This blog is the third in a series of Product-Led Growth (PLG) topics. Previous blogs were Designing Self Serve and 18 months of ShiftLeft PLG Journey.

Why are B2B business leaders looking towards Product-Led growth?

In most of my conversations with fellow product leaders and CXOs their response falls under four broad buckets.

1. My competition has adopted a product-led journey and is leap-frogging from a growth perspective.

2. Covid has forced digital growth channels on our business, and we need to find an alternate path to growth.

3. My investors would like me to adopt the PLG-based GTM model. That was a condition of my investment round.

4. We believe PLG is the inevitable future.

However, this desire to adopt PLG leads many leaders to realize sooner or later that PLG is a process of “unlearning” your current GTM models and rebuilding a new GTM strategy from scratch.

PLG is a Horizontal (product, marketing, sales) Play!

Let us get this one out of the way.

Product-led growth is about adopting a new GTM strategy. It is NOT about having your product team build out a version of your product as self serve offering.

It is about putting the product directly in the hand of prospective users and letting them drive the sales process based on their positive value recognition from your product offering.

3 Stages of PLG Maturity

For simplicity’s sake, one can visualize a B2B’s product-led journey comprising 3 stages of maturity. And Yes, this journey does start by building out your self-serve offering.

Stage 1 — Building out your self serve

For product-led journeys to exist, one should have a product that prospective users can “largely” try out by themselves.

This represents a significant challenge for most B2B high-tech firms as they have been mentally conditioned by the idea of complex deployments. In the bulk of my conversations, many product managers in existing B2B firms are loath to challenge this well-entrenched notion of “complexity”!

I propose the following model for building out self-serve. You will need three components — An auth strategy, an onboarding strategy, and an incredible first-time user experience (FTUX).

I have written about my experience building a self-serve workflow at ShiftLeft. Another interesting blog I recommend is SafeGraph’s story of building out its self-serve workflow.

I have the following recommendation to make while designing your self-serve offering.

Define and redefine your Ideal customer that you are going after

Self-serve requires a pretty elaborate UX design. You must define and redefine your self-serve experience to cater to your ideal customer profile. You should be able to imagine your ideal customers seeing instant benefits with your first-time user experience.

Choose carefully between Free vs. Freemium vs. Open Source.

Often in my conversations, I have found that open source is always the preference of engineering groups to launch a self-serve offering. I have also found that they usually struggle to answer how to monetize such a user who adopts their open-source product.

While open source will be preferable in an ecosystem-led business model, a freemium model might be easier to track and monetize.

Stage 2 — Overlay your business model on self-serve and automation.

For a PLG model, Self-serve does not exist in isolation from the rest of your GTM strategy. In fact, your self-serve product offering is designed to execute your GTM strategy.

However, we need to model a funnel at this stage to understand how your users are moving through the pipeline. My recommendation is to use AAARRR or Pirate Metrics. It is popular in B2C and can be quickly adopted in B2B.

You will need to define what each of the stages means in terms of your product offering. For e.g., Activation for a code analysis offering can mean that the user has analyzed at least one application. However, it might mean “approving an invoice” in an online billing software.

Also, not all stages need to be defined/implemented at the onset. You may skip stages such as referral if you are not ready with a well-thought-out referral strategy.

Irrespective of how you design your PLG journey, there will be fundamental changes to what you have historically thought about a B2B GTM model.

1. Part of your sales funnel will now live inside the product.

Efficacy of business metrics like marketing/sales/product qualified leads, visibility of activities like a demo, and proof of the value of discerning purchase intention will now come from the product team.

It is crucial to conceptualize your sales funnel and identify what part of the funnel will live inside the product.

The following is an excellent model to adopt if you are just starting.

2. Your current SDR/ISR-based lead development model gets upended.

Your users are interested in trying out the product “largely” on their own. )

SDR and ISR team’s first job is to qualify and mature a lead from a business need perspective. By signing into your self-serve offering, your users are already indicating that they are aware. With progressive usage and smart analytics, you can automagically understand a lot about the user without having to chat with them.

You can automatically collect zero party (demographics, some use cases) and their first party/third party data (behavioral patterns, use case intent, etc.)

At this stage, rather than talking to sales, your users would be better served by talking to technical folks like customer success, who should be motivated to make a user successful irrespective of their sales intention.

Your strategy should be to cause a bottoms-up adoption by free/open source users and then work on the high usage/enterprise users to convert to a paid license.

3. PQL — Product-qualified leads gain prominence as the key middle-of-the-funnel intent indicator(MOF)

Product Qualified Lead metrics have become a more reliable MOF indicator of intent in PLG.

This is still early for a credible user intent qualification model to take hold for product-led journeys. Each organization must define its product-qualified lead (PQL) model based on its own understanding of its business.

One can adopt a PQL definition of a user who “signed up, activated, and is weekly active.”

Stage 3- Keep optimizing your product-led funnel

Once you have self-serve and business processes in place, it is time to optimize your product-led funnel, which is a continuous activity.

You will not get it right the first time.

By carefully looking at your conversion numbers at each stage of the funnel coupled with engagement data, you could identify and solve conversion barriers.

Your best opportunities for improving conversion rates will always be in User Experience (UX). Your UX designers, product engineers, and broader product team should always focus on improving and simplifying the user experience.

Pro-tip → Create a data-driven culture of experimentation to drive up conversion. Your product, data, UX, engineering, and sales team will need to collaborate to drive success.

One more thing — Pricing!

Since the strategy is to grow by having your user realize value through active usage of the free or open-source tier, the pricing should reward the user for high consumption.

Your pricing should be directly related to the usage of your product

I believe consumption-based pricing is preferable to subscription-based pricing when the company is just introducing a new offering into the market.

If your product provides self-evident value → your users will use your offering regularly.

In an early-stage startup looking for higher usage that improves product maturity, you should consider rewarding your best users by offering a progressively lower unit cost per unit in case of high utilization.

Alternatively, one can use subscription-based pricing, where the utilization highly depends on the product's intended usage over time.

If you are selling into the SMB segment where the buyer is very budget-conscious, consumption-based pricing will allow your user to experiment and settle down in a usage tier that reflects their budget and needs.

However, if selling into the enterprise, their procurement departments are likely interested in something more predictable, like subscription-based pricing.

In the end

I would love to listen to your feedback and opinions. Do leave your comments below or connect with me on LinkedIn.