Somehow we’re almost at the end of 2021 and 2022 is right around the corner! As I look back at a explosive year for Correlated and the Product Led Revenue category, I can’t help but imagine what might lie ahead next year. Before we dive into 2022, let’s take a quick look at some of the top trends in 2021.
What were the top trends in 2021?
This year we saw the continued popularization of Product Led Growth (PLG) as a term and distribution strategy that more and more companies are pursuing. A recent report from McKinsey indicated that with the push to remote work, a lasting shift has occurred in the way people buy and sell software. More and more B2B startups are leveraging a self-serve approach or PLG approach from the start, and we expect this to continue in 2022.
As a result of the continued adoption of self-service distribution models, usage-based pricing has become an increasingly popular method to charge for self-serve products. OpenView released their full report that shows 2x growth in companies converting to usage-based pricing with estimates that more than half of all B2B companies will incorporate usage-based pricing in the next few years.
This year also saw the rise of Reverse ETL solutions like Census and Hightouch which have enabled go-to-market teams to start to take advantage of the benefits of their customer data by taking clean data sets in their data warehouses and pushing it to legacy SaaS systems like Salesforce, Hubspot and Marketo. Hightouch recently raised a $40 million Series B and Census raised a $16 million Series A in the beginning of the year.
Enough about 2021! Here are my top five predictions for Product Led Revenue in 2022. I also solicited predictions for next year from LinkedIn and I’ll be highlighting those at the end of the post.
Top 5 predictions for Product Led Revenue in 2022
1. Activating data in Cloud Data Warehouses accelerates growth
Adoption of cloud data warehouses like Snowflake, BigQuery and Redshift has been taking off over the last several years. Snowflake went public last year and is valued at over $100 billion. BigQuery and Redshift are part of Google Cloud and Amazon Web Services respectively and represent major product lines. These products enable companies to consolidate all of their business and customer data in one place to do analysis, forecasting and planning.
The ecosystem around these infrastructure products is maturing as well. Companies like Fivetran (send data into the warehouse) and dbt (transform and model data in the warehouse) have each raised funding at multi-billion dollar valuations in the last year. There are multiple other tools and products, such as Reverse ETL mentioned above, that further enable companies to get value from their investment in data warehouses.
In 2022, we expect companies that take a Product Led Revenue approach will further adopt and make use of the data in their data warehouses. In particular, one missing piece that Correlated is helping to solve is enabling business teams to take action off of the data that’s collected in the warehouse. This trend is still early, but we expect it to really pick up steam in 2022!
2. Self-service distribution continues to grow in popularity
While this was a trend in 2021, we don’t see it going away anytime soon. As the team at OpenView has pointed out, self-service software and pricing models, like usage-based pricing which enable it, are continuing to see growth in adoption. This can be attributed to the fact that business software is increasingly being adopted by end users first and individuals often prefer to try new products themselves without needing to speak with a salesperson first.
Usage-based pricing enables an even more frictionless path to adopting software since you only pay for what you use. That way, a single user can try a new product and pay a reasonable price, but when the product is adopted more broadly within their organization the cost scales with that growth.
For Product Led Revenue companies, embracing self-serve (and usage-based pricing) means lots of opportunities and challenges. The benefits to driving distribution and conversion at the top of the funnel are clear. What’s often neglected is enabling your sales and CS teams to work more effectively with customers once they have self-service access to the product. The playbooks here are largely still being written.
3. Lines between Product, Sales, Customer Success and Marketing become even more blurred
In Product Led Revenue, the clean lines of demarcation between Product, Sales, CS and Marketing are becoming increasingly blurred.
In a self-service product, when does a customer become a customer? When they swipe their credit card for the first time?
Who owns that customer relationship? Maybe every team has some ownership of that customer from Product to CS.
What are the rules of engagement for self-service customers between Product (trying to optimize the UX), Marketing (driving customer lifecycle), Sales (upsell, cross-sell and expansion) and CS (churn prevention/retention)?
Lastly, how will Revenue Operations help these teams effectively work together to enable a great customer experience and drive core metrics?
I think 2022 will see answers to many of these questions start to develop as new playbooks become clearer.
4. The role of sales in Product Led Revenue companies is evolving
I teased this trend in my LinkedIn post and alluded to it in prediction #3. For Product Led Revenue companies with a self-service distribution engine, one big question remains: how can sales effectively drive revenue while maintaining the right “rules of engagement” with the self-service business?
Increasingly this looks like a “product specialist” or “sales assist” type role where the salesperson is a product expert and helps to onboard customers, troubleshoot issues and enables self-service activation. This requires a consultative approach and a bit of a softer touch than the traditional enterprise sales motion. Think: BDR/SDR mixed with customer success.
I believe this role will pick up steam in PLG companies and traditional SaaS companies transitioning to PLG.
5. Revenue growth rate and Net Dollar Retention will be the top two metrics for CROs in 2022
Everyone knows revenue growth is the most important metric in SaaS. But more recently, Dave Kellogg gave an excellent presentation about Net Dollar Retention (NDR) as a core SaaS metric that is quickly becoming the second most important metric.
Net Dollar Retention measures churn + expansion revenue within a given cohort (month or year). In Dave’s presentation, he presents some data that suggests NDR is even more important for a company’s valuation than revenue growth.
In 2022 as public and private SaaS companies continue to see rich NTM multiple valuations and they seek to continue their growth, I expect NDR will be an even more important metric to keep track of next year. For Product Led Revenue companies, NDR is often a massive strength as the frictionless nature of self-service software enables easy revenue expansion within cohorts.
As I wrote about in a post earlier this year, the best way for companies to drive NDR is through revenue expansion vs. preventing churn. I expect CROs will seek more ways to drive expansion within their existing customer base next year.
Top crowd sourced trends from LinkedIn
We asked for the wisdom of the crowd in taking a stab at their top Product Led Revenue trends for 2022 and here were some of the responses we received:
Here’s to an exciting 2022!
If you’re interested in learning more about how top SaaS companies are developing their Product Led Revenue strategy heading into 2022, request a demo here, or find us on LinkedIn. We’re happy to dive into more about what we’re seeing. (Or, if you prefer, get started on your own.)