Mid-January we achieved one of our first milestones, reaching 1,000 customers on Zendesk. We launched on October 1st 2007 so our first 100 days have been pretty hectic and it doesn't seem to stop. Two of the keywords for developing our product and our business were convenience and especially transparency. In that tradition we would like to share some of our findings for Zendesk's first 100 days.
The company is a true virtual company. Besides the founding team who works from a loft in downtown Copenhagen, our company relies on services and products from all over the world. Telemarketing and customer care is operated from Atlanta, Hong Kong and of course Copenhagen. Our managed hosting provider resides in San Francisco. Our CRM infrastructure consists of Zendesk, DabbleDB, Skype and WebEx. PR and marketing efforts have been Internet-only. Product development is managed centrally but we have worked with partners from New York City to Ukraine to have the various bits and pieces put together and packaged neatly. We don't believe our customers care much. As long as we prove ourselves reliable we could be a pack of penguins working from an ice block.
Customer price tag: $60
An often mentioned web 2.0 concept is "the long tail" referring to the majority of a market difficult and expensive to target via mass-communication, but that can still be lucrative provided that you can keep your acquisition (and logistic) costs down. That said, customer acquisition costs aren't negligible. Each customer signup costs us around $60 in marketing. But the concept of a customer is also quite different in a web 2.0 business. A majority of our customers have not yet spent a dime on us. They're on a free plan and can use the product with some basic limitations. Some customers open an account and use it for a day, then disappear. Some customers reappear after three idle months and start rolling it out in their organization without ever contacting our support team. Some customers turn out to be extremely tech savvy 12 year olds, whose mothers talk proudly to our local telemarketing agent (!). A majority of our paying customers pay us less than 100 USD per month, but plan to stay with us for many months and years.
You speak long tail?
It has become increasingly popular to use the term Enterprise 2.0 for describing web 2.0's advances into the corporate world. As Zendesk only targets enterprises, not consumers, we have made our own observations about the penetration of the Enterprise 2.0 and SaaS model. 70% of Zendesk customers are from the US. Pretty remarkable, as we didn't plan to target the US market specifically. Of course language also has its saying. The Zendesk interface is currently in English only. Although most of the application can be localized, the overall English interface (including our web site) will have a negative effect on customers whose first language isn't English. In any case both issues challenge the long-tail model. You can only offer a low-cost but highly-configurable product if your customers embrace a SaaS model. And localized marketing is also more expensive.
A start-up in Wonderful Copenhagen
A few words about starting a business in Copenhagen, Denmark. Denmark has its fairy-tale reputation but is also being considered one of the most IT savvy countries in Europe. That said, Denmark is such a small country. There's one only internet merchant account provider in Denmark and for some reason we can't charge our international American Express customers in US dollars, although all of our prices are in US dollars. We have to charge in Danish Crowns and have had to build on-the-fly currency-conversion and provide AmEx clients with lengthly explanations. Likewise we have to offer a local Denmark-only credit card (Dankort) in order to be able to take on Danish customers. In many respects this is a good illustration of what it's like for an ambitious start-up here.
Future of Zendesk: loosely coupled customer relations
Back to our product. Zendesk is hosted help desk. A help desk system for the 2.0 enterprises. Our initial approach to the 2.0 conceptualization of the product had to do with the fact that it was indeed hosted, no worries about maintenance, that you could hit the ground running, just sign-up and get going, that you could still do all the integrations you require using modern approaches, web services and widgets, and that the product was easy on the eyes and didn't require neither training nor large manuals. Transparency and convenience, as mentioned earlier. But our first 100 days has also taught us something about the support industry 2.0. Whereas the traditional help desk has always been control-oriented in its nature, the new support paradigm carries a much more fragmented and loosely coupled approach to the customer relationship. An old-fashioned help desk sees itself as the single point of contact, with all the restraints, promises and obligations such a perception produces. Today it's clear for everybody that we as support consumers, as IT end-users, as technology customers, have numerous support sources thanks to the internet. As the consumerization of technology gains ground, the role of the help desk is changing. The help desk is just one of many sources for getting support, and is now more than ever someone working in symbiosis with the customer and the rest of world.
Help Desk 2.0
We believe that a key component to Zendesk's continued success will be its ability to easily accommodate to the many ecosystems, communities and tools that make out the total support-sphere. We're psyched about working with this great product and about the feedback we get, and enthusiastic about our role in a rapidly changing help desk industry. Setting up a help desk system is no longer about a $250,000 software license agreement and 9 months of implementation. It's about a few hundred dollars per month in subscription fees and hitting the ground running. We're glad that you've joined us and are looking forward to a fun ride.