Sales led vs. product led. It's an ongoing debate as to which approach is best.
In this post, I discuss the hard decisions, behavioral changes, and first results when shifting from a sales-led to a product-led business.
I wrote this article because many companies would like to build a product-led business, especially in the SaaS market, but have many questions about what the first steps are and what are the main challenges will be.
I’ll start this article analyzing the current business landscape and our understanding of what PLG means, both concept and practice. Then I talk about the current scenario of our company and the situations we faced. Last but not least, when we rolled out the product-led version of our product, we were able to increase our NPS by 25 points, one of our main indicators of company satisfaction.
Let me introduce myself: my name is Josias Oliveira and I am Head of Product and Design at Octadesk.
I divided this post into 6 topics:
1. The concept of PLG
2. How to change the company
3. What were the main challenges
4. The changes that we made
1. The concept of PLG
We understand that PLG is the evolution of the customer acquisition process, where the product is prominent and the main driver of acquisition and retention. In this model, every effort is focused on allowing our Lead to have the first contact with the product as soon as possible.
A product qualified lead (PQL) is radically different from marketing qualified leads (MQL) and sales qualified leads (SQL). PQL uses in-product behavior to find out exactly when a lead is ready to buy.
Lead remains the main asset. However, with PQLs, acquisition costs are much lower and the model itself is much more scalable than MQLs and SQLs. We can reach this by referrals, virality by value delivered by the product, virality of the product through word of mouth marketing among users. Depending on the use of the product it is possible to reach a zero CAC, especially when we are looking at users word to mouth.
In addition, there are SaaS market studies conducted by Openview that showed 98% of MQL never actually results in product sales. This proves the need to invest in a distribution and a product that allows ease of payment, and enable the delivery of value to the user as soon as possible.
PQLs demonstrated purchase intent based on interest, usage, and behavioral data in the product. Leads that are qualified for use within the product provide a more accurate method of tracking customer journeys from sign-up to sale to upsell.
It is a much more efficient model.
2. How to change the company: starting with culture
The initial big question is how to actually implement a PLG methodology if we don't have it very clear how it will work in practice for the people on the team. It is no use putting PLG as a savior of the homeland if people do not understand that it is a new method, a new way of looking and acting on the product, we were well aware that it would not work. And changing culture is not an easy task, it requires constant and continuous effort. Especially at the beginning of this transition. This will require a lot of support from company leaders on what really needs to be done and constantly align communication within the company.
3. What are the main challenges
Although the company is growing at around 15% a month in sales, one method was missing. The main indicator is that the churn was high, around 7%. We wanted to reduce and reach 2%.
With growth, scalability issues were starting to appear more clearly in the product. The system was going through a period of constant and continuous instability.
The big problem we initially faced is that people also felt that they were working without focus, with many tasks going on at the same time and almost everything with "urgent" status. People on the teams (marketing, sales, support, product) felt unproductive but at the same time they felt that they had a huge workload.
Looking a little at the service and the Customer Success team, they had the feeling that they were not heard on the product team. Many of the requests that were made end up in a backlog that were not actually implemented. There was a record but no one was looking to pull the resolution because it lacked prioritization and execution of demands.
And the big challenge: the Net Promoter Score (NPS), our top product health indicator, was in free fall. And it looked like we couldn't reverse it. And indeed, if we continued at that rate, the tendency was to make things worse. The big point is that NPS is just an indicator, if we do not identify the problems that cause this result and solve, we would not have the desired results.
4. The changes that we made
Extreme situations require extreme actions. It is up to leaders to act, prioritize, communicate properly and execute. Therefore, we put in place some changes in the structure of the company.
We set the product as the main protagonist of the company. The first action was to establish a minimum viable method to make the product team feel more organized. We changed some delivery dates and used a basic methodology to organize the information. We share a kanban board between the teams, distributing responsibilities and defining the area of action of each squad.
We also worked very intensely on the communication between the teams. We communicated to the entire company the strategy we would adopt, which key metrics we would follow, and how the product team would guide the company's growth from now on.
On the other hand, we needed to learn from every mistake we made. Because we need to understand in what moment some packages are not been delivered well. Revisiting in what step of the machine is not working. Understand, talk with your customers, learn with the problem and fix the machine of delivery (not the package). This is very important to scale up.
In fact, the methodology itself is not the most important thing. What is really important is to focus on putting the energy needed into what really matters in the product and what delivery most value to customers.
Both in product, service, and sales we start by mapping the user's journey. What journey our user would go through, how we would approach each one. On the product team side, we have restructured the product team on this journey. All with the view that the product should provide self-sufficiency for our users in the medium and long term. The customer needs to realize value self-service.
Today we know that we prioritize correctly and focus teams with the right mindset, focused on the pains of users. Thus, positioning the product as a major driver of customer satisfaction, growth results tend to be critical to engaging staff and delivering an incredible experience for our users.
Already in the first weeks in this new model, one of the product teams was responsible for evolving and improving the product we already offer our customers. We made a major improvement on one of the main and most used features of the product.
We have drafted a communication plan for our users regarding the launch of these improvements, involving the main areas of the company. The release was smooth and most users were able to extract value from the improvements made, based entirely on actual use-case pains. We were able to reduce support calls by 97% regarding release concerns.
And with the mission of building the vision of the future, we created a team with a full focus on product research and development. This team today is totally focused on understanding the personas and creating a continuous routine of conversations with users. Today they are working on a cycle of hypothesis raising, experimentation, conversations with users and continuous improvements.
In the CS Team, there was a need for changes as well, so that the team has scalable processes, predictable ways of working and especially methodology to extract the real pain from the customer at the time of cancellation or engagement.
We also made a major change to the sales team, extinguishing the Sales Developer Rep (SDR) team. We've moved some people who were once SDRs now to the Sales and Customer Success team. In place of the SDR function, we implemented a service bot. The experiment was a success and the bot started delivering around 40% better-qualified leads to our sellers. That is, in practice, the bot performed better than a human, although our SDRs are very good.
With the sum of several changes, our NPS began to point upwards. As we entered our third month of product team structure change, our NPS climbed more than 25 points. For the first time since we began to change methods and process, our main indicator began to move the pointer in another direction.
6. Key Takeaways
Product is an organic element
The way people interact, behave and relate to each other directly affects the product delivered to the customer. There is no magic or shortcut, the product reflects the organizational structure of the company. If you want to change that, start by changing behaviors that don't contribute to a better product.
Face hard decisions
Solve problems that are masked. People need to create awareness that the company's growth curve will require a certain state of constant discomfort due to the tough decisions that will be made along the way. These are problems that the product itself has, as well as problems between its own people, each other needs to be solved. Encourage brutally honest and difficult conversations by directing them to resolve conflicts and answer questions.
Identify and build alliances
Identify how people behave when there is a complex problem ahead and act directly if necessary. Try to identify who already in "bought-in" with the new idea and bring them to your side. This will help you walk the path of changing behavior, attitude and posture in the face of challenges so you can get out on the other side.
Solving Complex Problems
We cannot solve problems only for customers who have higher MRRs or for some customers who scream louder in support. The important point is to address the resolution of complex problems. Focus on how to solve problems for the next 10,000 customers and contribute to product scale.
Entry in the product must be easy-in and the product itself needs self-service features. In other words, the product needs to be extremely easy to use and with amazing UX. There is a radical reduction in the service layer, in fact reducing functions in CS that only teach the user to push buttons. CS now works more strategically as a product needs to make the user experience easier.
Small wins every day
Try to identify what daily earnings your teams will deliver to the product. This ranges from a new reward your product offers the user to a new way of support. Each victory is responsible for energizing the team. Do not expect a great achievement, at least not in the short term.
Don't call the Growth team a Growth team
And there are a few reasons for that. Brian Balfour says one of the main reasons is related to the relationship inside the company. If the numbers are falling, this is the Growth team that other people will blame - they will say "I have nothing to do with Growth". On the other hand, if the numbers go up and there are other components that helped, only the Growth team takes the credits. Instead, name it around the goal, the team's mission. In our case, we called the Growth team the Onboarding Team.
It's important to understand that Product Led Growth is not simply about making a free or trial version of your product available to your customers. These are just one of the acquisition strategies. Product Led Growth requires a whole new way of thinking about the customer journey in the company, turning the product into an amazing communication platform and making your customers falling in love with it.
With the changes that were made, the first consistent results began to appear. We know there is still a long way to go before the product actually begins to generate the Product Qualified Leads (PQLs) consistently. Generating a free offer is still in our plans, but we understand that the first step is to improve the trial version we already offer today.
What are your personal thoughts and experience with sales led vs. product led businesses?