Fighting churn: here’s our 3-track action plan to stop losing ⅓ of our annual revenue

July 4, 2018 by Louis Grenier Click Here to Read/Write Comments

This is part two of our post on the short-term revenue retention problem we’ve been having at Hotjar. In short, we’re losing almost a third of our revenue every year. We are, however, attracting lots of new, paying customers who offset those losses. But that doesn’t mean we’re okay with those losses.

Far from it.

In this post, I’m going to tell you our plans to address the issues we uncovered, and the challenges that prevent us from doing it perfectly.

Our 3-part retention challenge

In the first post, we found that some of our customers left for three primary reasons:

  1. They only used the paid version of Hotjar for specific projects - and downgraded their plans once the projects were completed (dormancy)
  2. They felt overwhelmed with data and didn’t have time or knowledge to analyze it (data overload)
  3. They didn’t see enough value and/or were frustrated by usability issues (bugs)

 

We’ve been coming up with a 3-track action plan to address those reasons - because they all have to happen in tandem.

Track 1: Aligning the entire Hotjar team around the challenge

To even start to address our retention issues, we need to align ourselves with the understanding that short-term revenue retention is our primary challenge.

Not a press-the-panic-button challenge.

An exciting challenge.

One that we need a company-wide focus on and commitment to.

Adopting a ‘good’ strategy

The first step we’ve taken towards alignment is using the core concepts from the book Good Strategy/Bad Strategy: The Difference and Why it Matters by Richard Rumelt.

The kernel of “good strategy” can be summed up in 3 parts:

  1. Diagnosis: Understanding the core challenges preventing you from going where you want to go
  2. Guiding policy: A sentence explaining the approach you’ll take to fix them
  3. Set of coherent actions: A list of specific actions to solve those challenges

 

For the ‘diagnosis’ part, the entire Hotjar team came together to identify our two biggest challenges that might prevent us from growing:

  1. Alignment due to our team size and growth
  2. Short-term revenue retention

 

For our guiding policy and set of coherent actions, we’ve introduced what Salesforce calls the V2MOM - an ugly acronym, admittedly, that stands for Vision, Values, Methods, Obstacles, and Measures.

Salesforce V2MOM

Salesforce’s first V2MOM back in 1999 (source).

 

If you want to know more about what the V2MOM is all about, check out this episode of Hotjar’s podcast 'The Humans Strike Back' with Bill Macaitis (ex-SVP of Marketing at Salesforce).

In the next sections of this post, I’m going to explain in detail the methods we’re using to improve our short-term revenue retention, but, before that, let me explain how we identified our core persona to further align the entire Hotjar team.

Customer persona alignment

We started with the standard, semi-dorky (but still effective), stock photo persona list:

Hotjar customer persona

Hotjar’s key customer personas are web/UX designers, marketers, and consultants working for large e-commerce and subscription service companies.

 

Questions we asked our ideal customers

We used Hotjar to send a survey to our customers who’ve been with us the longest (9 months or more) and paid us the most ($89 a month or more) - our ideal customers, basically. These are the people responsible for most of our revenue. And they told us who they are and what they do, along with answering a few other questions, including:

  • How often do you use Hotjar in a day/week/month?
  • How often do you use alternative methods in a day/week/month?
  • What made you look for a solution like Hotjar?
  • What was your decision process?
  • What was the main reason you chose us?
  • What specific outcomes were you expecting?

 

This set of questions enabled us to match who our ideal customers are with what they are looking to do with Hotjar.

When we had our company retreat in Malta in June, our Experience Lead Andrew Michael presented all of this information to the entire team to help us align behind the real customers we’re serving.

Track 2: Getting product development & design together at last

You might well ask: why didn’t you have Product Development and Product Design working together all along?

It makes sense. Product Design is the team that decides what features to build next and which bugs to fix first, and Product Development is the team that turns those plans into reality.

But, two factors came together to delay bringing these two sides of the Product Team together.

#1 - We had to keep up with growth

For one, we’ve grown so fast in the last two years that our developers have worked almost entirely on our infrastructure - the back-end nuts and bolts - that ensures we can continue to scale. It’s been a surprisingly complex job to make sure we can capture as much data as possible, as fast as possible, and that we can efficiently store and display all of the data we’re collecting.

#2 - The GDPR

Then there was the race to prepare for the GDPR. Thankfully, Hotjar was designed and built with privacy in mind (we created a service to help understand and interpret user behavior anonymously, without personally identifying individual users) but delivering on the GDPR's requirements remained resource-intensive.

Hotjar privacy

Hotjar was designed and built with privacy in mind.

 

We had to divert all of our development and engineering resources to make sure we were in line with the GDPR’s requirements and protecting people’s privacy.

All the while, product design worked on their plans separately, which created some frustration. Essentially, product designers wanted to work on providing value, but product engineers were busy with infrastructure and the GDPR. They weren’t aligned.

Better together

Now we’re working to ensure a much deeper connection between Product Design and Development by moving our Product Design teams to work with Product Development directly. No more separating the two!

As a team, their task will be to fix the most pressing bugs and UX issues that have been contributing to customer frustration and churn. And these high-impact, low-effort improvements should give us some quick wins. (Listen to ’The Humans Strike Back’ interview with Rand Fishkin for a really good discussion of ‘quick wins.’)

Some of Hotjar's upcoming improvements include:

  • Annual billing that allows customers to pay once a year.

Hotjar yearly payment


  • Adding more value to Recordings. One issue we identified when we investigated the causes of our revenue churn was that Hotjar users can feel overwhelmed by the recordings and unsure how to get the most value from them. Or, they’re unable to easily find the specific session they’re looking for. We’re going to add functionalities like always-on recording, being able to filter by behavior and feedback, saving filters into a segment, sending email summaries of interesting recordings or segments, and make the whole filtering experience easier in general.
  • Improving feedback tools (Surveys, Polls, and Incoming Feedback) to make it easier for teams to create, analyze, and collaborate on feedback within Hotjar, so they can more easily integrate Hotjar data into their workflow.
  • Making our heatmaps more reliable. Our heatmaps don't always show how a page is actually being used. Our current heatmaps cause a lot of issues and bugs which will be fixed.
  • Improving onboarding by encouraging successful behaviors. We’ve been identifying actions and behaviors that correlate with successful customers who stick around. For example, do users who create two new heatmaps within the first week of signing up tend to use Hotjar more often and for longer? With that information, we could encourage users to create those two heatmaps as part of their onboarding process to set them up for success right from the beginning. Onboarding is an incredibly important foundation for retention.

Track 3: Refining our marketing with education, consistency, and clarity

Our freemium model is working really well for us, and we don’t want to turn off, or turn away, those users. We love those users! At the same time, we want to make sure our paying users are getting the customer experience they need to reach their objectives.

Which requires setting them up for success by making improvements in our marketing.

Here is what we’re planning.

Educontent

What we have been doing until now is investing most of our marketing resources into acquiring new users.

But with short-term revenue retention as our driving concern, we need to switch our efforts to:

  1. Help current users get the most out of Hotjar
  2. Take the time to educate prospective customers before they even sign up

 

Email campaigns, video courses, webinars, ebooks - the medium doesn’t matter as much as the purpose. And the purpose of our educational content (“educontent”) will be to help new and continuing Hotjar users learn how to improve their customers’ online experiences with Hotjar, and reach their ideal outcomes outside of our product as well.

Hotjar course

An example of educontent: we recently launched Hotjar’s first video course (in beta) to help website owners to improve their website experience.

 

These resources can serve non-Hotjar users too by helping them become more educated, more informed, and more aligned with our mindset so that if/when they do sign up, they’ll be more likely to stay with us.

That will have a direct impact on retention.

Brand positioning

We want to hold a specific place in our ideal customer’s mind, which we’ll do by delivering a consistent brand experience. Which we haven’t been doing very well. Let me show you what I mean:

Hotjar wall

There is little in common between our paid ads, our careers page, or 'The Humans Strike Back' podcast page.

And this is only the tip of the iceberg.

Think about Hotjar’s entire footprint: help documentation, emails to users, product experience, third-party review websites, social media accounts, webinars, etc. Think about Hotjar’s visuals, tone-of-voice, brand colors, etc.

To hold a specific place in our ideal customers’ mind and heart, we must deliver a consistent and compelling brand experience. We’re working to find a common theme that will resonate with our users, and be easily recognized by our not-yet users. Clear positioning helps with acquiring the right customers who believe in what we do - and consistency is powerful.

Powerful enough to affect retention.

Prescriptive pricing

The current language around our pricing structure is creating confusion that’s easily solved. Now, the pricing page asks users to tell us how many pageviews they want to collect instead of how many pageviews they currently have. This could seem like a small difference, but it is creating a lot of confusion.

Hotjar pricing

 

The three tabs “Personal,” “Business,” and “Agency,” are also confusing - some people miss them altogether.

Clarifying the language and displaying all three options together should help users accurately identify and choose the right pricing plan for their needs. Then they’ll get the appropriate experience to become successful customers.

We’re also going to experiment with making our Free plan more prominent on the pricing page, and with making the business benefits of each pricing tier more clear.

When people find the right plan from the beginning, they’re much less likely to stop paying!

Doubling down on customer success

Our Support Heroes and Customer Success Managers already do an amazing job helping Hotjar users, but don’t take my word for it. In the last 30 days, despite having more than 4,650 users who contacted us, our Customer Satisfaction Score (or CSAT) averages 93%.

CSAT Hotjar 2

Hotjar’s Customer Satisfaction Score (or CSAT) averages 93% in the last 30 days (stats taken from Zendesk).

 

Sometimes, the answer isn’t to change what you’re doing, but to double down on what you’re doing well.

Our Customer Experience Team’s goal is to make the customer experience as effortless as possible, in terms of providing support, creating resources, and having the ‘human touch’ with every customer interaction. Part of pursuing that goal will be to:

  • Collaborate with Marketing to create some of the educontent we discussed
  • Revamp Hotjar’s Knowledge Base to provide more informative self-service options for customers
  • And find more ways to reduce friction (and ticket touches) when a customer does need our help

 

We’re also starting to think about ways to create negative churn

If revenue churn is when customers stop paying or pay less with a downgraded plan, there’s also a phenomenon called negative churn - when existing customers pay more. They can upgrade to a more feature-full plan, or buy additional products or services, offsetting regular revenue churn.

We’re already starting to think about ways we might generate negative churn by providing more value to our customers.

But, that’s another story for another time. Because our focus right now needs to be on our list of coherent actions that fix outstanding issues, deliver quick wins, and set our customers up for success right from the beginning.

How are you addressing your retention challenges?

Key Takeaways

  1. All of our efforts to reduce short-term revenue churn begin with aligning our entire company around one clear strategy and the needs of our key personas
  2. Bringing Product Development and Product Design together is a huge step in making our much-needed improvements happen
  3. Educational content (or “educontent”) will help us bridge the data-overload success gap as we train our users to get more value from Hotjar
  4. We’ll be working towards creating a more consistent and clear brand experience for everyone
  5. Customer Experience (Customer Success + Support Heroes) will continue working on ways to bridge success gaps and reduce friction in the way of customers getting the help they need

 

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Full transparency: idea, structure, data, and recording for this post were provided by the author (Louis Grenier) while the piece was written by our copywriter Lauren.

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