The tipping point: When should fast-growing companies stop ignoring customers?
CX Best PracticesTechnology
Sometimes the best thing a fast-growing tech company can do for its customers is ignore them — or so says LinkedIn co-founder Reid Hoffman in his famous Medium post, "7 Counterintuitive Rules for Growing Your Business Super-Fast."
It's part of the blitzscaling process, a moment in a start-up's early life where speed is better than efficiency, even if it comes with some missteps along the way. During this time, founders must toe a tense line between the life and death of their company as they pursue rapid growth.
"For blitzscaling companies, letting customers feel ignored is often one of the fires that's easier for you to let burn until you have finished fighting the bigger, more deadly fires," Hoffman writes.
Blitzscaling comes with a few caveats, however, the most important of which is knowing when to reshuffle priorities. Hoffman acknowledges that ignoring customers for too long may not end well, especially in the midst of customer acquisition efforts.
So, how can a company recognize that critical moment - the tipping point - when ignoring customers could actually become one of those deadly fires? And how can they adequately prepare for it without distracting time and resources away from other important activities, such as building and shipping product? Let's dig in.
The path of least resistance (and little customer support)
Hoffman writes that the fundamental rule of customer service — that old adage of "the customer is always right" — has been turned on its head by fast-growing tech companies.
In their case, developing a customer support operation at the wrong stage of growth could slow the enterprise down too much, which often leads them to hold off, even if it means harming those initial customer relationships. Some companies can succeed for a while by offering rudimentary self-service and discussion forums in lieu of a more sophisticated support program.
Rather than focusing on one to the exclusion of the other, "the best companies achieve a balance, where growth comes from both the product itself and great loyalty-building," says Edward Fu, entrepreneur-in-residence at Mucker Capital and former CMO of ZipRecruiter.
Finding that balance is different for each company. Some companies integrate customer service early on, once they've put out the biggest fires. Others, can wait an extremely long time before pivoting to more devoted customer service. The timing often depends on the product or service.
When disrupting an entire industry and presenting an obviously better offer than the status quo, sometimes the product itself serves as the customer experience. Thus, overwhelming success can further delay or negate the need for dedicated customer support channels. "If the product is already really good, and some small percentage of things aren't working perfectly, you might be fine with that," says Fu.
Tracking customer retention as the most important KPI
For an honest assessment of when to pivot toward a more customer-focused support strategy, take a hard look at retention numbers. Especially in a recurring revenue business, if customers are leaving faster than they're buying your product or service, that's a huge problem — and a sign that the time has come.
Fast-growing tech companies, particularly those that pursue the blitzscaling strategy, "should make sure to set up an early warning system to closely track customer defection with a pre-planned strategy for shifting attention should the churn rate gross into double-digit percentages," says Joey Coleman, professional CX speaker, consultant and author of Never Lose a Customer Again. “For most businesses, 10–15% is a good early warning mark, as 20–30% churn can often be too late."
Even for the most successful start-ups, there will be relatively lean times when cutting costs becomes inevitable to stay afloat. But Andy Mackensen, co-founder and CMO of SnackNation, named one of Inc.'s fastest growing private companies of 2018, argues that customer retention should be the top metric for a recurring revenue business. "It's always cheaper to retain customers than to go get new ones," he says. “Entrepreneurs who are starting a recurring revenue business must always be thinking about the customer experience and product, and making sure they're obsessed with their customers."
Some start-ups still use growth as an excuse not to pay attention to their customers. Coleman says that's a mistake, especially for software-as-a-service (SaaS) companies that intend to do future fundraising rounds. According to him, SaaS companies focused on reducing customer churn actually command higher valuations.
From scaling the business to scaling customer service
Shifting between growth and customer care is not easy though, says Coleman.
"If you think that balancing growth with customer care is challenging, try shifting your company culture from acquiring to retaining. It requires much more effort, time and money doing it this way rather than instilling that ethic in the organizational culture from the outset," he says.
But this isn't an either/or situation. It's actually possible to tend to both growth and customer service simultaneously, even in high-growth modes, by forging a strategic partnership with a reputable customer experience partner.
Striking up that relationship early in a growth company's life cycle allows start-up founders to focus on growth while letting the expert partner develop scalable support operations, i.e. facilities, technology and people. Splitting up tasks like this can help the blitzscaling start-up build its customer experience without investing too much of its own time and effort.
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Becoming 'customer obsessed'
After the blitzscaling phase, it's clear that the companies that survive and thrive over the long-term become the most ardent customer fanatics. Google, Apple and Amazon are three of the largest tech companies for the quality of their products, but also because they're well-known to be super customer-focused, and even "obsessed" in some instances.
If there's one lesson from these tech giants, it's that they actually maintained their innovation and growth through their dedication to the customer, not in spite of it. Even in times of rapid growth, it's much easier to put out a small fire than risk being engulfed in customer flames later on.