During an economic downturn caused by a crisis like the COVID-19 pandemic, hunkering down and waiting for better times is a natural response. It’s comfortable. However, challenging times present a significant opportunity to build a long-term competitive advantage—as long as your organization is built on a foundation that allows for flexibility and adaptability in its products and services.
As companies prepare for the future, they are asking how product management and product marketing professionals can help. Payfactors, a B2B compensation technology company that helps organizations ensure they attract and retain the best talent, is a case study in how established product offerings and client-experience best practices can allow a company to adapt and pivot.
Since its founding in 2014, Payfactors has provided tools for companies to understand how their employee pay trends against an ever-changing market and how they should adjust. These insights drive employee retention, ensure pay equity, and help manage companies’ No. 1 expense: payroll.
More than 20% of Payfactors’ customers are Fortune 500 companies. They span 22 industries and represent more than 12 million employees with combined salaries of more than $466 billion. Its customers typically have a dedicated staff of compensation analysts.
Though relatively young, Payfactors has seen 40% annual growth since it was founded. To sustain this growth, the company has kept a close eye on the market and stayed adaptable. Specifically, Payfactors took several proactive actions prior to 2020 that enabled it to adapt when the pandemic hit.
Action 1: Focus on Solving Market Problems
The Payfactors founders are self-described “compensation geeks.” As a result of their deep understanding of compensation, they realized that large organizations struggled with issues such as centralizing their internal employee compensation data—which was largely managed in spreadsheets—and reconciling this data against market surveys.
Compensation professionals don’t want to be considered a back-office function. They want a seat at the leadership table to help drive business strategy via compensation strategy. But if they spend too much time on small, transactional tasks, they have no time left to think about compensation as a strategic tool.
From the start, Payfactors focused on providing tools to reduce tedious activities and enable compensation leaders to connect the dots between compensation and talent management strategies. This market need–driven message resonated, and the company grew rapidly.
Payfactors’ senior management team recognized the reason for this success: fostering a culture that continues to ask, “What is the biggest market problem in compensation, and are we solving that problem?” This market-problem focus served them well at the onset of the COVID-19 crisis.
Action 2: Challenge Assumptions and Value Outside Expertise
Payfactors’ senior leadership has a combined 60 years of compensation experience, making it easy to fall into the trap of thinking “we know everything.” What made them successful since the company’s inception could blind them to future opportunities.
For example, the company achieved explosive growth selling to compensation departments of large, enterprise-scale organizations. Leadership believed there was an opportunity to expand into the middle market (companies with 250 to 1,000 employees). Initially, leadership believed that middle-market companies were simply smaller version of large enterprise organizations—and that the same messaging and sales approach would mean success. However, under the Payfactors culture, these assumptions about the middle market needed to be challenged.
In summer 2019, Payfactors engaged with a B2B market expert, Neil Baron of Baron Strategic Partners, to objectively identify potentially dangerous assumptions. Together, they listened to sales calls, spoke with salespeople, reviewed client case studies and interviewed customers. Through these exercises, it became obvious that what was successful with large enterprises would not resonate with the mid-market.
The key insight from this work was realizing smaller companies do not have a compensation department and, thus, the buyer need is different. In smaller companies, compensation was included among other tasks on the HR team’s plate. These HR generalists wanted compensation data, but they didn’t have the time or desire to become compensation experts. Armed with these insights, Payfactors revised its value proposition and organizational structure for the mid-market.
Within nine months, they restructured their sales organization to introduce a dedicated leader, business development representatives and sales approaches targeting HR-generalist buyers. This new team came back with more learnings around specific market problems for this segment. These learnings helped Payfactors to expand its “Payfactors Free” offering, which originally targeted only small businesses.
The impact was substantial. In the quarters after the team restructure, the company reduced the time it took to close new deals by more than 10% when compared with prior years. And the insights gained during the mid-market project proved valuable during the pandemic.
Action 3: Establish the Role of Chief Client Experience Officer (CXO)
As Payfactors grew, senior management wanted to ensure that the company maintained its laser focus on the customer as well as the market problems that needed solving. As vice president of product management, Russ Wakelin approached his role by going into the field, interacting with clients frequently and measuring the success of product improvements with direct-use metrics.
The founders appreciated Wakelin’s approach. He created processes that connected with customers and related to them on an emotional as well as business level. His approach caused management to ask, “What if this process could be extended beyond product research into a more holistic, cross-functional look at optimizing the client experience?”
In fall 2019, Wakelin was promoted to the newly created Chief Experience Officer (CXO) role—something that has emerged in many organizations in the past decade but was a new concept for Payfactors. Together, Wakelin and Payfactors CEO, Jeff Laliberte, looked at what a CXO role generally looks like, then refined it to fit the company’s specific needs. They established three broad goals for the role:
- Monitor client health through metrics such as net promoter score
- Encourage client and employee interactions and engagement
- Drive thought leadership.
Shortly after establishing the role, Wakelin traveled to dozens of clients and spoke at regional compensation conferences and gatherings. Working with client success managers, he visited clients onsite, listened as they explained the value they got from Payfactors, and discussed future challenges they were facing. Customers were carefully targeted for visits based on renewal dates, risk and complexity.
Discoveries from these interactions were shared with the broader Payfactors organization via weekly impact summaries. These reports, which included session recordings, were used to improve features currently in development, generate product upsells, schedule follow-up training to re-engage clients who were underutilizing the system, and shape thought leadership and market hypotheses. Retention for clients with CXO-driven interactions increased by more than 15%.
Adjusting for a COVID-19 World
The actions Payfactors took in 2019 allowed the company to adapt quickly when the pandemic hit.
Leverage the CXO
Centralizing ownership of the client experience into the CXO role enabled Payfactors to quickly pivot how it interacted with clients. This was especially true for clients in hard-hit industries (e.g., hospitality, restaurants, airlines). The CXO quickly established virtual meetups with clients as well as prospects in similar industries. Wakelin structured the format so participants could engage with each other and discuss the various challenges facing their compensation and HR teams.
It was a cathartic experience that strengthened Payfactors’ client relationships by demonstrating empathy and support. Additionally, Wakelin quickly learned how COVID-19 affected different industries, how to adjust client risk profiles and which specific market hypotheses needed to change.
The feedback became a way to scale CXO client interactions from dozens per quarter to hundreds. In just one month of running two meetups per week, more than 200 clients had participated. And more than 90% of participants requested that the meetings become routine. Many themes emerged that proved as valuable as the client engagement:
- Furloughs and company layoffs reduced some industries’ compensation teams’ headcount to near zero
- Companies needed up-to-the-minute market data more than ever
- The desire to communicate with peers was high
Leverage the Mid-Market Project
The mid-market project exposed that selling to companies with a compensation team is different than selling to HR generalists who don’t want to be buried in compensation details. When the meetups revealed that many larger companies had furloughed their compensation teams, it was a problem that Payfactors already knew how to solve. It needed to talk to these lean clients as HR generalists, not compensation geeks.
Fortunately, the plays built by the mid-market team already included stories around the value proposition for HR generalists. The market need was pivoting to Payfactors’ strengths, plus the mid-market team’s messaging could be used to expand these stories back to the enterprise companies that had experienced compensation-team furloughs.
Modify Pricing and the Product Offering to Fit the Current Situation
Like many companies, Payfactors offered a free version of its product. In response to the pandemic, the company pivoted the value proposition of the free version from “Free for Small Business” to “Payfactors Community Free” for organizations of any size. In less than a month, Payfactors Free Community was adopted by more than 180 new, high-profile enterprise clients.
Before the crisis, Payfactors believed that enterprise clients would not see much value in a free offering. By staying true to its culture of challenging assumptions, Payfactors adapted to market changes, pivoted its offerings and tried something new. As a result, a stable of strong future sales leads with marquee brands was generated.
Long-Term Planning and Adaptability Pay
The Payfactors case study is one model for converting smart investments into a strategy to remain relevant, regardless of the crisis. Organizations that made investments in building customer relationships and collecting customer insights have built a strong foundation to adapt to market shifts. For organizations that didn’t make those investments, it’s never too late to start.
Product management and product marketing leaders can begin by answering a few questions:
- How can we stay close to our customers, both intellectually and emotionally, when we cannot visit them in person?
- How do we use our customer insights to make the appropriate pivots to our value proposition?
- How do we keep our value propositions self-evident and easy to obtain?
- What are our processes for gathering routine market and client information to challenge our assumptions and answer the question “where am I wrong?”
Now is the time to execute product management, product marketing and customer experience best practices to build the foundation for a successful post-COVID environment. As Payfactors has demonstrated, this effort will make your organization more resilient in challenging times. And hunkering down until the COVID-19 crisis ends is not an option.