“You can't just release the thing and expect that people will find it, use it, and pay for it. You have to educate them, make it visible, show what the feature is." - Franciska Dethlefsen

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[00:18] Meet Franciska Dethlefsen

[00:57] The Journey to Self-Serve at Amplitude

[06:45] The Evolution of the Self-Serve Plan

[10:26] Addressing Concerns and Building Confidence

[17:57] The Impact of the Plus Plan Launch

[21:22] Lessons Learned and Future Opportunities

[25:27] Closing Remarks and Preview of Next Episode

Transcript

We're going to have a look behind the scenes on how the new Plus plan at Amplitude came to life. Before we get to the details, can you start by giving a bit more context of this new self-service plan that you introduced? How is this different and why did you do it?

Amplitude has had a free plan for quite a while and that has been a big part of how we have been driving sales pipeline. So a lot of our customers start on our free plan, use it for a few weeks, a few months, a few years, depending on who they are. And we've been using that free plan to help sales look for the right opportunities at the right time. 

But as we've been doing that for the past few years, we learned a lot from our customers around their needs and also our sales process. So we heard from our customers that Amplitude was somewhat expensive. Going from paying zero to paying $30,000 or more dollars a year was a big jump. 

Simultaneously we also continuously went down market for especially the SMB segment and started selling our plans at a lower cost to meet the customer where they were. So from a sales perspective, it also didn't make much sense to have humans in the process selling these lower price plans that were hovering around $10, $20k a year. 

So that was a big part of the motivation of introducing a self-serve plan. It was what customers wanted and it would drive efficiency internally, so we can have our sales team focus at the higher price points. So those were the main motivations internally and externally. 

Besides that, we also made some significant changes to our pricing and packaging. We've been expanding our suite of products and actually have more of a platform offering now, and we wanted to bring that to our free and self-serve customer base as well. So with the introduction of this self-serve plan, we also made some fundamental changes to what we offer. 

We're actually giving away a lot more for free now, on the self-serve plan. We want to give our customers what they need to be successful across experimentation, analytics, and customer data management. So we're giving that away for free in small increments so they can get started with what they need as an early company and can grow with our Plus plan.

When the original approach was put into place, I'm sure that the company would have considered that there was a segment of customers that wants to buy at a lower price point. What had changed that made the company reconsider?

That's a good question. I mean, we had different people in the company, including myself, that were advocating for this. We’d seen in the market, some of our competitors offering it. So it was really about internal pressure, also from Elena Verna who was our interim Head of Growth. She was a big champion of this, as well as myself and others. 

We were putting this idea forward with the leadership team and slowly convincing them that this was the right approach. That involved lots of conversations, slide building and model building around the opportunity we had in front of us if we introduced this self-serve plan and the efficiencies we could drive as well. 

So, I don't know if there was like a single point in time, but I've been working on this personally for over two years now. It's been through many different phases of testing and discovery and experimentation and many different phases of like leadership buy-in and convincing to conclude that this was the right approach.

You mentioned two things there, experimentation and model building. How did you build the confidence in the organization that this was the better approach, because some of these things you'll only learn afterwards…

I can talk a little bit about the experimentation we've gone through, testing the plan in market without promoting it officially. And then I can talk a bit about the other part of convincing, which is building a proper forecasting model around what this could bring in from a revenue perspective, including what possible cannibalization we would see from the sales-led business. 

On experimenting with the plan: we've had three versions of the self-serve plan live in the product. The first version went live August of last year, so considering it’s December now, this has been a long time in the making. The goal initially was to show that it was possible for the product to sell itself if we made that available in the product and the first iteration was pretty basic. 

We shuffled features around and introduced this V1 of the Plus plan in the product. We didn't tell anyone about it and we only showed the plan to very few of our free customers. We had sales tell us what customers to exclude, so we excluded anyone with an open opportunity and anyone that sales was trying to go after based on usage. 

We exposed the plan to a very small group of customers and we also got very few purchases of that plan. But V1 was really mostly about showing the company that it was possible to put this offer in the product and that the product could, to some extent, sell itself. 

The product didn't have a lot of bells and whistles around paid feature discovery, we simply put the plan in there. And without any work, we could show that it was getting purchased and people were using it. We slowly worked towards convincing our sales teams and our leadership team that this is the right approach and they got more and more bought in. 

So that was phase one. Phase two, we reworked pricing and packaging and we opened it up more. We released it to all customers in the product, no more sales exclusions or restrictions on who could see it. We still weren't able to promote it or put it on our website, it was still only in product. And slowly but surely we showed again that having more people have access to it means we have more people purchasing it. 

We kept iterating on that version for quite a while, and then we had some broader changes around pricing and packaging, as we were going to market more as a platform. So we had the opportunity to make a V3 of the offering, which is what it is now. That includes more features from our additional products, combining them into that self-serve platform that we have today. 

From there, we set up an official launch date and got it out the door. We had a soft launch of V3 as well, making sure everything was working as expected. Then we slowly rolled this out, again, without a big splash. And then on October 17 is when we officially launched this in the market and made a big splash about it as well from a marketing perspective, got the pricing up on our website, and officially brought it out. 

But yeah, that was a, almost a year and a half after the first version of the plan was conceived in the product. So a really long journey, which shows how much convincing and how much testing and how many iterations we had to go through before we felt good about what we were officially launching.

Yes, that sounds like a diligent release process. Can you talk a bit about the concerns that were coming from the sales team or the broader organization? What was the tipping point to get people onboard with this plan?

Yes, I can speak to that also in relation to the model building and forecasting, which I didn't touch on earlier. We spent a lot of time building out the revenue opportunity of the self-serve plan with very realistic numbers based on the data that we were gathering through our alpha and beta versions of the plans. 

And with that same lens, we assessed the impact the plan had on our sales pipeline now that it was in the product, to ensure that we weren't cannibalizing sales pipeline. We wanted the Plus plan to be additive, not a realization of what we were making through the sales motion already. 

We knew that would be some cannibalization and that would be ok. We actually do not want sales to sell the $15k a year plan. We want them to focus on those more lucrative deals and have the product sell that $15k plan. So understanding cannibalization was a big concern. 

The fear was that we were going to sell this plan at a lower price point, which is great for customers, but weren’t going to make the revenue that we need to grow at the rate that we need to. So in all the models that we built, we focus a lot on cannibalization. We mapped out what cannibalization could be from net new customers that would now go on a self-serve plan, as well as existing customers that would potentially downgrade to this new plan. 

We were able to level set with leadership and the sales org that while some cannibalization would happen, net-net this would be additive and show that over time how this could become a significant part of our revenue - a healthy self-serve business that runs 24-7. It's not relying on humans to be out selling or not on vacation or whatever else. This is going to be an engine that will power the business for the long run and help sales team become way more focused and efficient.

Can you say something about the main levers you have in the model you created?

We're still fine tuning the model as we get more data, which is great as we learn more about how the plan is acting out in the real world. We can continue to fine tune what the forecasting will look like in the coming years. 

The main inputs we are thinking about in this model are really the full PLG journey. We can influence how many new users come to our website every week, every month. We can influence how many of those users sign up for our free plan. So how many of the visitors that we have end up signing up. And can we increase that conversion rate? That's the lever in itself. 

Once they've signed up, how many of them activate? How many of them actually get started with Amplitude? Amplitude is a relatively difficult product to get started with. You generally, not always, but you generally need engineering resources. It's not a single player tool unless you're an engineer. If you're a PM, you gotta ask your engineer for help. If you're a growth person, you also have to ask an engineer, and maybe you need permissions to other tools where the data is. It's not easy. 

So our activation rate has been hovering around, I would say 20%, 25%. And so already there, that's a huge lever. Can you improve the number of users who activate in your product? That's something that will have downstream effects on monetization. 

You also have to keep these users engaged over time. So as they activate and start using the product, do they continue using the product? And do we have what we need to keep them engaged? That's another lever. 

Then there's monetization. How many of the customers that are active in our product or of our total customers will buy the Plus plan? There will always be a big percentage that won't buy. And how can we improve that percentage? We're looking at best practices around 3% conversion rate of total customer base, which we're not at just yet. But working towards that and having that as another lever in the model. 

And then we have our existing free customer base, which is a big part of our user base today. We have been having the free plan for years. So what percentage of these existing customers can we attract with this new offering as well. 

Those are some of the main levers we have, that we can apply different levels of conviction and investment in. And that's also how we're structuring our teams, to go and focus on these various levers and improving the conversion rates between each stage in the journey.

I can imagine that when you're for example talking about the setup rate, which might require multiple people and systems, that you might also consider introducing a human touch here to improve that conversion rate. Is that something you've considered?

It's always a balance. I think there is generally a sentiment from the company that when we say self-serve, we mean self-serve. But my teams are always looking for ways that we can use humans in a scalable way. So this would be things like a one-to-many implementation with office hours where it's not a one-to-one experience,

We get lots of people in and they can ask their questions on a group call with a specialist that will guide them on how they get tracking started. We also have invested in education. The Amplitude Academy is a big resource where we have lots of courses and education resources. So that's another way where we try to scale humans in a way. 

And we have our community efforts as well, where we run a lot of “How to” style webinars to show how you use Amplitude, how you expand your use cases, how you use the product essentially, and what the best practices are. 

We're considering other experiments like what if we introduced a 30-minute call when you buy the self-serve plan or a check-in or anything like that we can do to ensure that you are adopting the features in the in the premium plan that you pay for, so you will see the value and continue to pay us for that plan.

One thing you mentioned is that even though you've been testing this plan for one and a half years already, you only went public with it recently. Even though it's only been a few months since the announcement, what have you learned since then?

Well, having it be officially out makes a huge difference. Having it out in the world and on your marketing website, on the pricing page, front and center, definitely makes a huge difference in terms of people signing up in the first place, but also how many end up buying it. 

We actually have a good amount of customers that get started and immediately upgrade to this new plan, which was something that was surprising to us. We thought everyone was going to start on the free plan for a while before reaching one of our limits and then upgrading to the paid plan. 

Another learning we've had so far is that about the tiers customers buy in self-serve. Some of the sales leadership and leadership at large were skeptical around the product being able to sell $20k of $30k a year price points. That seemed like a big investment that people would want to talk to sales or human to do those things instead of putting down a credit card. 

But when we launched the latest version of Plus, we increased the tiers that you were able to purchase. And we've actually seen a decent amount, I think north of 10% of customers, buying these higher tiered plans that some of us were skeptical anyone would go and do. 

That was proof that this could also work in the tier where sales potentially could still operate. And obviously there are benefits to self-serve. You can pay monthly versus yearly. And a lot of people just don't want to talk to sales. They just want to go their way and use the thing. Maybe they've used Amplitude before. They don't need a demo. They don't need help. They just want to get started. So that was another big learning. 

The other learning and muscle that we still have to build out really is around retention and churn. Monthly payments, very low priced items, we go as low as $60 a month, also increases the chances of customers churning. They're just testing it out or maybe they didn't like it or maybe they didn't see the ROI. 

Churn is something that we anticipated to be high, but are still navigating and figuring out how we best address it. How do we make sure that when someone starts paying us that they feel that it's worth it and continue to feel that it's worth it? 

This is really about education and making sure that our customers adopt this new plan, which is not something that we've done in the past because we didn't have the plan and we didn't invest a lot of resources in that part. So that's an area of opportunity for us to make sure that we retain these customers at a higher rate.

Before we close, is there anything you want to share?

Yes, I think I didn't touch on something that changes when you go from sales-led to product-led., which is what we’ve done. We've had a really amazing sales team that has been able to sell our product and now platform. They've been talking to our free customers every day, convincing them that they should upgrade to our paid plans for these extra features, added benefits, etcetera. So they've done all this selling. 

The product hasn't had to do any selling. It just had to be there and be useful. So as you move towards the product doing the selling, that's a massive work stream that you need to deploy dedicated resources to. You can't just release the thing and expect that people will find it, use it, and pay for it. You have to educate them, make it visible to them, show what the feature is, maybe even  give them access to the feature in some way, shape or form. 

That stream of paid feature awareness, discoverability, education, that cannot be underestimated and it cannot be separate from releasing a self-serve plan because you might release it and then not get the results that you want. 

And that's definitely something we saw in the early days. We weren't really seeing a huge increase in free to paid conversion, but we had also not invested in that paid feature discoverability or awareness. So that's something for anyone who is exploring this route, going from adding product-led to a sales motion, you've got to invest in this. 

You need dedicated growth marketers, you need dedicated engineers, dedicated PMs, maybe even dedicated data analysts to understand. the user journeys and what works and what doesn't, and continuously optimize this experience because this is going to be a key lever as you grow as well. 

It's an efficient investment and there's compounding effects that you don't get with sales team. But it's an investment nonetheless. So don't forget to do that, because otherwise you're going to come knocking six months from now and be like, “Franciska, we did this, but we didn't get anyone to buy it” and that would be because you didn't invest in that experience that sales has been doing really well one-to-one for years. So that's a huge learning and an area I would double down on.

I could not agree more. Thanks for highlighting that and for sharing your learnings today.

References

Amplitude

“If you think about it, a decent part of the humans in our Go-to-Market are teaching people how to use the product. Because people do want to try things before they buy." - Todd Olson

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The audio will be released on April 11th 2024

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Podcast notes

[00:24] Introducing Todd Olson and Pendo

[01:02] The Power of In-App Messaging for Growth

[02:21] Exploring PLG Strategies

[04:25] Efficient Growth and Customer Expansion

[10:36] Advanced Implementations

[14:36] The Future of AI in Product-Led Growth

Transcript

To set the stage, can you give a brief overview of how companies are using Pendo today to grow their business?

Pendo is a platform to help drive usage and adoption of software. It has a variety of components, starting with product data and analytics on the user journey. We then combine that with a broader set of capabilities. 

You could use that data to target users for in-app messaging, like step-by-step guided tours or widgets in the corner for self-service. And we have a set of qualitative features, like asking people what worked well, or what features they want.

We support a broad range of customers, from startups to large enterprises. We see folks use us a lot for Product-Led Growth. This is everything from providing guidance when they're coming into a freemium product, to driving nudges to advertise areas of a product that a user is not yet taking advantage of.

I also see a lot of our customers using Pendo to drive a more efficient go-to-market. Let’s for example say I have Customer Success Managers in a scale motion, where they have hundreds of accounts. They’re not going to call a hundred accounts every single week, you just can’t. But you can use signals from the product to help inform where you spend that time. This is something pretty common I see in our customer base.

You're touching on something interesting there. Combining Product-Led Growth with the human touch of a Sales or Customer Success team. A big topic nowadays is efficient growth. What are you seeing in this space that’s working well? Can you mention some examples of what companies are doing?

I'm going to take some simple abstractions how people can think about it. Let’s say you're a company that serves a broad set of the market, meaning you serve both small customers and big customers. In order to drive a more efficient go-to-market motion, I’m seeing companies trying to find a way to create much more automation around servicing customers under a certain size of employees, revenue or spend. Both on the acquisition side as well as on the post-sale side. 

Then there’s a large enterprise company we work with that does enterprise sales. They started using Pendo to do product-led sales engineering. They wanted to make sure that within a trial, the prospects are doing five things. They know that if they do these five things within a trial, they're more likely to convert to a customer. So they’re using a set of organized guides, nudges, and guidance like try this first, try this second, and so on. 

That's an awesome way to reduce the reliance on humans, by making sure people are seeing the product. If you think about it, for a decent part of the humans in our go-to-market, their job is teaching people how to use the product. Because people want to try things before they buy it. And that is something that frankly is a commodity, teaching someone how to use something. 

I'm seeing a lot of success with finding ways to offload that task from the humans. Then the humans are being used more for the value or the negotiations or the heavy differentiation from competitors or things like that. 

If we look beyond that, you already mentioned expansion before. There's different ways that a contract can grow after customer has bought a product. Can you talk a bit about how that can be done?

There's a couple ways to think about expansion. First, every product has natural levers built in that are going to drive expansion. For a lot of SaaS companies, historically speaking, that has been seats. These are well-defined expansion levers. As I hit certain thresholds, the product itself can start warning the customer, which is a good experience. 

The last thing any customer wants is being surprises that you’re going to charge more money. It's great when the product can start warning you. A lot of our customers will use our messages to warn customers they’re within 75% of their contracted seats. And then of course, as they run out of seats, there could be button to upgrade or they present an offer. That's one level of expansion. 

The other level of expansion is net new functionality or capabilities. We're seeing all sorts of cool stuff there. Citrix is one of our main reference customers, and they are a heavy user of this. Citrix's strategy was to buy up a bunch of companies, mostly in the collaboration space, and try to cross-sell across all of them. And they have dedicated marketers to just do in-app marketing. 

They’ll have customers using their signature product and want them to use their file sharing product. So they present the benefits of having file sharing combined with the signature product in the same platform and offer to unlock that functionality for 30 days. That's a great experience. 

The other thing that we've seen people do is have the menu items for other products available, but when you click on it, it shows a flyover that says this is locked and allows them to unlock it for 30 days. It could also invite them to talk to an account manager, where they can learn about the value of this and go down a more human-led path. 

I think those are great ways to expose people to new capabilities. We're even seeing this with banks. I was talking with a large bank recently. They were onboarding new customers. And what they realized is if they just pulled a customer into a simple checking account, that they aren't the stickiest of customers. As opposed to showing them rates on CDs and getting them into a CD product, which has some sort of like lifespan to it. That locks you in to a stickier customer. And that's something that we see banks doing. Which is super cool and fully product-led.

And if we look beyond expansion, so like beyond what we just discussed, what are some of the more advanced implementations that you're seeing happening with the tooling that you have available. Especially when it involves a combination with customer-facing teams?

We're seeing folks using our signals in internal apps, like Salesforce and other parts of the sales stack. I'll given an example of banking again, because it's actually a pretty interesting one. When a new customer joins a bank, the bank asks them “What do you care about? Debt consolidation. budgeting, etc”. Let's say you choose budgeting. The system then tells a banker, a human that owns that geography. 

When that banker is logging into their CRM, they get a notification that Todd signed up and said he's interested in budgeting. This leads to a really positive human experience. Imagine a banker calling me and saying, ''Hey, I just noticed you are interested in budgeting. Would you like to set up a consult with me? You could do it online, but I'd be happy to do it personally.'' 

That's a great experience. Someone proactively reaching out to me who knows exactly what I want. That's the stuff that I think is super interesting because in general, people like personalized experiences. And the more personalized we can make it, the greater chance of conversion, and honestly, the more pleasant it is. 

That's why this combination of data and messaging is just so powerful. We have some customers develop advanced onboarding flows. asking the user “what do you care about?”. “Oh, I care about this feature” and it takes you on a bespoke onboarding flow that shows you that part of the product and gets you involved in that use case. 

Another derivation of that use case that I'm also seeing is we can look at website behavior. Todd was surfing these features on our website. Todd signs up for the product. And then it just immediately prompts me “hey, we noticed you were looking at trailers, let me show you the trailer part of our website”. 

The kinds of experiences that are highly personalized and it knows exactly what I'm looking for. That's ultimately a great experience. And technology is starting to evolve to do that. 

So what’s next? What opportunities should companies think about in this space?

I think AI is going to play a really interesting part. We have amazing signals in our data because we know when people perform a conversion event in a piece of software. We can start understanding the behavior that precedes it and start auto suggesting that customers that have this sort of experience automatically are five times more likely to convert from free to paid. Those are the kind of things that I'm very excited about.

Right now there are growth marketers and growth PMs, that spend a lot of time sifting through data. They spend a lot of time trying to formulate well-formed experiments to drive growth within their products. And look, there's smart people but I think AI will start auto suggesting campaigns and ideas that, frankly, the other folks just won't find. 

Because it's highly inefficient to go through all of the data and looking for some of these signals. So usually what happens is a growth person will have a thesis. And they go get some data and validate it with an experiment. I think the cool piece will be if AI could come up with different campaigns based on different desired outcomes. 

Free to paid is one outcome. Another outcome is retaining a customer. We can look at all the customers that stopped coming to our product in the last 90 days. Let's compare all their behavior versus people that did come back. And try to get a model of these people and then let's design onboarding flows around it. Let's make sure that we get a list of people who haven't done that so we can go proactively reach to them. 

There's a lot of automation we can drive. We still want humans to be checking it and validating it, but I think we should be able to increase the pace and number of experiments dramatically, which should have an impact.

Potentially fully AI driven campaigns. People are already doing it and manually, and I think we can drive a lot of automation to augment this and allow them to experiment faster with more confidence in the data.

Is there anything you want to share before we end?

This is an exciting time. I think if you aren’t thinking about ways to use some level of product-led techniques, then there's a risk of being left behind. In part because, regardless if you're talking to a large company or a small company, you have to meet users where they are. And we see people using technology at odd times of the day and on weekends. 

That means you can't rely 100% on human beings to be there to support and serve your users. You need to find other ways to augment that. And I think product-led techniques are a great one. And I think it's only getting more exciting with the advancements of AI and other technologies.

All right, thanks so much for joining today, Todd.

References

Pendo

“Boiling the ocean is a recipe for disaster with PLG. So pick a playbook to focus on first and ignore the others for now. You'll get to them." - Ben Williams

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• Spotify

• Apple Podcasts

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Podcast notes

[00:22] Introducing Ben Williams

[00:53] Combining PLG and Sales: Insights from Snyk

[06:21] Key Metrics for PLG Success

[08:39] Beyond Acquisition: PLG's Role in Retention and Expansion

[11:30] Integrating PLG into Sales-Led Organizations

[18:19] Deciding Where to Start with PLG

[20:13] Closing Remarks

Transcript

To get us started, can you share an example of how you combined Product-Led Growth and sales in a previous role?

I think the most well-known and arguably most successful example at scale that I have, would be from my time at Snyk. The entire motion from Snyk was actually built around bottom-up adoption of the product as a means to drive company-wide monetization. 

The founders understood that developers at that time were increasingly caring about security of their code. They needed better tools and less friction than they had. What made Snyk so successful was that crazy focus on the developer experience. Not just in the product itself, but also the go-to-market model. Much of the success of Snyk has been fueled by product growth, which I think is an acknowledgement of the reality that most developers would rather not talk to sales folks. 

At Snyk, we were trying to build a massive free user base, but not to try and monetize individuals there. We knew that if we were able to get a large volume of happy individual developers using Snyk for free, then they would be more likely to pay for the product when the need arose. When they wanted to use Snyk in a bigger team or when they wanted to go from a personal use case to a business use case. 

There were a lot of open source maintainers using Snyk on their projects. And it was common for those developers who started using Snyk in open source to introduce it at the companies they worked at. So that whole notion of bottom-up adoption was fundamental to the strategy. 

In the early days, I think as is the case in most companies, sellers would try to speak with anyone who came through the product door, that we could identify as being from a big company. And I think that was generally okay, because the first sellers were super close to the product team and through those customer conversations, a great deal was learned that helped shape the product's evolution. 

But that situation, probably went on a bit longer than it should have, before the process was refined out of necessity as the signup volume increased. We needed to have a filter that helped the sales team prioritize which prospects they engage with. At first that model was based around simple signals, like has the account reached any kind of usage limits? Has a threshold been reached in terms of contributing developers, which was the licensing mechanism? Has there been a self-serve purchase? 

There was a kind of naive, non-scientific definition of activation. This was broken down into what we called success levels, with different success levels scoring differently. Over time, as we gathered enough behavioral usage data, we were able to confidently redefine that. We replaced those success level metrics into something that was actually predictive of retention and of monetization. And we integrated that into the the product qualified accounts scoring model. 

I think one interesting thing to note is there was never any pushback from the sales team about potential cannibalization of the self serve motion. They had seen historically that the bottom-up motion was just so important in fueling the enterprise pipeline. 

In fact, even at the scale that Snyk was when I left at the end of 2022, nearly half of all recurring revenue came from companies who started using the product in a really meaningful way before any kind of sales engagement. And that is a metric I call product influenced revenue. It was quite demonstrative of the impact the bottom-up motion had on the overall revenue motion.

Besides product influenced revenue, are there any other metrics that companies need to look at when assessing if PLG is adding value to their go-to market?

Well, PLG has such a wide spectrum. How you track impact is going to be dependent on the focus and the qualitative goals you have for the initiative. Why are you doing this? 

If you're solving a problem that end users deem super important and it's painful enough for them to be actively seeking out solutions, then the efficacy of your product-led acquisition motion will be something that is important to track. 

From a sales perspective, you'd probably want to look at the dollar value of qualified pipeline that's generated as well as tracking the conversion rate of that pipeline when compared with the outbound motion. Over time you'd also want to compare things like LTV and net revenue retention between the different pipeline sources.

At Snyk net revenue retention was something we tracked closely. In the context of product-led sales, net revenue retention was actually double digit percentage points higher for customers that came through product usage. In other words, they were in that product influenced revenue bucket. versus the outbound motion. And that was obviously a significant finding for us. 

CAC and payback period may also be things you're looking to improve. You might want to cohort things like ACV, time to value, time to close and so on. But you have to go back to the basics and ask yourselves, what are you trying to improve? What's most important to you as a business? 

And the answer can't be all the things, or at least not to start with. I think focus is really important. Understanding what is most important to the business as you're embarking on this journey, setting your sights on improving that thing and figuring out what you need to measure to do that.

Based on your experience, what should people keep in mind when when combining PLG with an existing sales team?

Trying to introduce a motion for bottom-up adoption and generate top of funnel isn't going to work if there is little organic demand from end users. There has to be this user problem that is burning enough that those users are motivated to be out there actively looking for a solution to that problem. 

Without that fundamental dynamic, a product-led acquisition strategy is probably just not appropriate. And that's often the case for many enterprise sales-led companies. They're solving big meaty company level problems and have less focus on user level problems. In that case product-led acquisition might be less of a focus. 

It's my strong belief though that every company will need to become product-led in their approach to retention through delivering exceptional user experiences. The alternative is that those companies will eventually be disrupted by others that enter the market. These companies will provide the same value, but package it in a way that users love to use. When your product drives strong usage retention, strong revenue retention typically follows. 

If you can build your monetization escalator effectively, you can find ways to generate more revenue from each customer over time. Whether that's through expansion to more users, with more consumption, or with adoption of additional use cases. 

When you combine that product-led focus on usage retention with proper product instrumentation, you can begin to arm the sales team with the signals they need to farm the existing customer base for expansion opportunities. This lets the product take at least some of the load in nurturing opportunities with sales, and harvesting them when those opportunities are ripe and not before. 

A common pitfall I see with companies trying to introduce product-led motions into sales-led companies and vice versa, is when intervention in an opportunity is premature. So defining a collaboration model that has patience at its core. and understanding the right signals in terms of the right time to engage is really important. 

Establishing guard rails between product and sales can be really important too. When it comes to the meat of the work in terms of integrating PLG into a traditionally sales led organization. I think you most importantly have to be really conscious of the existing culture. And not try to push up against it too hard. The most effective way I've found is often to not disrupt the existing motion at all. I think it can be catastrophic if you try to change things wholesale before proving things out. 

Instead, I think it's far more effective to form a small tiger team, with the right people involved, including folks from product, growth, sales, and data. And have that team accountable and responsible for go-to-market experimentation. Think of it as an experiment to figure out what are the important signals? How should we score those signals? When's the right time to engage with an opportunity that's coming from the product? How should we engage? And not try to boil the ocean. 

It can be tempting to focus on all the different ways in which you can look at what's going on in the product and all the different playbooks you might run. Whether it is expansion, new revenue or  churn prevention. But at the end of the day, boiling the ocean is a recipe for disaster.

Pick a playbook to focus on first and ignore the others for now. At the end of the day, I think no process, no scoring model is going to be perfect. If you start simple and you approach it in the right way, methodically, you can make sure you stand the best chance of iterating your way to something that's highly effective.

You mentioned that at Snyk there wasn't a lot of objection coming from the sales team around PLG. Unfortunately that's not always the case. Do you have any suggestions how to deal with concerns or objections from the sales organization?

I think building confidence across the organization is important. It may be that your executive team is already aligned or it may be, you're a kind of sole voice championing this. There are a couple of upfront approaches that combined I’ve seen to be effective. 

You can start with making some comparisons with successful applications of product-led strategies in comparable companies and situations. Those examples don't need to be in the same industry. You might not even have the luxury of examples in the same industry. But the example should have similar context around the business and the market dynamics. 

Actually, if you reach out to product and growth leaders at companies that have those similarities in model, they're often really happy to share their journey and share what works. Building a portfolio of  examples like that can go a long way in making it feel like this is something that is achievable for us. That it's a path that's been trodden before. 

The second thing is building out a model around your business. Sure, that model is going to be laden with assumptions, but you have to have alignment about why you're considering PLG and what the goals are. You have to have some kind of realistic foundation in why and how, whatever it is that you're looking to do, can help you achieve those goals. 

Also when you're doing that, consider alternatives, like what if we didn't do this strategy? If we didn't do this, we could do that. That helps you present a more balanced perspective and not feel like you're necessarily just cheerleading on some passion project of yours. When you approach things  methodically and the case you bring forward is well thought out and well researched, I think it's certainly going to inspire more confidence. 

It can be useful also to think of any initiatives in this area as experiments. An exercise in learning how to grow. Though that can be a double edged sword as well. You can't mistake that for lack of commitment. Because PLG is not a quick fix. It's not a quick fix for anything. It is a strategic shift that needs long-term commitment. But pilot style projects can help build confidence for sure. 

One of my clients implemented a small ungated product experience on their marketing site before making the decision to adopt a freemium strategy. After validation they created a full fledged free plan and self-serve motion with a monetization escalator around that. So identifying those things that you can do to build confidence on a smaller scale before you invest further, that can be a worthwhile exercise. 

Particularly when you're in an organization that has a strong sales-led culture. If you can find some people in the sales organization, who have seen this working before in other places and recruit them as champions. If you have voices on the inside of a sales organization who are passionate advocates for the ideas that you're proposing. That can go a long way in terms of gaining acceptance within the broader organization.

As a final question, how do companies decide where to start adding PLG to their sales system? Is it the most value-adding place, or the most accessible?

It definitely helps to have someone in the team who's lived and learned across a variety of different hybrid go-to-market models. So, in the absence of that type of experience in-house leaning on an advisor can be hugely beneficial. 

I think building a growth model can really help you develop this shared sense of understanding around what are the bottlenecks in your business, in how you grow. What are the constraints and why do those constraints exist? And with that help you really hone in and identify the places where elements of PLG might help.

Apply critical thinking as well. If we were to apply PLG here, what would that look like? Why do we have any confidence that doing so would alleviate this constraint or this bottleneck in our growth model? Do we have an acquisition problem or should the priority be on improving retention? And do you have the right situational content? Are there ingredients in place for that to happen? 

Lastly if you're focusing on acquisition with PLG, then the market dynamic needs to be there. The user demand needs to be there. You can't just go out and build something and expect folks to come if they are not out there trying to solve the problem on their own. 

I've found an effective way to decide is by modeling the business, understanding the constraints, understanding your goals for PLG and then figuring out the right place to start in terms of achieving those goals.

Thanks for joining us Ben.

References

The Product-Led Geek

"Sometimes you need those human calories to land a deal because it's a larger customer, or maybe it's a very complex product, or there's multiple decision makers in the process." - Japna Sethi

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Audio links

The audio will be released on April 25th 2024

Video

Podcast notes

[00:22] Introducing Japna Sethi

[00:45] Product-Led Growth and Sales-Led Growth

[04:14] Overcoming Pitfalls and Embracing Patience

[08:33] PLG with Sales Teams: Real-World Examples

[13:42] When PLG and Sales Don't Perfectly Align

[17:02] Product Growth with Support and Customer Success

[25:28] Assessing the Fit for a PLG Strategy in Your Business

[29:44] Final Thoughts and Advice on Implementing PLG

Transcript

You've been part of a number of successful companies that use PLG to grow their audience. Have you noticed any pattern between these companies that contributes to their success?

A few things that I've noticed are more around practices of how you think about strategy. One thing is, a lot of companies tend to think about PLG and SLG, sales led growth, as black and white. Two different binary options that they must choose from.  And this gives people choice paralysis to figure out what's a good fit for their product, for their target customer, and their market. 

I don't think that choice is as binary or as black and white as people make it seem to be. I think about a Go-to-Market motion as a spectrum where you have, pure play PLG and pure enterprise sales on either side of the spectrum. And as we evolve, as new companies develop, as markets change, we're trying to figure out where we are on that spectrum. 

Are we a little bit more product led? Are we a little bit more sales led? I think that if you are more flexible in your thinking of how you define your Go-to-Market model then you can be nuanced in your way of understanding your product. Is it a little bit more complex or is it easier? How do you find your customer? Who are the right buyer types? 

And how does the market actually change as time goes on? Some markets can be new, some can be established. If you take all these inputs into how you think about your Go-to-Market motion, you can be a little bit more flexible in determining where you are between PLG and SLG, and also how much you don't know yet because you have yet to learn and experiment.

That's one kind of learning that I've had over time. Another important point to make in terms of patterns of success is that once you have a set of hypotheses that you want to learn about, that you want to validate or invalidate, you need to actually give it the time it needs for you to invalidate or validate that hypothesis. 

I've seen many examples where folks have not given strategies a really good shot and then they see some early signal that doesn't look good and they automatically put a stamp of failure. And maybe six to twelve months later, they think maybe they didn't do this properly, or they didn't design that experiment right. Therefore the hypothesis still remains and they wonder if they should test again.

It makes teams cycle back and forth on decisions instead of having confidence that something worked or didn't work. So really good teams will actually give the strategy a good shot and then have confidence that they give a stamp of failure or a stamp of success and then they move on to the next thing.

So those are some two overarching patterns of success that I've seen across many companies. 

Another common challenge when you're using PLG to reach a wider audience is that it can take a while until you see results. How do you deal with that? 

I think you're referring to the case where, if a company is deciding that they want to implement PLG, they have expectations that it's going to take only a short amount of time to decide if that's actually going to work for them.

This goes back to these common pitfalls. A lot of companies that I advise will say: we're going to do PLG learning experiments this quarter and we're going to see if PLG works for us or not. I would say manage your own expectations properly. That's not how it works. 

People think of PLG as a magic growth motion. And as soon as you turn it on, do some hacky experiment where you change your button color or something, or just add a trial, everything becomes better and you have hockey stick growth and whatnot.

I don't know if there's a specific place I can pinpoint where these misconceptions have come from. I think it's because when we first coined the term growth it came from a world of consumer and social media products that were actually operating at pretty high scale and have even higher scale today.

And so experiments at a small scale could actually lead to a medium to larger impact and a lot of learnings about consumer behavior, because that was the nature of the product. It was high frequency engagement and applying the scientific method was relatively easier there, but we're operating in a world where a lot of B2B SaaS companies want to try PLG and it's just not the same. You just can't have the same expectations about how long things are going to take.

Plus we have things like Product-Led Sales and how do you combine PLG with traditional enterprise sales motions. So it's not something you can just turn on overnight and then see if an experiment works right away or not. That's the spiel I give folks. Manage your own expectations. Make sure you're applying the nuance of your product for where all of these principles of growth have originally come from. 

For folks who have never tried any PLG type of methodology before, I usually say it takes a minimum of 12 months to see any fruits of your labor. Sometimes even longer than that and that's normal for B2B and B2B2C products. So pace yourself. And again, back to your original question and one of my philosophies, give a strategy proper time. Don't shoot yourself in the foot. 

The other thing I'd mention is that your approach to testing PLG is a portfolio approach of many different types of hypotheses and strategies that you may have in play. You want to make sure that it's balanced. Don't lose sight of other opportunities and keep in mind that you actually have flexibility in balancing short term bets with long term. 

Short term bets can be things like helping you to understand if you should invest in something in the long term. If it's a new opportunity or you guys haven't done research on it, you can implement some short term experiments that are learning experiments and then if they're successful, you can say “Great, this is a great long term bet that I can invest a little bit more in and do something that is probably going to have a larger impact and larger investment as well. But it's worth it because we have some more confidence now”. Pace yourself and try to develop a portfolio approach to your strategic approach as well. 

You touched a few times already on the combination of PLG with sales. Can you share any examples of how you combined a product led acquisition strategy with a sales team?

Yes, I mentioned a few times the expectation that you might work with sales. This is because of the overall evolution of what we call growth today. From this consumery social media era, to prosumer era, to now applying a lot of these methodologies to B2B products.

In B2B traditionally it was enterprise sales where a sales team would have some leads inbound or outbound and they would do a 30 minute demo with someone, get to know all of the folks on the prospects team, do a POC, maybe sign a deal etcetera. 

That's a lot of human calories to land one deal. Sometimes you need to spend those human calories to land a deal because maybe it's a large or mid market enterprise customer, or maybe it's a very complex product, or maybe there's multiple decision makers in the process within the prospect.

Then you need to work it a little bit more. However, the benefit of having both a successful PLG and SLG model together is to drive efficiency. I mentioned Go-to-Market is a spectrum with each of them at each side, so you're going to have to figure out where you are on the spectrum. I call that the API between PLG and SLG and folks call this Product-Led Sales. You're gonna have to figure out where that threshold is. Where is that API? And how do you communicate it between teams? That's really important. 

You asked about product led acquisition. This is essentially how you can use the existing product or existing users on your product to create more leads eventually and potentially even combine them with a sales approach.

In pretty much all of my last companies we were able to do this in some way. For example, at Dropbox we started as a prosumer product and then created a team's collaboration product. We called that Dropbox Business. One of the key signals for potentially creating a lead and sending this lead to the sales team to start talking to them and understanding their use cases more, was how many members you had on a team.

If you reach a certain threshold, perhaps it was a good idea to talk to sales. We started really simple because this API was just not a thing. No one talked about it before and so we literally didn't know what we were doing. We just put a stick in the ground and experimented with that and it was a new business and we grew Dropbox Business quite fast through this approach.

At Productboard, the product is a little bit more complex, so it was a bit more of a Product-Led Sales model where we used top of funnel to drive our sales team. But very similarly, it's a collaborative product. The value of the product is so much higher if you use it within a team and multiple personas in your team.

And again, if you had a certain team size or you had multiple different types of people in the team, like a product manager, product marketing persona, engineer, etcetera. Those would be signals to send this lead to sales and see if we could have a chat and uncover more complex use cases that our product could solve for them. And even at Calendly, very similar to the Dropbox example, it started as prosumer for the individual, but we layered on a bunch of team use cases. We have use cases like round robin, where someone can schedule a meeting with anyone on the team and collective group events, things like that. Especially for sales and recruiting personas.

So again, if you are using these types of collaborative features, you're engaging with other folks inside of your workspace. Those are signals to send to sales. And all of this is essentially a way to come up with key indicators of an account, that sales can use to personalize conversations. Sales already has firmographic and demographic data, but this is actually product behavior. 

I would say for more complex use cases that are worth talking about, maybe harder to discover, maybe harder to explain; there a high velocity sales team can help. We call that identifying a PQA or PQL and end up sending those to the appropriate sales team.

Have you ever seen cases where it didn't work out as you hoped it would? 

Yes, two ways to answer that question. Specifically with the teams use cases: not every product has a teams use case. I've worked a lot in productivity specific B2B SaaS and so that the collaboration aspect is a really great engagement loop and a high intent signal as we discussed, but your product may not be collaborative. It may not make sense to be collaborative and that's maybe not where the value is.

That doesn't mean that there aren't other signals that you can use to help understand if that account has high intent to talk to sales. Again, you've got to be nuanced to what your product is and what your target customer is. So that's one thing. 

The other way to answer your question is basically where have I seen issues or pitfalls of PLG teams working with sales teams where it didn't work, where this API kind of crashed essentially. And there are probably a lot more pitfalls that I'm going to mention but off the top of my head, sometimes,  especially when market conditions change, you have a really eager and hungry sales team, and perhaps your overall funnel is not generating enough leads.

And so your sales team starts to cherry pick in other pools of users that are not necessarily explicitly PQAs or PQLs that were sent to them. And when they start to cherry pick the PLG side, you get lower and lower intent, lower quality users. So your metrics start to degrade because they're taking the cream at the top, essentially.

That also has effects on the sales team because their efficiency metrics are also degrading, but they're trying to meet quota. So they're incentivized to do something a little bit opposite than the API that you set up. That doesn't work well because both of your metrics are suffering at the end of the day. 

And then this leads me to the second pitfall. Essentially your sales team is going to be spending their time trying to close deals on deal sizes that are going to be lower and lower if they are cherry picking into the PLG pool. For example, I've seen companies where sales teams are spending time on deals between 2 and 5K. 

That's pretty low. I don't think the ROI is there. It doesn't really make sense for them to spend those calories because a calorie isn't going to translate into more dollars than what you would if you had just let them convert self serve or with high velocity assist motion. So you have to always keep that ratio in mind. Consider if it is a ratio that actually makes sense for the business to continue operating at efficiently. 

And we're talking about sales all this time, but what about support and customer success? What are some examples of product growth teams working collaboratively with this part of the Go-to-Market? 

Yeah, that's a really great question. We always love to talk about sales a little bit more and then customer support are the follow ups. But I actually truly believe they need to have a seat at the table when it comes to creating a cross organizational growth team and taking care of your self serve customers or the lower touch customer segment.

It's really important to work collaboratively with support and customer success. I actually find that they're one of the teams that have the best nuanced understanding of how customers are operating the product. More so than any product research you can do on your own. So definitely take advantage of your success team. 

One example where I've worked with customer success and it was really successful was at Productboard, where we built a scaled customer success team. They would have goals and metrics against some of the lower touch customer segments. We wanted to create an integrated customer experience, both in product and using outer product channels. All towards the same goals. It would be consistent and unified communication messaging, depending on what were the goals for that customer. 

Productboard has quite a complex product. We serve product management teams, help them plan, generate insights from the customers in the market, help them create strategies and ultimately roadmaps to execute against. So it owns the product management lifecycle end to end. 

Our trial was really short and we needed to figure out what is the customer journey for a new customer overall, even someone who's converted. So we tried to be a little bit more prescriptive on what are the specific milestones we want a customer to achieve. And what does health mean and look like? And how can we create something a little bit more holistic in terms of the user experience and journey? 

We did this exercise and we partnered very closely with customer success because they had been working on this part of the user journey for a really long time and knew a ton about the different pathways it would take to get a customer to be healthy and green. And we did this exercise both from a quantitative perspective and a qualitative perspective. 

We created this 90 day journey map which was an artifact for us as a team, but it was also an artifact for customer success because they had been a part of it from the beginning and bought into this design exercise. So we were all aligned on this living artifact that actually stayed useful and stayed alive for quite a long time. 

Then the second thing that was really great is that we created goals that were either shared goals or complimentary goals in terms of metrics that we wanted our teams to drive. And that's wonderful because sometimes you are working with a different department and their goals are completely different or even worse: slightly opposite.

Then your cross organizational growth team, which really should be everyone from every channel, has tension and conflict when they're trying to figure out how to execute a project. And when your goals are shared or complimentary, the tension is gone and the meetings are so much more effective and collaborative, This is what ended up happening at Productboard in our relationship with the customer success team. 

So my overall advice and takeaway from this example is: Make sure you're involving your cross organizational team members early on and getting their buy in. Stakeholder management 101, but it's always easy to forget. And try to shoot for shared goals or complementary goals, so it'll make your life and your team members lives a lot easier. 

You've been at some companies that you said already had this prosumer focus So they're creating a large user base. How do you handle that in those scenarios? 

So when you have a very large free user base, over time your support teams have to prioritize their time and which types of customers they support. We did have another model that we used to collaborate with support and customer success.

Again, this probably has a name today in the realm of high velocity sales but at the time I was working at Dropbox, this didn't have a name. So we were trying to figure things out on our own and experiment with what would work with our more complex teams use cases.

We wanted to see if a calorie from a human or two could help increase conversion and we actually worked with our support team first. These were folks who knew the product and customer really well, could help customers make decisions, unblock things or reduce friction for the customers in our product.

We were used to giving a lot of support, but obviously, if you have millions of free users you have to prioritize your time. So we created a set of experiments where we would proactively show chat pop ups in different parts of the product. First starting with conversion moments to say “Hey, this is Japna from the support team, any questions I can help answer for you?”. “You seem like you might be having trouble making a decision…” and a user might see that and might ask about the difference between this plan and that plan or explain their situation to ask what's the best fit for them.

So we started experimenting with this motion, just at conversion, small percentage of the population, very small support team as well. We just wanted to see, if this was going to generate more revenue than if we didn’t do anything at all and the user was just thinking about the decision on their own. 

We saw success there. So then we doubled down on this and created a few different types of experiments in different parts of the funnel. Maybe we can expand this to different user types as well. So we started at conversion, then we also wanted to help people make the jump between free and trials.

So generating more trial starts was another kind of important decision point. We eventually grew this program so large over time that we had to spin out our own team of what we called “support assist” or I think a lot of people call them product specialists today. But essentially these people have deeper technical knowledge of the product and can help users and customers make decisions, reduce friction in their conversion moments.

It grew into a very large organization that supported the self-serve product led motion, and essentially was our version of high velocity sales. And this was not leads that we sent to sales, like PQLs or anything like that. This was simply just some friction points where a human in the loop could help reduce friction. And that was how we scaled that out over a really large user base at Dropbox and it started having revenue goals and conversion goals after proving certain success. 

That’s amazing. Taking a step back, what are the three things you look at when assessing whether a PLG strategy is right for a business? 

My first thing is going back to the beginning of our conversation today, where I talked about the Go-to-Market motion and how it's a spectrum with PLG on one side and SLG on one side. And we're all trying to figure out where we are. So for example, a few companies I've invested in actually sell tools directly to growth teams or PLG teams or high velocity teams. That's their target market. 

So they're always talking about growth. They want to be as product led as possible, but their own Go-to-Market motion doesn't really make sense to have a PLG Go-to-Market motion because the market is just not that large. So they need to go outbound, do a lot of content marketing and branding and essentially find those specific buyers and decision makers who will purchase that tool.

For a lot of these Product-Led Sales tools that's the motion that makes sense to them, given the market size of the buyers and complexity of the product and the ACV of the product. So just be honest about your product and who you're targeting, how long it takes to implement, how long it takes to get value, and what that motion is. You can always improve it over time, but sometimes the PLG model is just not a fit. 

The other thing is, when I see that there's potential for a company to have a PLG model, I always ask them first what the state of their monetization user journey is. What does the funnel look like today? From acquisition to activation, conversion, engagement, and retention and expansion if there is retention. What do those numbers look like? And if you had to put it on a map and you had to assign a color, red, yellow, or green. What's working well, and what are problem areas?

And a lot of times people don't have this, so the first step is to actually just generate this assessment. But once you have this assessment, you get a clearer understanding of the funnel, where the money is coming from, and where the leaky parts of the bucket are. And if you were to apply any PLG strategies, where might you start? You should do this assessment, and you should continue to monitor the state of your entire funnel. Month over month, quarter over quarter, etc.

And then lastly, let's say you do this assessment and then you have, some ideas about where you want to start. There's a lot of different PLG methodologies or mechanics that you can apply. They may not always make sense with your product or with your Go-to-Market motion or where those, you know, yellow and red areas are.

There's that API between a product and sales via the Product-Led Sales motion. There's a lot of different mechanics. You can start to figure out which methodology you want to choose based on this end to end assessment and then start designing your experiments against those. And again, managing your expectations about how long it's going to take to see if that strategy works. 

Amazing. Before we wrap up for today, is there anything else you’d want to add? 

For folks who are determining whether or not PLG is right for them or they should try it: the one other pattern I've noticed when I talk to startups or do some advising is that sometimes people jump to wanting to drive growth or implementing a PLG motion too fast. and haven't yet actually proved product market fit. 

Before I even ask people, what their monetization journey looks, I will ask how confident are you that your product has product market fit? And you'd be surprised. A lot of people say, I'm not that confident. And then we'll start to talk about the signals that drive that feeling of either confidence or lack of confidence. If you're not confident, why are you thinking about implementing a PLG motion?

You should make sure your product actually has value before you try all of these different things and strategies to scale the product. Because trust me I've worked in a startup where we tried to drive growth. We spent a lot of money trying to drive growth for something that just didn't really stick with customers. And it was a constant uphill battle. That's not where you should be focusing your time and attention. It's much too early. 

So make sure you have that confidence and that confidence is coming from some substantial material evidence before you decide to implement strategies or even hire a team against PLG. 

Thanks so much for joining today, Japna.

References

Dropbox

Productboard

Calendly

"There's usually a heavy misalignment between sales, product, customer success and marketing because sales has probably traditionally been using the product as an acquisition machine." - Leah Tharin

Subscribe now

Audio links

The audio will be released on March 28th 2024

Video

Podcast notes

[00:22] Introducing Leah Tharin

[00:56] The Evolution and Impact of Product-Led Sales

[02:21] Combining PLG and Sales: Strategies and Challenges

[03:51] Identifying and Leveraging Buying Signals

[12:14] Navigating Sales Concerns

[16:42] Expanding into Enterprise with PLG

[23:42] Common Approaches when Introducing PLG

Transcript

You've worked with many different companies on their Product-Led Sales strategy. Can you share what you're seeing in the market? What's working well, and what are some of the common mistakes that are being made on that front? 

An interesting movement that we see is that traditionally we thought about Product-Led Growth and Sales-Led Growth as separate functions. Then we started to have some kind of combination with Product-Led Sales, which was also a little bit fuzzy. So what are we doing with it, what are we not doing with it? The way that I'm looking at this is, this is about data driven sales.

On a conceptual level, I always talk with companies from two perspectives. The first one, which we do really well in PLG, is about understanding the behavior of someone. We try to measure what they're doing in the product, but we really do not know who it is. We don't have a lot of knowledge about the firmographics. 

Whereas, if we talk about what sales does really well, it's the complete inverse. They don't know what people are doing in the product, but they know exactly who it is. If you think about a company account in five, six figures, it matters a lot who you are talking to. Is it the buyer? Is it a bigger company account? Are we talking to a team? Are we talking to a division? 

And what we see right now that seems to work really well is if you combine the best of these two worlds into each other, as much as you can. That's usually the starting point and this works really well. Rather than just like looking at your pipeline in regards to, we have self-serve and we have a sales led pipeline, we try to combine it as good as it gets. 

That is much more complicated than it sounds right now but that's a very good starting point. And we see some movements in the markets as well, that this is going to fortify itself. So this is becoming much more important. We see this for instance with HubSpot that was doing the Clearbit acquisition.

This is about data enrichment of your leads. So you're trying to give a little bit more meat to who you are actually talking to. 

All of this is about getting data for sales before they call someone up in the first place. We try to arm sales with data as much as we can, through enrichment and the behavior side, to help them close better. And that is a different word for making sales more efficient. So it is not only about getting new leads. It's also to identify which leads are worth reaching out to and how can we drive our CAC, and more importantly CAC payback, down? The goal is to get ahead of this commoditization that is happening right now in the markets where more and more players are starting to compete for the same amount of revenue per account. 

When you say you look at the behavior, that can still mean a lot of things. What are the most typical types of behavior that you look for?

The first decision that you have to make for yourself is am I looking at the behavior of an account and what is an account for me? For some products, this is a team. But there are some companies that have enterprise value customers that are like single users. Like traders or anyone that is giving you a lot of money if they make a lot of money. So high value based transactions or asset managers.

The first decision that you have to make is on the scope. What am I analyzing? Am I analyzing the individual user? Am I analyzing the team? This is usually where we start from. Now, when you talk about a company like Slack, that is also doing Product-Led Sales, then the account of their typical customers, is a collection of a lot of teams. They're still measuring on the team level, but they are defining some of their metrics on the account level. 

A very good example of this is that if you think about what does Slack defines as behavior that is telling you that an account is worth reaching out to, then you come across some things like: they have sent 2000 messages in the last 30 days across the account. And for usage-based products this is very valuable because they know as a commonality, it doesn't matter how many teams are in there, but if they start to send that many messages, the chance that the entire company is starting to onboard onto the tool is very high.

And that makes the job much easier. So what we usually try to do as a very first step in every sales led company is to get alignment on what is a common aha-moment. Something that is giving us a signal, that is measurable as well, that the team or the account has now received value. They now understand what the product is and have moved from being promised something to having experienced it. At this point they should be informed enough to know what we're talking about. That's usually the conceptual side of this question. 

Do you have any examples of what doesn't work well if you try this approach? What should people not try to measure vanity metrics or anything? 

I think a very common mistake is that people mistake engagement always as a buying signal. When we're doing Product-Led Sales, what we're trying to make sure is that we really only look for signals that also indicate buying pressure. That depends on your pricing. It depends on what kind of product that you have. Does it make sense that if someone is using something a lot that they also want to buy it? That's not always the case. So we are dealing now with a couple of new problems.

Let's say you have a self-serve motion that is giving you a lot of new leads. And let's say you have a thousand new leads per month from your sales funnel. Just because you look at the ones that are starting to interact with the product a lot does not mean that they're becoming good sales targets.

There's a complicated question behind this where you try to figure out what actually is a good buying signal. Rather than telling you like a very specific signal that is always wrong, which I cannot tell you, I can tell you that processes that do not consider this and are iterative about it usually fail.

It’s very rare that the signals that you're starting with are staying in place the way that they are after six months. The very first approach that we have is usually just a starting point. We see what works and in Product-Led Sales it's very commonly not just one signal, but it's multiple signals. For instance, a good one would be that if you have a very specific page that you would only look at if you're actually interested in buying the product. A very detailed pricing page or some kind of SLA agreements. Even though those by themselves are also not buying signals, they're important if you want to figure out whether they are more likely to be interested. 

Then those are usually generating a score together and if the score goes above a specific threshold, then we would consider them to be interested parties that want to buy with us. And that's the principle. So figuring out this threshold and what kind of signals are going into this is quite a piece of work and also a reason why I make money with it as an advisor in giving companies this kind of context on where to start and how to get there.

When we're talking about this combination of Product-Led Growth and sales in the end what we're often trying to do is making a Go-to-Market possible that else just wouldn't have happened. That just wouldn't be possible if you do it by themselves. Do you have any examples that come to mind? 

I think all companies right now have to deal with this and one of the reasons is that if you're doing this well, then you're doing it cheaper than the competition. A very good example of this is I usually have calls with companies that are asking me "should we have a freemium or should we not have a freemium?”. That's the wrong framing of the question. In some ways it's correct, but the problem is not whether if you should have one or not. The question is if it's possible to deliver value for free to your customers or your pipeline in some kind of way. And if you're not doing it and your competition is, then your competition will be cheaper.

Why does this matter? Because at the moment capital is not that cheap and everybody wants to have efficiency. We need to work with the money that we're getting in most of the time. VC money is just harder to come by. So you cannot afford to let go of that efficiency. That's the first reason. And the second reason for this is that we see a lot of pressure on the very classical sales metrics, like CAC payback. What is a good payback period for whoever we acquire and so forth. 

This goes a little bit into the same topic in that there is something happening in the market. People are paying less for the same solution but expect a higher quality and an easier onboarding. And this is due to two factors. One of them is AI. Everything becomes easier to build. Everything becomes therefore easier to be competed with and therefore the prices are starting to come down. And the other thing is that companies themselves do not have that much money anymore, because of these interest rates that we started to have in the last two years. And therefore if they have less money, that means they can spend less money with you. 

So these two effects are making this a topic for everyone. Unless you are in a vertical that really cannot be commoditized in some way. Very few verticals are not affected by AI. So I just want to make this clear. We are in some ways always affected right now. And this is an interesting move because it makes companies much smaller for the revenue that they create afterwards.

When we're looking at a company with a sales team that's already in place. When people start sharing the idea of "let's have a freemium" or "let's give something of our product away for free"  it often raises concerns. People start wondering if we introduce a lower price tier, does that cannibalize our revenue, or are we giving something away that we could have sold? How do you usually deal with this? 

So why sales are getting scared when this conversation starts is that this is the one function in the company that you're telling now that their salaries are in danger. Very commonly the way that we are incentivizing sales is that we have an OTE compensation plan where a bigger part of their money is actually coming from how much they close. And it's usually when the signature is happening, depending on how mature that your organization is and so forth. 

Of course we are threatening people's livelihood there. So how do we get this kind of story together that we are talking about Product-Led Growth because in the heads of people, Product-Led Growth is a freemium. It's not what it is though! And even people that are very prominent in the area, they're still misunderstanding this. It is not about freemiums. It is about self-serving value where it is possible. That can be a freemium, but can also be a trial, or an interactive demo.

Conceptually, I always think about it in these three levels. For almost every company, even API businesses without an actual interface, you can think of self-serving value in kind of three stages. One of them is a freemium. We give something for free for an indefinite amount of time that is giving you some kind of experience with the product. It's usually limited by usage. Or you have a trial where you tell a customer they can experience the full thing for a limited amount of time. Or you have an interactive demo, which is this emulation of what a product could feel like from different perspectives.

Why does this matter now? Because it's very rare that I tell a company that is sales led that they should jump straight away into the freemium, if they have never done a trial or an interactive demo in the first place. Because to them, interactive demos usually mean going to a marketing agency, that creates a nice video, and then this is somehow the interactive demo.

We have a lot of new companies right now that are trying to take care of sales demos. We have interactive demos from Navattic, Storylane, that kind of stuff. Gong is starting to get much more sophisticated with their sales tools. There's a lot of market out there to make sales processes easier and some of them are dealing with this.

Now, when you jump to a freemium right away, then you have problems because your existing pipeline will ask themselves, why should I pay $5,000 per user per year when you're giving it away for $30? So that's what's happening in sales people's heads and we need to address this slowly and carefully, of course.

This is the reason why they are scared. So to your question, how can we avoid this? First of all, by making a layered plan. A good approach on this is coming usually from two ways. The first one is we make sure that sales is still earning the same money that they did before, at the individual person level. 

And the other one is with an existing sales pipeline, you should make sure that your pricing is more aggressive rather than very lenient. The reason for this is that we want to make sure that we can open it up. Making things cheaper is always easier than making them more expensive. So that's usually how you want to approach this. Be more aggressive with pricing, so more expensive rather than cheap, and the other thing is tackling them with the compensation plans. 

As long as you don't know what you're doing, you have to figure this out in a slow way. The first time you have a trial going is also probably the first time for a sales led company where they have to do something with this data. The UX researchers suddenly have now trial users. They've never had that before. They probably had just customers. The designers now have to deal with the growth onboarding flow. When do we limit someone like this? When does this show in the product? And marketing is also somewhere. How do we reconcile this? There's a lot of structural changes that need to happen and those are challenging for a lot of companies. So do it step by step. 

You mentioned an example where you go from $5,000 a year to a much lower amount, but what if a company is selling six figure deals, $100k, $300k, and they're wondering if PLG is for them? Would love to hear some examples of where you've seen that work well.

Very good examples that are combining both of them requires a little bit of an asterisk first. If you look at the ACVs that we're talking about in terms of how much money do they pay with us the first time, then this view is a little bit dangerous. What we are really looking forward to in PLG or Product-Led Sales or in any way is usually expansion revenue. 

Expansion revenue is when do we consider an account to be matured? Now, this is extremely important because it is possible that you are offering some kind of trial version that allows a team to onboard, instead of an entire account, for a very low price point. So to your example, let's say your typical product costs $100k and now I'm going to introduce a trial that allows you to use some parts of the product in a limited way for $5,000. 

Now sales might say that maybe we could sell them on the bigger plan but if you have a good strategy in this regard, then this might be the plan all along. What we were trying to do is we're trying to show people the free value. If you have this, all this is fine. We start to see now a trend where companies try to use these trials to get the foot into the door with the bigger accounts. What does that mean? If you take a CRM like a HubSpot that can be deployed at an enterprise levels but also works in a team.

If you have an autonomous team it works, but it could also be rolled out onto the bigger company. If you have a discretionary budget where you can buy the software for $3,000 without approval, then what's happening is two things. The first one is if you buy the software then we are open as a vendor to this company. We are in their system. We start to have champions in the company, we're starting to spread. So we're starting to grab some value from them, even though it's not the full one.

Now, if you have a good Product-Led Sales motion, you will know with huge teams, let's say you're starting to sell into Microsoft. If we start to have five teams that are using our tool individually, then I can start to group this and I can start to reach out to the director of the entire department. I can start to move up. And even though the ACV will still be around $100k, so we demand much more money, it is incredibly useful at that point to say that they’ve been using us already for one year. 

With this the due diligence process becomes much easier. The duration to close is going from ten months to three to four months. And this is important to understand because you might think that you have four teams in your pipeline when you actually are working on the big account. So we’ll take the lower value accounts and we cannot convert everyone to the bigger accounts, but the goal is still to go after enterprise. This is a very clear momentum that we see in the market. Everybody wants to go up market and the ultimate goal is to get enterprise value before it becomes enterprise value

Alright, Leah thanks for sharing your insights.

References

Leah’s ProducTea

"Focusing on enterprise customers doesn't mean the same thing as not doing Product-Led Growth.” - Kyle Poyar

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Podcast notes

[02:32] Barriers to adopting Product-Led Growth

[06:31] Strategies for transitioning to Product-Led Growth

[11:07] Using PLG to create shared incentives across Go-to-Market teams

[13:07] Which companies aren’t the best fit for Product-Led Growth?

[17:10] Current market developments around Product-Led Growth

[22:32] A common mistake when going from PLG to enterprise

[25:02] Moving beyond user journey automation in PLG

Transcript

A company’s existing pricing model may not always be ready to support certain product-led motions. What have you seen companies struggle with on this front?

Well, there's a lot of barriers to shifting to a product led growth model. Pricing and packaging certainly come into play, because when we think about product-led growth, we think about focusing on end users and using the product as a means of acquiring, converting and retaining those users.

It often corresponds with:

1. Having some sort of free offering for people to try before they buy

2. A relatively affordable entry price. If you're getting all of these people in, who are more users or team leads for the product, then hat's often a lower starting deal size than many enterprise focused companies are used to.

3. And you need more simplicity and transparency around pricing. Folks would be hesitant to even try out a product if they think there's going to be sticker shock. Why invest all that sweat equity in setting it up, if it's just a nonstarter in terms of the affordability?

All those things are challenging to a business that's usually enterprise focused. Many companies give some discretion to sales to figure out pricing on a specific deal. Sometimes they call that value-based pricing. That type of model doesn't work so well in a product-led growth environment.

And often folks are thinking about cannibalization risks, because they might have some existing customers that are paying a lot of money. If they introduce an entry level package or have more transparency around pricing on their website, there's a risk of these existing customers wanting to downgrade to these other offerings. So if you have that history, it's definitely challenging to be able to adapt pricing to a way that fits PLG. 

I personally believe that usage-based models work really well in these situations, because you can really grow with the customer as they grow their usage and having a lightweight or affordable entry point is really just meaning you're offering less usage. In terms of the initial commitment and initial spend, classic seat-based subscription models might not work so well for that type of purchase. 

The other thing I would flag is that when you think about this idea of freemium or a free trial as part of letting people try before they buy, people start to really worry about what they are giving away.

They are concerned that it’s too generous and would mean someone can just keep using the free version and never need to upgrade. This often ends up being an excuse for watering down the free version so much, that it's not actually usable anymore for the high value customers you’re trying to attract. And it ends up only really being useful for like prosumers, personal users and small businesses.

Then you end up having all of these free users who have a support burden, but who have no real likelihood of converting to a big paying customer down the line. So you've got to really strike that balance. And unfortunately, I think too many people are nervous about offering too much, and then it ends up coming back to haunt them. 

Something that’s also common in PLG is to operate a land-and-expand motion. Proving that a model like this is better can take a long time and once you make the switch, it's hard to go back. How can a company get more confidence before making such a big step?

I think there's actually a lot of different routes to test out product-led growth strategies that don't require jumping into the deep end right away.

I like to prove out those different steps and sequentially build out a more sustainable PLG model. Ultimately it’s about using your product as a means for growth. That means it's more of a dimmer switch than an on or off switch.

There are companies that are quite extreme in terms of using the product across the entire journey and having most of the revenue come from self service purchasing without any human interaction. But the product can also be a great source of leads for the sales team.

A great example of that is where you have interactive demos on the website. This is a great way of taking existing prospects and getting them more interested in an actual demo and purchase process. There's also the expansion angle where once someone's an existing customer, they can try a free trial of a new product offering that you have. So there's a lot of different elements. 

The first thing I would try if I was doing sales and thinking about PLG is to test a Free Trial call to action on the website. This would actually be a person-assisted free trial, so not fully self serve. But someone can request a free trial and then gets set up in a 30 minute onboarding call. This way you can see if that actually meaningfully influences the number of folks that take an action when they visit the website.

Another angle is testing an interactive demo on the website. Interactive demos allow folks to see the experience of what using the product would look like and the value that they'd be able to get from it without actually doing all of the work around setting it up.

For many people, that's something that they want to be able to see before they ever talk to someone on the sales team. And once they've seen it, they're often a lot more bought in to the sales process. So we tend to find that when you have these interactive demos on the website, you're able to increase the amount of qualified demo requests. 

So those are really great product-led entry points. From there, I would think about moving towards a more self service free trial or freemium edition and you can often do that while continuing to have the same pricing. 

If you end up getting a lot of these free trial requests or free trial signups but they're ultimately not buying because the price is too high, that's when you can really start thinking about a new entry level kind of package or offering designed around this audience that already exists and is already eager to buy, just at a different price point than you're selling today.  

I tend to find what works best for testing PLG is focusing on an area that is known as a critical focus point for the business. So the business might need to get CAC payback down for a segment, or accelerate time to close or increase competitive win rates. 

Whatever is the number one thing the board currently cares about, I'm sure there's actually a PLG angle to go after that opportunity that might not have been considered. If you can apply PLG towards the main problems in the business, that ends up unlocking a lot of permission to go further on the PLG journey.

Are there any industries, types of companies or pricing models specifically where you’ve seen that PLG is just not the best or first idea a company should consider for growth?

Well, in our product benchmark survey from earlier this year, we surveyed hundreds of companies to get a sense for what categories seem to be ready for PLG and in which categories is PLG just a much harder sell or harder to pull off.

What we found is for anyone selling to a really small business audience, like an SMB or very small business audience, Product-Led Growth was very common. It was much less common if you're selling to large enterprises with a thousand or more employees. That's where we only saw 15 or 20% PLG adoption. So the size of your target customer matters a lot. 

The other angle that matters is the category of software that you offer. For any software that's sold to developers or in an infrastructure type of environment,  Product-Led Growth adoption is extremely high. There's almost an expectation now from the developer community that people should be able to use the product on a self-serve basis.

They don't want to be forced to talk to sales. But then if you look at categories like finance oriented technology, vertical specific software or legal tech, you see much lower PLG adoption. Some of these industries are just less tech savvy in the first place. The buyers don't really want a self-service experience. They might need help or want to have a more consultative experience. 

So, make sure that you're focusing on an industry where the way people want to buy your software is aligned with PLG. That would be takeaway number one.

Number two is when you think about SMB versus enterprise. At the enterprise there's more stakeholders involved in a purchase decision. There's also a lot more complexity to deal with when setting up the product and there’s a lot more data and workflows to deal with. That's obviously much harder to pull off PLG unless you can find a specific wedge within that bigger opportunity where someone can actually get up and running really quickly.

The final area that I’d point to is if you're selling to a very small business audience, your deal sizes are usually small. Maybe a couple hundred dollars a month. Then the CAC payback just can't support a high touch sales motion like in an enterprise setting, where you're maybe getting a couple hundred thousand dollar deal.

And so in that case, you are really looking for anything that you can do to automate the customer journey. To bring that into the product as opposed to having a human doing it manually. And so that's where it's a much more business critical from a KPI standpoint, to find lower CAC ways of doing business.

So I would say also make sure that you're applying PLG to be able to develop the unit economics that build an attractive business. If your business can support high touch experiences that win over these really high value customers, that's great. And maybe in those cases, PLG is not as much of a requirement. But if you need to focus on extreme efficiency, the calculation switches. 

And if you look at the market today, what do you see happening in the PLG space? It’s evolved a lot over the past years. What do you think is coming next?

PLG almost became trendy in 2021-2022 time frame. And I saw a number of companies trying PLG, but it was never core to their business model. It was more a side investment or side project because people thought they should be doing it.

In those cases, I've noticed people are disinvesting in PLG. They're doubling down on what they know works, to build a more efficient business. As anyone looks to do more with less, they're going to focus on what they know works, as opposed to the things that they see as experiments. 

I think that's actually a good thing for PLG. We're able to find folks where it's really meaningful for their business and have a conversation centered around that group, as opposed to having a lot of the casual observers jumping in or trying it out.

One thing I look at to see if PLG is effective is ”Product Influenced Revenue“ as a new metric. This measures how much of net new ARR starts with a meaningful product interaction before there's ever a human involved in the sales motion.

In our latest SaaS Benchmark Survey, we found that freemium companies have a range from 25 to 100 percent of revenue being product influenced. So there's a big range and just because a company has a freemium offering doesn't mean that the product influence is that meaningful.

Another thing is that for PLG to really take off, you need to find low cost scalable ways of acquiring users. A benefit of PLG is that you're able to reach people earlier in your buying process and you're able to bring along end users of the product rather than just this executive buyer who might not have time for you and is getting pitched by hundreds of other vendors.

So you're able to get these end users, show them value and have them advocate from the bottom up of adopting the technology. That is, if you can actually attract these end users at scale. It means that you need to be able to reach thousands of these people, a day, a week or a month. And you expect very high drop off rates in terms of how many folks that you reach end up signing up for the product and take further steps.

And the pain points that are motivating the end user are often different from the executive buyer. If you think about Salesforce, they're helping the CRO have predictable revenue. But if Salesforce is trying to get a sales rep as that individual user, the sales rep actually hates the manual data entry in CRMs and they hate the back and forth of scheduling meetings. So you have to keep that in mind.  

When you think about finding these scalable marketing channels, it's often a different skillset and a different set of channels than what folks are used to.

One of the key channels that has worked for many of the PLG companies that are great today is SEO. And that's a channel that I think looking ahead, I don't know if we can rely as much on SEO as that really efficient, cheap way of attracting thousands or hundreds of thousands of users to the website and to sign up for the product. With what generative AI is doing with SEO opportunities and zero click searches in general, we have to find other other alternatives. 

And so it's about starting to look at some more creative acquisition tactics around the community strategies, social media, particularly like whether it's Linkedin, TikTok, working with influencers. There's a totally different set of these tactics for reaching users than folks were using five years ago.

And finally, if we look at the flip side of that. What's something that you're hearing in the market or seeing companies do that doesn't make a lot of sense to you if you think about PLG?

I see some companies underestimate the value of their PLG efforts. There's some companies that make a shift into enterprise, for example Airtable made a big announcement about their shift to enterprise. 

What often happens is they're seeing that more and more of their revenue comes from enterprise customers  And enterprises often have higher retention and higher rates of expansion. So it looks like a really appealing customer target and they lose sight of how they're actually able to reach the enterprise. 

For many companies that were successful in going from PLG to enterprise, PLG was their opportunity to attract people that were an individual user at a larger company. They could get that person to try out the product on a self-service basis and then advocate for enterprise adoption.

But oftentimes it's like, because we're going enterprise, we're going to water down everything we're doing on PLG. We're going to kill any self-service access. We're going to raise prices for everyone. And it actually looks like it works the first couple of quarters.

But then they look back a year later, and they don't have a pool of users that they can fish from and turn into these enterprise customers. All of that has dried up because they totally disinvested in PLG, which was the foundation for their enterprise growth efforts.

So this notion of ”going enterprise means we kill PLG” often ends up looking short sighted, and I see that companies look back and regret some of the decisions they made later on.

Thanks so much for sharing your views with us Kyle.

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Openview

Growth Unhinged

“We knew that if somebody takes a trial, then we can demo the product with their website visitors, with their customers. It's way more powerful." - Pekka Koskinen

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[00:00] Introduction

[02:49] The Power of Free Trials and Feedback

[03:52] The Role of Analytics and Support

[06:55] An Unconventional Approach to Outbound

[13:24] Knowing When to Give Up on a Sale

[15:44] Key Roles in the Growth Journey

[17:33] Advice When Building a Business

[18:12] Conclusion and Upcoming Book Announcement

Transcript

Hi Pekka, thanks for joining. To get us started, can you tell us a bit about how the Go-to-Market model for Leadfeeder evolved in the beginning?

Sure. So we started Leadfeeder in 2012 with my co-founders Herkko and Vicent. Before that we were running a web analytics company called Snoobi. That was a Finnish based business, and the majority of our customers was in Finland. 

We were selling with outbound sales and we were figuring out how to go international. This is around 2010. So we started to build outbound sales teams in different countries. And we learned that doing the outbound sales driven internationalization motion wasn't that easy. It was very costly. 

At the same time, we were seeing really great startups coming from the US like HubSpot and others that had this like nice free trial experience. They were generating leads at a fraction of the cost that we had. And also they were able to close the deals better because customers already gotten some value before they needed to purchase something. 

When we made an exit from Snoobi in 2012, I wanted to build my next startup very differently. So we built Leadfeeder to be international product led growth first. This meant we wanted to become really efficient at how we go to market. 

In the first couple of months, we built a prototype of Leadfeeder and then just put it out there. We didn't even try to sell. There was no price. It was a free tool, you just sign up, use it and give us feedback. And we started to do Google AdWords on it. The idea was to start validating that there actually is a problem and that we have a solution for it. 

We ran Leadfeeder as a free product for a year until we then put the most interesting features behind a paywall. We then started to validate the next step in the startup journey, which is if our customers were willing to pay for this. And are they willing to pay month over month over month? Which is a key thing to grow the product market fit.

Back then we didn't have any support or sales around it. It was just pure self-service. And luckily we started to get purchases all over the world. We had signups from US and Central Europe and Nordics. And many of those then found the product to be good and started paying us. 

We had of course developed analytics all around it. So tracking how much can we drive traffic from AdWords? How well do they convert into signups? How does the signup funnel? What is the conversion to paid? And then we started to improve this.

We didn’t have sales or customer success, we only had support. And we saw that if we could talk with customers through support, then the probabilities of us making a sale was higher. So when we had a good flow of trials coming in, we started to think if it would make sense to contact these customers and explain them better how to use the product. 

We hired our first salespeople that were contacting the most promising trials that we got. That worked really efficiently compared to the old model that we had experienced in the previous company, where we were doing cold calling. 

This is how we started to add these commercialization steps and started to hire more people to call the trials. Next we were experimenting with what kind of customers are we contacting and how much effort are we putting into them. We were quite light touch, so if they didn't buy then we moved to the next one pretty quickly and didn't try to force the sale. 

We scaled this motion many years. I think it was like 2017, when we already had several millions of ARR, that we started to look at the other channels as well. With inbound marketing, you can only reach those that are already searching for the solution. But we knew that there's a big group around these innovators and early adopters that did not yet know that they need our solution. 

You can only reach those by outbound. So we started to invest in outbound sales and in channel partners like marketing agencies. Those were two ways how we could go outbound. Either having someone else talk about us, which is the marketing agencies, or hiring outbound salespeople to contact bigger clients ourselves. 

After that we were evaluating the customer acquisition cost compared to the lifetime value that we were getting from each channel and started to put more money behind the channels that had the best ratios. And that's how we then ended up with this model where we have several channels and they serve different purposes. They target different audiences basically.

I know from our conversations that the outbound motion you put in place focused on getting people to use the product first, before making a sale. That’s different from a traditional sales approach, in which outbound sales usually sells something first and then gives access. How did you decide to do this more unconventional approach?

Yeah, that’s true. Our outbound still went through the free trial phase. This usage phase was a must-have, because we were pushing the 14 day free trial so much on the website. If we would reach somebody through outbound and they would visit our website, they would want to have the free trial before they would decide. 

So it was very hard to not go that route. And we decided to include the trial in outbound as well. Because we also knew that if somebody takes a trial and they install the tracking script on their website, then we can demo the product with their data, with their website visitors, with their customers. It's way more powerful. 

And of course, we had tested this. We saw the conversion rates with customers where we demo their own data compared to showing our own website data or some demo website. It was totally different. With the trial, we could already start setting up the customer account and set searches or filters like during those demo calls. 

That proved to be very powerful. The customer could then after the demo have access to the tool and continue from where our discussion left. And then we just had to call them to try and close the deal, because the product has already proven the value.

You touched on some of it already, but what were the key stages in the development of the Go-to-Market model?

This is related to the steps to build a company. In the beginning, we validated if there was a problem and if we solved it. To do that, we gave the product away for free. Because you can always upsell those customers later. 

When you later put a price on it, you're not going to lose any revenue, because they didn't pay in the first place. In the second phase, we started trying to close the deal and get the validation that people were actually buying and staying with the platform. 

If we look at how you build a startup, that was the Product Market Fit stage. The next stage is Product Channel Fit. So what is the effective go to market motion to sell this? The ones we looked at were inbound, outbound and partnerships. 

For inbound, we had two variations. Either purely self serve or touched, which means that there's also sales involved there. So we had these four different channels that we monitored and started putting small bets, to see how well they performed. And started improving them, by looking at where we were seeing the best LTV to CAC ratio. 

It takes some time to understand what churn looks like in these different channels. This makes the LTV challenging to calculate. In the beginning, the CAC payback time is probably the best metric to look at. How quickly are we getting the sales investment back? Because that's typically easier to calculate. You basically take the salaries of the salespeople and the marketing costs. 

After that, you put more money behind the ones that work. You try to find a sales channel that is profitable, scalable and is predictable. Once you find that, you go to investors and say that you can turn €1 into €5 in 12 months.

You mentioned that when you added the sales team to the free trial motion, you made them call the most promising leads. Can you explain how you identified those leads? How did you make sure that the investment of the sales team is profitable?

We were looking at the conversion rates per segment. If I remember correctly, if there was no sales touch, the conversion rate was around 10%. And when we added sales, then the conversion rate was around 40%, so four times higher.

Then we started to look at how many deals one salesperson can handle in a month and how much revenue they can close. We were then able to calculate the effectivenesses. In the beginning, we only called the biggest customers, but then we expanded that in search for the best fit. We ended up in a situation where we were calling probably half of the trials. 

But it's also important to know when to give up. How long are you trying to keep selling? This is something that many companies do wrong. They stick too long with the clients that are not yet ready to buy. We pretty quickly moved to the next one. 

Anyway we had a freemium version. if you didn't buy during the trial, you could keep on using a limited free version. So we didn't really lose them. We just got back to them after six months. In the meantime, the product would have developed a lot. So it was like logical to get back to them and ask if they wanted to have a new trial and evaluate again.

What were some of the key roles that you put in place to make all of this happen?

In the beginning, we only had chat support in the product. That's the main way how customers could get help. After that, we started to recruit salespeople. And we saw that we don't need these traditional salespeople. We needed people that can help the customer get the value from the product and understand online marketing. 

So you're not really selling, you're showing how to get value from the product. Then the customer just wants to buy. It's a different focus when it comes to selling. So we tried to hire people that know about internet marketing and can add value to the customer.

It took quite a long time before we added customer success into the mix. When the product got more complicated, we needed to have people to help customers go beyond the first use case they saw. But we've always tried to keep the product as simple as possible so we wouldn't need to spend too much time there. We always made sure that the automated onboarding works well. We had support materials. and we tried to do things in a scalable way because we already had the volume.

Is there anything you want to add before we close off?

Well, building a company takes a long time and especially the early years are often a struggle. But once you hit Product Market Fit and Product Channel Fit, then it starts to go really well. Then just keep your eye on the customers and the numbers. 

I would really emphasize to make sure that in the beginning, the KPIs and the product analytics are in good shape. That was the instrumentation we used to fly the plane, because otherwise you are flying blind.

Thanks for sharing your experiences Pekka.

References

Leadfeeder

Dealfront