How Intercom Got $10mil+ in Annual Recuring Revenue Without Splashy Media Coverage, a Sexy Story, or a Famous Founder
While companies like Slack have earned praise, press, and huge valuations for their rapid growth, an Irish-born startup called Intercom has been quietly but steadily creating a new category of software.
And even though the company is still in the “early adopter” phase of its market development, its products making in-roads into the low end of Salesforce’s, Marketo’s, and Zendesk’s markets.
In the last 12 months, the company doubled its customer from 5,000 paying customers to 10,000. They’re generating tens of millions of dollars in annual recurring revenue. Most recently, they raised a $50 million dollar venture round.
While this kind of growth is rare for even excellent SaaS products, Intercom’s story offers lessons for every SaaS startup founder and marketer around.
So how can you create, market, and sell a product that catches on and grows?
The key – if there is only one key – turns out to be simple (even though it’s hard): build a product that solves a big, expensive problem that you, yourself deeply understand.
This is exactly what Intercom’s founders did when they built Intercom to solve the problems they, themselves, faced when marketing, selling, and providing support to customers using a half-dozen different tools.
As they built their product, they discovered that a whole lot of other people had a similar set of problems. As Intercom grew, they found more ways to use and expand their offering to address both their own growing pains and the demands of a rapidly-expanding set of customers.
Of course, there’s a lot more to the story, and it can teach all of us a few lessons about how to create successful products.
It’s hard to define a new category when you’re the only one in it.
If you’re setting out – as more than a handful of founders have – to build a faster, cheaper, or better designed version of Zendesk, the problem you face is clearly defined: you just have to look at Zendesk, and ensure your product is faster, cheaper, and/or better designed.
Same thing goes for sales software, task management, or any other pre-existing category: you can look at the dominant players in the space and potentially carve out a niche by mimicking their best features and improving on their worst.
But if you’re building a complex, category-defining product, the problem is a lot less constrained.
You can’t simply say “We’re Uber for Salesforce!” and be done with it. You have to define what you’ve built without a clear reference point, and this is almost always incredibly hard.
Indeed, defining the product in clear and compelling terms (i.e. getting your product marketing right) seems to be an ongoing challenge for even founders and marketers of successful, high-growth SaaS startups everywhere. It certainly has been for Intercom.
As Intercom’s founder and CEO, Eoghan McCabe told me in an interview:
When we started out, we didn’t know the full breadth and depth of the competitive landscape. We didn’t frame the whole Intercom vision and the idea around what already existed. We simply started to solve our own problems and took it from there.
Because we weren’t entering a pre-existing product category, we struggled to explain not only what it was to the rest of the world, but even we struggled to understand it ourselves. What is this thing we’re building? Why does it matter? Why are people so excited about it? That was basically the fundamental challenge that touched every component of the business, whether it was on the product side, or the go-to-market side.
And, as even McCabe will admit, even though Intercom’s team has come a long way in understanding what they are creating, they still haven’t completely nailed down the language they use to describe it.
But if you’ve built a compelling SaaS product and are having a hard time distilling its essence, here’s some good news: Clay Christensen, the famous Harvard Business School professor and product marketing mind behind The Innovator’s Dilemma, came up with a framework that can help you.
This framework, lesser known than Christensen’s classic theory of disruption, is known as “Jobs To Be Done.”
How Clay Christensen’s “Jobs To Be Done” framework can help you explain your SaaS product
Christensen’s “Jobs To Be Done” is a product marketing framework that helps you articulate your product’s position and value. It boils down to asking yourself “what ‘jobs’ do my customers ‘hire’ my product to do?”
To make this concrete, let’s say you’ve built a big, beautiful collaborative task and project management application. The job your customers hire that product to do may include:
- Keeping their teams and themselves focused on the most impactful work
- Tracking and prioritizing bugs and feature requests
- Planning a complex marketing campaign
- Creating repeatable systems and processes that they can delegate to junior people on their team.
Applying “Jobs to be Done” to its full capacity enables founders, product people, and marketers to go beyond demographic-driven “buyer personas” and “user stories” and start to understand the purpose of their products in more concrete terms.
According to Intercom’s McCabe, the “Jobs To Be Done” framework has been invaluable for his team.
Jobs to be Done focuses us on these nuanced problems that arise in people’s lives. If you understand the nuances, you can then understand the specific criteria that the product must have. And then you can focus on building a product that fits those criteria and solves those problems. Anytime we want to build a new product or a new core feature in a product, we’ll actually write out the job to make sure we understand it.”
Now, if you take look at the top of Intercom’s homepage (screenshot below), you’ll see that the headline is a bit murky.
The fuzziness of this headline shows that even with the “Jobs to Be Done” framework in the background, boiling down Intercom’s essence to a single sentence remains a struggle for the company.
But applying the framework has helped Intercom do what few startups are able to do: break its core product into multiple successful products AND launch a new product line that catches on.
How to split your core product into separate products without losing momentum
Breaking up your core product into separate products can be an intensely risky move. Do it wrong and at best, you piss off your customers. At worst, you lose tons of them. Let’s look at how Intercom did it right:
When Intercom first launched, everything came bundled together. You got all of it–the support, marketing, and product feedback tools–for a price that varied based on the number of active users you had in your database.
But a couple years back, the company broke its core product into three separate products, each one targeting a specific “job” that a given team inside a SaaS company needs to do:
- Engage. This is the marketing product, intended to eliminate the need for a full-fledged marketing automation system like Marketo, Pardot, or HubSpot. Engage helps marketing teams on-board new customers and retain old ones by sending automated messages based on their behavior inside an app. The job here is to transform potential customers into actual customers without requiring hands-on contact from a salesperson or customer success team.
- Learn. This one is for product teams who need to develop a more sophisticated understanding of their users. It makes it easy for product managers and research teams to send highly-targeted messages to customers, based on what they’ve done (or haven’t done) inside the product. For example, you might use “Learn” to send a message to the 40% of your users who aren’t using that fancy new feature you just launched and ask them why not.
- Support. This is a tool for support teams who need to deliver customer support without turning everything and everyone into a “ticket.” Its features include a “Team Inbox” that lets a support team distribute support requests and basic reporting features to track how long responding usually takes.
The benefits of the Jobs To Be Done framework is clear here. Before Intercom implemented the framework, its product was much harder to explain, and perhaps even harder to sell.
Jobs To Be Done can also help you grow faster
By dividing the product into a set of jobs and then splitting the core offering along the lines those jobs create, Intercom can punt on its core positioning challenge. After all, if the company can sell individual products to the individual teams who will benefit most from using them, they can tell three individual stories, rather than a single unruly one.
And of course, once they’ve made in-roads into a company with one product, it becomes much easier to sell another product to another team. Eventually, the whole company is using Intercom, and paying a lot more money to boot.
This is a version of the “land and expand” enterprise sales strategy, where a sales team sells a specific product to a specific team or division of the company and then uses the opening that product creates to sell across and up the chain.
For Intercom, whose customers tend to be small and mid-sized SaaS companies rather than Fortune 500s, the “land and expand” process requires a bit less sophistication (and fewer salespeople), but the principle is the same.
Jobs To Be Done can even help you launch new products that catch on
According to research by an entrepreneurship professor at North Carolina State University, about 40% of all new products fail.
We see this all the time in technology, when even our favorite companies put out new products out that fall flat. (See: Twitter’s Moments, Facebook Home, Google Glass, Amazon Fire Phone).
Failed products are a sad way to waste a ton of money, human output, and morale, and while there is a much better, lower-risk way to build and launch new products, very few companies do the necessary legwork.
But in October of 2015, Intercom did what so few companies manage to do: they created and launched a brand new product that caught on and grew fast.
This product, called “Acquire,” is an alternative to the live chat software you put on your website to talk to potential customers. And while Acquire would benefit from more sophisticated ways to capture email addresses and communicate with potential customers, it does the job of converting website visitors into new leads fairly well.
When Intercom launched Acquire, they had around 6,000 paying customers. On the back of the new product, that number rapidly hit 10,000. But as McCabe will tell you, launching a new product that nearly doubled his business wasn’t 100% pure luck.
As he says,
Before we built Acquire, we already had people trying to install Intercom on their marketing sites, even though it wasn’t something that we designed Intercom for. A lot of people made that request. So when we launched it, we had a really high degree of confidence that it was something that people wanted.
By diving deep and investigating the unconventional ways your customers already used your products, you can discover the big gaps in your offering. Equipped with these insights, you can build a new product and be confident that it will have instant appeal.
This sounds simple, but it’s easy to get it wrong: building a new product you know your existing customers will love is far less risky than attempting to concoct something new and compelling from thin air.
Of course, even if you focus on building new products for your existing customers, it’s still easy to slip up. Indeed, McCabe says that when Intercom first released Acquire to the public, the product faced “really aggressive churn.”
It was rocky going, but the team had a clear path to addressing the problems and getting their product right. After all, Intercom’s own product happens to be expressly built for collecting feedback about itself.
How regular, “expensive” communication with your customers pays huge dividends
This brings it all back around to the beginning: Intercom got started because Eoghan McCabe and his co-founders looked at their 10 years of experience building, marketing, and selling software and concluded that the conventional processes and tools were a disaster.
As he says,
When you think about how humans want to interact, and then you look at how most companies talk to their customers, those two things look very different. They spam them. They treat them like tickets, like statistics. Sales, marketing, and support teams talk across each other so that the customer gets the opposite of a holistic experience. That’s the status quo today: Many different teams in many different apps; no one on the same page about the customer; everyone treating customer like data points and tickets rather than humans.
The solution he and his team came up with was Intercom: an all-in-one tool for communicating with your customers in a far more personal, human way.
The challenge, of course, is one of scale.
When you have tens of thousands, hundreds of thousands, or even millions of customers, how can you possibly give them the attention necessary to make them feel like you care? And even if you could, should you?
McCabe’s perspective here is instructive, so I’m gonna share a bunch of it.
Every single conversation we have with every one of our customers goes through Intercom. There’s 50-odd people on the sales team talking to people every day. We’ve got our product folks building segments and getting feedback from different groups of our users and customers. Our research team also talks to our customers in Intercom. Our customer support team does too. I even jump in there to see what conversations people are having and talk to customers, too. While other companies try to add efficiencies over time and try and reduce conversations, we are fully committed to increasing the amount of conversations we have with our users, and always being available.
If all of that sounds like an expensive way to engage customers, it is: McCabe intends to grow his sales and support teams to “many hundreds of people in just a couple years.”
But instead of treating personal communication with customers as a cost center that would ideally be automated, Intercom treats it as an investment. Indeed, McCabe sees all of this interactions critical to Intercom’s growth and success.
Final Thoughts: Your existing customers are actually a goldmine of strategic insights.
When new users are confused about your product and tell you, that’s an opportunity to improve your messaging and your on-boarding. When a feature you just launched isn’t getting traction, talking to customers that haven’t used it is a great way to find out why not.
When you talk to your customers as a matter of practice, you can learn all about the strengths and weaknesses of your product, the accuracy of your marketing messages, and the efficacy of your internal processes.
Yes, communicating with your customers in a more human fashion is expensive.
But you know what else is expensive? Failing to understand your customers, watching tons of them leave, and building products that don’t catch on.
So what do you think? Are you talking with your customers on a daily basis? Or is your company still considering it a cost instead of an investment? Let me know in the comments below.