PLG for Retention and Expansion

Customer Journey series – Part 3/3

For the third and final part of the customer journey series, we’ll look at the value of Product-Led Growth when applying it to paying customers.

The first application we’ll look at is for retention, where many companies that handle Customer Success professionally are already applying some PLG whether they know it or not. The second is to apply PLG to drive the expansion of existing contracts. An often underestimated application of PLG.

PLG for Retention

As a SaaS business, once you have converted your customers, the next priority is to retain and renew them. Retention, or its inverse churn, is a topic that’s usually owned by the Customer Success team (CS).

CS typically follows the same interaction-based model as in sales where personal touchpoints with the customer are the main means to understand the needs and considerations of the customer.

The downside of this approach is that customers often aren’t consciously moving away from your product, but stop using the product due to a change in circumstances. The contract can often still be saved at that point which is where product led growth comes in.

The goal is to identify these events early on before the customer has stopped using your solution for a longer period of time and because of that concludes they don’t need it anymore.

Moving from recovery to prevention

Changes in product usage can be caused by a myriad of things, of which some common ones are change in personnel/management, a change in working methods, or new tooling being taken into use.

The most important thing to do is to make sure your CS team is notified when the usage changes. If you champion stops logging in, or the number of team members is going down, that’s something your CS team should know about so they can reach out to their point of contact and get ahead of the situation.

A change in usage doesn’t have to mean that the customer can’t use your product anymore, but it might require you to reposition the value of your product in the new situation or re-sell the value altogether if your buyer has changed.

By catching these events timely, you are hopefully reaching the customer while they are still actively looking into the situation, giving you the chance to provide input and reengage them before any decisions are made.

Defining a health score

The good news is that it is already quite common for CS teams to work with product data. For many of the CS tools out there, the main proposition is around operationalizing these product signals into meaningful information for the business.

This is often done with the help of a health score. While a health score is not always only built up out of product signals, it’s usually the main component so let’s explore it a bit more in this context.

With a health score, a company tries to combine a number of different signals into one number often combined with traffic light coloring to identify if a customer’s product usage is healthy or if the customer is at risk.

The effectiveness of this score really comes down to the details of the definition. For example, an active user could be measured by merely looking at if they logged in to the product, but could also measure if the customer is actually getting value out of the product.

The latter is of course a much more reliable indicator for a health score but even when assessing value, it matters how this is defined. People might use your product in very different ways.

If your product provides analytics or insights, some users might log in every day and actively engage with your reports, whereas others might log in once per month and download all the results for analysis somewhere else. Both might be very happy customers and your health score needs to be able to reflect that. 

Keeping it updated

As you might sense from the above, there is an art to finding the right definition of good product usage for any product. In addition, this is not a static definition. It needs to be reviewed regularly to account for changes in the product offering, competitors adjacent tooling, and so on. 

It’s also important to align this definition with other stakeholders, like the product organization, to make sure all departments are using the same measurement of success.

In my experience it is useful to discuss the reports of these metrics regularly with all stakeholders to make sure all teams have the same understanding of what’s happening in the business and what can be done to improve results.

It’ll be hard to win from competitors if your customer base is a leaky bucket. Using product data to identify customers at risk early on and recover them is a proven method to improve this.

PLG for Expansion

No matter how product-led your customer buying journey is, at some point you will have paying customers using your product. This is where the next opportunity for product-led growth comes in, which is expansion.

Depending on your offering, you might have further seats, modules or products you can sell your customers. Traditionally this would be brought up by CS in a quarterly review or during promotions, or Account Management might reach out. But neither of those actually signal a need from the customer.

In a product-led expansion motion, you would aim to showcase these additional features or other expansion options in the right context while customers are using your product.

This means for example making it easy to invite more users when sharing content, or if you have an analytics add-on, to tease certain statistics in the core product to peak the interest of the user and get them to explore this additional functionality. 

Upsell through product usage

To use PLG in expansion is application that is perfectly suited for a step by step implementation, instead of requiring a complete change of strategy right away.

Once you’ve identified the right moments at which a customer could experience a need for one of your additional products, you can start by a simple in-app notification to introduce the product and offering a call with sales. Ideally with the possibility to book this call in-app right away.

This follows the same principles as product led qualification where you look at the product usage to decide on the right moment to reach out to a customer.

As you start seeing results from this initial approach, you can start introduce sneak peaks as mentioned above, or go a step further and introduce actual product functionality the user can interact with before deciding to buy.

Trials for paying customers

Of course, this raises the question how far you should allow a customer to go before requiring further payment.

Many companies that have fully embraced the product-led philosophy offer paying customers the possibility to start a free trial of any add-on module. The idea in this case again is to have the product do the heavy lifting in terms of identifying qualified customers and selling the additional product to them.

For a full product-led experience the customer would also be able to pay for this new product through self-service after the trial ends, but this doesn’t always make sense.

In some cases, the upsell can cost more than the original contract, or it is too complex to be configured completely through self-service. Offering a booking page to schedule a call can be a good alternative in this case.

All decisions on product-led expansion follow the same logic as if you would acquire a new customer, the only difference being that this customer is already paying you and using part of your offering.

This means there is a higher level of trust and you have more user context so generally this is a great way of increasing the contract value per customer.

What’s best for your business

Other options are to proactively reach out to any customer who starts a trial in this kind of scenario or to only tease the value but require a call to get full access. While that’s not a fully product led approach, what should matter is what’s best for the business.

Even if you can’t go fully product-led at this point in time, there is still a huge benefit to leveraging the product to identify the interest of customers into further products.

And this value can already be obtained just by using in-app messages in a smart way. This is something pretty much any company could start experimenting with today if they want to become more product-led.

What’s next

Now that we’ve covered all the ways PLG can be applied in the customer journey, we can get into the fun part and start looking at where it can be applied in your business. Next week we’ll take the first step, see you there!