"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
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.