Product-led growth B2B companies succeed if they master this first step | Elena Verna

[00:00] I think every single company has to first focus on being product-led and retention. [00:06] Period. [00:07] The only way that you will ever have any chance of acquisition [00:11] being product-led is if you nail your product-led retention. Let me break it down. Retention falls into two main KPIs, which is activation and then engagement. If your product is not able to activate and more importantly engage via habitual loops and be in the habit-forming zone, [00:28] then you'll have no chance to hooking an acquisition engine. [00:32] into your product because acquisition and product lead means users invite or users refer or users create content that attracts other users. [00:41] Well, [00:41] If your users are not habitually using your product, there's less and less opportunities for you to actually create any sort of product-led acquisition. So never start with product-led acquisition. You first always have to start with product-led. [00:54] Retention. [00:56] activation and engagement then you can choose is your product has a relationship of one-to-many [01:01] if it has a collaboration at its core, say Slack or Miro, or even the Amplitude, or does it have more [01:10] of a singular mode relationship. So let's say snowflake. [01:14] There is not one too many relationships there between users. [01:17] Well, if you have one-to-many relationships, product-led is a fantastic way for you to prototype that model. If you don't have them, then it becomes increasingly hard. And most of the B2B products don't have that one-to-many relationship, so it's very difficult to stand up product-led acquisition. So you rely on marketing-led and sales-led, and that's fantastic. Those are fantastic growth models as well. The only other question becomes in the self-serve monetization. That's product-led.

[01:43] Otherwise, you go in the sales lead and you chase after those large contract values. [01:48] And you can still be product led and monetization with sales team via product led sales, or you can just be self-serve if you have a specific segment that is valuable for, but. [02:01] The question there is your use cases and your market matureness to handle self-serve, or do you need that sales touch? [02:10] Every industry and every [02:13] sector is going through transformation, [02:16] at different velocities. So even if you don't have that product-led sales or self-serve in your industry now, [02:24] I guarantee you it will pop up in the next 10 years. And if you're not going to introduce it, you will get disrupted by it. [02:30] Say a company starts sales-led on acquisition. By the way, I love how you're kind of expanding this, what seemingly is a binary idea of product-led versus sales-led. Everyone's always talking about them in such simplistic terms. And just your way of thinking about it where it's kind of this, like, I don't know, three by three almost, it's just bending my brain. So I'm going to try to keep up. So say a company starts sales-led on acquisition. [02:58] And [02:59] later wants to think about adding a product-led self-serve motion. Do you find that that [03:05] often works, doesn't work? Is that like a rare success story or how have you seen that happen? I think

[03:13] In order to succeed and own the market, you have to do both. [03:17] It's not a question of it working. [03:20] it's the question of how you will make it work the game is a layering game it's a sequential game which one will you introduce first and how can you layer the next one on top of it so if you're sales led now if you continue being sales led you have a high chance of leaving product led to be disrupted by it from the bottoms up but also going from sales lead to product let does not mean you have to abandon sales lead [03:45] That means you have to hunker down on your sales lead and overlay product lead on top of it to amplify already existing growth, never to switch. So in the most successful companies, whether they go from product lead to sales lead to sales lead to product lead, they're able to execute both correctly and together as opposed to saying I have to switch or pick one versus the other. [04:15] sequential play. [04:16] That makes life so much simpler, knowing that eventually you're going to do both. It's basically a question, where do you start? I know you have some strong opinions about kind of how product-led often gets crushed by sales being added down the road. Is there something you can share around that problem you see? Yes, I see a very clear pattern. And it's sad that so many companies fall into that pattern, even though it's so prominent. And the learnings, unfortunately, don't get shared and propagated enough.

[04:46] product-led company. [04:48] You get the user love. They talk about you. You have word of mouth loop happening. You have community happening. You have great retention. You're ready to monetize. You monetize self-serve and you get fantastic traction. You start aggregating multiple users within an organization, starting to get inch closer and closer to your first enterprise contract and it closes. And that's exciting. It's a big ACV, average contract value. It's exhilarating. It's addicting. How many [05:18] we have to close instead of doing these 10 20 30 dollars arpas what if we have 100 200 000 arpas how fast can we grow you start doubling down and saying let's just hire more sales people we have all of this usage let's put productivity per sales head put that in the forecast hire sales people let's go at the beginning everything is unicorns and roses because you have very strong [05:48] So you're going and you're closing them, but then slowness occurs. [05:52] It always occurs because you run out of enterprise buyers in your user base. [05:57] because only 30% or less times is your buyer going to be in your usage user base. [06:06] which means that the rest of the accounts usage is happening and it's the correct usage that is leading to enterprise conversation but you need to go find the buyer because the user does not have a relationship with the buyer that's when you're starting to go up the market you realize that you start hiring enterprise marketing team demand gen team you start investing into enterprise marketing activities you seem to be connecting the dots and your pipeline is taking on next level

[06:36] you probably remember the first time that you close your first 200 500 000 a million dollar deal and that's exciting but then at the result of going and chasing after those enterprise buyers most of the companies make crucial mistake of letting go of their product usage growth of their product-led tactics because you still have to make prioritization on your resourcing do you hire a pm [06:59] Or do you hire an enterprise rep? Do you hire a growth PM or growth marketer? Or do you hire an ABM specialist? And most of the time when you're chasing after those enterprise buyers, those personas don't overlap. So you have to choose one or the other. So you hire for enterprise because that's what you're doubling down on. That's what your board, that's what market wants from you. Those contracts, large contracts and commitments that increases your valuation. However, very [07:29] inbound of going on top of usage is going to start drying up because if you're not putting continuous pressure on growing those user growth of driving that community of driving that user habitual loops even on self-serve monetization your enterprise will not grow if that was the root of your growth if that was your original dna and if you let go of that [07:52] and i would say 80 of the companies let go of your product-led initiatives in order of enterprise they start seeing a massive slowdown in enterprise pipe many correct and they realize that they've forgotten

[08:06] the hand that feeds them in the first place, and they reinvest into that growth. Many companies decide to pivot and say, forget product lead, we're too far gone. Now we're going to create a sales top-down machine. [08:18] and we're going to go and hunt those enterprise buyers and be good at it. But that requires a very different work structure that creates a very different profiles of people that you need and the different types of running a business and expectation. So it's a dangerous turn for a lot of the companies. I just wish that businesses would never forget the roots that they came from, especially if they started in PLG and have a sense of when to, [08:45] Swing the pendulum. [08:46] to the right direction and correct it when it's the right time.