The exact customer-driven methodology Drift used to grow from 0 to 70k customers in 4 years

October 11, 2018 by David Peralta

Every company in the world will tell you they are customer-driven. They’ll even have framed posters on the wall about it.

But after spending 20 years in my career building and leading SaaS companies, I’ve learned that none of that means anything unless you actually make the structural decisions to ensure it.

 

David Cancel

 

 

David Cancel

Most startup founders dream of creating a single successful company.

David Cancel has done it 5 times.

His latest company, Drift, has already raised $107 million in funding and acquired over 70,000 active users in just 4 years.

So how did he do it?

The key has been a customer-driven methodology that David stumbled upon almost by accident at one of his previous companies.

That methodology boils down to six insights:

 

In today’s article, we deep dive into what led to David’s discovery of this methodology as well as what each of these insights looks like in daily practice at Drift.

NOTE: This is article is based on a one-on-one interview I had with David for Hotjar’s podcast, 'The Humans Strike Back'. Check out the full episode here.

The light bulb moment that led to Drift’s customer-driven methodology

Back in 2009, David founded his 3rd company, Performable (acquired by HubSpot in 2012), to help marketers analyze their performance. 

customer-driven methodology performable site

Performable’s website circa 2011

At the time, David would struggle to get his engineering and product teams to build the features that he felt would have the biggest impact. No matter how he positioned it, he’d always get the same reply:

“No, you don’t understand," they’d say. “It’s too difficult. It’ll take forever to do this.”

But then the company started growing faster than it could hire support people, so David had every single employee start taking customer support calls right away—including the engineers.

That’s when something magical happened…

Suddenly the features that were impossible to build were getting built in a matter of hours.

I asked one of the engineers, like, "How did you do that? You told me it was going to take a long time."

And they said, "Oh, well, I heard from three customers today about this thing, so I just figured out a way to fix it."

That was a light bulb moment for me.

That was a moment that I was like, wait a second. If we shorten the feedback loop... and the engineer hears it directly from the actual user—not me, not someone else that they think of as just trying to convince them to do something that doesn't make sense—then they're willing to take action right away.

And the customer is happier.

 

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Almost immediately, the Performable engineers started getting gifts sent to their office by delighted customers.

David started hearing stories from their customers such as:

“You know, the engineers in my company won't even talk to me, and your engineers actually fixed something.”

customer-driven methodology  HYPERGROWTH_by_David_Cancel_pdf

Image courtesy of David’s book, HYPERGROWTH

The running joke among the customers was that Performable’s answer to everything was just “hit refresh.”

As in, the engineers would actually fix a customer’s issue or feature request while the customer was still on the call. In real time. To see the fix or feature, all they had to do was hit refresh.

What I was witnessing was this incredible feedback loop.

So, we built the methodology that we’ve continued since then, built around that idea of putting the engineer, putting the product people, putting everyone as close to the customer as possible, and removing the roadblocks so that we could create a product cycle around that.

 

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What Drift’s customer-driven methodology looks like today

Once HubSpot acquired Performable in 2012, David came on board as HubSpot’s Chief Product Officer and immediately went to work testing and refining this new customer-driven methodology.

By the time he left HubSpot to found Drift, David had helped cut HubSpot’s churn in half and increase their annual revenue retention from 75% to 95% (Source: HYPERGROWTH).

Let’s dive into what each of these insights actually looks like in practice at Drift.

Customer-driven insight #1: Everyone stays in touch with the customer. Always.

After his experience at Performable and HubSpot, David made sure that his new company, Drift, would be built 100% around the notion that every team member should stay as close to the customer as possible.

 customer-driven methodology  DriftTeam - from Drift Glassdoor

David and the team at Drift (back when it was still called Driftt)

To achieve this, David and his team created a system of customer-based metrics (more on that later) and what he calls ‘guardrails’ to make sure that Drift’s teams stay in touch with the customer on a regular basis.

At Drift, each one of our product teams has to have contact and work with some set of customers each week.

We don't have an absolute measure like, "You have to do it 2.3 times." It's more of a guardrail that acts like an early warning signal.

If we see a team that has not had any customer interactions that week, we kind of parachute in and try to figure out what's wrong with that team.

And almost always, it's that they're going off on some deep end they don’t need to be focusing on, and we try to bring them back.

 

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And while David’s epiphany came from having each team member take actual customer calls, that’s no longer a requirement at Drift.

The main focus now is for his product and engineering teams to have weekly user testing and user research calls with customers—either in person or via Zoom.

Some still rotate through shadowing support calls (especially if they are new), customer success call, or sales calls. But the emphasis is less on whether each team member is joining the calls and more on are they spending at around 6-8 hours interacting directly with customers.

That’s true for the leadership team as well at Drift, though with a slightly different focus…

Customer-driven insight #2: Focus on the unscalable

David is a firm believer that the key to scaling a company successfully is to focus on the unscalable things.

Here’s what he means:

Every week, we do things like meeting up with small groups of customers. We'll fly out to a city, one or two of us, and meet up with some prospective customers, some people in the industry, some existing customers, and I'll do a lunch with them. I'll do a dinner with five of them. I do it a lot.

We want to have a mix of successful customers, unsuccessful customers, new customers, old customers. So, we try to mix it up.

And this is not a product pitch for Drift. We just let everyone talk. Let's just be real people and just have a conversation.

And it's amazing that in every one of these cases, without coaxing them, the conversation naturally goes into Drift.

And we just sit back and mostly listen to them.

 

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Customer-driven insight #3: Make customer research a priority

According to David, the most powerful insights come from direct interactions with users (a belief we share at Hotjar).

And a key source to getting those insights has to do with understanding the daily practices of your customer.

That’s because while surveys are powerful, many times what people think they want is different than what they actually need.

That’s why at Drift, they’d gain these insights directly by visiting their customers in their ‘natural setting.’

customer-driven methodology D_E

David with his Drift Co-Founder, Elias Torres

As David mentions in his book, HYPERGROWTH:

We want to see their office, who sits next to them, if they’re in a cubicle, what’s in their cubicle, what do they have printed out that’s hung on the wall, what does their browser look like, what are their favorites, what’s on their desktop?

And the reason why I care so much about that is because rarely do you get that information when you ask someone a pointed question about features or functions or things that they need.

So, we learned way more by having those interviews and watching what they were doing, and seeing their daily practice, and seeing how they had to go through five different apps to do something or download something into Excel.

Excel was gold for us. As soon as I see a customer or prospect use Excel, I know we’re onto something. That’s where they’re doing something that we can help them do more efficiently.

 

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David makes sure to earmark a certain percentage of his time to get out of his office to talk to customers and prospects. In person and at their office, if possible, but at least over a coffee, a walk, or lunch.

The key is for David to “get them in an environment where their guard is down, and we can start talking about things that matter.”

However, to successfully transform those insights into action, there’s another important step along the way...

Customer-driven insight #4: Process customer feedback the right way

In David’s experience, there are three questions he gets asked over and over when it comes to customer feedback:

      • After I talk to a customer, what should I do with their feedback?
      • How do I make customer feedback actionable?
      • How do I cut through the “noise” and make sense of what all these customers are telling me?

But there’s a problem most people have when it comes to processing feedback:

People tend to focus on the wrong part of the feedback.

Instead of focusing on the root cause or underlying issue behind the feedback, they focus on the subject of that feedback.

For example, a customer might ask, “How do I integrate this with Trello?” And if people hear that question enough times in feedback across their team, they’ll start to say, “We have a Trello problem. OK, let’s add Trello features. We need more Trello features. I keep hearing about Trello.”

So, they’ll run and rush to go fix the thing that they think is the subject: Trello.

 

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According to David, the most important part of that feedback  wasn’t the Trello features. It was the part where the customer asked ‘How do I…?’

That’s why he and his team developed The Spotlight Framework:

To help people identify whether the feedback they’re getting is pointing to a User Experience issue, a Product Marketing issue, or a Positioning issue.

customer-driven methodology  Spolight_framework

Drift’s Spotlight Framework at a glance (from David’s book, HYPERGROWTH)

The key is to use the framework to categorize what the underlying issue is behind the feedback, so your product team can make the right call on what to focus on next.

You can use Excel or a Google Doc. The important thing is to process your feedback on a regular basis and categorize it, then turn that into action, measure the results, and then get more feedback.

Customer-driven insight #5: Get your features out in the field before you market them

While at HubSpot, David and his team got into the habit of releasing a feature about six months before they ever mentioned it in any marketing material (in fact, that’s exactly how we launched Hotjar).

That way customers have time to interact with the feature and—most importantly—give feedback. The product team would then use that feedback to iterate on and improve the feature.

customer-driven methodology  ProductTeam-from Drift Glassdoor

Two Drift product team members at work

By the time it was time to officially launch that feature, the marketing team would have a wealth of useful feedback to use in their announcements.

Depending on the circumstances, we would have 50 beta testers, 100 beta testers, 2,000 beta testers, or more. And they’d be using that product, and not only using it, but also becoming successful with it.

And that would give the product marketing team time to go back to those customers so that when we had a marketing launch, we could have case studies, examples, and real data.

The takeaway: With any of your releases, work with marketing so that you always have separate tracks for product releases and marketing releases.

 

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Customer-driven insight #6: Only reward performance based on customer-driven metrics

At Drift, all the teams are organized to focus on and be rewarded only for customer-driven metrics.

According to David, rewarding the kinds of things that most engineering teams focus on, such as hitting sprint points or releasing version 2.0 on a specific date, leads teams to become dogmatic and divorced from their customers

If you take a step back from it, if we measure things the way that most companies do, those metrics are totally misaligned with the customer. And then we wonder why we're not doing the right thing for the customer. It just doesn't make any sense.

We don't reward any of that stuff. We only reward these customer metrics:

Is the customer happier? Are they more successful?

What that does is it forces everyone to focus on the real problem and avoid the massive disconnect I see in most organizations today.

 

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So what kind of metrics do they measure at Drift?

Here are a few examples:

      • Are the customers using the product more or less? (Churn)
      • Are the customers who are using the feature a particular team developed upgrading more often as a result? By how much? (Recurring Revenue Expansion)
      • Are the customer support issues for a given product going up or down? (Customer satisfaction)
      • Are the customers likely to recommend Drift to someone else? (Net Promoter Score®)

The metrics are compiled using an in-house analytics tool and surveys, then used as proxies to understand whether a specific product team is pulling those metrics in the right direction.

Once you focus on those things as a goal, then you shouldn't actually care that much about a version, a release date, you know, how much infrastructure work we're doing versus new product work or any of that.

That stuff doesn't matter because all that matters is that the customers are more successful in using your product more over time.

 

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Do it like Drift…

Based on this methodology, here are three actions you can take right now to get closer to your customer:

      1. Book a call or meeting with at least three customers to get their feedback one-on-one
      2. Set up an NPS poll or incoming feedback to get feedback from a larger group of customers
      3. Pick a customer-driven metric for your team that you can start measuring today

After all:

For you to stand out and for you to compete in this next century, you're going to have to figure out how you stay closest to the customer, so you can continually evolve and build products that meet that customer's needs in this world of infinite supply.

Companies that fail to adapt, and that fail to listen to and communicate with their customers, will inevitably lose out.

 

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David Cancel

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David Peralta

As Hotjar's Outreach Marketer, David is obsessed with helping others succeed by putting people first. He also loves a good walk in the Redwood grove near his home in Mendocino County, CA.

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