Horse’s Mouth: Jonathan Allan, Xero

If, as suggested in the media recently, New Zealand is set to be one of the world’s ‘rock star economies’, then Xero would have to be the rightful lead singer. General manager of marketing Jonathan Allan talks about ‘doing beautiful business’.

On the marketing focus: “It’s 100 percent B2B but we put a very consumer lens on it. We don’t want to go out in a traditional B2B sense because we’re not talking to a business, we’re talking to people, like small business owners and accountants. So you see that in the communications. It’s very one to one. We don’t use business language. We’re using language that is non-gimmicky and non-geeky to explain what we do. And that flows through from the product, because there’s no complexity. We have this whole philosophy about accounting being there to make it easier to run a business. And we spend a huge amount of time on writing and finessing to make it simple before it goes out.” 

On delivering: “The worst thing for a customer is when the experience doesn’t live up to the marketing, so it was baked in to the original plan that the product design and marketing teams would be married together. Since then, it’s grown that way and it’s only been as we’ve seen the significant growth this year we’ve started asking how we address it. We need to be able to dial up and down due to different buying seasons. That’s when we get the biggest sales jump by country because it’s easier to start using technology or change who you’re using at the end of a financial year.” 

On agencies: “We’re completely self-sufficient from a creative standpoint. But with the scale and speed we need to move at, we need support. But how do we keep the values of Xero while bringing in a wider community to allow us to scale quickly? An agency has to be part of that, but it’s not a bodyshop agency. They need to think with us. We’ve spoken to a few. And we were introduced to True by Air New Zealand. But it will take some time to gain trust.” 

On following the leader: “Rod [Drury] is very anti-hierarchy, which is part of what makes the company go fast. We have hierarchy when we need it, but in terms of doing business, it’s effectively gone. The right groups get together to get the job done, whether the manager is included or not. If one of the data people on my team is invited to a meeting with the chief executive, that’s great, because it means we move faster. And everyone knows that. There’s no politics or conflict.” 

On America: “We’re still a niche player, which is where we want to be. We just launched our payroll product in the US so we now have a very stable product line. From a technology point of view and usage point of view, we’re superior to the competition [primarily Intuit], so now’s the time to make a point … We’re not afraid of the competition, because we know we can outsmart them. And that’s going to be fun.” 

On word of mouth: “The biggest sales channel for us is through accountants, but an accountant isn’t going to use the product unless customers have confidence in it … The design of the product, the design of the communications and the joy people have when they use the product helps sell it. It’s the best advertising.” 

On passion: “My first week with Xero was at Xerocon in Melbourne, which 1200 people attended. And in 22 years, I’ve never experienced anything quite like it. You see an industry that’s built up around Xero because they trust us … I had one person say to me ‘you know this isn’t about Xero, right?’ And the point he was making is that Xero is the catalyst, the facilitator for the add-on partners.” 

On making accounting sexy: “I don’t think it’s about being exciting, it’s trying to make it easy to run your business. But the ability to be able to reconcile your accounts off your mobile phone on the ferry in the morning is pretty sexy. And it can’t be a bad thing if we make accountants feel sexy. Talking to them it’s really quite fascinating because what it is allowing them to do is add value. The reports are effectively done. So they can spend more time looking at opportunities about how they process that information. It’s changing their business.” 

On brand: “There’s a pride in being Xero certified. We’ve had accountants want to buy our merchandise so they can give it to their customers. And it’s not just a New Zealand thing. We’re seeing it in Australia too. It’s the brand. You see it with Apple, which has built a hugely loyal base of die-hard fans in the creative community. And we’re not dissimilar. For some people Xero has been life-changing.”  

On value: “The valuation of the company is something people like to talk about. But it’s not relevant internally, which is an odd thing to say. I’ve worked at companies in the past where it has been relevant, like Cisco. But people are at Xero because they feel passionate about what they’re doing. They’re passionate about being part of this phenomenon and making sure that continues. Where people are discussing the stock price is when it allows us to raise capital. But the pressure comes from making sure we can be as successful in the US as we are in Australia and New Zealand and making sure we can do the same thing in the UK and other markets we go into in the future. Businesses don’t look in the rear-view mirror very often. And you can’t. As soon as you do, you lose.” 

On expectations: “That pressure [of quarterly reports]sometimes drives creativity. We’ve got a long-term plan. If we need to make tweaks to hit the sales numbers, we might do it, but we don’t deviate from our long-term plan. Some public companies will change their plan, because of what they’ve seen in a quarter. We’re not about that. We can now invest in accelerating product development, but if we had a bad quarter we wouldn’t change that. Land grab is too harsh of a word, but we’re about building the product and getting market share up. When we’ve done that we need to start seeing costs taper off, and get revenue growth and customer growth. But we are beginning to focus on those financial optics and making sure the business dynamics are right as we continue to grow.”

On the mission: “When I joined the company I asked: will we move from New Zealand? And was the strategy to be bought? And the answer to both was no. If the answer to either was yes, I wouldn’t have joined. This company’s big enough now that it’s about finishing the job off. We’ve got an opportunity to educate the SME market and an opportunity to be the voice of that market; someone who can speak out on behalf of small businesses …. And when we become the small business platform, people will tell their grandchildren they were part of that … We don’t have company credit cards. And that’s one of the things I like. I’ve always worked at big corporates. I was at SAP for six years and it’s partly about the company and partly about what you can get from the company.” 

On testing: “For mobile, we have a control group, a test group and most of the things we run on the web will be AB tested. It’s critical. It’s a volume game for us. So a 0.1 percent increase in a conversion rate from a trial to a paid order is significant. The data is really important and that’s what we’re building right now. The investment for the marketing team is in knowing more about our customers.”

On transparency: “It comes from the top. Yammer technology is what we use internally. And we’re extremely active on it. Nothing is hidden. All the executive team have a policy of ‘you ask on Yammer and you get an answer’, so it’s very rare that we can’t share something. We also have an all-company meeting every two weeks and that is very transparent … The employee engagement is the highest I’ve ever seen in my life. I think lack of engagement often comes from staff feeling they’re not being communicated to and they don’t have the opportunity to talk back. And that’s just not here.” 

On going global: “Local marketers need to change into a global marketing mindset and that’s a transition we’re embarking on. It’s an amazing opportunity for everyone on the team. They‘ll be even more employable than they are already, but the job changes dramatically. It’s not about your individual contribution to a campaign … It’s about understanding all of the countries and building something that is easy to adapt internationally.”

On content: “You don’t normally go into a company and build the marketing team the way it needs to be built. For example, we have two outreach writers, and their role is specifically to create content to get posted on other people’s sites. Most marketing departments are made up of people who push campaigns out the door. They’re basically project managers. But I think every marketer knows that it’s not about pushing a message anymore … We’ve invested in content and it’s very focused, and the people we’re hiring from a marketing point of view are in content and data. We’re piloting a news desk at the moment and we’ve just hired a freelancer from Stuff Video, so we’ve got two video guys and they sit down daily and they look at what’s interesting in the news and then say ‘alright, that’s the hook’. It doesn’t necessarily need to have a tie to Xero, but as long as it’s content worth creating and has a tie to small business, we can do it. In any communication, it’s never about Xero. We’re trying to push them towards Xero, but why would they care about the company? They don’t. It’s about the product helping them do their job better … Some of the stats we get from our organic search are amazing. And what does it cost? It costs a writer’s time to put together some great content.” 

On helping: “We are just about to launch our training organisation XeroU and the focus of that is on driving education and training to the wider community. It’s not just encouraging people to use our product, it’s giving those starting a business advice on the best way to run their accounts. And giving them information at the right time … We don’t see anyone in the market doing that right now. It’s very much about their products, not helping clients.”  

​Xero by the numbers
  • Xero had over 280,000 customers at 31 March 2014 (81 percent year on year change).
  • Xero’s operating revenue was $70.1m for the year ending 31 March 2014, up 83 percent from last year’s $38.4m. 
  • Xero has 13 offices around the world and over 750 staff, with hundreds of vacancies currently ready to be filled.
  • Xero’s stock price increased by 333 percent in 2013, with the company at one point valued at​ more than $5.4 billion (only Fletcher Building, with a market value of $6.2b, was worth more). After a worldwide selloff of tech stocks last week, its stock price fell to $30.06 (a market cap of $3.8 billion), which put it at levels not seen since November.
  • Xero raised NZ$180 million in capital from a range of investors last year, and had $210 million cash in hand at 31 March 2014. 
  • This story originally appeared in the March/April edition of NZ Marketing.

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