An overview of how Zendesk and Freshdesk are competing- The No Holds Barred game for market share!
If we consider Customer Service tools as the Italian Mafia, then Zendesk could be aptly termed the godfather! It is one of the oldest and most comprehensive customer support tools in the market.
Zendesk originated in Copenhagen built by a team of three friends (Morten Primdahl, Alexander Aghassipour, and Mikkel Svane in the year 2007.
Help desk applications like Zendesk and Freshdesk help an organization in many ways giving them the the ability to automate customer support processes.
This automation enhances customer relationships and streamlines IT issue resolution and customer request management. Help desk solutions act as versatile companions for growing businesses, offering customizable options to meet unique business needs and support business growth.
Zendesk revolutionized ticketing systems and customer support, offering a comprehensive and user-friendly solution. Its ease of implementation made it a preferred choice for businesses seeking unified customer support solutions.
The platform was ahead of its time and excelled at transforming customer queries into engaging conversations, infusing businesses with a personalized touch instead of a robotic presence.
Freshdesk, an Indian startup, was founded by two friends who personally experienced the frustration of poor customer service when dealing with a broken TV. In 2011, they rose to success by winning the Microsoft Biz Spark challenge, propelling their journey towards creating an innovative customer support platform.
Freshdesk has pretty frequently been in the News for IP issues by not only Zendesk but also by another SAAS major Zoho, but over the course of years, they have stood their ground and have made a major leap forward in terms of their platform capabilities.
When Freshdesk was launched it had quite a few overlaps in terms of the functionalities that they provided vis a vis Zendesk but it stood out by having a multi-tier pricing option that included a free tier not provided by Zendesk and by having a predominantly India-based engineering team a much more enhanced customer experience.
Let’s look at how Freshdesk has been able to stand out from the market leader Zendesk:
Freshdesk has positioned itself as a cost-effective alternative to Zendesk, offering similar functionalities at a lower price point. By targeting price-conscious customers, especially small and medium-sized businesses, Freshdesk has carved out a niche market segment for itself. This product differentiation based on pricing has helped attract customers who are looking for a budget-friendly customer support solution.
Freshworks has witnessed significant growth in its revenue model. Although only a quarter (25%) of its customers pay more than $5,000 annually, these customers contribute to a substantial portion, representing 84% of the total Annual Recurring Revenue (ARR). This percentage has increased from 78% in 2019 to 84% presently, indicating a growing reliance on these high-value customers.
Despite not primarily targeting super-enterprise clients, Freshworks has experienced substantial growth through larger small and medium-sized businesses (SMBs). 50% of its ARR now comes from customers with more than 250 employees, showcasing the company’s ability to drive growth at scale.
Interestingly, the fastest growth is being driven by the largest number of customers. Although only 2% of Freshworks’ customer base pays $50,000 or more in ARR, these customers contribute a remarkable 34% of the total ARR. This represents a notable increase from 29% just a year ago, indicating the accelerated growth potential of the company’s largest clients.
Overall, Freshworks’ revenue model has seen impressive growth driven by larger SMBs and its focus on nurturing and expanding relationships with high-value customers, resulting in a substantial increase in total ARR.
Zendesk’s enterprise customers have proven to be highly valuable, as they bring in higher Annual Recurring Revenue (ARR) and engage in longer-term partnerships. These customers demonstrate a higher rate of expansion and exhibit significantly better retention rates compared to other customer segments.
Currently, customer accounts generating over $250,000 in ARR contribute 38% of Zendesk’s total ARR, showing a noteworthy improvement from the 32% they represented at the end of 2020. This highlights Zendesk’s success in attracting and retaining enterprise-level clients, contributing to their overall revenue growth and business performance.
Going by the 6Sense Data North America continues to be the strongest geography, for both Zendesk and Freshdesk. Zendesk has (41.74%), of its customers from the United States and Freshdesk has (38.41%) of its clients from this geography.
Freshworks employs a strategy of keeping headcount flat while concentrating on revenue growth and efficiency. By maximizing productivity and profitability without significantly increasing operating costs
Freshdesk has a majority of its headcount in India contributing to efficiency, taking advantage of the talent pool and cost advantages in the country.
Overall, Freshdesk’s strategy focuses on generating more revenue and improving operational effectiveness while maintaining a stable headcount.
Zendesk places importance on continuous improvement and innovation. They invest in research and development to enhance their platform’s capabilities, introduce new features, and stay ahead of industry trends.
By constantly evolving and introducing innovative solutions, Zendesk aims to provide businesses with the tools they need to deliver exceptional customer experiences and achieve their growth objectives.
Go to market motion
We talked about the Go to market motion in one of Vichinth’s earlier blogs and Freshdesk replicates that pretty closely. Freshdesk handles customers whose headcount is less than 500 through its inbound channel in India, and large enterprise customers that is where headcount is over 500 are handled by their field teams.
Continued success moving upmarket- Zendesk on the other hand is more enterprise-focused as a result, customers that generate more than >$250k ARR now account for 39% of their total ARR. With a focus on large enterprise customers, Zendesk can afford to have a largely onsite focus.
Freshworks divides its customer support based on the size of the organization, handling customers with 500 or fewer employees through inbound support out of India, while larger customers are managed by field teams.
It also split its sales teams into hunting and farming, with dedicated teams focused on acquiring new customers and upselling to existing ones. These strategies enable Freshworks to efficiently allocate resources and provide tailored support and sales efforts based on customer size and needs.
Freshworks and Zendesk are both customer support platforms but they have evolved in different directions over time.
Freshworks has expanded its product offerings beyond just ticketing and support. It has grown into a comprehensive customer engagement platform that includes features like calling. Freshworks recognized the importance of providing integrated communication channels for customer support and added calling functionality to its platform.
This enables businesses to handle customer queries and issues through voice calls, making it easier for agents to resolve complex problems or provide personalized assistance.
On the other hand, Zendesk has evolved more towards customer relationship management (CRM). While it initially focused on customer support and ticketing, Zendesk recognized the need to provide a holistic view of customer interactions and relationships.
As a result, Zendesk expanded its platform to include CRM features, allowing businesses to manage customer data, track interactions, and nurture relationships throughout the customer lifecycle.
By moving into CRM, Zendesk aims to provide a seamless experience for businesses by integrating support and customer relationship management into a single platform. This evolution enables companies to have a unified view of their customers, from initial contact through ongoing support and beyond. It helps businesses track customer history, preferences, and engagement across various touchpoints, enabling personalized interactions and improved customer satisfaction.
Freshdesk’s go-to-market strategy has allowed it to give tough competition to Zendesk, an already established company in the customer support software market.
Freshdesk’s success can be attributed to several factors, including its product differentiation based on pricing, focus on user experience, agile development and innovation, targeted marketing and partnerships, and exceptional customer support.
By offering similar functionalities at a lower price point, Freshdesk has appealed to price-conscious customers, particularly small and medium-sized businesses. Its user-friendly interface and intuitive design have made it an attractive choice for businesses seeking a straightforward and hassle-free customer support solution.
Freshdesk’s agility in product development and innovation, coupled with its responsiveness to customer feedback, has allowed it to stay ahead of the competition and address evolving customer needs.
Through targeted marketing campaigns and strategic partnerships, Freshdesk has effectively reached its target audience and positioned itself as a compelling alternative to Zendesk. Furthermore, Freshdesk’s commitment to providing excellent customer support has helped build a positive reputation and gain a loyal user base.
Overall, Freshdesk’s go-to-market strategy, combining competitive pricing, user-centric approach, innovation, targeted marketing, and strong customer support, has enabled the company to challenge Zendesk and establish itself as a formidable player in the customer support software market.