In a previous life, I used to dread using this one software tool for developing and publishing online user guides. This was a fairly popular product used by some teams and individuals in the company. But, it didn’t cater to the needs of my colleagues who needed modern formats of documentation. So, why did the organization buy the enterprise license for the software which clearly didn’t help their employees’ range of needs?
Back in the day, the purchase process used to start at the top. The research and vendor discovery might start at the VP or C-level folks. A qualification call with the selected software vendors just to get access to a demo, more rounds of demos for the stakeholders, security and legal reviews, procurement, implementation, and finally, the users training. The process easily takes several months.
In many cases like mine, the software purchased falls short of delivering the end user expectations and as a result, never gains traction or gets fully adopted by the everyday users inside an organization. This was typically the situation when software products are being targeted at the executive buyer at a company.
Today, this way of purchasing software gets turned on its head. The end users are finding the products that can improve their lives and work. They are telling their boss which products to buy. The best SaaS companies are recognizing this change in the purchase dynamic.
Kyle Poyar, operating partner at OpenView and leads their growth team. He partners with the executive teams of the VC firm’s portfolio around driving revenue growth. Kyle says product-led growth has been on top of the minds for most of OpenView’s portfolio, whether they started as native PLG or transitioning into the business model. As an expert in product growth, optimizing go-to-market strategies, and SaaS benchmarks, Kyle says, “Winning the end user is critical for success in a PLG company“. He explains how to appeal to the end user in four key steps.
Historically, we've thought about executive pain, pain in terms of ROI, revenue or cost savings impact to the company, and such but not the end user’s challenges. For example, an executive's pain point might be in managing a sales pipeline effectively. So, they adopt a CRM like Salesforce. But, the team member who uses Salesforce every day might face friction with scheduling meetings or importing notes from an app like Evernote because taking notes in Salesforce is not a smooth experience.
These annoyances are everyday challenges that hold us back from being successful at work and that is why we are out there searching for solutions. Now think about the end user challenges around your product. And, you want to be found in the context of that research. Here are some great examples of products that turned annoyance into opportunity.
As long as we are on the subject of solving end user pain, bear in mind that a rigid signup process is also a pain. Think about how you’d wade through processes like requesting a demo, talking to sales, or having to fill out a contract. End users usually hate to see those CTAs on a website. What makes their (or our) lives a bit easier is a self-service solution - to be able to test out the product, see value first-hand, set it up, and get support in real-time when needed.
You need to make it easy for the users to get started. In a product-led environment that means easy signup from the website to jump straight into the product. It typically looks like this:
There are hundreds if not thousands of users for every executive buyer. Targeted marketing becomes hard because you need to reach so many potential users and the high costs of acquisition marketing like trade shows aren’t going to be feasible. Kyle calls it the blessing and curse of product-led growth.
Once you solve that end user pain, you know why someone needs your product. You need to find scalable ways to reach those users.
In PLG, there's an expectation to be able to try the product for free. And, you hit the paywall after someone's ‘aha moment’ or after you've delivered value. For example, Slack charges you after it becomes the place where mission-critical data of your customers is exchanged within your org from a place where your team has casual conversations. They allow unlimited users and offer an amazing free experience but limit the number of messages you can keep on Slack.
Talking of pricing, freemium or free trial? 74% of PLG companies have a free trial and 38% have some sort of freemium model. But, which suits you? Luckily, OpenView did some math on this.
Kyle says, “If your product grows in value over time, or free users create value because they invite other users or have other benefits then freemium is natural for you. But, you have to be willing to sacrifice immediate conversions and revenue in order to see success. If it's more important that you get that return on your marketing spend, you drive more conversions in the paid product, then free trial is the way to go.” But, Kyle prefers combining these two models and cites Calendly’s 14-day Pro trial is a perfect example of this.
Minimize the friction in your product’s user experience and test out which pricing model works for you.
In PLG, you target a large number of users in different job roles and vary in product engagement. This requires a big data approach to optimize every aspect of the funnel. To measure everything, you have to first set up a PLG tech stack. This can be different for each company.
Think of your old tech stack in the old way (sales-led, marketing-led) to the equivalent in the product-led environment. For example, if CRM was your source of truth for prospect interaction, product analytics will be the new source to understand user engagement.
Define your user activation goals and Product Qualified Leads (PQLs). These are unique to your company and product. But, bear in mind that the activation metrics must be easily achievable by somewhat committed users, quickly. These metrics should be to predict future retention and correlated to business performance. An improvement in activation metrics should easily flow through to purchase. Also, run in-product experiments and keep tabs on user cohorts.
Not only Calendlys and Slacks of the world but, the PLG phenomenon is even adapted in spaces like security, which have never been traditionally end user focused. Software is finding a way into organizations big and small through the users. It’s clear that the end user era is here. You need to adapt your business model to win them over.
Listen to Kyle Poyar’s complete session from Blastoff! 2021.