Is your Business Model a fit for PLG?

Where to start applying PLG - Part 1/2

To find your path on the PLG journey, it’s important to understand your current position in the market. Combined with the goals your company has set for the PLG efforts, this will give you an idea of the best places in the customer journey to start applying PLG.

To get a first understanding, I’ve created a test to assess some of the most important factors. The goal is to provide some direction towards what could be a good starting point for your first PLG wins.

While other starting points might be deemed more challenging by this test, that does not mean they are not worth exploring. It will typically just cost more time and effort to get them going, but depending on your goals and strategy, you could still decide to pursue them.

There is no need to keep track of your answers while reading through. An interactive version of this survey is available on this link and will provide you with a summarized result.

A survey for PLG-fit assessment

The biggest question for most companies when thinking about how to apply PLG, is if there is potential to do product-led customer acquisition or marketing to increase visibility in the market and gain new customers. So we’ll cover that but we’ll also look at some of the other possible tactics.

Disclaimer:

The guidelines below are meant as guidance based on what has commonly worked in the market. Every year there are companies that figure out something new and find ways to engage customers that haven’t been seen before.

This is how markets are disrupted. And if you think you can be that company, then don’t give up on that thought just because the questions below suggest a different approach.

This test is meant for the companies who are not sure where to begin with PLG. It aims to increase their chances of success as they start their journey, based on what has worked for other companies.

Now let’s start with the first questions:

Q1 – Does your product facilitate any kind of collaboration?

For example messaging, conferencing, task management, or design reviews.

• Yes

• No

Q2 – Does your product facilitate any kind of transaction of information or value?

For example sharing a survey, collecting payments, or signing a document.

• Yes

• No

Q3 – Does your product allow users to share or broadcast content?

For example sending email campaigns, sharing to social media, or sharing an internal report.

• Yes

• No

If you’ve answered Yes to any of these first 3 questions, then that’s an indication that you might be able to use PLG to drive user acquisition of marketing.

This doesn’t mean that you should jump straight there, but it is definitely an opportunity worth investigating as it can be a powerful driver of new customers and revenue for the business.

But even if your product doesn’t have all these characteristics, all hope for top of the funnel impact is not lost. Let’s explore another angle:

Q4 – How many potential users (i.e. people who would get an account on your product) are in your target audience?

For example if you on average serve 10 people per company and you total market is 2 Million companies, then that’s 20 Million users.

• More than 10 Million

• Less than 10 Million

Q5 – Do you have a secondary audience that is 10 Million people or more?

For example if you offer software for doctors to book appointments, then the patients who book them would be a secondary audience.

• Yes

• No

If you’ve answered Yes to one of the above two questions, then that means you have a large audience to work with and then there can be some angle for customer acquisition or marketing through the product experience.

Even if there is no natural way to get users to drive that, you could for example still consider releasing a new free product specifically aimed at driving this.

An example would be the free Logo API that Clearbit released, which got many companies to include and attribute Clearbit in their applications even though it is not one of their revenue drivers.

With a secondary audience the angle is slightly different. You would want to create a product-led motion that attracts more people from that audience, like patients leaving reviews for doctors.

By increasing the number of patients, your relevance for your main audience the doctors will grow. You can then introduce further features to connect patients with doctors to close the growth loop.

When there is no form of collaboration or sharing in your product, and there is no large audience to target in any way, then it might be hard to apply as a successful PLG motion at the top of the funnel.

Your options then are to either change those conditions (which would imply a change of strategy) or to start looking at the potential of product-led onboarding and expansion.

Next we’ll look at the actual price of your offering, which can say a lot about the potential of PLG in the customer journey.

Q6 – What is your typical first year contract value?

• Below $10,000

• Between $10,001 and $30,000

• Above $30,000

Q7 - Do you sell any other separate products for the same audience that are below $30,000?

• Yes

• No

If your typical contract value is above $30,000 then that usually means you’ll need some form of sales involved. This can still be a product-led motion with sales support however it most likely will not be product-only.

This is because at this deal size there are often different factors at play, like multiple decision makers to manage, drafting up implementation plans, and/or simply the desire of the customer to speak with someone.

All of these are topics are well-suited for a sales rep to help with and at this contract value the economics of that setup typically work out.

When we look at deal sizes between $10,001 and $30,000 then it can become harder to make the economics work with a sales-only approach, especially with the increased competition we see nowadays.

Therefore some form of product-led onboarding can be beneficial in this case, to provide the sales team with Product Qualified Leads that will have higher conversion rates than regular demo requests.

This is where free trials or a freemium model can be worth considering, to create a setup in which the product can filter out good-fit customers from your audience.

For deal sizes below $10,000, a product-led or product-supported growth motion is pretty much a must have. Even if you have a sales team in place, they will need to have conversion rates far above the usual inbound or outbound metrics and this is exactly what PQLs can deliver.

Lastly, even if your ACV is normally above $30,000, companies in this segment are seeing success with offering a lower priced product-led offering to then sell the bigger contract at a later point in time.

As a last step in this assessment, we’ll look at the structure of your pricing model.

Q8 – Do you have a standardized pricing model?

Do you use a price list for your offers as opposed to providing custom pricing to every customer.

• Yes

• No

Q9 – Does your pricing model support any type of scalable metric?

For example pricing by number of users / seats of by usage (credits, visitors, contacts, etc)

• Yes

• No

Q10 – Does your pricing model include add-ons or multiple products?

• Yes

• No

If you do not have a list price or always heavily discount your prices during sales conversations then it will be hard to build this part of the customer journey into your product.

If this is your situation then you could still look at product-led onboarding and have the product experience provide Product Qualified Leads (PQLs) for new business or for expansion.

But automating the actual buying journey in the product without having a customer facing team involved will be hard in this scenario.

If you do have standardize pricing but you typically only sell one product at a custom price, it will be hard to sell this through an automated motion or to expand the contract of an existing customer.

On the other hand, if your pricing can scale based on the number of users or usage and/or you have multiple products or add ons that people can buy in addition to their initial contract, then this provides a strong potential for product-led expansion.

This could for example enable a typical land-and-expand motion where the goal is to close the initial deal as fast as possible and then upsell. Even if the “land” part of this journey is not yet product-led, you could already become product-led on the “expand” part. This can often be done with much less effort.

So what now?

To summarize, the above questions should give you some guidance for which part of the customer journey you are well-positioned to introduce product-led principles.

That doesn’t mean the organization is ready to engage on these opportunities though. Another important thing to consider for that is the maturity of the current Go To Market motion of the company. We’ll cover this next week in the second part of this mini series.