PLG for Onboarding, Qualification, and Conversion
Customer Journey series – Part 2/3
Welcome back. I decided to speed things up a bit as we are going through some of the foundations of Product-Led Growth. So instead of having 7 editions covering the customer journey, I will combine multiple steps of the customer journey into one post.
Why do I even cover this? Well, there are so many different interpretations of what PLG is, that before I can actually get to the juicy part of how to apply PLG in your business, we need to have a common understanding of what we’re talking about.
This week I’ll cover applications of PLG in the customer journey from first engagement up until first payment. Let’s get started.
PLG for Onboarding
In this section we’ll look at one of the most fundamental differences between being product-led or doing sales. In a product-led motion a customer can start their onboarding journey long before they ever speak with a representative of the company.
This is in fact one of the most characterizing traits of a PLG motion. The steps to convert a customer with initial interest to an active user are very different. Instead of requiring a customer to sign a contract to get access, a product-led experience delivers value first, and only then asks the customer to pay.
Let’s explore what this means for the business.
Focusing on value delivery before selling
We’ll start at that first step of initial interest. A potential customer has done their research and identified your product as a possible solution to their problem. They have made their way to your website. What happens next?
In a traditional sales approach there would usually be a “Contact Sales” or “Book a demo” button on the website, which would bring the user to a form to collect their details for a call, and maybe even schedule it.
Good companies get the customer on the phone within minutes, but many make them wait longer. In all cases though, the customer will need to wait for that conversation before a next step can be taken. And they might be talking to the competition during that time.
In a product-led approach, there would typically be the option to “Start your free trial” or something more specific to the use-case the product facilitates like “Design for social media” on Canva.
After clicking this button, the user will be asked to fill out some of the same details as the Contact Sales form would have, to allow for customer segmentation. The big difference here is that once this is done, they are in the product and can start using it.
Delivering value
Those first moments in the product are all about showing value and getting the customer to their first “aha moment”. This is the first moment the user sees that your product can actually solve their problem.
Based on the usage, the product will identify qualified customers (more on that in the section on Qualification below) which will then be presented with offers to buy, either automatically or by sales.
But wait, did I say sales? I thought we were talking about PLG… Well just because you are product-led, doesn’t mean you can’t have sales. Nonetheless it usually operates slightly differently than in a traditional sales motion.
Sales in this context is generally referred to as Sales Assist. People in these roles are sometimes called Onboarding Specialist or Success Coach, and are more aimed at helping customers onboard and get value from the product and later in the journey to help them overcome the organizational hurdles to buy.
I’ll cover the role of sales assist and how to apply it in more detail in a future edition, but if you want more information in the meantime, Openview has a good article on it here.
The most important difference though is that if a customer doesn’t respond to sales, they can still continue their onboarding and use of the product. In a traditional sales motion that would not be possible, because the product is not accessible until the customer has at least spoken with a sales rep, if not signed a contract.
Changing the sales mindset
To introduce product-led onboarding in a company where growth has originally been driven by sales requires a change in mindset when looking at leads.
Instead of trying to get every lead on the phone as soon as possible, the goal is to onboard new customers on the product first and then qualify them through product usage so you can reach them when they are already seeing value.
For this approach to work for the existing sales team, it is paramount that the conversion metrics from signup to activation and first value are well understood and competitive.
This means the onboarding steps need to be intuitive and concise, in order to convert as many new users as possible to qualified customers. We’ll cover more on this in the next section.
PLG for Qualification
Traditionally in sales, customer qualification has largely been driven by customer characteristics like industry, size, and the contact person.
More advanced companies nowadays take additional layers into consideration, like recent events that might indicate that this customer is a good fit (new hires, recent funding, etc) all with the goal of making sure your sales team spends their time on leads that are likely to convert.
Another way of qualifying customers is by looking at their behavior in the product. If you qualify customers in a product-led way, then the sales team only reaches out to those leads who have taken qualifying actions within the product.
This qualification can take the full picture into account. Aside from looking at behavior, information can also assessed from connected integrations (a CRM, a calendar, etc) or from data entered by the user while using the product (a job post, a project, a team, etc).
Letting the product qualify your leads
There are two important differences between product-led qualification and the way leads are typically qualified in traditional sales.
Firstly, even if a lead is not qualified yet or even disqualified, they can typically continue using the product through self-service without ever knowing that they are not qualified.
Depending on the business model of the company they could even still be able to buy through self-service or proactively request a quote from sales if they are ready to buy. In traditional sales a disqualified lead can usually not engage further with the company.
Secondly, qualification typically happens more than once or is even ongoing. If a company has a freemium model, they might requalify all accounts on a daily or weekly basis. If a company has a free trial, there might be multiple moments or triggers during the trial at which the qualification status is reassessed.
The goal is to have sales reach out at the right time and to let the product do the initial heavy lifting. This again is very different from how this is done in traditional sales, where qualification is typically done only once.
Building confidence in the product
To move to product-led qualification you will need to build confidence in the onboarding process and automated qualification process amongst the revenue organization.
You are basically telling them that while leads are coming in, they will not reach out to them. They are going to wait and assess the product usage and only a subset of those will actually reach the sales team. You will need some numbers to back up a proposal like this.
The goal though is to provide sales with much better leads that will have higher closing rates. Nonetheless it will feel unnatural to the sales team to let leads sit there, and if the process doesn’t work well you risk losing good leads and revenue.
This can for example be the case if the product is too hard to use, if the required learning curve takes too long, or if the onboarding process is not mature enough.
Also, an automated qualification process might not always behave as intended. Especially not in the beginning. It is therefore of critical importance to be measuring and regularly assessing the success of each part of the process.
I generally recommend an open dialogue with the sales team to give them the ability to point out parts of the process that seem suboptimal. Your sales team knows best how to sell to your customers and they know which narratives drive success in the sales process. Product-led qualification cannot be implemented without their involvement.
Combining the best of both worlds
If your organization grows mainly through sales today, then you should have a good sense of which leads are a good fit, regardless of their product usage. To de-risk you endeavor into PLG, you most likely don’t want to go all-in on product-led right away. Luckily there’s good ways to combine the two.
You can for example have product-led qualification as a primary qualifier, but still reach out to certain ICP profiles proactively regardless of their product usage. This approach will de-risk your transition and will get you much easier buy-in from the sales team.
It’s important though to give the product a chance to deliver the value you’re looking for in the majority of the cases. This way you are learning the right things to get better at product-led qualification.
This could mean that the sales team reaches out a bit later, but still reaches out. Having the sales motion as a fallback can be a good safety net until you are more confident about the numbers.
There are other scenarios in which this combined offering can be useful. For example, many product-led companies have a bottom-up motion where single users can start using the software. The customer could buy a single user license through self-service and only when a certain number of users is reached, does the account qualify for sales.
Getting qualification right requires a leap of faith from the old ways to the new product-led way. It’s important therefore to make decisions based on data and real-life examples and to keep an open dialogue.
Another topic where this is the case is the approach to closing deals, which we will explore in the next section on Conversion.
PLG for Conversion
In a traditional sales motion the goal of the sales rep is usually to identify the complete need of the customer and provide a proposal covering all of that.
This is further emphasized by how we reward sales reps, which is typically a commission based on closed deals that ignores expansion that happens later, where expansion is often accredited to a different team.
As we discussed in the section on PLG for onboarding, in a product-led buying process the customer receives value first before deciding to buy. In addition, when the buying decision comes, the emphasis is typically on closing as fast as possible on the specific thing the customer wants.
After first acquisition, the company will then try to grow the account through what’s called a land-and-expand motion. As a result, a product-led motion is expected to have a shorter sales cycle, lower initial deal sizes, and more upsells later on.
Choosing velocity over initial contract value
This creates a challenge when comparing the two. The sales team might raise valid concerns that moving to a product-led conversion model could have a significant opportunity cost because they were able to close larger deals on the same customers before.
This is a not an easy analysis to make. You obviously can’t just compare the initial deal sizes but at the same time you often don’t yet know the conversion values of the different product-led steps of the process.
I’ll cover the possible calculations in more detail in a future edition focused specifically on how to compare the customer lifetime values between different go to market models.
In the meantime, here’s is a very rudimentary first assessment you can do to know if you’re on the right track. Have a look at the number of deals and the number of resources required to close a deal.
If a product-led motion closes more deals at a lower value and less effort, then this means something is working. The next step would be to prove the upselling motion, and this data could provide some confidence to further develop this muscle.
If however the number of deals is similar or lower, the value is also lower, and there is a similar amount of effort required, then the model is probably not working as it should just yet.
In that case could be wiser to spend more time on the onboarding process before channeling sending potential customers into this funnel.
Differentiating by customer behavior
Another pragmatic way of looking at this is to segment customers by their behavior. This can be based on the channel they came in through, the keywords/offering they were interested in, or the button they clicked on the website.
The simplest example of this is offering a ¨Request a Demo¨ and ¨Start a Free Trial¨ button next to each other and letting customers self-qualify which option they want to go for.
I’ve tested this in multiple companies and generally having the two buttons next to each other results in higher total conversion rates and helps you send people into the experience they prefer.
People generally think that demos are only for traditional buyers, whereas more innovative buyers would start a trial. But there could be many other reasons why customers might prefer a demo.
For example, someone from a large organization might not be allowed to sign up before it is internally approved. Or an executive who won’t use the product themselves wants to understand the value for their team.
I love PLG but these people are simply often served through a sales motion.
Transitioning to a hybrid model
By offering both the option for a sales demo and a product experience, you’ll start seeing what your customers actually prefer and if in the future it makes sense to keep serving both models or if there is potential to simplify.
It also makes the conversation with the sales team easier because you won’t take away their entire pipeline overnight. And if more people actually click the trial option it clearly shows that’s what the customer prefers.
While there are a number of mega trends that would make us think that product-led growth is the future, that doesn’t always mean that this is the case for your customers today.
Lastly, it is risky to switch to a new model before knowing if everything is working as expected. A hybrid model can help the transition and learning curve and will give the organization time to get used to a new way of approaching deals as well as adapt team resourcing where required.
What’s next
Next week I’ll cover the last edition on the customer journey, where we’ll look into how we can use PLG to improve retention and drive expansion revenue. See you there!