Delivering Happiness

Whether the customer is always right remains a question up for debate. But the underlying implication that companies would be well served to do everything possible to ensure that customers are happy and think positively of their brand interaction is hard to argue with. This is one area where software can play a major role.

Going beyond the traditional customer service, one lesser known but potentially more impactful area of software is Voice of Customer (VoC) Feedback platforms, which are also known as customer experience management platforms. Rather than waiting for customers to provide direct feedback, as is the case with a help desk might platforms, VoC enables companies to aggregate the conversation around their brand wherever it takes place online and also surveys customers to collect additional data, using software to extract sentiment and deliver actionable feedback to companies.

Put simply, VoC software aims reduce the time it takes a company to understand what its customers are thinking and enable rapid action to address concerns or further emphasize successes.

Today, two of the largest companies in the space are joining forces, with Salt Lake City-based Mindshare Technologies acquiring Toronto-based Empathica. While the companies did not disclose financial terms of the transaction, Mindshare used capital from its existing private equity investor Sorenson Capital and a new backer Peterson Partners to finance the acquisition. The combined entity will be among the world’s largest provider of VoC, serving 200,000 business locations worldwide and operating in more than 125 countries collectively, while supporting 32 languages.

The combined company is on pace to surpass more than 300 million total customer reviews collected by the end of 2013, representing a combined growth rate of nearly 40 percent annually. This is nearly double its nearest competitor, Medallia, according to Mindshare CEO John Sperry. By comparison, Sperry says, Yelp has only collected on the order of 35 million customer reviews across its 10 year history.

Many acquisitions between competitors leave one company feeling victorious and another feeling defeated. This was anything but the case in this transaction, according to Sperry.

“The timing was uncanny,” Sperry says. “Shortly after we raised financing from Sorenson, I asked my board for authorization to begin seeking out acquisitions. Not a day later and Empathica’s CEO [Mike Amos] called me up and said ‘We want to do something together. We want Mindshare to acquire us.’”

Whether or not this is the rose colored perspective of the victor, there are true synergies between the companies. Mindshare has a strong presence in the United States, but is less well established internationally. Empathica, on the other hand, is strongest in Canada and Europe – where it has a continental headquarters in the United Kingdom. Despite the geographic differences, the companies target very similar industries, with Mindshare being among the VoC leaders in food, retail, and call centers, and Empathica being equally strong in food and retail. Collectively, 80 percent of the companies’ combined revenue comes from these three categories.

Sperry believes that Mindshare has built some of the strongest real-time feedback technology in the industry. However, he’s quick to admit that Empathica has far superior consumer insights, client services, and marketing competency. Combined, the two platforms address both sides of the customer experience management coin.

“What it really comes down to is that we’re both in the business of helping people smile,” Sperry says. “We help companies make sure that their customers are happy, and we think this deal puts in a position to do that more effectively.”

This does not mean that integrating the two companies will be simple. In fact, Mindshare plans to keep Empathica as a semi-autonomous, wholly-owned subsidiary for the foreseeable future, Sperry says, and will simply utilize each company’s global sales infrastructure to cross-sell the other’s product portfolio. This does not rule out the possibility of a deeper integration of the two companies, brands, and technologies at a future time. Mindshare and Empathica have 300 employees collectively.

Mindshare raised $20 million from Sorenson Capital in October 2011, while Empathica had raised just $7 million from JMI Equity in April 2006.

The most likely long-term path for Mindshare is an IPO, Sperry says, although the company still views an acquisition as a viable potential exit strategy, although decreasingly so. Before either scenario takes place, Sperry says the company needs to reach $100 million in revenue, something that he projects will take three to four years. Mindshare’s revenue has grown at a compound annual rate of 31 percent between 2010 and 2012, according to previous statements by the company.

If all goes according to plan, today’s acquisition will add additional horsepower to the engine driving mindshare to this major milestone. Sperry won’t rule out making future strategic acquisitions along the way, describing the customer feedback market as “segmented, fractured, and pulled in different directions,” in a statement today.

Although Mindshare is now clearly the largest player in its category, there remain significant challenges for the company, Sperry admits. The most pressing is the dramatic increase in adoption rates of VoC software across industry verticals – the company now serves 25 industries.

While it’s hard to paint demand for your product as a negative, the breadth of new potential customers is forcing Mindshare (and its competitors) to build additional domain expertise beyond their current emphasis in food, retail, and call centers. Mindshare is in the process of building a Salesforce-inspired certification program to address this problem, Sperry says.

Entire companies, like Zappos and Ritz Carlton, have been built on the notion of exceptional customer service. This is so core to the DNA of these companies that Zappos CEO Tony Hsieh titled his seminal book “Delivering Happiness.”

It stands to reason then that any company which can help facilitate this kind of customer satisfaction will have plenty of demand for its product. Mindshare will still has plenty of execution challenges ahead of it, but these are the kind of problem that you might consider “good to have.”

[Image via BostInno]