“In a freemium world, there’s far less sales involvement. The product does the majority of the selling.” — Jess Iandiorio (Drift)
It was some time ago that SaaS companies discovered that, by aligning engineering, marketing and data teams they had created a new channel for lead generation. Better yet, the channel was usually more effective than the established sales and marketing practices they had previously relied upon in terms of conversion.
The new channel was the product itself and the new leads it produced became known as Product Qualified Leads, or PQLs.
As Tomaz Tunguz observed at the time,
“PQLs are potential customers who have used a product and reached pre-defined triggers that signify a strong likelihood to become a paying customer.”
These qualified leads could be passed to the sales team, where they typically converted at 25–30%.
“The potential to leverage the a SaaS product’s freemium tier or trial period to identify high quality leads has never been greater.”
Fast forward to 2017 and the potential to leverage the a SaaS product’s freemium tier or trial period to identify high quality leads has never been greater, thanks to improved understanding data science and a suite of analytics and instrumentation packages that have shifted the needle definitively from build to buy.
As a product manager, it’s easy to get lost in vanity metrics and data points. But it’s clear to any product team working in B2B SaaS that the real ‘metric that matters’ for qualifying propensity to purchase AND propensity to churn is product adoption.
As Josh Elman recently reaffirmed, the only thing product teams really need to think about are:
- Are people using your product?
- Are they using it how you expect?
- Are they performing at the frequency you expect?
You want to understand which users are more likely to come back than others. Those that are highly likely to come back are your core users. You want to have most of your new users converting to core in the first month
Once you can predict which users are core, you can start figuring out what things they did to increase the likelihood of being a core user. The best starting point is to calculate how likely someone is to return to your product in Month 2 based on how many days they visit in Month 1.
In fact, this ethos now forms the central axis of any high-performing SaaS outfit, aligning Product, Engineering, Customer Success and Growth teams around a central goal (happy, engaged users) underpinned by robust data that provides measurable outcomes.
Long standing principles of marketing, like the concept of ‘The Funnel’, have been irrevocably challenged by social media channels that make it easy for people to become advocates for a brand (like Instagram followers) without ever becoming a customer. Consumer engagement is no longer linear so new touch points have emerged to measure the path to purchase; almost all within the product itself.
“Each company will have its own unique set of product engagement metrics which means the definition of a PQL will differ from product to product.”
Each company will have its own unique set of product engagement metrics which means the definition of a PQL will differ from product to product. What doesn’t change between them is that engagement strongly correlates to purchase propensity so sales teams can efficiently invest their time and energy communicating only with those that tip the scales in this regard.
In the B2B space in particular, there’s another vector that the product team can leverage to positively impact sales; one that precedes AND impacts engagement. Product design itself.
Amongst Sam Altman’s extraordinary trove of quotes and anecdotes is one that has become part of the Y Combinator creed:
“Until you’ve built a great product, almost nothing else matters.”
Simplicity, usability and elegance are not terms typically associated with enterprise software. But, as the sales environment evolves, so must the product.
Slack is the poster child for adopting consumer-grade design as its secret weapon for winning in B2B. Instead of focussing on selling their product, they focus on delivering value by obsessing over every interaction and ‘micro-moment’ of the product experience.
It’s well known that ‘helping is the new selling.’ Which is why delivering value, measured by product engagement, is the most powerful sales tool in SaaS.
Originally published at www.notioncapital.com on August 24, 2017.