Special: Leah Tharin on Modelling PLG

Product led growth is still all the rave. But is PLG right for you? How do you build the business case and how do you think about modeling it out? 

We're not experts in PLG. Fortunately we brought on Leah Tharin who is to discuss it.

Here's what we covered:

• First: Is PLG right for you? (07:54)
• 2 stages where you can implement PLG (09:54)
• PLG is not about acquisition (11:08)
• Can you easily explain your offering? (17:44)
• Modelling PLG (21:02)
• Product Qualified Accounts (30:57)
• Operating cadence for PLG/PLS (40:04)

You can check out Leah here:

www.leahtharin.com + her linkedin: https://www.linkedin.com/in/leahtharin/

Enjoy!

Creators and Guests

Host

Mikkel Plaehn

Marketing leader & b2b saas nerd

Host

Toni Hohlbein

2x exited CRO | 1x Founder | Podcast Host

Guest

Leah Tharin

Leah Tharin, Head of Product at Jua.ai specializes in product-led growth in B2B. She writes about her experience on her blog, podcast and guides on www.leahtharin.com

What is The Revenue Formula?

This podcast is about scaling tech startups.

Hosted by Toni Hohlbein & Raul Porojan, together they look at the full funnel.

With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.

If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.

[00:00:00] Hi everyone, this is Tony Hobe. You are listening to a special episode of the Revenue Formula.
[00:00:05] It's special because we have a guest. The guest is Leah. And we are gonna talk about modeling plg. Enjoy.
[00:00:12] Mikkel: This is so weird. By the way, we have no intro music. I know. For this start. I
[00:00:21] Toni: know. We just, we, we just need to adapt here. One other thing that's weird and only people that actually watch the video can see that we are sitting differently today.
[00:00:29] Oh,
[00:00:29] Mikkel: yeah. Next to each other. Yes,
[00:00:30] Toni: we can. Yeah. And, and the reason is we, um, Actually, let me ask you something else. Mikkel, why is that Solo road
[00:00:38] Mikkel: on the table? Gosh, I don't know. I think, uh, I just really love chocolate. No, it, we are getting a bunch of complaints. People are tired of listening to just the two of us.
[00:00:48] Yeah. And uh, it's also kind of limited. We've covered a lot of things we already know would be great to talk, uh, about other things. So we have a guest and I believe from Switzerland. No.
[00:00:57] Leah: That is correct.
[00:00:58] Mikkel: That is correct. So Swiss chocolate here to, uh, to represent Leah here. Yeah. Yeah. So, , I mean, uh, so first off, welcome Leah.
[00:01:06] Thanks so much for joining.
[00:01:07] Leah: Thank you for having me.
[00:01:09] Mikkel: Basically I learned about you the first time, Tony, I think it was maybe a couple of months ago. He said, you should check out Leah, on LinkedIn. And no joke, I looked you up and I scrolled through your entire feed of posts and made it to probably year one or year two or something like that.
[00:01:25] I didn't get any work done that day whatsoever. I read, PLG Guide 3.0. I basically just devoured everything, which is pretty cool because you're, um, you're head of product.
[00:01:36] Leah: Yeah.
[00:01:37] Mikkel: So I didn't expect you to be so deep ingrained in how to operate business. And it was just so refreshing actually to see, uh, that piece.
[00:01:45] And there were a bunch of things, coming out of that. And I think we could maybe do some quick learnings from the feed if you wanna hear some of it. Yes, please. So, strong opinions about nps.
[00:01:57] Leah: Oh, I do. Oh, I do. I do. Oh, yes. Yes. And in my list of bullshit metrics, it's very high up. Yeah. Yeah, for sure. Do you want to hear about it or do you just like, do you want to just
[00:02:07] go
[00:02:07] Toni: no,
[00:02:08] no, it's gonna, this is
[00:02:08] Mikkel: gonna be a quickfire one. Yeah. We, we, we can get into that, uh, maybe also a bit later. The other thing was you wrote, PLG is better than wellness. safe is organized depression. And I just, I kind of fell a bit off my chair to be honest. sorry. I don't
[00:02:22] Toni: understand that. What is safe is organized.
[00:02:24] It's
[00:02:24] Mikkel: a scrum, isn't it? The scrum thing. The agile safe.
[00:02:28] Leah: Yeah, so it's, it's um, it's kind of a scaled version of agile, taking everything out that makes it agile and putting it into a waterfall waterfall. It also, I think it's also responsible for the misery of like most product owners in the world, but yeah,
[00:02:43] Toni: Yeah, that
[00:02:44] Leah: very ineffective. Yeah.
[00:02:45] Mikkel: you go. So there were a bunch of that and I just devoured everything. Um, by the way, uh, Leah has a pretty cool podcast called Product Tea with Leah. There's also a CK Newsletter, a course on Maven, and a bunch of other things you should totally check out if you're considering or
[00:03:00] Toni: interested in plg.
[00:03:01] Yes. And one thing you know that we wanted to mention was an Aprils fool. Turns out, uh, but uh, but Leah had a really weird encounter with Steve Ballmer from Microsoft when she worked there. Uh, but it turns out it's actually not true. But you have a different crazy story about Steve you mentioned. So maybe now is a good time to, to talk about that.
[00:03:20] Leah: That's not what I said at all. Like, I mean, I have some funny stories about Steve Palmer because, you know, like, okay, so everybody knows this kind of story where he's, where he's jumping around on the stage and is being erratic and so forth, right? And you would assume that if he's in front of staff, he's gotta be completely different or whatever. Turns out he's totally not. So this was, um, I cannot remember exactly how long this was ago, but I think I worked at Microsoft like 15 years ago. I don't remember anymore. It was a long time ago, but like whenever Steve was there, he was also in Switzerland and he visited us a couple of times. I think two times I've seen him in person.
[00:03:55] Um, but yeah, I mean I don't have any crazy insight stories from Steve. It's just like he is actually this crazy, or he was this crazy in these
[00:04:03] Toni: So Steve, Steve on stage is also Steve in reality. That's what he basically saying.
[00:04:08] Leah: Um, kind of, and this was the time where he had his strongest takes about the zune player. I don't know whether you remember
[00:04:14] Toni: Oh yeah. Oh
[00:04:14] Mikkel: yes.
[00:04:15] Leah: this was this big fight between, uh, the, what was it called? The iPod and, and the Zune player. And then people just took whatever he said as, um, as ultimate truth.
[00:04:27] And you know, the memes are just, They're going very high. What I can tell you is, is that the, the measured responses and the measured decisions that you had in the backrooms, you know, like this, whenever you bring a new product into the market is there's a lot of guessing. You know, like, and it's a lot of risk management.
[00:04:42] Obviously we don't know whether something works, but we had to make a couple of guesses back then at Microsoft that they did not really work out for the Zune player. For sure. That was a big failure. Um, but yeah, I mean, we had a couple of failures in that time. It's not connected to me though, right? Like Windows Vista
[00:04:57] another one.
[00:04:58] Yeah,
[00:04:59] Toni: and I'm pretty sure that Steve's confidence really helped to make the right product decisions, right.
[00:05:04] Leah: I mean, look, if you were an operative team like I was back then, um, it's like this was, I don't know how many employees that we had, but it was thousands, 10 thousands of employees worldwide already back then. Um, I mean, what do you expect from a, from a leader that they come to you and tell you how to do things?
[00:05:22] I mean, the only thing that they can actually deliver is kind of some kind of vision, and Microsoft was never really cool. Um, in that sense. But on the other hand, apple was also in Switzerland. We had a very interesting situation. Apple was not that cool either, right? Like there was not this brandism that we have nowadays.
[00:05:41] We're just like, yeah, yeah. Where Apple people are just always like, yeah, you know, like, oh, it's a holy grail and
[00:05:46] everything else is garbage. Um, behind the scenes it's always kind of, the reality is just different, right? So that's all I'm saying.
[00:05:55] It's like,
[00:05:55] you know, don't, don't believe in brands.
[00:05:58] Toni: That was, well, uh, that was, that was our little intro here. Mm-hmm. Um, so since we have you here on the show today, we obviously wanted to, you know, big surprise talk about plg. Uh, and obviously there's tons of different areas we can go into. We had a little bit of a LinkedIn poll, actually winning, uh, modeling plg Right.
[00:06:18] Before we kind of jump into this, I think as a backdrop, and at least this is, you know, my perception of this whole thing, PLG kind of emerged what. One or two or three years ago. Right. As a, as you know, as, as three, you know, letters kind of really talking about this. Previously this, it was kind of a trial, a free mia, and kind of all kinds of other ways of how to get into the product, right?
[00:06:40] It. Feels like it has become very much a hype, right? There's a lot of, everyone wants to do plg, every vc things that PLG is the, the greatest thing of all. So by the way, plg, for people that are not, uh, fully familiar with this product led growth, there's now, uh, the newest thing, at least from my perspective, is than pls.
[00:07:01] So product led sales, kind of connecting these things together and so forth. So the, the space is still very much. Expanding and evolving. And there's a lot of interest in PLG as as such, right. And, uh, I think it's really interesting from this product perspective, Hey, you just need to pour people in and you have money out, right?
[00:07:19] It's not quite like this. Right. So before we kind of dive into some of these issues here, from your perspective actually, thinking about PLG as a high level and saying PLG is good for this and not good for that. How would you actually, you know, advise people that currently having this nagging conversation with the CEO that says, Hey, I read about PLG on LinkedIn, you know, we need to do this tomorrow.
[00:07:43] How do you actually advise them to, you know, manage and moderate this and, you know, maybe come to the conclusion that PLG is the right thing, but, you know, go through a proper process of, of assessing that.
[00:07:54] Leah: Um, let me just preface this, why I believe I have some authority to say anything about the topic. So, first of all, I think I also position myself not only as a head of product that does something with product like growth in the company that I'm working at, but I'm also a consultant that puts herself out there, um, in regards to how do you bring product led growth into a company?
[00:08:16] Because usually, so what you're talking about is, is that. Everybody talks about product led growth. It's a very easy to kind of tease subject, but when it comes to the nitty gritty on actually implementing it into a running company, that's where things get dicey, right? So like you usually have two stages of where a company actually goes into this.
[00:08:35] And I specialize on sales led companies, not exclusively. But I specialize in sales led companies that already have an existing distribution somewhere in some way, right? So like, this is a, an existing company that has revenue. This is now pre-product market fit. We're talking about a revenue roughly around 15 million to a hundred million arr.
[00:08:54] Once they're bigger, I'm not interested anymore because you probably need someone else, uh, to, to handle such a beast. Um, And the reason for this is, is that product led growth, right? So like exposing value through the product first without having any control over what the customer does. So there's no high touch, there's no salespeople going in somewhere and trying to grab the customers. This is a distribution model, right? It's a different way on how to distribute your product, and it is extremely strong in high amounts, low value markets, so like b2c, classical end consumers, that kind of stuff. Or like micro businesses. Businesses where you have a lot of autonomy over your own stuff, right?
[00:09:37] So like I can choose, during the day, whether I want to use a tool or whether I can't, whereas if you work at Microsoft, you probably have a browser that is locked down. You have some company guidelines and so forth. So the, the, the buyers and the users are starting to change completely. So how is this relevant?
[00:09:54] There's usually two stages on where you can start to implement product led growth, because in the other ones it does not work. The first one is you're very, very fresh. You figured out some kind of product, you're stumbled into it, or you're starting to figure out product market fit and you're still very, very young.
[00:10:10] Um, but you want to now pull up your product that, that you know, is kind of interesting Now with product led growth. So that means you have, uh, a trial version. You are going to focus on loops inside of the product that allow you to recommend the product if you love it to other users quite easily, right?
[00:10:30] So like this entire thing is what we call a flywheel
[00:10:32] now, and this concept is not that new, right? This concept is not that new. The other side is, is when you already have an established distribution and now you want to bring next to sales led also a product led growth distribution into this. This is difficult.
[00:10:48] This is very difficult because you're already a grown company. If you're sales led, you probably have sales people. You don't have a very strong product development. Uh, most of the product development happens based on what product says, and sorry, what sales says, and not instead of like what the product metrics tell you and so forth.
[00:11:03] So there's these two things, um, that that happened. Yeah.
[00:11:08] Toni: I have actually a quick, quick kind of, uh, follow up question. This, so you, you mentioned this twice actually, and I think this is extremely interesting. You see PLG as a distribution mechanism, whereas many, many people see PLG as a conversion mechanism. Am I just, you know, juggling up the kind of, the, the, the, the, you know, words here or is that, do you also see that that is a differentiation that, you know, some people are sometimes stumbling over.
[00:11:34] Leah: So it is a word, right? So I can attribute anything to this because the other people cannot say anything about it. But like, let's, let's just say, let's just define what it means. What we want to do is we want to have good revenue. We want to make good money, uh, with our product. And what means good money?
[00:11:49] Good money means revenue that retains. There's no use for me to onboard anyone with tricking them into anything, and then they churn after one or two months. I mean, at least not for a product that depends on retention. Right. So like one off product where you just like buy one product and then it doesn't matter.
[00:12:04] Sure, of course. But like we're talking here about SaaS businesses, tech predominantly, where it actually pays to have customers return all the time. There is a difference between having two customers that pay you 60 each, and one that pays you 120. And if we're talking about this and we say, okay, we want to have good revenue, because most SaaS businesses and most tech businesses are actually built on a trajectory, right?
[00:12:28] So like we want to grow, we're not interested in just like staying flat because then the discussion changes again. So, What do you need to do in order to grow? If you have nothing, you have nothing to defend, then acquiring a lot of new customers seems very, very attractive and at any price. But once you have an existing business, like let's say I'm the head of product of something where I already have an existing 10 million arr, I need to defend my existing base.
[00:12:57] At the same time, whenever I do something on top. So a good example is if I start to make experiments and say like, yeah, you know, like we're just gonna cut the price of our product by 90%. How are the existing customers are gonna feel about this? Right? So like suddenly now I have to think about also, okay, so what happens with the current growth that I have already?
[00:13:14] Right? So like all these levers and motions need to work. So why is this a distribution model? It is a distribution model because we focus on retention, which means only good, only a good product. Will retain and then also recommend itself through other people. For instance, you might incentivize, uh, recommending the product to others and so forth.
[00:13:36] But this is ultimately a retention feature. What people are talking about, what they're mixing up about a lot is acquisition hacks. How do you optimize the landing page? How do you format a value proposition? How do you, um, Make a register flow easier and so forth. This is very easy to describe and that's why you have a lot of tips about it on it, right?
[00:13:59] So like on LinkedIn, on Twitter, everywhere, like everybody's talking about this, the thing that I'm talking about is about retention, and you need to think. About retention on a conceptional level. Like you need to understand why and how can I actually create a product that retains well, and that is far more complex than just acquiring people.
[00:14:19] And the problem that we have now with acquisition is, is that AI and machine learning makes it harder and harder and harder for people to differentiate themselves. Through acquisition methods, it's easier to create the perfect messaging for whatever you're trying to sell. It looks perfect, it sounds perfect.
[00:14:37] Um, everything looks perfect, but you don't know what the real good product is behind. And this is the thing where we say like, product led growth is taking the market by storm because the only remaining differentiated that you have overly simplified is retention. And retention can only happen if you have a good product.
[00:14:55] That's the idea.
[00:14:56] Toni: and, and kind of just to kind of recap it from a different perspective, right? At least kind of that's what's landing with me here. It's really, Hey, uh, plg, the only purpose is to retain customers. So you need to build an awesome product, and if you build an awesome product and you successfully retain folks, You know, guess what?
[00:15:12] They're gonna word of mouth refer, you know, more folks to enter the same cycle and kind of, then you get to this flywheel effect, right? Kind of, that's, that's why this becomes a distribution mechanism rather than an, you know, oh, this is a self-service onboarding flow where we don't need to use, I don't know, support a CSMs or whoever kind of to help people with this, right.
[00:15:31] Kind of, that's, that's really kind of the, uh, the different lens to kind of look at this. Um, at least from, you know, when I'm, when I'm listening to what I'm hearing.
[00:15:39] Leah: So an interesting thing is, let's say you want to figure out what makes a product successful, right? So like a successful product and the successful part is very important because you can have a good product that is not successful. A successful product is a good product that is distributed in a specific efficiency.
[00:15:56] To the market. So there's a couple of people who tell you that, oh, you know, product led growth acquires people for free. The CAC is zero. That's total garbage. This is, this is a garbage statement. All you do is you're masking the fact that if you don't have sales to go out into the market, then you have to cost somewhere else.
[00:16:13] And product led growth product by nature usually have. Um, a lot more research, research and development, right? So like you have, you go out to, uh, to customers much more. You probably have more overhead when you're talking about product itself, right? So like the cost just shifts somewhere else. It is cheaper per individual user for sure if we're talking about this, but like, just like framing this in a sense of like, oh, sales is stupid because they don't know how to acquire customers.
[00:16:41] And product like growth is superior is exactly the wrong approach,
[00:16:44] um, because it does not tell you the entire story.
[00:16:47] Toni: relaying this, again, one, you know, one way around, right? So instead of spending this on sales folks salaries, You're spending the money on building an awesome product, right? Kind of. That's, you know, that's almost kind of how you then kind of think about it, right? Because that's then, uh, you know, money you invest into development, into your orgs research, into all kinds of, kind of ways to improve this and build this out.
[00:17:08] So, and I think when you, you know, when folks are listening here and they're like, you know what, actually, it doesn't matter if it's sales or not sales. I still want to build a great product because, you know, I'm a SaaS business. I have retention problems, I wanna fix them and so forth, right? I, I do believe, and, and I would like to have your view on this, and I think you were kind of about to go there actually.
[00:17:26] There are businesses or products where it doesn't make sense to have a PLG approach, right? What would be your, you know, easy to digest, kind of, Hey, those are the st, you know, those are usually, uh, how products smell and businesses smell that actually don't, uh, where, where PLG probably is not gonna work.
[00:17:44] Leah: So your product needs to make sense in a market where you have a lot of users that can actually onboard relatively easily. Right. And then also like recommend it for sure. I mean, that's, that's the, that's the base thing easy. If you build something incredibly innovative. You're trying to, and I'm gonna say a very dirty word here, disrupt, like you're trying to disrupt an existing way cuz everybody's talking about disruption and so forth, right?
[00:18:08] But like, if you are building something that disrupts existing markets or like you're creating a new category, and it is very difficult to explain to people without explaining them from face-to-face what your product is about in one or two sentences. So let's say we are using, uh, Tesla. Tesla is a favorite example of mine, right?
[00:18:27] So like 10, 20 years ago. It was very difficult to explain to someone what an electrical car does. I mean, sure you understand, okay, it's electric instead of combustion. I get it. But like there's no infrastructure around. Why should I do this? This does not make any sense. So 10 to 15 years ago, most of the interest was actually created through sales. The market was not ready yet. And it was not easy to retell why I should use this over the other thing because climate change, like, uh, you know, like the need for why do I need something else than the card I already have was not really there. So, for generating initial interest for products sales is actually, it can depend on the, on the case can actually be stronger and better because if you cannot explain to me what your product does, then I cannot explain it to someone else.
[00:19:15] Toni: Yep.
[00:19:16] Leah: that inherently breaks the flow of this recommendation where you say like someone is coming into the product, then they become fans, then they become advocates, and then they tell someone else to use the product. And then you have this entire loop again.
[00:19:28] So, and this is why we're talking about a loop, right?
[00:19:30] So like from a specific amount of people that are coming into the product, you have a specific amount that goes to fans and then, you know, and so forth, right? And this, this kind of loop is a certain efficiency. That product like growth is really good and optimizing and making sure this is called the flywheel, right?
[00:19:46] So like this is, this is the thing that you want to have. Um, another thing is you need to have a product that makes sense to be used recurringly. So if you cannot create stickiness, so let's say you say like, Hey, you know what, we're gonna create a product led growth, uh, mortgage business. Depending on who you target, you have a problem because people don't need that many mortgages. It really depends on who you target. Right. So, but like this is the thing, like sure I can cell phone board, I can maybe, I don't know, I can see all the material relatively easy and so forth, but like I just need one mortgage and then, then I'm done.
[00:20:22] Mikkel: Yeah. Then see you in 20 years.
[00:20:24] Toni: So, but I, I, I really like this, um, you know, angling around, this is a distribution piece. That's kind of how you think about it in the first place. There's a funnel to be a distributor, right? Kind of you've mentioned, um, You know, be a fan and an advocate or something like that, right?
[00:20:40] And if, if this flow breaks somewhere, because, you know, let's just say the advocate loves you, but has no clue how to pitch you. Then that still breaks and then it's not plg and then you maybe shouldn't do it, right? That doesn't mean that you should build a shitty product. Now invest all your money into sales, but at least, you know, PLG as a distribution motion will basically break, right?
[00:21:00] Kind of that, that flywheel will break.
[00:21:02] And, kind of moving into the, the, the modeling bit here, right? Kind of this is now, hey, this is how you need to look at this. That's the purpose. I really love this by the way. This is very much, you know, first principle thinking how we are kind of trying to approach some of those issues.
[00:21:13] So how would you actually now go about, you know, modeling something like that out. how do you even, how do you even kind of get started if this is something that someone maybe wants to do in order to put a business case together, or they have something running already and they kind of get stuck and, you know, really proving that this works for them.
[00:21:30] Kind of how do you, how do you conceptualize that and bring that into a, you know, modeled structure?
[00:21:38] Leah: So it depends on, unfortunately, where you start from, right? So like I have to unfortunately, like paint a picture now, so to speak. So let's say you want to do product led growth from these two dimensions where I said, right, so like either you're a sales business that is already established, or now you wanna add some product led growth to whatever you do, which is usually also means that you have enterprise accounts, right?
[00:21:57] So like you're closing customers average two to 300, 400,000, whatever for whatever software that you sell. If you wanted to do product like growth. Now the reality of the business is usually that your product development is not very strong. That is more often than not true, and this is also the reason why I'm getting hired into companies like this, at least on a retainer business, where we just say like, okay, first we have to kind of figure out how can we prove in a layered approach that product like growth could work without risking the entire company.
[00:22:29] So this is quite important, right? So like, I don't wanna risk your entire, I'm not gonna just like put in a self-serve version of anything and then just say like, yeah, LA let's cut the prices by 90% and then hope that everything works. You cannot do that. So the first thing that you need to do in product, probably all of these companies, is you need to sit together and you need to kind of understand, okay, do we have buying from the entire company?
[00:22:50] It does not work as a product initiative. This is where the, this is where the term plays a little bit of a joke on you cuz it's not a product initiative. It focuses on product. But what it does is it focuses sales to pay attention to product marketing starts to pay attention to product and product needs to enhance what they think is the product.
[00:23:09] Let me elaborate on this really quick. So what that means is, If you are targeting with sales a high value segment of two, three, 400,000 ACVs, then usually you have a lot of stuff in your inbound that is not valuable to be touched just too low, right? So like, you know your close rates, you know your CAC.
[00:23:27] So like let's say your CAC is at 50,000, you're not going to touch anyone that gives you 60 to 70,000 an
[00:23:33] average. You're just not gonna do that. So what do we do? We are trying to establish with the company, First through data, and I can go get a little bit more into detail with this, but like we're first trying to identify, are there objective measures about how customers or prospects are interacting with our product before we even pitch it to them, right?
[00:23:55] So like self-serve a demo or whatever it is. Are there objective measures that help us to qualify the leads for sales in order when they reach out, that it is almost guaranteed ahead.
[00:24:09] That's never, that's never true, but like the hit trade will be much higher, and that allows you to drive down your CAC dramatically.
[00:24:14] And this is called product led sales?
[00:24:16] Toni: Yes, I was about to say, right. That is really then the PLS kind of version. You have someone come in through, uh, a trial environment, they click around, they qualify themselves into, uh, you know, maybe if I think, you know, some of the things are like they've reached aha moment or, you know, something like that, can indicate through, or they click this button three times, they invited seven users that it's something else over there.
[00:24:39] And that then for, you know, whatever product, for whatever reason, then signifies, hey, this is now a, I don't know, a product qualified lead. I'm not sure if this kind of fits into this. And then bang, you know, someone from sales calls up in order to close the bigger deal, right? It might be Coca-Cola or some other account going in, playing around with this, qualifying themselves in.
[00:24:59] And then, you know, sales comes in into, uh, ideally close than the bigger deal here is, is that, that's kind of the motion here, right?
[00:25:06] Leah: kind of the thing is we should not care about in which like, so it's, it's not really fixed. It is possible that an account or a prospect actually comes in through self-serve, then goes to sales and stays with sales with, until they close or they come in. They're with sales. Sales says, by the way, we also have a self-serve trial.
[00:25:27] Um, then they go there and then they close by themselves. You know, like if you have a self-serve funnel that allows you to just pay by credit card or whatever your process is, or through customer service agent, whatever it is. The thing is the customer does not care whether they're with sales, whether they're with support, or whether they are actually on the website.
[00:25:44] I mean, they do care because in general they don't want to have people talking into them, right? So like they don't want to have people talk into them. But what happens? If I tell a classical sales, like just an SDR, if somebody comes in and this SDR is incentivized to close high because they get a bonus based on this closing, what are they gonna do?
[00:26:04] They're gonna try to talk the customer into closing with them and that the revenue is attributed to them because of their incentivization plan. So, and that's the second dimension that you have to take care of. First of all, you need to kind of measure everything. It is highly oversimplified right now, right?
[00:26:20] You need to measure everything, but then you also need to take care that the incentivization on sales is not to close high. It's actually quite the opposite. We want to close low and we want to make our money through expansion revenue and that. What we mean with that is, is that we want to grab enterprise accounts before they are enterprise accounts. And that you do, you grab them off the market by getting them when they're in the mid-market segment, and then at some point they expend, it's basically the HubSpot model,
[00:26:47] Mikkel: And I, and I think this is also something Asana is excellent at having read, you know, about their business pre, you know, following the I P O. They literally have a structure with a team focused on lifting those accounts out where they can see, okay, now we have users from different departments. This is the build of an enterprise case.
[00:27:04] We can now go and make That makes sense also to that business. So it's not just, you know, an interruptive kind of thing. It, it does make sense to the business. I
[00:27:11] Toni: want to be this, the greedy CRO here for a second, so, you know, uh, on a piece of paper makes total sense. Right. Um, Seldom, you know, you could even make an argument and say, well, if you close them smaller, you close them quicker, you close them on a higher conversion rate, and then you're gonna see the benefits coming out of this.
[00:27:26] But if I could jump in and do the wall to wall deal today, uh, you know, falling into my quarter today, uh, why wouldn't I do that? Why would I, why would try and kind of force delayed gratification here for me in this case, right? Why would I actually do that?
[00:27:40] Leah: Because I'm your ceo and then I'm gonna ask you, how do you prove to me that this particular revenue is better than the other one? I mean, you can also turn it around, right? Like so I can say, well, product led growth is not a short term initiative. Let's get this just right outta the way because I need to prove a couple of things.
[00:27:56] Exactly. To address what you just said. I need to have some kind of deal flow. And accounts that I can close to prove out of six, uh, prospects that we've closed, one of them is expanding within a specific amount of time. Right? So like the entire revenue story only becomes actually relevant and true once we actually see whether in the big masses of leads and closings that we have, how many of those are starting to expand?
[00:28:26] Now, an important question about this is always the the CAC Payback period. So like how fast does the acquisition cost that we have associated with an account actually being paid back? Right? So it's not just about CAC, it's not just about, oh, this cost is 10,000 to to acquire or whatever. But like if your CAC is so low that you can say like, okay, you know what, the Payback period of this is like three to four months.
[00:28:50] Toni: Hmm.
[00:28:51] Leah: That sounds really interesting. I mean, we, why don't we just let, let this test, right? So like we, why we just let this run? Because the first thing that I'm going to do when I have salespeople in a product led growth motion, I take away their access to the leads on the PLG self-serve funnel because this is quite important, right?
[00:29:09] So like, PLG is not just like generating leads and then sales is gonna go and then reach out to all of them. You are not allowed to reach out to a product qualified lead until they are qualified. And qualified leads could mean that depending on the customer success that you have to find. So for instance, only if the customer has used the product a specific amount of time in a specific timeframe, they count as qualified.
[00:29:32] Or if they go to a very specific page. So for instance, the terms of service are a really good hack, right?
[00:29:37] So that kind of thing. Then we consider them to be qualified. If you don't do that, Then you have a situation where you get bad leads that are just being reached out to, oh, I mean, they signed up for the demo.
[00:29:49] They must be interested. And then you think that product like growth does not work. It only works if you're patient, right? You need to wait and you need to have less salespeople. Your salespeople need to be underemployed by the, by the pool of leads that you have. Only then it works.
[00:30:04] If you have too many, then they will start to grab leads
[00:30:06] that are not qualified.
[00:30:07] Toni: I think, the patient's thing is a difficult one, I think to land with any CEO and CEO by the way. Uh, but I think what's, you know, I think the parallel that's pretty clear for me is. Um, you know, it's also not like every sales rep wants to reach out to every single lead that signs up. Uh, on the marketing side.
[00:30:24] No. They actually wanna talk to the ones that are ready to talk to, right? Kind of. It's either MQL because of some scoring or s SQL or whatever you're gonna call them in the end. And really this product approach is the same thing, but. You know, I think to your point, when you then implement that, there's kind of a feeling of like, oh wow, but they're the product, they're totally qualified.
[00:30:40] Let me reach out. Mm-hmm. And that is something that, you know, need to detach yourself from actually. Right. But, um, so again, right. Kind of, hey, there's a funnel. Uh, once that lead reaches a funnel step, I'm just gonna, you know, everything's a funnel to me. By the way, this whole flywheel thing confuses me, but we're gonna get to that in a second.
[00:30:56] I'm sure.
[00:30:57] But you know, once then, you know, a lead reaches a specific stage in the funnel. There plop become pql. Now sales can, you know, jump on if they want to. Um, and, uh, and kind of the next step then is like, okay, do you then model it actually like this? Do you then say, okay, you know, we had 100 sign-ups out of them, uh, 50 reached, you know, this stage of 20 reached, then the P q L stage, and then we closed, you know, X amount of them, uh, you know, towards the end.
[00:31:24] Is that how you do it or how do you, how do you approach it?
[00:31:27] Leah: Kind of, kind of, so it is difficult to infer from flat users. How many accounts did you have in your business? So just for clarification again, right. So like a product qualified account is a collection of users that belong to one account. So like, it could be like if Coca-Cola's in there and we have
[00:31:43] four users from Coca-Cola, then they belong obviously to the account.
[00:31:47] The product qualified lead. In the end is the one person that is actually making the buying decision, right? So like we also need to identify someone in that, um, particular process. So like that is then in the account, the one person that can actually make the buying decision. This is already something that you can try to figure out if it's defined.
[00:32:07] Sometimes they define themselves. Sometimes sales has to do some research or whatever. Um, but. You should not look at the numbers in terms of like, okay, this is how many users and we have, and out of a thousand users we can actually generate one enterprise deal or whatever it is more about, okay, so from the amount of accounts that we're starting to approach, how much revenue can we generate per account?
[00:32:32] I would say that's a really good measure.
[00:32:35] Um, and. What is the inferred cost that we have with this? Because usually you start, right, and then you have some kind of, you have kind of some metrics to kind of work, but if this is your baseline, you already know like, okay, it's not gonna get worse than this, obviously, because we're always gonna improve, right?
[00:32:49] So especially at the start, we're gonna be more efficient. We're gonna have people starting to use this process more and more and more. And it also depends heavily because we're right now talking heavily about product led sales. Product led sales is kind of like a subgroup of product. LED growth. And what we mean with that is it really depends on how deep you can actually go.
[00:33:12] Is there a version of your product that you can serve to end customers like single users? So for instance, Figma is a really good, uh, example. This is being used in enterprise. It's used in the mid-market segment, but also on end users because then you're really in the product like growth space there. You don't touch them at all.
[00:33:29] There's no salesperson reaching out to them at all whatsoever. So now you have also the complication. You need to be able to kind of identify mid-market segment customers before they identify themselves. Do you know what I mean? Right. So like we need to kind of, we need to have some, some kind of good logic in there that makes sense to identify and separate our entire user base.
[00:33:51] Toni: Yeah, and, and really the idea is right to kind of based on their behavior, based on the, oh, I want to have this governance piece, I wanna have this overview dashboard, kind of tho those would be like little hacks or say, oh, kind of, these guys might be a bit larger than just two or three people as say, you know, they have a bigger use case here based on their behavior.
[00:34:07] You would then kind of sift them out and be like, Hey, they should go on this bucket, and they should, could potentially in the other bucket. I think what I really wanted to actually double click on, so. Whether or not this is a, you know, a funnel or not. And, and you know, how it kind of, you know, lead versus account versus opportunity and, you know, all of these things.
[00:34:22] You're totally right about this. I think, uh, just kind of circling back to some of the start of this conversation was really about the distribution piece, right? How do you, how do you create this arrow that now goes back into the funnel, um, from okay, we have, you know, again, a hundred, a hundred, really like this, uh, you know, 10 signed up are really happy. How do you then think about it? Right. Can you, so this is very stupid and the answer is no. But for every 10th user we get to grow, there's gonna be one more user that signs up or something. Is there, you know, I think in B2C times they call it virality and the viral loop and kind of this kind of stuff.
[00:34:59] I'm not sure if there's similar concept that you would, um, advocate for people to think about in this PLG distribution model.
[00:35:06] Leah: that's not a stupid example at all. That's exactly how I look at it
[00:35:10] as well. Right? So like you have an R factor, which is usually like, okay, per person that we get in, we are getting also 0.1 people in, right? So like it's at some point, so the longer that somebody stays, The, the more likely it is that they start to recommend the product as well, and I can go forward.
[00:35:26] And so it makes sense, right? So like some people also churn from your product because they don't have to use case anymore. We'll just ignore those for the moment, right? So like, we also need to understand why people churn. Um, because then it doesn't matter how good your product is, right? It doesn't matter how good your product is, if the use case falls away for someone, like again, it's kind of like the mortgage thing.
[00:35:45] Um, But we know also from, so this is actually an area that is relatively well documented. We know from experience and we know roughly how much L t V we can expect from a given market segment. And that also means we can also assume how long an average an average customer stays, and whether they are starting to, when do they actually start to recommend our product?
[00:36:08] And this is different per segment in general. It takes longer and more the more upmarket you move. So let's say you have B2C customers, and let's say we are in a very down market segment. We have now the first consumer version of what we have. We have a hundred thousand customers in. In average, we're gonna convert for a B2C direct customer, one single use case thing.
[00:36:32] We're gonna probably convert between 0.1% to 1% of users into paid. Through the entire funnel, right, that we have. That's a very standard conversion rate that we have, so not very high. It's a very, very low number. Like you have to give a lot of trials out before someone actually pays for you, and this is also a very, very generic number.
[00:36:50] It depends, blah, blah, blah. The good thing is once you have them, they're very strong drivers, right? If we're looking at your funnel, again, you forced me to say the effort here a lot, but once we have the, so right, the first step is really inefficient, if you want to call it that. But the second thing that becomes really efficient is, is if that someone that starts to recommend your product, and this is why it's worth it, to also spend time on this in your own product to make it easy to recommend.
[00:37:17] You don't have to incentivize people necessarily. This is why once you do have them and you do identify them, you can actually push to them that they are recommending the product to others. And that is extremely efficient. So I don't have numbers for this because that really highly depends, but that number is lower in B2B and micro businesses, because obviously businesses, I mean, yeah, they talk to each other, but it's not the same as with, oh, I need a fitness app.
[00:37:44] Can you recommend
[00:37:44] one? But the conversion rate in the acquisition funnel is much, much higher. So for b2b, we talk about 7% enterprise in a self-serve funnel up to 20%. Why do we know this? Because an enterprise customer in average tests five solutions before they go into a poc. That's why we know that 20% is really realistic here.
[00:38:07] Toni: Yeah. Interesting. Okay. I think we're coming up on time actually. So, um, I don't know, did you have a specific, I
[00:38:13] Mikkel: actually had two questions I hope we can kind of squeeze in. Um, one is . Planning season. Planning season, uh, is, you know, a couple months out, up on us. Up on us. It's getting closer. Uh, one of the things I have experienced, so from a marketing background and also talking with others in sales and so on, is there's this desire to hit a very ambitious number.
[00:38:35] And it's always a struggle to figure out how do you then say yes and actually commit to that number and feel that, hey, this is. This requires this plan and we can make it. What does that look like actually, when you're running PLG or pls, how do you, how do you say yes to the number?
[00:38:52] Leah: That's a very difficult question because one of the problems that you have is, is that you will in some way cannibalize a little bit with one distribution model to the other, but like product like growth, if that is your question as well, is not just like, oh, I'm now taking the bike instead of the car to get from A to B.
[00:39:08] You actually reach different markets with this, right? So like this is also quite important to understand. A lot of markets are starting to lose penetration or like you will lose penetration in specific markets because there are more and more competitors that serve their product in a self-serve motion.
[00:39:24] So if I have to create a business case on this, then I also need to make sure that if I start to have incumbents on competitors coming up with their own self-serve version of you, then you need to address this. So this is more downside protection rather than just like, okay, now we're growing 30 to 40%.
[00:39:40] Having said that, I don't touch anything in general as a product initiative, and this depends on the size of the company. That does not at least promised me 15% of, uh, revenue upside because if I cannot imagine how this can work, at least for 15% of my revenue in a year, um, probably don't want to touch it.
[00:40:00] Right? But this is a highly, highly theoretical, right? Like, and it's also a lot of wishful thinking.
[00:40:04] Mikkel: Yeah. the other reflection I had is you have a very clear operating model when it comes to the whole sales and marketing cadence, right? You will do sales forecasting, you will do pipeline meetings. What does, you know, what's your recommendation? What should that cadence look like? If you're either running PLG PLS today, or considering building it up, what you know, what cadence should you have in place?
[00:40:27] Leah: That is a brilliant question and one of the difficulties that you have is, is the first thing is you have to lock yourself into a room with everyone to really talk about what you consider to be customer success. And, but what we are doing here, because I'm serious, like one of the biggest problems that you have is, is that when you come into a company and you say like, oh, we're doing product like growth.
[00:40:45] Everybody fears for their job.
[00:40:46] Mikkel: Yeah.
[00:40:47] Leah: First of all, this does not take away anything. It also makes your life less miserable. Right, like as a salesperson, this is actually quite fun, if you want to call it that, but you need to build it up slow. That means even if you have 10 to 20 SDRs, they still have their own uh, rituals.
[00:41:02] They still have their own meetings. All of this makes sense. Build it up slowly. Do not change everything for people. Bring in a growth mindset, maybe with one SDR that works on the self-serve pipeline. You know, like try to build up the product until they are overloaded and bring in a second one. That kind of stuff.
[00:41:18] So, At the start, it's not that difficult to do at all if you compartmentalize it a little bit and do not disturb sales too much, right? So like bring it slowly towards them because at the start, the first three to six months, nothing will happen. Absolutely nothing. You still need to have a product that you know that self serves, and then you need to kind of surface the data and then bringing the data to the sales people that they can actually do something with it.
[00:41:40] This takes time,
[00:41:41] this takes time.
[00:41:42] Mikkel: It's funny, I mean, it's, it's, we've, it sounds like a lot of the, the things we've talked about in the past, we are touching on this thing with being patient. We've, so one of the examples we've had re uh, in a previous episode is outbound. People think you're gonna make it work in a couple of months and then cut it.
[00:41:57] But your, you know, your sales cycles are like three months. So, you know, the, it's like throwing out the baby with the bathwater, right? And I think that patience and, uh, basically look, uh, how you look at operating the business, I think is super valuable. And I hope, I hope for people listening that there's a ton of value in here.
[00:42:12] I was least, really enjoyed it just, uh, on the sidelines here in,
[00:42:16] Leah: I can maybe ask one.
[00:42:17] I, I can maybe add one really interesting bit about this, because if you're talking about sales cycles, there's a very interesting thing happening. So like from the very first moment where someone actually comes into your product led growth motion and let's say like it doesn't matter which kind of segment that they are.
[00:42:30] It actually can take longer to close them in general, right? So like the sales cycle actually increases, but you will not hear about them because they were four months dormant in your product before they start to become active. So you will know thanks to your analytics, when to start to grab them. And that time, the first time you actually contact them and they've already been four months into your product, that sales cycle is incredibly short.
[00:42:57] 40 to 50% sometimes compared to your enterprise contracts with the same value. And that is a very interesting thing, I think. And just to your question of the
[00:43:05] of the rituals and
[00:43:06] Mikkel: sales cycles.
[00:43:07] Leah: Yeah.
[00:43:07] Toni: Really cool stuff. so this is what I love about, uh, you know, this guest series that we are kicking off now, kind of, you know, don't wanna give too much away, but, you know, you learn a lot from those conversations, right? And, and I think you made, you know, one, one comment, Hey, you know, Really, I just record really great conversations that I'm having.
[00:43:24] And those are then called podcasts. And, uh, and then to, you know, to a large degree, you know, I wanna, we want to try and mirror some of that. So Thanks, thanks a lot for this conversation. That great conversation that we had. Leah.
[00:43:34] Leah: Thank you for having me.
[00:43:35] Mikkel: I think I'm gonna steal the talent things from Leah. I just need to figure out whether I need to pay royalties.
[00:43:39] So let's, uh, I'll drop you a message on LinkedIn. Okay. Thank
[00:43:42] Toni: you. try,
[00:43:43] try,
[00:43:43] try, try this Steve Baer story, you know? Yeah.
[00:43:47] Leah: Don't reach out to Steve. He does not remember me for sure.
[00:43:50] Mikkel: Yeah, I'm not sure he's gonna check my InMail when I write him.
[00:43:54] Toni: I mean, it's by Microsoft. Maybe you will. Anyway, uh, Leah, fantastic to have you. Here was really great conversation and um, yeah. You know, see you next time or something like that. Really, really nice to have you.
[00:44:05] Mikkel: Yeah, and check Leah out on LinkedIn there for sure.
[00:44:08] Toni: There's some good stuff in there. Yeah. Wonderful. Bye-Bye bye.
[00:44:12] Leah: Bye.