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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]]