# Product-Led Growth Explained: The 4 Pillars That Drive Real SaaS Growth

Channel: MicroConf
Video: https://www.youtube.com/watch?v=AK8iFiKWskQ
Duration: 46 min
Language: English
Words: 9002
Transcript page: https://viewrankai.com/tools/youtube-transcript/AK8iFiKWskQ

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[0:01] All right. All right. So, if you've never seen me speak before, uh, welcome. I'm super pumped to to to see you and to meet you and to have you. And if you have seen me speak before, you know, I'm going to go really fast. I'm going to talk really fast. I have a bunch to cover. We've got a lot of slides. We're going to make it work. Um, but okay. So, I wanted to start out with uh a story, and it's a story that I hear pretty often, especially when it comes to productled growth. But it's the story of how do I make X millionaire R could be anything

[0:33] one five million 10 million whatever it is but how do I specifically make this amount of money uh without hiring anybody I want to uh not have to make bloated software and I want to do it from my pajamas. I'm not sure why it's always the pajamas, but there there's something there's something about the comfort of I want to build something amazing and big, but I want to do it in my way. I'm not probably aspiring to be a unicorn or anything like that. I want to do something that is more like me, like kind of I don't want to say like comfortable, but something that's a

[1:08] little bit uh less intense. And here's the thing, this is the dream of SAS, right? This is the dream that we've all been sold. Build a SAS company, they said. It will be fun, they said. [laughter] And the dream is always the same. It's always like, yes, like you can you can build something that, you know, scales infinitely and you can deliver value to millions and millions of people and make money in your sleep and it's going to be awesome. And then you actually do it and

[1:35] you're like, [ __ ] this is this is hard. This is actually really really hard. And you really don't understand what it's like to build a SAS company or a startup until you've actually done it. And yet there's still that dream of oh but yes like how can we how can we make you know all this money and like deliver all this value but but still you know not necessarily go the the big path like what do we do it actually it it's possible to do this I admire this dream and I want to help everyone in this room get there if that's the dream that they want to

[2:08] achieve. uh but in order for us to do that we have to focus on a very specific aspect of of productled growth and I would wager that most of us in this room are probably productled growth companies but let's just do a quick primer so the three most common SAS growth models you've heard of these uh there are others but we're going to cover just the three basic ones um you've heard of salesled growth so this is pretty much what you expect as you grow your business uh this is going to be the more sales people that you hire, the more that you grow. Then there's of course

[2:41] productled growth. This is taking out the sales team. This is more focusing on you build your product, you generate traffic, you generate trials or signups or whatever it is. And the more people that use it and get value out of it, then they become in theory like they become customers somehow and then you retain them over time. Boom. Product led growth. Pretty common. Uh I would say most of this room probably is in the PLG category. And then of course there's PLG with salesled assist. Uh so this is as the company grows and scales um we may actually introduce a sales team to handle mid-market to enterprise accounts

[3:17] um we also may have a sales team specifically to handle a particular segment uh within the growth spectrum. But what I like about Slack though is I think Slack is a perfect example of this. Uh, so up until about 2016, Slack got to I don't know X billion dollars. Never had a sales team. And then I think they actually put like PR out out out about this uh in 2016 and then 3 months later after this PR went out that like, oh yeah, we've gotten this growth without a sales team. Uh, they immediately hire a head of sales like three months later. Um, I would like to

[3:48] think that there was a board meeting and they were like, "Wait, we don't have a sales team. Let's let's get a sales team right now. What are we doing?" Uh, but anyway. Okay. So, three most common uh growth models. We're going to talk about PLG. And the thing about PLG is you're going to see a lot of frameworks for this. There's tons of frameworks out there that help you explain or that help uh explain PLG. And I don't disagree with any of these frameworks. I think that these are all great. Uh there are some that say yes, focus on acquisition and then focus on conversion and then

[4:18] get to expansion, etc. There are some that really just kind of rehash pirate metrics, which you've heard of, awareness, acquisition, activation, retention, referral, etc. All of these are awesome, but I think again if we want to accomplish this dream that we have, we have to take a a much more focused approach. So I'm not saying get rid of these. I think these are great. But what I am going to suggest is let's focus. So today, hopefully at the end of this, I will give you uh three areas to focus. And I doubt we'll have time to go over the fourth one, but we'll go over a fourth

[4:51] one as a bonus if we have time. But first, we're going to talk about activation and what the opportunities are in activation, where we can improve in activation. We are also going to talk about retention. There's a very specific aspect of retention that I don't think gets enough limelight uh that we're also going to dive deep into. And then finally, monetization. We are going to talk about pricing. It's going to be fun. And then if we have time, we're going to talk about being insights driven. Uh but something tells me that we'll we'll have plenty to cover even

[5:21] with just the first three. All right. Activation. Activation can be defined in a few different ways. Activation can be defined uh either as the percentage of people who achieve a value metric uh whenever they sign up for your application. But it can also be defined more commonly as that free trial to paid conversion rate. And one of the most common questions that I get is, well, what's a good activation rate? What is the number that I should be aspiring

[5:49] towards? I have a few stats for you. So, according to Lenny's newsletter, which if you're not subscribed, you absolutely should be. It's a gold mine of information. But Lenny's newsletter has suggested that 36% is a good activation rate on average. When we look at the median, however, which median for those who aren't familiar, median basically just means that this is a number that is more representative of the full sample. But 30% is about the median of the average SAS activation

[6:17] rate. However, there's also studies that show according to open view at least that activation rate actually depends on the size of business that you are. So if you are less than a million in ARR, your average or median activation rate is probably closer to 14%. But notice on the far right of this chart, there's standout PLG, which is about the 20%. So the PLG companies that are really killing the activation game are probably 20% and above. And then of course in between all the way up to like 10 million AR R there's fluctuation. But once we get to enterprise this is where we start to see 28% 25%. So this number

[6:59] becomes uh it becomes a little bit more stable around that 30% mark. But again 14% if you're less than a millionaire R doesn't seem too bad. uh except there are many of us in this room today who definitely aren't even getting the the 14 to 15%. There's a stat from the micro uh 2022 state of indie SAS survey that has also kind of validated this number that um the average if I'm not

[7:26] mistaken was between the 10 to 15%. So, if you don't already have 10 to 15% activation rate, boom, that's already your first growth KPI to focus on, because if you think about it, if you're getting 5%, if you were to double this to 10, you've doubled your MR. And whenever we do that math, it's always amazing how many founders their eyes light up when they're like, "Oh, that's almost free money that we could just be making." That's why activation is so powerful. But even within uh even if you're getting a 10 to 15% today, standout PLG, you can get up to 20% and even more. Uh and I'm just going to be

[8:05] the person to say that these are ultimately floors. These are not necessarily even ceilings. I've worked with products that have 50% activation rate, which is amazing and possible. 100% possible. Um, just because you see a benchmark, it doesn't mean to stop once you get there. It means to see, can you push this further? And again, activation is powerful because you're not spending more money on more marketing. You're spending more effort and energy on your product itself and the overall onboarding experience, how value is delivered, and how quickly it

[8:39] is. But the formula for activation is actually really simple. We we like to over complicate it, I think, but I'm going to give you a very very very simple formula for activation. It's dead simple. Activation is your customer's outcomes, their jobs to be done. If you want to use jobs to be done language, it's their customer outcomes minus the

[8:59] barriers. It's minus all the stuff that gives them pause, that gives them concern, that makes them worried, that makes them compare, contrast, and it's both psychological. What are the psychological barriers? But it can also be more tactical barriers. Do we have an extra step in our signup flow that we don't actually need? Do we have weird things happen when they actually get to the product? Like, are there a million popups? Uh, I'm working with a company right now. They're at 60 60k MR and there's their their onboarding experience is like they get like four popups when they first sign up and then they get four more when they actually

[9:37] get access to the product. And it's like, do we need these? These are just barriers. So based on what our customers want to achieve, let's get them there as fast as humanly possible with a little bit with necessary friction. You have to have some friction, but all the stuff that we don't need barriers wise, let's get rid

[9:52] of it. But there are some special cast members here in this process. There's really just three. There's user qualification. Uh I would say this is probably the area that most of us can improve. Most of us can't really say like what percentage of our users who sign up for our product are actually qualified. meaning when we ask people questions on when they sign up such as email address and okay create a password uh there are many products out there that don't actually ask any other questions after that like who are you or what type of business do you run or whatever it is whatever it is that

[10:23] you need to know from that user to that who's signing up whatever it is that you need to know about them to qualify them are they qualified we call this uh back in the day there used to be a KPI called the product qualified lead the PQL I think there was like a time where it was going to replace the MQL anyway way. But if you were to think about the trialists who sign up for your product as are these product product qualified leads or not, that should hopefully help you think about your signup flow and how can

[10:49] you ultimately measure this. Excuse me. Because this is one of the greatest opportunities that we actually have. If we know what percentage of people are qualified when they sign up, then we can actually one improve that KPI if it's not super awesome, but also it gives us a sense for what kind of experience to

[11:05] give them after that. There's also insights and analytics. Uh I cannot tell you how many times I have worked with SAS companies who have no idea what adoption rates look like, what new user retention rates look like. No clue. Um they're not using like a mixed panel or amplitude. So I would say if you don't have something like this to help you understand the activation onboarding experience, highly recommend to do this. Uh because otherwise we're guessing in a vacuum. We don't have any actual stats or data to help us with this. And then finally, um, supporting materials. So this is anything and everything from help documentation,

[11:41] onboarding emails, uh, marketing content, all of these things I'm going to call supporting materials because this supports the customer and again achieving that outcome and removing the barriers as much as possible. So this is activation. Uh, again, we we we complicate this and I think it's just because there's so much content about out there about it, but also I think it's just because we're kind of all

[12:04] obsessed with acquisition, to be honest. Um, but anyway, so this is my very simple formula for activation. Again, get the customer getting and accomplishing their goal as fast as possible. Remove the barriers, remove the things that get in the way. And if you're not sure what those barriers are, I'm of course going to recommend customer research. But let's talk about retention next. Okay, so when it comes to retention, retention is what you would expect. It's okay, you've gained the customer, but now let's keep the

[12:32] customer over long term. And I can't help but think about another talk. This talk actually like lives rent free in my head. I think about this talk all the time and it's the long slow SAS ramp of death. You can watch this for free online. Uh it was given by the great Gail Goodman and this was from business of software. I think it was 2012 so almost 12 years ago now. It's still very true even today. And what Gail was talking about in this talk was you know you're you're sold the dream of SAS. So you start a company and again build a SAS company that said it'll be

[13:07] fun. They said and she joined Constant Contact and is like we're going to get hockey stick growth and it's going to be awesome. But instead what she got was the long slow SAS ramp of death where it just feels like everything you do it just gets you a little bit further and a little bit further and a little bit further and it's tough. It's really it's challenging. But she said one of the things that was the most critical part of this journey was retention. retention was huge. And not just short-term retention. Most of us are probably measuring monthly churn. Most of us probably have a good sense of what

[13:41] monthly revenue churn looks like. And I would also wager that most of us probably are 5% or less. Um 7 to 10% is usually more common for very early stage uh SAS companies, but for those of us who are a little bit more established, less than five 5% or less is pretty common these days. So most everyone is like, I'm good. We've got 5% monthly revenue churn. I don't have to think about this anymore. And then I pull up a particular chart that is my personal favorite. I pull up this chart and this chart tells us everything we need to know about how good is our retention

[14:15] really. How many of you have seen your net revenue cohort retention chart? Okay, I see a few hands. Okay, for everyone who has not seen this chart before, I'm so excited to give you this gift. If you have Profitwell, Chartmogul, Bare Metrics, you 100% already have this chart. You have this, you have access to this chart right now. Uh, and I would not be mad if you opened up your computer and you were like, "Let me just look at this really quick." Uh,

[14:44] it is the revenue core retention chart. Basically what this means is for every month of revenue that you have generated we are now going to measure the retention of that revenue month over month as time passes. So at the top you can see how much revenue this particular company generated and how much it has kept over time and at the bottom it actually summarizes it for you what is the average and I specifically like to look at revenue. I also specifically like to look at the percent of total and not the percent of previous month. But this company needs help. They probably don't have a super healthy monthly

[15:19] revenue churn. Uh to be honest, but even still, looking at this chart, if you look at the 12-month mark, it's a little it's really hard to see because I know the color grading is kind of weird on this, but it's 24% retention at 12 months. That means that this company turns, it's going to lose 75% of its revenue every year. So every year this company has to bust their butt on acquisition. They've got to hope and pray to the SAS gods that their activation is awesome. And then something happens along the way across that 12 months and customers start turning, especially right around like

[15:56] the two and three month mark. This puts a ton of pressure on the business and also growth here is likely really frustrating. Uh in fact, this company probably is still figuring out product market fit. Um this is not one of my clients by the way, but uh this is a real life example of what it could look like. So while you may have healthy monthly turn, what does your 12 month

[16:22] net revenue core retention look like? because that tells us the story of do you keep customers long-term. And now you may be wondering what's the number to aspire towards here. So 80% is what you're looking for at 12 months. If you have 80% net revenue core retention at 12 months, you're keeping customers. You might actually be expanding them a little bit, but more than anything,

[16:47] growth likely feels really comfortable. Growth probably feels like, okay, yeah, like we're going somewhere. This isn't like painful. It's actually doing something. I can tell you though that the dream, the real goal, because again, we're going back to that dream, the SAS dream that we've all been sold, right? Uh but the dream is 100 to 120%. It's absolutely possible. It is real. Uh if you are in the 100 to 120%, that means that not only are you retaining a pretty healthy amount of customers, but you're also expanding them more than the revenue that you're turning out. uh which is also really cool. But what I can say is if you are 50% at 12 months

[17:27] or less, growth is going to be really uncomfortable. It's going to feel like you're pushing a boulder up a mountain. It's going to feel like everything you do marketing wise isn't working. Um all the campaigns you're running, it's not working. It's going to make it's going to feel like also um you know, you changed your headline or or whatever it is like on the website a bunch of times or you've changed your signup flow and you're not figuring out like oh man, it

[17:48] doesn't feel like anything is working. It's because we're turning more customers long-term than we are keeping them. But retention is a specific challenge and there's a specific way to solve it. Just to prove that it exists, this is what an example of what very healthy net revenue core retention should look like. But like I said, uh this is 75ish% at month 12, but you want to be at least 80% for this to be uh a machine, an engine, for it to be effective. And then even beyond that, ideally you get to 100 to 120% is

[18:19] possible. I've also seen as high as 140. Uh those those companies are like 2xing and tripling and doing all kinds of crazy things which is pretty cool. Um but this is a chart that I highly recommend if you have profit well or again Tartmobile whatever it is take a look at this and see what is this for you because it may actually give you the tidings of maybe not as good uh uh retention as you might have thought especially if your monthly churn is actually healthy but long-term not so

[18:48] much. But I want to give you a quick primer on what's actually happening in customers heads when churn like this happens. Because long-term churn and long-term retention, it requires a different mindset. It's not quite exactly the same as trying to save as much uh as many customers as possible like in the moment. It's much more about thinking long term because again this happens over six month time frames, 12-month time frames. So I want to give you a little bit of a sneak peek of what's actually happening in customers minds when they turn like this. Uh one aspect of my work and the work that I do and

[19:22] the job that I have is I've talked to thousands of customers across just about every single segment that you can imagine B2B B T B T B T B T B T B T B T B T B T B TOC, I've talked to CMOs, I've talked to individual contributors, I've talked to consumers, but I've also had the privilege of talking to tons of churned customers also. And this is what's happening in their head when they

[19:39] turn longterm. This is what they're also thinking, but they they just can't quite articulate to you. So, they're thinking, I'll buy your product once I'm convinced it will help me accomplish my jobs to be done. Pretty straightforward. I will absolutely have new jobs to be done. You can als,

[20:04] when this is going to happen, but it will all of a sudden overnight be urgent that I address those needs. But again, I can't really predict when that's going to happen. I just know it's going to happen. I also cannot promise that I'm going to remember to check your product for if you have those needs or things that you can fulfill my needs. I might not remember. And I'm sorry, [laughter] there's a lot on the internet out out there right now. It's it's busy. It's crowded. I might not remember. But I will however if I do remember and if I'm convinced that it fulfills my needs,

[20:39] I'll stay. I'm not going to turn. But I will however churn. Guaranteed that uh if I find something that accomplishes all of my needs for a better value, keyword better value, I will also absolutely churn. And I'm also going to churn when my context changes the nature of my needs or my jobs to be done. Think about this like maybe I switch jobs, maybe uh I get uh maybe I have children or something and now my whole world has changed and I'm not thinking about whatever this product is doing, whatever. Like it could be anything contextual, but this is what's actually happening all seven of these

[21:18] things. And there's there's a couple of more, but I wanted to boil it down for you. This is what happens with long-term both retention and churn. So, as these new needs pop up, if we're fulfilling them, great. But if we're not fulfilling them and we're not making sure that the customer even knows about these new things that we're adding to our products, then we may lose them at that 12-month mark or six-month mark or

[21:40] whatever it is. Most businesses actually are really good at number one. So, I would say if you have customers, whether it's 10 customers, 100 customers, whatever it is, um chances are you're actually probably doing number one really well. uh especially if you have excellent copy uh especially if you have excellent positioning especially if you have an excellent understanding of the customer probably killing number one and if not that's okay you're making progress uh most businesses are also relatively good at understanding why customers churn I do think that there needs to be more vigor here because just having the cancellation survey I will say is not enough um but generally speaking most of

[22:18] us have a pretty good understanding of why customers churn from our products It's everything in the middle that needs way more energy, way more rigor. What I mean by that is how are we creating processes to understand what those new needs are? And also when we add new features, when we produce new value in our products, how are we ensuring that

[22:40] customers are aware of these things? Because again, they might not remember. They might not even think, oh man, I didn't know that so and so could do this. That's so cool. Uh but at the same exact time when you talk to turn customers sometimes you hear a lot of oh I didn't have I had no idea that you did this didn't know had no clue. So we have to make sure that when we add value to our products that we're telling our customers about it as consistently as possible and also of course that we are uh we have a continuous discovery process to enable us to understand what

[23:15] are those new needs. Customers can't really ever tell you exactly specifically what to build, but they can tell you what's frustrating, what's rough about their life right now, what's hard for them. They can tell you at least those things. So, this is how we go from uh well, first I'll say which ones are we great at internally and then also which ones need addressing. But this is how we go from this chart to a chart that looks like this. That's the long-term retention game because again, customers may have needs that pop up at month six or month 12 or month 14, whatever month it is. And we have to be

[23:48] prepared for those and we have to make sure that customers are aware of the new things that we add to our products. All right, you still with me? All right, I heard a yes. [laughter] Monetization. Uh, okay. Monization is the process of exactly what you would expect. What are we charging? How much are we charging? Who are we charging? and all of the decisions that go into everything monetization wise and the conventional wisdom is to you know look at your competitors and just kind of determine like what pricing is and then I've especially appreciated the over the last I would say 3 to 5 years um the

[24:25] flag that has been raised by so many bootstrappers of saying like we could be charging way more and you're exactly right we could all absolutely be charging certainly more more dollars for what we're offering but I'm going to be a little bit contrarian. I don't want you to just raise your prices. Yes, we could all be charging way more. 100% agree with this. Uh I do not disagree. I

[24:48] just want us to gather insights first. So before we double or triple our monthly rate, whatever it is, let's just make sure we really understand what customers expect pricing wise. Very rarely will customers say, "Yeah, sure. Raise my prices." But what they will say is this to me is valuable and this to me is not. I would pay for this but I would not pay for this. They can at least tell you that. So uh most of us uh I would say I mean I don't want to say you know most of us but I would say there's definitely a percentage of folks who are thinking of increasing prices and

[25:22] they're thinking I'm just going to double it and just see what happens. And that's fair. Go for it. But I am gonna say let's just make sure we understand what this is first. So, I go back to this chart because if you have a chart that looks like this, it could very well just be because we don't understand what long-term

[25:39] retention looks like beyond a year. That's fair, but it could also be because we have changed pricing and we didn't really see an immediate effect, but it had a long-term impact. I'll tell you a quick story. Okay, so I was working with a founder once and she was telling me about how uh she was she's like at like 50k on her R. She's been stuck there for like ever trying to get to a million and uh she's not sure what happened, but all of a sudden it just kind of felt like growth was really slow. So I do my thing. I'm like, "Okay, well let's open up profitable. Let's

[26:13] look at what's going on." And I pull up this chart and I can see it's like green green. Everything is green and then boom, red. Everything is just red. It's like there's one month October 2021. Like what happened in that month? Like everything was green and then October 21 happened and everything is like sad after that. What what happened in October 21 or like near that time? And she was like, "Huh, well, we did change our pricing about two months before." I was like, "Ah, it was probably it was probably that if that was the big change and it created this uh down, you know, flow effect." uh it was it probably was

[26:53] this. So then what did we do? We did pricing research. That's what we uh and I'm hopefully I get to talk to you about this now. Um but okay, so monetization, why do we care about this? I can guarantee you that if you can nail your monetization in your productled growth strategy, you're going to go gang busters. Like it's just really, really, really tough to beat a strong monetization strategy. But there's also tons of research that already shows us that if we put more effort on retention and monetization, way more than acquisition, we'll likely see a two to threex return. So two to three times more growth for businesses that focus on

[27:28] retention and monetization than those who don't and who focus on purely acquisition alone. This is why I fly my flag of of growth, but also even more specifically activation, retention, and monetization. If we can nail these three things, we can accomplish that dream. Okay, but I want to give you some tools. So, let's say you're in the process now. You're thinking of changing your pricing. I'm going to give you just a few tools to think about. I don't want to overwhelm you, but I do want you to consider these. So, we're first going to talk about two different types of interviews that you can run. Pricing

[27:57] interviews and UX interviews. And then I want to talk about uh two types of surveys that you can run. You can combine these. Uh you can also keep them separate. I want to say best practices and keep them separate. We're going to talk a little bit about Max Diff and a little bit about Van Westonorp. Uh you can research both of these and decide to, you know, to apply them to your pricing strategy if you're thinking of increasing pricing. If you're not increasing pricing at the moment, that's okay. When you get to the place where you're about to, I hope that you remember this. And I also hope that you

[28:28] conduct your own research about how how successful SAS businesses uh change their pricing strategy, especially if they're PLG. Okay. Pricing and UX interviews. This is the most often overlooked step when it comes to changing pricing. I think most of us just kind of like change the page like in a vacuum and we're like, "Oh, we're just going to like increase the

[28:47] price." Uh, and just see what happens. But I think the tricky part with this is that there are so many different data points that could change and it's really tough to know was that because of the pricing or was that because of something else that happened in the business or whatever. So, I highly recommend if you're thinking of increasing pricing or changing pricing in any kind of fundamental way, conduct first what are called pricing interviews and then also strongly consider UX interviews. The difference is pricing interviews are really just you talking to your customer. How do you feel about our pricing? Anything that stressful or bugs

[29:18] you or gives you pause? Pretty straightforward. You can also use pricing interviews to understand if you're about to run an experiment that's pricing uh like how do you feel about this new pricing? How do you feel about like how does this impact uh your world? And you don't have to do a ton of these.

[29:35] You just have to do like three to five. But you're going to get so much information about how your ideal customer thinks about the tradeoffs of buying, staying, and then also whatever the new potential pricing is. Very straightforward, but very often overlooked. highly recommend doing this if you're about to uh start changing pricing anyway. And then the second thing are UX interviews. Um I'll be

[29:55] honest, UX interviews are very cringe. Have you ever watched someone navigate your product or your website? It's painful. It's painful. It's I'm I'm going to be the first person to say it's painful. But I actually live for those chaotic moments. I love it when people navigate pricing pages in particular because they like don't even see certain elements on your page. They don't even see certain things and you just don't know what that could be unless you run interviews on ideally inmarket strangers, people who are not your customers, people who've never seen your product before. But even still, watching someone navigate your pricing page, what a blow to the ego. [laughter]

[30:37] But I I highly recommend we do it no matter how uncomfortable it is. You don't need a ton here either. You just need three to four. And when you get your prospect on the call, you just want to give them a few action items. I want you to go to the pricing page. I want you to look at this and I just want you to describe to me what you see. And some people are going to give you really thorough answers. And some people are going to be like, I see this. I see that. And then when you say, "Okay, great. I want you to actually go through

[31:02] the process of attempting to buy this uh and ask them, you know, watch for hesitation moments. You're looking for pause. You're looking for barriers. you're looking for the like, h, what's I don't really understand what's going on or I'm not really sure what that means. You'll be blown away by what you learn. You don't need a ton here, just three to five. Uh, and if you're not exactly sure how to source people for this, there are

[31:21] two platforms I'm going to recommend. Respondent.io is a big one. And then the other is userinviews.com. We use both of these in our work all the time. And you don't have to necessarily source perfect like customers. You just need to get proxies. Uh, you need to get people who are close enough. Okay, the last two. Oh, little delay.

[31:42] Okay. Uh, the last two are surveys. Another uh example of collecting feedback first before we just go change things willy-nilly. Um, but I'm going to introduce you to what is called the Van Westonorf pricey survey. There are many different ways to understand willingness to pay. Like what would you pay in theory for this product? Uh, and then of course what would you actually pay? uh which of course if you're live go to market already you already have a sense for what this could be um but with Van Westonorp uh I highly recommend doing a quick Google search this is a really simple four question survey that you can

[32:14] run and the goal here is just to understand what is the overall sensitivity of your existing customer base and also what could be the sensitivity of prospects the goal here though is not necessarily to use this to know exactly how much do I charge the goal is to understand what cohorts are more sensitive than others Because if you notice that cohort number one, maybe one particular type of customer is more sensitive than another type of customer. Those could be your two plans right there. That's how we use Van Westonorp. Um not necessarily to say like, okay, yeah, everyone said this price, so we're just going to charge

[32:47] that price. No, no, no. This is more about sensitivity. Who's willing to pay more? Who wants to pay less? Okay, great. Now what? These are probably our two plans. Maybe this is where we start. Um after that, we have max diff. So what should be in the plans? What are the features or things should actually be in the plans when we think about creating our monetization strategy? And this is where we get into what is called a max diff survey. You've probably heard of liyker scales before which is you know rank this feature on a scale of 0 to five where one or zero is least

[33:18] important and five is like super important. But the thing about liker scales is that they're not exactly great at like telling us okay but what's priority? What are the trade-offs? So max diff aims to force respondents to actually rank things. Uh so what's most important to you and what's least important to you and then calculating

[33:34] the difference between those two things. So when it comes to what we charge, we use van west and dorpish. But when it comes to what goes in them, we use max diff. You can use this on value metrics. So how would they like to be charged? Is it on number of this? Is it on number of

[33:49] that? You can also use it for features. What should be included in these plans? Uh but either way, if you're collecting any amount of data when it comes to monetization, you're already doing great in my book. Uh but if you're not, I hope this encourages you to start. Uh and just to give you a very quick example of of how much pricing can change, uh Zenesk has been around for a minute since 2008, and I have their pricing uh up to I want to say last year. They have

[34:17] dozens dozens of iterations on pricing. You can go into web archive uh and look at exactly what they've done, but they've changed and tested a bajillion things over the years. And to their credit, it's been one of the aspects of course that has made it very successful for them. But this is what it used to look like way back in the day. Bunch of plans uh based on agents. Then it they whittleled it down just to four plans with an enterprise plan. Prices have

[34:43] also changed a little bit here. Then over the years they actually kept the same number of plans. Uh but notice that their pricing on the per agent has dramatically changed. Again, we can all be charging more. They absolutely did, but they likely did it with gathering a little bit of data. And then all the way up to today, uh charging the most that they've ever charged. Part of this probably due a little bit due to inflation. Uh but the other part of this is also because they've likely gathered the data over the years of again that willingness to pay and also what should actually go in these plans. Um but all

[35:16] that to say this is hopefully uh a pretty good primer on where to focus. So recapping really quick, I want you all to focus on activation. What are how can we remove as many barriers as possible and help customers accomplish their goals as fast as possible? Second, retention. It's not just the monthly revenue turn. also that long-term turn and again the mindset of the customer as

[35:36] they go and then finally monetization. Uh don't just raise your prices. I mean yes do it. Absolutely do it but let's collect some data first. All right. Thank you so much. [laughter] Keep it going for Asia. Amazing. [applause] You know it's like it's like Jesus always said um let he who has 80% cohort

[35:57] retention cast the first stone. Do we have time for questions? We have time for questions. Yes. So please stay on stage. I will stay. Um, we have a little question catch box. Instead of running people around, you see Tracy at the back of the room has a question box with a microphone in it. Um, because we respect you so much, we're going to throw this at you. Alex has one over there. So, if you have a question, raise your hand and we will

[36:18] throw things. Oh, wow. [laughter] Hello. Hi. I love your shirt. Thank you very much. I love yours. [laughter] Thanks. Well, actually, it's more of a jacket. Yeah. Okay. So uh the question is uh you were talking about monetization raising prices uh you know okay yeah sure you can go double and stuff like that um and I love the idea of the data gathering however the question is what are your thoughts or do you have any experience or advice around perhaps taking a different path and leveraging a strategy around sort of feature flags with add-ons as yes add as a method to increase pricing for those that care about it rather than

[36:55] just increasing pricing. Yeah. Um great question. So, I I would say that that is more of how do we improve our expansion strategy more so um I mean it's of course part of pricing but I love the add-on strategy. Yes. Uh if you ever seen Patrick Campbell talk about pricing, he highly recommends that you get to a place to where you're leveraging add-ons as a way to improve expansion revenue. Um but yes, if you have plans that um es especially if you have plans that you know don't necessarily fit uh certain types of customers that you have, usually it's because like there's a feature or two

[37:32] that are in the plans that could be taken out, added as add-ons, and that way anyone of any plan in theory could add that particular thing on. Um so I do think it depends on product usage. I think it ideally comes from a space of we understand that you know these types of customers like they may be happy with these types of plans but there's certain features that don't fit perfectly or uh it's something that anyone could get value out of um that's where we tend to see more add-on strategy but yes huge fan of add-ons. Highly recommend if you have a good sense for this it'll help

[38:02] expansion revenue a lot and it'll help you get to that really pretty revenue core retention chart. Cool. Any other questions? Oh, yes. Yeah. So, most of our plans are actually annual plans as opposed to monthly plans. So, how does that change the kind of retention rates that you're that you're showing in terms of like what's

[38:20] appropriate and what's not? It's actually the same. It does not change. Uh the only difference though is that it's just going to take you longer to know if changes that you're making have an impact. It's literally going to take you a year uh or whatever the the annual uh number is. Um, but I have also worked with products that are annual focused and it's like a it's like a death drop. Like it gets like to 12 and then month 13 it just boom plummets. Uh, but if even still it the same logic still applies. Uh, it just takes you

[38:49] longer to get the data. When I'm over here Oh, hello again. Yes. So when considering activation rates, where do you consider the start? Is it the point where somebody gives you their email address? So, in other words, for what's 100%. And then I mean, when it ends, I think it's pretty obvious when they actually subscribe and have paid. But where's the

[39:09] start point? Yeah. Oh, you're going to get me in a product fight. Um, there's a lot of debate about this. That's why I say that. There's so much debate about this. Okay. When does it start? In my opinion, it is when they ultimately give you some piece of identifiable information. That's my opinion. But there are many uh other product experts out there that say that it could actually start even before then. Um the moment of activation though I do think that I gave both definitions of value metric versus free trial to paid. I do think it's important that teams still understand both definitions of activation in that way. Um and just

[39:44] making it really clear to the team which activation rate you're talking about at a given time. Uh but yes uh there are some who believe or say that you know it starts actually even before they give you identifiable information. In my opinion though it starts there. Um, and then I I would say even from then, yeah, I just I think it Yeah, I think it just depends on like what exactly we're looking at, but I would say it probably

[40:08] starts from that point. Any others? These are great questions. Yeah, one over here. Hi. Other side. Can you hear me? Uh, nope, not really. Oh. Oh, sorry. Sorry, you were telling me what to do. My bad. [laughter] So, yeah, one of the things that um we've got that um resonated is the number of conversations we have with our customers where they say, "Oh, if I only did XY Z," and we're like, "Yeah, it's there." And uh so that product marketing, what have you seen that really works in that space? Because we, you know, we we communicate with them, we send inapp messages and so on and so

[40:52] forth. It's amazing how many people still just are oblivious to some of the new stuff that we've got that genuinely fixes their problems. Yeah. Okay. So, I think there's two aspects to this. I think the first, to be honest, is going to be UX and design, which may make some of y'all cringe because you're like, "Oh, no. She's

[41:09] going to tell me to make my app pretty." Um, but some of it is UX and design. And I think if you have a team of excellent UX designers or even like a UX consultant who can come in and and show you like this is what is uh possibly preventing people from literally seeing uh software is ultimately visual. Um so it could very well be that. I think the other side to this is what are the ways

[41:31] that they actually do like to engage. I'll be honest though, there's going to be a percentage of people who they're just in the Caribbean we say God bless the dead. God bless the dead. They're not paying attention. They're just not going to notice. But I would say when it comes to how we're engaging customers, sometimes um we can create a really engaged base by um not just like creating content, but creating like experiences. Uh which is probably like it's a little bit hard to say like specifically do this. Um but I like to think of it like if you create a very engaged customer base, then when you do

[42:04] announce new things, they're going to pay attention. They're going to notice. Um this is much easier said than done. I think it ultimately depends on what is engaging or interesting to your customer base. So, when you do make announcements, they're aware. Um, one of my favorite things though that I've seen some companies and some of my clients do is they'll do um like weekly webinars uh

[42:23] and also weekly like community events. So, maybe customers can be other customers. This might not work for everyone of course, but those are some like some examples of creating customer engagement. So, when you do make announcements, they're paying attention. We have time for just one more and we already have that person. [laughter] Awesome.

[42:43] Awesome. Uh well, first off, Asia, thank you for answering everybody's questions and the great presentation. Um we have an issue I think with uh packaging like figuring out what to put in each of the packages that we have. And you were talking about using the I think the max diff uh to figure out what to put in each package. Can you talk a little bit more about

[43:02] that? Like how does it actually work? What you actually do? Yeah. Yeah. Yeah. Okay. So I'm going to recommend uh of course max diff surveys along with doing jobs to be done research grown I know uh you've seen me speak you know I'm going to talk about this um but okay so what I will say is when it comes to deciding what your plans are or should be if you understand again what are the customer outcomes and what are the customer goals you may discover that maybe some people would prefer to be charged based on what they want to accomplish and then we use the max diff survey to survey those people

[43:38] and then say okay great prioritize these features. Um max diff surveys the way the the charts and graphs themselves are prioritized. So people who say that like this is most important to me uh you're going to see that across a data set. So for example maybe you've got um I can create charts I can send emails I can send text messages. You may find that one cohort of customer is like I care

[44:02] the most about sending text messages. another coord maybe cares more about creating charts. Um, you could create plans for those or you could say here's maybe a few different plans. Um, this one is geared for this particular part of the market. It includes those features based on that max diff survey. It's a very simplified example. Uh, but you can run several max diff surveys in one survey. So you could say help me like what is important to you these features. Um and then you can also say how would you like to be charged? So think about like the value metrics in your product. Maybe you're charging

[44:37] based on the volume of users. Maybe you're charging based on the volume of usage of some in some way. You can also have them say um you know what's most important to you in that way. And you may also find that some cohorts of customers are like charge me by user. Like I could do that all day long. And you might find that there are others that are like don't do that. Charge me by this. um it's tough to explain like how it all comes together, but when you have that data in front of you and you're analyzing it, you'll start to notice patterns and you'll also then use

[45:07] that to create experiments. Um usually with pricing work that we do, we have about two to three pricing experiments cuz you're you're not really going to know until it meets reality, right? Um but then of course we'll then conduct interviews and then we'll say, okay, like which one seems to be the one and

[45:22] then there's always a lift and shift. You may pull a feature into this and make this an add-on and make changes from there. But it's definitely iterative. Uh, and then of course nothing is better than actually executing it and seeing what happens. [applause]

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