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Product-led sales starts with customer segmentation main image

Guide

Nov 3, 2021

Product-led sales starts with customer segmentation

Alex Bilmes

Alex BilmesFounder & CEO

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:

  • Sales leaders
  • Growth leaders
  • Founders
  • Anyone who wants to juice their product for more $$$

If you keep reading, you’ll learn more about:

  1. The best (and worst) customer segments for product-led sales
  2. The strategies that work across some of the world’s leading PLG companies
  3. The tactics that sales teams can use to close more lucrative deals faster

What is product-led sales?

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.”

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Jesus Requena
VP of Growth at Algolia

Product-led vs sales-led segmentation

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):

  1. Product usage. In PLG, what people do in the product is of the utmost importance, so you want to make sure that certain milestones are added.
  2. Employee count + TAM. This is typically less important in PLG, since you can see things like active user count in your funnel, but can be important for seat-based pricing models, where, as an example, you need at least 50, 100, or 200 employees to be worthwhile for sales. Also, not all companies are created equal when evaluating purely on employee size. For example, if Figma is evaluating two accounts, both with the same number of employees but one has 10x the number of designers, the one with the larger TAM makes the most sense to prioritize.

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.

Pro Tip 💡

“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.”

Jonathan Krangel
Jonathan Krangel
Sales Strategy and Ops at Retool

The best segments for product-led sales

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.

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Top free and/or trial accounts

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.

EXAMPLE SEGMENTS

Product Qualified Trials

  • Plan: Trial (typically 14 or 30 days
    as seen on Loom’s pricing page)
  • Product Usage: High/Medium
  • Employees: 50+

Sales-Ready Freemium

  • Plan: Free
  • Product Usage: High/Medium
  • Employees: 100+

Sales Strategy

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.

Sales Tactics

  • Surface sales-ready accounts based on raw end-user activity within your product. Start by surfacing 1-2 high intent signals, rather than 7-8 which can make the cognitive load unbearable.
  • Identify the champions and buyers in target accounts and cross reference roles within the account before engaging.
  • Send helpful content, like Loom videos or documentation, when you see that certain features haven’t been used, or used properly.

“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.”

Top self-serve paid accounts

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.

Example Segments

Pro Accounts Ready for Enterprise Sales

  • Plan: Pro
  • Product Usage: High
  • Employees: 50+

Sales Strategies

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.

Sales Tactics

  • Focus on customer love, or trial user NPS because it makes it so much easier to have a conversation with a potential buyer about WHY a company is seeing bottom-up adoption.
  • Send potential buyers and champions data on how their team is already using your product, as well as information on features that are only available in an enterprise (or other more expensive) plan.
  • Be more aggressive in experimenting with offers to your existing customer base.
PRO TIP 💡

“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.”

Sam Taylor
Sam Taylor
VP of Sales and Success at Loom

Top enterprise accounts

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.

Example Segments

Enterprise Upsell

  • Plan: Enterprise
  • Product Usage: High
  • Employees: 500+

Enterprise Accounts with Low Penetration

  • Plan: Enterprise
  • Product Usage: High
  • Employees: 1000+
  • Active Users: 20

Sales Strategies

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.

Sales Tactics

  • Look for low usage of certain enterprise features and make sure that customers are fully ramped and getting value.
  • Make sure you are building relationships with the various product champions in your customers’ organization by looking at the most active users that are also inviting other users to your product.
PRO TIP 💡

“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.”

Scott Tousley
Scott Tousley
Head of Startup Growth at Hubspot

Lower-value segments for product-led sales


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.

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Opportunistic accounts

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.

Example Segments

ICP-Fit Pro

  • Plan: Pro
  • Product Usage: Low
  • Employees: 100+

Stagnating Enterprise

  • Plan: Enterprise
  • Product Usage: Low
  • Employees: 500+

Sales Strategy

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.

Sales Tactics

  • Share documentation and best practices by creating templated Outreach or SalesLoft sequences that you can add users to with low effort.
  • Send personalized Loom videos with examples on how to use a particular feature that the account has struggled with.
  • Send emails offering to help with a Calendly link.
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The dead zone

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.

Example Segments

Stagnating Free

  • Plan: Free
  • Product Usage: Low
  • Employees: 1-50

Sales Strategy

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.

Sales Tactics

  • Use marketing automation to send mass emails and get people to log back into the product and re-engage.
  • Target users in this segment with advertising to get them to re-engage.

“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.”

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Jonathan Krangel
Sales Strategy and Ops at Retool

Start small and don’t boil the ocean

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.

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