The market for customer feedback is only just emerging

The start-up Zenloop sells software that companies can use to analyze customer satisfaction. Zenloop co-founder Paul Schwarzenholz on response rates and whether he would recommend WirtschaftsWoche.

Paul Schwarzenholz (38) founded Zenloop in 2016 together with two colleagues in Berlin. The start-up now employs 50 people and takes care of querying and evaluating customer feedback. Zenloop customers include Deichmann , Douglas, Peek & Cloppenburg , Thalia and Energie Baden-Württemberg. Schwarzenholz had previously sold his first company, the online perfumery Flaconi , founded in 2010 , to ProSiebenSat.1 .

In the middle of June, Zenloop closed a new financing round in the amount of 6.1 million euros. The main shareholders Nauta Capital from Spain and the British investor Piton Capital increased their investments; Signals VC, the investment company of Signal-Iduna-Versicherung, has also been added. The three founders still hold more than 50 percent of the company’s shares. Zenloop sales are in the single-digit million range.

WirtschaftsWoche: Mr. Schwarzenholz, your first start-up was an online perfumery. How did you come up with the idea of ​​collecting and analyzing customer opinions for companies?
Paul Schwarzenholz: What we built with Zenloop is exactly the software that we would have liked to have at Flaconi back then. Back then, the shopping experience was the most important issue for us: What can we improve for our customers? We asked ourselves this question after every single transaction. And a little later we also asked our customers this question. At first, it was very upbeat: We received several thousand comments every day, and we really evaluated them individually using a long Excel list. At some point it was no longer scalable. But there was no software for that. So we first developed an internal solution. When it became clear that we were going to part with Flaconi, it was clear relatively quickly what we would do next.

At the center of customer satisfaction measurement is the so-called NPS, the “Net Promoter Score”. The value measures the willingness of customers to recommend a product or a brand – and was invented 17 years ago. Aren’t you just reselling an old idea?
The method is a bit older, that’s true. We didn’t invent the NPS either, but the management consultancy Bain. Because I used to work at Bain, I know the methodology very well. And there was no software for it back then, at least not in good.

How is your business developing?
We are in an extremely fast growing market. How big the growth rates actually are is unclear because there are no valid market figures. You can only look at the individual providers, and they are growing very well. An estimated 90 percent of companies in Germany hardly ever use customer feedback, and very few have a system in place.

According to the US magazine “Fortune”, two thirds of the 1,000 largest US companies now use the NPS. Is customer feedback a hype?
No, because then it would have collapsed in the corona crisis. But we gained new customers during the crisis, and also a new investor. Hype sounds like little substance. But business is still in demand during the crisis. We have three-digit growth rates per year. We are extremely satisfied.

What do you offer your customers? What do the companies want to know?
We offer a complete feedback management platform. Our customers can click into our surveys at any point in the so-called customer journey to collect feedback. In the second step, they can then evaluate their customers’ comments, automatically with the help of artificial intelligence. In the next step, the customer can decide what to do with each individual feedback. The point is that I use each comment one or more times, what I can deduce from it to improve my product or my service. And it’s also about how I can bring back unhappy customers who drop out.

Do you have a specific example?
The most common question that our customers ask is roughly: How likely is it that you will recommend us on a scale from 0 to 10? This is queried at various points, either directly after the purchase or after the order has been received.

How meaningful and representative is customer feedback anyway? Doesn’t the German consumer tend to express their opinion especially when they are dissatisfied with the product or service?
Yes, he does that when he is not asked proactively. If you are not asked directly but are dissatisfied, write a nasty comment when in doubt. But our customers have a response rate of around 25 percent of their users, which is more than representative. That is extremely meaningful. Classic market research, in which the customer base is surveyed once a year, has a response rate of perhaps one to two percent. We have already evaluated x-million feedback, so we are sure that there is no distortion. Also because all customers are interviewed: the satisfied and the dissatisfied.

And what do the companies do with the feedback?
What almost all of our customers do regularly, mostly weekly, is a so-called continuous improvement meeting. Specifically, the question is: What can we do better about the product or the service based on our customer feedback? And around two thirds of our users also ask those customers who say they will never order again for feedback. This means that the moment they threaten to churn, these customers are either called or written to again, asking them to better understand their feedback. This almost always leads to greater customer satisfaction. They then receive a tailor-made apology if something has gone wrong.

With all due respect for your software, but: It all sounds pretty simple.
It’s not rocket science either. The secret is the speed. Such an apology and request for an explanation must be made very quickly – then customers will forgive. And when a company has tens of thousands of customer interactions, it needs very good automation and a good technical infrastructure to make it scalable. The challenge is the amount of feedback.

One of your competitors, the US company Qualtrics, is attracting attention : SAP bought the company for eight billion dollars at the end of 2018 , which triggered criticism. Now SAP boss Klein wants to put parts of Qualtrics on the stock exchange . Where do you see Zenloop compared to the Americans?
Qualtrics comes from the market research corner, and they’re good at that too. As I judge, your system is less geared towards responding to each individual feedback as individually as possible and integrating this into the respective system. I see us better there. But the purchase price that SAP paid is probably justified. Experience management is one of the fastest growing and the market is just emerging. I would compare it to Facebook’s takeovers of Whatsapp and Instagram: Facebook paid billions of dollars and there was a lot of criticism at the beginning because the companies hardly generated any sales. In retrospect, however, those were two very smart decisions.

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