Led by Openview Labs, product-led growth has become a recognised SaaS business model. Much of the focus has been on the use of the product as the primary sales tool. I want to focus on product-led customer success (PLCS) as an approach to build scalable, profitable growth through retention and expansion revenue.
Product-Led Growth =
Product-Led Marketing & Sales + Product-Led Customer Success
To secure the retention and expansion revenue that is key to SaaS growth, B2B suppliers must be able to convert the promises in the marketing and sales stages into measurable value, preferably a proven ROI. Zuora CEO and Subscribed author Tien Tzuo said “We tend to meet each new challenge by creating a new stovepipe.” That’s how most companies approach the delivery of customer success. Rather than think about CS being built-in, we create it as an add-on. This approach however does not deliver scalable margin, especially in businesses with low AOV.
PLCS addresses this by building the success realisation process into the product. A success realisation process follows five stages:
- Discovery: Extending what has been learned in the sales process to provide context.
- Benchmark & Goals: Determining the current and desired levels of the measures of value.
- Success plan: A customer specific project plan, including actions beyond the product, detailing what is needed to achieve their desired goals.
- Advice & guidance: Context rich delivery of resources throughout the success plan to help the customer achieve their desired goals.
- Success dashboard: Tracking & reporting of progress in the steps of the success plan and achievement of the desired goals.
To learn more about the process read our e-book “Product-led Customer Success”
I believe PLCS will become the dominant model for B2B customer success for the following reasons.
It is what many customers want. Customers have bought a product and expect that product to deliver the value that underpins their buying decision and what was probably promised in your marketing & sales. In a blog about predictions for CS in 2019, CS software supplier Gainsight say “Customers are happier when their needs are anticipated and addressed through efficient digital means.” Given a choice, busy customers don’t want to call a support or success agent, they just want a product that delivers what was sold to them.
It delivers significant financial benefits for the supplier. Shifting the balance between people and product-based costs provides massive opportunities for scalable profitable growth. It also holds out the opportunity to shift from costs and low-value services revenue to recurring revenue: a mix preferred by investors for its scalability and predictability. Openview’s Product-Led Growth Index suggests PLG companies attract higher valuation multiples. We have created a PLCS financial model to help companies assess this impact on revenue, profitability and company valuation. It is important to note that the product-led growth approach shifts the balance of costs way from sales, marketing and customer success to research & development. Data from Openview show that some companies recognised as leaders in product-led growth spend up to 50% of revenues on R&D.
Building the success process into the product creates opportunities for companies to understand better the relationship between value and the activities required to achieve it. Mastering this relationship will deliver further benefits:
- Companies will find it easier to direct product roadmaps to further improve value achievement.
- Marketing & sales messaging will be strengthened with value-proven case studies and reference customers. PLCS companies will be able to offer guarantees for their SaaS products.
- Analysis of customers value achievement will refine ideal customer profiles, creating a virtuous cycle.
- Confidence about proven value will enable companies to introduce performance-based pricing
- performance, where customers pay for the value delivered against that promised in the sales process.
Products that are easy to use go hand-in-hand with PLCS. Consumer software achieves this, even with complex products. Where they lead, B2B will follow. The techniques are known, it is the intent and desire that is often missing. PLCS requires a level of ambition for software developers far in excess of what many now aspire to.
Let make clear that product-led does not mean product-only. I do not see the end of people as a means of delivering the advice and guidance customers need to achieve their goals with the product. I do however predict a lower ratio as more of the success process is productised. This will result in a shift in what CSMs do; guiding customers on the process and psychology of change rather than product use.