There is a change underway in how you build and scale a software company and two moments are coming together—Product-Led-Growth (PLG) and remote work—to accelerate this shift.
What is product-led-growth (PLG)?
In its essence, product-led-growth is a different way for software companies to bring their products to market. While the old model relied on demos, sales calls, and long implementations, the PLG model is focused on trials, inbound customer conversations, and fast organic expansions. The approach, in other words, is product-led rather than sales-led.
What does PLG have to do with remote?
There are a few interesting intersections between these two trends in software. For one, remote is dependent on a set of collaboration tools like chat, video, and project management, which are represented by some of the best-in-class product-led companies like Slack, Zoom, and Atlassian. Beyond that, though, a PLG go-to-market model turns out to be much more robust in a remote world as its reliance is on users trying software, not salespeople traveling to offices and conferences.
Selling: From here to there
To fully illustrate the differences between the two models, check out the slide below, which we originally put together for a small PLG event we held in New York in the fall of 2019. The slide breaks down the differences between the two go-to-market approaches: placing the old enterprise software tactics in the “before” bucket and their PLG equivalents in the “now.”
Essentially, we can take all those points and group them into three big areas of focus for any software selling model:
- Sales & Marketing Methodology
- Tactics and Techniques
- Purchase & Customer Success
Let’s take each line and look more closely at the differences between how it’s done in a sales-led world versus a product-led world.
Sales & Marketing Methodology
Every enterprise sales and marketing organization follows a methodology (usually more than one). You have Sandler, Miller-Heinman and simpler systems like BANT in sales and models like AIDA (awareness, interest, desire, action) in marketing. At the highest level, enterprise software sales organizations typically use a funnel that looks something like the one below, with a lead moving through different sets of qualification steps as marketing and sales tries to ensure they’ve got a real fish on the line.
One of the fundamental differences between the sales-led and product-led models starts with this funnel. Because PLG companies have products that can be used before they are purchased (either via trial periods or reduced-functionality free offerings), what happens after the lead stages change fundamentally. Instead of qualifying using people (marketing, sales managers, solution consultants, business development reps) and methodologies (BANT: Budget, Ability to purchase, Need, Timing), a PLG company can qualify based on the actual usage of the product by the prospect. Did they sign up and never use it again? Clearly not qualified. Have they spent the last week pounding the system and adding coworkers? Qualified! The fundamental idea here is that the very best way to qualify whether someone will buy your product is to see them actually use it. It seems simple when you put it that way.
Beyond the obvious efficiencies, this offers the company, for software buyers it can be a dream come true. Instead of sitting through long demos in sandbox environments, you can actually get fingers on keyboard and see for yourself whether the product does what you need it to. Obviously not every category lends itself to this immediate setup approach, but I continue to be impressed as more and more companies find ways to convert what used to be long purchase and implementation cycles into trials and upsells.
At the heart of all this is a shift from the marketing- and sales-qualified leads in the funnel above to product-qualified leads (PQLs). Michal Alon of Apptrinsic put this together well in the following diagram. From his post, Why Product Qualified Leads Are Rapidly Being Adopted in SaaS:
Note how the MQL/SQL methodologies go out the door when we introduce the PQL. That’s not to say we don’t have work to do there anymore, but the work of qualification is now very different. Rather than talking about budgets and timelines, you look at their usage to understand whether they’re taking the actions that typically correlate with good-paying and expanding customers.
This approach is fundamentally more efficient and cost-effective:
The average SaaS conversion rate from lead to won deal tends to be anywhere from 1 to 10 percent. Simply put, marketing and sales spends a majority of its resources on leads that will never convert. To drive enough revenues from these conversion rates, marketing works hard to pump even more leads into the funnel. It is largely these ineffective lead generation strategies emphasizing quantity over quality that lie at the heart of sales and marketing misalignment.
What’s more, it’s also better for the customer, who is increasingly expecting a B2C-like experience in using software. This allows PLG companies to build journeys that are much more in line with both the expectations and realities of modern software buying.
The New Customer Journey
With the new PQL process you have a different customer journey experience for both the company and the customer. Where you used to have handoffs from marketing to sales to implementation and customer success, you now have much more porous boundaries between the teams. Finally, and the largest shift in terms of teamwork, you have the introduction of the product team throughout the entire sales process as selling is now dependent on product usage.
Here is the traditional acquisition model. This follows the traditional funnel approach above and was also created by Michal Alon at Aptrinsic:
In the PQL model the journey now really kicks off at signup/trial and clearly shows the overlap of responsibilities between sales, marketing, success, and product who need to work in unison to orchestrate the product functionality, marketing messages, support content, and sales calls to ensure signups convert to paying and expanding customers.
WIIIIFS: What Is It In It For Sales?
The shift sales has to undergo is in finding ways to be more patient with their potential customer base. Deals will most likely land smaller and will take time to mature. Now, more than ever, you will need to quarterback deals and customers, be as consultative as possible and bring in your team across marketing, product and customer success to help you out. You also have to be comfortable with some customers not making it at all and we will cover that more below. Your role as a consultant increases.
Tactics and Techniques
For many companies, field marketing was one of the biggest parts of the go-to-market budget. Field marketing was about getting in front of the customer, in -person, to host or to attend conferences that were relevant for both the buyer and vendor that were in the bullseye of content that the vendor wanted to address and ultimately solve for the customer. Field marketing is expensive, inefficient, and, with the new challenges we now face, it could even be considered dangerous.
But what if an “event” meant something different for the go-to-market team? What if “events” were triggers set up in the product that alerted you to customer behavior that could help be great, good or bad and helped you make smart decisions on when and how to reach out to them for help or expansion. That is the idea around events in the world of PLG. Segment, a system built to technology companies pipe events between systems help you with events defines them this way:
An event can refer to either an action by a user, or something a user does which triggers a track call. Events have a name (for example “Product viewed”) and properties (for example the product name, price, and category), and take place in a single moment in time.
The goal of events remain the same, to move a customer deeper into a relationship with you and and to demonstrate the value of your product. The difference now is with these new events, you don’t have to hang out in poorly lit and carpeted convention centers.
Here is an example of our early- stage stack in order to qualify our prospects and turn them in to customers and how we believe “events” from systems like Segment will help us understand if the customer is on the ideal customer journey.
With each one of these systems, they are designed to automate and action steps that we see when the customer is using our product. In the “Funnel Flow” chart above you can also see in the diagram how triggered events play a role once the customer enters the trial period and lasts through the entire customer journey. An example of this journey in our stack would be how we intake alpha requests through Typeform, we then give that request access to our system and start to nurture them with onboarding emails via Customer.io. Their product usage is tracked in Amplitude and we append events via Segment to different actions the user takes. Based on the user’s journey these events can then fire off additional transactional emails via Customer.io or in app via Intercom. The goal here is to make sure that all events lead to a successful outcome for the customer and align with the north star metrics that you have set up as a company.
WIIIIFS: What Is It In It For Sales?
In this new world of events, both sales, marketing, and success will have to change how they think of their events that flow through multiple systems that lead to the ideal customer journey for your product. All these events will need to be in agreement and the final vote will come from the product team that agrees these systems are leading to the ultimate orchestration for the customer journey.
Purchase and Customer Success
I’ve written in the past about buying loops and the challenge of selling in the old world of software. One thing that has always bothered me about the way business software is sold is that a higher purchase price almost always leads to a worse buying process. Specifically, as the buyer has to worry more about justifying their spend to leadership, than validating the usage, or even usefulness, of the tool to the organization.
In the PLG approach, this model shifts as the buyer can start free and then expand based on usage and adoption, rather than discounts and quarter-ends. It also pushes software companies to focus more on delivering faster time to value (TTV), which ideally can unlock more usage, users, and a higher eventual annual contract value (ACV). This creates much more alignment between the needs of the buyer and the vendor by ensuring that the fit is right and the product is effective before large-scale expansion takes place.
It’s not just what happens in the initial purchase that makes this different, though, but also how things work afterwards. In the old world of enterprise software, with long-term deals and roll-outs measured in months not minutes, when things start to go off the rails you send in the service cavalry to try to spur usage out of the customer. They were locked in, and the sunk cost fallacy only pushed them deeper, so spending a bit more to try to get things back on the rails seemed to make sense.
But in a world where purchase and expansion are more driven by the customer than the salesperson, this model goes out the window. Part of the reason you see such high net retention numbers in PLG SaaS companies is because the cascade of trial, purchase, expand, expand, expand makes for a much more robust relationship between companies and software vendors. The small customers you have are either bad customers or ones that will grow and the big ones should be exclusively good, since they became big mostly by their own choice, rather than any external pressure. Of course that’s not always true, but it’s a lot more true than the old model. One of the ways I like to think of the PLG model from a vendor standpoint is that it’s all about firing bad customers before they fire you. Keeping them small at the start makes that easy.
WIIIIFS: What Is It In It For Sales?
In a word, patience. Less friction means your deal velocity will be higher but your initial deal size will be smaller. You earned your customer in the traditional way and you will your customer in the PLG way as well. The PLG way will just take longer, it will require a more direct translation from product usage to enterprise value and will require you to take on more of a quarterback-type approach as you work cross functionally with marketing, product and success as the customer grows their usage with the product.
Conclusion: The Death of Sales is Exaggerated but a Shift is Required
The question you might be left with is, if the world shifts to PLG and remote, where does this leave the traditional sales model and the sellers who operate it? Like most things, the answer lies between two extremes. Without question, sales must move “up the stack” of value and get closer to the product, and closer to the users of the product. As the product becomes the center of the company, sales roles shift from leaderboards with call volume and gross bookings, to leaderboards of PQLs and other product usage metrics. And this shift isn’t just true for sales, it’s also going to fundamentally change the job of both marketing and customer success.
The sales leaders of tomorrow need to be more systems-minded, product-oriented, and have backgrounds that include understanding what channels drive trials, what events in the product showcase the best data around a user’s health, and how to build a relationship with a user buyer that maximizes expansion. If this sounds part marketing manager, part customer success manager, part product manager, part sales manager, I do believe that is right. That is the future of sales in a PLG and remote world.