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How to know when PLG companies are ready for product-led sales main image
Oct 14, 2022

How to know when PLG companies are ready for product-led sales

Elena Verna

Elena Verna

In the part 3 of this guest series, learn from Elena Verna about the signs you're ready for product-led sales and best practices on how to layer on new growth motions.

Welcome to the final installment of a three blog series I'm partnering on with Endgame to help PLG companies better understand what product-led sales is and how they can incorporate it into their growth strategy.

Part 3 is all how to layer new growth motions, but be sure to check out the entire series including:

  • Part 1:The difference between traditional enterprise sales and product-led sales
  • Part 2: What are PQAs and PQLs and how to use them in product-led sales
  • Part 3: How to know your PLG company is ready for product-led sales

How to approach layering new growth motions

Layering growth motions is a complex exercise, and product-led sales is no exception. Each growth motion is incremental, starting with product-led growth, evolving into marketing-led growth, and scaling with sales-led growth.

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The most efficient and highest growth software companies use a combination of all three – so they can grow revenue with frictionless self-serve conversion and maximize contract value and penetration by selling to enterprise buyers.

But going from product–led self serve monetization to sales-led contracts (or vice versa) requires you to change both monetization demand generation *and* capture tactics. Internally this feels like a revolution, with lack of ability to apply your existing superpowers to win.

PRO TIP 💡

Instead of looking at product-led and sales-led monetizations as the only options, consider introducing product-led sales as a necessary bridge to evolve your monetization strategies.

So instead of looking at product-led and sales-led monetizations as the only options, consider introducing product-led sales as a necessary bridge to evolve your monetization strategies. Regardless of which way you need to travel, product-led sales deploys teams to monetize on top of self-serve *usage*, meaning:

  • If you are PLG, it helps you keep usage while layering brand new revenue capture sales motions.
  • If you are SLG, it helps you utilize your existing sales team while introducing self-serve activation/usage to generate new demand.
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You should never try to replace a product-led motion with sales-led one (or vice versa). The goal is always to layer. Product-led sales allows you to evolve your GTM by introducing new growth motions while leveraging existing expertise. Avoiding starting from scratch increases your chances of success and helps prevent you from making incorrect assumptions.

Three signs that you’re ready for product-led sales

The question of product-led sales is not ‘Should we do it?’ Rather, it is ‘When and how should we do it?’ So what separates the companies that do it well from the ones that struggle? There are three signs you should look out for:

1. You’ve nailed your current monetization motion.

Make sure that you have predictability and sustainability in your current monetization growth motion before embarking on the layering exercise. Perfecting your initial product-led or sales-led monetization is the key, with most companies waiting till first $10M in product-led, self-serve purchases or $50M in sales-led contracts before taking a bet on introducing new monetization channels. Each motion fuels the next, so trying to accelerate this process can leave your business in the lurch.

2. You have pull outside of your current monetization motion

Watch for clear signs from your existing customers that there is demand for additional monetization motions.

In PLG, this may look like self-serve users reaching out saying they are looking to buy your product for the entire company and could you help them with invoicing/contract. This is the first sign of hand-raisers and a clear signal that there may be enterprise demand!

In SLG, this materializes two ways:

  • Large drop offs on your home/landing pages from users discovering your product but not willing to engage in sales because they are not buyers. This means you are already attracting users who are looking to try out your product, so self-serve activation is a great next step.
  • Prospects or buyers asking to give their teams trials to validate functionality for their organization.

3. Your product has a team network effect

Network effect is when product value improves as more people use it. Although we frequently think of network effects on a platform level, in product-led sales it is important to establish network effects on a team level. This means that the team benefits when more users are added, which is the force needed to translate usage into company-wide purchase.

An example of a product with a high team network effect is Miro. The more people use Miro, the more collaborative and productive individuals can be with their team. This resulted in fast growing team sizes that quickly escalated into enterprise-wide deals.

Network effect can be measured by either direct usage or indirect utility.

  • Direct: Miro becomes more useful as people log in and collaborate directly in the app.
  • Indirect: Amplitude creates value for an entire organization which consumes reports or dashboards that were created by amplitude users.

A counter example at SurveyMonkey

When I ran the Growth team at SurveyMonkey, we solely focused on building a passionate base of individual users. They were happy with the product, but had no need for enterprise upgrade. Ultimately, there was no user reasoning to move to the enterprise product; it was based on the revenue strategy of the business. To sell to the enterprise, Surveymonkey had to completely change the product or use a traditional top-down motion that ran in parallel but didn’t leverage their greatest asset: their passionate user base.

How to layer on product-led sales

Embrace your new normal and experiment like hell

Figuring how product-led sales fits in is not linear – it requires experimentation and should incentivize entire business growth vs individual quota attainment. Consider following tactics:

  • Goaling your sales team on overall revenue, including multiples on self-serve purchases, to eliminate internal channel competition.
  • Set sales compensation to be heavy on expansion, not just land amount. Product-Led sales land ACV will be lower compared to top-down sale, because it is anchored to freemium or self-serve pricing. Sales should be aligned and goaled on revenue expansion vs. overselling from the start. This may feel counterintuitive, but it's key to being successful long term.

Continually evolve your team

Although the existing team can help you prototype product-led sales, the same team will not be able to scale it. You will need enterprise marketing (ABM, ent channel lead gen, etc) teams as well as enterprise sales teams. You may even need an enterprise product management team building functionality for these finicky enterprise buyers.

Keep track of the right metrics

Measuring success in product-led sales isn’t the same as PLG or traditional enterprise sales. For product-led sales, you want to center around acquiring self-serve teams that fit your ICP. You should also understand and grow PQAs and PQLs as not all usage will impact sales pipeline.

To get the most out of product-led sales, invest early in optimizing for organic hand raisers by developing a hand raiser health score. Letter grading works well here and can include:

  • A - ready to buy
  • B - consideration
  • C - not a fit
PRO TIP 💡

Implementing a 15 minute SLA for sales to engage ‘A’ hand raisers improves conversion through the sales funnel. From there, it’s important to learn how to connect buyers and your sales motion to usage, especially if the buyers themselves are not users.

Final Thoughts

The future of product-led sales is an exciting one, but ultimately it is to-be-written. Don’t beat yourself up and like most new things, failure is critical path. We are all figuring this out and it’s incredible to see what product-led sales tools like Endgame are doing in this space and how the next generation of great software companies are using product-led sales to scale revenue growth.

Elena Verna is a Head of Growth at Amplitude, Growth Advisor to companies including Krisp, MongoDB, and Maze, and a Board Member at Netlify. She is also a former CMO & Advisor at Miro, SVP for Product & Growth at Malwarebytes, and SVP at SurveyMonkey. Elena has a breadth of experience in PLG models for B2B companies.

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