The Hotjar Framework You Need to Grow a SaaS Business Now

The Hotjar Framework You Need to Grow a SaaS Business Now

They say that every entrepreneurial journey starts with an epiphany or meaningful experience. This is certainly true of David Darmanin’s entrepreneurial journey as a non-technical founder. Dr. Darmanin (he has a doctorate in law) realized after two failed startups that he was his best customer. He had all the skills to build what he needed, but instead of seeking inspiration, he looked to his own experiences.

This is how he described his aha moment that led to the creation of Hotjar, an all in one analytics and feedback tool for websites.

Just because there are other competitors in a market doesn’t mean I can’t do it better. The idea was: how do we create something ten times better than what already exists in the market? And basically, build something for ourselves, something that we wanted.

Suddenly I’m not trying to understand a market, a customer. I am the customer, I am the market. That just made things so much easier.

That feeling was so amazing at that point, when you suddenly realize, “Wow, we actually have some traction here. We’re building something people want.”

What captured attention around the world was not just the usefulness of a product like Hotjar. But rather, the way in which David and his team managed to focus on essentials and grow a SaaS business to eight-figure annual recurring revenue (ARR).

For its beta-launch campaign, Hotjar was able to attract 60,000 email users in the first six months.

To understand how Hotjar grew its SaaS business with remote teams, it is important to understand how it:

  • laid the right foundations.
  • views innovation.
  • focuses on its users.

It’s all our fault: laying the foundation for a customer-centric business

Around the time of Hotjar’s launch, David read the book Delivering Happiness by Zappos founder Tony Hsieh. The process Zappos used to build its culture resonated with him.

Early in the process, David spent time setting the foundation for how Hotjar would operate. He and the four co-founders worked remotely because they wanted to hire globally, not just locally. They also established the values they wanted to live by. They wrote down eight, which now guide their decisions and the hiring of team members.

Some of the values are self-explanatory. For example, their long term objective is to “wow” customers and to strive for “wow” moments. Another one is “good is better than perfect,” which helps them deliver what their customers want more frequently.

The Hotjar team went further. They wrote an ethos on how to communicate and behave with customers, which includes the idea, “It’s always our fault.” As David says:

We created a business. If customers come to us and didn’t have a good experience — even if there is ignorance on their end, or even if they made a mistake — at the end of the day, we’ve created the situation for this to happen. It’s good to have that mindset.

Another part of the ethos is: always say PM, deliver AM. It covers the ingredients needed to be very customer-centric, in how we communicate and how we behave. A lot of that still drives how we do stuff today.

Leveraging innovation for user-centric growth

According to David, growth occurs when you innovate. Simply because you are in a position to leverage three main elements that help spread word of mouth. These are:

  • a message that echoes the self-interest of your ideal clients;
  • having something new and different to communicate;
  • curiosity, which, when built upon, amplifies the first two elements.

Avoiding disastrous growth strategies: Four critical elements to customer success driven growth

David says that growth for the sake of growth is a recipe for disaster. It takes your eyes off users, their needs and experience. A better way to ensure growth is to center your business on providing value to customers.

There are four critical elements to user-centric growth:

RESULTDRIVERWHYMEASURE
1.ConversionDemandGenerate demand for your brand by positioning yourself and converting a large % of a large market.Google Trends
2.MonetizationValueFocus on creating value for your users. The more you do, the more you can monetize. Beware quick wins that can harm other drivers.Lifetime value
3.UsageExperienceCreate an experience that your users truly enjoy. Anticipate their needs and simplify the ‘interface’.Addiction
4.Word of MouthWow!Create moments of delight and wow. This is key to word-of-mouth growth.NPS Survey

Hotjar’s growth engine

Hotjar’s vision is to democratize user analytics and feedback. Early on, the Hotjar founders knew they had to offer a product that could provide essential website insights at a price point to rival others in the same space.

Best practices suck @daviddarmanin Click To Tweet

Given this, Hotjar knew they had to get users — and fast! So, it needed to build a growth engine. Its journey from zero to over €10,000,000 in ARR in four years has shown that their growth engine works.

The engine has five components, as follows:

1. Acceleration

Hotjar achieved acceleration early on thanks to their SaaS go-to-market strategy by:

  1. creating demand quickly; they communicated the idea of Hotjar to their target audience rapidly, as you can see in the graphic on their webpage.hotjar graphic - grow a SaaS business
  2. positioning themselves wisely in the market, which helped gain a lot of press coverage.
  3. building a wave during the beta process. The waiting list, for example, helped in the building of a wave. This resulted in Hotjar acquiring over 60,000 email addresses in the first six months with 18,000 of these becoming beta users.

As a result, Hotjar was able to validate the idea, get users and improve its product by accelerating testing.

In large part, this acceleration can be attributed to the Hotjar team paying attention to details, which included recording all feedback, acting on it, and informing those whose feedback was acted on. These actions helped compound the “wow” moments.

Testing is for confirming winning ideas… not for finding them @daviddarmanin Click To Tweet

2. Low friction

To make a low friction product, Hotjar continues to eliminate any barriers that prevent users from making full use of the tool. The company ensures:

  • their plans and pricing are transparent.
  • setting up an account and using the product via the interface is easy.
  • transparent communication is key; for example, Hotjar always puts its product roadmap up to inform readers about upcoming updates and features.

This was influenced by most of Hotjar’s team having a B2C background. In fact, the team used its B2C experience to sell B2B. In other words, they sold to teams, not to company executives, that would derive the most benefit from using the product. These teams would then sell their company on using the product.

To this day, Hotjar does not have a sales team, but it does have a customer service team, which is key to its operation.

3. Efficiency of channels being used

David says that he was aware of Hotjar’s strengths and weaknesses from the beginning. Given the need for a wave of new users, he decided to leverage their past experience with Facebook ads as a part of their SaaS marketing strategy to generate awareness and drive a targeted audience back to their launch page.

Hotjar also reached out to groups or communities that shared their target audience, asking if they would sponsor Hotjar’s email lists. An email campaign was created from copy used on successful Facebook ads.

Although content was something the Hotjar team enjoyed, they had little expertise in this area and, until they developed a long-term strategy, didn’t invest in it until later.

Given Hotjar’s experience and proficiency with the channels it uses, the company monitors two metrics in particular –

  • its Lifetime Value (LTV) to Customer Acquisition Cost (CAC) ratio
  • the number of people going from freemium to paid

4. Traction

David says they had to decide not to get lost in data. Instead they focus on customer experience and qualitative feedback. At Hotjar, direct interactions with customers provide feedback along with Hotjar widgets like polls and incoming feedback.

Hotjar spends time examining their traction points or areas where they are visible to people. One early traction point was a referral program, built in-house, to encourage users to jump the queue for early access by referring friends and colleagues.

David says a good part of Hotjar’s traction also comes from the product itself and its ease of use.

5. Experience

The experience people have with a product drives them to use and talk about it. It is not just the UX but the conversations people have and want to have with Hotjar.

When Hotjar hired people, they developed strategic documents covering the ethos of customer experience in detail. This document included answers to policy questions such as: How we are going to prove a successful customer experience and how we are investing in it? According to David, this is very much a part of the company, where an entire team is focused on the customer experience.

Another part of the experience is the way Hotjar takes care of its employees. “We treat our team in the same way we want them to treat our customers,” he said.

Tracking is also key to creating better customer experiences. Hotjar reviews all closed conversations and replies, and their Customer Satisfaction Scores (CSAT).

Hiring and onboarding

Hotjar has a rigorous and fairly lengthy hiring process.

David calls potential new hires and explains the company vision and what it wants to achieve. The idea here is to make sure new hires are on the same page, that they are interested in the vision and can connect with it.

For every new hire, a pre-onboarding task is to watch a video of David telling the Hotjar story in embarrassing detail. David says he wants it to be memorable. The video shows photos of him with a horrible haircut fifteen years ago, with a narrative relating how he started an ad agency while at university, the lessons he learned, and some stories about what he was doing at Conversion Rate Experts.

During the one-on-one call with David, prospective hires spend an hour talking about the company’s vision in practice. Hotjar uses a V2MOM (Benioff’s model) for alignment within the company.

David says:

We look at the company V2MOM together and I explain the details, how it connects back to the vision. We typically schedule a follow-up call. Twice a year, we meet up in person in different locations, and I always open by talking again about our vision and where we’re headed. We also take the opportunity in our monthly product update calls, and company update calls, to just constantly repeat the same thing over and over.

Four years in, we’re now at the stage where we’re actually revisiting our positioning, the way our vision is worded. We’re also making it more visual. We’ve done the same with our values in the culture book we’re creating. We always have to be revisiting and revamping and re-energizing these things.

The best tools – listening, speaking and thinking about customers are free @daviddarmanin Click To Tweet

Staying productive

David says there is a direct correlation between productivity and SaaS business growth at Hotjar.

There was a time when they were quite unproductive because of internal architectural issues. However, during a long-term retrospective look, they noticed that, as they grew, more and more issues affected their productivity.

We looked at how many times we’re releasing and how often, what value-based changes we were making to the product versus issues in architectural problems we had. Unsurprisingly, as growth went up, productivity decreased. In mapping that back to growth, we could see a clear correlation between productivity and business growth.

At Hotjar we have a very clear roadmap ahead and we know exactly what we need to do; but getting to that is incredibly dependent on being productive.

Currently, Hotjar tracks productivity qualitatively but not quantitatively. They started with the engineers and devops team, asking: How productive do you feel? Follow up questions such as, “What are the main things that are impacting your speed?” were asked to delve into issues.

It’s been a great experience because we’ve uncovered some issues. We’ve actually created a new team in engineering focused purely on team efficiency because we know that efficiency is actually the biggest leader of our productivity. From a product point of view, and from an engineering point of view.

Lessons in hindsight

From a monetary and active-user perspective, Hotjar is an undeniable success story. Although there are several lessons we can learn from its journey, I wondered if there were things that Hotjar might have learned in hindsight.

I asked David if he would do anything differently if he started Hotjar today. Pausing for a moment, he said they would have stayed in beta longer and raised funds to allow for that. Why? Because it would have allowed Hotjar to improve its product and create the kind of user experience they wanted.

During its beta period, the Hotjar team tested the blocks of the tool, such as heatmaps, replay an experience and ask a question. But they decided to launch at that point because they needed to monetize and continue their journey. What they didn’t foresee was getting bogged down with a number of issues, such as:

  • billing that didn’t work
  • VAT calculations
  • VAT returns
  • tax returns
  • customer complaints and handling bug fixes

David says they realized they needed to hire but didn’t have time to because they were scaling and growing. For a team of five, it was overwhelming. Because they were self-funded, it took two years to get past this and hire sufficient staff to get to where they needed to be.

With hindsight, given that they had enough beta users, he wished they had been in beta for longer. This way they would have improved the technology, connected the dots between the tools and started building their vision. Instead of monetizing so quickly, they would have hired engineers to nail the product and get closer to the vision they wanted.

Do lessons from Hotjar’s SaaS growth journey inform yours? If so, let us know how in the comments below.

The Full Guide to Scaling Your Business with Virtual Assistants

The words “outsourcing” or “virtual assistants” don’t sit well with the majority of people. That’s no surprise provided that most of us have had a really bad experience trying to find even one person who is reliable and willing to help our business grow, let alone a team of them. We’ve all found that person who…