The single most important factor in FreshBooks’ phenomenal success – with Mike McDerment, CEO
If you’re a FreshBooks (online invoicing service) user, you know how obsessive these folks are about customer service. The benefits of delivering a great customer experience are obvious – more loyalty, leading to more sales and (hopefully) more profits. But how do you even begin to build a customer-centric company culture? How do you remain consistent, especially when your company’s growing really fast and things keep changing at the drop of a hat? Can you measure something as vague as ‘good customer service’?
These are questions that kinda keep me up at night. Being a FreshBooks customer for several years, I’m convinced that an awesome customer experience is the single most important factor that catapulted the company into the spotlight in a fiercely competitive industry. Since launching in 2004, FreshBooks has over 1.25 million users! I’ve always wondered what it is that really goes on inside FreshBooks that allows its team to deliver exceptional customer experiences. So I invited the devil himself – Mike McDerment, CEO – to find out:
Faheem Moosa: Mike, thanks for taking the time to speak with me – it’s always great to have you here. FreshBooks is known for its strong customer service culture. Was this a conscious decision you made early on or has your customer service philosophy evolved over time?
Mike McDerment: I think there have been a series of conscious decisions along the way but where it came from I would say it was more our culture, and the truth is I didn’t realize where it came from until I went through an exercise with an outside consultant a while back. We had had somebody have a look at what we were doing and give us some objective feedback. And the first thing that this guy did was he sat down one at a time with the founders of our company and went through the various stories from our inception to understand our motivations and the way we work. He made something very clear to me, which I never really realized until then. Before I was running FreshBooks I was running a successful little consulting firm. We never did any marketing for it – we basically just built the business through word-of-mouth one customer at a time and had pretty big clients by the end of it (largest real estate brokerage in Canada, largest privately-held real estate company in Canada, travel companies, etc.). We built the business doing a great job for each client and were really good with setting expectations and delivering against them, all of which is very long-winded way of saying that when we built FreshBooks we had a culture that kind of migrated to this business. When we were running our consulting firm in a basement, we were very focused on customers – we spoke to them, took good care of them, we wanted them to come back and we had done everything we could to foster that kind of attitude and orientation ever since.
And so now the conscious decisions are around ‘how could we do a better job of that?’ Why would we invest two months of our employees’ time, (everyone at FreshBooks starts and spends their first two months in customer service)? It’s a massive investment – we think it’s very important so we do it.
FM: Describe some of FreshBooks’ customer service initiatives that have delighted its customers. Which of these initiatives are you most proud of, and why?
MM: Well I am going to be dead simple…everything we do here is about the customer – everything! I love the days when we improve the product - that delights the customers. I love it when I see new things deployed that have been built by our development and design teams. I love it when our customers are happy about it and give us feedback and are up fired up…that is extraordinary. We run a Software as a Service business where adding new improvements to the product is a big part of offering great service – we do that every two weeks.
And then there are things like…we just always answered the telephone from day one and we still get phone calls from people who literally phone us just to see if we’re there and to see if its not a hoax that our phone number is on our website. So every time we take one of those calls I am really proud of that. It’s a simple thing but I love being able to deliver that experience to somebody where they weren’t expecting anyone to be there.
In terms of specific stories…we have done all kinds of things. For example, one of the more noteworthy ones is we send things to our customers from time to time. We will send somebody – who is nice with us on email and really like what we are doing – a T-shirt or flowers. There has been times when people had a late night issue, were really cramming to get some invoices out the door and just needed support because their credit card was toast and they needed to get into their accounts so they can send some invoices. I go, ‘Okay you send some invoices and pay us back when you get paid’. And sure enough, they do. Pick any one at FreshBooks and speak with them because they’ve have all been in service, and have all done a million little things for people. Sometimes the really heroic stuff is the ‘little thing’.
FM: What challenges have you faced while building a strong customer service culture amidst rapid growth? Is there anything you would have done differently?
MM: I honestly feel like we make it a lot easier on ourselves by hiring the right people – people who share our values. We don’t hire people who we think are going to be short with customers because chances are that it says that they are not a fit for this culture. I also think we make things a lot easier on ourselves by starting everybody – no matter what department – for the first two months in customer service, because they get so grounded in our customer, our product and our culture that they understand the importance of this. For example, the marketing team always knows that they can talk about great service because they lived it themselves and they continue to do so during our ongoing rotation that sends them back to customer service once a month or so. I think just ingraining customer service as the bedrock of the experience of everybody who is on the team has made it a lot easier for us to get buy-in.
I think in several other organizations service is perceived as a cost centre whereas I perceive it as an opportunity. The better you know your customer, the better you can serve them. And the better you know them, the faster you can realize other opportunities in the marketplace. If you do a better job of developing a product you are going to generate more word-of-mouth – all of which creates this virtuous cycle where when you take care of customers, they help you market the product. This helps drive more business so you can work on the products some more so customers can continue to tell people about it…and on it goes.
It’s hard to say if there is a massive change or anything that I would’ve done differently. I actually think our culture has evolved and the way we teach people has been extraordinary. Everybody who starts here gets a ‘buddy’ who works with them for their first two months to answer questions and lead them through some of the internal curriculum about how we do things. And this has evolved as it needed to, which is fascinating. So, I can’t say that I would do a lot differently. Frankly, it has been wonderful to see all of that evolve out of our culture naturally and that people want to do the best job they can to help others get up and started.
FM: What tools, systems or processes do you recommend entrepreneurial companies make use of to deliver extraordinary customer experiences?
MM: First of all, I think it helps if you break down all the experiences your customer has – whether it is trialing your product or visiting your website or just visiting your office – and designing the hell out of those experiences. For example, when someone’s visiting your office, ask yourself how you can make that experience extraordinary. Can you do better than just say, ‘Hey how’re you doing, sit over there and here’s a newspaper?’ I think you probably can. So, break down all the touch points your customers have with your business and try to make them more remarkable. Frankly, I feel like we still have a lot of work to do there, which is just great because it means there’s just lots of opportunities to improve. So that’s not just about using ‘tools’. It’s about creativity and taking the time to not accept whatever you have today but to reinvent and try to improve it.
As for tools, I think you need to figure out what works best for you – its not so much the tool that matters. I’m a big fan of the telephone. I’ve been talking to customers on the phone for a long time. Also, there are tons of services and software that will help you manage, for example, email that comes in from your customers or a phone system that will help you manage calls. However, it’s my belief that it’s not about the tool but about how you use it. Tools can help efficiency, but if you don’t have right team to use those tools, just forget about it. The tools are always secondary to the execution.
FM: How does FreshBooks measure its customer service initiatives and ensure a high Return on Investment (ROI) from each initiative?
Mike McDerment: Interestingly, this is something we are thinking more about. There are several metrics in a recurring-revenue business like ours, such as churn rate, lifetime value (LTV) etc. that can be influenced by customer service. Historically, we just focus on answering all our phone calls from 9 to 6 or sometimes even later than that. We are returning emails within two business hours or less (except maybe on Monday mornings when it might be three hours because of the backlog from over the weekend), so that’s really important. We also focus on responsiveness to date, and now we are looking at things that we can go further in. There are other metrics that we look at, but the trouble is some of the stuff does not relate just to customer service, right? There are metrics like the Net Promoter Score (NPS), which is the measure of your whole business, of which service is a component. Can you directly attribute NPS to customer service? It’s hard to say.
We currently don’t ask customers to rate their customer service experience on a scale 1 to 5, which might be something we would do in the future. I should point out that we don’t look at our service team as just a service team. Our customer service team does a lot more than just respond to emails and pick up the phones and stuff like that. Our core support team only does support for about three days a week. On the other two days they are working on projects that help advance the business in one way or another, whether it’s by developing content that teaches people how to use the product, working on some of our internal systems – perhaps documentation – to make people better in doing customer service themselves. I think that’s a balance that most outsiders wouldn’t expect, where sixty percent of our customer service folks’ time is actually spent on the role itself, while the other forty percent is spent doing other important stuff. I think that speaks to the kinds of people we like to have in customer support and the influence we think they can have on the business.
If we have this same conversation in a year, I feel like I may have more to say on the subject (of metrics), as we are just kind of opening this up and seeing how we can apply ourselves to this. I think the opportunity is for us to do more to service than we offer and I have a feeling I will never have that feeling go away. I am also very reluctant to describe certain metrics like average call time – I don’t ever want to know how long the average call time is. Because I just think a call should be as long as a call is.
Having said that, I think there are other things that are important like ‘responsiveness’ times or maybe the percentage of your customer base you talk to every month, etc. I am curious to see what we come up with in this regard. So I think there is a whole bunch of things that we will be exploring in greater detail; as we get larger obviously it will get more challenging. Today we’re a 40-person company and have everyone involved in support. Maybe we are 90 people or more, we will have learned a lot and look at this stuff differently than we do today.
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