bowery influitive talk aug 6 2013 v5
TRANSCRIPT
The Advocacy-Centered Company:A deeper look at CAC and LTV
Bowery Capital CFO SummitAugust 6, 2013
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About Influitive 2013 Cool Vendor in Social Marketing
Influitive helps B2B marketers recruit, mobilize and recognize an army of advocates that outsell their best sales reps.
WHO WE ARE:
• Founded in 2010
• Toronto, Bay Area and Boston
• >$11M raised from top tier investors
SELECT CUSTOMERS:
3
Double-Entry Daddy? Lady of the Ledgers?No thanks!
Bookkeeping Boss ManBig Chief Beancounter
Historical Cost Head Honcho
Trial Balance Top Dog
Lady of the LedgerKing of the Counters
Double-Entry Daddy
Numerate Nobleman
Penny President
Bookkeeping Big Cheese
Sir of the Spreadsheets
Ruler of ResultsCFO
Nicknames
Source: Zazzle.com & the-alternative-accountant.com
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A monster of a company – 20X sales – at scale
Source: Yahoo! Finance
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A roadmap for a 20X sales (!) valuation
Sustainable com-petitive
advantage
Network effects
Predictability
Switching costs
Gross margin
Marginal profitability
Customer concentration
Partner dependence
Customer acqui-sition efficiency
Growth!
Source: Bill Gurley’s Above The Crowd Blog, 2011 (bit.ly/jX4nB0)
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A partner for maximizing big picture ROA
Cash
Talent
CustomersReputation
*
** Highly leveraged!
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CAC and LTV: Customer Profitability
What we want to see!
Source: David Skok’s ForEntrepreneurs Blog, 2010 (http://bit.ly/bZpMfB)
LTV = ARPU x Average Lifetime of a Customer – the Cost to Serve them (COGS)
CAC = Total cost of Sales & Marketing / No of Deals closed
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Advocates drive customer profitability
Source: David Skok’s ForEntrepreneurs Blog, 2010 (http://bit.ly/bZpMfB)
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CAC: Customer advocates generate better leads & drive the most efficient buying process
Source: Eloqua data, Sirius Decisions
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LTV: Second order revenue effects are huge and should be modeled explicitly
Source: Jason Lemkin’s SaaStr Blog, 2013 (http://bit.ly/14fYjiF)
Total revenue from customer
Year
1
Year
2
Year
3
Tota
l Firs
t ord
er
Cham
pion
_x00
0d_C
hang
e
Wor
d-of
-_x0
00d_
Mou
th
Tota
l sec
ond
orde
r $-
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
Base
Base
Base
Upsell
Upsell
Series5
Series5
Series5
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LTV
CAC
LTV
EV
EV
2X
Business Model - Today Business Model – with Advocates
A high ratio of LTV to CAC drives profitability – and enterprise value
CAC
LTV4X
12
13
Week 1 Month 1 Year 1 Subsequent years $0
$10
$20
$30
$40
$50
$60
$70
Customer Onboarding
First experience First month First year Subsequen
t years
How to build advocates? Create a massive customer value surplus
Customer value surplus
Value to customer
Cost to customer ≈ cust. expectations
Critically important that early interactions offer a very high degree of surplus
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Product Management should forecast value, and backtest to ensure value is delivered
Source: Influitive data
SUMClose New Revenue/Pilots
Retain customers, convert pilots
Competitive Differen-tiation
Strategic Investment
Platform Improve-ments
Improves Advocate Experience
Embeds 11 2 2 3 2 2Community 9 3 2 3 1Maven 9 2 1 2 3 1Referrals 11 2 3 2 1 3
Employee Advocates 7 3 2 2 Reviews 9 3 2 2 2
AdvocateHub API 6 2 3 1
Event Streaming 3 3 Admin Stuff 2 2
• 4% conversion of embedded display to completion• 40% of completes join the advocate program• 80% would recommend process to a colleague
Assumptions:
Backtestevery
quarter
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CS analytics to focus time on renewal saves and upsells in creating customer value surplus
Value received by customer*
An
nu
al S
ub
scri
pti
on
Reven
ue (
$)
Source: Scout Analytics
Categorization
Explanation
Retention riskThese customers pay significant $ but fail to receive much value today
Up-SellThese customers receive significant value in excess of payment
Cross-Sell These customers receive good value for the money
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Advocate mobilization capability allows more investment in customer value surplus
Source: Influitive data
Marginal cost
Marginal benefit
Total investment in customer experience
Marginal cost/valu
e
Status Quo:
Invest in CX so that marginal benefit =
marginal cost…raising the optimal level
of spending on CX
Advocate mobilization increases marginal benefit
to investing in CX....
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To mobilize advocates, you need an advocate marketing program
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1. Part of the Team
What motivates advocates?
1
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2. Measurable Impact
What motivates advocates?
2
20
3. Social Currency
What motivates advocates?
3
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500% increasein award
submissions
26 customer videos captured
in 2 days
17 positiveproduct reviews
on Quora
#1 search
result in Google!
Integrated advocate marketing at
Source: Influitive data
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>150 super high quality new referral leadsper month from integrated referral program
100X higher survey response from advocates
Advocate marketing at
Source: Influitive data
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Influitive advocate engagement metrics
Source: Influitive data
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Influitive advocate retention metrics
Cohort Analysis measuring engagement over months.
Source: Influitive data
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Advocacy impact on CAC
231 referrals
4.1 activities per visit
13 visits to VIP per month
90% Cust. Advocacy
rate*
Sales Conversion
Marketing program costs
High Cost Sales Touches
Personnel costs
33%
10%
47%
Advocacy Metrics
CAC Metrics CAC
CAC
27%
* Percentage of total customers who have engaged in advocacy for Influitive during a quarter
Source: Influitive data
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Advocacy impact on LTV
26% Advocate Conversion
73% Advocate Monthly
Retention Rate*
2108 Total Activities
Advocacy Metrics
LTV Metrics LTV
LTV
48%
MRR Churn Rate
ARPU
Cost to Serve
(13%)
11%
4%
* Cohort Analysis for June 2013
Source: Influitive data
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Integrated advocate marketing to drive lower CAC
OutboundInbound
Advocate WOM
1. Expanded referral program
yields targets
4. Use advocate testimonials, case
studies and references to rapidly close.
3. Add to nurture track.
Tele-prospect to targets that show interest in content
2. Sponsored content appears in prospects’ social
media feeds
Example integrated campaign
v
v
v
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Integrate advocates into account management process to drive higher LTV
Demand / Value received
An
nu
al S
ub
scri
pti
on
Reven
ue
By asking your happy customer to do a
reference call with your unsatisfied
customer…
…you can often get the unsatisfied customer to
understand how to drive more value from
your product…
…and you might even get your satisfied
customer to upsell into a more appropriately- priced product offering
Source: Scout Analytics
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QUESTIONS?
@markorgan@influitive
APPENDIX
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Marketers are no longer in control of the buying process
2006 2010 2014F0%
10%
20%
30%
40%
50%
60%
70%
3.5X increase
Dependence on knowledgeable peers in the buying process (B2B software buyers)
Initiates process
Initiates contact
Purchase
complete
75% of buying process complete before B2B buying interacts with company!75% 25%
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Experience is poor for advocates today
What advocates seek:
Status
Recognition
Career value
Connections
Part of the team
Reputation
Perks
Feedback
What advocates get:
Neglect
+
Abuse
=
Annoyed
Leads to Advocatedisengagement
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Experience is also poor for B2B companies today
No self service solution
Weak integration and analytics
Data is all over the place
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Our current paying customers include many leading software and technology companies
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AdvocateHub has truly changed the way some of the best B2B companies run their businesses
“Without hyperbole, I literally could not do my job without Influitive.”
–Fred Bals, Customer Relations Manager, Ektron
“Whether in a presentation, as a reference, or through a referral, no voice is more powerful than that of a satisfied customer, and our Influitive AdvocateHub, O-Zone, helps us amplify that voice.”
–Frederick Kerrest, COO & Co-Founder, Okta
“After Act-on launched our Influitive AdvocateHub, our motto became: I have a marketing initiative, how can Influitive help?"”
–Jeff Linton, Sr. Product & Field Marketing Mgr., ActOn
“Mobilizing 1,000 advocates with a few simple key strokes is pure genius.”
–Deena Zenyk, Marketing Mgr., SMART Technologies