Embargo’s secret to low churn

Fryderyk Szydlowski is the co-founder and CMO of Embargo, the UK's number one CRM and loyalty platform for hospitality businesses. The company launched in 2017 and has since grown to over 1,500 coffee shops, restaurants, bakeries, and QSRs. In this episode, Fryderyk shares all the strategies and tactics behind Embargo's exceptionally high retention rate.

Your users are your product advisors

There are many strategies that can help startups reduce their churn rate, but none of them will ever be as impactful as having the best product. At Embargo, this meant involving their target customers in the development process from day one.

Fryderyk had been working in the space for many years, so he reached out to his network and onboarded some potential customers to build a solution together from scratch. These early adopters had a direct impact on Embargo's development. As Fryderyk puts it, their initial customers were their “product advisors”.

He explains, "I think that over the years, this has helped us not only to understand what works but also to identify our ideal client profile. We have learned how to sell to those customers and what they truly care about, because some things that may seem important on the outside are not necessarily what drives their decisions on the inside.”

Focusing on a specific segment

A product like Embargo can work for almost any Main Street business. However, for a startup, it's better to start with a specific segment first instead of spreading yourself too thin. Fryderyk initially attempted to sell their solution to various types of hospitality businesses. However, they learned the hard way that this approach was not effective. He explains, "What we learned is that loyalty in a coffee shop is different than loyalty in a high-end restaurant. In a local coffee shop, you can measure loyalty on a weekly or monthly basis. In a high-end restaurant, it's a completely different story. The average customer may only visit twice every six months. If we approach high-end restaurants, we would have to wait probably a year to see data on whether people are returning or not. Instead, coffee shops see the value within the first month. We can offer them a free trial, and they will likely stick with us because they can see the value right away. That's why these businesses have really low churn rates. They see the data right away and it's quite impressive to them.”

By focusing on a specific segment with particular needs, you will also be able to develop a better sales strategy. In Fryderyk's words, "That allowed us to really hone the sales strategy because we have an ideal customer profile and understand the potential needs or challenges they have. So whenever we approach a customer, we know what challenges they are facing and can offer a solution that similar customers, including their competitors or neighbors, are already using.”

An additional benefit of focus is that many of your customers will share the same needs. For instance, a large number of Embargo users have requested a click-and-collect solution for their loyal customers. This allows restaurants to avoid paying fees to the most popular delivery platforms. As Paul Graham famously says, it's better to have 100 people who love you than a million people who just sort of like you.

Furthermore, you can always expand later. As Fryderyk puts it, "When you operate in a big market, a segment of it is still going to be huge, and if you can serve these customers well, it will create this ridiculous stickiness. Then, once your business is large enough, you can start targeting additional segments.”

Help your customers succeed

Focusing on a specific segment allows for a deeper understanding of how customers use the platform and what works best for them. With this knowledge, their team can help customers succeed by explaining exactly what the product does and the strategies they can use from day one.

"On the launch day," Fryderyk explained, "we utilize the data we've gathered from our platform to create tailored solutions for each type of business. This includes defining the ideal loyalty reward system, communication strategies, and successful onboarding processes for customers using CRM and loyalty card systems."

This doesn’t necessarily involve human interaction. You can also provide a handy playbook that customers can choose to follow or not. "It could be something as simple as a PDF or a user-friendly landing page. There's so much software out there that can help you automate these things. This allows us to provide a reference point for customers even if they face challenges down the line."

Fryderyk added, "If a customer comes back and says, 'Sorry, it didn't work for me,' we can refer them to the playbook. This enables them to see if they've implemented the strategies suggested or if there's room for improvement."

The lesson here is that the key to lowering churn is to help your customers succeed. The sooner they reach their 'aha' moment, the less likely they are to churn. This is something we also implement at Wefunder. We provide founders with a fundraising playbook that includes our time-tested guides, templates, and resources to help founders raise capital from their community of customers and fans. So regardless of your industry, helping your customers succeed will undoubtedly improve your retention rates.

Land and expand

Another key factor behind Embargo's great retention rate is that they have not limited themselves to being a simple loyalty solution. Instead, they have developed an all-in-one tool that replaces 10 different platforms which hospitality entrepreneurs would otherwise need to use. "As a hospitality entrepreneur, you are so busy, and whether you have one site or 50 sites, you cannot be overwhelmed with managing 20 different solutions for tipping, table ordering, loyalty, etc. This is why we are building a proper data-driven software platform and not just a one-feature platform.”

This is the reason behind launching their delivery and pickup services, their tipping service, and many other features. Indeed, the more problems you solve for your users, the higher the value for them, and the lower the churn. The best part about their land and expand strategy is that they can charge significantly lower costs for their additional services because they are selling to their existing customers, so they have no user acquisition costs.

Expectations setting

Another important component of reducing churn is to set clear expectations and be upfront with customers about what your product is really about, instead of focusing solely on numbers and rushing to onboard as many customers as possible. In Fryderyk's words, "We are very transparent in the sales process about what we offer to the customer. If our sole goal was just to onboard as many customers as possible, we could do it. But churn would be high."

"For example," he says, "all loyalty cards are in one app, so there is a discovery component." Businesses might join because they will be listed in Embargo and gain new customers. "But," Fryderyk emphasizes, "we always make it clear that if they want to sign up to our system just for that, they should not sign up. We're not Groupon."

Succeeding where others failed

One of the things we couldn't stop thinking about when we interviewed Fryderyk is that there is literally a graveyard of startups that have tried to build in the loyalty space and failed. So why has Embargo succeeded where others have failed?

The first reason is that, as discussed before, Fryderyk and his team have built a robust solution and not just a one-feature product. He explains, "We always knew we had to do more than just a loyalty card, and I think that was the key for us to not be just yet another loyalty social platform. We knew that many previous businesses couldn't scale because they could only charge a certain amount, and they saw a huge churn."

There is a saying that being too early is the same as being wrong. And indeed, timing (and digital adoption after COVID) has played a crucial role. "In any type of industry or business, timing is key. If you look at any successful company, it's like 25% skill, 25% hard work, 25% luck, and then 25% timing. When we look at our industry, the last couple of years have seen technologies evolve, and there has been a period of accelerated tech adoption, even among the less tech-savvy. We all now expect some sort of tech solution, such as delivery, and QR codes for ordering food.”