Unpacking Product-Led Growth with Leah Tharin

Speaker A: Foreign.

Speaker B: Today I've got an episode of Protect the Hustle for you featuring Leah Theron. Now for those of you who don't know, we did a deep dive video on PLG that includes a lot of different clips from this episode. I strongly encourage you go and check that out. Uh, you're going to get a lot more depth out of that. Uh, uh, but for those of you that are wild like me and like to listen to the unfiltered interview, this is for you. Without further ado, let's get into Leah Theron's interview where she talks all about product led growth. Well, cool. We're going to talk through uh, PLG today. Can you, do you mind just giving me like the depth, your definition, your own words of plg?

Speaker A: So one of the definitions that we use for product led growth commonly is referring to anything that has to deal with self serving value towards the customers. I would say that's something where people don't uh, really fight about it. What do we mean with that? This is the pipeline that can do stuff without having to talk to Gary from sales. That's usually where the agreement kind of ends. So what I talk about when we talk about self service or product led growth is in that sense is the most efficient way in how to connect your users and the visits that you have on the website with the value of your product without being too restrictive. And why is this important? Because we also want to use the free users of our product to attract other users that might be actually those that are paying for it. So we're leveraging pretty much everything that we have. It's not just about monetizing everyone, it's only about monetizing those that have a pressure behind it. Right. Like that also want to pay for the product and we're not going to ask for a credit card unless it's really absolutely necessary. And I think this is a big, big difference between what we used to do where we tried to monetize everyone, we tried to not give too much for free. And um, yeah, this more holistic view of like we incentivize the teams by it, we try to optimize and reduce the friction that is between us and the core value of the, which is that's, that's plg. We try to give you value as fast as possible.

Speaker B: Do you think that comes from like this exasperation of maybe, I don't know, I don't know how long like we could say this PLG movement has been going on. Is it just an exasperation of, like, we want to. All right, fine, you want to. Like, you want to see the product. Here it is. Like, here's the value. We've been telling you there's this value for so long, but now it's finally like, hey, here you go. Like, experience the value yourself. Tell us if we're crazy.

Speaker A: If you think about what a company does on the marketing side, so the messaging that kind of gets you into the store to consider, hey, this could be something. I'm going to check it out. That is a value promise. So we are being promised something. So there are some expectations that are being woken. The value experience. So, like, using the product, uh, is then usually the reality check. And the closer that the expectation and the reality check is, the higher the conversion hopefully is in the future. But this is a bit of a weird thing with sales because sales usually still promises you a lot of things. They don't really let you use the product. So even a product demo is not really the value of the product. It's getting closer. Right. Like, it's just like a. It's a betterment of the message that we give to the customer. Right. Like, it's a more polished version of the fuzzy message that you had in the beginning, but it still is not the real product. And then we usually require you to pay. And then if you pay, then you can experience the product and then hopefully it kind of works out. But like, sales was also trying to reduce the risk with this process where they just give you also proofs of concept time. So you're like, you can try the product for at least three months and then if you still love it, then you kind of use it. But that's also not really addressing some of the problems that we have naturally with sales processes. And the first one is that people inherently do not trust salespeople because they know that they get money based on whether they are closing you or not. So there's a mismatch between interests. If I want to put out my legal hat there, it's a conflict of interest because what I want is not the same that you want. But if you can try the products for free, then this entire relationship becomes much more honest. The other thing is that we really have to be careful about is that PLG is originally a B2B term, because we always used to do this in B2C where you have a lot of choice and so forth. And if you think about it in this way, let's say you want to have a tool for a very specific product problem that you have in B2B, if you have 20 tools to choose from and 10 of them offer you a free trial to try it out, then you're not going to call the other 10 that require you to talk to Gary the sales guy. So before we even get in touch with the product itself, how dense your competition is, how differentiated you are, is going to define whether people will be paying attention to you having a free trial or not, or like a freemium. And that is very weird for a lot of companies to kind of understand that it's not about their product first, it's whether you can try it or not. And that's usually the case in commoditized markets where we have a lot of competition going on.

Speaker B: And there's still a. To me, you've said as much yourself that it's sort of agreeable, that it's like, hey, to really understand the value of a product, you kind of have to use the product for those. For folks listening, I highly recommend checking out Leia's productized keynote. It's on our, uh, YouTube channel. Product T is your YouTube. If they look up Product T, I'm sure you'll come across it. And a big theme in your talk is about showing the value instead of telling people what the value is. To the spirit of that, I was wondering if you could share some examples of where people or companies rather have gotten PLG right, or maybe even some examples of doing PLG wrong.

Speaker A: So we can take a, uh, very prominent example is Slack. I think most people know Slack quite well. So Slack is a classical B2B problem solving problem product, right? Like, this does not really exist for B2C in that sense. Maybe, maybe you have your friend group on Slack. I don't know. But classically, this is a B2B product. What Slack does so well is it separates the core value of the product from the more extended stuff that is coming later on in your journey. So what do I mean with that? What we try to do with PLG is we try to identify, okay, so what do you need to know to kind of get really what this product is about? So. And, um, a product is not just like feature A to Z. There are core features into it. This is like the basic function of the product. It's basically in a car, it would be getting you from A to B or whatever you're trying to do with your car. On the other side, we also have features that are kind of nice to have that make everything going a little bit smooth, you know, like whether your phone is actually connecting to the car and so forth. So in the case of Slack, what I mean with that is that the ability to talk to someone and exchange information is contained within the free portion of the plan. So I can sign up, I can relatively easy message you, and I can easily drag and drop a, uh, picture into the chat. I can just do all these things that are so very, very annoying in composing in an email, even with Gmail, depending on for what you are using it for, you're competing with different core values, right? Because if it's just about exchanging information and keeping track also of a conversation, Slack is actually much, much better than email in this regard. Especially if it goes back fast, if it goes back and forth fast. So that is a very good example. So the extended value is only showing its face afterwards. So what happens if you and me had a conversation in two months about something that we're talking about today? Now you need to have the search function. And it also turns out that Slack is better in finding conversations that have happened over the entire kind of stack that you had with different and so forth. But now this is locked behind a paid plan. So this is something that you do not even notice in the first couple of days because there is nothing to search for. There are a couple of features like this that only kind of appear once you have understood the core value because it does not make any sense to search for messages if you do not understand what it means to use Slack as a base product versus for instance, inviting external people into your own Slack space also does not make any sense if you've never talked with your team through Slack. So the separation of these features is very, very cleverly done. There's more to this, but like, this is where I pause for a second. But yeah, this is a very, very good motion to kind of highlight what it means to have a free version versus a paid one.

Speaker B: And it seems like for every company there is to your, I think forget the specific word that you use, but I've heard it being used before as with Slack, it's like you know, 2,000 messages. Is there magic moment or, or the moment of like realized value an objection that I, maybe I'm making, maybe I'm like making a lot of assumptions here. But to take your car driving example, if I'm driving my car and I'm, or I'm, I'm testing it out, or perhaps it's a, you know, a trial run. I know carmax, um, is a company out here in the States where you can drive a car For a week. And if you, you can test drive it essentially for a week, and then once you're, once you're done, you can bring it back, no questions asked. Uh, I know, uh, I want to put a pin in that for a sec because I know time boxed value, like free trials, I know that's an issue in itself, but I want to make sure that my magic moment is not something artificial like, hey, the car is free to drive but you have to pay to turn the air conditioning on, that sort of thing. And so could you help me differentiate a bit what we're talking about here where it's like, we're not talking about from the seller side, taking advantage of maybe things that people. I mean, this is an extreme example. I don't know if Slack really has air conditioning, although maybe they're coming out with that soon.

Speaker A: This highly depends on who you are, right? So just because you use a car doesn't mean that you want to use it for driving long distances and so forth, right? So you can also have different variations. So let's say you are very specific ICP. And, um, with ICPs, we talk about ideal customer profiles that are representing the users who are getting the most value out of your product for the use case that they have for the most amount of money. Right? So like we can take an identical product and put it on different ICPs, which then also generates different pricings. So even though we do not change the product. So what do I mean with that? If you take a very specific car, this car has a different value to a pizza delivery driver than it has to a chauffeur that is like actually driving people around. So for pizza delivery drivers and some other things, it might be much more, uh, important that the car is very small so they can squeeze into, you know, like they can park it really fast or that they have some kind of connection to keep the stuff cold or whatever it is, Right. Maybe the navigational system becomes more important than with the other people who have much more local knowledge, whatever it is. So even though you have the same exact product does not, um, mean that you're willing to pay the same amount of price for it. And with that also these aha moments, so the moments where you derive value from it are also starting to change. So for instance, for a delivery driver, it could be the first time they actually successfully completed an order order with a client, or maybe it's when they return to a home base, right? So like before they have to, uh, fill up the car again, whatever it is. So this might change depending on the different ICPs that you have and not because of the product. So it's not product specific. It's more like buyer Persona, uh, specific. So, like, who do you actually serve with this? That is so fascinating because this completely changes how you design the product. If it is important for you that the first delivery is done fast or more reliable or whatever, this is changing the direction of the product. Right. Because if I have teams on this that are really like, working on this, they try to kind of reduce the friction of this. Is it important that the car is fast? Is it important that the car is safe? Is it more important that the car has, I don't know, wings where it can actually take off and fly into the air? That's why this is so much more than just like a distribution framework where we talk about, oh, you know, like we just give you something for free.

Speaker B: Well, and understanding too, that where, where those signals are coming from. And if it may, you may be hearing a lot of noise about, um, delivery drivers, but in reality, maybe your core customer base is chauffeurs, like, and so making sure that you're catering to the larger user base, I guess, is probably more important than maybe just the ones that are most loud.

Speaker A: There's a specific danger that comes down to the maturity of the business. So let's say you're starting completely new. We have a lot of assumptions that we make about the business. We have to kind of find out with qualitative research on who we're going to go for. Now we have data that proves that this is a very dangerous process. Why is this a dangerous process? Because we know that most of the companies at that stage will fail in trying to kind of find buyers that are willing to pay money for this. Now, let's just say, okay, you have some kind of revenue, you can stumble into quite a lot of revenue actually nowadays, and you do not really know, like, so now how should we grow the business? Because this is usually the stage where PLG also becomes quite important. There you really have to go into your data and try to figure out, do we know who actually gives us the most money for the, for the most value that we are presenting, can we actually narrow it down now and really execute on these people? And specifically, if you have like 4 to 5 million of revenues, sometimes you have a small base in your data that is retaining incredibly well on the longer term. So all of these customers, all of these people have converted in the same way, but some of them love your product so much more than the rest, and this can sometimes be the one case that you want to have to scale up the company. So a good example would be, let's say you have, um, a telehealth, um, application and you are trying to allow doctors to give medical advice to their patients. And you start to figure out that the doctors that are dermatologists, so people who are treating skin, uh, abrasions and that kind of stuff are loving your product much, much more. And you try to figure out, so what is the deal? Why do they love our product more than the other average doctors? Or they just like, they have more requests or like something is different about them in the data. Then you might find out that because dermatologists are treating with stuff that is very visual, they can handle much more of their patient's journey through the visual medium. Right? So like hey, sending pictures, using AI to kind of also diagnose patients and so forth. This is a very good example of where it then sort of makes sense to understand who actually loves this value that you are providing the most. Or is there an opportunity where we can actually do the inverse, where we say, hey, if we have AI and we can use image analysis, then we might actually be a better product for dermatologists because they do not have a current solution in the market. So that's a good example of why verticalizing down and really understanding who gets the most value is important for folks

Speaker B: that are unfamiliar to our folks that are building a business just starting out already running. Paddle has a B2B SaaS index report that we put out monthly where we track the cumulative monthly recurring revenue. It's from a sample of 34,000 plus companies on our metrics product. In our December report it was sort of an end of the year look back, we found that there was the first ever decline in compound annual growth rate since we started tracking the index January of 2019. So we're talking about like a four year period and if you're sad yet it gets worse, uh, sales is also down, churn is also up. And I've got some questions, but uh, any initial reactions that you have to

Speaker A: that this is really to be expected because we have a lot of stuff that is coming from quite a few directions. So the first one that we have is that we're still suffering from capital not being this readily available, which means also our customers have less money to pay. So they're being also more defensive about where to spend stuff. On the other side we have AI. Everything is becoming much more efficient. And efficiency unfortunately means if you Have a business that was running on 100 people for a very specific revenue. Now you only need 75 people to run the same revenue. That means you can actually reduce the prices to gain more market shares. So we are starting now to fight on price, which is then increasing cac. It's also increasing cac, payback periods and so forth. So we have pressure from the market because of the technological advancements. On the other side, we also have uh, the capital question. And the third thing is it has never been easier to compete in this market with a product. Does not mean that it's easy to compete with your product. But there has never been more competition for the same amount of market, um, that we had before.

Speaker B: And to the, to the spirit of that. So we found in the, in the report, well actually in the open view benchmarks report that we did as well, this separate report, all the links and stuff will be available below, right? They'll be below the link to product t to laitharen.com I'm wondering, so the outliers that we've found that have actually done well and maybe become more efficient in a world where efficiency is so important right now are those that are typically AI native or in vertical SaaS. Is that just the direction that every company. Should every company be focused on having an AI component or like figuring out that verticalization, um, or is that just we learn from what they're doing?

Speaker A: Absolutely. No, not every company needs to have an AI component. But I'm saying what I always say also in regards to whether you should do PLG or whether you should not. If the core use case that you're serving is substantially better by having AI and you're not doing it, then one of your competitors will do it. This is putting you in front of two problems. So whenever we have a technological jump like that, the one that we have right now, this is putting companies who are completely established in a market for, in front of a very big problem. First of all, if you have running revenue and you're changing a system like this so much you will lose revenue. It's normal. This is absolutely normal because you're changing something about the core product. You know, like some people just don't want to change with you, but you have to also do it at the same time. Changing a boat that is moving already in a specific direction is difficult and is more expensive than like completely founding a new company that is, is doing this now natively, as you said. So that's the first thing. But I do not believe that this is the uh, you know, like the final destiny for, for all these companies. On the contrary, you can also run a strategy where you think like, hey, you know, like the human touch here is actually much more important than whatever AI can provide. There's a lot of stuff right now happening where you specifically go outside of your way to avoid AI. And that can also make sense. But these are usually highly, highly, highly specialized and vertical solutions about very specific use cases that cannot be served with like a horizontal approach. So what this is is it is a play on going up market, you know, delivering more individual solutions for individual industries, for very individual players. Because there it still makes sense to have a sales motion. And that's, that's just what it is. It's always been the case.

Speaker B: Are there points where like it's, it's a little bit too much or the value is actually speaking to a person. I know there's definitely for myself, customer experience, uh, experiences where I would prefer to have that human touch which I'm a use case of one here. But I know that that exists.

Speaker A: I think we have two major motions right now that we see materializing in the market where also people are willing to pay money for. So you know, like real value, not just like Apple Vision Pro. Oh, this is amazing. For 10 minutes and then they never, then they return it. I mean real, real value. When you think about Gen AI or any of these productive AI tools like ChatGPT that can formulate the text for you and so forth, they're not good enough to cover the entire flow from A to Z. So it's not about oh, you have a salesperson or you have AI that is doing now, ah, the same job or like you have marketing and then you have AI to do the same job. What it tends to be is that instead of having a person sitting on an entire job for 100%, we do the start, the 10% at the start. Then we have AI take over the boring stuff in 80% and then we put also a qualifying portion of this at the end of it, uh, which is the human again. And then you tend to have a really, really good solution in the end. So for instance, customer support is a very good example. Do I mind if I have a chatbot in front of me or a human person? Actually I don't if the chatbot genuinely helps me. And this is one of the things that is quite funny to me. So if you remember in the past, I don't know, about 20 years, there was, there was something really funny happening with Google. So Google came onto the field, we started to search, uh, on Google. Everything and every company that I remember had a search engine on their own site. But Google was actually better in searching through company sites than the companies themselves. So what do we do? We don't even use those anymore. We always go back to Google, even if we're on the website. So if you go to United and you're looking for, I don't know, the phone number, you probably find it faster on Google, if there is one to start with. The customers always go there where it makes the most sense for them, right? And if you cannot provide them a good solution, they will not go for your solution. Uh, unfortunately in the case of airlines, you have to also talk with this particular airline. If you can separate with AI and AI, ah is really good in this regard. Like if you can just take 30% of the support requests and handle them through AI, then there's a real case to be made that you do not need maybe the Indian support call center anymore that was outsourced, that handles really, really simple requests that you don't need to have the business context for. So this is a good example where we really try to marry what AI actually offers as additional value with what we do as humans. And there's a lot of examples like this, but that's just, yeah, that's just what it is. It's going to be a hybrid going forward for a lot of use cases.

Speaker B: I've brought us a little bit away from the PLG specific talk, so just want to make sure that the uh, and again, that statistic we were talking about was that the compounding growth rate in December of last year was the lowest that it's been in the last four years. Sales are down, Churn is down. Uh, specifically, does plg, like, if you were to just, and I understand you can't just turn on PLG tomorrow, it's, it's a, to your point, shifting, moving a, uh, a large ship, which is a metaphor we use a lot over here. Does PLG fix all these issues? Does it get you directionally? Like, is PLG going to improve your, your sales, your churn, your compounding growth rate?

Speaker A: So I think classical sales, classical sales that does not care about retention is over. I really do believe so. So why, what do, what am I saying here? What am I saying here is that again, if you have commoditized markets or like anything where there's competition, if the customer can switch, they will expect to be able to switch times where someone commits to for two years, even on an enterprise contract are getting rarer and rarer and rarer. So why is this now relevant for plg? Because PLG is a distribution framework, right? Like where we can kind of get some volume, um, or like some value just that we can self serve. This matters because if we are so good in understanding like what kind of features about our product are actually important to acquire a user, then the step to understanding what we now need to have to retain them is also just, it's just one step a little bit further. And then what kind of features do we need to wow the users on a more longer term basis? So like what also creates habits? This view tends to be much more efficient in creating good long term products like uh, fixing churn, improving net revenue retention than just going by what Gary in sales thinks it is. Because what sales does and what sales is really really good at as well, like if they're unassisted, like classical sales is to come up with features that help you sell the product but that does not retain the customers necessarily. Why does sales not care about this or the classical sales functions? Because their compensation plans are rewarding them for just selling but not for retaining. And usually two year contracts are longer than the average tenure of, you know, a salesperson that does not perform but that closes really well. Companies are much more interested in finding long term revenue. We know this. All investors are, all companies are. And this is why this classical kind of sales shark behavior in that sense is going to go away. We will see this in changing uh, sales compensation plans. We will see this with much more data maturity because exactly as you said, we see in the data what works on the longer term and what doesn't. It doesn't help you if you get 20 new customers. If you're losing 22 at the end of it. The metric of net new revenue is nice, but it's not good enough anymore.

Speaker B: How do you get sales on board with PLG? Should they feel this threat?

Speaker A: Absolutely not. For two reasons. The first one is that 95% of businesses that distribute through product led growth have a sales department. It's very, very clear that we need to have sales. The difference is is that sales is becoming data driven. Now what do I mean with that? Every salesperson that I know uses data already. But the question is what kind of data classical sales is really good in kind of figuring out like who am I talking to? In what kind of company do you sit? What is the size of the account? Who is the buyer? Who is uh, the approver, like you know, buyer Personas that kind of thing. Now what we are trying to do from the product side, we are trying to give you usage data that you can use to combine it with this firmographics together to kind of not only figure out who am I talking to but when is the best time to actually call them up in case it's necessary. And that together is generating a very very efficient sales motion that is not so much focused on outbound which is not efficient anymore as we know because of AI again but that is depending on a uh, really like on an inbound strategy where they are trying to see that ok here are some leads that are very interested in the product and here's what they did in that product before you even pick up the phone. This is creating a very personalized experience. I mean I cannot tell you how many times where I started to get a B2B product. I was talking to one guy who did not know that I was talking to another guy. And then the customer success guy also had no idea what I was talking about with the first guy. This has to go away because B2B companies who manage to get this kind of onboarding experience and you know like talking to them much more smooth will always win out for against the other ones. But this costs money so we have to make sure that it becomes efficient. And PLG is really good because it identifies the people who will pay with you much much better than compared uh to a classical sales motion. So it's not about sales versus plg. It's actually about product LED sales. So it's the combination of both. Because PLG alone cannot survive sales LED growth alone cannot survive.

Speaker B: And it comes down to um, as you've said like it comes down to expansion revenue as well. Where you know it's been our advice with, with cross sells and with upsells. And I know you've said as much yourself but I'm wondering kind of going back a little bit to driving the car and get the, getting the air conditioning unlocked. How do you optimize for expansion revenue without compromising the user experience?

Speaker A: Thinking about how we used to build products and how we're doing this right now. So like let's say you have a classical product that has an enterprise tier and like a smaller company tier. Your first initial reflex would be to put the enterprise people somewhere over there with their own product and then the small company product somewhere over there. But they have completely different experiences. Now you could argue and say that well these are different products because you know the smaller teams do not have that Many needs as the enterprise customers have and so forth. And you might be right in some kind of way. Or you start to challenge this and say, hey, we're going to go and do what HubSpot does, for instance. So what HubSpot does is they take a very specific use case. So for instance, the marketing hub and that marketing hub conceptually feels exactly the same as it is for a small marketing team, as it feels for a big smart marketing team. So like, if you know how to use it in a small team, you probably also know how to use it with a lot of teams. There's still, of course, there's some additional functionality here, but we do not restrict the users by size. Why do we not do this? Because there is a specific chance that the, that the account is going to expand on two ways. The first one is maybe they only onboarded one team and now we have multiple teams starting to use the product. So therefore we already have a champion team in the company that is going to help them to onboard. Or the company is naturally growing with you as they are with you. You know, they start to make more revenue, they also start to hire more people. So naturally these new people will also start to use the product. So where does the expansion reven you come from as well? Maybe in that company we see how successful the marketing department is and now we're going to cross sell to the side to also sell something about the CRM. How is that different? Well, it is different because the entire marketing department already loves you. You're already present as a vendor in the system. So I don't have to go through this entire process anymore with you that everybody else that is now offering a CRM has to. It's this typical conversation that you have in a sales call. Oh, uh, by the way, we're already using marketing, the marketing suite that you have. Oh yeah. Oh, then it's easy, right? Like you can just like it's easier to activate. This is how you're driving this. So it's not about like having one entryway to the product. You actually offer use cases and then you give them an entry. And then if there is a natural expansion from this use case to another use case, you make it easy for them. And that's how we think about business on a conceptual level. So we're not separating any more enterprise from small. We've really tried to separate by use case whenever it's possible. Um, and that's a product strategy decision that everybody can make.

Speaker B: I know a little more data with this, but supporting what you're saying there where from our State of SaaS pricing report that we did last year primarily, you know, we have this price intelligently product where we talked a lot about pricing. Gotta throw a plug in there a little bit. We found that 63% of the respondents changed their prices in the last year which uh, is good, that's, that's much, much better than um, in the last 10 years. But the next step is um, focusing on what you just said there is, you know, we want folks to address pricing a little more frequently like quarterly. But most importantly, and I think this is tied into that expansionary revenue conversation, we know that value based pricing is the way to go, not focusing on something like competitor based or cost plus. Because to your point, if someone using your product and it's based on value, it should be logical on both ends when they expand or uh, either go up or cross sell or something like that.

Speaker A: That is exactly what it is. And I could give you also good example. When we were selling our product or like our PDF solutions, our ICPs were completely different than the ones from Adobe or the ones from Foxit. Even though the product solution or like the technology behind it is largely the same. You don't see from the outside exactly who the ICP is except for maybe in the messaging. But like you don't see it in the product and how it behaves per se. Right. Like it's not that easy to see. Uh, oh, is that that easily like who you're actually targeting? Yeah, you know, to your point, I mean this is what it is, right. So like if we have different kind of special cases, it's almost like having different verticals inside of our product that we are starting to address. And that seems to be going better than just like horizontal solutions that try to take everything.

Speaker B: If we move back in the, I'm thinking, I guess in the, in the funnel side, surprise marketers thinking about the funnel. Um, it seems like this does put the onus a tad more on marketing to bring those initial users, those users that are going to be actually using that product before actually paying you money. Does this shift the onus onto marketing a little bit?

Speaker A: So marketing has always been struggling with this kind of blame game that starts like hey, you have to bring us better quality leads or like you have to bring us better this, better that. Right. So like product tells them like what to do or there's always like this kind of mismatch. And the reason for this is that there is a gap between marketing and product that we have never really covered. And that is who is responsible for improving this process between the people that are landing on our website and the people who are using the product. And this is what we call growth as a function. It's about how do we activate these users in the most efficient way, how do we decide which one of those do we hand off to sales, which ones of them do we keep in the product and so forth. And to your question, a very modern way to look at this and also like with effective marketing, is that we're not measuring anymore necessarily. Like this classical MQL where you just like, okay, now this is a marketing qualified lead, but we can also start to measure how many of the people that you are bringing into the product per dollar are reaching the aha moment, which is like this core value again, right? So like before they even pay. Like we just want to have people who are reaching the aha moment because we can also predict afterwards how many of those that are reaching the aha moment then convert into having a trial with us and then how many of those are converting into being full customers. Because this is dealing with a really interesting problem that marketing has. The higher the quality is of the traffic that they're bringing, the more likely they're also going to convert to the aha moment. And this is something that you usually struggle with. So like how do you determine the quality of a marketing traffic? Well, if sales is converting better, but is it now because of sales or is it now because of marketing bringing better leads? So this takes away a lot of this kind of blame game, right? Because we're trying to attach some kind of quality that has nothing to do with payment. It tends to be that between a uh, visitor and a uh, payment there's just way, way, way too much happening that we do not observe with data. And this is where growth teams come in specifically for plg. Because the payment usually happens later. We try to separate the steps and this allows us to experiment on pricing, on packaging, the onboarding flows. And just by doing this you learn a ah ton that you have never really expected beforehand.

Speaker B: It feels like a self repeating cycle in a sense where like the more people that come in that realize the value the like better qualified you are at qualifying those leads. For folks that are hearing this that may be, you know, going back to that ship metaphor, this is seems like a pretty dramatic change that needs to happen for a company that maybe isn't considering PLG at all and there's an opportunity. What are some of those like sort of initial conversations? I mean I myself, let's say I, I'm just hearing a plg. I'm in the marketing department. I know Stretch. How would I approach maybe the rest of my team? Like, hey, we should think about this, you know, this, this has a lot of opportunity here.

Speaker A: I can give you a very specific example again from where I am right now. So at Godphoto, we have 20 million in revenue. And the question is, so like, how do we evaluate whether PLG makes sense? And a lot of the things that we just do is we try to really simplify it. Again, so the very, very first step that any company has to do is to define like. Okay, so like for one buyer type or for one icp, what is the aha moment? And an aha moment is something that we can measure when person so and so reaches for the first time this particular moment, they have reached this particular moment. Right? And then we can measure this. And just getting to this particular alignment should be the very first step. Once you have that, you can start to think about, okay, are there things that we can do to actually increase the conversion rate to this particular aha moment? Of course, the entire kind of journey is a little bit more complicated than this. But like, this already puts a lot of challenges in front of of teams. So how does the product manager query for this aha moment? Do they have data access? Do they know how to find this stuff? How does this fit into the entire business context? So just like starting simple, defining one signal and making sure that people can consume the data but also surface it themselves and create business cases based of it is probably the start of everything. Because then you can also try to analyze like, hey, is what we do really efficient versus what we're doing? Like, yeah, what our competition is doing, or whatever it is, whatever triggered you first to kind of look into this? Because oftentimes it is the competition because they see like, oh, they offer freedom and we don't. I always encourage people to do it step by step. So if you have absolutely nothing, try to start with an interactive demo. An interactive demo, even in the most enterprise led ways, is a way for marketing to also kind of try to figure out, hey, can we give something to customers that also has tracking inside of it? There's a lot of companies that are starting to do this that are just offering interactive demos as a service. And once you have figured out or like you're confident that you can actually offer more, then you can also offer a trial. Once you've figured out your trial, you know, like, so, hey, how does this work, like, you know, like this entire onboarding friction is a bit much. Then you can also think about adding a freemium. But what I definitely do not recommend for companies is to jump into a freemium without understanding whether you should even do a trial or like, you know, there is just so much stuff to learn that going from having a sales process to, oh, we have freemium trial, reverse trials, and then some other interactive demos, you just, you're trying to do too much in too little time. So going down the ladder is probably easier for most companies. That's what I would say as a, as a first principles answer.

Speaker B: I just want to clarify here because I know earlier on you said, um, that folks who just have a demo, like that's not exactly PLG what we're talking about here. In this instance though, are you suggesting that a demo could lead into like a freemium offering or a free trial or something like that? That's. But that's like kind of the leading thing that you could maybe set up. But, but that itself is not PLG is basically, I think what you were, uh, who cares?

Speaker A: Who cares whether it's PLG or not? Like, what you are after is like you are after more revenue. I think the lines are becoming really blurry. So traditionally we said that, well, having an interactive demo is more like a sales assist, right? So we're producing something that is helping sales to sell. But now I can flip it on my head. I can also say that, well, what if this entire tool has analytics in themselves? So like, let's say instead of me giving you the demo, I give you the demo and then I lead you through it. And we are tracking how you're using this. So in HubSpot, it automatically updates whether you've seen a specific part of the product or not, or whether you're sharing it with another colleague or whatever. Is this now plg? I don't know. It depends on what you're doing with this kind of data. Because the moment I am not in the picture anymore, I can also give you this interactive demo on the website itself. So you're kind of self serving some kind of value already. And this is the thing where I'm just saying it doesn't really matter whether it's PLG or whether it's sales LED growth if you can automate and make it more accessible to the customer to see something. So, for instance, transparent pricing. There's just like there's this eternal fight about, oh, uh, should we have a pricing pitch or not? And so forth. And I'm always like, hey, if you cannot be transparent in your pricing, you will have a multitude of problems unless your product is really so complicated that not even a competitor that would start new could do it simpler. But that's now in a totally, uh, completely new can of worms. But this is why, I mean, like, there is no reason in 2024 why you do not have at least an interactive demo. I don't care how upmarket you are. I really don't care. If we can do it for robotics companies that have ACVs of like 5 to 10 million and so forth, you know, like actual hardware products, and you cannot show something on the website. Come on, that's just like, there's just no more excuse.

Speaker B: It seems like it comes from a place of fear of, of, uh, being trans. That transparency element that you said is around is there's some vulnerability. There's a lot of vulnerability there where you're exposing yourself to if you really are providing that value that you say you are.

Speaker A: Yeah, there's two reasons for this. The first one is like, yeah, I don't know how to do this. Indifference. Or that's more coming from a place of I don't know what I do not know. And the other thing is like, yeah, again, sales compensation. If you jump into a meeting like this and you say, like, hey, we're going to change how you earn money. Nobody wants to hear this. The CRO definitely does not want to hear this. And the CRO is usually also the person in the company that the closest to the revenue. So now you have the person who is generating the most revenue having a panic attack. So, like, this is also where product people just, like, they just need to learn how their stuff is related to the revenue. And that goes also to founders. Like, if you cannot make these two motions comparable with each other and how they, uh, can actually help each other, you have no chance. You're not going to go with conviction like, oh, it's cool. You're not going to go against 10 million in revenue like, oh, it's cool. And this is not, oh, we should do it. Oh, yeah, we should redefine the way how we call things. Or, like, we should have a freemium. It's always going to ask yourself, like, okay, so what are we doing with the existing revenue? So you need to have a business case behind this. That makes sense.

Speaker B: Well, I could talk for another hour, but I want to be respectful of your time here. Is there a place where folks, uh, have finished up here? Where, where should they go next? Um, they go to layetheron.com, is there somewhere you want to send folks?

Speaker A: There is this website, Google. You just go there, you type in my first name, Leah, and then plg, and then you find a lot of material. That's the good thing about having a strong brand. I can just like. It's like my first name, plg, and then you see a ton of my stuff.

Speaker B: Cool. For folks listening, how do they spell that?

Speaker A: Uh, Leah is just L, E, a H, and plg is pl.