Product led growth has been around for a while, but it's popularity has skyrocketed over the last year. And more and more companies are now leveraging their products to drive customer acquisition and expansion. But what are some key mistakes PLG companies make?
In this episode of the Product Led Revenue podcast, our host Breezy Beaumont welcomes Mark Roberge, Managing Director at Stage 2 Capital. He talks about the four phases of North Star evolution for PLG companies, why you must bring product and go-to-market together, and how to architect your pricing structure.
💡 Name: Mark Roberge
💡 What they do: Managing director at Stage 2 Capital.
💡 Company: Stage 2 Capital
💡 Noteworthy: Mark was a CRO at HubSpot and is the author of the bestseller The Sales Acceleration Formula.
💡 Where to find Mark: LinkedIn
⚡ Bring product and go-to-market together
Mark talks about the importance of bringing product and go-to-market together. He says, "There are a couple of things that I think we're screwing up in PLG. First, I do believe that you have to bring product and go-to-market together, and you have to do that with a growth team that reports up to product. This is very controversial and not usually done in B2B companies. Everybody's like, 'No way, if marketing reports to product, they're going to become product marketers.' Yeah, that will happen if you don't split product into core product and growth. That's the key."
⚡ PLG is the new SaaS
Mark compares PLG to what SaaS used to be. He explains, "I do think that PLG has a similar business model and is the disruptive opportunity that SaaS was to the first two decades of a century. Just look at the public markets, the on-prem companies have been disrupted, not completely, but the growers are the SaaS companies. PLG has that opportunity in the next decade, but it's not as pervasive. SaaS was applicable to almost every software category, PLG is not."
⚡ You have to cannibalize yourself
Mark says you should cannibalize yourself before someone else does. He explains, "You have to find a very safe sandbox to figure out PLG in. So, you have to siphon off some paid ad users over to this group — maybe it's two engineers with a product manager, designer, and a CSM — that's your team, and you filter them off. It's going to take them three months, six months, whatever to get the PLG motion going, and then you have to raise money. And before you tell anyone, put money in the bank, and then, cannibalize yourself."
The four phases of North Star evolution for PLG companies
"If we're in the startup ecosystem, there are four phases of North Star evolution that PLG companies go through. The first phase is just finding a way to get enough users coming in every month to experiment with, and that's where paid ads are really useful. Phase two is working on the retention of those free users. Phase three is figuring out how to get those users in; now that you’ve figured out how to retain them for free, get them in for cheap. Then, we move to CAC, which is where virality, content marketing, and influence marketing kick in. And then, phase four is monetization."
Have a weekly experiment review
"Another opportunity is how we fuel experimentation, like having a weekly experiment review, having a bottoms-up creation of what experiments we should work on, and having a documentation process that is literally 10 minutes, and you write down what the experiment is. How are we going to do it? What's the hypothesis? What will happen?"
Architect your pricing model to attract users
"That's a better model because if I'm like, 'Okay, one company is going to charge on the consumption of the free use, and another company has unlimited free use, and they're going to charge on the enterprise features. If I'm an end-user, it's a no-brainer. I'm going for the unlimited free.'"
[03:34] "Don't be confused; those are consumer companies. Why are we talking about them? We're B2B PLG companies. I think that is a big opportunity. The way that growth is defined in the Valley or in those companies — it's the intersection of product and go-to-market with high experimentation — is a huge opportunity for PLG to be inspired and level up the way they run."
[11:28] "I think the best salespeople are awesome discoverers. They just do great discovery and empathize and align. And the difference is that once they do discovery, we teach them to do a demo that's tailored to the [customer’s] needs, close the account, and then the CSM onboards them. The difference here is that you do great discovery, but you don't do a tailored demo. Get them set up, show them how to use it, and then let them trip the natural wires of PLG."
[15:50] "My thinking on the pricing is to be very careful about hindering the free use case. It's almost like I prefer to keep the pricing extremely attractive to the end-user and generate revenue from the enterprise."