My Experience at Return Path and Signpost

I’ve held senior leadership roles at two companies—Return Path and Signpost. Both companies offered “add-on” (or “bolt-on”) solutions that integrated with customers’ core business platforms. Both faced significant churn challenges that demanded extensive leadership attention. Return Path functioned as an add-on to email marketing or marketing automation platforms—the core systems our marketing teams relied on. Signpost served as an add-on to the core CRM applications used by home service professionals to manage their workflow. In discussions with leaders of these core platforms, it became clear that their platforms—serving as the essential operating systems—consistently achieved much lower Gross Churn and higher NRR than we did.

Why is that the case:

1. Switching costs are high for ‘core operating system’ platforms: Using platforms like House Call Pro (for Home Service SMBs served by Signpost) or Salesforce Marketing Cloud (for Email Marketers served by Return Path) requires substantial time investment. Companies heavily invest in training, configuration, and integrations to make these platforms effective. Switching platforms becomes a major decision that requires significant business benefits to justify. In contrast, switching add-on solutions is much simpler—the investments in integrations, configurations, and training are smaller.
2. **There are more revenue expansion opportunities:**Customers naturally look to their core platform for additional related features. For instance, invoicing and payments have become successful expansion areas in SMB Home Service Platforms.
3. **The platforms eventually need to expand to grow:**Core platforms will expand into the add-on’s feature set, increasing churn. This makes it challenging for add-on providers to compete effectively.

Jason Lemkin’s Article (Hubspot, MangoMint and Toast)

I recently read an insightful article by Jason Lemkin of SaaStr (Inherent Churn vs. Fixable Churn) that examines several SMB-focused companies (Hubspot, MangoMint, Toast) achieving NRR above 100%. These stories support my hypothesis that add-ons typically have lower NRR.

A few supporting points that I found interesting:

• Hubspot: The article cites Brian Halligan, co-founder of HubSpot, as an example of successfully increasing NRR from 60% to over 100%. HubSpot initially focused on top-of-the-funnel products but realized they needed to incorporate middle-of-the-funnel functionality, similar to Marketo or Pardot, to reduce churn and boost NRR. They eventually acquired Perfomable to achieve this.
• MangoMint and Toast: The article also highlights the examples of MangoMint, a SaaS for spas and salons, and Toast, a restaurant management platform, which both achieved NRR exceeding 100% by building suites of integrated products that function as an OS or ERP for their customers.
• Expand to Increase NRR: The solution to increasing NRR in an SMB business is to expand to create a full platform while maintaining strong customer experience.

It’s a good article—I recommend reading it in full rather than relying on my summary.

Bottom line (especially for companies that sell to SMBs): If you have the capital, expanding to become a competitive core platform makes for higher NRR.