Product-led organizations are flipping the traditional sales-led go-to-market strategy on its head. Gone are the days where companies are holding customers’ hands and leading them through the sales cycle thanks to product-led growth which lets the product speak for itself by giving the buyer the tools they need to achieve a meaningful experience while using the product.
Product-led growth makes the customer decision to upgrade or opt for a paid plan a no brainer, and the research backs this up with PLG organizations boasting faster growth rates over their SaaS counterparts.
What has led us to product-led growth
My name is Travis Kaufman, my role Technology Partnerships at Gainsight, and I want to kick off by talking about a bit of a career crisis that I had about four years ago. I was at an early stage startup, I was leading both product management and product marketing. I had some very creative sales leaders and what we found happened was they would go after our core customer, and they would identify what our product would solve for them and they would get creative.
They said, "We not only do X, Y, and Z, but we also do ABC", so we were able to acquire customers which was great and celebrated, but what would happen when customers came on board, our products actually didn't deliver on that core value proposition.
As a result, this massive expectation gap was being created between what our customers thought we could do for them, and what in reality we could deliver on. Of course, as a consequence, the business metrics reflected a high level of churn rates so we were creating this false sense of growth. We celebrated when we would get new customers, we were super excited about it, then we would kind of mumble when they would churn away.
That led me into this little state of crisis - as a product leader, what I'm trying to do here is grow this organization, I'm trying to build products that solve problems, and solve very pervasive problems so we can generate business, and that wasn't being achieved.
What I did from there was actually lookout into what could change the dynamic there and what I found after spending a number of hours researching this, and moving on to a few different companies, is the act of executing a product-led growth strategy, meaning we're going to give our product to our customer before we ask them for money.
That scares salespeople so badly, but it can work. That's the foundation I'll be talking about - my experience, learning from what's been out there being presented in the product marketing universe around this topic as well as my own personal experience of having now led this at Gainsight, which is where I'm at now leading product growth.
The agenda for this article and what I’ll cover is as follows:
- What is product-led growth and why it matters.
- I’ll give you a few examples as a product marketer you can take back into your organization to start trying out.
- I’ll recap
New market = new expectations
I wonder how many people reading are working for organizations that were born in the cloud? You've always been a SaaS company, you've always had renewal revenue. And how about the other dynamic maybe you're an on-prem organization and you're now moving to the cloud and you're trying to jolt your organization.
The reason I bring it up is that these expectations for some are very well understood and for others, they're still quite new. There are three dynamics that I'm going to talk about the first one is the fact that you have this subscription model - no longer can you sell your customer once and then kiss them goodbye, you have to deliver repeat value to them in order to keep them.
The second dynamic here as it relates to product lead growth is around the expectations that customers have of your software - no longer can boring enterprise software, (and I've been involved in boring enterprise software for quite some time), you cannot be boring anymore, the expectations that your users have are now influencing whether or not they continue to use your product.
And lastly, it's never been easier or more cost-effective to introduce a new SaaS offering today, and for organizations, this means you are now competing with more than just the top two known competitors, there is a myriad of solutions that you're now competing against.
All three of these dynamics are what's influencing the different go-to-market motions that exist today.
Evolution of go-to-market strategies
This is an evolution chart, and it's not to say that any of these models are dead or no longer exist, it's that we as an industry have evolved into how we can deliver our products and how our products can deliver value for our customers.
First up you have your field sales team, I always imagine the vacuum cleaner salesman walking up to your door selling you this amazing vacuum cleaner even though you already have one - this was very well adopted in the early '90s.
More efficiencies came into play with the introduction of an inside sales team so now you have this concept of closers and your outbound sales organization trying to drum up new business, this motion exists now and is again, more efficient than the last.
Next up, with the advent of new technology and the marketing automation space, you now have this concept of inbound marketing, we're generating content, thought leadership, we're trying to pull people into our organization as opposed to everything being an outbound motion.
And lastly, where we are today is that organizations can now deliver their product ahead of time to that customer before they have made that purchase. This is the act of product-led growth. I'll put some more shape around this in a minute.
Product-led growth companies outperform Saas
Take a look at this table, don't worry about every single cell I'm going to summarise…
Companies that have a product-led growth strategy have faster growth rates, they have higher multiples, and they're just generally worth more as an organization. And it's the fact they're more efficient with their customer acquisition and their customer growth strategies.
Now this information was pulled from open view, they are one of the brain trusts of the product-led growth movement and so they've done a good amount of research on this subject.
Here's a cute little definition of product-led growth - PLG is using your product as a vehicle to both acquire, to engage with your customers, and to grow with them.
Now, most product lead growth talks focus on the acquisition piece, our mental models are set to where, 'if I have to grow my business, I have to acquire more customers'. Many of you reading may already have a well-established install base, you may be deriving additional value not by acquiring new customers with your product, but leveraging your products to increase retention rates, or to identify new expansion opportunities. So I'll cover some of those next.
Product growth practices apply across the customer lifecycle
What you see above is a lifecycle so to speak - the customer acquisition, the onboarding, adoption and expansion, these are four different stages which you can apply product-led growth, and again, most are focused on talking about freemium, trial, etc. I'm going to spend some time on that today but then I actually want to introduce the fact you can use your product for onboarding new customers, increasing their time to value, making sure they understand the value and they're getting it in a very scalable way.
Also, your products are evolving, many of us are delivering products in the enterprise space, I mentioned how cool we are when we deliver daily and we deploy, it's awesome but the reality is our customers are consuming typically on a monthly cadence, and our products are evolving just as our customer expectations are evolving.
So making sure that you're able to communicate to them in an effective way, allows you to increase the retention by your customers increasing adoption of your product.
Lastly is the expansion, there are techniques that you can use, I've been in a number of companies now where we introduce pricing every month, and we think we're doing this great optimization work whereas what we're doing actually is creating a massive amount of debt and an inability to enforce it.
For those of you who have a solid customer base, and you're not yet enforcing whatever entitlements they have purchased for you, this is actually a great place to start any sort of product growth tactic - to actually enforce the usage of your product when they go above what they're entitled to and what they've purchased from you.
Three strategies for PMM to unlock product-led growth
For the product marketing community, I'm gonna talk about three different strategies that you can take back.
- The first is that you want to define a product qualified lead, I'll go into what that looks like.
- The second is that you want to be able to use your product as a marketing channel - that poses challenges, we can overcome them.
- The third is to focus on customer outcomes - making sure that your customers are delivering or receiving the value that they had anticipated receiving when they first bought your products.
Product qualified leads (PQLs)
We're all familiar with the marketing qualified lead, customers are engaging with our website, we try to infer intent from that. There are heavy debates around the validity of this method when it comes to sales readiness and sales accepted leads and inbound leads.
The concept of a product qualified lead is different in the sense that it is the activities that users are taking in your product, not just the activities they're taking on your website. So think of the features they've adopted, think of the number of people within their organization who have access to your product, all of these are indicators that would qualify a potential customer as a product qualified lead. This also changes the acquisition process, the dynamic is different.
So in this model above what we're looking at is the customer lifecycle, you have your inbound strategies - these are things that are taking place on your website, you're running webinars, you're trying to attract buyers to you.
You have visitors, you still have the concept of marketing qualified leads, you have your sales qualified leads, your marketing team and your sales team and you have your customer success team on the delivery side - this is the marketing qualified inbound universe.
How this shifts is you actually see the product influence moves much, much higher into the consideration cycle and so you have content, you have paid, you have all of your marketing campaigns, but you've now introduced this new stage which is product qualified lead - users are in your product, they have begun a trial.
That doesn't always mean they are ready to buy from you so as counterintuitive as it is, and although your inside sales team is gonna jump on and say, "This is the most indicative signal that they want to buy from me, I better call them now", it's actually once they have understood the value of your product, that's the time to reach out and that's the intention behind the concept of a product qualified lead.
Product qualified lead in this model is demonstrating the acquisition process, the same can be applied for a cross-sell motion, so customers that are using three out of four features or capabilities within your product, unless they have reached that state, they may not be in a state of maturity for a cross sale product.
But how do most of us operate today? We have a cross-sell product, we have our own intentions, we're trying to grow our business and so we propose to them whenever we can and say, "Hey, we have this new thing" and the attach rates suffer as a result.
Keeping the usage of your product in mind when introducing a cross-sell offer is going to make a huge attach rate difference.
Characteristics of product qualified lead
These are the characteristics of a product qualified lead.
You have firmographics, you have the role within your organization. This is applicable primarily to a product-led strategy at an enterprise SaaS company. So who the person is, takes a very significant role. What features they are adopting? How did they value your offering? So the response from a specific survey, are you still evaluating software like this is an indicator of purchase intent.
And lastly, because now users are in your product, your support organization, which historically has only been reserved for quote-unquote 'paying customers' is now part of the equation. What are the questions that are being asked of your support organization? All of these are factors that influence whether or not a person trying your product has intention to buy from you.
Use product as a marketing channel
The second aspect here is to use your product as a marketing channel. One of the biggest differences between let's say email for example, and using your product to communicate with your prospects and customers is that your product has an owner.
When working through this cycle at Gainsight, there was a lot of reservation around what type of things we should promote within our product. What type of communications should we have? And this is a natural reservation. Your customers, on the enterprise side are spending potentially millions of dollars with you, they don't want to be introduced to what they consider banner ads in their product, they're already paying you money.
How do you overcome that? How do you make sure that your communications are relevant to them? And for presale use cases, communicating into your prospects is a way to drive for those of you who have trials or freemium offerings, being able to communicate to them what the next step within your product is. And for post-sale is the retention upsell, and I'll cover that in more detail soon.
In-product messages - so communicating with your customers in your product, has a three times higher engagement rate than through email alone. So all of our demand Gen teams, our counterparts in demand Gen start chomping at the bit here and the opposite side of the spectrum is also true that your product teams get very nervous.
It's not only your product teams, if you have an account management organization, they are very accustomed to meeting with your client one on one, they have spent time building a relationship, there is a potential fear that you're going to communicate something and they're going to lose face, they're gonna lose credibility. And so there's a component to where all of these product growth strategies, using your product as a marketing channel needs to be coordinated well, and informing your internal customer-facing teams.
The goal here is that you're providing value to your customers both when they're using your product and when they're interacting with your organization. Here are some examples.
This is an example of a product update. I mentioned before our products are evolving, we as consumers of technology are not sitting on our hands every morning waiting for all the technology that we use to update and to learn about it and read about it. It has to be very easy firstly for me to become aware or for all of us become aware as a user of technology of something that has changed and there's some new value that I can receive.
The second characteristic that you want to address with this type of communication is reducing the friction. What is the overhead that I have to learn in order to take advantage of this feature set? So this is an example of a new product release, one of the aspects of our product is that we instrument your product for you so you can see what your customers are doing and one of the biggest pain points is that most solutions have to manually select 'this button click means this feature' and it's very time-consuming.
We've introduced a feature set that takes away that burden so we automatically curate all the actions in your product. This is a communication related to a product update, again driving adoption of new product capabilities for the purposes of retaining that customer and them realising value.
My second example I took from Turbo Tax and it relates to feedback engagement, so in that feedback coming back is a net promoter score - how likely are you to recommend our product or service? It’s a very common use of gathering feedback but not always as actionable as you would like.
To help with this you can also introduce customer satisfaction surveys and customer effort based surveys at a very functional level within your product to help you hone in on the areas that your customers need your help to change your product. So again, another type of in app engagement.
Next up I took an example from Survey Monkey which is promotional in nature and looked something like this:
"Hey, did you forget something? Check it out. We have this new premier plan waiting for you. It's right here, hit this button".
All of these are valid communications and there's a time and a place for each of these.
Lastly, we've got an adoption-related communication. A customer has the ability for, in this case with LastPass, you can download a browser extension so you can get more value from our offering by using it in a certain way.
In this case, they're intending to help you adopt the feature set.
Each of these has its own purpose and as I mentioned before because your product is owned by someone, you need to be very careful about what type of communication you are introducing into your product.
The TRUSt framework
At Gainsight we had a number of conversations around this and it came down to, what is our promise to our customers when they buy from us? What are we promising them that we are going to help them do?
As a result, we established the TRUSt framework for in-app communications.
First here is that it's timely, and timely doesn't mean on your cadence, we introduce a new feature, it's our intention to broadcast it to the world. If they haven't used a given capability, let's take a reporting example - boring enterprise software, we love our reports, if we've created an advanced reporting capability, what are the odds that someone who hasn't created a single report is going to derive value from that? So it's not actually a great time to introduce that. So there's activities that lead up to when they're actually gonna realise value.
That actually leads to our second case here, which is relevance. Any communication you're going to introduce into your product, you want to base it on some activity or potential lack of activity that your users had within your product. Again, this is helping it become relevant.
Communications that are relevant are welcome, when they are not relevant they are spam.
We learned that very well through email, it became a very abused channel. And our intention here with this framework is to help you in gaining the advantages of it without abusing this as a communication vehicle.
Next up is useful. Are you helping your user or your customer become better at their profession? Are you helping them take advantage to save them time? So unless you are introducing a communication that is useful to them, drop it, don't do it.
Lastly is that it's straightforward. We have a tendency to over-communicate, we have a lot of beautiful words and we like to use all of them. Don't. Be very concise, they're actually in your product to achieve an activity and you want to make sure that activity can be completed seamlessly without massive amounts of interruptions.
Classify your in-app engagement
The trust framework is something you can take advantage of when thinking through what are the ways that I can communicate with my customers in my product? I mentioned different categories and the reason that categorizing your engagements is important is because like I mentioned before, your product team will think everything is a banner ad and your marketing team will have everything communicated under the sun thinking it's relevant.
What you want to be able to do is help your users understand what are the things that they can opt-out from? Opt-out and that's fine but we're not going to opt-out when there's a new capability or we're going to help you drive adoption or take advantage of the value that this new feature set creates.
Make sure you have operational things that you cannot opt-out of, and informational things that you can opt-out of. Putting yourself into the seat of your user and creating some empathy for them and what they're trying to achieve is always a good basis to start with.
Lastly in terms of communicating with your users in your product, in a lot of the information that I have found product lead growth talks about the lack or the absence of people and that is simply not true for so many enterprise SaaS companies today, it's actually a combination of using the product with your customer-facing teams.
What we're looking at in the above slide is the process in Gainsight's trial experience. As a new user comes on board we introduce specific 'Getting Started' guides, we actually polled them to ask what is their intention with the trial, what do they want to achieve? And then we have guides that are directed that follow up and are personalized as a result. So that is also being communicated through a set of automated emails, as well as personalized outreaches through our inside sales team.
We held a customer advisory board about a month ago, and we asked them, how do you want to evaluate software? And every single person in that room responded with, they want to try it themselves but they want to be able to call someone and talk to someone if they want. So if they hit a roadblock they want to know that someone's there.
With product-led growth you have the option for being very low touch but for many enterprise SaaS companies, there's a sales organization, there's an inside sales team, there's a customer account management team, there could be customer success management teams, all of these players have a part in the growth of your business. Making sure your product is a player that is coordinated with them is where you're going to see the most results.
Focus on customer outcomes
Lastly here focus on customer outcomes. With customer onboarding and user onboarding, it's often the case - and this is true within customer success organizations that they will meet with the primary stakeholder, they will have a kickoff meeting, they're going to say what we're going to do this week, what we're going to do next week and the weeks following. That communication is typically with one, maybe two or three people in the organization.
What about the hundreds of potential users after that meeting? This is where user onboarding becomes a very nice compliment that can be driven through the product.
Secondly when it comes to product engagements, use how customers are adopting your product to source customer references and create case studies. Our sales organization comes to us at the most inconvenient times and says, "I have a prospect. They're in this vertical and they want to see how other customers have used this feature" and we gasp because we have generic customer success stories.
Ideally we want to be able to get to a point where we can say, "Yeah, we have a customer that's using this feature, here's the business outcome they were able to achieve. And here's a case study reference". You're not going to get to that level of detail unless you're looking at what features your customers are using within your product and being able to then identify the champions that can be references for case studies. Again it's all about making sure usage is a part of your case study and customer reference equation.
The last item here I mentioned before - driving upsell and cross-sell. Just enforcing entitlements, it sounds so simple, but so many of us are on the honor system when it comes to the usage and the packaging limits that we've set in place. So, up until now, there has typically been a set of development resources that are required to enforce this formally.
At Gainsight PX, the product that I'm representing, we've taken that burden off of the engineering team - product marketing organizations can enforce entitlements like this, and block product capabilities without involving engineering teams. As you're evolving your pricing and packaging, as your customers are moving up in their adoption, and potentially going beyond the entitlements of purchase, you can now introduce communications to them to warn them when they're approaching a limit, and to eventually block them to introduce and create that demand that is going to be at the right moment to introduce an upsell conversation.
In summary, the three strategies I’ve gone through for a PMM to unlock product-led growth are:
- Define product qualified leads (PQLs)
- Use product as a marketing channel, and
- Focus on customer outcomes.