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

Summary

The transcript discusses how companies should focus first on product-led growth and retention before acquisition. Retention has two key metrics - activation and engagement. Without these, there are limited opportunities for product-led acquisition. Determine if the product has a one-to-many collaborative element to enable product-led strategies. If not, rely more on marketing and sales. Most B2B lack one-to-many relationships. Execute both sales-led and product-led motions correctly together over time, instead of choosing one approach. Reinforce the product-led roots even when chasing enterprise sales to avoid slowing growth. Letting product usage and community growth lag risks enterprise pipeline drying up.

Takeaways

• 😀 You must first focus on product-led retention before product-led acquisition
• 😇 Retention has two key metrics - activation and engagement
• 🧐 Without strong activation and engagement, acquisition efforts will fail
• 😎 Successful companies layer sales-led and product-led growth
• 😮 Don't abandon one model when adding the other - amplify both
• 🤔 Determine where to start with sales or product led based on market and use cases
• 😠 Avoid letting enterprise sales crush underlying product-led growth
• 😢 80% of companies abandon product growth when chasing enterprise sales
• 😡 Pivoting from product to pure sales requires changing company structure
• 🥺 Successful companies never forget the product-led roots that drove initial growth

Q & A

What are the two main KPIs for retention according to the speaker?

The two main KPIs for retention according to the speaker are activation and engagement.

What does the speaker mean by a 'habitual loop' in relation to product-led retention?

A 'habitual loop' refers to getting users to habitually use your product through engaging features and experiences that keep bringing them back.

What are the prerequisites for effective product-led acquisition?

The prerequisites are strong product-led retention with good activation and engagement metrics, so you have a solid user base to build acquisition strategies on top of.

What are the two types of monetization models mentioned?

The two types are product-led self-serve monetization and sales-led monetization chasing larger contract values.

What layering game is the speaker referring to?

The layering game refers to typically starting with either product-led or sales-led, and then later layering the other model on top rather than switching completely.

What crucial mistake do most companies make when scaling up sales?

They let go of their product-led growth initiatives and tactics that were the original root of their success.

Why does the speaker say the sales pipeline starts drying up when focusing too much on sales-led enterprise growth?

Because without continuing to grow the product-led user base that feeds inbound sales interest, there is no foundation for sales to continue exponential growth.

What pendulum swing is the speaker advising companies to be aware of?

The pendulum between investing in product-led growth vs. enterprise sales - needing to correct back to product if neglected too long.

What percentage of buyers will typically be in a company's user base according to the speaker?

The speaker says only 30 percent or less times will your buyer actually be in your user base.

What crucial mistake do most companies make when scaling up sales?

They let go of their product-led growth initiatives and tactics that were the original root of their success.

Outlines

00:00

😊 Focusing on product-led retention before acquisition

The paragraph argues that before focusing on acquisition, companies must first focus on nailing product-led retention comprised of activation and engagement. Without strong retention metrics showing users are habitually using the product, there will be limited opportunities to hook in an acquisition engine. The core message is to start with retention before acquisition.

05:01

😟 Neglecting product usage growth after pivoting to enterprise sales

The paragraph explains a common pattern where product-led companies successfully monetize through self-serve, then hire enterprise sales teams to increase deal sizes, which works initially. However, most companies then neglect ongoing product usage and community growth. This dries up the pipeline as enterprise inbound relies on continued product usage growth. Reinvesting in product-led is key.

Keywords

💡product-led

Product-led refers to a business model where the product itself drives user acquisition, activation, and retention through its inherent value. The video emphasizes starting with strong product-led retention before adding other acquisition channels. Examples from the script include focusing first on activation, engagement, and habit-forming product experiences.

💡retention

Retention refers to getting users to continue using the product over time. The two main metrics are activation (getting initial adoption) and engagement (driving repeat usage). Strong retention comes from habit-forming product loops. This establishes the basis for product-led acquisition.

💡acquisition

Acquisition means getting new users. Product-led acquisition relies on viral loops driven by the product experience itself. Examples include user referrals, content creation, and word-of-mouth. The alternative is sales-led enterprise acquisition targeting high-value contracts.

💡sales-led

In contrast to product-led models, sales-led relies on manual outreach and sales teams to land big customers. However, the video argues both models can co-exist by layering sales-led acquisition on top of strong product-led traction.

💡self-serve monetization

Self-serve monetization allows a product-led company to generate revenue directly from users without sales team involvement. This may work for some but not all use cases. Others require product-led sales or full sales-led models.

💡enterprise

Enterprise refers to large organizational customers that require complex sales processes but have the potential for huge deal sizes. When product-led companies shift focus too heavily to enterprise sales, they often lose their viral product-led growth.

💡advocates

Advocates are highly engaged users who actively promote the product to others. Advocates are crucial for product-led growth, creating word-of-mouth and referrals. But over-indexing on enterprise sales tends to neglect advocate usage and growth.

💡pipeline

Sales pipeline is the amount of potential enterprise deals in progress. While chasing large pipeline deals is alluring, putting too many resources here often starves product-led growth, damaging long term traction.

💡inbound

Inbound means leads or interest that come to the company organically, without costly outreach. Strong product-led usage feeds inbound enterprise interest by putting relevant users in target accounts. Killing product growth kills this lead source.

💡pendulum

The video argues that companies must balance product-led and sales-led efforts, oscillating resources between them like a pendulum. Letting either side go too extreme risks losing the benefits of the other.

Highlights

Focus on being product LED and retention first before acquisition

Retention is key - activation and engagement via habitual loops is crucial before acquisition

Start with product LED retention before product LED acquisition

Choose if your product has a one to many or collaboration relationship for product LED to work

B2B products often don't have one to many relationships so product LED acquisition is difficult

You can still be product LED with sales via product LED sales

Every industry will go through transformation to product LED sales and self-serve

To succeed, do both sales LED and product LED - it's about layering sequentially

Going from sales LED to product LED means amplifying growth, not abandoning sales

Most successful companies execute both sales and product LED correctly together

Starting product LED and then focusing on sales crushes product growth

Letting product usage growth slide kills inbound enterprise interest

Reinvest in product LED growth to correct the sales focus pendulum swing

Never forget your product LED roots that drove initial success

Know when to swing the focus pendulum back to product for sustainable growth

Transcripts

I think every single company has to

First focus on being product LED and

retention

period the only way that you will ever

have any chance of acquisition 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 hobbit-forming zone

then you'll have no chance to hooking an

acquisition engine into your product

because acquisition and product LED

means users and buy it or users refer or

users create content that attracts other

users well 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 retention

activation and engagement then you can

choose is your product has a

relationship of one to many if it has a

collaboration at its core say slack or

Miro or even the amplitude or does it

have more

of a single mode relationship so let's

say snowflake there is not one too many

relationships there between users well

if you have one too 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 relationships so

it's very difficult to stand up product

LED acquisition so you rely on marketing

lead and sales lead 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 otherwise you go in the

sales LED and you chase up to those

large contract values 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

the question there is your use cases and

your Market matureness to handle

self-serve or do you need that sales

touch every industry and every

sector is going through transformation

at different velocities so even if you

don't have that product like sales or

self-serve in your industry now I

guarantee you it will pop up in the next

10 years and that you're not going to

introduce it you will get disrupted by

it say a company

starts sales LED on acquisition by the

way I love how you're kind of like

spanning this would seemingly as a

binary idea of product lab for sales

like 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 gonna try to keep up

so say a company starts sales LED on

acquisition and

later wants to think about adding a

product LED self-serve motion do you

find that that often Works doesn't work

is that like a rare success story or how

have you seen that happen I think in

order to succeed and own the market you

have to do both it's not a question of

it working 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 are sales LED now

if you continue being sales LED you have

a high chance of leaving a product led

to be disrupted by it from the bottoms

up but also going from sales led to

product LED does not mean you have to

abandon sales lead that means you have

to hunker down on your sales lead and

overlay product lit on top of it to

amplify already existing growth never to

switch so in the most successful

companies whether they go from product

led to sales led to sales led to product

LED they're able to execute both

correctly and together as opposed to

saying I have to switch or pick one

versus the other and I think it's the

biggest mistake when people view it as a

decision making of which one I should be

versus a sequential play 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 lead 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 you start as a

product LED company 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 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 or

more of those do we have to close

instead of doing these 10 20 30 dollars

arpas what if we have a hundred two

hundred thousand dollar R bus 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

usage you have great Advocates your

Enterprise buyers are likely already in

your user base so you're going and

you're closing them but then slowness

occurs it always occurs because you run

out of Enterprise buyers in your user

base because only 30 percent or less

times is your buyer gonna be in your

usage user base

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 a 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

disconnecting the dots and your pipeline

is taking on next level of growth and

you're starting to close even larger

deals you probably remember the first

time that you closed 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 in your resourcing

do you hire a PM

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 you board that's what

Market wants from you those contracts

large contracts and commitments that

increases your evaluation however very

quickly you will realize that even your

sales LED 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 and I would say eighty

percent of the companies let go of your

product-led initiatives in order of

Enterprise they start start seeing a

massive slowdown in Enterprise pipe many

correct and they realized that they've

forgotten

the hand that feeds them in the first

place and they reinvest into that growth

many companies decide to Pivot and say

forget product LED were too far gone now

we're going to create a sales top-down

machine and we're gonna 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

of 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 swing the pendulum to the

right direction and correct it when it's

the right time

thanks for listening you can find the

full episode on YouTube or head on over

to lennyspodcast.com

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