout. Tiny little link. Not even a button, not even quantitative information. Something I could analyze. So I had the HubSpot research team go out and survey thousands of actual people in a statistically valid survey and came back with a bunch of data and a button. That's what I have to do to get my pizza. And so the thing that goes in my head is like, I'm weak. I'm very weak.

I give up.

Now some of you are thinking, Dharmesh, have you considered that they're running an A B test? I know how the Internet works. So I'm excited to share with you the patterns that we discovered from all those stories. I don't have an AOL.com email address. Give me some respect. Yes, I considered that it might be an A B test. So I tested it with multiple browsers, multiple devices logged in from different countries. This is not an AB test. They are showing this friggin to everybody. Not just a week of will like me. Now all those anecdotes and all that data, it's the first time I'm sharing it and I'm super excited. I am this excited about what I'm about to share. I'm as excited as a labradoodle on a lawn. Now I know some of you, the more astute amongst dominoes is well within their rights to do this. They have the right to do this. But just because they have the right to do it, doesn't make it right. Which brings me back to the question we started with. How do you grow better? The answer, you're like, well, that looks an awful lot like Brian's dog, Romeo. Well, Romeo is simple. Not easy, but simple. Do the right thing. Treat people with respect. Treat them like you'd want them to be treated. Recognize people's differences. Some of us, some of us spend $120 on a Patagonia fleece. Some of us spend $120. Romeo's a minor celebrity now. That's his stunt Double Romeo on pizza and extra bread. We need to recognize and honor people's differences. Do the right thing. Even when it goes back in the Airstream, relaxing and curled up in a Patagonia fleece. By the way, Labradoodle, officially in the dictionary, it's a real word. It's hard. I know it's hard to own your screw ups. I know it's hard to not get taken in by the temptation of short circumfric. Okay, there are short term results. I know it's hard to let a customer go and not hug them too tightly. All these things are hard. But do the right thing. Especially when it's hard. Because when you do the hard things, by definition you are differentiating yourself because the hard choices are the choices. Few others A bunch of insights and observations that came back from this study and from this research will make so We've all had these moments. Faced with a tough choice, we make the right choice. We do the right thing for the customer. It feels good. Doesn't just feel good. It doesn't just feel better. You actually do better. We need more of those moments because I'm going to share the top five with you. The things that I think would be most impactful for you to take back to your if you put all those moments together where you do the right thing for the customer, all those moments Take business and grow better. Number one, earn my attention. Don't steal it. Give me something I value before you. Together is what creates delighted customers and customer love is the most powerful force you can apply to your flywheel. That's how you grow better. Thank you. Take something I value. Like my time. Now people have pushed back on this use of the word stealing because it's a little harsh. But it's like, okay, well what word would you use when someone takes something that you value from you without your permission and doesn't give you anything in return? And you have to admit some of these kind of permission free outreaches can be somewhat inconvenient. It's like, then when would be a good time to tell you about our special offer? The data backs this up. When we surveyed people, 85% said they think less of a company that reaches out to them without getting permission. 11% said eh, unchanged and 4% said their opinion went up. I don't know, maybe they were just happy to get some attention. I don't know. But the point here is the worst case scenario is not oh well, we did that and it didn't work and we got zero return that's not the worst case scenario. The worst case scenario is you damage your brand. You dig yourself into a hole and companies that may have bought from you in the future are now less likely to do so. So when you do this permission free outreach, it's like applying force to the flywheel, but in the wrong direction. Number two, solve for my success, not your systems. Don't make your process my problem. Now we've all tried to buy some things and experienced this. Thank you for your interest. Let me take you through our sales process. Now I understand some of you have beautiful handcrafted, artisanal processes made with only the freshest organic steps. I get it. But if a customer wants to skip some of those steps, let them. If a customer wants to skip all the steps and just give you money, let them. Do not impose your process on your customers. It adds friction. And just like you shouldn't impose your process, you also shouldn't expose your org structure to your customers. It's embarrassing and it's unseemly. They don't care that you have a customer success team and an account management team and a customer support team and they all report to different people who may or may not like each other. Customers don't care. They want their question answered and they want their problems solved. Making customers deal with like your departments and their dysfunctions is friction in the flywheel. Number three, own your screw ups. We all make mistakes. Just say sorry. Be sorry and make it better. So I'm going to share with you an email from a fictional company that had a fictional outage, but the email itself is very, very real. Now I've changed the name of the company to protect the innocent. And by the innocent, I mean me. Now what I'm going to do is I'm going to read through parts of this email and I'm going to put my brain on speakerphone so you can kind of hear what I was thinking as a customer of this company. Here's what I was thinking. So we're aware that you may have lost connection to your Internet. May have lost connection. I've been a customer for 14 years. You know, I live on the Internet. You have the data and like, like the Internet goes down, all we have is each other. Like people, the horror. They go on to say there were major cuts to the fiber provided by third party partners. Blah, blah, blah, blah, blah. I don't care about your third party partnerships. For all I know, fiber is the thing that my doctor keeps telling me I need more of in my diet. But here's the most egregious problem with this message. Nowhere in the entire message. It goes on for two more paragraphs. I'll spare you. Nowhere in the entire message does the word sorry, apologize, or any of its synonyms appear. Nowhere in the message. That is not how you own your screw ups. Now let me tell you about another company that screwed up. Kentucky Fried Chicken. Kentucky Fried Chicken earlier this year had an issue. They ran out of what many would consider a critical component of their offering. They ran out of chicken. And as it turns out, KFC alone just doesn't cut it. Like the C is important. And so what did they do? They didn't say, oh, well, this will. We'll get over it. It'll be fine. We'll brush it aside. They took a full page ad out. Let me repeat this. They paid for a full page ad to broadcast their screw up. Here's the now, there are several things that are noteworthy in this ad. The first is just like the playfulness, they didn't take themselves too seriously. The second is the headline of the ad. Are the two words we're sorry. Those are the perfect words to use. Not if we happen to have interrupted your culinary behavior and habits. For that, we sincerely apologize. No, we're sorry. And I love the first line. A chicken restaurant without any chicken. It's not ideal. I love KFC for this, right? And this is from a lifelong vegetarian. I've never been to a kfc and I love this, love this. The data substantiates this. 96% of the people, if you acknowledge a mistake and fix it, 96% of the customers will not leave. You just own your screw up. So when you own your screw up, you save yourself from a possible slowdown in your flywheel number four. I don't mind paying, but I do mind being played. Make your pricing open, make it clear and make it fair. Kept coming back from customers. Kept coming back on the data. So let's start with being open. If I visit your company's website looking for pricing information, it's like, hello, I'm not seeking the Holy Grail, just some pricing information. And the response is, go away, you son of a silly person, or I shall taunt you a second time. That was just me doing an audience survey of how many people watch Monty Python. That's not important. Don't guard your pricing information like it's a treasure. Now, I know some of you are thinking, well, Dharmesh, we're B2B. We're in a very niche industry. Every one of our prospective customers is a special little snowflake. And we create special little price quotes for each individual one. The data substantiates this. Again, we asked people, if a company doesn't have pricing information, what do you do? 75% of the people said they would look for an alternative. So unless you're working at a monopoly where there are no alternatives, the absence of pricing information is friction in your flywheel. We've talked about open pricing. Let's talk about clear pricing. Customers should not need a math degree to understand what they're going to pay for the product or service. Mere mortals should be able to understand it Now. I showed this cartoon to Brad Coffee, who's the head of strategy at HubSpot, also one of the smartest people I know. And as expected, he was confused and he's like Dharmesh. So what part of Sigma over the first derivative did people not understand? Like, what was confusing here? Data once again says, if you have confusing pricing, people don't buy as often. 69% said, Yes, I would leave as a result of confusing pricing. So we've talked about open pricing, we've talked about clear pricing. Let's talk about fair pricing. Which brings me to Blockbuster. So Blockbuster, for those of you that are under 30, it's like Netflix in a little plastic box, except you have to get out of your pajamas, you totally can't chill, and then like an idiot, you go to the store and like browse shelves for a movie. And there's negative selection bias because the only movies there are the ones nobody wanted to rent, including children who works there, right? So you go home with your movie and you put it in this device that's like the size of 20 iPads and you watch it. And then like a caveman, you rewind the thing and then you have to repeat the process to return the movie when you're done. So in 2004, there were 4,500 of these non pajama friendly locations that Blockbuster had. Today, they are down to exactly one. This one in Bend, Oregon. Now, when the analysts and the media dug into the reasons behind the fall of Blockbuster, the most commonly cited customer complaint was what Blockbuster called the extended viewing fee, otherwise known as a late fee. Extended viewing fee. That's like, oh, well, I know you had elf for 43 days. I hope you really enjoyed it. Here's $200 tab, right? It's like, no. Because even though they called it the extended viewing fee, customers perceived it as a you're lazy and we're greedy and we're going to charge you fee, one of the critical pieces of the blockbuster downfall. So here's an actual takeaway for you. When you get back to the office, pick 10 random receipts or invoices that you have sent to customers recently and read it as if you were the customer. Does every item on that invoice, does it sound reasonable? Does it sound fair? How would you react if you got that invoice? Now, there are two parts to being fair. There's the charge. That's proportional to the value received. But there's also the charge me the same price that you charge other customers that are like me. Pricing should be programmatic. Don't make customers negotiate. They will reluctantly if they have to, but you should not make them. Now, some of you are thinking, well, he's not suggesting we, like, do away with discounts. No, you can have discounts. They just need to be programmatic. So you can say, we're running a promotion for the holiday, or it's a full moon, or this is a repeat customer, or this customer bought multiple products. All those are great reasons to offer a discount. Just don't offer different discounts to different people at the same point in time. If they have a similar profile in the future, that's a recipe in my mind, for discrimination. There's going to be a time where people pay a higher price simply because where they're from or what they look like, that's just bad. It's just bad business. So charge them fairly. Last one. Number five. Don't block the exit. You made it so easy to buy. Don't make it so hard to cancel. It's like customers buy with the best intent. We wanted it to work out. Sometimes things don't work out. Relationships just don't work. We don't always know why. It doesn't have to be awkward. I didn't leave clothes at your headquarters. We can still remain friends. We might get back together someday, right? Don't block the exit. Don't be that person, because we've all had this. Okay, well, to cancel service, you'll need a letter from your doctor, notarized by the Dalai Lama and filed at the end of that rainbow. We've had variations of this experience, kept coming back in the surveys and the anecdotes. Once again, the data says if you make it easier to break up with you, more people buy. This is not counterintuitive. If you make cancellations easy, it adds fluidity to your flywheel. Which brings me to an idea. We've all seen this button. It's the Buy now with one click. Brilliant. We've all seen it, we've all used it. Here's the idea. What if we started putting up a Cancel now with one click button? Do we think that if our companies built a reputation for being easy to break up with, easy to cancel, that more people would buy from us? I think so. There's precedent in the retail sector, Zappos, Nordstrom, lots of. It's like if you make it easy for people to refund or cancel, you get more sales. I think that works. So those are the five biggest insights and lessons drawn from the research and drawn from the data. There are more. You do not need to speed read all these.