Listen to the Story
The relationship between organizations and their customers is changing rapidly. Modern organizations need technology that adapts to their individual needs and empowers them with the ability to guide and enhance their customers’ experiences.
To position themselves for success, organizations must integrate service into every customer interaction and use customer insights and service data to enrich the overall experience. On a logistical level, an organization must communicate consistently and contextually with customers across multiple channels and empower customers to resolve their problems.
With the right technology, organizations can empathize with their customers, identify friction points in their customers’ experiences with their businesses, and address them. However, legacy customer support software is costly and complex, causing most SMBs to rely primarily on tools like email, phones, and spreadsheets.
Even larger organizations able to afford customer support software often adopt a piecemeal approach to minimize support costs. The result is the inability to support multiple channels or expand to new channels, ultimately leading to customer frustration. This siloed approach reflects a view of support as a necessary burden rather than an opportunity to build customer loyalty.
Due to the emphasis on customer service in the new customer-driven economy, having the right technology is more critical than ever. Effective customer service requires a purpose-built platform that embraces the new landscape of omnichannel communication and the empowered and informed customer and emphasizes well-designed experiences. This is what Zendesk does.
As strategy enthusiasts, we decided to break down various aspects of the business model and marketing strategy of Zendesk while also learning how does Zendesk work.
What is Zendesk? How does Zendesk work?
Zendesk, founded in 2007 in Denmark, is a software development company that provides software-as-a-service solutions to help organizations and their customers build better experiences.
Founded to democratize customer service, Zendesk solutions are built on an open and flexible platform. With roots in service and a deep understanding of the customer mindset, Zendesk gives companies the solutions they need to create easy, cohesive, and frictionless experiences.
Zendesk works as a SaaS company to provide customer experience solutions built upon a modern architecture that enables its clients to rapidly innovate, adapt technology in novel ways, and integrate with other products and applications.
Zendesk has evolved its offerings to product and platform solutions that work together to help organizations understand the broader customer journey, improve communications across all channels, and engage where and when needed most.
Zendesk’s flagship product solution, Zendesk Support, allows organizations to track, prioritize, and solve customer support tickets across multiple channels, bringing customer information and interactions into one place.
Other Zendesk product solutions integrate with Support and include Zendesk Chat, Zendesk Talk, and Zendesk Guide.
- Chat is live chat software that provides a fast and responsive way for organizations to connect with their customers.
- Talk is cloud-based call center software that facilitates personal and productive voice and short message support conversations between organizations and their customers.
- The Guide is a self-service destination that organizations can use to provide articles, interactive forums, and a community that help an organization’s customers help themselves.
Zendesk’s strategy is to leverage the open and public cloud both in hosting our applications and providing platform tools and services for developers for both extensions of Zendesk and to power their own applications and experiences.
This strategy provides Zendesk and its customers more reliability, performance, and flexibility than operating through proprietary platforms and self-managed data centers.
Zendesk works as a software to design customer experience solutions that share the following characteristics:
- A more conversational experience: Zendesk enables organizations to have seamless conversations with their customers, allowing organizations of all sizes and industries to transform how they engage with customers regardless of how and when those customers want to communicate.
- Easy to use and implement: Zendesk focuses on making the user experience intuitive and product implementation fast while managing complex processes and interactions on the backend of our software.
- Open and flexible platform: Zendesk’s flexible platform leverages public cloud technologies and open standards.
- Expanding access to analytics and data science: Zendesk empowers organizations to better understand their customers through analytics that unify data across the product and platform solutions and connect easily to outside data sources.
Business Model of Zendesk
Zendesk has over 110,000+ (as of 2021) paying customers. Before purchase, Zendesk offers a free trial of fully-functioning versions of its solutions.
Free trial forms a central part of the business model of Zendesk as it gives users the required confidence before being locked into a subscription. This strategy also helps Zendesk establish a relationship that can facilitate further adoption of its solutions as organizations grow in size and their needs become more complex.
Customers: Through our platform, customer service focuses on people, making it convenient for them to seek help. Information is available where and when they would look.
Background information does not need to be repeated, nor requests endlessly passed from agent to agent. Organizations proactively reaching out can anticipate and preemptively address people’s needs.
Employees: Zendesk’s customer service platform empowers employees and improves overall job satisfaction. Zendesk makes it easy for employees to learn and navigate. Well-designed features, including automated tasks, save employees time, and mobile apps facilitate working outside the office.
Organizations: Our customer service platform creates a strong foundation for customer-focused organizations by managing their communication across channels and establishing a centralized source of customer information.
Through Zendesk, organizations can successfully build their brand, influence strong customer advocates, and, ultimately, enhance their financial performance.
Zendesk for Service: Zendesk provides a complete customer service solution called Zendesk Suite. Zendesk suite combines many existing solutions (including Support, Chat, Talk, Guide, Explore, and Sunshine) into a complete customer experience offering. Subscription starts at $59/month.
Zendesk for Sales: Zendesk offers a sales CRM product solution called Zendesk Sell to enhance productivity, processes, and pipeline visibility across customers’ organizations. Zendesk Sell eliminates the friction from deal updates, so representatives and management can always access, analyze, and collaborate on relevant deal data. Subscription starts at $25/month.
Sunshine Platform: An open and flexible solution that allows organizations to address an increasingly broader set of customer experiences. Sunshine allows organizations to develop a complete picture of their customer with flexible databases and the ability to model, store and manage customer profiles, events, objects, and relationships.
Organizations can integrate this data across our product solutions with other business applications to build highly specialized workflow and unique customer experiences.
Marketplace: Zendesk introduced its first app marketplace for third-party Zendesk software in 2012. Zendesk’s customers can build custom apps or select from over a thousand pre-built apps and integrations on the Zendesk Marketplace. Zendesk marketplace has integrated several third parties technologies to provide more services to the end customers.
How does Zendesk make money: Revenue Generation
Zendesk has a subscription-based business model. Zendesk primarily generates revenue from subscription services, comprising subscription fees from customer accounts on Zendesk Support and, to a lesser extent, Chat, Talk, Guide, Gather, Explore, Sell, Sunshine, and Sunshine Conversations, and includes related support services.
Zendesk offers a range of subscription plans that vary in price based on functionality, type, and the amount of support.
Zendesk also derives revenue from Zendesk Suite, an omnichannel offering, which combines many of these existing solutions into easy-to-purchase plans. In addition, Zendesk generates revenue by providing additional features to certain subscription plans for a fee that is incremental to the base subscription rate for such plans.
Zendesk generated $1.34 billion 2021. Revenue increased by $309 million, or 30%, in 2021 compared to 2020. The total increase in revenue was primarily attributable to expansions from existing accounts, and the remainder was attributable to revenue from new accounts.
Saales and Marketing Strategy of Zendesk
Zendesk designs subscriptions to its product and platform solutions to be easy to purchase. Many customers subscribe to solutions with limited or no direct interaction with our sales team.
Zendesk has deployed a direct sales approach as part of its sales strategy. The sales team manages prospective and current customers, aiming to initiate, retain, and expand their use of Zendesk solutions over time. It is responsible for driving expansions and renewals.
Zendesk’s sales strategy is to continue increasing penetration into larger organizations through land and expand strategy whereby it attempts to capitalize on the use of its solutions by a functional or geographic department to expand the use of its solutions into other use cases throughout the organization.
The sales strategy of Zendesk also utilizes indirect sales channels, including referral partners, resellers, business process outsourcers, and implementation partners. These channel partners provide additional sales coverage, particularly in geographic markets where Zendesk may have a limited presence.
Moving on to the marketing strategy, Zendesk focuses on generating awareness of its solutions, creating sales leads, nurturing prospective customers through product discovery and evaluation, establishing and promoting the Zendesk brand, and cultivating a community of successful and vocal customers.
Zendesk believes that the best way to sell subscriptions to its solutions is to provide customers with the opportunity to use and explore their capabilities actively. Hence Zendesk encourages free trials to get paid subscriptions.
The marketing strategy of Zendesk leverages both online and offline marketing initiatives, including digital advertising such as search engine, paid social, email and product marketing, content marketing, user events, conferences, corporate communications, web marketing and optimization, and outbound list and contact generation.