Product Led Growth

The software product industry is swiftly graduating from desktop to cloud based applications. Interestingly, there is also a hand-in-hand shift in the associated sales and marketing strategy around these products. Till some time back, a typical B2B sales cycle was heavily dependent on building relationships, and hand-holding the prospects through the product implementation. In this new age however, the products are driving the sales and marketing by themselves.

Let’s define “Product Led Growth”. For this, let me ask you a question: What is common across all of the below products?

Product led growth

The answer: all of them are in the MULTI-million dollar club! All of them have demonstrated an exponential growth in business, and all of them are being used by millions of customers around the globe. And then, what else?

Well, its simple: all of them have minimal setup and minimal implementation time. Any person can simply go to the website of these products, and get him/herself started; all within a few minutes. All of these products offer a free trial and/or a freemium version: and it is exceptionally simple for anyone to start using these products. And this is exactly the definition of “Product Led Growth”.

“Implementing the product is faster than selling”

Jeff Lawson from Twilio (@ SaaStr ‘ 2017)

“Product Led Growth” is a concept where the product sells itself. Quick on-boarding of customers, and simplicity of the product become the reason for their exponential growth. There is no hand-holding of customers, and there is no requirement of any explicit sales effort.

It is important to get the customers to identify the ‘value’ of the product in the shortest amount of time. The product must show-case its most important feature (I like to call it the ‘aha’ moment of the product) in the least number of clicks and the least amount of time. Free Sign-Ups and Freemium packages are a very useful ways to achieve this goal. The ABSOLUTE best way to show a customer that the product solves his problem is by having the product to solve his problem. If the product is able to demonstrate ‘value’, then it’s easy to convert the customer into paid accounts.

“Self service is the core to our DNA; and the reason for our growth”

Mikkel Svane from ZenDesk (@ SaaStr ‘ 2017)

Let’s pick on the example of Slack:

(1) Free Sign-Up: Any person and/or organization can simply jump onto the Slack website, and get started. Getting Started does not involve any physical sales intervention and/or any payment formalities.

(2) Implementation Time: It takes less than 2 minutes to get yourself started! Slack provides an extremely simple, step-by-step process flow to receive the required information.

(3) Tutorial: What’s more, once you get into the product, you are welcomed by a SlackBot, and a series of screen overlays that tell you everything that you need to know to start using the product.

(4) Retention and Conversion: This is the best part – till 10,000 messages, Slack is Free. And by the time you exhaust your limit, you get so hooked-up to the product, that you feel good about paying for it!

More often that not, I come across a lot of startups in India, that struggle to hire expensive sales teams, even to reach out to retail customers. Right here, is a solution: there is much a lot to learn from the success stories from around the globe and identify the reasons for their success and growth. In essence, a product that is easy to use and simple to on-board can and will sell itself. With an initial kick and strong push from marketing, your products can quickly become their own self-sustaining entities. And once you have a self-sustaining entity, you can use the money that you’ve made to hire your sales teams, and focus on selling to enterprises.

Guest Post by Pranab Agarwal, Product Head @ RateGain & Co-Founder, ZipBoard.

Freemium Model for SaaS – The Good, The Bad, and The In-between

In 1999, Vistaprint, a four-year-old French startup, launched its internet-based printing services in the highly competitive US market.

Going against the popular advice to target the bigger companies (who would spend more money on printing), the Vistaprint team went for the micro businesses (who were then considered as a terrible market, as they were close to impossible to reach).

To tackle that, the Vistaprint team came up with a direct marketing strategy, which turned out to be a runaway success, becoming their core acquisition flywheel in no time.

And, it’s simpler than you think.

Basically, this was their offer: Customers could get 250 full-color business cards (that were being sold for about $85 online and about $200 to $300 offline, in those days) printed for free, and pay just a nominal charge of $5.67 for shipping and processing.

They could place this order as many times as they wanted, and Vistaprint would fulfil it for them, under a few conditions:

● The free cards will be printed only using one of a set of 40 designs

● It will take three weeks to deliver them

The customers who wanted a different card design, or wanted to get their cards delivered faster, would have to pay a premium price.

This strategy, that worked wonders for the printing company (which had about 17 million people individually buy from them by 2009), lies behind the freemium model in the present-day lexicon.

(Note: If you’re new to the freemium concept, head over to this post that outlines what the freemium model is and how it works, and then get back here. We’ll wait for you.)

However, all is not perfect in the freemium fields.

Even though a plethora of SaaS success stories including SurveyMonkey, FreshBooks, and Prezi have managed to make the model dance to their tunes, we can quote an equal number of accounts where businesses have fallen prey to its deceptive allure – Baremetrics, Ning, and Bidsketch, to name a few.

So what’s the deal with this elusive model? What does it take to win over it?

When does the freemium model go wrong?

VistaPrint already had a full-fledged card publishing and manufacturing technology in place, when they started providing business cards for free. Thanks to the economies of scale, the more cards they printed, the lower their manufacturing cost.

As you’d probably know by now, the basic premise that the freemium business model operates on is this:

Several hundred thousands of users sign up for the freemium plan, and then a good cohort of them will convert into paying customers.

“The easiest way to get 1 million people paying is to get 1 billion people using.” – Phil Libin, CEO of Evernote

So for the freemium model to work out, one specific product attribute must already be in place – low marginal distribution and production cost. Only if you can keep the cost as low as possible, an additional free user will cost you nothing more than a database entry.

SourceMicrosoft, in one of their whitepapers, showing how the cost plummets with quantity

Although this is an inherent characteristic of SaaS products (as shown above), if you’re not careful enough, your freemium pricing can still go completely awry.

The number road to failure is pretty straightforward: Keep investing in more and more infrastructure to handle new users, without generating additional revenue (or having a backup plan) to offset the growing cost.

A majority of websites that sell downloadable content fall under this category. These businesses don’t charge their freemium customers and rely solely on ads for revenue. So when they can’t make enough money from the ads, every new freemium user will exert a bit more strain on their existing infrastructure, to ease which, they will have no other option but to augment their resources.

About 11 weeks after having launched their free plan, things were looking positive for the Baremetrics team – over a 1000 free accounts had been created, of which the eligible paying customers sported a conversion rate of about 11.5%.

And over a period of two years, their free users outnumbered their paid customers, and they found themselves grappling with increasing server and performance issues. The result? More dissatisfied customers began leaving them, because of the “down time, delayed data and inaccurate metrics”.

Source“Our free plan was causing our business to slowly implode.” – Josh Pigford, Founder, Baremetrics

Countless such services have gone under because they weren’t able to bear the weight of the overwhelming scale of operations, both financial and infrastructural.1

But, that isn’t the only reason that leads SaaS businesses to succumb to the dark side of the freemium model and shut shop (or pivot, if they’re smart).

Had the Baremetrics team restricted the data import/export for the free users, they could’ve saved up on the server usage, and have in turn strengthened the reason to upgrade.

Here’s our next SaaS example, Bidsketch’s free to paid conversion rate over the weeks:

SourceFrom “Great!” to “Grmph.” to “Grrrr!”

What’s happened here is a textbook example of how the different kinds of adopters operate as per the “Diffusion of innovations” theory.

The real game begins after you move past the Early Majority adopters

Once the Early Majority customers have moved up the pricing ladder, the conversion rate starts tapering down, as the Late Majority and Laggards are more averse to change. The trick is to keep innovating and adding more value to your premium plan, thereby nudging them down the conversion funnel.

Summarizing this section, the main reasons that contributed to the failure of the freemium model in these businesses are:

● Not having a business model that’s cut out for freemium, where every new user puts more pressure on the existing resources. Adding to that – under such circumstances – not having been equipped with a solid strategy to accommodate the growing load.

● Not striking the right balance between your freemium and premium offerings – if the freemium plan isn’t attractive enough, then you won’t attract new users, and if the freemium plan is too heavy, then the new users won’t move to the premium plan.

● Not communicating well to the free users, a straightforward and solid benefit of upgrading to a paid plan.

● Not constantly hitting on the innovation pedal and making your premium product more and more lucrative, to convince the users in the Late Majority and Laggards categories to upgrade.

When does the freemium model pay off?

1. A DIY product/service, where the cost of servicing a new customer is close to nil. These are the businesses that are designed for the freemium model by default.

SaaS examples: Massive Open Online Courses (MOOCs), Webflow.

This business model accommodates the main ingredients that were missing in the previous section – economies of scale, and low marginal cost.

While MOOCs incur an initial significant fixed cost on course development, contrary to a regular classroom, they don’t have a restriction on the number of students. So a $500,000 fixed cost will be brought down to about $5 per student, if 100,000 students enroll for the course.

Also, the marginal cost of serving an additional student can also be brought down to $1 per student, as there’s no personalization of the service, the product doesn’t have a steep learning curve, and a community-based support will suffice.

The premium plans usually consist of certificates from reputed universities, and according to Daphne Koller, Coursera’s co-founder, they’re able to monetize around 20% of the total registrations.

Moreover, a majority of the students drop out mid-way, thus lowering their streaming cost (their biggest marginal cost). Only around 10-20% students make it to the final exam, and they are the ones who will most likely be interested in paying for certificates.

Now these aspects aside, the other deciding factor for the success of your freemium plan is your value metric.

Check out Webflow’s pricing for instance.

An attractive freemium plan + an even more appealing paid offering = a very satisfied cash register + an even more satisfied customer

These guys have nailed it in coming up with a super compelling reason to upgrade – they have used the collaboration feature (they call it the Team Dashboard) – one of the fundamental activities of website building – as the value metric.

This ingenious move set them up for success, and it wasn’t as easy as you think it was.

Only when you have a crystal clear idea about your customers’ Jobs to be Done (JTBD), will you be able to pinpoint the exact feature that will deliver the ultimate value for the price that you’re charging them.

So if they get a freelancer web developer on board, Webflow can either have them in the freemium plan, or they can make a decent sum of money in the Professional plan, and the moment the freelancer grows into a company of at least 2 members, they directly take them to the Team plan and charge them $78 per month.

The product is designed in such a way that it keeps track of the IP addresses; you can’t log in with the same ID more than once, and you won’t be allowed to view the same folder. For a user who is thoroughly impressed with the product, and is looking to collaborate, these enforcements act as a natural motivator to upgrade to the higher tier.

Which highlights the next factor: it all comes down to how irrefutable your offering is to the customer, and how effectively it gets their job done.

2. Businesses which deliberately try to assimilate and absorb the cost of operations, support, and service, to have a freemium model up and running.

Now why would anyone do that, you ask? Well, for one or more of the following reasons:

When you’re having your freemium plan as a differentiator in the market.

About 75 startups were already operating in the American market when VistaPrint set foot on it. Millions of dollars were being raised by e-printing companies, and the competition was cut-throat. And they counted on their strategy to target a different market and to offer a freemium deal to give them a spotlight.

SaaS example: SALESManago.

This Polish marketing automation startup knows what it’s up against – giants like HubSpot, Pardot, and Eloqua. And that’s precisely why they double downed on nailing their pricing strategy, to stand out from the crowd of Goliaths.

Notice how the 0’s stand out in the collage of screenshots with numbers strewn all over them? There you go.

And they seem to have done a great job at it. This February, they have raised about $6 million, following a 200% growth over the previous year,  2015.

Let’s examine their pricing plans for a moment – clearly segmented free plans, each with their own specific set of benefits, and the introduction of a premium plan only when the customer’s business grows large enough to integrate and automate the marketing activities. Just like Webflow, it is evident that the SALESManago team has a thorough knowledge of their customers’ JTBDs and pain points that they’re solving.

The result? The customers get an offer that they can’t refuse.

When you’re employing your freemium plan as a free branding tool.

Wait. The VistaPrint team didn’t have just two conditions attached to their freemium offering. There was one more. Apologies for missing it in the introduction.

Yet another tactic of theirs is that all their free cards will have “Business Cards are FREE at!” printed in small fonts at the backside bottom. Those customers who wanted to get the line removed, will have to pay.

SourceViral branding at zero cost – Check.

SaaS examples: Zendesk and Typeform

At the time when they had just launched, Twitter was Zendesk’s highest referrer. Zendesk had a freemium tier back then, where they’d brand the Help Center’s URL. So everyone who was on Twitter and had to get in touch with the support team had to do so via Easy, free, referral program to earn new customers!

Typeform does that at present. With the “Powered by Typeform” signature on the bottom right corner of the free forms.

SourceWant to replace Typeform’s brand with yours? Become a PRO!

If just by including a line at the bottom or by adding your brand name to the URL, you’re able to generate ample volume of new users through your existing customers, why would you mind giving it away for free? The cost that you incur because of the freemium plan can then be brought down under your marketing costs.

When you’re having your freemium product to market your paid product

VistaPrint’s objective was clear. They wanted to sell anything and everything that will help their customers to brand their own businesses – brochures, presentation folders, stationery, apparel etc, and printing business cards was the starting point to get there. Give away business cards for free, and use them to market/sell your other paid products.

Even though this particular category doesn’t fit the textbook definition of the freemium model, the underlying intent is very much aligned to that of the model. And the SaaS world has a name for this: Side Projects.

SaaS examples: Crew and Intercom

When the Crew team was running low on money and were desperate to turn the tables, they created Unsplash, a website that curates and gives away hi-resolution stock photographs for free. The results? Unsplash was (and still is) the number one referral source to Crew, that brought in around 5 million unique visitors.

Mikael Cho, Crew’s founder, quotes Jay Baer to back his faith in side projects (they have since developed a truckload of free side projects – 13 to be precise).

“Due to enormous shifts in technology and consumer behavior, customers want a new approach that cuts through the clutter: marketing that is truly, inherently useful.” – Jay Baer, Youtility

Intercom does that too. Their free product? A customer intelligence platform.

In short, businesses that belong to these three categories, spend those extra dollars to sustain their freemium product, because they know that the free users are paying through one medium or the other –

● They will either use the product and allow it to become a part of their workflow, thus pay for it with their mindshare, or

● They will pay for it by marketing the product

How to find out if the freemium model is right for you?

There’s one school of thought that argues that freemium is dead and gone, and businesses must shift to the next big thing to stay afloat. Then there’s another side that vouches for the abundance mindset, where websites like Craigslist let people post ads for free, and still manage to earn $400 million. Both make sense, and both are equally right.

Vistaprint entered the US market just after the infamous dot-com crash, as a result of which they weren’t able to raise much money compared to the other bubble companies. And its founder believes that that situation, in fact, saved them; because they weren’t able to pool in investments, they had to operate leaner, come up with better strategies, and work harder to make a profit. And that set them apart from the rest of the venture-backed companies.

This is also the reason why they were able to go big with free products and over-the-top distribution strategies, which backfired for most of those latter companies; Vistaprint was clear about its customers and what they wanted, and in turn, the right fodder that will fuel its growth.

Ultimately, it all comes down to how well you understand the value that you’re bringing forth to the market, and how well it aligns with the freemium model.

Dan Martell sums it up in four crisp points, and says that you’ll have to get 3 of them right, to evaluate if the freemium model will work for you:

  1. The number of potential users in your market: The more, the better – remember, only around 5% of the free users will eventually end up paying you
  2. The specific market advantage required to win: What do you want the freemium model to win for your business? Is it a competitive advantage? Is it free distribution? Is it getting more referrals? And how realistic is this goal?
  3. The max complexity of your product and how it works: How simple and straightforward is your product? Does your offering set itself apart from the din around? Is it lucrative enough for your customers to ascend the pricing tiers?
  4. The specific cost each additional user can have: Is the marginal cost of serving an additional customer negligible? Can you ramp up your operations without shooting up your cost? Do you have the capacity to handle the exponential escalation in scale?

MailChimp launched their freemium plan after about 8 years of building a “powerful, affordable, profitable, self-serve product,” and after gathering and analyzing “tons of pricing data”, to justify the 10:1 ratio of free to paid users of the freemium model.

“The question to ask yourself is whether or not your “one” is big enough to pay your bills yet. For eight years, our company never thought about freemium. We didn’t even know the concept existed. For eight loooong years, we were focused on nothing but growing profits… … In other words, we’ve been laser-focused on the “1” side of that 10:1 ratio. We’d never consider freemium until our “1” was big enough. Enough to pay for 70+ employees, their health benefits, stash some cash for the future, etc.” Ben Chestnut, Co-founder of MailChimp

Guest post by Sadhana Balaji, ChargeBee. The blog was originally published here

5 Tips for creating a compelling product tour

In between that 90-sec video on the homepage introducing your product and a visitor actually signing up for a free trial, there is this glue that is required. The glue that helps visitors map the problems they are looking to solve to the features your product offers. Or the other way round. Back in time when men hunted for food and the web had animated star-shaped red-colored 50% OFF buttons all over, it was a lengthy page usually called Features. Today, when people are busier and the web richer, it has been replaced by what is called the Product Tour.

A product tour is an all-round summary of a product. An all-round summary because it has to bring out all aspects of your product but without going into details like how it allows the color of the error message to be changed from red to pink. It is a very important piece of your product literature, and I am going to talk about the best practices for creating a compelling product tour.

Sell benefits, not features

You have heard this a million times. Make it a million and one. But when it comes to a product tour, the importance of this point cannot be overstated. In fact, it is one the main differences between a deathly-dull-almost-useless feature list and a product tour. A feature list tells the visitor what a product can do, a product tour tells what the product can do for him.

Apple is a master at this, like at most things marketing. For the iPad, rather than listing out all the business features of iOS and the apps it comes along with, Apple just says how business users can be productive right from the start itself.

iPad's product tour

Write these benefits like you write tweets — simple and crisp, conveying just one point at a time.Mint does this really well with its product tour, a very important piece of literature for them given the sensitive nature of the product.

Mint's product tour

Make your benefits easier to understand with use cases. Don’t come up with problem-solution scenarios that everyone can directly relate to — they just don’t exist. Use scenarios 80% of your audience can relate to straightaway and let the others draw a parallel. It is better to hit the exact spot with a majority of your audience than try hit close to the spot for all of them. TheFusionCharts product tour, which I was a part of conceptualizing, uses examples in plenty to drive home benefits that would have taken otherwise taken multiple paragraphs.

FusionCharts' product tour

Group similar benefits

Do not throw all the benefits of your product at once on your visitor’s face. It worked back in the day when the length of the feature list was as important as the features themselves but man has evolved now. Firstly, too much content overwhelms the visitors. These days, they digest it much better in bite-sized chunks. Secondly, for people interested in only a particular angle of the product, a page talking about that angle and around makes it much easier for them.

Freshbooks does this well by grouping benefits under simple action-driven heads.

Freshbook's product tour

Or you could group them in the sequential manner the product is going to be used in. With an email marketing tool like Campaign Monitor, a user will design the campaign first, then send it over and finally track its effectiveness, so that’s a good logical way of grouping the benefits.

Campaign Monitor's product tour

Make it visual

Get your screenshots, diagrams and photos to do a bulk of the talking. Sure, copy is important and be sure to sum up your point really well in words but the visual is what will ultimately drive home the point. Also, visuals are much easier to scan through and remember.

FusionCharts, which is all about data visualization, has an open layout for the product tour and uses visuals in all shapes and sizes.

FusionCharts' product tour

Get the visual to convey as much of the benefit as possible. If you can depict a complete use case with the visual, go ahead and do it. Don’t get Company A to work on Project 123 in the screenshot — use real data and real people, like Basecamp.

Basecamp's product tour

Do a complete roundup

Users don’t just buy a product, they buy a solution. Tell them what kind of documentation your product comes with. Do you also have demos that helps them get started quickly? What about tech support? MailChimp does this well in its tour.

MailChimp's product tour

Do you have an API for developers to create their own apps and add-ons? Is there a community developing them already? JIRA has a dedicated slide about add-ons.

Jira's product tour

And finally, it’s time to establish the credibility of your product.

FusionCharts' product tour

Think your navigation through

Now that we are done talking about the content, let’s talk navigation. Where do visitors come to the tour from and where do they head out? What about the things in between? Since the product tour is a glue between attention and conversion, this is a very important piece of the puzzle.

Typically a visitor comes to the tour from the homepage or a landing page. Could the tour be used as a landing page by itself? After all, it sums up the product pretty well, doesn’t it? Unfortunately, there’s no clear answer for this. It depends on your product, the problem your visitors are looking to solve when they hit your website and the length of the tour itself. Just be sure to add the promise of your product right at the start of the tour if you decide to use it as a landing page, so the visitor has the right context before he takes a deep dive into the product.

FusionCharts Product Tour

What about linking to blog posts and videos for more information on a particular feature? Isn’t that a good addition? The products I have used as examples in the post are evenly divided on this question. MailChimp sprinkles links liberally throughout the content and after it.

MailChimp Product Tour

Basecamp, on the other hand, keeps it all clean.

Basecamp's product tour

For me, internal links are not a good addition. The intent with the product tour is to give the visitor an all-round summary of the product and then send him packing to the free trial. Additional links only divert from the intended navigation flow.

If you have to have the deep dive resources, put them all together at the end of the tour. Interested people can check it out from there, and others can simply ignore it.

And now the final part. For product tours having multiple slides, more simply pages, what should you link to at the end of each slide? Rather what should you link to most prominently — the next slide or free trial signup? Again the thoughts on these are pretty mixed, but here’s what I consider best. The slides should have link to the next slide most prominently. Links to sign up for the free trial or register for the newsletter could be present but in lesser glory.

JIRA Product Tour

The idea is that if the visitor wants to spend more time understanding the product, let him do that before forcing him to sign up. For someone who figures your product will solve his pain point and wants to sign up immediately, he can always find that link from the main navigation or pick from where they are put out in lesser glory.

Over to you

Do you think the product tour as important as I make it out to be? What are other important considerations to keep in mind for a compelling product tour? Got good examples to share? Go for it.

[Helpful read: Behind the scenes of the FusionCharts product tour]

3 objectives your homepage has to accomplish

As a tech startup, your homepage is the first encounter a visitor will have with your business. The first real encounter. And as a business, what is it that you would like to convey during this encounter? Ideally, you would talk for 30 hours straight but then people have lives to live, promises to keep and food to eat. So what do you do?

Get your homepage to cover you on three simple grounds. Three primary objectives. Here they go.

What’s your promise?

Every company has a promise. The promise answers the question Why should I look at your products? and sets the expectations before the visitor takes a dive into your offerings. Are your products the easiest to use in the market? Most powerful? Reliable?

For companies having a single offering, it is the promise of that single product itself. MailChimp promises easy email newsletters as opposed to Campaign Monitor’s beautiful email newsletters.

MailChimp's Homepage

For companies having multiple offerings, it is the common promise that runs along all the products, more like the promise of the company. 37signals’ promise is making collaboration productive and enjoyable for people every day while Atlassian’s promise is to help innovators everywhere plan, build, and launch great software.

Atlassian's hompage

However, if you have been chosen as the special one and different products of yours have different promises, it is best to stick to the promise of your flagship product.

Talk about your products
This is a drill you know all too well, so I will just focus on how this differs for a multi-product company from a single-product company.

If you are a company with a single offering, just talk about the benefits of your product liberally sprinkled with examples and use cases like FreshBooks does. FreshBooks' Homepage For multi-product companies, it is best to display the most important products from the portfolio with a short description of them and link them to the respective product pages. 37signals Homepage Remember the homepage is not about throwing all the information you have in your visitor’s face, it is about sending them the right way in the right frame of mind.

Build credibility

Would you have dinner at a restaurant where you would be their first guest at 10 pm? Would you go to a concert that starts in 2 hours but has sold only 300 tickets till now? No. If there isn’t anyone else at the restaurant, or there aren’t thousands of people attending the concert already, it just isn’t good. Period.

Human beings are social animals, and for us to be convinced that something is worth our time and money, we need to be told that other people have used the product earlier and found it to be food. We need to be ascertained of the credibility. And as a tech startup, you establish credibility using customer names, testimonials, success stories and press coverage. If you have all of them in aplenty, the world just gave you a standing ovation. If not, a couple of them work fine too.

Campaign Monitor's Homepage

However, building credibility is a bit of a chicken-and-egg problem. A prospect will become a customer only if he can see a customer list, and you can have a customer list only if prospects convert to become customers. In cases like these, get customers to invest emotionally instead — tell them the story of your company, show them the pedigree of your founders and give them a behind-the-scenes peek.

Final words

Of course, you can get creative with the order and medium of the obejctives I mention above. You can have a 90-sec video, an illustration where your mascot does all the talking, screenshots of the product itself or wax eloquent in good old text.

What’s your take? Do you think there’s anything else that a product homepage has to have?

Cross Post –