What must a company do to switch to a product led growth model from an enterprise GTM model?

I was talking with a cybersecurity portfolio company today and they mentioned that they have a significantly lengthy time at the beginning of their customer qualification process. Their model requires them to book a demo to show the value proposition, and the time consuming part is they must go into a sales motion to allow the customer to validate the value proposition and compare it versus other vendors. After that they can work to get the right decision making authority and budget holder. Going into the validation process is a necessity to cut through the noise of the big vendors in the market over selling their products. Customers have to see it side by side to believe it.

As we discussed potential options to this problem, product led growth (PLG) came up. PLG is so powerful since we are human and want to get our hands on a product as soon as possible rather than waiting on a sales demo. This got me wondering, what must a company do to switch to a PLG model from an enterprise GTM model?

I did a little research and here is what I came up with. I’ll walk through PLG and then I’ll give my thoughts on what this portfolio company should do.

PLG GTM Model

PLG is a very different model. In the enterprise model, a product team builds a product, then a marketing team generates Marketing Qualified Leads (MQLs), that are handed off to sales who generate Sales Qualified Leads (SQLs) and then they turn them into customers — sales often overpromises, and product has to chase that to ensure the customer gets the unique product features. In a Product Lead Growth model Product and Marketing work to build a product, generate traffic, signups and Product Qualified Leads (PQLs), that are handed to sales. Sales and Customer Success then helps customers onboard to new features.

What are the steps for creating a product led growth GTM model?

It revolves around really understanding your customer deeply and their journey of how they want to interact with the product. You almost need to get into a B2C mindset.

You need to closely integrate a cohesive unit of Product Management, Marketing, Sales and Customer Success. Here is what each should focus on.

On the product side focus on the following:

• Usability — fine tune the product so it’s easy to use; as close to self-service as possible
• Functionality — understand what customers need and establish regular updates to deliver value
• Innovation — deliver new products that create value or capture value in a different way
• Open source — embrace the open source community
• Adoption — offer a robust free/trial product to drive awareness and adoption

On the marketing side focus on the following:

• Growth marketing — digital marketing is going lead to 80–90% of free/trial users

On the sales side focus on the following:

• Pricing — simplify, e.g., only charge for data and users
• Flexibility — eliminate mandatory upfront financial commitments and payments
• Channels — think about investing in partners for broader distribution and deeper value through integrations

On the customer success side focus on the following:

• Onboarding — partner with customers to find ways to deliver value
• Collaboration — work with customers on bespoke implementations
• Training — deliver training and education to help customers leverage the full capabilities
• Support — enable in product access to docs, demos, check/submit tickets

According to OpenView metrics to consider:

• What’s the activation rate?
• Does it correlate to positive business outcome?
• PQLs — What’s the activation point — activity or task completed by >50% of trial users?
• How quickly is the activation point reached? (enterprise motion is longest and it depends on price)
• CAC payback period (similar to SaaS measurement, and by cohort)
• Natural Growth Rate — How strong is the underlying machinery that is bringing qualified leads in and % of visitors that are organic and being converted without intervention (Atlassian is in the top percentile at ~90%) [=(annual growth rate * % organic signups * % of ARR from products * 100)]

How can this company that has a deeply technical cybersecurity product convert from an enterprise GTM model to a PLG GTM model?

It revolves around their product and the ability to intersect with their users journey. So first step is validating their customer journey. After they’ve successfully done that, I suggest they focus on the following pieces of the PLG model.

Product:

• Usability — there needs to be a very simple way to get started. If you know the first thing a user needs to do is evaluate the products side by side, an evaluation kit/trial version, customers can download and install for free. It should also think about how it adds value beyond the evaluation.
• Adoption — It shouldn’t be thought of as “just get a free evaluation going.” It should nail the first step and allow the user to start working with the product in a small way.
• Potentially explore embracing the open source community. This requires a lot of thought since the open source community is a lot different philosophy than a paid enterprise software solution. A free-tier isn’t open source. Open source is about the developers. If you’re going to go down this path, you must be developer centric.

Sales:

• Pricing — create a tiered structure from free to enterprise and simplify what you charge users for — whether those are hosts or users
• Flexibility — eliminate mandatory upfront financial commitments. Just ensure a 1 year license is hard to break.
• Channels — for current partners, they are security resellers and the incentives are difficult since they make a lot of money selling monster ELAs from large vendors. To combat this, look into integration partners. These partners are the prime tools customer used today, and they can easily switch your product on inside.

Customer Success:

• Create this organization, it currently doesn’t exist.

Metrics — need to get product analytics to be key part of infrastructure.

It will be an interesting case study to see the transformation and if they can pull it off. It will require building a new set of muscles and require Product, Marketing, Sales to retrain themselves, and Customer Success to be a new capability. I look forward to the journey and ultimately the results.