As I did last year, I’m going to give my top five predictions for Product Led Revenue heading into 2023. Before I do that, let’s review what actually happened in 2022 and grades on my predictions from last year’s post.
What actually happened in 2022?
2022 definitely led to some surprises that few failed to predict. The biggest surprise by far was the dramatic shift in the macroeconomic environment highlighted by increasing inflation which led to an aggressive policy of increasing interest rates by the Federal Reserve. This had a massive impact on technology companies as funding has become much more challenging and every technology company has had to make substantial adjustments in 2022 to adapt.
A number of the PLR predictions for 2023 will feature guesses as to how adjustments to the macroeconomic conditions might impact SaaS go-to-market.
Another highlight of 2022 that I didn’t catch was the tremendous advancement of LLMs. Specifically companies built on top of GPT-3 by OpenAI saw tremendous investment and momentum (including Correlated customer Lavender). I expect this to continue into 2023 and will discuss in my predictions.
Now that we covered what happened this year, let’s grade my predictions from last year.
Grading our 2022 predictions
- Activating data in Cloud Data Warehouses accelerates growth. I think I got this one mostly right. We’ve seen a lot of customers adopting Snowflake, BigQuery and Redshift to centralize their data and enable business teams. Many Correlated customers stood up a data warehouse just to work with us.
One thing I didn’t appreciate was the level to which data modeling is still nascent. It’s not enough to just have your data in Snowflake. You also need to have it cleaned, prepared and in good shape to use in SaaS products like Correlated. More on this in 2023 predictions.
- Self-service distribution continues to grow in popularity. I think we got this one right. Self-serve isn’t going anywhere in B2B. As Elena Verna has trumpeted on LinkedIn and other platforms, PLG is simply an extension of what’s been happening in B2C for years. Better UX and a “user-centric” model for adopting and purchasing software. This product approach will continue in 2023.
- Lines between Product, Sales, Customer Success and Marketing become even more blurred. I’m not sure I got this one right. I do think we saw the first “Head of Product Led Sales” roles at companies like Canva and MongoDB. That said, organizational change was perhaps thwarted a bit by the layoffs prompted by macroeconomic uncertainty in 2022. Potentially this prediction will be more relevant in 2023 as the dust settles from the upheaval for SaaS companies this year.
- The role of sales in Product Led Revenue companies is evolving. I got this one wrong as well. While we’ve worked with sales assist teams at Correlated, we have not seen teams re-architecting their sales teams in a major way to align incentives around PLG. At least not yet. We’ll see if that comes to fruition more in 2023.
- Revenue growth rate and Net Dollar Retention will be the top two metrics for CROs in 2022. I got half of this right and half of this wrong. To start 2022, revenue growth was still the most important metric. As the year progressed, NDR became much more important as growth rates started to stall in the second half of the year. This will come up in 2023 predictions, but I expect a refocusing on retention and “efficient” growth next year.
Overall we got some things right, some things wrong and we were mixed on a few things. Now onto our top five 2023 predictions!
- Macroeconomic challenges continue through the first half of 2023 and start to abate by the second half of the year. I believe the issues (inflation, rising interest rates, a frozen VC funding market for growth stage companies) that have led to mass layoffs for SaaS companies will continue in the first half of 2023. In the second half of the year, the funding market will improve at more reasonable valuations, inflation will abate and interest rates will level off creating a “new normal.” This should lead to more clarity around GTM for SaaS companies as they attempt to navigate a more challenging environment.
- First party data becomes even more important to enable Growth teams in a challenging environment. The challenges associated with 3rd-party cookies and the decreasing returns from cold emailing and cold calling will lead Growth and GTM teams to turn to their first-party data to increase conversion and drive retention from existing customers and users of their products. I’m particularly biased in this prediction as Correlated helps here, but I expect this trend to continue in 2023 in light of the other predictions laid out in this blog post.
- Data teams are tasked with helping their GTM peers to drive retention and growth. As the data warehouse becomes more important to GTM teams, data teams will help their peers by properly modeling their data. I think we’ll also see companies like Reconfigured and consultants like Big Time Data provide tools and services to enable companies to build and deploy a Product Led Revenue GTM strategy on top of their first party data.
- Retention is the core metric for 2023. A slight edit to last year’s prediction. Revenue growth is no longer the predominant metric for CROs and executive teams. Now the focus will be on retention and increasing conversion from existing product users which will lead to “efficient” growth. This prediction dovetails with #2 and #3 as GTM teams will need to arm themselves with the tools and processes to drive retention.
- AI will influence every SaaS category and lead to an explosion of new PLG businesses. By this point the rise of GPT-3 and the recent release of ChatGPT is not news to technology industry observers. That said, I think we are in the early innings of the influence AI models like GPT-3 (and the upcoming GPT-4) will have on enterprise software. I think 2023 will be the year that this technology truly breaks out both in many incumbent SaaS solutions as well as in the creation of brand new SaaS products. Since these tools offer a magical user experience for end users, I expect many of these enterprise software products to be PLG by default continuing the rise of self-serve software in the enterprise.
What are your predictions?
I asked for a few predictions in a LinkedIn post. Here are a few good ones from folks who replied.
I’d love to hear your predictions or feedback on my 2022 grades. Let me know what you think will happen next year!