[00:00:00] Kaz Ohta: What is interesting is, if you do 101 with the customer C level, you have gained so many insights like organization level changes. Some of the CMO told me, "Okay, I'm actually not satisfied with the performance of my guy. How you can actually help on that," which is an eye opening question, because then that's our champion at the field level, too. 

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[00:00:26] VO: How do you build a habit-forming products? And you saw this different... Don't just gun for revenue in the door.

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[00:00:29] Andrew Michael: This is CHURN.FM, the podcast for subscription economy pros. Each week, we hear how the world's fastest growing companies are tackling churn and using retention to fuel their growth.

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[00:00:45] VO: How do you build a habit-forming products? We crossed over that magic threshold to negative churn. You need to invest in customer success. It always comes down to retention and engagement. Completely bootstrap, profitable, and growing. 

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[00:00:59] Andrew Michael: Strategies, tactics, and ideas both together to help your business thrive in the subscription economy. I'm your host, Andrew Michael, and here's today's episode. 

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[00:01:09] Andrew Michael: Hey, Kaz. Welcome to the show.

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[00:01:11] Kaz Ohta: Thank you for having me today, Andrew.

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[00:01:12] Andrew Michael: It's great to have you. For the listeners, Kaz is the CEO and co-founder of Treasure Data, an enterprise customer data platform that powers the entire business to accelerate customer centricity in the age of the digital customer across all engagement channels, including marketing, sales, and customer success. Kaz is also an investor and advisor, and prior to Treasure Data, was the CTO, Preferred Infrastructure.

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[00:01:36] Andrew Michael: So my first question for you, Kaz, is what has been the most challenging aspect of transitioning from CTO to CEO of Treasure Data?

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[00:01:45] Kaz Ohta: It's not a challenge. It's a lot of fun. So since I was CTO, I've been in charge of product direction and, particularly, running the engineering organization, product management organization, product marketing, and customer support. So that's a lot of function already. But I always thought that best product is always better, but best product doesn't always win. The best marketing and sales execution always win. So I've been really focused on... Yes, developing best product is number one focus. But then, how do you bring that to the market is much more difficult question. And you have to [marry] together. So that's why I've been CTO for eight, nine years, this company. And then, I became a CEO 18 months ago just to see everything else. And then, I'm the last one, and I really enjoy that pressure.

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[00:02:43] Andrew Michael: Very nice. And definitely, I think, like you says, it's not enough just to build a great product. You really need to understand what your go to market is and how you're going to penetrate this as well. The interesting thing as well, talking a little bit about marketing itself, is the way you position the company. The products is really purely focused towards the enterprise space. It's in your marketing, it's in your messaging. And we thought as well before this, we discussed it might be good to discuss this topic itself for the day. So maybe just talk us a little bit about... First of all, give us a little bit more context about what Treasure Data is. And then what does the typical customer look like for you?

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[00:03:21] Kaz Ohta: So this comes from the really simple example. For example, I've been living in Palo Alto, Silicon Valley. I'm having a really poor internet connection somehow in this tech industry. And then one time, I got this email from cable company saying, "Hey, Fiber is finally coming to your house." I was so excited. So I contacted their contact center. I waited, like, 30 minutes, and they're asking my phone number, even though I'm calling from my phone. And they didn't know about my plan. And of course, they didn't know about that Fiber plan. I was disappointed. So I go to their retail store, and then talked with salespeople. But then, I needed to wait 30 minutes to ask him my phone number, and same bad experience happened. And two weeks later, I got this email saying, "Hey, Fiber is not actually available in your town." And this happens because a lot of customer facing services and people doesn't have access to customer data.

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[00:04:25] Kaz Ohta: For the younger age and digital native customers who are using Google, Amazon, Facebook, they expect brands and businesses know about you in every single function. But it's not happening everywhere. And if you look at on the enterprise side, what is happening is your customer data is getting siloed everywhere. According to our survey, there are more than 170 tools storing a pot of customer data, and no one has its own complete customer 360 view.

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[00:05:00] Andrew Michael: [inaudible]

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[00:05:02] Kaz Ohta: Yeah. And what we provide is what's called Customer Data Platform, where we can collect data from thousands of data sources into one. And you can create customer 360 views so that marketing, sales, and also customer support, and a lot of function can reference the unified customer view to provide a better customer experience while consolidating a lot of stacks. And naturally, a lot of our customers, enterprise where they have a lot of legacy data and multiple divisions, brands, and data sources. And that's our main customer.

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[00:05:42] Andrew Michael: Main customer. And I think as well, you've been very deliberate to focus on the enterprise space. Because obviously, from a customer data platform perspective, there are quite a few other players in the markets, but they generally have a much wider scope in terms of who their customers are, where you've been specifically very narrow focusing on enterprise. What does this mean for the business and the way that the company is structured? Is there anything unique that you think you have at Treasure Data when it comes to serving these businesses?

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[00:06:13] Kaz Ohta: Yeah. So we have this fundamental belief that enterprise company has the most challenge about managing customer data in terms of more historical systems, legacy systems, more data sources, divisions, and siloed, in terms of systems and people. And we just thought that's going to be the biggest market. And I also learned that there's this expense software called Concur, and it's widely successful under SAP. And I'm using it every day. But their UI, probably, is not the best. But a lot of enterprise companies have to adopt Concur because if you are, let's say, Toyota or Bank of America, or wherever you operate company across many countries, Concur will give you unified expense across the globe. Then you don't have any choice.

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[00:07:12] Kaz Ohta: So similar to that, Treasure Data is actually the only CDP who has data center across Europe, US, and Asia, so that brands can unify all of the customer data across 100 plus countries. And if you become the unique and only company in this specific segment, people can pay up. We provide so much value more than any other competitors, and that's where companies started providing more value to the customer. So this is just a differentiation strategy where, okay, let's forget about SMB and small companies because they have less data sources. We need to be enterprise, specifically targeting towards global companies. Let's build a feature and company towards it. This also requires not only product, but also sales and marketing motion.

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[00:08:09] Kaz Ohta: Everyone is talking about PLG, but no one's going to buy half a million product with the credit cards. All SLG, sales-led growth, and we've been doing that for ten years. And that's why we have the entire marketing funnel, where we have physical events and digital marketing acquiring a lead. We have the SDR team to convert it into the opportunity. And then, we have an AE team supported by multiple functions, closing it. And we have an expansion team. It's an expensive motion, but it only sustained because our average sale size is around 400K plus a year. That's the annual average contract size. So that has been really more focused effort around, how do you build a company around your target audience?

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[00:08:59] Andrew Michael: Interesting. So from there, when you were very deliberate, said, "Okay, we're going to go off to enterprise," I think this is a little bit counterintuitive for most startups. Because most startups in the early days, they say, "Okay, there's no ways we'll be able to service enterprise clients with all their technical specifications, the needs, security, privacy, and these sorts of aspects." How did you go about this in the early days? Meeting those expectations and balancing what you could actually ship as an early stage company to service these enterprise organizations.

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[00:09:29] Kaz Ohta: We learned by failures. So, like, $30 a month and failed, $300 a month and it failed, $3,000 a month and then, we're getting some success. And we just thought we can probably go to $30,000 a month. And all of a sudden, we're getting a lot of traction in that segment. So I wish I could actually start it from the top, go straight to the answer. But we tried many things and failed. And then we just learned, okay, our product is actually better for the enterprise because we design our product so that we can integrate a lot of data. And the only enterprise has that type of challenge.

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[00:10:14] Andrew Michael: Yeah, I think it was recently, I read somewhere Jason Lemkin might have been, in terms of how do you close a million dollar deal as a startup? And basically, you start with a $1,000 deal, then you do a 2000, then you do a five, then you do a ten. Just sort of scale your way up then, so you've reached the ceiling where you feel you can go no further. But it was interesting hearing you recite that as well. The motion then, as well. You mentioned you've got a big sales organization off the back of that. Obviously a topic on the show that comes up quite a bit is Customer Success. And I'm interested as well because you mentioned the complexities involved in all these different solutions that these enterprise companies have and centralizing this data. Is there a customer success organization within Treasure Data? If yes, how is it structured? If not, why not?

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[00:11:01] Kaz Ohta: Yeah, so we have expansion team. So we have what is called Account Directors, who is in charge of, more like, expansion. So selling into different divisions and brands, and different skews and products. So they are more in charge of sales. And we also have Customer Success team, who is in charge of retention, basically preventing the churn. We learn in the hard way that we, first of all, incentivize CS team to expand it. But then, customers are like, "Your customer success people are always trying to sell something." So basically we lost some confidence from the customer. So we actually created this role called Account Directors basically for expansion, so that they can have good cop and bad cop when it comes to churn and expansion conversation. And that has been working out really , really well.

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[00:12:00] Andrew Michael: It's good to hear. The thing, as you mentioned, now I got flashbacks of the conversation you had with your telephone company. And there's transitioning between an account executive and then, an expansion, like customer success role. How does your team ensure that you're... Like, making sure you're centralizing your customer data, and that everybody has got that full 360 view so that when they are interacting with the customers, the customer doesn't need to be repeating things and going through that? Do you have any unique setup for that, for the team to manage those communication and that flow?

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[00:12:34] Kaz Ohta: Yeah, so we obviously use our CDP to track everything. But the interesting part of SaaS business is, let's say, a lot of people try to find the churn signal from the product usage. But when product usage drops, it's already too late because they already made the decisions to migrate away. So we needed to standardize a lot of things. Okay, first of all, we need to always talk about ROI. If someone is giving us a million dollar, they need to make at least 10X more ROI. There are some customer who made 150,000,000 profit, and they are paying us $3 million. And they're probably thinking it's bargain. We should probably do a little better job on that. But they're not going to churn. If you rip off Treasure Data, you're going to lose 150,000,000 worth of profit. And what is really interesting about the technology company is technology is just a means to the business goal. We always need someone and customer success organization who talks about the outcome of the business.

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[00:13:51] Kaz Ohta: So for us, integrating data into one system is good to have. What's important is what to do with it. So we always talk about running the campaign, marketing campaign around, and how do we improve the return of advertisement or conversion? If you improve 1% of the entire huge business, it's going to improve 50 million, 100 million easily. If you improve 1% of churn in the [inaudible], that also impacts tens of millions of dollars. And then, we show all these data because we're a data company. We can track all these conversion based on the campaign they launch, and then prove, "Hey, look, you're paying us 5 million, 10 million, but then you're actually getting $100 million ROI." And then, people are going to love it. Because at the end of the day, it's all about ROI. And then, in this economic downturn, that's something you should just come first. No matter how you like your customer success representative or not, if you're not feeling ROI from that system, you will be consolidated, and then getting rid of.

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[00:15:05] Andrew Michael: So I think it's a very valid point to [inaudible], specifically at these times now that even, like, CFOs are getting more and more involved in decisions when it comes to software. And definitely, a lot more pressure is coming in all directions to show an ROI from that side. It's interesting, as well. I think that Treasure Data... So one of the aspects, I think, that you're in a good position is that you can really illustrate the value. The other thing, though, I think when it comes to general retention, specifically focusing on enterprise clients, what you typically see is really strong net retention just due to the fact of the switching costs, the issues going through. And I think, with a customer data platform, you also have this concept of stored value, where the more data that's in the system, the less likely they are to churn out off the back of it. What are some of the areas that then, like, a business like yours sees churn typically? What would be some of the common examples then? Because I think it's typically... It's not a common occurrence.

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[00:16:07] Kaz Ohta: The biggest threat for us is when champion leaves the company. And then all of a sudden, we have this with a great champion who's the advocator in this company, and we're losing it. So we're always trying to figure out, how can we have more higher exit support, and then having the relationship at multiple levels? For example, I'm the CEO of the company, and our pious executives were selling into a CMO. So I'm trying to have a relationship. And then, we also have a BP Executive Sponsor Program, where they're a VP, and an RVP meet every quarter. And we also have... At the field level, we have a QBR,  Quarterly Business Review so that we actually show ROI every three months. So that, "Okay, here's how you made it. And here's how you pay it for us." Just trying to see... In this circumstance, a lot of people are trying to right-sizing the company. And that's always a threat for, of course, new business and expansion and churn. And that's what we're trying to manage. And sometimes it's hard, but we're trying our best. But at the same time, if you have a fund leaving to other company, they're going to have the one trying to introduce Treasure Data at the new place. So it always has pros and cons. So far, the number one reason for the churn is champion leaving.

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[00:17:34] Andrew Michael: This is definitely something we hear quite a lot on the show, even [inaudible] explored potentially starting a company raises because like, as you said, I think there are pros and cons. One, it's a big churn risk when somebody leaves, but it's also a big opportunity because they're going to go somewhere else. I think, on the previous show was [Julian Caban]. He was adrift. I can't remember which company he was for at the time. But what they ended up doing was that they were monitoring when a champion left the company. They would actually, then, wait for them to get a new job, and then send them some crazy present, like a set of Bose headphones and just saying, "Congrats on the new role. When you're ready to chat about thing, we're here for you if you want," or whatever. And the ROI from the campaign, he said it was crazy at the time.

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[00:18:20] Andrew Michael: And when you think about it, it's like four or 500 euro gift or whatever it is. But when you talk about the contract size and you already have this Champion there, it's peanuts in terms of like a customer acquisition cost of that kind. 

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[00:18:33] Kaz Ohta: Yeah, if you get like a really good, nice headphone, I'm going to use it. 

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[00:18:36] Andrew Michael: Yeah, exactly. It's definitely very interesting conversation from that side, but the customer Champion is really critical. And it's interesting you say you sort of have these three different levels that you try to reach out to customers. And how are you making these connections happen, though? So, in the beginning, I assume if somebody comes to your product service, reaches out, starts chatting to sales, they're getting internal approval, and they make the heaven. At what stage are you sort of getting the VPs and yourself another C level involved in the customer communication, in building those champions within the organization? 

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[00:19:15] Kaz Ohta: Yeah, I guess we're a little unique, but every customer is 400k, 500k year contract. And our Champion is betting their career on us, so they're very serious on us. And they're VPs. And usually what happened is new CMO comes into really legacy old brands, and they're trying to digitize all these brands and ecommerce and all these digital experience through customer data, and we're the center of that transformation. So a lot of C level and VP level are really keen to meet our people. So when we close the deal, we always try to make sure, okay, first six months, nine months, it's implementation. But once it's over for the initial milestone, one or two, then let's make sure we have a really great relationship up every level. So we typically use a QDR as a first way to gather up. Okay, they're seatable VP level, our me joining, our VP level joining, and then get to know each other. And we'll offer more like either monthly or quarterly sync up together. And what is interesting is if you do 101 with the customer C level, you have gained so many insights, like organization level changes. 

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[00:20:42] Kaz Ohta: Some of the CMO told me, like, okay, I'm actually not satisfied with the performance of my guy. How you can actually help on that, which is an eye opening question, because then that's our champion at the field level too. If our champion is not performing, and if CMO is telling me he or she's not performing, then it's a huge threat to our project as well. So in that case, we can actually guide them. Okay, all right, here's how you actually think about how to evaluate that person, how you can coach it. So I think having the multiple level of contact is really critical for our business and giving us a lot of visibility on that account.

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[00:21:25] Andrew Michael: That's interesting. And the customer trusts you enough to share that sort of information, as you said, is like a big risk. So there's a lot of value in trying to see how you can help that individual as well succeed in their role. Is there anything else that comes to mind when you think about customer champions and trying to strengthen those relationships that you think you do particularly well traded enough?

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[00:21:51] Kaz Ohta: Yeah, one of the hard things we learn is customer success starts when we're selling. So when we sell, we obviously don't want to sell the dream, but for the salespeople they can probably sell a little bit of dreams, you know what I mean? And then for the implementation side, okay, customer is like, okay, this is different from the expectation. So we're trying to have more professional services and then sales engineering team engage more earlier so that we actually make sure the implementation plan is feasible.

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[00:22:30] Kaz Ohta: And we are trying to be as transparent as possible on what we can do now and what we can do in next three to six months. And we will be bringing in  a product management people and then trying to figure out, okay, here's the gap, and we need to identify before we close how to fill this gap, because those are the features and capabilities which is critical for this. Let's say $2 million ARR deal and starts from there. And then, implementation is also really important. We're defining the clear success criteria so that, okay, not only we unify the data, the goal really is to get the ROI. Our milestone one is you pay 1 million for us and you make 1 million. And that's like a break even point. And that's when you pass the first phase of customer success.

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[00:23:28] Kaz Ohta: How can we get to the point as quick as possible together with the customer is really important. So you really need a strong engagement manager and professional services team to make it happen as quick as possible. And once you got into that break even point, all you need is launch more campaigns and do more stuff with customer data and show more profits and ROI and the conversation becomes easier. You know what, Mr. Champion? You're making 100 million or $1 million. It's flat annual contract. Why don't you actually sign next, like, four year, five year contract? And we have all these additional product features and SKUs, and you can use it for multiple brands, multiple businesses. So that here's the expansion plan. So that's kind of the path towards the penetration.

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[00:24:27] Andrew Michael: Penetration, yeah. And you mentioned you touched on it a little bit, but I think it's also interesting that focusing purely on enterprise, I think the onboarding and the initial experience is drastically different from a product led business where the goal is trying to get to value as fast as possible. It's not always going to be possible in your case, at least fast. So what are some of the ways that you're trying to show value as early as possible to customers? Because I think in some cases, there might be a lot out of your control as well, where the end customer actually needs to do the implementation and do the work. How are you trying to show that value as quick as possible? 

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[00:25:09] Kaz Ohta: Yeah, so we have this, like, a value engineering framework, and particularly for CDP, there are a few areas. One is you have, let's say, spent a billion dollar marketing budget. Let's improve 1% of it. That's like probably $10 million. What happened was a lot of CPG company is spending billions of dollars for marketing, but then they're also showing beer ads, tobaccos and all these ads to the existing customer, which is not necessarily needed. And then you instantly started saving millions of dollars. So that's like instant saving the other things is trying to optimize the conversion for the new customer. And then the other is like preventing the churn for the [Conoc Center] or unhappy customers. And then by just adding those things, we need to make sure, okay, which one is low hanging fruit for your organization?

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[00:26:11] Kaz Ohta: And let's make sure within two to three months, your CMO is actually gets convinced that CDP actually delivers those ROI. And that is critical for you and your career and your company too. So we create the Joint Execution Plan for the implementation. And I think it's really important that we have a joint... I would say the success Plan or criteria or goal. Because a lot of product you just do POC with no goals and criteria defined. And then customers like, "you know what, this product is good to have," they never buy it. That happens all the time for the enterprise company and then we will avoid that at all cost. 

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[00:26:56] Andrew Michael: I find it very interesting because a lot of other CDPs and things, the goal really is to get good clean data. And that's sort of where the focus is. And at the end of the day, it's okay, here you go. Like you've got this 360 view of your customers. It really sounds like you and the team are taking it an extra step further and saying it's not enough just to have good clean data. That's not the goal, actually. The goal is to do something with that data and get an ROI at the end of it. And having those conversations up front with customers really allows you then to go back and measure and sort of show that value. And I think it's the ultimate position to be in where you can actually measure and show the ROI of the work with your customers. Any tips for companies wanting to start this in their business? Like trying to really show that ROI, like some other things that you might think that have been really valuable for you? 

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[00:27:46] Kaz Ohta: Yeah, I think right now CFO is becoming huge important role for SaaS buying process. And it's simple. They are looking for revenue increase or cost reduction. There's no good to have system. Our CFO is trying to reduce a lot of system internally at Treasure Data too. And if you're infrastructure company, for example, you have to show, okay, you actually increase developer productivity 5S void. So those are the ROI through your system. Or you may be able to consolidate multiple systems into your product.

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[00:28:26] Kaz Ohta: And that's a direct occurrence. Or like Treasure Data, you actually show the revenue increase through the system. And the best is you can actually show them all. Okay, Treasure data, increase the revenue, consolidate the tech and then actually increase the productivity for your marketing products and salespeople. And that's how we pitch. And around 2021 when I became CEO. That's the golden era of SaaS, where everyone is buying everything. Now it's all about consolidation, more efficiency. And that's when the ROI comes in. And I think that's the only thing customer is looking for right now. And in a customer success organization should really focus on how to prove it for your customer. Otherwise you will be get rid of. 

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[00:29:18] Andrew Michael: Yeah. And I think most customer success teams are really at this stage trying to understand how can we go about doing this as efficiently as possible and really measuring and showing that value to customers. I want to ask a question I ask every guest that joins the show. Let's imagine a hypothetical scenario that you join a new company and general attention is not doing great at this company. And the CEO comes and says, hey, Kaz, you're in charge. You have 90 days to turn things around. We really need to reduce churn. The catch, though, is you're not going to tell me that. I'm going to go look at the data or speak to customers and figure out and start from them. You're just going to choose a tactic that you've seen work at a previous company and try and apply to this company and hope blindly that it works for you. What would it be? 

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[00:30:09] Kaz Ohta: That's a really good question. I can't be the god of reducing the chart. But what I will do is I… first of all, increased activities overall. I mean, a lot of customer success organizations saying they're talking with customer and then trying to make customer successful. But at the end of the day, maybe because we're enterprise the number of meetings, number of interaction with the customers, number of onsite meetings like QBR really matters. How do you actually build a connection with the customer and keep learning? You need to push the decision to the people who knows the customer the best and then need to drive those decisions as quick as possible as a leadership. So instead of you, becomes the person who knows the customer the best, let your people know the customer the best, and then bringing in more ideas how to make more customers more successful, bringing in more ROI. And you as a leader, trying to facilitate that decision in the company so that you actually pushes down the decision to the person who knows the customers the best. 

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[00:31:33] Andrew Michael: So from your perspective, we're really just trying to see how you can increase those customer touch points more to build stronger relationships in those organizations–

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[00:31:43] Kaz Ohta: And make sure your people actually understand the business of a customer, not how they use the product. Your product is just probably 1% or even less than that entire marketing or It budget. What are they doing for this list on 99%? That's what a lot of customer success person doesn't do. You only focus on how your system is getting used and then that's just a really narrow view. 

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[00:31:12] Andrew Michael: Nice. What's one thing that you know today about churn and retention that you wishing you when you got started with your career? 

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[00:32:19] Kaz Ohta: I would say the churn prevention starts when you sell. If you don't have defined clear customer profile, no matter how hard you work, it's going to be churn. So I'm glad later, maybe after four or five years, we knew Enterprise is our segment to go. Since then we're trying really hard to get the customers, which is not ideal, we're trying to make customers happy who are not ideal and then they churn because our product duration is different. So that's actually a waste of lot of resource and time for both ends. So that I wish I knew because it took four or five years to learn. 

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[00:33:06] Andrew Michael: Yeah, a few people mentioned sort of the same like you should know when to fire customers, but I don't think you need to fire customers if you have a really good understanding of who your ideal customer profile is to begin with, so that you're only really focusing on acquiring them to start. And yeah, definitely it has a drastic impact on churn and retention, really having a good grasp of who that ideal customer is and then building for them and having the team really align and go behind that as well.  As we're running up on time. Is there any sort of final thoughts that you want to leave the listeners with or anything you'd like to share today before we close off? 

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[00:33:45] Kaz Ohta: Yeah, I think we talk a lot about ROI and I will stick to it. Last, I don't know, probably twelve months or so, our customer is all about ROI and that's I think, what this industry should focus on. SaaS industry has evolved a lot. There are so many tools and productivities we can increase, but at the end of the day, you have to show the ROI by the hard [inaudible] number and that's the practice we need to do as an industry, so that we make the world more efficient and productive and safer through the technology. 

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[00:34:26] Andrew Michael: Very nice. Well, thank you so much for joining today, guys. It's been absolute pleasure hosting you and wish you best of luck now going forward. 

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[00:34:35] Kaz Ohta: Thank you for having me, Andrew.

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[00:34:37] Andrew Michael: Cheers.

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[00:34:42] Andrew Michael: And that's a wrap for the show today with me, Andrew Michael. I really hope you enjoyed it and you're able to pull out something valuable for your business. To keep up to date with CHURN.FM and be notified about new episodes, blog posts and more, subscribe to our mailing list by visiting CHURN.FM. Also, don't forget to subscribe to our show on iTunes, Google Play or wherever you listen to your podcast. If you have any feedback, good or bad, I would love to hear from you and you can provide your blunt, direct feedback by sending it to Andrew at CHURN.FM. Lastly, but most importantly, if you enjoyed this episode, please share it and leave a review as it really helps get the word out and grow the community. Thanks again for listening. See you again next week.

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