Twilio & Customer Signals

By Tien Tzuo October 23, 2020

Last week Twilio spent $3.2 billion in stock to buy Segment, an API platform that helps companies make sense of their customer data. Twilio wants to help companies understand that information more effectively, so they can use Twilio’s API capabilities in order to orchestrate better customer experiences.

This acquisition represents a smaller battle in a much bigger war, of course. Right now there’s a Battle Royale going on among the biggest companies in the world to “capture the customer.” Twilio is stepping into the ring against giants like Adobe,, and SAP in the race to help companies figure out who they’re actually selling to.

Why? Well, in the old product era, companies were obsessed with optimizing the manufacturing and distribution of their products: supply chain efficiencies, “just in time” inventories, retail channel optimizations, etc.

As a result, enterprise IT departments today are sitting on top of billions of dollars worth of sophisticated ERP systems that are designed to do exactly one thing: track the manufacture and distribution of products.

But Subscribed readers know it’s the End of Ownership. And in the Age of Usership, the race is now on to create sophisticated IT systems that do something else: track the satisfaction and evolution of customers.

Right now these same companies are obsessed with Customer Satisfaction Scores (CSAT), Net Promoter Scores (NPS), Qualtrics surveys, etc. There’s practically a military-industrial complex out there dedicated to quantifying customer experience. Pick a function, and you’ll find a dozen platforms vying for your time and dollars: SEO, e-commerce, web optimization, data management, the list goes on.

This diagram may look like a map of a medieval city, but it actually represents the roughly 8,000 companies that currently comprise the market for customer analytics platforms.

As Twilio CEO Jeff Lawson recently told Stratechery’s Ben Thompson: “The great thing about SaaS is that it let every line of business owner buy the solution they needed. The horrible thing about SaaS is that every line of business owner went and bought their own thing, and now the data about your customer was all trapped in these data silos.”

Again, that’s what the Segment acquisition was all about: sorting through all the data, connecting the dots, in order to create great customer experiences. Finding the signals.

But when it comes to tracking the customer experience, I think a lot of companies are neglecting the biggest signal of all.

In the product era, companies didn’t realize any dividends from all their fancy ERP systems until they created equally sophisticated financial measurements: gross margins, price sensitivity curves, etc.

Well, guess what? The same revolution in financial insight and metrics is happening on the customer experience side. In a world where companies are focused on delivering ongoing customer value, customer revenue may be the most important signal of all.

There are companies with giant mission control rooms dedicated to web analytics and CRM efforts and product usage, but they’re not treating their revenue as an essential customer analytics signal. That’s a huge miss.

In subscription models, revenue is a signal that changes constantly: upgrades, downgrades, suspensions, resumes. It’s the beating pulse of your subscriber base.

Here are some questions that subscription revenue analytics can answer:

  • If my customers are putting in a lot of change orders, does that mean they’re dissatisfied with my service? If they’re not touching their subscriptions at all, does that mean everything is smooth sailing?
  • Are my customers happier with a usage-only model, a tiered model, or a combination of the two? If it is a combination, what does that ratio look like?
  • Are my customers always happier with more payment methods? Is there such a thing as too many?
  • Are my customers fine with subscriptions that renew on their own, or are they asking for more notifications and touchpoints?
  • If my customer is in danger of churning, then when does a downgrade offer make sense? What will it take to help them re-evaluate my service?

Lots of companies treat their revenue as a byproduct, an after-effect. Let’s invest a ton of money into customer analytics and experience, the thinking goes, and if things go well, we should see an increase in revenue. Hopefully.

But just as a thought experiment, what if you flipped that dynamic? What if you started by figuring out the composition and behavior of your revenue over a given period of time, and then invested in customer experience solutions in a way that supported the revenue trends that you would like to see accelerate?

For subscription companies, those positive trends involve an emphasis on recurring over transactional revenue, increased net retention, and minimizing revenue lost to churn.

But these things aren’t just happy accidents that result from having a great service. They are objectives that require incentives and organization.

And that project starts with listening to your revenue.


