PLG: A Reframe

After my last article (Product is Eating Sales) I chatted with a VP of Product at a Cybersecurity company. He made the case that Product-Led Growth (“PLG”) wasn’t a fit for his early-stage company. They’ve built a complex technology difficult for competitors to replicate, with an enterprise-focused use case. Though I’m a pretty staunch advocate for all things PLG I couldn’t argue with him. To take advantage of the head start they have against the competitive landscape, a traditional sales model/program/process is the best go-to-market strategy for them on their journey to $100M in Annual Recurring Revenue (“ARR”).

After noodling on this for a few weeks, I came to the conclusion that PLG is not binary. Retrofitting select PLG principles that align with your business needs is optimal. Below I offer a high-level framework I’d use to begin the process of implementing PLG into your company’s growth model. Anything more granular involves a thorough understanding of both your business and PLG principles.

Product-Led Marketing

This level is PLG-light and describes the cybersecurity company I discussed above. Though this is a direct sales model in which executives need to be educated through a heavy-touch sales process, time-to-value (“TTV”) is still a consideration to ensure executives engage in initial conversations.

Think about this: A CISO who gets hundreds of emails a day from Sales Development Representatives (“SDRs”) (half of which he’ll junk before reading passed the subject line) is intrigued by an email that may solve an urgent issue for him. He’s not yet sure, however, so he goes to the website and does a quick glance. It is imperative that in the 10 seconds that this CISO spends on your website, the business problem that your product solves is crystal clear. If a clear and concise value prop is not presented on the website there is a 0% chance he’ll engage.

This reaction differs from what may have occured 5–10 years ago. Back then, the executive may have connected with the SDR for an initial conversation even if there was only a fuzzy understanding of the value, and if it made sense to continue the conversation after that, next steps would include a more formal evaluation of how the technology fits into the environment. Today, executives simply have too much to evaluate and too many outside requests coming at them that if they aren’t able to arrive at an understanding of how you can help them BEFORE they engage, they simply will not respond. Marketing and Product Marketing teams must be on point in this growth model.

Product-Led Conversion

This is PLG medium. You can think of it as significantly compressing a sales cycle by offering product value without sales interaction, typically presented as some sort of freemium offering. Rancher Labs (recently acquired by SUSE for ~$600M) is a good example. They’ve built one of the most popular open source projects that DevOps leaders can use in the beginning stages of operationalizing their Kubernetes infrastructure. It’s free and publicly available. The open source version, however, is not suitable when it comes time to scale Kuberenetes across the enterprise. At that point, the technical end-user must reach out to a Rancher sales rep to map out which products and support services in their portfolio would result in the greatest business value. Negotiations with the executive buyer are quick and swift, as the distribution of their products to customers will depend on a scalable and reliable Kubernetes/Cloud infrastructure across the enterprise.

The product team’s ability to develop an easy-to use and valuable limited version of a paid product will cut down sales cycles by 40–60%. In the old model sales reps will spend most of their time identifying all stakeholders and conducting a sales-led trial version in order to prove enough value for purchase. If the typical sales cycle is 7 stages once an opportunity is created, and the first 4 stages represent the pre-negotiation period, a self-serving model in which the end-user becomes reliant on the product themselves all but eliminates the first 4 stages i.e. 4/7 stages or 57% of the cycle.

Product-Led Transaction

This is pure PLG. No sales interaction required when purchasing the product. Companies in the consumer technology or developer tool space typically fall into this category. Slack is a good example.

Though Slack does have a “reach out to sales” for enterprise pricing on their website, small teams have the ability to purchase Slack on a per user basis very cheaply. As teams and businesses grow, so does Slack’s footprint. A classic cheap “land” with the majority of the revenue attached to the expansion of Slack alongside company growth. No need for a sales person in this model.

Not all companies can take advantage of this GTM model, however. Slack can be used by any team at any organization: A massive total addressable market (“TAM”). Enterprise SAAS companies that provide a niche need within a specific function should not architect their businesses around pure PLG. They must maximize contract value from the opportunities that fit the value they provide. Though they can take advantage of some PLG principles to gain efficiencies in their GTM motion to make selling easier, sales reps are required to educate and justify the business value for the organization they are selling into.

For early-stage tech executives: is there an alternative framework you would use to get started with PLG? If so, would love to chat nate@bluebirdanalytics.co