Operator: Our next question comes from Elizabeth Porter with Morgan Stanley. Your line is open.
Elizabeth Porter: Great, thank you very much. I just wanted to ask on the investment that you’re making in additional channels after cutting back on some of the direct sales heads. You noticed some increased CAM into 2024. So I just wanted to double-click on kind of the strategy there, where you’re looking to make other investments in customer acquisition, where you see the biggest opportunity.
Daniel Wernikoff: Yes. Thanks for the question, Elizabeth. We’ve been a little bit centered on performance marketing over the last year. And we — coming out of 2021 and ’22, where we had heavy brand investments, at this point, we now have our model pretty well tuned against premium. And I think we’re starting to branch out into channels like social and video but also we’ll do a lighter brand investment as well. The brand investment this time will be much more actionable because again, the model to convert is kind of tuned against those — those different customers that we’re trying to reach. And then I’d also say, I just want to call out, while we restructured the sales team, we also believe that, that’s going to be an opportunity as we start to go through the year because this is where we now have better — a better view of our customers and segmentation, and we’re building propensity models, and we have a multichannel approach, including MyLZ, which can now do dynamic targeting for our customers.
but also the high-value customers moving more towards just specifically in sales, so we can do it a little bit more efficiently than we’ve done historically. So I’d say we’re moving much more into like an omnichannel strategy, but still heavily reflective in being able to respond quickly with performance marketing as well at the core.
Elizabeth Porter: Great. And then just as a follow-up, I believe initially you expected subscription revenue growth to slow in Q4, but you actually — due to the change in commercial strategy with LZ Tax. But we actually got a nice acceleration in growth in that segment. So what surprised you in the quarter? I know you mentioned kind of good retention. But was there anything else to call out there?
Noel Watson: Yes. So we were really happy with our revenue performance in the quarter, and particularly on the subscription side. And we saw the strength across multiple products in the quarter, really, Elizabeth, and Virtual Mail, LZ Tax a bit as well, but primarily in our core compliance subscriptions where we saw really improved retention that exceeded our expectations for the quarter and allowed us to outperform the guide that we had for — we had set for Q4.
Operator: Our next question comes from Ella Smith with JPMC. Your line is open. Hi, thank you so much for taking my question.
Eleanor Smith: My first question is, I think you called out 7,500 LZ Books subscribers. I was hoping you could either qualitatively or positively profile the subscribers, for example, had most of them use LZ before? And are they cross attaching any other products?
Daniel Wernikoff: Yes. So the data point there is 7,500 subscribers for LZ Books, and they are all coming from our ecosystem. So we really didn’t deploy — initially, we deployed this just through MyLZ, and so it was cross sold post formation. And then as we proved out the experience and start to get customer feedback. We decided to put it also into our formation flow, which we really did right at the end of October. And we’ve seen strong attach. I think the things that we’re looking for right now is good activation our customers oftentimes come in before they’re operational and purchase things, and then they need to sort of have the income or the expenses before they start to use the products. And so we’re — we have a lot of activities decked against that.
And we’re also really watching the up-sell motion into tax, especially with season right now going on. So that’s where I think we get really excited. As you are going through your taxes, if you use LZ Tax, I mean, it’s a single click to upload all your data directly in it. And then also as you finish taxes, if you didn’t have a way to organize your books, it’s a very simple cross-sell back the other direction to introduce you to LZ Books. And so it’s really built — it’s custom built as a single platform that works all the way across from just managing your expenses and connecting your banks and sending invoices all the way through to filing.
Eleanor Smith: Got it. That’s very helpful. And for a quick follow-up. I am curious when thinking about the restructuring changes in your sales operations, which you’ve been asked in the past few years, what are the biggest key changes now and moving forward versus what we’ve seen at LegalZoom in the past?
Daniel Wernikoff: Yes. I mean, historically, because we didn’t have a great view of our customer, we contacted just about all of our customers through sales. And it start in — we would do an abandoner program. We would do on-boarding and then we would do continuous cross-sell depending on sometimes seasonal needs like tax. And it’s a pretty inefficient motion, right? If you think about that, that’s indiscriminate. So we’re marketing to you in the formations flow. We’re marketing to you an e-mail, and we’re calling you as well, which there are a segment of our customers that are extremely high value that we can identify now, and we have propensity models that we’re building, so that we’re only targeting those customers with a very consultative sales experience that’s much more tailor made to them.
and then driving the other customers towards our lower cost self-directed channels like e-mail and MyLZ. So it’s — I would say that we’re moving from more blunt force into like a much more scientific approach to how we market to our customers.
Noel Watson: And one thing just to reiterate, I think Dan said it earlier, but we’re actively managing our reinvestment in sales headcount, and we have a targeted ROI and if we were able to exceed that ROI, then we will continue to invest in that organization, and that would have an impact on our top line versus our plan as well.
Operator: Thank you. There are no further questions at this time. Thank you for your participation in today’s conference. This does conclude the program, and you may now disconnect.
