Startups

The product-led growth playbook

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Vidya Raman

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Vidya Raman is a partner at Sorenson Ventures.

More posts from Vidya Raman

As an investor and a recent product manager, I have encountered many companies that failed and some that succeeded at their product-led growth (PLG) efforts.

The PLG journey is never easy, but it can be a powerful path to enduring success.

I have distilled my experience into a short but essential list of prerequisites that I believe will significantly increase the chances of success at your startup.

Build (or rebuild) to enable a self-serve experience

One pervasive approach to embarking on a PLG journey is to create a sign-up page and make the whole product available for self-serve consumption. Maybe there is a snazzy marketing campaign to go with it.

Now, unless the product is so simple that the user can, on their own, get to an a-ha! moment in a matter of minutes, I have never seen this approach work — ever.

In a PLG setting, there is no live human being who can set the stage or hand-hold the customer through the product. If the home page doesn’t make sense in a few seconds and the product doesn’t work in a few minutes, the customer will summarily dismiss everything the startup offers.

Optimizing time-to-value requires figuring out the smallest, atomic, self-contained units of value that you can package into a self-serve offering. It has the benefit of not overwhelming the potential customer and delivering incremental value while keeping them hooked.

Some founders argue that their products are too complicated to lend to PLG. Instead of completely giving up on self-serve, how about designing an experience that showcases the essence of the product with complexity pre-packaged or sandboxed? For example, depending upon the use case, this might mean an offering that works in a multicloud, pre-configured setup or runs on multiple virtual endpoints.

Self-serve doesn’t have to mean that the entire product works in the customer’s own desired setup. Think in bite-sized experiences, each of which would be a meaningful outcome for the customer.

Instrument, measure and manage customer touch points

Product-led growth can be notoriously difficult to troubleshoot because of the inherent low-touch nature of this go-to-market approach.

Consider a scenario where conversion to a paid product is low. Is it because you’re giving away too much of the product for free? Are the benefits of the paid product not clearly articulated? Is it because you are targeting a customer segment with no budget? Is the pricing too high (or low)?

To determine what the issue(s) is — product packaging, positioning, pricing, market segmentation or some combination — you need data to inform the troubleshooting process. This is why I’d highly recommend carefully instrumenting various customer touch points (including, but not limited to, product usage) even before rolling out a self-serve product.

Equally important is investing in the right set of tools for collecting various metrics and then coalescing them into an actionable stream of data. Finally, craft a process for actively managing the metrics, including a clear line of responsibility for who owns which metrics, and how often they get reported out.

Align everyone in the company with the customer’s journey

By definition, a PLG effort requires everyone in the company to align themselves around the product as the prime vehicle for scalable business growth.

This requires that the engineers know who they are building for — the user persona. Which other tools do the users use daily? How technical (or not) are they? Marketing needs to know what messaging will resonate with users who have tried the free version of the product and are exploring more advanced functionality. Customer experience needs to see the product functionality that drives upsell and triggers requests for support.

Having a common vocabulary and a shared understanding of the customer’s journey is vital for every functional role to be efficient and effective. Busy founders can make it easier upon themselves and any new hires by writing down the customer journey and making it a living, breathing document as it evolves.

Finally, while it is crucial to break traditional sales/marketing/product silos, it’s also important to delineate responsibilities clearly. For example, marketing owns the job of getting the right users to try the product, sales owns upsell, product owns the roadmap and empowers other teams by sharing usage and engagement metrics freely, customer experience owns retention, and so on.

Teams function effectively and cohesively when they have a shared view of the customer journey with meaningful metrics and clear ownership.

Partner early, and partner smart

I see technical founders fall into a common trap: the desire to build as much product as possible. While nothing is inherently wrong with building deep product moats, it is more prudent to focus on things where you can be at least 10x better than everyone else. That focus requires choosing not to do certain things.

Now, these other things might be exactly what your customer is asking you for, because they are making side-by-side product comparisons, or perhaps they want to reduce the number of vendors they get the “whole product” from.

Even so, for your startup’s long-term viability and (hopefully) success, it is important to ignore these “asks” at least until you completely dominate a smaller niche. You can still create the “whole product” your customer is looking for, but not by building everything yourself.

Instead, partnering with complementary solutions in the market is the way forward. Taken together, the end customer should be able to get all they want if they can effortlessly work with you and your partners.

I often come across startups that brag about the number of integrations or the brand name of their partners. Nothing is inherently wrong with that as long as you remember to optimize for customer outcomes and partner motivations.

For example, Snowflake or Databricks may not be the best partners for your data startup if (a) your product doesn’t influence customer acquisition, usage or retention for Snowflake/Databricks, or (b) what your customer does immediately before or after using your product has nothing to do with Snowflake/Databricks.

Nurture user communities with a people-first mindset

Some companies will create a Slack channel to kickstart their community effort, but rarely go beyond that. Others will ignore  communities because they have many other things to do, such as building products, sales, marketing and customer service.

Admittedly, it is hard to add one more seemingly touchy-feely item to the to-do list. But if managed well, your user community can become a moat that can be hard to emulate overnight. The best part is that everything from building the right products to selling them becomes easier when you create a strong user community.

The key to building strong user communities is to understand why people come together in the first place. It often boils down to two things:

  1. They have similar problems for which they want to explore possible solutions.
  2. They like to be recognized as experts among their peers.

Once you understand these basic needs of a community, it becomes easier to know how to build and foster communities.

Here are a few key points to consider:

  • Support bi-directional exchange of ideas, resources and expertise across multiple platforms (webinars, blog posts, community forums, slack channels, etc.). Content and engagement both matter.
  • If you are starting a community, seed it with thought leaders and people who like to produce content and ideas (rather than just consume them).
  • In the early days, be selective about who gets to participate in your community. Principles of scarcity can be helpful for creating intrigue and demand.
  • Remember that you don’t always need to build a community from scratch. Riding on the coattails of a great existing community is a smart way to optimize resources and get started.

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