Product Led Growth: How to Determine the Right Time to Upsell Users
Editor’s Note: This is the third article in a series by OpenView’s Entrepreneur in Residence, Natalie Diggins, where she explores and defines product led growth. You can read Part I here and Part II here.
Product led growth is a go-to-market strategy that relies on product features & usage as the primary drivers of customer acquisition, retention and expansion.
In previous posts we defined Product Led Growth (PLG) and discussed the need to create products that customers love for the strategy to be successful. We heard from PLG leaders like Slack and Expensify on their secret sauce. And we learned that the core of any successful PLG strategy starts with the customer experience. But in a PLG world, who are the customers?
Who’s the Customer
Identifying and targeting the “customer” has always been an important element of formulating a go-to-market (GTM) strategy. But “customer” is a broad term that encompasses a range of personas at a target company. As Scott Maxwell wrote, two key customer personas to differentiate are “users” – the people who actually interact with your product – and “buyers” – the people involved in the buying process. Scott’s post was written five years ago, when B2B software GTM was predominantly sales-driven and well before the rise of PLG. Yet it’s still relevant today.
We’re all familiar with implementing a sales go-to-market (GTM) strategy. Now we’re adding a PLG strategy to our growth toolkit. These are two different, powerful, and as we’ll see, complementary frameworks for approaching GTM.
In a sales-driven GTM world, sales are made utilizing inside and outside sales resources to deliver a unique value proposition to buyers, who have the budget and authority to place an order. In some cases, the buying process is initiated or influenced by users, but often the buying decision is made in a top-down process with little involvement from the people who would ultimately use the product.
A PLG GTM strategy also delivers a unique value proposition, except it delivers, through the product itself, that value directly to a user, who may or may not also be the buyer. Both strategies depend on buyers for making a sale but PLG is explicitly a user-led strategy.
Let’s start by distinguishing between PLG users and buyers – sometimes the same people and sometimes not. Users are the people who use the product and buyers are the ones who pay for it. When the user is also the buyer, it’s simple enough, but what happens when these roles diverge?
When Users aren’t Buyers
Users and buyers are often one and the same in the beginning, particularly when there is a significant free trial or freemium element to the PLG strategy. As usage scales and the product penetrates more broadly into the customer organization, the role of the buyer evolves, often passing from the user to a buyer not directly connected with product usage. User sets become larger and more complex. Companies begin to demand administration functionality with different roles and permissions, reporting capabilities across multiple business units, and the ability to manage multiple layers of hierarchy, often with multiple inputs.
When this happens, it’s time to complement your PLG strategy with a robust and effective direct sales strategy. A real world example of how this works was shared with me by Eric Bisceglia, one of the first employees and former VP eCommerce at join.me, a video and audio conferencing product from LogMeIn. A join.me user might initially buy the service for their individual use, but as usage scales the buyer often becomes a corporate office purchasing for many users.
“We saw a lot of people purchasing and then expensing the product. It was interesting, because it was probably a finance team’s nightmare. But because the company, at the time at least, wasn’t necessarily equipping them with something they needed, there were a ton of one-off transactions.”
Once join.me saw a critical mass of users who were also buyers in a company, they would overlay a sales GTM strategy by presenting directly to corporate finance teams the benefits of consolidating many of those smaller accounts into a more efficient (and better priced) corporate account. This is a terrific example of the complementary nature of sales GTM and PLG strategies.
Jason Mills, Director of Sales and Success at Expensify, an OpenView portfolio company that makes expense reports that don’t suck, emphasized the point that a PLG strategy, even when the buying relationship evolves, always starts with the user.
“A top down approach is definitely something that we need to accommodate and optimize for as well. I do want to clarify, though, that even if it’s a big enterprise company, let’s say like Yahoo – they’re one of our customers – that conversation actually started via employees.”
In a user-led model, when do you need to start paying more attention to buyers? The users will tell you. As you’re talking to users, whether in support conversations, customer success conversations, or sales conversations, they will eventually say, “I don’t have authority for this. I need to talk to my boss,” or “we need to get purchasing involved to roll this out further in the company.”
The more the user can influence the buyer, whether it’s the person at the next desk, or a boss, or somebody down the hall, the easier it’s going to be to make the sale.
If the users can’t create the sale, either by buying it themselves or convincing somebody else to do it, then you need to start communicating directly with the buyers. This is especially the case when the users and buyers are located too far apart for the users to directly influence the buyers to buy.
PLG can drive explosive growth, but if that growth slows or you see a pattern where expansion within large customers reaches an upper limit, look at adding a sales GTM strategy to facilitate the buying process and find more pockets of users. The more seamless you can make your PLG and sales GTM processes, the better results you will achieve.
But Wait – Not So Fast!
While adding a Sales GTM strategy to your PLG strategy is an effective way to continue to drive growth, the timing can be a slippery slope. Add the strategy too early and you risk losing out on a capital-efficient way to build your business. Add the strategy too late and miss the opportunity to close large enterprise deals. Ultimately, you want your product doing the work for you until growth within large organizations tops out and begins to slow.
The upsell is a critical component of your PLG strategy. After all, if you can’t eventually make a sale you’ll be out of business. Slack, a messaging and workflow software application whose mission is to make your working life simpler, more pleasant and more productive, does an excellent job of providing value as part of their freemium product, then upselling additional paid features. Slack’s Head of Product Marketing, Kelly Watkins, shared with me this example:
“One of the differences between a free plan and our paid plans is that one could transition to a paid plan so you have access to your entire archive of messages for all time. On the free plan, that’s limited to 10,000 of your most recent messages. So generally within the product, when you get to that threshold of 10,000 messages and go over that, we have a very small sort of notification to you that says, “Hey, you know if you would like to have access to your entire archive, that’s available, and here’s how you access that.”
The most important one: Don’t overthink it.
Thanks to the rise of product-led growth, it’s more urgent than ever to revisit freemium.