HubSpot’s 5 Strategies for Transitioning to a Product-Led Organization
About six years ago, we noticed a dramatic shift happening in the world of buying and selling: companies that were going to market as “product first,” customer experience-focused entities were outpacing large incumbents that were over-reliant on high touch, high friction sales models.
It became clear to us that these product led growth (PLG) companies like Atlassian and Dropbox were simply matching how they sold with how consumers (humans) wanted to experience and buy software.
HubSpot’s founding notion was based on a similar seismic shift (Outbound > Inbound) and to kickstart our exploration into this new PLG motion, we spun up a new team that I worked on which sold our CRM and Sales products. This team operated as a startup with HubSpot, giving us the space and freedom to experiment with a new freemium style motion. We had our own management structure, product teams and a small sales/CS function attached to our new Sales tools.
Eventually, after finding a lot of success with the PLG motion, we merged the Sales Products skunkworks teams into our core infrastructure of GTM teams which were at the time heavily reliant on our traditional inbound strategy–generating marketing qualified leads (MQL’s) through content, nurturing these leads, providing a demo and ultimately closing customers, almost always without trials. As a result, we really had to educate the core company about how making leads product users would be the most important investment we could make for both our customer experience and HubSpot’s long term growth.
Through a lot of time, training and communication, we eventually converted our core go-to-market motions to a PLG strategy. Shifting HubSpot from a traditional inbound marketing enterprise to a more customer experience-centric and nimble freemium company.
This journey has taught me a lot about best practices for implementing a product led growth strategy. Here are five pieces of critical, well-earned advice.
1. The Transition to PLG from the Customer’s Point of View
As mentioned above, when we decided to move quickly and transition HubSpot to a PLG company, we passed on a lot of change and unknown onto our legacy GTM teams.
In order to quell any doubts and uneasiness from our core teams, we had to embrace that this was not just a tactical pivot but a significant cultural shift for our company that required an effective change management strategy. Part of our change management strategy was to adopt the customer’s point of view rather than an employee’s when narrating why we were adopting PLG to the company. When employees put themselves in customers’ shoes, they were able to empathize and understand why it’s helpful to try a product before purchasing since they too prefer to prove value before buying expensive items outside of work.
2. Clearly Communicate with Sales and Incentivize Sales through New Comp Plans
In particular, our sales team had a lot of angst around adjusting to a product led growth strategy, which we confounded by not developing a clear communication strategy. When we first shifted to PLG, we sent tons of product qualified leads (PQL’s) to our sales reps, this increased the volume of leads but we hadn’t laid out a clear plan of attack or provided them with enough training to know what to do with this new ‘lead type.’ This taught us to prioritize incredibly crisp communication with sales for absolutely any product, pricing or package change and to provide ample training leading up to any transition.
In addition to improving communication, we learned how critical sales compensation and incentive plans were to drive this switch to PLG (or generally any change in go-to-market strategy). When we switched to a freemium model, we readjusted our comp plans to promote a seed and growth strategy, whereby we incentivize our customers starting with a small number of users, gaining a ton of value, then adding more licenses/seats over time. This is the same model that you see at places like Slack who employ similar B2C2B strategies.
3. Hire Inbound Success Coaches to Complement Sales
When we changed our sales strategy, we realized that we needed to hire entry-level Customer Success and Implementation folks who are entirely focused on customer satisfaction, providing freemium users with a human to supplement the nurturing and onboarding that our product automates. These reps, who we call “Inbound Success Coaches” are not salespeople and they don’t have variable compensation. Instead, they help customers get set up on our free tools in order to ensure they realize value.
This team also synthesizes large volumes of feedback to pass back to Product/Eng, they are both a customer help channel and feedback funnel for us to build the right products faster for our customers.
4. Embrace Ruthless Segmentation to Ensure Quality Leads
When we first transitioned to PLG, we allowed unqualified users to book valuable time on salespeople’s calendars, even if these users were not a good fit for our product. This quantity over quality approach was good at first, funneling a ton of feedback to our teams, but created absolute mayhem as unqualified users/bad fit users began taking up a ton of time for our front line GTM teams.
This taught us how critical it was to ruthlessly segment users/leads by creating a system that connected our best-fit prospects with our sales folks, and pushed all others towards full self-service.
In order to determine best-fit, we used firmographic data around the company size, industry and business mandates of our prospects. This, coupled with historical health data of customers that grew with us overtime, created a virtuous cycle of good fits > good customers > good fits > good customers.
5. Track Product-Oriented Metrics
When we transitioned to PLG, we tracked the standard SaaS metrics: LTV, CAC, ARR, MRR, revenue retention and customer retention. Yet we soon saw that in order to gauge our customer lifetime value, we also needed to monitor more product-oriented metrics such as active usage, retention and upgrade paths within our tools. While we still track traditional revenue and financial metrics, we target these more appropriate benchmarks carefully:
By tracking the number of signups or prospects who visit our website, we can determine which sources (e.g., channels) generate the highest rate of top-of-the-funnel demand for our tools at the lowest cost.
We monitor how many and which sign-ups convert to active users on each of our tools to improve usage.
By tracking which activations eventually become paid users, we can see which PQL’s convert the fastest with the highest ultimate value.
Time to Value
Tracking how quickly we deliver value to customers after they sign up ensures we are minimizing this metric and that customers understand the value we’re providing.
HubSpot has always been a quintessentially customer-focused company; it’s not uncommon for our CEO to forward positive client feedback about individual sales reps across the entire international company. When we transitioned to a product led growth strategy, we became even more dedicated to our clientele. Yet, shifting from a traditional inbound enterprise to a freemium model created many internal challenges. In order to smooth this transition, we learned to adopt the customer’s point of view, clearly communicate with sales, hire complementary Inbound Success Coaches, segment prospects and track unique metrics. While we’re constantly iterating on our process, one thing remains the same: a dedication to our customers.