Alex Bilmes
So you’ve built a great bottom-up funnel and your users are highly engaged. Now you’ve raised a ton of capital and have sales targets to hit. In PLG, customer segmentation is critical to identify the core opportunity areas for growth.
This article is for revenue leaders at PLG companies, including:
If you keep reading, you’ll learn more about:
Selling to companies that already use your product is what we call product-led sales. You give the product away for free—or make it really cheap to get started—and then you drive larger deals with sales after users are hooked. That’s the endgame ;)
Having your sales team engage with companies who are already using your product makes for a huge win-win. Sales reps get better conversions and faster sales cycles because they can be more picky about who they engage with on the basis of real usage data, and customers get a better experience because they’ve derived value from the product and enter the sales conversation on more equal terms.
“Great segmentation for PLG companies makes it feel like reps are shooting the right fish in the right barrel. The only way you can accomplish this is by looking deeply at user and account behavior.”
Because you have all this amazing product telemetry—such as what users did in your product and who they invited—you can tell who your great accounts and users are. This makes your usage data your primary dimension for segmentation, followed by your top and most important firmographics (e.g., company size, revenue):
This approach is in contrast to sales-led segmentation approaches that are used for top-down selling—which include dimensions like territories, account potential, etc. While great to know, the value pales in comparison to knowing what people are actually doing in the product based on data.
Now that we have the basics down, it’s crucial to understand where your sales team’s efforts will be the most impactful.
“The most important usage to salespeople from a qualification standpoint is recent usage (WAU/MAU/etc.) Momentum/changes are key. The new ‘speed to lead’ is noticing that ‘XYZ power user just invited 10 new people to the org’ and acting on it the same day.”
The nature of selling changes when your product sells itself. In fact, you’re doing more closing than selling. When organizing your team, think of building a machine not an army. Because your product has already sold itself, knowing when and where to engage is how you win. The first priority for a product-led sales organization is to go after the lowest hanging fruit.
For PLG companies, trial and freemium plans are bread and butter. Given the size of most PLG funnels, it’s critical to narrow the world so that your sales team can work on the highest value accounts and users.
Land high value logos from self-service signups. Pick out the best logos (typically by brand value using something like SimilarWeb for traffic) from the self-service funnel to engage with. Given relationships are typically not established at this stage, this is often a segment ripe with unclaimed, sales-ready opportunities.
One thing to be aware of here is the internal interplay between the sales business (which sees self-service as lead gen) and the self-service business (which sees self service as a means in and of itself). Unless the goals for the self-service team are set with that in mind it can create a real conflict within the organization.
“In product-led SaaS: Product Management’s main job is to make it easy for the User to say Yes. Product Marketing’s main job is to make it difficult for the Buyer to say No. Sales’ main job is to monetize by overcoming Customer inertia.”
In many PLG companies, customers sign up for a pro or team plan on their own with a credit card. Self-serve revenue is fantastic, but there are likely opportunities to convert customers to larger plans, move them from monthly to annual billing, and upgrade certain accounts to an enterprise plan.
Convert Pro accounts to Enterprise. Identify accounts in the Pro tier that have high conversion potential from a product usage perspective and reach out the buyers and champions in those accounts to drive a sales conversation.
Rollup workspaces to a single account. Companies like Calendly or Loom, which are very easy to get started with by anyone in the organization, can have multiple workspaces, apps, accounts, or whatever those are called within the product. At Endgame, we’ve seen examples of a single Fortune 500 customer having upwards of 250 unique teams using a product with no knowledge of other teams within the same company. Creating a comprehensive view of all usage within a prospective organization provides an opportunity to engage IT buyers in order to upsell compliance and security capabilities, resulting in a larger ACV.
“It's important to consider the inherent gap that must exist for an organization if their employees are changing their workflows and adopting new tools on their own. At Loom, there are a significant number of people using our product in a Free or Starter plan that are swiping their corporate card, or even their personal card, because the value is there and it impacts their work in such a meaningful way.”
Many companies leave a ton of revenue on the table by not identifying upsell or expansion opportunities before an enterprise contract comes up for renewal.
Sell additional capabilities. Depending on how pricing is structured, many companies we work with sell add-ons to existing customers. This can be done to the same teams already using the product or across teams.
Upsell usage. Companies like Algolia, that have consumption-based pricing models, can see which accounts are consuming less than their potential. This is a great opportunity for proactive expansion.
Increase seat penetration. For many horizontally oriented companies, like say Loom or Airtable, reps can leverage penetration metrics (e.g., how many seats are used out of the total number of people within an org/company) to identify poorly penetrated accounts and help increase seat count. This works particularly well for seat-based pricing, as you might imagine.
“Assigning reps to help (measured by depth of product usage) versus sell (measured by New MRR) was an experiment we ran in 2015. We said: ‘well we have a ton of free users, instead of routing them to sales, what if we route the high firmographic/low product usage people to a person who helps them get the most out of the free tool.’ We knew the correlation between this specific product usage and purchases so we hired 1 person and called them an Inbound Success Coach. It worked and that's now a team of 100 people.”
Now that you’ve gone through all the high value accounts, your team can start looking at segments where the ground isn’t quite as soft. You’ll have to do some digging.
There are a few areas where it makes sense to hunt after the top accounts have been handled. You still want to be focused on paying customers or good ICP fit accounts.
Help accounts become sales ready. Focus efforts from multiple teams to make sure that these strong ICP accounts are getting value out of the product. Don’t get distracted with trying to close these customers as they are likely to churn.
This is where sales teams go to die. For the sanity of your team (and business), please stay away from segments that have low product adoption--especially if the company size is tiny.
Nurture users to come back. There’s not much of a sales strategy in helping small deals that are not active in the product, so you want to solve this as much as possible with automation.
“My overall take on PLG is that it's a powerful tool that helps us do fewer, higher quality things in the right order and at the right time. Pre-PLG, I had a list of 100 target prospects. With PLG, I have a similar list, but I know that today I need to reach out to these three of them and when I do I know exactly what to say and to whom I need to say it to.”
While there are (hopefully) some useful concepts in this post, the most important thing is to prioritize an area of opportunity and go after it. The most successful companies we work with start by identifying one or two segments and getting those right before expanding to other areas.
In our upcoming blog posts, we’ll cover how to apply the right type of sales pressure to each customer segment, as well as some best practices from companies like Loom, Retool, Figma, Algolia, and others. If you’d like to chat about any of the concepts in this post, or have questions, feel free to reach out to us at hello@endgame.io.
