The X-factor: the secret to Xero’s success
Editing this piece, out of the corner of my eye I’m watching the Twitter feed flick over. Some event called ‘Xerocon’ is on in the UK and the attendees look to be having a great time. Blue T-shirts, photo booth snaps, smart quotes from business/innovation keynote speakers stream through. The thing that’s hard to believe is that it’s all about accounting software. But that’s selling it short, as you’ll read in this interview.
Since 2006, the New Zealand start-up has listed in two markets, grown to count revenues of more than NZ$70 million in 2014, and Xero offices now occupy the world’s major English-speaking markets.
Behind the growth chart, there’s something about Xero that its users fall for. Mention the name to an owner of a small or medium business (SMB) and you’ll either get a blank look or a wave of almost giddy recognition.
Is it just that it’s a cool brand and Kiwi start-up success story? Well, it was named by Forbes as number one in 2014’s list of the 100 ‘Most Innovative Growth Companies’.
Or is it simply that, as a piece of software, it’s that good? It can do a lot of things: automatic bank and credit card account feeds, invoicing, accounts payable, expense claims, fixed asset depreciation, purchase orders, reporting… not to mention features the 275 third-party vendors that have built add-ons bring through Xero’s open API.
But keep reading and you’ll discover that isolating what brings that smile to a business owner’s face is not so straightforward, and that just breaking down Xero’s functions is not necessarily the most educative endeavour.
So, in this interview, we ask Xero’s CMO, Andy Lark, about the secret to Xero’s success and, even more importantly, how he plans to keep it going.
Andy Lark: I think it’s good to talk about Xero in two ways. One is, unlike the competitors in Australia, Xero is a global brand. It’s really about, in a large way, how do we continue to grow the brand in the traditional sense of ‘brand’.
If you look at our marketing priorities globally, it’s a really interesting story because what you’re talking about is one of the fastest growing, if not the fastest growing, software as a service (SaaS) companies in the world today. It’s really a remarkable growth story. The vast majority of what we’re focused on is real growth, and whatever tactics lead to growth are the tactics we tend to pursue and the strategies we tend to pursue.
If you look at nearly every buzzword out there, we’re testing it, deploying it, doing it, from rich content marketing, community, social… but we’re also testing more traditional tactics and strategies to drive growth. An example there would be we’re running radio and billboards in the US. We’re doing TV tests in New Zealand.
Our tactics are really, really broad and diverse. We tend not to look at one philosophy as being dominant. We tend to look at the outcomes we’re trying to drive and really measuring the performance hour by hour of how those tactics are working for us. That’s what makes us uniquely different to other brands, because we can see the outcome of our efforts in near real time.
M: With software as a service, it’s immediate – with a sign-up, you know straightaway?
AL: Yes, an example would be we did some competitive radio and billboards in the US and almost immediately saw an uptick of traffic to our landing pages in the US, coupled with, if you looked at our chat sessions off the home page, they were directly about competitors. Those chat sessions were, ‘Wow, I didn’t know you guys were around as an alternative. Can you do this? I’m really frustrated with this.’
You see it almost immediately. The best way of summarising our view of the marketing agenda is ‘data driven’. We’re heavily driven by the enormous amount of data we’ve collected, coupled with the overall performance of tactics as a whole in the market.
What we’re trying to get away from is one of the common problems I’ve seen in marketing, that people tend to look at the lane and not the swimming pool.
M: How do you mean?
AL: What they’ll do is they’ll say, ‘Oh my God, search just performed so well in driving traffic to the site’, but what they haven’t looked at is what happens when you turn radio off. When you’ve got radio on, search improves. It’s not about any one tactic; it’s about the overall return on the marginal investment. We tend to look at that very aggressively.
Some of that makes sense, right? We really believe in the power of the small business to drive economic growth and performance. They’re the largest source of new jobs in an economy. We really want to do better and better at advocating and supporting small businesses.
We’ll do more and more diversified activity over the coming year, and talk to small businesses and work with small businesses on advocating their role in the economy and ensuring that they continue to do well at driving overall economic performance.
That’s the big agenda item for us.
M: And that’s where content and community comes in?
AL: Yes, it plays a huge role. I think that content is widely misused as a whole. I think that what we want to do is what’s relevant, contextual content. Content that helps you do better, content that helps you work better as a small business.
That’s what probably sets us apart from, say, a consumer goods company. A consumer goods company may be more into viral content that is more about the buzz and the vibe of a particular thing; whereas we are far more concerned with the overall education and support of the small business through content.
M: Is that the brand vision then, to help small businesses succeed?
AL: Our brand vision, so to speak, is absolutely that, but also is summarised as, ‘We are here to drive small business success and the success of our partners’. Bringing to life our purpose and why we’re here in more compelling ways is going to be a big thing for us in the coming year.
M: I imagine it’s very, very different to a big bank. Is the high growth and international expansion part of the reason you wanted to be involved?
AL: Absolutely and getting back into a really entrepreneurial environment, where you’ve got your hands on the reins of the business. If you think about marketing within a SaaS company, you actually are the sales engine. You drive the sales performance of the business, so we have a huge role to play, particularly in the direct online space. Driving sales every minute of every day becomes an enormous focus for us.
That’s what I enjoy. I really love this idea that the marketer is getting back to the core of the business as a driver of the business performance as opposed to a support function.
M: That ties into product as well – is that part of your remit?
AL: Yes, we oversee product marketing in particular – the positioning of the product in the market and providing that crucial feedback loop into product development, design and engineering of what needs to be built to meet customer needs and create new opportunities with customers.
I have this view that I think most organisations I look at, particularly in the Australian market, have lost their way when it comes to marketing. They actually don’t have marketers in senior roles; they have general business managers. They don’t have marketing driving the business; they have marketing supporting the business.
I was really excited about the Xero role because it really fulfils something I believe strongly in, which is marketing is not a crutch for the business; it’s actually a driver of the business, and you can do that in a high-growth environment like Xero.
M: You mentioned earlier about being involved in all the buzzwords – one of the things we’re really interested in, and the theme of this issue, is around design principles and thinking, not just in graphic design and app design, although that’s part of it. Would you describe Xero as a design- led organisation?
AL: Yes, and I think what you’re getting at there is really crucial. I think there are two elements to ‘design led’.
One is customer experience, which we are, I would argue, close to best in class in Australia in that. This is the idea of the actual way you interact with the product, the way the product looks, the way the product feels. One of the exciting things about Xero is I’ve yet to meet a customer who goes, ‘Yeah, I use Xero, and yeah, it’s OK.’
Every customer I meet, including my mate, who’s a plumber who I didn’t even know was on Xero, was like, ‘Oh my God, we love Xero. It’s changed the way we run the business. We love it and we love how simple it is. It just works on our phones. There’s not all the hassle with other apps that we had. It’s great.’ That core idea of customer experience is crucial.
The other element, and this is where marketing has to play a bigger and bigger role in products and in brands, is what I call ‘service design’. This is the end to end, not just the product itself, but the delivery of the product, educa- tion around the product, experience of the product, all those building blocks that wrap around a product – that’s what marketing has to own.
That’s a really exciting part because we own everything from that moment we catch your interest as a customer through to converting you to becoming a customer, to getting you on and using and engaging with the product. That is a marketing value chain. If you think about it, if you were to look at the head of marketing for, say, an airline in this country, do they really own that entire value chain or do they just make some fancy TV ads?
We’re engaged completely in that end-to-end engagement and interaction with the customer, which is just so cool.
M: I’m interested in the distinction between user experience design and service design.
AL: I think ‘user experience design’ is a subcategory that’s kind of interesting, but vastly overplayed, because what you get into, particularly in large organisations is – even small organisations – you’ll find by the time you get everyone’s individual user archetypes together, there are 90 different user archetypes. It’s crazy.
User experience really was borne out of the web world, at the end of the day, but this idea of how you engineer a product experience, both user design, customer experience, all those elements.
I’ll give you an example. For one of our competitors – not here in Australia, but elsewhere in the world – we’ve got a product, both products are quite competitive in the market. But we went out and talked to SMBs and found that their biggest gripe was with customer service and support.
What we found was that, if you’re a consumer and you phone, let’s say Telstra, you might be OK waiting on the phone for 20 minutes for someone to answer and deal with your issue. If you’re a small business and you’ve got customers coming in and out of your hairdressing salon, you can’t do that. Or you’re on your five-minute grab a coffee, check the cash flow thing, you can’t do that.
They said to us, ‘Actually we don’t want to call at all. What we want to do is go on the site, log our question, have someone either say, ‘Here’s the answer’ or ‘I need to call you to step through your problem, when can I call you?’ Then we give you a time to call us, that’s what we want.’
So we re-engineered our customer experience to be what we call, ‘no-wait customer service’. Our competitors, meanwhile, are busy outsourcing their call centres to India, which is just going to deliver a miserable experience to customers. It’s not what that particular group of customers wants in terms of engagement.
You look at that and you go, ‘Well, is that user experience design?’ Not really. No, that would never be comprehended as part of someone’s user experience design, so you actually have to come all the way back into the overall service design that wraps around an individual product before you get into what the product experience is, and that can be rendered through a whole lot of sub-strategies to service design or UX (user experience) or CX (customer experience) or whatever.
Whatever it is I actually believe marketers should fundamentally own the customer experience, that’s a very exciting part of my role.
M: One of the things we hear people comment on with Xero is that the mobile app is great. What’s the trick – especially in things like this where it’s the operations of running a business, which are quite serious – to nailing mobility?
AL: Blinding simplicity. And a real commitment to useful, elegant workflow.
I use a number of SaaS products. I use some very big SaaS products, from big brands, and the service, the design and the workflow is appalling. It’s appalling. It’s like none of these people have actually observed how someone does something in a very simple, basic way.
Now the downside to that is you’ll meet endless numbers of people who will tell you, ‘Oh my gosh, I wish there was a field that did X’ or ‘I wish you could do Y’, but you can’t do that because, if you do that, suddenly you’re at 30 screens and 40 clicks instead of keeping it blindingly simple.
One of the key principles that drives simplicity of design in mobile is getting the customer to adapt to a universal, standard workflow as opposed to giving the customer endless options that reflect all the desired variances that different customers may have.
You’ve got to make it so beautiful and elegant that people go, ‘Wow, I’m willing to change the way I work and use this product.’ Because if it’s bloody ugly, it looks horrible, it’s clunky and it’s simple, they go, ‘Oh, this just does not look like fun to use, so I’d rather keep doing it my way.’
M: So it’s a balance between doing what it needs to do, but keeping it simple and elegant?
AL: The three magic words are simplicity with standardisation and beauty.
AL: Beautiful really does matter.
M: OK, interesting.
AL: It really does matter. We would talk about that as ‘brand experience’ or whatever, but I think that’s a load of waffle too, people get lost in that. You have to bring it straight back to ‘it has to be beautiful’.
‘Beautiful’ is an interesting acid test, because if you look at something and you go, ‘Is that beautiful?’ The answer is yes or no. You quickly see things that aren’t beautiful, they’re just interesting. ‘Interesting’ is not good enough if you want to get people to convert from the way they work to a new way of working.
M: But beauty is quite subjective, isn’t it?
AL: It is subjective and that’s where marketing has to play a role. You basically establish the boundaries of what beautiful is in your business, you establish the standard.
We have big, thick examples of dos and don’ts, of what we think beautiful means for us. We have a standard.
M: Like plastered on the walls?
AL: You have a wall of shame and a wall of fame and you have examples of what works. We sit and look at competitors’ stuff. I was looking at a competitor’s TV ad the other day. We were going through it as a team and I said, ‘It’s just not beautiful. It’s passé. It’s clunky. It’s beautifully produced, but there’s no story here, this is just a collection of passé ideas and images. There’s no beauty and elegance to the story.’
M: So it’s not just visual?
AL: It doesn’t have to just look beautiful; it actually has to be beautiful. Know what I mean? That’s an interesting acid test to apply.
It’s a funny thing, I was with a bunch of guys – who were tradies – the other day, doing a bit of an acid test with them on how much they liked Xero. One of them sent an invoice out for a job. At the end of it he went, ‘Oh that’s beautiful, look at that’. You know when you’ve experienced it.
M: It seems like a small nuance, but it’s a big change, especially in running a business and especially in, for example, accounting. It’s a very, very different mindset.
AL: Yes, it’s funny. I was doing a speech on it the other day and I said to them that ‘beautiful’ is interesting in that it’s quite paradoxical – on the one hand, you would think it is the most subjective thing in the world, but it isn’t, because when you ask a group of people, ‘What do you think? Beautiful or not?’, they can very quickly and almost universally say, ‘Yeah, beautiful.’
M: How are you approaching the international markets? Are you changing anything or trying to keep things the same, and what’s worked?
AL: We are definitely trying to drive a little more standardisation globally. Write once, run everywhere, particularly at a brand layer.
One of the unique things that we’ve done is we literally have our own agency in-house. We have a thing called ‘The Hub’. We’ve got a world-class creative director in there, we’ve got designers, writers, producers, traffic management… and what we’ve found is that we can very quickly plug into this global network of freelancers – that, ironically it turns out, most of the big agencies use for their best creative ideas – and pull them into our own agency at a fraction of the cost and get world-class work.
It’s really, really fascinating to us. We benchmarked it. We just did a little bit of a brand campaign we’re working on and we asked a few agencies we work with globally to come in and work on that with us. They were, on average, five times more [expensive] than us doing that through our own Hub. We ended up picking the idea that came through our Hub. And that was done by a group of freelance resources.
These new communities and sites that are aggregating freelance resources and giving you access to really world- class talent are very disruptive if you’re willing to go and do interesting things.
What’s also interesting is having your own creative lead in-house and your own agency lead in-house; you’re able to very quickly understand and filter what works and what doesn’t work.
Standardisation is a big theme across our international markets. We’re at the point now where we’re at the size that we need a bit more standardisation.
Second, scale. Rather than, for instance, buying search individually in markets, we now have our digital trading desk at the Centre of Excellence in San Francisco and they’re buying and working across markets. Then we have people in-market who do local implementation and run it locally. So [we have the] ability to do world class SEO (search engine optimisation), SEM (search engine marketing), display, retargeting.
The third big thing is standardisation of platforms. We’re just implementing Marketo at scale as our marketing automation platform.
We’ll probably be implementing Simple as our marketing operations platform [Editor’s note: an Australian vendor of very user-friendly cloud software – in some ways, the Xero of marketing resource management]. Getting the business running on SaaS products in the cloud, from a marketing standpoint is a big global priority for us in the coming year.
M: Why choose Marketo over its competitors?
AL: First of all there are a lot of great companies in the space. If you look at the big three, Marketo, Eloqua and ExactTarget, they’re all strong in different spheres. If you want a direct plug-in to a large relational database engine and you’re doing mass, bazillions of email volume every day, ExactTarget is very, very competitive for that.
If you’re looking to do automation of the customer journey with very precision-guided targeting, complex playbooks and rule books as well as the email, then you’d pick between Marketo and Eloqua as your two platforms there.
For us, Marketo was very familiar to many of the team, [they’d] used it before and it was straightforward. There are other systems out there, Pardot and the like. I have used ExactTarget, Pardot and they’re all pretty good platforms, but Marketo is really fit for purpose if you’re looking to get into the guts of that marketing journey and automate it.