Flint's Blog

Do Long Term Contracts Lead to Unhappy Customers?

The Business of Software Blog had a great post recently (see here) about why locking customers in for the long term can often be a bad thing.  One of the big takeaways is that when customers are locked into long term contracts then your goal is primarily to get customers to sign the contract. Keeping them happy becomes secondary because what are they gonna do, they can't leave.

The outsourced billing space operates primarily on long term contracts as well.  The theory put forth is that a certain amount of equipment time (printers/inserters) needs to be purchased/reserved and that if customers could leave whenever they want, then it would be incredibly difficult to forecast capacity and therefore impossible to run the business.  I think for the most part this is a complete fabrication.

At the very high end of our market where customers are mailing out tens of millions of bills per month, this logic is true.  In fact, some of outsourcing vendors actually will buy not only additional equipment to service a customer but also additional facilities to house the equipment.  I agree that long term contracts make sense here because you're asking a vendor to commit a lot of capital and they need some assurance that they've got the business for a fixed amount of time.

However, this large end of the market probably accounts for < 2% of the billers who outsource or are candidates for outsourcing.  For the other 98% of the market, the equipment needed to satisfy their billing volume is minimal.  Therefore the argument that you need to protect the vendor for the capital outlay doesn't hold up.

Now for my blatant Billtrust plug.  Over 99% of our customer contracts have the following clause:

Unconditional Guarantee: If at any time Customer is dissatisfied with the performance of Billtrust or for any other reason wishes to cease using the Billtrust CompleteBilling Service, Customer may terminate this Agreement by providing written notice to Billtrust.

We do this for a few simple reasons.  I want our customers staying with us because they love our service. I want everybody in our organization to know that if we don't do a great job, that customers have the right to leave.  I absolutely don't want customers staying with us because they legally have to.

So after almost seven years in business, I think we made the right call.  Our customer retention rate is over 99% in an industry that churns 10-15% of their customers annually.  Our customers are our best salespeople because we try our best to keep them thrilled with our services every day.

What Would The Customer Want?

Several years after starting Billtrust we felt the need to have a guiding principle for engaging with customers.  When you handle millions of bills per month for hundreds of customers, there is a fair amount of questions, concerns, and sometimes complaints from customers. The famous line of "The Customer is Always Right" never felt right to me.  In fact, it is seriously debunked here.

After much deliberation (or maybe it came to me in a few seconds but "After much deliberation" sounds far better), we came up with a question as our guiding principal.  Every time we need to make a decision, we would ask ourselves "What would the customer want?" 

Here's a real example that occurred a few months ago when we strayed from our principal.

A customer sent in a billing file in to be processed that failed processing because it was missing a fax number.  A customer service rep immediately called the customer and let them know there was a problem and ask them to correct the file and resubmit it.  That’s good customer service. 

But is that "what the customer wants"?  My guess is no.  For something as basic as a missing fax number, maybe the customer just wants that item mailed out instead, or emailed back to them.  In fact, you probably don’t know until you ask.  That would be great customer service.

Some non-believers will argue, well wouldn't the customer want us to send out all of their bills for free?  Well maybe short term they would.  But long term if we did that we wouldn't be in business so there obviously needs to be a balance.

We need to earn a customer's business every day because we live in a highly competitive market. This guiding principal has helped us immensely.  What do you think?

Planning a Business, Product, Idea, etc.

There was a great post recently at The Business of Software blog entitled Why you should burn your business plan.  The gist of the article is that it's not so much what is in your business plan, it's that sitting down to actually think out, draft, edit, and forecast is by itself a crucial exercise.  I couldn't agree more.

Writing in general is a painful exercise for me.  I don't particularly enjoy it, I make basic grammar errors all the time, and would prefer to just manage by feel.  However, anytime I'm faced with any type of significant decision - whether it's a new product, a new direction, a new management structure - I always try to get my thoughts on paper (not real paper of course).  It's not particularly fun but there's just something about writing it down that makes your brain think differently.

I spent a lot of time on the original business plan for Billtrust.  We were going to provide an outsourced billing solution for the QuickBooks marketplace.  Intuit had recently decided to become more open with a software developers kit and it seemed like perfect timing to provide a value added business service like outsourced billing.  That first business plan was so wrong it's comical.  However, that doesn't mean it was a waste of time.  I had set some milestones in the plan and within six months it became pretty obvious that the plan wasn't working and it was time to "re-plan" (re-plan is secret  code for you better come up with something else).  Fortunately for us our solution was fine, it was just that we were targeting the wrong type of customer and were able to recover.

Sometimes the writing is just for me.  Other times I circulate to my management team because I don't feel strongly about my conclusions or need additional input.  If I'm going to distribute externally, I always have my Mom do some editing for me.

No matter how much you dislike the process, spend the time and write it down.  No one ever says "Darn, what a waste of time collecting my thoughts and putting them on paper."