21 December, 2020
This eighth episode titled ”Product-Led Growth”, that aired on December 17, 2020, we had Wes Bush (CEO & Founder of ProductLed) in a conversation with Alexandra Marcu (VP of Marketing at 2Checkout, now Verifone).
Product-led growth is one of the darlings of 2020. And it makes so much sense – as the tech market becomes more and more crowded, product-led growth focuses on the product as the main vehicle to acquire, activate and retain customers or users.
Wes Bush is one of the undisputed leaders of this shift. The author of “Product-Led Growth: How to Build a Product That Sells Itself” and founder of the Product Led Institute, Wes comes with a fresh point of view in the product world.
Wes and Alexandra shared invaluable insights into product-led strategies and their implementation. Here is a sneak peek into their live discussion:
Listen to the full discussion on Spotify and on Apple Podcasts too.
3 takeaways from Wes and Alexandra’s live discussion:
►”Now, whenever we think about product-led, the main difference here is you’re actually flipping the sales process instead of no, waiting until someone signs the contract to get into your product. You’re actually giving your potential customers the keys to your product, they can see it for themselves, if it solves the problem. And what happens, what’s super interesting about being product-led, is when you do that, and when people are able to solve their problem using your product, they are way more likely to become a paying customer.”, Wes, on the essential strategy behind product-led growth.
►” We’re having this very long sales cycle with the big accounts, we’re selling to big companies. And it is a difficult aspect of growing and making sure that the entire account is healthy. You’re marketing to the entire account, even if that account is part in France, part in Germany, part in the US. Like you’re having a holistic approach, both in terms of marketing, as well as sales. It is difficult. And happily, yes, there are more tools nowadays to address that. But it’s still not very, like the whole marketing toolkit let’s say, it’s still very lead contact driven.”, Alexandra, on the difficulties in a approaching an account view and strategy in sales.
►”I find a lot of companies start focusing on it like, yes, you do need revenue, you do need to have that as a metric. But when it comes to success for a product-led business, what you should really be focused on is what is end user success? Are our users actually experiencing the value of the product? Because it’s the best leading indicator any product-led business has. Because if people aren’t experiencing the value of your product, and the free experience, then chances are not many of them are going to become paying customers, unless you really force them through a sale, or like heavily discount or something crazy. “, Wes, on the fundamental metric of product-led business.
Are you more into Reading? The Full Transcript is below!
Alexandra: Hello, everyone! Good morning, good afternoon, good evening, wherever you are. Welcome to How to Web Live. I’m really pleased to have Wes here, which is not only a great influencer, but also a friend of ours, if I may say. Wes is the founder of Product-Led Institute and host of Product-Led Summit. He’s also a book author. If you haven’t read ‘Product-Led Growth: How to Build a Product That Sells Itself’, you should go on his website and buy it. So Wes, welcome! And I’m happy to be the host of your session. How are you?
Wes: I’m doing great. Thanks so much for having me.
Alexandra: How’s winter in Canada?
Wes: Oh, man! So, I woke up this morning, and yesterday there was no snow. And we’re expecting like two feet of snow. I’m like, yeah..
Alexandra: I wish I would be in California really right now, with all the winter and everything. Okay, Wes. So this is really an exciting subject. And I know you’re so keen and you’re super passionate about product-led strategies. And let’s start with a really easy one. Like, what would be the most common strategies you can deploy? Like, what are the options for the startups and like, for all type of companies, the go to market strategies for growth?
Wes: Yeah, absolutely. So when you think about, like, what are the most common ones that you can typically use for a SaaS company, most people will say there’s three. But I kinda argue there’s just two, to kind of simplify things. So there’s your sales-led way, which is really the more traditional way where on the website, like you’re just trying to get people to go on your demo request. And then they go through that sales process, goes on and on, until hopefully, one day, they sign the contract. And then you have that new customer. Then you can do customer onboarding. They can get into the product and actually solve their problem. And then there’s this new concept of marketing-led, which I still label it as – it’s still sales, but it’s just doing better marketing. At the end of the day you provide marketing qualified leads to sales, to the same process at the end of the day. But then, what we’re looking at now, is more companies opting to be product-led, which is really exciting. So we think about like the main difference there, between sales-led and product-led sales, that is your really the only way you can sell your product is through your sales team. Now, whenever we think about product-led, the main difference here is you’re actually flipping the sales process instead of no, waiting until someone signs the contract to get into your product. You’re actually giving your potential customers the keys to your product, they can see it for themselves, if it solves the problem. And what happens, what’s super interesting about being product-led, is when you do that, and when people are able to solve their problem using your product, they are way more likely to become a paying customer. And a lot of times they can become that paying customer without talking to anyone in sales. And so that’s the caveat – your product can sell itself, absolutely. But there is still room for sales in a product-led business, it just depends on where does your interaction with a customer start. Is it with your product? Or is it with your sales team?
Alexandra: Like can we a have a combination of the two? I go more on the hybrid model. And just do both because I personally feel that we’re doing that at 2Checkout. We do have the self service model, where it’s like with product-led and the merchant can come and test the product before, and have that all experience tested, and enjoy it. But we do have a strong sales process as well. So is there room for both?
Wes: Absolutely. And like whenever I talk to you sales teams, whenever they’re going through this transition from sales-led to more product-led, usually, honestly, the most resist it because they see it as like a threat at the end of the day. Like the product is going to take their job away. And what I try to remind them is like – actually no, that’s not what should happen, at least. What should happen is your product is going to be onboarding a lot of the users and accounts that probably weren’t going to be the best fit, or best use of their time anyways. And so the product will do the onboarding for the smaller accounts. But then, when you think about like the big enterprise companies, they are companies focused on, and they get to focus on those accounts and really providing value. And so, the one question, if you’re ever thinking about like, should we have sales or not? You need to ask yourself this question, which is really is your sales team adding value or friction? And ask about it, every interaction of the customer journey. So at the very beginning, like if the only way they can sign up is a demo request, is that adding value or friction? Whereas if we look at like more of a product-led onboarding experience, some of those use the product, they’re experiencing it, they like it, but the sales team reaches out then and says: ‘Hey, we noticed you’re using like these specific features. We really recommend you try out this new feature because an account your size, this makes a tonne of sense, you can see really impactful change. That sales rep is adding a massive amount of value. So in that case, absolutely. Like that makes perfect sense to have that person interacting with that user.
Alexandra: Hmm. That’s, that’s great. I was thinking about 2Checkout. We’re doing a good job, then. Okay, why it’s such a trend and spotlight on Product-Led Growth? And what’s exactly Product-Led Growth? Can you define it? A little bit?
Wes: Yeah, absolutely. So the first part, what is Product-Led Growth? It’s so interesting. Is like when I initially got really excited about Product-Led Growth, I was at the very onset, kind of like the iceberg analogy, like, you look at the top of the iceberg, you’re like ‘Oh, it’s a small one’. And I thought like, when it came down to what a product-led business was, there’s just like a free trial freemium model. Is the easy way for you to really give people your product and let them try it. But what got me super excited about it, is I realise ‘Oh, wait a minute. Like there’s so much more here!’. Every team actually has to do something different. Your marketing team, for instance, they can start thinking about – well, how could we use the product to hit our goals. There’s been great examples like ConvertKit.com. They have actually launched a free landing page tool for their audience. And what that’s been able to do is just help them acquire a massive amount of users that then feed into their main email marketing tool. So it was like, really, at the end of the day, they could have wrote 1000 articles on how to build great landing pages, or they could have just built a product to help people do that. Very straightforward and very easily. So it’s really interesting 10x thinking you can have, when you start thinking product-led for your marketing team, and then for your sales team, you can start thinking about as well. Well, what are we looking at? What are people doing in the product that would really help us provide more value to them? So they’re using specific features? Well, could we help them at that particular point? And so, it really is a whole organisational strategy and a mindset around how you change your business. So whenever I get asked like, well, what is Product-Led Growth and what does it mean to be product-led? At the end of the day, it comes down to end user success. And I truly believe like the secret behind being successful at building a product-led business is really you need to believe that eventually, like end users success will become your success. Because you need to leave with serving first before you’re selling. And the best product-led companies, they do an amazing job at serving first before they just hard sell.
Alexandra: But your product needs to be amazing, I guess. Like maybe that’s a fear that the startup companies, you know, with startup, they never feel ready. They are like my product is not ready yet. They don’t feel that they’re ready to launch it. Then, like ready to sell it, and sometimes, okay, I’ll just go through sales because I can manage the conversation, I know what they’re asking. It’s easier. But like when you’re showing it to the world, then it’s ‘Oh, they’ll see they. They won’t see the value the way I see it.’ Or I don’t know, complexities like that. So do you really need to have extraordinary product? Is this process only for extraordinary products? Or is it to support any type of product?
Wes: And it’s a great question, because it is one of those fears, like you do go product-led. And let’s say you don’t have a very good product experience or anything else. Someone signs up for your product for free. And I call it game over. Like if there is no clear action for them to really go in and get value, most of those people are going to just leave anyways. Now, there’s a scary stuff too, that even if you do have a good product experience, this can still happen. So Intercom did a study on this a nd they found that about 40 to 60% of users, when they sign up for your product, that first time, they’re never coming back after that first time. So 40 to 60% of all your users.. All your marketing budget, basically, it’s been spent on getting these signups. It’s like letting it on fire, and they’re not coming back. And so in that first experience, that’s really where the exciting part happens for that user. Is like, either they’re going to change their behaviour, they’re going to try this new thing. Are they motivated enough? And that’s the thing too, that really comes into play. Is, let’s say you’re in the new space, you have, you know, a new product, things are kind of still maybe not perfect in the product, and not saying anything is ever gonna be perfect. But maybe your product still has a lot of work when it comes to the user experience and design of it. But if that person is really motivated, I tell you, they will figure out how to use your product. But that’s also limiting your total addressable market, because you always want to be making sure that it gets easier and easier for more and more people to experience that value. So yeah, don’t stop and not go down this route. If you just think like ‘Hey, we still have a lot of work. This is going to help you accelerate that in that direction. You need to be willing to at least invest in like how do we up our product design, and really, our product experience at the end of the day? Because these users are going to make that decision on their own around ‘Should I upgrade or not? Did I get value or not?’ And that’s really what it comes down to.
Alexandra: Okay, great. Like, from what you said, it feels to me that you have to transform your entire mindset and the entire company, basically, to be able to, to go through a product-led growth. Like you would have to change the mindset of sales. You would have to start a nurturing programme, like have a strong experience. Because if you’re only asking for demo, asking for trials, and then you’re doing nothing with them, like you don’t have any other communication with the client, you’re just leaving him hanging. When in the product, just waiting for him to come – that doesn’t seem like it is going to work. So is this transformational? Is Product-Led Growth transformational?
Wes: Yeah, absolutely. And one of the things that I was working on like a couple days ago, with another founder of a product-led business was really just like, what are the mindset shifts? Because I feel like there is a lot of tactics, and you know, now there’s a bit more strategy kind of going around on how to build a product-led business. But the 80/20 for me is always been the mindset. Like what needs to change within every team’s minds around how they approach things. And so, I try to break it down by each team to kind of give this founder a better idea of like how that might look. And so for sales, for instance, one of the big mindset shifts you need to have is really going from hunting to farming. In a lot of sales-led companies it’s like, okay, let’s find the big whales, big accounts, and let’s go after them. And so in a product-led company, the majority of the sales team should at least be focused on farming. You have lots of these users coming in. How are you identifying who you should help and who you should harvest, in that kind of weird analogy way. You don’t harvest people, you harvest accounts. And that’s one of the the big shifts for sales at least. Whereas, when it comes to marketing, this is where it gets super interesting. And so it’s really going from just creating demand, which is really interesting because my background is in demand generation. And religious, like how do you get more leads for your sales team. But you got to change that focus from creating demand to just creating value. So like that ConvertKit.com example. Like, they were really saying ‘Hey, we could go down write 1000 articles and create a bunch of demand around how to create amazing landing pages. Or we could just create a product that can help people with that. And, by the way, like, we have a product, if you want to send those leads emails. It’s a perfect kind of extension for them. And so for support, instead of just like focusing on answering tickets, like it should really be about creating more experiences. How can we really help people, and not just be like reactive, but proactive. There was a great company called Xsellco. And so one thing they do, in their onboarding experience, to really focus on creating great experiences, from a support perspective, is they have these really kind of tricky integrations to set up. And it’s not on their site. So it’s really out of their control. But whenever people are on this page, if they’re on it for more than 30 seconds, and they’re having some trouble, there’s a little pop up that comes up, which says, Hey, do you want to do you want us to help you with this and go through it with their product experts. So it’s a like pure play on value. Like, if you want help, you want us to do this for you, we’re happy to. We’re here. We’re not just like, you know, hidden behind that little support request. We’re here, we’re here to help you kind of deal. And so the last kind of mindset shift for product is really just product. Now, more than ever, in a lot of product-led companies is focusing on driving revenue over just building features. And so those are like the four main mindset shifts. And like the whole methodology of product-led growth, the big mindset shift there, is focusing from selling to serving, and really leading with that product experience. So yeah, great question.
Alexandra: Yeah, for everyone, you can ask your questions, please. We would be more than happy to answer them and have Wes share his experience. We have a first question already. You kind of answered that, but I will just ask it anyways, maybe you can add some more. Marga asks: ‘From the from the perspective of product driving growth, what could be the new role of marketing?’
Wes: Yeah. And so there was a little bit around, like, just how do you create value as a marketing team versus just simply creating demand? I think, now more than ever, like, we’ve got the creating demand component down for a lot of marketers out there. But I think where we struggle is just how are we adding value? And I’ll give you another example. I shared the convertkit.com one, but there’s two more that come to mind as a release to marketing. And so if you’ve heard of canva.com, like it’s really easy to make graphics with Canva. And like her onboarding and marketing team are like in sync. So for instance, if you type into Google ‘How do I make a poster, something simple.’ You’ll see there’s a page on Canva that ranks for that pretty highly. Here’s why. And you go on that page. And yes, it’s like kind of landing page style tells you a little bit about how to make a poster, has some great examples and templates. You can even pick a template that you see there. And then it just takes you through a very simple signup process. And you’re actually there creating that poster. There is like many, many different types of graphics you can create in Canva. But what they have done very strategically there is just tie that first interaction from the marketing site, all the way into the product. And it was seamless. So the user journey, and the user themselves, are saying to themselves, like ‘Wow, I just solved my problem.’ They’re creating value there. I’ll give you another example. Soapbox HQ, they’re in Toronto. And so they have a tool that basically helps you have a lot better meetings. And so one of their most common meetings that they help you do a lot better, is one on one meetings with your manager. So a lot of people are once again searching like how do I have better one on one meetings with my boss or maybe it’s the boss saying how do I have one on employee, it goes both ways. And so they have an Amazing articles on this. But in the article, the main call to action is really just the template that they have for the one on one meetings that feeds directly into the product. So regardless of if they sign up for the product or not, it is creating that value. But it ties perfectly into the product experience as well, if you want to take that next step and really become better at that core problem.
Alexandra: Thank you. Another interesting question is when should we adopt or when should we avoid product-led growth? Like is there an instance where it doesn’t work at all? Maybe I don’t know, maybe for a very complex type of product? Maybe for really long cycles? Like, is there a moment where we should say ‘No, it’s not a fit for my for my company?’
Wes: Yeah, so I built like a – it’s called a MOAT framework – around just like how to think about like does it make sense or not for you to go down this path? And in that entire framework, I’ll focus on one piece. And that I think, is the the 80/20 here. So, if you are in a blue ocean, and when I say blue ocean, if you’re not familiar with it, it’s basically an uncontested market space, you’re creating a new category, you’re doing something completely new that maybe a lot of people just don’t quite understand. So, if you’re in that kind of situation, very new product, very new market, not many people understand exactly what it is that you are doing. So if you’re in that kind of ocean, sometimes it makes a lot of sense to have that sales team. Because, at the end of the day, it comes back to that question I asked you: is your sales team adding value or friction? And in a blue ocean, your sales team is adding a enormous amount of value. Because they’re helping you identify like ‘Hey, wait, this was a big problem I didn’t even know of kind of deal. And so there’s a lot of benefit in having that. Now, take that fast forward, maybe 5-10 years, your market is super competitive. We call that a red ocean. And so in a bloody red ocean, what’s happening is, it’s harvesting demand. You are trying to figure out how to build the most efficient business possible because there’s so many other competitors. And there’s only room for a few at the top, who take the majority of the profits in any market. And so if you’re in a red ocean – even the the folks at Salesforce, when I was chatting with them about this, like there is one go to market strategy that makes sense in a red ocean. And drumroll… It is a product-led business. Because it is just a lot more efficient. We could go through like the benefits as well of being product-led. But a big piece here is lower customer acquisition costs. You have the dominant growth engine in your business. And so there is just a tonne of benefits if you’re in that situation for you to truly just double down on that and build a product-led business.
Alexandra: Okay, that’s great. Are there any differences in product-led pro strategies for B2C versus B2B? Is there like, are we doing something different? Is it even a fit for the B2C world like, usually the B2C it’s kind of product-led in a lot of cases anyway?
Wes: Totally right. Like in B2C, they’re well ahead of us in the B2B world around how we are thinking about building our product-led business. Because for many of them, like their business model just wouldn’t have worked had they not been product-led because they’re operating at very low margins. When you think about like a lot of the products in the B2C space, they’re under 10 bucks a month, like in the B2B world, we just like ‘Stop, like, wow, that’s low!’. And that is very hard to operate in, especially if you’re a B2B company, just mostly because your total addressable market is a lot smaller. So you do have to have higher prices, more specialised problem kind of deal for the reasoning behind it. But as it relates to the differences between B2C and B2B, as when you’re building a product-led business, one of the biggest ones I’ll tell you about is really when it comes to analytics, and how you’re measuring this internally. So many of the B2C companies out there, I won’t name names of the product analytics companies, but they’ll focus on measuring the user and that’s great info. Don’t get me wrong. Measuring the user is super helpful. You have to understand it to figure out like where are the gaps in your onboarding, how do you improve it. So on an aggregate level is brilliant. But where it breaks down for product-led businesses is understanding accounts. Because in a B2B world, you need to understand the account.
Alexandra: That is so challenging, I have to tell you, with all the account based marketing and account based selling, and that’s so much different from like, it’s very difficult. That’s, that’s for sure, a lot more complexity added to the table.
Wes: Totally. And when you think about like all the majority of like the well known CRMs, right now, they’re all deal based. Whereas like, we should be focusing on something that’s more account based. Because, if we’re looking at like a big company, let’s say like a Fortune500 company, there might be certain departments that are already customers. And then there’s some over here that are not customers. But if you think of Slack, and how it spreads through like a Fortune500 company, that gets super interesting, because when it comes back to the sales question, like your sales team can start building, accelerating that within that one company, as you kind of figure out like, how can we help more people adopt this particular product? So yeah, that is one of the bigger challenges I’ve seen companies bump up against. Now, thankfully, there is some more tools around that to understand your accounts. And really just like how do you measure the success of the accounts? Not just the user. Not saying the user is not important. But if you don’t understand like the holistic picture of like the account health, when it comes to customer renewal and different things, it can be really tricky to understand, like, is this person at risk of going away? Or are they consistently getting a tonne of value from this product?
Alexandra: Yeah, that I can tell you. We’re having this very long sales cycle with the big accounts, we’re selling to big companies. And it is a difficult aspect of growing and making sure that the entire account is healthy. You’re marketing to the entire account, even if that account is part in France, part in Germany, part in the US. Like you’re having a holistic approach, both in terms of marketing, as well as sales. It is difficult. And happily, yes, there are more tools nowadays to address that. But it’s still not very, like the whole marketing toolkit let’s say, it’s still very lead contact driven. Less so on the account side. And, yeah, we have had that challenge as well. So we have time for one more question before the ad break starts. We’ll take Alex’s question: ‘What are your thoughts on product-led growth strategies for early stage startups?’ I think we discussed about that in the beginning. But let’s just give it a short answer. I think we hit on this one, when I asked you about like, does it make sense for early stage startups? When they’re just that the MVP level? They don’t feel that the product is right, ready yet? And you mentioned that it does make sense.
Wes: Yeah, it can make sense like to go forward with it in that early stage startup. But once again, it comes back down to like, what kind of market are you in? If you’re early stage, and you’re going into like a very competitive market, I was just talking with a company called like Bubbles, I’m not sure if it’s bubbles.com. But it’s like a Loom competitor Slash like, you could use it kind of like Figma, and comment on anything. So like, they’re pure product-led play. There just optimising on getting as many users as possible to grow their business, and then they can layer on some different paid upgrades in the future. So like, yeah, you can totally do it in the early stage, as you get that growth and really see like, is this a good fit. But eventually gonna have to figure out like, what is the best monetization strategy? And I have seen some companies, the early stage Loom.com as an example. Like they went all in on user hungry, like had like, no limits, almost for their paid plan, but then they didn’t quite know it, then they kind of put the brakes on it, put a bunch of barriers out for people to now pay and limited their free version. And that just caused a lot of people to be like ‘Well, no, I don’t want to use this product now.’. And so you do have to be very careful about that as you scale because just optimising on users for super, super long time might mean that people just get too comfy with, you know, getting everything for free, that the minute you pull that away, they’re just upset and they don’t want to pay.
Alexandra: Yeah, not paying customers. That’s what you want, that’s for sure. Okay, so let’s have a short one minute ad break and then we’ll be right back, and talking with Wes about Product-Led Growth.
Alexandra: Hey, welcome back from the ad break. I just want to remind everyone that you can still ask questions and we’ll take them on to to Wes. And he will answer them. And let’s go Wes into more concrete stuff like – what are the 1234 5 10, whatever you think that is necessary, what are those steps that a company needs to take in order to start the Product-Led Growth strategy? What do they need to do to start like now, tomorrow, in 2021?
Alexandra: Yeah, we wouldn’t want that. Yeah, so we have another question from the from the audience: ‘When is the most appropriate time to launch a product? It’s clear that product development never ends. Let’s take ClickUp, for example, they’ve recently released an amazing product. Kind of buggy, but now they release new features almost on a daily basis.
Wes: Yeah. So the first thing I always recommends is just start with like, what’s the purpose behind this? And get crystal clear on them. Because in this moment, like, you’re going to have to decide like, well, what is the main reason why we’re going to go through all this pain? Just like the same thing, if you’re thinking of like, working out like you want this? I don’t know, like your ideal version of you, like okay, so how are you going to get there? There’s certain steps, certain things like waking up that early in the morning and working out. That’s not quite the best thing you want to do. Of course, you want to just sleep in bed. But the same thing applies to product that in any change. And so, that’s where I focus on – is just understand the reasons why maybe it is your competition, your competitors are all going product line, and you just see like ‘Hey, we’re going to lose out on the SMB and mid market space’, because you just can’t compete in that area. So we have to have this down market motion. Or, maybe it’s something like ‘Well, our customer acquisition costs are just going up and up and up.’ And that’s pretty common across the entire SaaS space. ProfitWell did a study on this, they found that over the last five years, customer acquisition costs have just gone up 55%. So that’s pretty crazy when you think about that. And so if you’re just always increasing your customer acquisition costs, something has to change. Because if not, like your profit margins just erode. And you’re running more of an unprofitable business or maybe just breaking even. And so both those aren’t the best outcomes. And so that’s where I would start. And then the next thing is really just identifying what is the first quick win. And in every story that we hear on either the Product-Led Summit or Product-Led Podcast, from people have made this transition from sales-led to product-led, they all kind of reference the same thing in a different way. They say I started with like a little quick win. And then I took a bigger win. And then I took bigger swings, and they just kept going bigger and bigger. So that’s typically how you do it. Now what that first quick coin will look like for your business, totally dependent on your skills, your business size. And what you define is risky. At the end of the day, if you’re the founder, you might say ‘Hey, we’re willing to take like bigger risks.’ But if you are, maybe middle management, or even just the front line, too, that’s totally fine. You can start thinking about ‘Well, maybe we could just try rolling out a free trial offered to 1% of our website visitors.’ I’ve seen companies do that and it’s really great because they can start testing the waters without dipping their entire body into the cold water and saying ‘Oh, I don’t like this’ and running the other way. And so, that’s one thing I would recommend, if you are planning on making this transition, is really just find what is that first quick win, and then go on to the next. Because there are several challenges that you do have to identify. One of them is really like pricing. Pricing is one thing you have to change, that can be its own webinar on it. I could really share the some of the big things you got to think about there. The main thing is you just have to make sure it’s easy for your people to understand what they’re going to get charged. And so, yeah, those are some of the big challenges. Some of the other ones are really just around like: How do you build that mindset around? How do we think product-led, and the onboarding experience. In that first user experience is one of the most critical and how you can get people to experience it out of the product. Because like we were talking about earlier, if you don’t get that people just don’t have that really great reason to come back a second time, and they don’t understand the value of the product.
Wes: Yeah, so when is the most appropriate to launch a product? There’s no appropriate time to market like, well,…
Alexandra: Depends who you’re asking Wes. I think it really depends where you’re asking. If you’re asking Sales, the product is always too buggy. If you’re asking Marketing, we’re not always ready to promote it the way we want. Really when you’re asking product, maybe ‘We’re ready, we’re done! I don’t know. It really depends when you’re asking in the end.
Wes: Yeah, absolutely so. It’s always like, if you are thinking about launches, I know.. we recently had Todd Olson, who’s the CEO of Pendo, on The Product-Led Podcast, and like one thing they do really well is their launch style. And so, whenever they’re thinking about launching a new product or feature, it really starts with that beta. They launch it to a beta group. And they get the feedback with the bugs, and really get some immediate feedback. And, actually no. Before that, they launch it to just their entire team initially. And then they launch it to the beta group. And then, after that, if you want to have this second group, it could be like, customers pay extra to get access to these early features that goes to them. And then it goes to the general audience. And so it’s really this interesting flow that you could have when you’re launching new products, to really vet it at every stage. So that it doesn’t get to the main general audience, that your new customers potentially are there, who are just saying ‘Oh, my goodness, I first experienced like, everything didn’t work.’ That’s obviously not what you want.
Alexandra: Yeah, yes, that’s true! I know that you have been working with a lot of companies to optimise their product-led strategies. Like what have you started with? What did you look at? How can we, like, for those that already have a product-led strategy – what should they assess? Like how should they evaluate whether it’s working? If it’s, like, bringing them the value that they want? And like, what are you looking at, if you can share some of the tips with us?
Wes: Sharing all the secrets? So one of the big things here is onboarding. And I mentioned that a couple times, because it’s so important. I really feel like if you’re going to be product-led, you really have to get great at this one component because, like we were talking about, the majority of the people who sign up for your product in that first time, they’re not going to come back. And, honestly, it can be some of the simplest things that turn away so many people from ever going in and experiencing viable products. I’ll give you an example. So this company is based out of Canada, it’s called Snappa.com. Basically, like the Canadian Canva competitor. And so like they had a massive amount of signups every single week. And I was talking to the founder, Chris, I’m like ‘How many of these signups actually go into the product?’. He’s like, his homepage conversion rate was bonkers. Like it was amazing, the best I’ve seen in SaaS. And so it’s like ‘Well, I don’t quite know.’. So he goes to mixpanel, comes back to me about an hour and a half later and says ‘Wes, oh my goodness! 27% of all the signups never touch foot in the product.’ Like, well, why is that happening, Chris? That’s, a lot of people. It’s like over a quarter here. What should we do about that? And so we looked into it a bit more, and found out that it was actually the email activation step. So whenever you signed up on Snappa.com initially, it was you’d sign up, and then they say ‘Great, now verify your email, and then you can go into the product.’ So that’s what many people did. That’s actually what 73% of people did. But that other 27%, they said to themselves – oh, maybe they went to their email, they didn’t bother, they didn’t care about it, or something else came up. And because you’re thinking about it, in the back of your head, you’re asking people to really sort through their email, maybe they go into their email, they see something else that’s higher priority, which chances are many things are going to be more high priority than verifying your email.
Alexandra: You know, I’ve seen this practice so many times! And I’d have to be honest and tell you that 2Checkout also did in the past, and we were losing much more than 27% of the signups that came. And just because the emails went to junk in some so many cases. And yeah, there there were so many occasions. It was a strong fight with IT to actually pass through this email confirmation stage. But yeah, I’ve seen that a lot of companies still do this. I don’t, maybe we shouldn’t. What’s the recommendation here? If IT, if you don’t have the means to actually convince IT, what do you recommend? Maybe moving it to a different stage, when the client is more engaged? Or?
Wes: Yeah, I’ll tell you how we did with Chris. That’s not bad. So essentially, what we realised that we’re losing a tonne of people through this one step. And so we decided, okay, let’s test it. For the first time user, whenever someone signs up for the first time, they don’t have to verify their email right then. They would just go straight into the product and through that onboarding, experience so they get the value of the product. But the second time, the second time they come to the product, if they hadn’t verified it, yet, they get a little prompt that said, okay, please still verify your email. So that was one way they could circumvent the IT issue of like ‘Hey, we still need people to verify their email for this product.’ But actually, when we looked at their monthly recurring revenue, it actually went up 20% in that month, whenever they rolled out that change. And that was largely because whenever that 27% of users went into the product, they started using it just like everyone else. Sure, they were maybe a little less motivated when it came to the email activation step. But they still use the product, and still upgraded, just like everyone else. And so that was really a huge growth lever for their business. And so the reason I bring that all up is that, whenever you think about onboarding, conquering friction – that is one of the biggest pieces. That if you take away nothing else, like just focus on that, make it easy for your users to experience the value of the product. Because what ends up happening, just like in Chris’s case, is people start upgrading, and becoming a paying customer, because they understand and they trust you fully. Your product can deliver on its value, because it just did in the free experience.
Alexandra: I think what you did, because you’ve done that for us in a webinar. Live, at 2Checkout’s webinar, you are looking for the onboarding experience and you’re like adding green, red, like status stages. And you just – the target target is to have a straight line. Can you elaborate a little bit about that and your assessment process?
Wes: Absolutely. And so – for anyone listening too, feel free to run with this process on your own product. So, how it works, if you want to really reduce the friction in your product, and how more people expensive out of your product sooner, which I hope everyone here wants to do. We don’t just want to create a bunch of hoops for our users to jump through. Here’s what you need to do. So the easiest way is probably find like some sort of screen recording tool that you can use that has video, so just start recording it. And sign up for your product, the new email account, or if you’ve already signed up for it with your current email, use something else. So just sign up, go through every single step. And then basically stop the video. Once you’ve experienced first value. If you want to keep going, that’s fine. But just for the purposes of this stop when you’ve experienced the first value of the product. And, then what you’re going to do, is kind of go through that video and screenshot every single step. And I use Trello. You can use Notion, you could use anything. It just needs to be a canvan board, or Kanban board if I pronounce it right. And you’re going to start putting down all of those steps that are required for you to see value in that particular product. That’s the first analysis; takes a longest. It’s not the funnest part. But it’s really important to have every one of these steps. Even every single email field or name field; that’s its own step. And so, what you’re going to do then is really ask yourself these three questions. Can this step be eliminated without impacting the user experience one bit? If that’s the case, I call those red, I just label them red, because it’s like we could just get rid of this without impacting anything. Now, the tricky one is this one, which is is this an advanced step? Now, if it’s an advanced step, that’s something that maybe we think about, maybe it’s their second or third or fourth time, or maybe it’s totally contextual. I’ll give an example of a contextual onboarding experience. So when you’re using Slack, for instance, let’s say you share a Google Drive link with a friend or colleague. So right then and there, Slack will prompt you if it’s your first time and said ‘Hey, would you like to set up the Slack Google Drive integration?’ It’s contextual, is based on what you’re doing right there. So that’s perfect. Like, you wouldn’t want to do that integration right at the beginning of the user experience, because it’s advanced. It’s based on what they’re doing at a different point in the user journey. And so trying to identify what are those advanced steps? And then the last one you’re left with, hopefully, is what are those mission critical steps? What do you need to have in your onboarding experience to help someone see value. And so the goal of it is, when you redo your onboarding experience, you start cutting out all of those red steps, and you just try and delay as many of the advanced steps as possible. So you’re left with something that’s really quick to getting someone to value your product. And if even if you just do that, what I typically see is most companies can shave off anywhere from 20, to fantasise 70% of their onboarding, experience steps to that first value.
Alexandra: That’s great! Thank you, thank you! We’ve had the pleasure of actually receive this experience in a webinar, directly in the webinar live, without being told previously. So, it was really fun. We enjoyed it! Okay, another question from Cosmin: ‘Theoretically, what are the product options not to disappear once it reaches its maturity of the market it was initially designed for?’
Wes: So I’m not sure I completely understand the question. Do you want to take the first tab out?
Alexandra: Yeah, so let’s see – theoretically, what are the product options not to disappear once it reaches its maturity of the market. So, basically the question I would think is – okay, the product was launched, is already very mature, it has a lot of market share. What options do they have on the table to spice things up? Grow, upgrade? Like what what would be those strategies that you would recommend? That’s what I understand from the question.
Wes: Yeah. So in that particular case, I actually recommend reading book. This book is called ‘Profit From the Core’. And the reason I would recommend it is because this book is fantastic around just getting you to think about – okay, when you do reach that point of maturity for your main product, what do you do now? Do you go venture into completely random businesses and reinvest this profit somewhere else? Or is it something more complimentary around the moat and the core of your business? And so I would start there. I could dig more into it, but the book honestly is just fantastic. And one of the best reads I have this year. So Cosmin, read it, and I can, yeah, full confidence, you’ll figure out that problem there.
Alexandra: That’s great. Okay, a question from Laurentiu: ‘Do you recommend having a free trial versus paid like low price, low price like $1 trial? This will improve a lot the free trial paying conversion rate, but decrease the free trials, the number of free trials?’ What are your thoughts?
Wes: So this is a tricky one, because you can see in like, the internet marketing space, like a lot of them will have like $1 trial. And the goal is like you just try and get someone the pay something so they’re committed. And they’ll go through and but what often happens is you actually kind of hurt your brands in this process. Because they started looking at like ‘Oh, it’s just $1 product. It’s nothing!’. And then they start saying ‘Oh, maybe at the end of it, it’s like 1000 or $2,000 kind of expense on their end.’ And so it really shocks them. What you end up having is a lot of unhappy first time customers, because maybe they forgot about that trial they were just charged. And so the big difference here is there’s really two kinds of trials. There is the opt-in trial, which is essentially what most of them are, which is you can sign up just with your email, you don’t need anything else. If you want to pay however, you do have to opt in and upgrade that plan. Whereas the opt-out is more like that $1 trial option, where you have to like, go in and say like, I don’t want to pay this and and please send me a reminder, because although every time I go into one of those trials, I’m like so conscious now. I’m like – I am putting this in my Google calendar to cancel this. Because it’s just like, I’ve been burned so much..
Alexandra: But you are getting reminders. Why don’t we see it as an option for the product, or for the for the user to get committed more. I get your point. But I kind of see the other option as a business. Like having the tool, sometimes commitment and having strategies to move from freemium or a free trial to a paying customer, that it’s so challenging. And if he can cover some strategies, okay, you’re not in line with the, with the paid trial, I can get that. But then what are some of the strategies that we could use, or the startups could use, to turn those free users into paying users? What do you recommend there?
Wes: Yeah, so I mean, a little bit before, when it comes to like the app drivers opt in. Before I get into that part. They actually did like quite a bit of studies. I forget the exact report, but I’ll try and send it after, around just like which one performs better. And the theory is like with the opt out, is you’re thinking about – okay, we’re gonna get less people, but it’s higher quality. That’s, it can be like a good business strategy. When you think about, if you’re like a super small team, you can’t handle a bunch of people. Maybe you do actually want to put a lot of friction initially, just so you vet people. You only get the serious ones kind of deal. Less tire kickers. But what ends up happening is when you do the opt in, you do get a lot more. But the overall MRR at the end of the day is a lot bigger. So there is more tire kickers, but you do get to turn more of those people, who might just have never signed up for that free trial. They do actually turn into customers. So, super interesting. But to answer your question around – how do you turn those users into paying customers? One of the big things here, we talked about it a little bit before, which is just about how do we get people to have full confidence that this is the best product for them? And it comes down to how do you build trust. And in the sales-led kind of context we were talking about at the very beginning, it was really just about like let’s show people and tell them everything that the product can do, so we can make sure that they’re confident around this. But in a product-led company, it’s just about showcasing the value. How are we showing them exactly what this can do? And how it’s going to help them. And when you do that, you’re getting the person to really just decide like: ‘Do I want continued access to this?’. And, if so, how can you make it as easy as possible for them to upgrade, and go to that next step. And so, the way I structure onward experiences typically is the full, like, as soon as you sign up, my whole goal for you is to experience the value of the product. Now once you’re experienced the product, then something ticks. It’s all about how can I get you to have ongoing access to this product value? Because at that point, I’ve done my job around helping you experience valuable products. And it’s up to you if you want continued access to that. And so that’s really where it’s about how can I make the upgrade experience that its own straight line experience, where it’s really streamlined, and doesn’t have a bunch of extra hoops that people have to do.
Alexandra: And do you recommend like, besides, definitely, creating value, having to have a product that actually helps the user, do you recommend like, I don’t know, sending out emails? Or how do you keep the customer engaged? Because yeah, you can have like, great product, but you know, we are busy. There’s thousands of products. Yours is not necessarily the only one we’re using. How do you, like, keep the value? How do you keep the customer engaged? How do you do that? Do you have any any feedback on that?
Wes: You mentioned one way, like emails – that is definitely one. If you’re gonna leave with one, though, it’s not email. It is the product. And you think about, let’s use a B2C example, most people might have heard of, like Netflix or something like that. What keeps you coming back to Netflix?
Alexandra: I’m not sure whether it’s Netflix. I’m going back to Netflix for watching movies. And like for, I don’t know, for ‘The Crown’ but actually, even Crown is made by Netflix. So in the end, it is Netflix. You are right.
Wes: Yeah, so I mean, like, in that particular cases, like they want more access to that particular product. So that’s the best one because it’s all about internal triggers. And in the book ‘Hooked’, by Nir Eyal – awesome guy, he really spends a lot of time focusing on, the difference between what kind of triggers you can use to really get someone to motivate them to change the behaviour. And internal triggers are the ones where you start saying to yourself, like, for instance, I want to hang out more with friends, maybe I should spend more time on messenger and actually reaching out to old colleagues that I haven’t. While, okay, that’s a valid reason why I would use messenger more. Now, if it is, external triggers – external triggers have a very short lifespan. Because they are great initially, but then they get annoying very quickly. So email, as a bunch of these kind of tools, are all external triggers, just different forms of them. And so they’re great at the beginning. And if you use them correctly, you can help people along their straight line onboarding journey identify, like, hey, if you didn’t do this one core step, and you can access it out of the product, like let’s prompt you maybe like a day in or two days in, and after you signed up, to go through that step. So you can get the value moment. And so they’re really effective in that capacity. But their value definitely deteriorates when we’re thinking about external triggers. So just thought I’d mention because it’s super important to understand the difference between internal and external triggers. When you’re thinking about how do we turn these users into paying customers? Because you want them to use that internal trigger, but that takes time to build.
Alexandra: Yeah, that’s the hardest one, I would say. Like, how do you convince free users to turn into paying customers, and actually create that margin for revenue? That that’s difficult. It’s a difficult one, but it’s not impossible. That’s for sure. Okay. How do we measure if we’re successful in product-led strategies? I know that there is a metric for that. But yeah, can you elaborate more about the natural rate of growth? And what other metrics are there that you look to to determine whether a company is successful or not?
Wes: Yeah. So we have alluded to this success metric for so long. Now, I’m excited to reveal it to everyone. But I’ll go through what you should look for first, before I share the metrics. So when you’re thinking about success for product-led business, it’s not your success, it’s not about the revenue. I find a lot of companies start focusing on it like, yes, you do need revenue, you do need to have that as a metric. But when it comes to success for a product-led business, what you should really be focused on is what is end user success? Are our users actually experiencing the value of the product? Because it’s the best leading indicator any product-led business has. Because if people aren’t experiencing the value of your product, and the free experience, then chances are not many of them are going to become paying customers, unless you really force them through a sale, or like heavily discount or something crazy. That’s not a sustainable kind of deal. And so you need to measure that end user success, whatever that is for your product. And so, yes, the metric we have both been alluding to is called product qualified leads. And it’s really important to use them because it is impactful when you just start looking at how many of our users are actually experiencing our product, and going from there. So that’s the secret. Look for more product qualified lead stuff online.
Alexandra: That’s, that’s great. Thank you! So we have time for one more question, and then we’ll wrap it up. The last question is from Maria: ‘In pushing for a product-led growth strategy can excessive focus on customer success and user acquisition generate a blindfold as to sales, monetization, and ruin the entire strategy? Have you ever encountered such an example of contradictory steps taken?’
Wes: In the past, I haven’t. But one example that kind of ties this all together from a sales perspective, as well as marketing and customer success – it all comes down to pricing. Whenever I was talking about, like, one of the big challenges a lot of product-led companies have, or not even product-led but sales-led, is they go to product-led, is they have to reevaluate pricing and create it in a way where it’s really based on that value exchange. And so, yes, like product qualified leads is a way of measuring that. But if you start charging by that, it becomes super interesting for your business. So I’ll give you a couple examples, so you can walk away with understanding what this change in pricing is. So if you look at MailChimp, ActiveCampaign, ConvertKit, all these examples, they charge based on one metric. Now, that’s not to say they have other features and different pieces, but the core metric they sell by is subscribers. In the CRM space, it’s pretty common too, it’s contacts, just different label. But it’s been well established that that is the way you charge for those particular products. Same thing with to 2Checkout, like there’s a certain percentage of the sale that you would get. Like there’s tonnes of different examples like that. So you need to align your revenue model with your customer acquisition model. And that’s really the powerful piece here, that when you connect them, you create this environment in your business where everyone’s focused on how can we help more people achieve that outcome? How can you like, in 2Checkout’s case – they want you to grow a very big, profitable business.
Alexandra: Yeah, we do. Yeah. if you grow more, we get more. So yes, all further growth, that’s for sure!
Wes: Exactly. And it creates this aligned perspective. And so, when you do that, is powerful for your business. So I’ll end on that. Try and align your revenue model with your customer acquisition model, cause great things happen.
Alexandra: Okay, so thank you so much Wes for this discussion today. Now, this brings brings us to the end of our live episode. Again, thanks Wes, for another great conversation. I’m looking forward to talking to you very soon. And maybe to even see you at one of the Romanian events. I don’t know when those will happen with this COVID situation, but looking forward to actually meet you in person. Thank you very much How to Web for for this amazing opportunity to us. Stay tuned for the next live sessions and have a great day, and evening or afternoon, wherever you are!
Wes: Yes. Thanks everyone for tuning in!7
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