Shifting from a funnel to a flywheel with Yamini Rangan, CEO, Hubspot
Shifting from a funnel to a flywheel with Yamini Rangan, CEO, Hubspot
“Customer retention is more important than customer acquisition,” says Yamini Rangan, CEO of Hubspot. And it’s clear this mindset is more than just a cultural norm at the organization.
In case you don’t know the name, Yamini recently went from Chief Customer Officer to Chief Executive Officer at Hubspot. Her ‘customer first’ mentality creates a fundamental shift in the B2B space from the traditional funnel approach to a flywheel. Learn how to provide value, starting with the first sales conversation.
Yamini RanganCEO, Hubspot
Devin Reed: Welcome to the show. You are now part of Reveal, the Revenue Intelligence Podcast, powered by Gong. We're your hosts, Devin Reed.
Sheena Badani: And I'm Sheena Badani. Revenue intelligence is a new way of operating, based on customer reality, instead of opinions. It's an unfiltered view of your customer reality. In other words, making data- driven decisions, based on facts, instead of opinions or guess words.
Devin Reed: And it's made up of three success pillars, people success, deal success and strategy success. The things all revenue teams need and care about. Every week we interview senior revenue professionals and they share their stories and insights on how they leverage revenue intelligence to drive success and win their market.
Sheena Badani: You'll hear how modern go- to- market teams win as a team, close revenue with critical deal insight and execute their strategic initiatives. Plus all the challenges that come along with it.
Devin Reed: Sheena, you came from MongoDB before you joined Gong, right?
Sheena Badani: Correct. Yeah. There was another company in between, a small industrial analytics company.
Devin Reed: Forgive me for missing them.
Sheena Badani: You should have my LinkedIn resume down and memorized, Devin- crosstalk
Devin Reed: I get the real thing. I get to hang out with you, I don't got to look at the profile. But no, I was saying that is because, well, so same question but I was like, why Gong? Why did you come from MongoDB, which is very successful, I don't know where they were when you were there. Obviously, you were very impactful but I don't know at what stage they were. You had this other pit stop, it sounds like. What pulled you to join Gong, right? We were 100- ish employees, we were not very well known in those days.
Sheena Badani: Actually, I would say, that was probably a common thread between MongoDB and now Gong, was this concept of really focusing on the customer. And at Gong, I remember doing my research and we had these operating principles on the website, even at that time, and one of them was, create raving fans and it was the first one up there. And you could just feel that pulsing through the entire company. It wasn't just something that was on the website, it was like walking into the doors of the company and every single person that I talked about, the customer experience was woven through that. And the few people, at that time, who were customers that I was able to even talk about were like, this is the best thing that I've ever had. And that was what sold me. I think that's actually an extremely critical thing for anybody who's looking for a job is, make sure there are raving fans of this product, that's what's going to define the company. And it was similar to what I had experienced at MongoDB, which was from a different lens, in the developer space, where the developers were raving fans of MongoDB and they created this community themselves and this movement around MongoDB, at that time. So, I think that's, kind of, what I was looking for, really.
Devin Reed: I mean, worded beautifully, if I might say so myself. But the reason I asked was because, when we were talking to our guests today, Yamini, CEO of HubSpot, that's what she said drew her to HubSpot, was that customer centricity. Now, customer centricity, ding, ding, ding, kind of, sounds like a little bit of... kind of, the tech jargon, right? Sometimes. But when you talk to some of the leaders or when we get to listen to them on the show, you can tell the ones who truly live it, their eyes light up, their body posture, kind of, changes, right? They get really excited. And you could tell that Yamini wanted to create raving fans. It might not be on their wall at HubSpot but the concept that we talk about today, of building a flywheel, is centered around the customer or creating raving fans.
Sheena Badani: And I think the most unique thing about our conversation was, again, she's CEO now, she was chief customer officer and so, that's the lens that she brings to her work, day in and day out, whether she's talking to investors or customers or her own employees. And that focus on the customer and that whole flywheel, of course, has to be living and breathing through the whole company. It's not a sales thing, it's not a marketing thing, it's an everyone is in it together thing.
Devin Reed: It's an everyone thing, an everyone thing. All right, let's go hang out with Yamini. Yamini, welcome to Reveal, it's been a long time coming and we are very excited to have you.
Yamini: Thank you so much, Devin and Sheena, for having me, I've been excited for this day.
Sheena Badani: Pleasure.
Devin Reed: So, Sheena and I are marketers but sometimes we put our sales hats on and we do some prospecting, a little outbound, a little nurture and make sure some great folks get on the show. And you are someone we talked to in July and in July, you were the chief customer officer for HubSpot and now you are the chief executive officer at HubSpot. So, congratulations. Surely you did something right in the last few months.
Yamini: I hope so, Devin, but thank you so much for your wishes and yes, things have changed since July.
Devin Reed: So, I'm curious, with that shift, how are you thinking about the business differently, in your new role? Or maybe in other ways, kind of, what's been the biggest change from CCO to CEO?
Yamini: I will say that, I joined HubSpot as the chief customer officer and my singular focus was to deliver delightful customer experiences. HubSpot always focuses on the customer. In fact, we have a north star mantra inside HubSpot, which we call SFTC, solve for the customer. And that is one of the reasons why I was really excited about joining HubSpot as a chief customer officer. And part of my prior role was to bring together marketing, sales, customers success, operations, so that we can deliver delightful experiences. Now, I think, in terms of the shift to a CEO, it's still about delivering great customer experiences but the way I think about it is two things, how we build products and how we sell products, because both of these actually deliver great customer experiences. And so, the shift has really been about making sure that I am looking at how we build and how we sell products, making sure that we have deeper insights about our customers, that drive both parts of the customer experience and making sure that we are, as an organization, connecting the dots across both of these.
Devin Reed: Totally makes sense. And I think a perfect segue into our topic for today. So, when we hung out first, we always like to ask, what are you passionate about? What do you want to talk about? What is that thing that you can provide value to your peers? And without hesitation you said, creating a flywheel. So, just to get us even started and, kind of, set the table, can you describe or define for us exactly what a flywheel is?
Yamini: First, imagine this physical thing, a flywheel, right? A giant flywheel that when you put the right kind of force into the flywheel, it starts spinning and it starts spinning and goodness happens. That's the picture of what you should be thinking about is a flywheel. So, why does this matter for go- to- market organization in the worlds that we operate in? In order to explain the concept of the flywheel, Devin, I got to give you a view that is different from the flywheel concept. The one that's different from the flywheel concept is funnel view, not tunnel view, but funnel view. And the funnel view starts with marketing doing its magic to drive leads at the top of the funnel and then, your sales organization taking that pipeline, making calls, inbound, outbound, all of those activities that drive to winning a customer. And no pun intended, when the customer is won, there's a gong and you hit a gong and that's what happens and that's funnel view. There's nothing wrong with that. But the big thing is that, your customer's, kind of, hanging out at the bottom after the gong is hit and there's a celebration of the customer but that's the most important part of the journey, is after you have won the customer. What do you do with the customer? That's the most important view. And so, a few years ago we said, this funnel view that we take is all wrong and the much better view that you can take is the flywheel view. The flywheel view starts with putting the customer at the center and then, organizing all of the activities that you do to attract your customers, engage your customers and delight your customers, so that the customers themselves become promoters of your company, your organization, based on the customer experience. So, I can go on and on about this but the biggest change is really thinking about the flywheel view, instead of the funnel view.
Sheena Badani: Why should a business be thinking about shifting from a more traditional funnel view to a flywheel, what's in it for them?
Yamini: What's in it for them is that, you want sustainable ways to drive growth and revenue. That's what every organization, every sales organization, every go- to- market organization, every marketing organization, cares about one thing, which is driving sustainable growth with a great customer experience. And the reason is that, when you put the customer at the center and when start aligning marketing, sales, customer success, operations, around the customer, a few things happen. First of all, your customers, after they sign up, if you continue to delight them, they become promoters. And when you have promoters, they advocate for you, they spread word of mouth. Therefore, you get more customers, more of them engage with you and become delighted. And so, that is the start of a flywheel that begins to spin. And why is that important? Because as customers are delighted and become your advocates, you get more customers and those customers become more advocates, right? So, that's the effect of creating a flywheel and therefore, it's important. I think the second part of it is that, it takes each of your siloed or typically siloed go- to- market functions and aligns them around the most important asset, which is your customer base. And let me explain this. If you go to a marketing agency and you say, what's your aspiration? They'll say something about pipeline or leads. If you go to a sales organization and say, what's your aspiration? It will be something about winning a quota or hitting a target. And you go to a customer success organization and you say, what do you focus on? It'll be something about CSAT. Now, none of them will say customer and that is a problem, that's a problem in most go- to- market organizations. And what you want with the flywheel, by putting the customer at the center, is for your marketing, sales, customer success and operations team, to always be thinking about the customer and have an aspirational goal of delighting that customer. And that, in and of itself, creates the flywheel, because if every team is aligned and every team is focused on the customer, then you are going to be delighting those customers and those delighted customers drive your flywheel.
Sheena Badani: In reality, it's really, the whole company has to be on board, everyone, even on the product and R& D and operations side, has to be in on this flywheel concept.
Yamini: 100%. You are hitting it exactly right. And I think delightful customer experience is not a one time initiative, it's not a one function initiative, it's a company priority and it needs to be treated as a company priority. And one of the things that we have found works is, our product organization carries NPS as the goal. That has changed the dynamic pretty significantly. So, exactly to your point, I mean, if you think about the entire company caring about customers and customer experience and you have the product organization and if they are motivated by driving NPS, then you have just magical things happen. And couple of the things that happen at HubSpot is, we actually start every month with a customer first meeting. This typically happens in week one of the month. We bring together a panel of customers and it could be across the business, international, different combinations, but we hear from them directly on one or two topics, we learn directly from them. And then we have a good two hour discussion with the top leaders across the business, product, engineering, UX, marketing, sales, you name it, across the functions, about what we can do to improve the customer experience. So, it's not one function's job to go and ask another team to care about the customer, it's the company's priority and every team cares about it.
Devin Reed: Yamini, I want to go back a little bit because something I'm always interested in is, what happened to change someone's perspective? And so, you had mentioned, hey, we were looking at this funnel view and we realized something was wrong, something was broken and then, kind of, introduced the flywheel. What was either that for you, maybe personally, in your career or at HubSpot, where you looked at something you were like, this isn't right?
Yamini: I think it happened at HubSpot. HubSpot has been talking about this for a lot longer but I came to this realization in my career, probably around the same time as well. I think the biggest shift that has happened is that, customer retention is even more important than customer acquisition, really comes down to that. And when you take the funnel view, you take the last decade of how we have run go- to- market functions, it's always about winning the customer. But then, SaaS and having a subscription- based economy has really changed it. It's not about that first contract and the first win, it is about making sure that you retain the customer, you continue to deliver value to the customer and they vote by staying longer with you and doing more business with you. And so, that has been the fundamental shift. And if you think about that concept, Devin, and you say, well, we've celebrated the customer then, what happens next? Well, then you realize that you need a fundamental shift. It cannot just be that celebratory gong that happens but it really has to go from there to putting a whole framework in place, where customers are front and center of everything that you do in the business. So, I've believed in this for a long time and HubSpot talked about this in 2018, I think. And when I started talking to Brian Halligan in 2019, I was like, this is it, this is exactly what I've been thinking about and you are already driving this as a key part of the strategy. You're trying to do this for your customers and more importantly, you're trying to do this within the organization. So, it resonated very deeply with me.
Devin Reed: For folks listening, they might be brand new to this idea and thinking, wow, this is really interesting. Or like you said, kind of, feeling this way but didn't really know maybe flywheel existed or, kind of, how to put it into play. What are some things they can do immediately to start to move in this direction and start to get those leaders from different departments together and, kind of, align them on this vision and make it an action plan?
Yamini: I love this question. And in fact, I think there is an art to it and there is a science to it. So, I'll break it down. The art piece of how you drive the flywheel and customer centricity is to build it into the culture, build it into the cadence in which your company operates. And I gave you a couple of examples. For us, starting with a north star of solving for the customer. SFTC is, in day one, when you come into the company, day 365 and continues forever, right? So, it is built into what we stand for as a company and then, it manifests itself in the customer first meeting and the importance that we give to customers' voice within the organization. That's really the cultural part of it and art. There's a science part of it and the science part of it is a few simple things that you've got to prioritize and be able to do. The first one is just creating a decision- making group that cares about the end- to- end customer experience. A lot of companies that end up growing grow up in silos and you continue to add people within silos and you don't really think customer facing in, you start thinking about your function and what your functional goals are. So, the first step is, create a decision- making group. In our case, we brought together marketing, sales, customer experience and revenue operations under one team, called it the flywheel team, no surprise. But you don't need to make organizational changes to be able to drive that, you can actually create a group that makes decisions. The second part of it is actually creating a clear winning aspiration. What I mean by that is, the goal should be around the customer, not your functional priority. In our case, it's simple, the winning aspirational goal is to create a delightful experience for our customer. That's the same for marketing organization, the sales organization, customer success support, you name it, it's the same thing. And so, that's the second step. What does winning for your customer actually look like? And then, the third and the fourth piece, we could probably have an entire conversation about these two, Devin, but the third piece is, your systems need to be aligned. Because in order for you to delight your customers, you need information about your customer, where they are in their journey, not the journey that you are with your customer but the journey that your customer is with you. And finally, you have to have incentives that are aligned across all of these. And so, four fairly straightforward steps that are part of the science of delivering customer experience that's delightful and a flywheel that is aligned.
Devin Reed: Did you know, it can cost five times more to acquire a new customer than retain an existing customer? And if you increase overall customer retention by just 5%, your profits increase anywhere from 25 to 95%. These stats come from the Harvard Business School. And yet, most organizations focus on acquisition more than retention. The success rate of selling to a customer you already have is 60 to 70%, while the success rate of selling to a new customer is 5 to 20. Now, let's go deeper on the science side of things with Yamini, starting with some of the key metrics she looks at to know whether the flywheel is working or not.
Yamini: You have to design a set of metrics and KPIs that are around the customer. And a lot of times, your metrics are typically around, what's your revenue, what's your ARR, if you're in a subscription business. Those are all fine but you still need to ask questions from the customer's perspective. How many customers do you have now? How many customers have you grown over this period? That actually says that, are you, kind of, continuing to retain and grow your customer base? Are your customers getting value? Another way to say it, are customers churning out of your company, right? If your customers get value, then they stay with you. Are they continuing to grow with you? Which is a type of revenue retention metric. A lot of companies will use net revenue retention or gross revenue retention. But the primary metric there is to say, your customer's staying, are they buying and continuing to grow with you? To me, those are the highest ones, as well as the NPS metric, which I mentioned before, which is the net promoter score that your customers give. If you start with those primary metrics, are your customers staying? Are their customers growing? And what is their net promoter score? And then measure the growth of the organization that you're driving, that's great. That's the place to start with, they are all customer- oriented metrics rather than functionally- oriented metrics and that would be the place for you to think about and start.
Devin Reed: I love the point that you made which is, hitting the gong or closing that deal is just the beginning, right? And that's where things really get interesting, where you really need to delight the customers. I thought it was really interesting that you said, hey, our product team is now looking at NPS. I'm curious if on the sales side, if that's changed in terms of some of the... I'll call KPIs for them because it's bit of a stereotype, sales people are coin operated or they only care about the close. But if you zoom out, it's because most incentive plans are to go for the close, right? Go for that acquisition, get that new customer. So, I'm curious if there has been either a change in focus there for you all or maybe just an added, still go for new business and also this other, maybe new metric?
Yamini: One of the key things that you're hitting, Devin, is incentives shape behavior. And we forget that most of the times but incentives absolutely shape behavior, is the thing that I mentioned about the product organization. In terms of the sales organization, we talk a lot about how we sell is why we win and really having a great customer experience being part of how we sell, that's number one. Specifically, in terms of metrics and incentives, we have done a couple of things. One, we have made it important for directors within the sales organization to care about revenue retention. And the way we define revenue retention is the value of the install base minus the churn, minus the down sales, plus all of the upgrades and upsell. So, what that means is, is your customers staying with you and are they continuing to get value that they continue to spend with you? That's what that revenue retention goal actually means. And we've moved the whole customer success organization to this revenue retention goal and we've also made it as part of the MBO for lot of the senior sales team, leadership team, within HubSpot. So, those two really align the motives, the incentives, of acquiring the right kinds of customers. The other thing that we have done super tactical, from a comp perspective, is that we will claw back if the customer churns within a certain period of time, which really emphasizes the acquisition of the right fit of customers within the organization. So, you don't want to just grow for the sake of growing but you really want to bring the right kinds of customers that you know you can make successful within the organization. So, we have a tactical claw back there as well. But, again, this takes us to the broader point of, incentives align behavior and the behavior that we want from the sales organization is to care deeply about customer success.
Sheena Badani: I'm curious how the concept of a flywheel evolves as the company grows up. So, I imagine a small startup, it's easier to rally around this single focus and you have few people on each team and you can really make it work. But for a Fortune 100 type of company that may have had the prior view of a funnel, now getting them to evolve or that small company grew into this company now, how does that flywheel concept different at these different stages?
Yamini: That's where most companies start, right? When you are a startup and you have 20 people and 10 of them are in go- to- market, you're all sitting in a room or virtual room, however it is, and you can make decisions. Company our size, we are about a 5, 000 person organization, we can and bring these teams together into one flywheel organization with a common vision and the ability to execute customer- oriented priorities. I think as you continue to grow, you may decide that they all belong in one organization. Or like I said before, you could have a decision- making group and a decision- making cadence that is centered and focused around the customer. So, what I mean by that is, you don't need to have marketing, sales, customer success, all report to one leader within the organization. As long as you realize these are the departments and functions that have impact on the customer experience and they get it together on a biweekly cadence, at least, if not monthly cadence and you have a decision- making framework. How do you make decisions? If there is a priority A in one function and a priority B in another function, how do you make a decision? And that is the most important question that a Fortune 100 company he needs to ask. And if that decision is really governed by what is the impact to the end customer experience and if there's someone that's always there, taking the seat of the customer within the decision- making group and you align that type of a framework, then I think you can continue to scale. So, you're absolutely right, different sized organizations have different ways that they can get there but the primary focus should be, customer in strategy, rather than a function out strategy.
Sheena Badani: As you, kind of, look around the world and at different companies, what companies do you think are really living and breathing this flywheel concept? Are there folks that really inspire you?
Yamini: I would say, B2C companies have gotten this down way more than B2B companies. You see this in your day- to- day, right? In the last 18 months of the pandemic, we've all lived our lives but things have changed dramatically. I shop at Chewy, I adopted two cats during the pandemic and chewy is an incredibly amazing customer- oriented organization. They sent me a bunch of cat food, my cats hated it, I called them, they're like, well, donate it to someone else, we'll send you something new. I was like, what? That is incredible. And that does couple of things. One, now I've become a loyal customer of Chewy. Two, I donated the cat food to one of my other friends and that was word- of- mouth, I was talking about it. And three, I'm talking to you about it, right? So, they have gotten a flywheel of customer advocacy and loyalty going just because of how they treat the customers. And so, there are so many of these examples, Warby Parker, Amazon, DoorDash, all of these B2C organizations, they get this and they nail this right. It's a lot about that buyer experience that they care about and it's changed pretty dramatically. I think B2B is trailing. It's trailing in terms of buyers experience in how they interact with the customer, with the company. And it's much more about buyer empowerment, not seller engagement. So, a lot of the tools and a lot of the ways in which we interact, as a B2B organization, tends to be, I'm a seller, how do I interact with my customer? It has to be just the other way around. It is about, you are a buyer interacting with me as a B2B company, how can I give you the most relevant information if you're just looking for data? How can we give you the best experience if you are looking to talk to a rep? How can I give you the best experience if you require support and needs to be on that journey? And so, I think B2C companies have nailed it and B2B companies need to catch up.
Devin Reed: It's interesting how a support question, if you think about it, that's what... My cat doesn't like the cat food, by the way, we do the same thing but for our dog, very picky, we went through two or three. Same thing, they were like, we'll just send you until Cuddy likes something, we'll just send it. And we're like, wow, how amazing is that? And I point at my glasses because I have the Warby Parker glasses and same thing, you go in there and I was putting it off because personally trying on glasses and does this look good? It's not a very great experience, typically. And I go to buy and they're like, when they arrive, if they don't fit, come in, they'll do some technology to fit them to my face, we promise that they will fit. It's like when you sell someone on that promise of your cat having great food, your glasses fitting, they don't let anything get in the way of that, from that moment occurring, even if there is some friction or some hurdles in the meantime. So, it's funny, we all know it immediately, we all have examples from B2C and then you think B2B, well, this gets a lot smaller, right? There's a much smaller list of companies you've interacted with who you're you're like, yeah, they really did right by me or they went above and beyond.
Yamini: Exactly. I think that's where we are obsessed, we care deeply about our customers and delivering a delightful experience to our customers but we also want to enable our customers to be able to have that type of experiences and deliver those types of experiences to their end customers.
Devin Reed: One of the good things I'll say, I don't know if it was part of the flywheel or fits into it now but you see HubSpot certifications everywhere and people are proud about those things, right? They put them on their LinkedIn profile. People love that, right? Because I feel like I got something, I get to show Sheena what I did. I put it on LinkedIn, that hundreds or thousands of people see it. And it all starts with providing genuine value to people and letting them go talk about it. It seems so simple but we don't do it as often as we probably should.
Yamini: I love it. It's the content, right? Content matters. And providing value to people and educating them and inspiring them matters and that's part of what we care deeply about. So, I'm especially delighted that you brought that up.
Sheena Badani: So, Yamini, we ask all of our guests one question to wrap up our conversation which is, how would you describe sales in one word?
Yamini: Providing value.
Sheena Badani: We'll take it, we'll hyphenate that thing.
Devin Reed: Yeah.
Yamini: It's not one but providing value. It is all about providing value.
Devin Reed: The way we ended the conversation I was, in my head, I admit, I guess what people are going to say, I'm usually wrong but I was like, Yamini said value, I think that would be a good stamp on this conversation. So, Yamini, thank you so much. We always appreciate your time, your wisdom and expertise. And I genuinely enjoyed it, I was taking notes, I'm sure our listeners were too.
Yamini: Thank you so much for having me.
Devin Reed: Every week, we bring you a micro- action, something to think about or an action you can put into play today. Now, regardless of where your organization stands on retention versus acquisition, one thing is true, understanding your customers better will help with your sales conversations. So, if you only take away one action this week, inspired by our conversation, do this, find when and why customers churn. And if you're feeling really inspired to uncover these insights, look at the opposite, when and why do contracts increase in value? One direct path to uncover this data is asking your customer success teams what they're seeing. Your customer facing team often has what you need to showcase the value you're offering by sharing stories and highlights of how you've served similar customers. This is a simple way to tap into the reality of your customer experience. You'll not only have better conversations but you'll also grow your current customers. Did you like today's episode? Subscribe now so next week's episode will be waiting for you on Monday.
Sheena Badani: And if you really like the podcast, please leave a review. Five star reviews go a long way to help get the word out there.
Devin Reed: And if you're not ready to give a five, check out another episode and see if we've won you over by then.