Ep. 317: Rachel Hepworth is VP of Marketing @ Pilot, the startup that offers the best bookkeeping, tax and CFO services for growing businesses. To date they have raised over $58M from some of the best in the business including Index Ventures, John Collison, Paul English, Drew Houston, Frederic Kerrest, Diane Greene and more incredible names. As for Rachel, prior to joining Pilot, she saw the hyper-growth of Slack firsthand enjoying a couple of different roles including Head of Growth Marketing and then also Head of Self Service and Platform Marketing. Before Slack, Rachel spent 4 years at LinkedIn where she led the product marketing team for content experiences. Finally, before LinkedIn, Rachel spent close to 3 years at Climate Corporation, prior to their $1Bn exit to Monsanto.
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In Today’s Episode We Discuss:
* How Rachel made her way from marketing manager at Climate Corporation to VP of marketing at Pilot today? What were Rachel’s biggest takeaways from her time seeing the hyper-growth at Slack?
* How does Rachel think about organic growth and inciting word of mouth today? How does Rachel think they can be more accurately tracked and measured? How does Rachel think about the optimal ratio of paid to organic in growth? Would Rachel agree in paid, your payback period doubles every $5M you spend?
* With the rise of product-led growth, are we seeing a fundamental shift in the structure of sales and marketing? How does Rachel see marketing move ever close to the function of customer success today? What is the optimal way for customer success and marketing to work together?
* How does Rachel think about the importance of getting in front of your customers? Why does Rachel believe that data tells you the what and customer conversations tell you the why? What is the right way to structure your customer conversations? Where do so many people go wrong here?
Ep. 318: The first step in success with SMB clients is to recognize that it’s not a one size fits all scenario. Companies need a specialized approach for SMB accounts, different than the tactics used for Enterprise. Accel Partner Andrei Brasoveanu will sit down for a conversation with Agnes Bazin Doctolib on how to create a targeted and effective sales process tailor-made for SMB.
This episode is sponsored by TaxJar.
SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.
This podcast is an excerpt from Agnes’s session at SaaStr Europa 2019.
If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:
Below, we’ve shared the transcript of Harry’s interview with Rachel.
Harry Stebbings: This is the official SaaStr podcast with me, Harry Stebbings at HStebbings1996 with two Bs on Instagram. And there you can both suggest guests and questions for future episodes and I really do love to see you there. But in the show today, and it’s been a while since we really delved into the world of SaaS marketing and I’m thrilled to say that all changes today and I’m very excited to welcome Rachel Hepworth, VP of Marketing at Pilot, the startup that offers the best bookkeeping, tax, and CFO services for growing businesses. To date, they’ve raised over $58 million from some of the very best in the business including Index Ventures, John Collison at Stripe, Paul English at Lola and Kayak, Drew Houston at Dropbox, Frederic Kerrest at Okta, Diane Greene, and many more incredible names.
Harry Stebbings: As for Rachel, prior to joining Pilot, she saw the hypergrowth of Slack firsthand, enjoying a couple of different roles including Head of Growth Marketing and then also Head of Self Service and Platform Marketing. Before Slack, Rachel spent four years at LinkedIn, where she led the product marketing team for content experiences. And finally, before LinkedIn, Rachel spent close to three years at Climate Corp, prior to their $1 billion exit to Monsanto. I do also want to say huge thank you to Waseem of Pilot and to Mark at Index for some fantastic question suggestions today. I really do so appreciate that.
Harry Stebbings: That’s quite enough for me though. I’m very excited to hand over to Rachel Hepworth, VP of Marketing at Pilot.
Harry Stebbings: Rachel, it is such a pleasure to have you on the show today. As I said, I heard so many great things from your wonderful founder Waseem and then also from Mark at Index. Thank you so much for joining me today.
Rachel Hepworth: Thanks, Harry. Happy to be here.
Harry Stebbings: I would love to kick off though with a little bit about you, Rachel. Tell me, how did you make your way into what I call the wonderful world of SaaS, but come to me the killer head of marketing at Pilot today?
Rachel Hepworth: Well, the beginnings of it are somewhat of a long and winding story and I’ll spare you most of it. But basically about 15 years ago, I was out of school. I’d had a variety of truly random but slightly interesting jobs, including selling cheese. And I decided that I wanted to join a startup because I was young, I had no responsibilities, risk meant nothing. And I joined this company called Weatherbill, which was basically a market for weather derivatives, which hadn’t existed before. And this was a slightly strange but really large opportunity because it turns out that almost every business has economic impact from the weather. The idea is you want to be able to mitigate that risk like you would any other type of insurance risk. But if I’m really honest, what drew me to the company was their logo. They had this cute little umbrella and I just thought that was really friendly at the time.
Rachel Hepworth: And so the company took a chance on me, I took a chance on them. And then I spent the next year sort of learning about tech marketing, making every mistake in the book. And basically not really helping the company at all. And this was right around the time of 2006 to seven. After a year, decided that the definition of insanity was continuing to do what you’d always done hoping for different results. And so went back and started to actually focus much more on customer development and product marketing rather than demand gen. And I didn’t even have words for these functions at the time. It’s just the type of work I was doing. And I realized that Weatherbill actually didn’t have product market fit when I joined, and it’s never good to be a marketer at a company without product market fit. And so I spent quite a while figuring out who actually was our target audience. Turns out it’s not every business in the world.
Rachel Hepworth: What do they like? What was missing from the product that prevented them from buying? How did we need to change how we went to market? And eventually Weatherbill rebranded to become The Climate Corp and it sold to Monsanto for about a billion dollars. So we did figure it out, but in the middle was the financial crisis, looked like the company was going to go out of business. We weren’t selling anything and it was a pretty incredible learning experience, but probably not one that I’d really want to repeat anytime soon. Through great stress comes great lessons, but I feel like I’ve had those lessons and I don’t need to kind of repeat that experience.
Rachel Hepworth: But then after Climate Corp, I joined LinkedIn, which was a totally different experience because LinkedIn had just gone public at the time. This was 2012, and that was really where I learned how to market and operate at scale and use data and test really rigorously and learn about a lot of the fundamental best in class practices of marketing. Because at a startup, you figure out how to be scrappy and get things done. You don’t necessarily figure out the optimal way to get things done. At LinkedIn I started out on the prosumer subscription side of the business and then eventually I switched over to the consumer side, which is more about the LinkedIn feed and video and SlideShare and kind of managed PMMs that were driving all of these features that contributed to the daily engagement metrics of LinkedIn.
Rachel Hepworth: And that was a really great experience,, but after four years, I had this urge to go back to something smaller. LinkedIn grew from 2,000 to 12,000 employees while I was at the company. And that growth was really exciting, but 12,000 there’s a lot of people, communication gets harder and I just wanted to be able to build something. And so that’s when I went to Slack to start their growth marketing team. And Slack had about 500 employees at the time. It was a really nice size of company. They clearly had product market fit, they were growing like crazy, but they were still small. People forget how small Slack was back in that time. And they still had a lot of things to work out.
Rachel Hepworth: On the growth marketing team, we worked really closely with the growth product team, the analytics team, engineering team, and it was really, how do you optimize that really strong Slack funnel? We had so many people who had heard about Slack, they wanted to try Slack, but they really didn’t know what it was, nor did we know how to describe it. And so it made it more difficult for people to get value out of it quickly because they’d land in Slack and they’d say, “Okay, I send a message to somebody, but where’s the bigger so what?”
Rachel Hepworth: And so that was really a lot of what we focused on is how do you deliver value to all of those users who are trying your product? But because there’s so little friction, it’s so easy to start. That means the intent is not quite as high. There is no lock in effect. And you can see a lot of churn in those first couple of days. Really focusing on not just acquiring customers, but acquiring healthy, active customers was where I spent most of my time. And then after a couple years I ended up managing most of the Slack product marketing team as well. Really figuring out how to take new features to market. And then as Slack transitioned up market, how do you sell a product that had been so focused on bottoms up user growth and sell it into the enterprise? Because it really is a very different muscle.
Rachel Hepworth: And then I got excited by Pilot because of a couple different things. One is that Pilot is a company that automates bookkeeping and eventually the larger financial back office for SMBs. And it’s a really, really large market. The things I learned from Climate Corp and LinkedIn and Slack is, market size is really important. If you have an amazing product with a $10 million total market size, you can kill it. But it’s only ever going to be a nice little business. And so the size of the opportunity is so important. And for bookkeeping, which is this service that is almost mandated and certainly needed by just about every small business out there, you’re talking about a $60 billion TAM in the US alone. Really legitimately huge market. Everyone needs it. No one likes it. It’s a pretty ripe industry for disruption because there’s no big player who’s really killing it in this space.
Harry Stebbings: And also no one bloody loves bookkeeping.
Rachel Hepworth: Yes, that is another challenge that we can talk about, but exactly. Yeah. No one likes it. At best, everybody says it’s okay. I pay for books, I get some books, I guess. The government forces me to, ho hum. And then the second challenge is that when you’re dealing with an SMB business, it’s really about acquiring customers at scale. And that is fundamentally a marketing challenge. And so this is not a freemium product. There are costs to delivering books to customers. We can’t just give it away. And we’re not targeting $100,000 deals or million dollar deals where you can have a sales team who goes out and hunts for the appropriate customer. You really need to find a way to drive the growth in a format that’s scalable and repeatable and profitable for this very, very large audience. And that fundamentally will come down to a marketing challenge, which was really interesting and exciting for me.
Harry Stebbings: Let’s dig in on that marketing challenge because kind of speaking of that growth as you said there, it’s different ACVs and it’s different kind of styles. And so if we talk about kind organic growth and word of mouth, a lot of people say today, it’s untrackable, it’s immeasurable, and almost kind of denigrated to a certain extent. I guess my first question is, would you agree with the statement on word of mouth and organic being this untrackable, immeasurable avenue?
Rachel Hepworth: It’s certainly harder to track than a Facebook ad. What’s not? But that doesn’t mean that it’s impossible. And it’s something I’ve thought a lot about because at Slack in particular, organic growth and word of mouth, were such powerful levers. And if you feel like you have no control over them, you don’t feel really good about your fate because you’re basically just at the whim of whatever happens in the marketplace. It’s not a total black box. I look at the growth of our organic acquisitions. I look at the growth of our acquisitions coming through referrals, just natural referrals where a customer calls up and says, “So-and-so told me about this product,” which is actually a pretty high percentage. And in that way you can track it pretty specifically. But another more indirect way I think about it is I track it through NPS because you’re not going to get referrals without a high NPS. And then thinking through how to create a environment where you’re going to grow word of mouth and organic more strongly. And it’s not just sitting back and saying, “I hope it’s happens.”
Harry Stebbings: Is that focusing on hyper-local geocentric areas where you know that there’s a community of small businesses and actually if you target one and penetrate it, there’s a higher likelihood of virality through word of mouth if you’re within that tight community, is that the sort of kind of strategic thing that you do to in the site word of mouth?
Rachel Hepworth: That’s part of it and that’s certainly at Pilot one of the things we’ve done is we’ve initially focused on startups because they are such a tight knit community who are constantly asking for recommendations. And so one founder will ask another founder for advice about how to set up their company. And so that creates a very natural environment for word of mouth to flourish. But first more fundamentally, is you have to have a product or service that’s worth talking about. Because even if you’re in that tight community, if nobody likes what you’re selling or they think it’s mediocre, the recommendations aren’t going to happen. And so I actually explicitly think about measuring your word of mouth potential as it’s really what happens when the experience of a product or service sort of vastly exceeds the expectations of the person buying it. And I think about that in terms of Pilot in that you buy bookkeeping from us, let’s say, and every month we deliver you accurate books and that’s great. You bought something, we gave it to you, we did what you paid us to do.
Rachel Hepworth: But not many people are going to run out to their friend and say, “Guess what? I found this bookkeeper and I paid them for our P and L statement and then they gave it to me and it was awesome and you should go try it.” That’s just not going to happen. But if we delivered books to you and we said, “Hey, here are your statements and we noticed that you’re paying twice as much for your Salesforce subscription as startup industry standard, you can negotiate that and save $30,000 a year.” That’s something that people aren’t expecting. That’s an extra piece of value. And that’s something where they will go out and say, “Hey, this company I use just told me about this thing. You should go try them because they’re going to give you other valuable information that can help your company be more successful or grow.”
Rachel Hepworth: It’s about really over delivering upon what the expectations were, whatever you set them to be. And that’s setting up, how do you measure that? And how do you understand if you are doing that? And that just providing people what they pay for is really not enough, I think, is key to finding levers to really boost word of mouth and organic growth to a much higher degree.
Harry Stebbings: No absolutely. It actually reminds me of Gusto, the employee payroll company, who realized that actually no notifications are sent when traditional payroll companies pay people and so they send a fun email saying, “Hey, you just got paid, go celebrate,” essentially. It’s not actually really additional value but it is an additional incremental thing that incites word of mouth, which I liked.
Rachel Hepworth: It’s a moment of delight for people and so that’s what gets them talking.
Harry Stebbings: Totally. Absolutely. I guess I think, though, when we look at kind of the marketing split and often founders ask, “Okay, so I obviously desperately want word of mouth and organic,” but the right ratio between organic and paid and how that relationship looks is a tough one. How do you think about the optimal ratio for you of paid to organic?
Rachel Hepworth: I think it’s always going to depend on the company and the particular market and model you’re in. And so one thing I’m always hesitant about is I don’t think there are any hard and fast rules. Except for that for me, I’ve never seen a particularly successful B2B company thrive with paid as its dominant channel. And so I have a strong perspective that if organic in some way or shape or form isn’t driving the majority of your purchases and it doesn’t have to be 90%, but still the majority, particularly in the early days when you’re attracting those early adopters who tend to be the biggest advocates, if you haven’t achieved that, I think you have a problem with product market fit and you need to step away from the paid ad spend and sort of forcing people through the funnel and think about how you create a better experience or you’re solving a more important problem for your customers.
Rachel Hepworth: Because for most SaaS companies, you’re not selling toothpaste and so thinking that you’re going to get all your growth through Facebook or Instagram or LinkedIn through an ad, of we offer this thing, go buy it, is not very realistic. I think of paid as useful for targeting very specific high value audiences, for promoting certain events that can nurture people down a path. It’s an ingredient in the mix, but it can’t be your base.
Harry Stebbings: I do agree with you there. Thinking of just accountability within the org, I am interested, kind of going back to the organic growth element, where do you think organic growth and kind of accountability with it lies? Is it marketing? Or is it actually customer success who really should be the ones encouraging product engagement, creating that community? Where do you think that accountability lies actually? With marketing or customer success?
Rachel Hepworth: I actually, in most of the companies I’ve been, would question whether it lied between product or marketing versus marketing and customer success. I think customer success is really important. Retention for upsell, for expansion, and certainly the more up market you go, the larger the role customer success plays because they tend to be a little bit more bespoke in their interactions with customers, a little bit more one-on-one. They’re really, really crucial for those big deals. But in the beginning, particularly the freemium model or an SMB model, if you want to get a lot of people and you need to get a lot of people in the door and you need to have them see some initial signs of value before they deeply engaged, you have to have them prepped and educated and understand what they are supposed to be getting out of the product before they even start engaging with the product. And then the product has to actually deliver on those experiences.
Rachel Hepworth: I think of it as a partnership between those two functions and after they’ve kind of gotten that very initial traction is where customer success tends to come in to say, “Hey, you’ve gotten some value here. We can help you get even more.” But if you don’t get that initial value, customer success never gets that chance to engage.
Harry Stebbings: No, it’s super interesting to hear the emphasis on product there. It takes me to kind of probably one of the buzziest words in SaaS at the moment, which is kind of product growth and a strategy that’s star struck in the minds of so many people in our ecosystem. I am interested with this fundamentally new way to approach both kind of the distribution and engagement with the products that we create, do you think we’re seeing the fundamental shift in the role of sales and marketing?
Rachel Hepworth: I think for product led growth companies we are, because the volume you’re dealing with for product led growth, which typically is a freemium model, by its nature of being freemium, it has to be a very, very large volume of users coming in at the top of the funnel because they’re lower intent, there’s less friction. You haven’t, in my mind necessarily acquired them just because they sign up to your product. There’s still a lot left to go in terms of actually capturing them and capturing that value. And so marketing shifts from trying to initially attract these users, to trying to help them understand the value, and at Slack, we called it activated users, but actually engage in the product in a way that implies that they’ll have success, they’ll have health, and they have some potential of paying you down the line. Versus just we signed up tons of users and then they all churned one day later, so the value was really zero.
Rachel Hepworth: Those initial signups almost become what marketing typically has thought of as the leads. And so marketing turns much more to, it’s about education. It’s about understanding how the features relate to value versus kind of the more brand building or extremely top of funnel activities that it would focus on in other types of companies.
Harry Stebbings: You mentioned brand building there and it’s one that I often hear a little bit of reductionism towards, which is kind of brand marketing and the lack of kind of attribution that it delivers. How do you think about brand marketing today given the challenge of attribution with it, but actually in many positive externalities it can have in terms of ecosystem building, employee incentivization, how do you think brand marketing?
Rachel Hepworth: It depends on the stage of company you’re at. I think brand marketing when done correctly can be immensely powerful, but even when it’s done correctly and is powerful, it’s extremely difficult to track. Again, not everything that you can track has value and vice versa. You can track Facebook ads very easily, but they often end up being not particularly interesting drivers of growth. Just because you track it doesn’t mean that you should spend all your time on it. If you’re a startup or an earlier stage company, it’s you don’t really have a brand to market. It feels too early for me. But once you become a little bit more established, there’s a lot of power in brand marketing. But if you want to be able to attribute every dollar you spend to the dollar impact, you’re going to be unhappy and fail. My first rule of thumb at companies is if your executive team wants to see the ROI in very strict terms from brand marketing, I’ve never seen that successfully happen.
Rachel Hepworth: And so you’re just going to fail and be really dissatisfied. But that doesn’t mean that there wasn’t an enormous amount of value delivered. You just have to understand that a lot of it is indirect. A lot of it you are not going to be able to put a tracking pixel on and you have to have a certain amount of faith. And that’s really unsatisfying to people in tech marketing. But I also strongly believe that it’s the truth. And so I wouldn’t engage in brand marketing until my company had some amount of brand to market. If people have never heard of you before, there are quicker and simpler things to do. But Slack certainly engaged in quite a bit of brand marketing. And at this point it’s about extending and defending the brand more than it is about generating tons of new users. But Slack is a very valuable brand to extend and defend so that’s extremely important.
Harry Stebbings: Oh it does indeed. I guess my question though, is you mentioned kind of the challenge of attribution there and kind of communicating that to maybe the other members of the team. Can I ask, in terms of kind of creating a pipeline goal for you as the head of marketing, how do you think about creating a goal that’s a stretch goal for you and the team and it’s an ambitious target to hit, but also not a stretch too far, which will kind of create a dampening of the team if it’s not hit. How do you think about the right goal to set in terms of pipeline?
Rachel Hepworth: It’s a big challenge and the one thing I’ll say is that at most of the companies I’ve been at, we have not actually been able to particularly accurately set or hit goals both too low and too high, almost any quarter, which just tells you, and these are very successful companies, so this tells you how hard it is. Part of what I start with is just looking at the current funnel and what’s happening with it and what you think you can realistically change with it. And this could be as high up as we’re going after the wrong audience so we’re fundamentally going to shift that very top of funnel of even who is our addressable audience down to, is sales picking up the qualified leads quickly enough? Or is our messaging correct? Are we converting people at a rate that we think is healthy?
Rachel Hepworth: Every different business and industry has different kind of standard ratios and metrics for each of these. And so I’d also caution against looking at the company to your left or right and saying our funnel should look like theirs because unless they’re in the same business you are, that’s almost certainly not true. But for me it’s about having an actual plan for how you’re going to move the numbers and not just saying, “Next quarter we’re going to double it and we have no idea how, but we want to be aggressive, so we’ll double it.” If you don’t have a plan, you’re never going to make it.
Rachel Hepworth: And so this goes back in some ways to very classic growth teams. You form a hypothesis and then you do an experiment and then you learn from it. If you don’t have a hypothesis of how you’re going to achieve the goals you’re setting, then you’ll never figure out why you either blew them out of the water or failed to come close to them. And so that’s my rule of thumb with setting goals is I need to be able to see how we’re going to get there. And if I can’t, then we need to have a conversation about if the goal is realistic or not.
Harry Stebbings: Totally. And I guess in terms of that conversation that then ensues, what’s the ideal relationship, do you think, between the head of marketing and the CEO? And what does that interplay look like with the C-suite itself?
Rachel Hepworth: I think as much honesty and real talk as possible is important because you’re not helping the business by not providing all the information. And that’s actually one of the reasons that I was really drawn to Pilot is I felt that the executive team were people who I could have that sort of conversation with. Where if you had bad news or a point of view that wasn’t exactly the same as their point of view, you could have a vibrant discussion about that and it wasn’t going to be a problem. And so one of the first things I did when I came in at Pilot is I did some 2020 planning and kind of looked at our funnel and what’s our growth numbers? And the conversation I had here was we’ve been focusing exclusively on startups. That’s a relatively small TAM in terms of all SMBs in the US, shouldn’t we expand that and go after some other industries?
Rachel Hepworth: And this doesn’t just have impact on marketing, it has impact on how the sales team will pitch and message. It has impact on if the product team has built all the features that will fit some other industries that may have different requirements. It has impact literally on our bookkeepers and how they do the books. There’s a lot of spillover effect of expanding who your focus is. Obviously Pilot is a horizontal product. Eventually we want to go after all SMBs, but you can’t do it all at once. How do you stage it? What’s that timing? And so we had a very rigorous discussion literally in the first one to two weeks that I joined about whether this made sense, should we do it now? What’s the sense of urgency? And they ended up agreeing. And so we’ve been expanding into eCommerce and professional services over this first quarter as a way to increase that top of funnel and provide a larger audience for Pilot.
Rachel Hepworth: But that was, the company was a 100% focused on startups before this and really hadn’t considered doing a really strong push at this point into other ancillary industries. And so we had to have some real talk about how large the actual startup market was and if that made sense. And so I think being able to have that conversation and then back it up with some numbers, not just, I feel startups are a small industry, we should go after a different industry is really, really, really important. But if you don’t, you’re just going to be working at cross purposes and ultimately we all, startups are hard, everybody has to work together for any company to have any chance of succeeding. And so if you’re not all on the same page, you’re just totally doomed to failure.
Harry Stebbings: I totally agree and I think that transparency is key. You mentioned the secondary expansion there though for the business and I do want to touch on the customer base before we move into the quick fire. I know you are a strong believer in the power of really getting in front of your customers. I guess why is this necessary today with the incredible data profiling tools we have on our customers and the data that we have without being in front of them. Why is it important?
Rachel Hepworth: I think there’s so many subtleties that you miss that prevent you from really killing it on your marketing and sales if you just use data because data will tell you the what, but it never tells you the why. Again, a lot of that data, if you are a freemium product that can watch how people interact, you do have more robust data than maybe a more typical product where you have to engage with sales and actually purchase it before using it. But either way, you don’t really know why things are happening.
Rachel Hepworth: And so I’ll give you an example way back from the Climate Corp days where we didn’t fully have product market fit and we thought we understood what was going on, but we really didn’t. One of the ways that we priced our product was, and again this is a weather insurance product, so you buy a million dollars worth of coverage and we’ll charge you $500. It seemed really straightforward. This is how insurance works. Who wouldn’t get it? Well, it turns out that if you focus on agriculture, which is what we ended up doing because who has more weather risk than farmers? Farmers don’t budget like that. They budget by acre. And so if you tell them something costs $500 they have no idea if that fits into their working model. But if you tell them that it costs $7 per acre of corn, they instantly know if they can afford that and they know that you are a service or business that sort of understands their industries because you’re speaking their language.
Rachel Hepworth: But we never would have known that from the data. All we would see is that nobody completed the purchase funnel. And so kind of getting out there and talking to people and understanding their world and how they speak and the language they use in how they run their business was really crucial to being able to take that company from essentially zero sales to being acquired for a billion dollars. And that happens, every company I’ve been at, there are stories like that where you don’t know what you don’t know until you go out there and get close to people and kind of have those conversations. And you’ll miss out on all of that just by looking at data. I love data, but it can’t be used in isolation.
Harry Stebbings: No, I agree. And I think it’s fascinating, especially in terms of kind of the granularities around how they think about pricing there by acre, as you said. I guess my question to you is, that’s fantastic. Especially when we look at the startup market, but customers change. They get smaller, they get bigger often in many cases, and they just become very different. I guess first is, how do you watch for this and stay ahead of the change in customer base?
Rachel Hepworth: Yeah, we had this at Slack for sure where it started out so strongly in the engine dev community. And then in order to really grow, you need to be useful to all functions within a company. And so one thing is that you can just look at the typical customer segmentation information, either demographic, firmographic or the actions they’re taking within the product and see how it’s shifting over time and how that seems to change their engagement with your company or product and the value they’re getting. And so that tells you that your customers are shifting. And so at Slack we segmented our customers. When I first came in, that was one of my first projects and what we saw is that, this kind of startupy engineering centric company was less than 5% of our TAM but 30% of our users. And so you can see who you’re killing it with, who’s getting all your value and you can also predict that as you expand and more and more people use your product, that’s going to shift because it can’t stay at that same ratio.
Rachel Hepworth: And so you need to understand how to provide value to different types of people. And that has been true at every company I’ve been at. You start out with this group of early adopters who are just attitudinally, they’re very different from who your larger audience is and over time you have to figure out how to make your product more approachable and usable by people who are less interested in spending enormous amounts of time understanding a new tool or being kind of the first to market. The requirements for the customer experience actually get higher I think as you become more mature because you have less and less engaged, eager users who are willing to bend over backwards to make your product or service work for them. And so you have to refine it more and more and be more and more self serve and simple to use and obvious in the value that it’s delivering.
Rachel Hepworth: At Slack we had to figure out, well if we want people in sales to use it, what is the value for people in sales? We don’t have Jira integrations for sales folks. People in sales speak a lot to folks outside of their company. Having this only internal communication is not a particularly big value prop. And that was a really big focus of the marketing and product teams and customer success, all the teams over time of how do we speak to each individual function and understand the value they’re going to get out of Slack? And then oftentimes build new features to actually deliver enough value because the features didn’t innately exist in the original product.
Harry Stebbings: Can I ask, is it super hard when you have a product like Slack or like Pilot though, it works across many different industries, is it not challenging in terms of speaking horizontally to so many industries with one message? How do you think about resonating with so many when you are so horizontal?
Rachel Hepworth: I think the first challenge is one, figure out the axis that you’re going to segment on. How are you going to cluster your different customers? At Pilot, our theory is is that we’re going to segment on industry because different industries have different financial integrations that are important to them and they have different ways that they use their books. An example is eCommerce lives and dies by inventory and cashflow. You talk about how bookkeeping helps you grow your business by managing that inventory and cashflow. Startups, bookkeeping is important because investors require that you keep good books, they want to see where their money’s going. And really high quality books can actually help you raise money faster. That’s very compelling for startups, but generally doesn’t speak to eCommerce at all. And so figuring out not just everybody needs bookkeeping, but what is that deeper value that they would get out of it is really important.
Rachel Hepworth: At Slack we segmented by function, it wasn’t so much by industry except for a couple of regulated industries. That was about understanding that Slack spread function to function. An engineer would bring it in and it would spread to the engineering team. And then how did it spread to other teams? Well who works with engineering? Product. And so if product wanted to work well with engineering, they needed to be on Slack. What’s the value to product beyond just you can speak to your engineers? And then who works with product? Well marketing and product marketing. And so understanding how people adopt the tool and then understanding how to message it to that specific group of people becomes really important. But I think the key that differs for different companies that are horizontal is they might all segment on a slightly different axis. Understanding what that is is really key.
Harry Stebbings: Yeah, no, no, I totally agree with you. And fascinating in terms of that kind of internal expansion within the org there for the Slack products. I do want to move into my favorite element, Rachel, being the quick fire round. I say a short statement and you hit me with your immediate thoughts. Are you ready to roll? About 60 seconds per one.
Rachel Hepworth: I’m ready.
Harry Stebbings: Okay. What do you know now about the process that you wish you’d known at the beginning of your time in marketing?
Rachel Hepworth: It’s really that you never know enough about your customer and that a lot of people, particularly in Silicon Valley, have really brilliant ideas that sounds so amazing and are just totally irrelevant for the market they are trying to go after. You cannot believe other people’s hype or your own hype. You got to get out there and talk to people and it will cut short a lot of pain and banging your head against the wall when things are not working out.
Harry Stebbings: What’s the hardest element of your role with Pilot today?
Rachel Hepworth: It’s what we talked about before. How do we smartly approach this really big TAM? Because SMBs are not homogenous. And so how do we segment them? How do we find them? And how do we communicate the value of what Pilot does in a way that’s relevant? Because everybody needs bookkeeping, but bookkeeping is not sexy or exciting. So how do you capture their attention and create that sense of urgency of I need to switch or I need to buy this service today?
Harry Stebbings: If you could change one thing about the world of SaaS today, what would you change?
Rachel Hepworth: I think it’s actually that a lot of SaaS companies have become very addicted to getting people onto their subscriptions and then hoping that they don’t notice how much they are spending. This is true on the B2B and the consumer side and so you see this actually marketing strategy, people can refer to it as don’t poke the bear ,where you don’t want to remind people that they’re paying for your service because then it will cause them to cancel because they realize they’re not getting enough value on it. And that’s always really bothered me and I wish there was less of a tendency to use that as a churn reduction strategy than actually figuring out how to help people get more out of the product.
Harry Stebbings: Yeah, no, I totally agree with you there. Buffer actually have a brilliant email. It says, “Thank you for making Buffer possible.” And it’s got pictures of the team and it’s just, it’s integrating a moment of delight into something that’s traditionally painful, being your invoice. Yeah, it’s our final one. Who in SaaS marketing today do you think is killing it? And why?
Rachel Hepworth: This might be because of the function I’m in, but I spend a lot of time thinking about SaaS companies that are targeted at marketers and who does a really great job. And the companies that come to mind are, HubSpot is obviously killing it with content marketing and understanding their customer. And I think what’s been interesting about them in the last year or two is they really expanded their share of wallet. They’re not a young company, but they’re accelerating their growth. And because that’s because they know how to combine a bunch of different products and deliver more and more value over time to this SMB base that they’re serving. And then I think Drift has done a pretty amazing job, specifically in marketing. They are trying to name and own a category that has existed for a while and they did not by any means create but still seek to sort of dominate it through their marketing. And I think they really understand their target audience and what people care about and they’ve done a great job there.
Harry Stebbings: Rachel, as I said at the beginning, I’ve been looking forward to this one since I interviewed Waseem. He said, “You’ve got to have Rachel on.” And then obviously Mark from Index said many great things, so thank you so much for joining me today and I’ve absolutely loved doing this.
Rachel Hepworth: Thank you so much, Harry.
Harry Stebbings: So much fun having Rachel on the show there, and as I said, could not be more excited for the future with Pilot. And if you’d like to see more from us then you can find us on Instagram at HStebbings1996 with two Bs. I really do love to see you there.
Harry Stebbings: As always, I so appreciate all your support and I can’t wait to bring you a fantastic episode next week with Anthony Kennada at Front.