by Tiffani Bova
This may surprise your salespeople. After all, they may say that they have been doing a great job at finding, qualifying, and closing new customers; that it is the company’s fault if it hasn’t been able to keep them. In some respects, that may be true. But even so, the fact that those customers were lost in churn suggests a general failure of perspective throughout the company. And now that the problem has been fixed, the successful processes and perspectives must be inculcated throughout the organization—and nowhere more than on the leading edge, in sales and customer service.
Inevitably, the sales force will need to see prospective customers differently, qualify them differently, and ultimately deliver a different group of new customers to the company. Otherwise, if the fight to reduce churn only occurs downstream, the company will continue to battle churn without much improvement. Ideally, changes in sales will start having an impact, churn will be reduced—and the company will be able to navigate on into the far more exciting paths of Market Acceleration and Customer and Product Diversification without the burden of losing customers unnecessarily.
Customer service is equally important, especially in a subscription business that “sells” online. Once customers purchase, any interaction they will have with the company going forward will be with customer service (billing and support). There are two sides to customer service as it relates to churn. One is when customers call in and have an issue. During those interactions, customers care about how quickly their issue is resolved, how long it takes to resolve it, and the “hassle level” of the time spent. This is where companies like Zappos have changed the game. Customer service and the people who work in that organization are the center of its success. They are empowered to do what’s right by the customer first, expecting that the rest will follow.
The second side to customer service and churn is proactive communication with customers, anticipating their needs and predicting when they may need some help or want to purchase more from you. This latter example is where technology plays a huge role. Don’t forget that you can get in front of churn and create a more memorable experience that your customers can’t get anywhere else.
The content streaming market is on an aggressive journey to transform the way we enjoy our favorite movies, music, and TV shows. The way service providers in this space interact with customers will go a long way in shaping future interactions between subscriber-based businesses and their customers. With the huge variety of choices available to customers, streaming service providers do not have any other options apart from upgrading their customer retention strategies. Retention is a direct result of an incredible customer experience and a quality product. Both are inherently linked, and neither exists alone. While this isn’t the only combination path, I wanted to keep you focused on the one that can and will have the greatest impact. If you are selling better, keeping and servicing your customers, churn may just take care of itself.
PATH 8
PARTNERSHIPS
PARTNERSHIPS
Partnership is the way. Dictatorial win-lose is so old-school.
—ALANIS MORISSETTE
WHY PARTNERSHIPS MATTER
Forty-eight percent of global CEOs plan to pursue a new strategic alliance to drive corporate growth or profitability.
Organizations are increasingly leveraging partnerships to develop relationships for mutual gain, address business challenges, and drive bottom-line results.
Two-thirds of CEOs expect to grow through collaboration.
Eighty-five percent of business owners feel that strategic alliances are important or extremely important to their business, but most say that fewer than 60 percent of those partnerships are successful.
BETTER TOGETHER
In 1984, nineteen-year-old Michael Dell launched PC’s Limited. He had funds totaling $1,000 and a game-changing vision for the technology industry. It began with a simple premise that challenged the status quo with its distinct supply-chain model and its sales of customized computers directly to customers to meet burgeoning PC demand. The context of the market was changing; consumers wanted a computer, not just at work but at home, too. Dell saw an opportunity and took it.
If you are not partnering, you are missing key opportunities to expand the brand.
—JOE GUITH, president of Cinnabon
Fast-forward almost twenty years later to 2006—Dell found itself at a crossroads. It had used its direct sales philosophy, its focus on product development, customer experience, and culture as the blueprint for its success. Dell’s revenue was $56 billion, it was shipping thirty-seven million systems worldwide, its Market Acceleration and Customer and Product Diversification strategies were in full swing, but the market context was once again shifting, impacting the prospect of future growth.
While Dell could still enjoy competitive advantage from customizing computers and selling them directly to consumers, the market for such offerings was beginning to contract, largely because customer needs and related supply-chain costs had shifted in the maturing PC business. What was needed now from Dell was a reevaluation of the way in which it went to market with its products. Selling directly to customers online had been the lifeblood of Dell, so much so that when Michael Dell wrote a book in 1999, he called it Direct from Dell, but the model was finally beginning to show its age.
In the spirit of full disclosure, I used to compete against Dell when I was hired to formally launch the indirect sales division at Gateway computers (2004–2006), right at the time when all of this was happening. We were facing the same dilemma at Gateway. There were 188 Gateway Stores across the United States that sold direct to consumers. If you wanted to buy a Dell computer, you had to do it through Dell online or over the phone. If you wanted to buy a Gateway computer, you could do it at a Gateway store, over the phone, or online. There were limited, at best, third-party “partnerships” available for customers to leverage. For both brands, it was time to move from direct sales to Partnerships, a hybrid model that would embrace both direct and value-added reseller (VAR) channels to more effectively compete against HP, Compaq, and IBM at the time. That is what both brands did. Gateway closed all 188 stores and instead chose to sell its products online and through other retailers—CompUSA and Best Buy. The move indicated Gateway’s interest in leveraging partnerships and lowering operating costs to improve its competitiveness.
In 2007, Dell formally announced its PartnerDirect program. In a bit of competitive irony, I had since left Gateway and joined Gartner, where I was part of the advisory team that helped design and launch the Dell PartnerDirect program. I always knew that if Dell ever decided to make this shift, it would be a game changer, and it was. Dell technologies’ global channel business is on a run rate to hit $43 billion under the newly formed Dell EMC partner program. While the Gateway story didn’t end as well as it has for Dell, the moral of both of these stories is that you must be willing to step outside your comfort zone when the customer and market context change—and partnerships can be one of those ways.
TRUST, FAIRNESS, AND MUTUAL BENEFIT
The tenets of an effective partnership are trust, fairness, and mutual benefit to both parties. Companies can’t always go it alone. The Internet’s global expansion is entering a new phase, and it looks decidedly unlike the last one. New competitors and potential partners are ubiquitous. The next billion people who come online will avoid text, use voice activation, and communicate with images. They will come online for the first time thanks to low-end smartphones, cheap data plans, and apps allowing them to learn about products, services, and brands to shop in entirely new ways.
The response to all the changes in the market, in industries, and in consumer behavior requires businesses to work together much more closely than they have in the past, especially considering all of the advances in technology and new competitive threats. This is why partnerships have become so popular in recent years, squarely focused on addition
al avenues of growth, market coverage, and sales and marketing collaborations.
While partnering sounds great in concept, it often gets a bad rap for adding complexity to an already complex operation. You need to deal, intimately, with outsiders from another corporate culture. Executives worry it will cut into their potential margin and earning potential or that you give up some control and ownership of the customer relationship. Why do it?
The simple answer is that rarely is a company able to do everything on its own. Partnerships, collaboration, co-branding, strategic alliance—pick your term—can provide an important piece to the growth puzzle. If you choose to expand to a new region, you must ask yourself which would be more effective: hire a sales team, diverting marketing resources, leasing distribution facilities, and so on, in an expensive months-long effort, with a high risk of failure, or partner with a local company to augment its corporate-based efforts and to experiment with a new growth path without heavy capital investments?
The answer should be obvious. For example, an established company looking to expand into a new international market (Market Acceleration) would be starting from scratch if it pursued that strategy on its own. It may not want to take on too much initial risk, so it decides to partner with an independent local distributor who handles sales and maybe even marketing in country. Why? Because the local distributor has unique expertise and knowledge of the market context and understand the needs and wants of those local customers far better than the established company does. Plus, it already has the built-in advantage of a customer base.
When used correctly, partnerships can help companies avoid the costs and risks of entering new markets or going after new types of customers, and they can accelerate returns on investment in expansion efforts. The result: both parties reap the benefits of the partnership. However, don’t kid yourself and underestimate what is required of your company if you choose to pursue this path.
Partnerships are more than a loose arrangement between two companies. Partnerships should be proactive and have well-thought-out arrangements between the companies, with clear expectations and measurable results. It can’t only be about avoiding risk or costs but rather about capitalizing on a unique opportunity. Partnerships should be used in combination with other growth paths such as Customer Base Penetration, Market Acceleration, and Customer and Product Diversification—with an eye on increasing the potential joint revenue opportunity by combining sales and marketing efforts focused on predetermined goals.
STORY
1
GOPRO
ADRENALINE JUNKIES
Partners have been, and will remain, at the heart of this company as long as I’m here.
—CHUCK ROBBINS, CEO of Cisco
IN THE FIFTEEN YEARS SINCE Nick Woodman developed the first GoPro prototype, he has gone from sleeping out of his 1971 Volkswagen Bus to one of the fastest-growing camera companies in the world. Between 2004, when he was selling GoPro cameras on the Home Shopping Network, and 2011, when the company sought its first round of venture financing, it underwent a series of strategic changes to increase sales. The moves included Customer and Product Diversification—introduction of video, wide-angle lens, high-definition, and key messaging adjustments; Market Acceleration—taking its existing products global; and Partnerships—establishing joint marketing initiatives with key brands.
Fast-forward more than a decade and GoPro is the global leader in manufacturing and selling mountable and wearable cameras and accessories. How were they able to accomplish that? There is no question that GoPro used many unusual tactics to grow the business, such as aggressive marketing and social media campaigns. However, the real boost to its success was in its ability to respond to the changing market context, which was increased access to Wi-Fi and cheaper bandwidth, combined with millions of smartphone users who wanted to create and share videos from anywhere, anytime. How well would GoPro have done if there were no YouTube or if there was only limited Internet access? The company was in the right place at the right time, with the right product.
It was 2011, and Cisco Systems discontinued their Flip camcorder, which was the market leader at the time. That led Best Buy, a large U.S. retailer, to scramble to backfill the product in its consumer electronics category. It decided to make a bet on GoPro, which at the time was a ten-person company—yes . . . only ten people. It was a big bet for both companies: Best Buy working with such a small supplier, and GoPro having to deliver large demand from a massive retailer like Best Buy.
But, as you might have guessed, the stars aligned, and GoPro became one of Best Buy’s fast-growing partners. As part of its “Renew Blue” strategy launched in 2012, Best Buy was very focused on “improving shoppers’ perception of the store by building eye-catching merchandise displays,” in hopes of increasing sales “by providing an experience that is unique to brick-and mortar channels.”
GoPro merchandising was a perfect fit, and Best Buy’s customers responded. They wanted to learn about the product, how to use it, and then purchase lots of accessories (similar to the Apple iPhone accessory windfall), but most notably, the new product provided Best Buy with an increased level of engagement and an enhanced Customer Experience from its existing base, at the same time attracting an entirely new demographic—extreme sports enthusiasts. The positive results, both for brand awareness and (sales) growth, built GoPro’s partnering confidence—Best Buy would become the first of many.
Today, according to GoPro, its sales distribution channel is one of its most valuable assets. It does business with forty-five thousand retailers around the globe, which accounts for approximately 43 percent of its total revenue. But even after all of the subsequent partnerships, Best Buy remains its single largest partner, responsible for 17 percent of GoPro’s 2016 revenue.
We’ve always felt a bit like Red Bull’s younger brother.
—NICHOLAS WOODMAN, founder and CEO of GoPro
GoPro was experiencing envious growth between 2011 and 2014. Revenue in 2011 was $234 million, 2012 $526 million, and 2013 $985 million. Then, in 2014, the company warned: “We do not expect to sustain or increase our revenue growth rates,” suggesting that its sales growth had peaked—and it was right. GoPro found itself in a growth stall shortly after its IPO in June 2014. While its stock price initially shot up, slowing sales, failed ventures, and product issues hampered growth. But it was a series of partnering decisions, combined with shoring up its product issues, that helped GoPro get back on track.
According to Woodman, GoPro had been inspired by Red Bull—from producing action-packed videos to share on social media to sponsoring extreme sports events—but now, after years of an informal relationship, both companies decided it was time to make the relationship more formal.
In May 2016, in a deal that seemed surprising—and yet somehow perfect—camera maker GoPro and beverage giant Red Bull announced they were joining forces on a multiyear global partnership that included content production, distribution, cross-promotion, and product innovation.
As partners, Red Bull and GoPro will amplify our collective international reach, the power of our content and the ability to fascinate.
—DIETRICH MATESCHITZ, founder and CEO of Red Bull
The two companies found their common context in public events and their combination in attacking those events from different directions—beverages and image-capturing hardware. Remember, effective partnerships are built on trust, fairness, and mutual benefit—and this partnership had all the makings of a powerful combination.
An energy drink company and a portable digital camera company—odd couple? As this new co-branding, strategic partnership unfolded, the vision of the two firms emerged. The goal, seemingly, was to enhance the ability of both brands to create content to reach beyond their existing bases. For Red Bull, so dependent on its sports and adventure marketing, this meant a better presentation of those events. For GoPro, it got a crucial role in hi
gh-profile sporting events around the world—events it couldn’t afford to get on its own.
According to Statista, both brands are in the top 10 most popular YouTube brand channels as of October 2017, ranked by number of video views—Red Bull with 1.94 billion views and GoPro with 1.56 billion. Monster Energy has 1.5 million subscribers. 5-Hour Energy has 14,000. Apple has 5.3 million subscribers. Sony Camera, less than 100,000. Samsung Galaxy has 2.3 million (as of October 2017), and Rockstar doesn’t share their subscription numbers.
These companies post content regularly on their YouTube channels, which is an important stat to review: between the two brands they have more than eleven million subscribers. On its fourth-quarter 2017 earnings call, GoPro even calls out social media statistics.
GoPro gained more than 4.8 million new social media followers in 2017, growing its total following to 35 million across all platforms, a 16 percent increase.
Instagram followers increased by 26 percent year over year in 2017, with the addition of 3 million followers, reaching a total of 15 million.
GoPro content was viewed approximately 700 million times on social media platforms in 2017, up more than 25 percent year over year. GoPro content on YouTube saw a 93 percent increase in median organic viewership per video in 2017.
GoPro has made Partnerships a part of its growth equation for years. In 2014 it signed deals with BMW and Microsoft (Xbox 360 and Xbox One). In 2016 it expanded its 360-degree video partnership with YouTube, signed a live-streaming deal with Periscope, renewed its partnership with the National Hockey League, signed a patent licensing agreement with Microsoft, and inked a new golf deal with the PGA and Skratch TV.