216: Cracking the Digital Transformation Code and Eliminating Churn

“It’s hard to outsell churn.” — Jeff Folckemer

Well, our friend Jeff couldn’t be more correct, or t-shirt worthy with a statement like that. Jeff comes from a background in the startup and digital media transformation spaces, and joins us on the podcast to share some of his greatest trials and tribulations over his years in the industry.

Among other things, Jeff was responsible for growing a digital team to revenues in the ballpark of $350 million dollars, so you better get out your pen and paper because this is going to be a good one.

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Introduction

George: It is the latest edition of the “Conquer Local” podcast with our guest today, the new executive vice president of Vendasta Technologies, Jeff Folckemer. And some of you may recognize that name, you’re like, “Oh, I thought Jeff was at Hearst? I thought he was at LocalEdge?” Well, for 18 and a half years, he was. He was the senior vice president of Newspaper Sales, and then he headed up the LocalEdge group and grew that. Now, Hearst is a private company, but I can do math, grew that to around a $350 million business.

And when you’re running a business that large, you either learn or die and adapt or die. And Jeff is gonna be taking us through some of the lessons that he learned inside the Hearst organization and how they transformed from being that legacy media company into one of the fastest-growing digital groups out there in this space.

And we will dig into that and find out what some of the tricks and tips that Jeff has, so coming up, in just a few moments, the very latest edition of the “Conquer Local” podcast, Mr. Jeff Folckemer joining me next.

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George: It’s the latest edition of the Conquer Local podcast. Joining me all the way from St. Augustine, Florida, is that how you pronounce it, “Saint Augustine”?

Jeff: “San Augustine”. It’s close enough there, George. Close enough.

Jeff’s Humble Beginnings

George: Jeff Folckemer joining me. And if this was six to eight months ago, I would’ve said, “Jeff Folckemer joining me from Hearst and LocalEdge,” where he was the SVP of Hearst Newspapers and president of Media Services and Affiliates of LocalEdge, and that’s where you and I met six years ago when I joined Vendasta.

But I get to say now, Jeff Folckemer, executive vice president with Vendasta Technologies, because we’ve had the privilege of coercing Jeff into joining us, and I’ve had the great privilege of working very closely with you over the last few months. So thank you for letting me twist your rubber arm and bringing you onto the podcast. I’m just gonna tell people, get ready. You’re about to learn some stuff from Mr. Folckemer.

So let’s dig into your career because, you know, when I first met you, it was pretty easy to see that you knew what you had your hands around there with that monster that you built. But before LocalEdge, you built a monster and sold it. So let’s talk about that first and just kinda set the stage.

Jeff: Sure. Before LocalEdge, I worked with…I’ll even go back a touch further. I left college and took a job at a local health insurance company called Blue Cross Blue Shield, a little company in the States that handles health care. And so I got to learn a lot about ANSI regulations, and data formatting, and structure. And then while I was there, I was working with a bunch of physicians, a bunch of hospitals. And one of my good friends, Paul, came to me and he said, “Hey, I’ve got this crazy idea. Let me show you what we’re thinking about,” and it was called Clean Claiming.

And it was basically taking a feed from hospitals and physicians, running it through an EDI engine that would basically clean that data, scrub it so it would be accepted by the third-party payers, and then translate that data so that, guess what? The doctors would get paid faster, the hospitals would get paid faster, the insurance companies would also get cleaner data so they didn’t have to touch it, and it would take out a bunch of pain points or toil, as we say, from the work and reduce expenses and cost.

It became such an engine that we started signing up a massive amount of hospitals and physicians that we ended up selling that company to what became known as a company called WebMD. And at the time, on paper, we were very wealthy. But, as you know, the stock market has its ups and downs, but Paul and I remain friends to this day. He’s in China and he runs a huge operation over there in the air filtering business, and he actually moved to Shanghai because business was so big over there. So that was my start.

And then after understanding a little bit about data movement and flow and reducing pain points and churn, I left Blue Cross and left the business that Paul and I did after we sold it to WebMD and I ended up taking a job at a phone book company, of all things, back in the day. And I came in as, really, their technology person, and when I went in and started looking at their entire process, they had no email because email was so new at that time.

And those were things that we were really focused on. And we literally scaled a phonebook company from no technology to losing the dumb terminals, getting computers, laptops, moving into the Microsoft world with Outlook, and starting to show them what the internet was going to do. And at that time, we built the first what we called web cards, and built a little mini search in all of our markets. We put up all the businesses from our phone book listings and, boom, right away, I got them into the internet space.

Building a 350 Million Dollar Digital Revenue Engine

George: So, we’re talking 20 years ago when you walked in the door there, and there’s been a lot of change. I want to make sure that we touch on the amount of change, keeping in mind our audience are salespeople, sales managers, VPs of sales now all over the world that are listening. And I remember when we first started this thing, I was like, “Oh, I’m gonna do a podcast and I’m gonna say it’s gonna be weekly, and I’m gonna regret saying that because it’s gonna be a lot of freaking work.”

But it’s been fantastic to…it actually isn’t as much work as I first thought because, you know, you get some great guests and you get them to share their experiences. And when we talk about transitioning that phone book company to being a digital organization, you didn’t just do that in a small way. What was the revenue at your peak that you were generating from that organization?

Jeff: So our revenue at the peak of…and, again, Hearst is a pretty private company, but when I examined the entire newspaper division, we peaked our revenue north of 35% of a billion-dollar-plus operation. It was pretty astonishing, now…

We had some help, besides developing digital marketing services and scaling that up with websites, and search engine marketing and search engine optimization, display, you know, reputation management and monitoring that we ended up buying from Vendasta and social media management which we ended up using the Vendasta platform. It became really apparent that this business was gonna take off. And so we invested in the business, and our newspapers really doubled down on engaging their websites and pulling in display.

And so the digital revenue from all aspects really started to take off, and Steve Swartz, who is now the CEO of Hearst, was the first one to really get that going, and then, obviously, other managers came behind. And the big corporations get that stuff going and then they like to see that profit, and it was driving some numbers and covering some traditional media loss. And it was taking those traditional media advertisers and keeping that original revenue from leaking out the bottom because our sales teams and sales reps would go in and they would pitch their prints, their display, and then move into the online display, and then move into digital marketing services.

And instead of that advertiser saying, “I’m just gonna move this to somebody else or an agency,” they might trim back on their print, but they would move that money into the digital services. And that was our story much of the late single-digits 2000s and we rolled that into most of the time from 2010 probably to 2016 and ’17, and that was really key for our success.

Shaping Digital Sales Reps

George: So what happened to the sales organizations? Like, we’re talking about directory business, we’re talking about newspaper reps, and, you know, I’ve heard that it’s hard to transition those reps into selling digital. Did you experience those challenges in transitioning those people?

Jeff: Oh, absolutely. We tried multiple models in this equation. First, we did the four-legged sale. We ended up hiring a whole, separate sales force, getting them out there just to see the market. Hearst was fairly aggressive and LocalEdge was fairly aggressive, then we went, “Look, this is part of your job. If you couldn’t hit your milestones,” unfortunately, we would help them find other employment, and we’d bring in the next group that was really engaged thinking digital-first.

And then it went from a four-legged call to a two-legged call with experienced digital or internet marketing managers that would step in and assist if the sale got too complicated or too big. So it was almost like a two-and-a-half-legged call as that digital sales manager would go wherever the sale was ready to close, they were there. And, eventually, it morphed into where it’s just the two-legged call, and the whole time that was happening, George, probably the biggest pain points for…and it’s occurring today for newspapers and, obviously, yellow pages is the print revenue kept going down, and down, and down, and now yellow page print revenue is very, very low. And newspapers are feeling the pinch, too, but they’re reinventing themselves.

I’ve been doing a ton of research on some of the latest things that they’re doing with subscription-based models, putting up the paywalls, making sure that they fit very tightly on content that’s strategic, and then keeping the reps engaged and going after those bigger sales.

Now, what’s interesting now with newspapers, not all of them, but some of them are thinking about what is the best thing to do? Is it to go after the big agency-type clients and go pitch the whales, or is to bring in a bunch of small, little sales from the DMS side that average anywhere generally with what we call a basket size or the number of products between three and six products per account?

And, generally, they’re only spending between $400 and $600 a month. That’s like their sweet spot for the smaller SMBs or SMEs. And when you get into the bigger accounts with the newspapers, they can spend anywhere from $1,100 a month up to, you know, $20,000 a month. And with the pain and struggling of subscription based on print, the pressure from the large national advertisers pulling a lot out of print and doing their own in-house digital or outsourcing it to agencies or outsourcing it to larger partners like Vendasta or all of these different types of companies puts a lot of pressure. You have to have thousands of those small SMB sales to make up for Verizon or somebody pulling out $2 million or $3 million dollars.

Cracking the Digital Transformation Code

George: So I’ve heard mixed reviews on the transition of various media companies. You just have to go their earnings calls and then the analysis that goes along with those earning calls. But Hearst was able to do it. What do you think was the secret of Hearst being able to evolve and transform their media business?

Jeff: Well, Hearst is still going through it, right? They’re still a big, big media company, and, you know, my gut tells me, this year, Hearst will get to 50% to 55% of their overall revenue in newspapers will be from digital. That’s a big number. Now, most newspapers are losing top-line revenue at the rate of 8% to 12%.

Hearst always generally outperformed everybody else. And I’m gonna give you a range because, again, their numbers are private, but let’s say that Hearst would lose 3% or 5%, right, and everyone else is losing 8% or 12%. Part of the reason that Hearst has been able to do it is, one, they’re focused, very driven, very by the book, and everybody has their marching orders.

And the sales process that folks like Mike DeLuca set up and Ron set up, who is now running one of our other partners, Spectrio, is just amazing because they’re very driven, they have a very concise package, a very concise training. I mean, they call it boot camp for a reason. They take these sales folks through these boot camps and they have to rehearse the script, spit it out sideways, backwards, and frontways. And if they can’t do it, they’re not allowed to go into that field until they can, and it really drives the top-end funnel.

Now, again, that causes issues on the backend side because it’s like a machine, so your backend success or customer support or customer success has to be really ready for that onboarding piece. And this is a lot different than a SaaS platform where folks are logging in and driving the business themselves. You’re going after somebody and the salesperson might sign them to a $24,000 deal right directly to that small to medium-sized business, and then they walk away. And if that customer doesn’t feel like they’re getting touched or appreciated quickly, it’s gonna drop out of the bottom of the funnel. And Hearst has been pretty good about maintaining strong customer success, and I would probably credit that with a lot of it.

The Newspaper Company of the Future

George: You know, you spent a little over 18 years LocalEdge with the Hearst organization. Pretty easy to tell that you’re a bit of a futurist, too, you’re always thinking of the future. What does that newspaper/media company of the future look like three years from now?

Jeff: So three years from now, I think the price of print subscriptions will continue to climb. You’ll see a lot more consolidation in the industry for sure. We’ve seen it happening consistently, but the small mom-and-pop is generally getting bought up and merged and integrated really for economies of scale by these large companies. Everything from GateHouse, to Hearst, to McClatchy or whoever, you know, Tribune, formerly Triumph, formerly Tribune, all of these companies are starting to engage in consolidation.

There’s a reason for it. They’re sharing the newsroom, cutting cost, they’re using buying power to get paper as paper costs change by, you know, the ton. And as trade agreements get installed and changed, it affects the cost of newspapers tremendously. You have other parts with the newspaper where their websites are driving huge amount of traffic. And as the younger generation really doesn’t engage in newspaper reading and they’re staying on the internet, these paywalls are going to have to come up because these newspapers cannot fund these editorial journalists without having revenue.

And the ad revenue is definitely moving out of print. Now, not to say that’s right. I always look at print as a holistic engine. You want all legs of your entire marketing stack moving in the right direction. So if you have TV going, you have print going, you have radio going, you have the internet going, you have social going, the market is so segmented. You’re missing parts and pieces if you don’t capture it all.

But your question about in three years, more consolidation for sure. You will see tons more in the native ad space, so stories are written and power links are paid to be tied to that story. If you’re reading an article about cars and engines and your Toyota ad or your Chevy ad will pop up or be embedded in that story, and that will be advertising. It’s going to be a crazy world, for sure, and it won’t be three years, but at some point in the future, print will go away. It’s not gonna happen as fast as people think for that. Now, yellow pages, on the other hand, that is going to die in three years and you’ll be lucky if you can get a phone book in three years. I think it’s really close to its death.

George: You know, interesting, I was talking to my friend Jason Lee the other day when we were in Croatia. He runs the YP on the island of Malta, and he said they were just about to do their last book. He’s pulling the pin, and they’re gonna do everything digitally. So you’re right on the money there. New York Times today just announced they have 3-million page digital-only subscribers and they’re going to get to their revenue goal of $800 million from digital revenue by 2020 that they had set.

So it looks like that number’s gonna happen, so, you know, again, it’s the Times and it’s a global brand, but they definitely have done a good job with that digital transformation. You can’t get that content if you don’t pay for it. I think, what do you get, one or two articles, and then you gotta pay for it. So, you know, we definitely see that.

The Newspaper Sales Rep of the Future

George: Let’s talk about the sales rep. What do you see that’s happening to the sales organizations that are out there? How do you see them evolving over the next couple of years?

Jeff: So this is an interesting part, George. And one of the things I think that most organizations that have digital sales reps or any reps, they immediately cut back on the trainers. And that is really scary because the products are getting so much more sophisticated, the services are getting more sophisticated, and the buyers are getting so much more sophisticated. And the training piece is just being pulled back because everyone looks at them as a cost center. They don’t generate revenue, they cost a lot of money, you gotta pay to fly them around to different locations whatever you’re doing. And the real impact is that you have people out there talking about your business that are representing it in the complete wrong way. You know, I’ve seen it firsthand, I’ve witnessed it, I’ve gone on ride-alongs.

Look, I’m new to Vendasta, so, George, if you went on a ride-along with me and I was talking to a large client, I might scare you because I don’t know the products well enough. But my plan besides you helping me and some of the folks get through some of the training stuff, I’m actually going through some formal training at Vendasta in early December and I think that will be important for me to sit down and listen to the phones on how customer success responds to those questions and issues.

Because if you get to know those issues, there’s a few things for sure you will do. One, you’ll understand your product better. Two, you’ll know this is something we should open a support ticket and get fixed because I don’t wanna be in the field dealing with this issue. So it helps all the way around, and so the tightness or the connectivity between customer success and sales is so clear. And those organizations working together closely and providing the right responses and getting that feedback back to R&D and the engineers is so critical. It makes the world of difference because if customer success gets one issue and they get it fixed, they just saved thousands of people that won’t have to face that same issue, and, to me, that’s a big deal.

“It’s Hard to Outsell Churn”

George: You know, interesting, we had a guest here, my friend, Bart, from FCR Media in Belgium who is a product guy. If you go in the dictionary and look up product guy, there is a picture of Bart, same as if you go on the dictionary and look up sales guy, there’s a picture of me.

And so we did sales versus product, and it was interesting because he heads the product innovation for that organization, super smart guy, and he said, “What could we change or what do you wanna see when it comes to interacting with your sales team?” And he said, “I just wish that they would give me more feedback.” And I’m like, “Wow, now you just went up even higher in my ranks of being a smart person because you have those boots on ground.” They’re talking to customers, they’re getting feedback either on a product or a service, and if that isn’t being translated back to the people that are building the product or service or responsible for the deliverables, then you’re gonna get that misaligned expectation. And then that favorite word that you brought up the top of our broadcast, churn, comes into the equation.

Jeff: Yeah. And it’s hard to outsell churn. I won’t mention the company, but there was a company that we were looking at. We were looking at their churn per month and it was 9% per month. And if you think about it, you basically…now, granted it’s not that every single customer churns because it’s the same group of customers you bring in, they churn, you bring in more, they churn. But, in essence, you’re churning 100% of your customers every year. That is a huge problem, and you can’t fix that by selling more when the boot’s that leaky and it’s coming out the bottom. That just doesn’t work. So churn is huge.

So back to your point, though, your product managers are so smart, the developers and the engineers, if they don’t get a good sense of what an actual user is doing, that hurts your entire application, your stack, your sales organization. The one thing that I’ve always done, George, and if I can leave this with your listeners, is any time somebody’s coming into your application…because I’ve done a ton of product design implementation, organization, replacement, you always have to have the vision. When somebody clicks the first button and what they see on their screen, they’re lost. And if you think they’re lost, then you can figure out how to guide them through the system.

And I’ve always articulated that as human intelligence. And when you take human intelligence and merge it with artificial intelligence, you get a guide in a system that flows seamlessly, and that’s the part that most companies miss. And even that philosophy, they miss it in their entire sales organization, they miss it in their development organization, they miss it in their product organization. But including sales in how you set up a product is a must, and it will reduce churn if you engage that way for sure.

Solving the Product, Sales, and Customer Disconnect

George: So, interesting thing that you mentioned earlier was that connection between product, sales, customer success, and it hit me like a lightning bolt today this morning when I was dealing with a certain situation.

And you have product folks and they’re talking to stakeholders, but these stakeholders are buyers that aren’t necessarily users. So you’ve got a product group that are just talking to stakeholders for the new deal, but they’re not talking to the people that are dealing with the actual users. And that is coming from customer success because usually there’s a bit of a difference especially if you start dealing with larger organizations. It’s like, remember in the early days when we would go out and make a sale to the business owner and then you’d have to defend the sale to the person that was writing the check?

Because there are these different nuances. You got the buyer who, “If you get me and you just get me going because I’m a type A personality, I’m buying shit,” but then Nancy is the one who’s gonna have to pay for it, and she’s gonna get the bill at the end of the month. She’s gonna phone me and go, “What the hell did you buy?”

So we have those nuances, but there’s a new nuance inside an organization where you’ve got the person that buys it or the new deal we’re trying to get, and then there’s this forgotten group of users over here that are so important that we listen to because they’re the ones that are actually using the application. And, you know, is it software as a service that brought this on? Probably. Where you have that distance between those two individuals even though they’re inside the same organization. So I think that was what you were getting to.

Jeff: Yes. That internal disconnect easily can be fixed. And at some point, George, I’ll walk you through some of the things that I’ve had the honor to work with Bryan Larson over there on. And when we do the flow from…instead of literally horizontal where you have all your business stacks this way, you look at the data vertically, you will see how the data is not cohesive and why the departments don’t connect.

And if you do it vertically, you will engage the signer and you will engage the user which will then remove the conflict, the calls to customer support or our sales success centers and reduce your cost and reduce your churn, which would make the salesperson’s job a lot easier, too, because the product’s so much easier to sell. So this thing connects in a big circle, and if you don’t close that loop on those very specific things that we discussed tonight, I think it affects the entire sales organization in a way that folks can’t even understand.

George: So you just spurred another thing in my mind because I’m sitting across here from my long-time friend and sound engineer, tBone, and we both started in the radio business. Sales guy would go out and he’d be working with the auto dealer and he’d sell the auto dealer a live remote broadcast. He’s gonna have tBone at his dealership for four hours on Saturday.

So George goes in, I sell you, Jeff, the live remote, you own the dealership, but guess what? You don’t work there on Saturdays. You leave it in the hands of a couple salespeople and the receptionist, and guess what? He’s a sales rep. I don’t work on Saturday. tBone’s taking care of everything, tBone goes in and deals with all of the people at the dealership and there’s a huge disconnect. And the donuts don’t get delivered on time, and he’s set up in the back corner where nobody can see him, and they didn’t put the power line in, and, you know, there’s all of these items.

So this has been going on in legacy organizations, it’s going on in new digitally transformed organizations, and it all comes down to making sure that you have an alignment between what you’re offering the customer, and what gets delivered, and you’ve got those feedback loops.

Jeff, you know, I’m enjoying every single day that I get to work with you quite closely, and it’s a real pleasure having you on the broadcast. We wanted to cover off some of the learnings that you had over that 20-year career. That was a stellar run that you had there at LocalEdge. And now, you’re, you know, is it semi-retired? Because I see you working at all hours, so I don’t think you’re semi-retired. But it’s a privilege to have you at Vendasta, and looking forward to many more debates and conversations as we head down this road. So thanks for joining us on the “Conquer Local” podcast.

Jeff: Appreciate it. Thank you for the invite.

Conclusion

George: Well, what a great episode. We probably could have went on for hours and hours, but we’re gonna stop. A lot of learnings there from Mr. Jeff Folckemer. But one thing, I’m gonna put this on a T-shirt and hand it to all of our people, “It’s hard to outsell churn.” Wow. You’re absolutely right it is, and you need to be concerned about churn.

And what I mean by churn, I don’t mean a customer that leaves you because they go out of business or they can’t pay their bill. To me, that shit’s just gonna happen. I mean churn that you could solve where there are deliverables in your product that aren’t right, there are mistakes that are being made in the execution, the service level isn’t as high as it needs to be to satisfy the customer, your salesperson oversold it.

And then when they finally open the box, you’re like, “Oh, what the hell is this? This isn’t what I bought or what I was promised.” It’s the churn that we can solve that we need to be laser-focused on. And I think that when you laser-focus on that churn, you’re gonna realize that you need to improve the products or services or training inside your organization on how to deliver those. It actually comes down to some very basic tactics, and Jeff covered a bunch of those inside this latest addition.

We’re always looking for your feedback. You could check us out online, conquerlocal.com is the website address. You can also find us on LinkedIn, it’s George Leith on LinkedIn. And I’m looking forward to getting your feedback because we planned 2019.

Boy, we’re gonna do a whole bunch of on-location podcasts because that’s always fun to just grab people at a convention, pull them over in the corner, pull the recorder out of the bag and bang out a podcast and get them right on the spot. We’ve had some great episodes that way.

But we’re looking for your feedback and your ideas, so the things that you would like us to cover. That’s how we got the Master Sales training series. Then the other thing, could you tell a friend about the podcast? Would you do that for Uncle George? That would be fantastic. Because we are looking to grow the audience and to reach more people than ever. We’ve had a great six months. Our growth’s been fantastic.

But we want to make sales great again, and we could do it by having you listen to the “Conquer Local” podcast and bring great people inside to teach you the things that they’ve learned over their careers. So thanks for joining us. We have another addition coming up next week. My name is George Leith. I’ll see you when I see you.