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• Author:: [[OpenView Venture Partners]]
• Reading Status:: [[Books Read]]
• Source:: Link
• Recommended By:: [[Blake Bartlett]]
• Tags:: #Books #[[Product Led Growth]]
• Key Takeaways::
  • [[Sales]] becomes more like [[Customer Success]] in a [[Product Led Growth]] company; more of a consultative muscle to help customers understand the product better
    • Product led growth is not anti-sales. But in a product-led company, sales takes a consultative approach that looks and feels more like customer success than traditional sales. End users love your product and are happy to pay for it. Remove friction and help them expand usage by letting the product lead, while support, success and sales follow. #Sales #[[Customer Success]]
    • There is still room for sales in a product-led business, but sales should start to look more like customer success. It’s particularly urgent that all customer-facing employees become fluent in the product.
    • SaaS businesses have a unique opportunity to engage in what I call “product-minded sales.” This approach of adding a consultative layer into the sales motion allows you to become an in-house expert and thought leader for your customers. It involves spending quality time with early customers so that you have the knowledge to perform deep account optimization, layering "The bottoms-up nature of PLG, which means each team can choose best of breed tools without additional layers of approval." in new features and premium functionality that will educate your customer and ultimately influence their core KPIs.
    • In essence, our sales approach isn’t that different from our customer success approach. In both cases, we’re just helping people get the most out of our products. It’s just that one group helps existing customers and one group helps prospects.
    • The profile of people we hire into sales has evolved over the years. We began with a generalist profile, a common strategy for younger companies that are still figuring out [[product-market fit]] and defining the buyer audience. For the most part, that early team was comprised of people who had some technical experience — in product or consulting — but not necessarily a lot of hands-on sales experience. A common mistake that startups make is to hire too experienced a salesperson as their first sales hire. This profile often fails as early sales is about finding and refining product-market fit rather than closing as many deals as possible.
  • The world of software is becoming more competitive in a well-funded universe
    • Benchmarking data shows that it’s harder than ever for new SaaS companies to gain initial traction and reach the expansion stage. More and more startups are vying for traction against extremely well-capitalized SaaS powerhouses. Not surprisingly, most struggle to break through. The median growth rate of startups with $1–2.5M in ARR fell from 100% to 64% in just the last year. This begs the question: how much room is left for emerging startups? #[[Mike Speiser Playbook]]
    • Those on the front lines know that more competition means greater saturation of traditional marketing and sales channels, increasing [[Customer Acquisition]] costs ([[CAC]]). In fact, the cost of acquiring a customer has gone up by 65% in the past five years, according to a ProfitWell survey of 800 companies.
  • [[Consumerization of the Enterprise]]
    • "The consumerization of the enterprise is largely a failed promise to date, and it’s certainly not for a lack of effort. It's just a really hard problem to solve." [[Andrew Reed]] at [[Sequoia]] // Source as of Aug. 5th 2019
    • https://twitter.com/webaficionado/status/1339832146052014080?s=20
    • ^^When in doubt, ask if you would tolerate it in a consumer app.^^
    • "71% of employees want their companies to provide the same level of technology as they use in their personal lives... Employees are increasingly the primary force for it modernization at work as they bring the latest technologies from their personal lives to their jobs."
    • Individual employees no longer have patience for bad (or, let’s face it, even mediocre) user experiences.
    • Sometimes, there are also opportunities to “consumerize” the enterprise. In many ways, Calendly and other PLG companies like it, that use viral and network effects are really just targeting consumers inside an enterprise. Many tactics similar to those used on consumers in general can be applied to good effect.
  • [[Customer Acquisition]]
    • Research from ProfitWell has found that customer acquisition cost ([[CAC]]) is up 50% in the last five years across B2B and B2C. Comparatively, CAC for freemium businesses is only up 25%.
    • Understanding the acquisition dynamics across different channels
      • Make sure you track and understand which acquisition channels (paid ads, paid social, organic social, content syndication, etc.) are most effective. Not all channels are created equal, so some channels will work better for freemium than others.
      • We’ve seen that email outreaches from our sales team, immediately following a free trial signup, have a 67% open rate and an 18% reply rate. Compare that to the reply rate of other email outreaches following an inbound activity, such as downloading a white paper or attending a webinar, and you’re looking at a 6x increase.
      • Go ahead and allocate 95% of your resources, time and money into staying on top of your short-term objectives; but take the remaining 5% and put that into making longer-term bets. Spend some time thinking about what’s next, what’s just emerging that could make a huge difference for your business. What’s new used to be things like [[Community]] and podcasts. Now it might be streaming TV. The law of diminishing returns is real. To stay ahead, you need to be ready to jump on the next big thing before the other business does.
    • Barrett’s discussions with customers were the same as the kind Typeform’s sales team was having. The only difference was that Expensify relied more on the product to sell itself. This type of focus is a little like burning the boats in the harbor — you have to close off other options and put all of your focus into one thing, the product. As Barrett explained it, he would talk to customers about their dream product and then modify the product to suit their dreams.
  • [[Metrics]]
    • The viral coefficient is the number of new users generated by existing users: (#) Invitations Sent per User x (%) Conversion Rate = (#) Viral Coefficient #Metrics #Community
    • Traditionally, marketing teams have used marketing qualified leads (MQLs) or sales qualified leads (SQLs) to benchmark willingness to buy. Once your product has a free trial or freemium experience, you can use it as the indicator that a user is ready to buy — that’s a product qualified lead (PQL). #Marketing #Sales #Metrics
    • Make sure to collect the right data to keep tabs on customer health, retention and expansion. This means looking beyond lagging indicators like retention rates and toward leading indicators instead. In Typeform’s case, leading indicators are features that instantly make customers more “sticky,” like their teams feature or integrations. Go beyond [[Net Promoter Score]] (NPS) surveys and track KPIs like actual referrals, customer health scores and product stickiness.
    • Recent research found that one of the things the top 10% of SaaS companies have in common with each other is a retention rate that’s 20% higher than the median. More to the point, the typical drop off that led to a decrease in the competition’s retention happened within the first week of use. It’s not hard to connect the dots and figure out that onboarding plays a central role in influencing short-and long term retention rate.
    • Early on, we decided that our department’s North Star Metric would be [[net revenue retention]]. Eventually, I realized that while this was very motivating for my team, it ultimately did more harm than good. The problem was that other departments assumed [[Customer Success]] had retention covered, and therefore didn’t include retention as part of their quarterly goals. This led to a lack of [[Collaboration]] from other teams on projects that required cross-functional collaboration. The typical response was, “Improving net retention isn’t part of my OKRs, so I can’t prioritize this project.” While I still believe that net retention should remain our North Star Metric, we shifted from being the “owner” of net retention to becoming the “champions”
    • The fastest growing SaaS companies see 89% annual logo retention and 109% net dollar retention (NDR) in their cohorts, according to data from OpenView’s SaaS benchmarking survey. That’s compared to 82% and 90%, respectively, among slower growing companies
    • [[Net Promoter Score]]
      • NPS doesn’t have mystical powers and it should not be exalted. For starters, NPS doesn’t turn out to be very predictive of logo retention or net dollar retention rates across SaaS companies, according to new analysis of OpenView’s 2018 SaaS benchmarking
      • For every 10 additional points to a company’s NPS scores, there’s only a 0.9% higher logo retention rate.
      • The correlation is even weaker when comparing NPS scores and net dollar retention rates. For every 10 additional points to a company’s NPS, there’s just a 0.55% higher net dollar retention.
    • Building a [[Product Led Growth]] organization
      • At [[CA]], we spent approximately 15% of revenue on R&D for my particular product line (Application Performance Management), while at [[SendGrid]] (where the PLG approach kept us from needing to make such a steep investment in sales) we were able to invest approximately 25%+ of revenue into R&D. #[[% of Revenue]]
      • There was also a corresponding difference in the ratio of engineers to product managers based on the demands of each go-to-market [[GTM]] strategy. At CA, the ratio of engineers to product managers was 20:1 and we had to share a pool of designers. At SendGrid, we have a 6:1 ratio of engineers to product managers and a 1:1 ratio between designers and product managers. As you can imagine, the variance between the makeup of these two teams creates two very different product development experiences. #[[Hiring]]
• Notes::
  • It used to be hard for a company to adopt new software. Long sales processes, complex implementation, formal training and certification — the list goes on. All this took a lot of time — months, quarters, sometimes even years. But today, software just shows up in the workplace unannounced. End users are finding products on their own and telling their bosses which ones to buy. And it’s all happening at lightning speed.
  • While the shift in focus to the end user feels like a hard pivot, it’s just the next logical step in the market’s evolution. Infrastructure has become an elastic utility that scales as needed, and developers have gained further superpowers from APIs and other modular tools and services. #[[Customer Obsession]]
  • Design first became critical to software success around 2011–2012 when the [[Consumerization of the Enterprise]] was all the rage. The basic premise was that legacy software was clunky. But as consumers, we had gotten used to well designed apps and websites. Naturally, we all wanted the software we used at work to look and feel more like the well-designed consumer apps and websites we loved.
  • When you need to attract tons of individual end users to a free product, human-dependent growth doesn’t scale. The only choice is to de-labor the distribution engine behind your product by empowering end users to find, evaluate and adopt your product on their own. #freemium
  • It’s important to avoid the trap of trying to sell an executive on the value of a product designed around solving end user annoyance. They just won’t get it. It will always feel like a nice-to-have to a KPI-focused executive. In other words, pick a lane and stick to it. #Stakeholders
  • If your end users live in Chrome, distribute through the Chrome Web Store. If they live in Slack, distribute through the Slack App Directory. If they live on their smartphone, distribute through the App Store. You get the idea: multiple screens, multiple distribution channels. #distribution
  • ^^When in doubt, ask if you would tolerate it in a consumer app.^^
  • If you put the paywall before the “aha moment,” you kill your conversion rate. It feels like a broken promise on the call-to-action that brought the end user to you, and they will bounce. #freemium
  • The product itself then drives end user conversion and expansion through increased usage, viral loops, collaboration and word-of-mouth referrals. As your product footprint expands from individual end users to teams, they will need help with new use cases, deeper integrations and perhaps switching to a team account with an invoice. And since these teams are all-in on the product, you should be proactively helping them get the most out of new features and releases. Sounds like a great time to hire a success team. #[[Customer Success]]
  • Product led growth is not anti-sales. But in a product-led company, sales takes a consultative approach that looks and feels more like customer success than traditional sales. End users love your product and are happy to pay for it. Remove friction and help them expand usage by letting the product lead, while support, success and sales follow. #Sales #[[Customer Success]]
  • The End User Era is upon us, but many software companies are still relying on decades-old advice about sales and marketing led growth models that are human-dependent and untenable in the current market environment.
  • Benchmarking data shows that it’s harder than ever for new SaaS companies to gain initial traction and reach the expansion stage. More and more startups are vying for traction against extremely well-capitalized SaaS powerhouses. Not surprisingly, most struggle to break through. The median growth rate of startups with $1–2.5M in ARR fell from 100% to 64% in just the last year. This begs the question: how much room is left for emerging startups? #[[Mike Speiser Playbook]]
  • Those on the front lines know that more competition means greater saturation of traditional marketing and sales channels, increasing [[Customer Acquisition]] costs ([[CAC]]). In fact, the cost of acquiring a customer has gone up by 65% in the past five years, according to a ProfitWell survey of 800 companies.
  • Power is shifting away from executive buyers and we’re seeing the rise of the individual user. You’ve heard this trend called a number of things, both positive ([[Consumerization of the Enterprise]]) and negative (“[[Shadow IT]]”).
  • As the pace of releasing new features has accelerated, it takes less and less time for competitors to copy your latest product innovation. This commoditizes features and exacerbates price wars, eroding pricing power in the market. #Competition
  • [[Product Led Growth]] — where the product is front and center in how a company acquires, converts and expands users — offers the potential for disruptive growth by championing the user, not just the buyer.
  • "71% of employees want their companies to provide the same level of technology as they use in their personal lives... Employees are increasingly the primary force for it modernization at work as they bring the latest technologies from their personal lives to their jobs."
  • Individual employees no longer have patience for bad (or, let’s face it, even mediocre) user experiences.
  • There is still room for sales in a product-led business, but sales should start to look more like customer success. It’s particularly urgent that all customer-facing employees become fluent in the product.
  • The Market Map shows us that PLG is being adopted across all product categories, from developer tools to finance applications to enterprise-grade solutions. The most mature companies have built a flywheel where their product is acting as the primary driver of acquisition, retention and expansion. #[[Best-in-Class Tech Stack]]
  • Three core ingredients that are absolutely critical if you want to successfully pivot from a wholly traditional marketing strategy to one that leverages PLG elements: data, an experimentation-driven mindset and the ability to think about your product as a sales channel.
  • [[Experimentation]] is, by its nature, risky because you don’t know the outcomes ahead of time. It’s all about learning from what works, and — just as importantly — what doesn’t. You’re not always going to get the “right” answer, but you will always learn something.
  • For buyers who have a pretty simple decision-making process and don’t require any human interaction, you can provide a self-serve option that allows them to try your product and then buy it without needing to go through a salesperson. Adding this path into your existing customer journey is what will drive incremental product led growth.
  • The viral coefficient is the number of new users generated by existing users: (#) Invitations Sent per User x (%) Conversion Rate = (#) Viral Coefficient #Metrics #Community
  • "The key to [[word of mouth]] is simple: Have a product that is so awesome people just can't stop talking about it."
  • There are three elements to product-market fit: the product, distribution and customers. [[product-market fit]] is achieved when you have a product with a clear value proposition that resonates with customers whom you know how to reach and convert. In other words, build a great product that solves a real problem and make sure you have a way to get it to the people who need it.
  • In addition to the problem-solving element, PLG also means that you don’t engage in any high-pressure sales tactics. Instead, the product sells itself. In fact, with a true PLG approach, the first interaction with your company or product is typically through the product itself. For most of your customers, sales and marketing don’t even come into play until after that initial interaction.
  • For PLG to work, everyone in the organization needs to recognize that the company is taking a product-led (versus a sales-led or marketing-led) approach. There has to be real alignment. It’s imperative that every functional group is clear on their roles and responsibilities. Product becomes the center of gravity, so to speak, as everyone aligns around supporting the product team to help the entire company grow. #[[Best-in-Class Tech Stack]]
  • At [[Calendly]], we have a weekly process in which we collect almost every piece of customer input and triage it to zero. This is a painstaking process, but we’ve learned how to do it at scale so that we can stay on top of customer pain points and absorb all the new ideas for how to deal with that pain. #Productboard
  • Sometimes, there are also opportunities to “consumerize” the enterprise. In many ways, Calendly and other PLG companies like it, that use viral and network effects are really just targeting consumers inside an enterprise. Many tactics similar to those used on consumers in general can be applied to good effect.
  • The collection I started, called ‘Free Stuff for Startups,’ is the #1 most popular collection on Product Hunt. #look-it-up
  • In the SaaS world, well-built developer communities offer software companies unique insight into the minds of the people who are creating the code that powers the digital age. A developer community serves a crucial role not only in helping newcomers to learn the ropes, but also in getting them excited about your product and — more to the point — about being part of the team behind your product. #Community
  • Another appealing attribute of companies who are able to use a product-led strategy is their maniacal focus on selling directly to the end user of the product and a strong understanding of an entry point to land and then expand within an organization. This is critical information for any company, but especially for those in the fast moving world of SaaS products. #[[Land and Expand]]
  • SaaS businesses have a unique opportunity to engage in what I call “product-minded sales.” This approach of adding a consultative layer into the sales motion allows you to become an in-house expert and thought leader for your customers. It involves spending quality time with early customers so that you have the knowledge to perform deep account optimization, layering "The bottoms-up nature of PLG, which means each team can choose best of breed tools without additional layers of approval." in new features and premium functionality that will educate your customer and ultimately influence their core KPIs.
  • PLG is more than just a cost effective [[GTM]] motion for startups, it’s also a strategy that aligns well with how consumers want to buy software today. The bottoms-up nature of PLG gives more power to the functional experts within a company, which means each team can choose best of breed tools without additional layers of approval.
  • Research from ProfitWell has found that customer acquisition cost ([[CAC]]) is up 50% in the last five years across B2B and B2C. Comparatively, CAC for freemium businesses is only up 25%.
  • Make sure you track and understand which acquisition channels (paid ads, paid social, organic social, content syndication, etc.) are most effective. Not all channels are created equal, so some channels will work better for freemium than others.
  • The right sales approach should be an expression of your company values. Don’t assume you have to do sales like everyone else does sales. Instead of worrying about what might go wrong, ask yourself what could go right. Reframe things by thinking about how the right sales approach can make things better for your company, your customers and your prospects.
  • In essence, our sales approach isn’t that different from our customer success approach. In both cases, we’re just helping people get the most out of our products. It’s just that one group helps existing customers and one group helps prospects.
  • We’ve built a user-driven feedback loop that allows us to observe what users are doing in the product and then bake those behaviors and features back into additional flows. #Productboard
  • This is why, very early on, we set up a process of trying to discover if our hypotheses were wrong. Rather than trying to make the data fit a predefined conclusion, we are very intentional about testing out the negative hypothesis to make sure that we’re getting the most accurate information possible. #Experimentation
  • Over time, this effort gained momentum and awareness of our content grew within the [[Community]]. By delivering content with intrinsic value (and never forcing anyone to use our service as part of the solutions we offered in our content), we earned our way into people’s minds. Ultimately, our content is a sort of contribution to the greater good of engineering. #[[Content Marketing]]
  • What they found was folks who converted from a [[freemium]] plan have a 10% better net retention on an absolute basis than their free trial counterparts. But, those on a free trial still have about a 10% better retention than those who aren’t using either free play.
  • Traditionally, marketing teams have used marketing qualified leads (MQLs) or sales qualified leads (SQLs) to benchmark willingness to buy. Once your product has a free trial or freemium experience, you can use it as the indicator that a user is ready to buy — that’s a product qualified lead (PQL). #Marketing #Sales #Metrics
  • There are a few ways to do this: first impressions really do matter 1. Look at cohort analyses of previous purchasers 2. Create gated premium features and tracking clicks or learning more information about those 3. Limit use of features and tracking when their limit is tripped
  • [[Mixpanel]], a product analytics company, published a report in 2017 analyzing 572 products and 50 billion events. In their research, they found that the top 10% of products outperformed the average by nearly 100% when it comes to retention.
  • In short, the high-value, strategic work. Instead of sales selling features (the folks they are talking to already know and use those), they can become a strategic lever. They should be prescriptive about how to use the product strategically and tailor it to each specific organization they are talking to.
  • Make sure to collect the right data to keep tabs on customer health, retention and expansion. This means looking beyond lagging indicators like retention rates and toward leading indicators instead. In Typeform’s case, leading indicators are features that instantly make customers more “sticky,” like their teams feature or integrations. Go beyond [[Net Promoter Score]] (NPS) surveys and track KPIs like actual referrals, customer health scores and product stickiness.
  • Recent research found that one of the things the top 10% of SaaS companies have in common with each other is a retention rate that’s 20% higher than the median. More to the point, the typical drop off that led to a decrease in the competition’s retention happened within the first week of use. It’s not hard to connect the dots and figure out that onboarding plays a central role in influencing short-and long term retention rate.
  • "Done right, the [[Onboarding]] experience is a gold mine of opportunity. Done wrong, it can sink your customer relationship before it's even gotten off the ground."