Mastering Product Experience

We also envision a new organizational culture emerging, geared toward generating Product-Qualified Leads (PQLs) rather than Marketing-Qualified Leads (MQLs).

In the process of getting these accounts to adopt our product and realize its full value, we discovered interesting patterns that separated early adopters from our early majority.

Along the way, we pinpointed our ideal account size and the sequence of core features that, once adopted, would lead to successful adoption and renewal (we called those “Golden Features”). Our goal was now to influence user behavior and guide customers to use these Golden Features through our webinars and e-mail marketing campaigns, but those marketing tools were ineffective—mainly because the timing didn’t match the context of what our users were doing with our product.

It needed to figure out how to: Get validated metrics about current product usage compared with customer lifetime value (CLV) Drive strategic product decisions based on empirical facts Tie bookings and revenue to engineering resources Increase adoption to newly launched products, set measurable goals, and take effective actions to improve bottom line results

3.6 Embracing a Bottom-Up Sales Strategy

Trello, Zoom.us, and Asana drive customer acquisition with a bottom-up sales strategy, thus getting individuals in organizations to use their products first; and if the product is valuable for them, the rest of the organization is more likely to adopt it.

When SaaS companies understand in-product customer journeys and where a customer is in the lifecycle, teams can segment customers into meaningful groups to address individual needs and goals. This strategy of understanding the behaviors that drive customers to the next lifecycle stage is more effective in increasing product adoption and engagement.

CUSTOMER JOURNEYS

What are the most important customer journeys? What milestones advance the customer along the lifecycle? TOUCHPOINTS, INTERACTIONS, AND ENGAGEMENTS. What are the most optimal touchpoints and interaction for each customer journey? Can some be eliminated or simplified?

Table 5.1 - In-Product vs. Outside-of-product Customer Engagements

The velocity with which a prospect moves through the lifecycle to reach the next stage is a very important factor to consider and prioritize. Shorter time to value will likely correlate with higher probability to close and to become a highly satisfied DAU.

In essence, customer lifecycle optimization means creating an ongoing process of sensing and responding to customer behaviors and feedback. The rate of growth in SaaS correlates with how effectively the company is creating loyal customers who renew or purchase higher subscription levels. We call this a LOYALTY LOOP, a continuous process of delivering substantial value and customer experience to keep customers using the product, adopting new features, increasing usage, and renewing.

An Engagement Loop uses product usage data to influence prospects and customers to re-engage. A Loyalty Loop delivers substantial value and experience to keep customers using the product and adopting new features, leading eventually to renewal.

The first step in understanding the customer experience is to change from a sales process perspective to a buyer process perspective.

Customer lifecycle thinking helps teams and departments understand and respond to how prospects and customers buy. Let’s be clear: Customer lifecycle is about understanding the buying process from the perspective of the customer, rather than a sales process from the perspective of the seller.

Traditionally, marketing is responsible for generating awareness and interest in the form of leads. Lead nurturing also falls under marketing. Sales teams close deals, and customer success oversees the customer onboarding process post-transaction, ensuring customer satisfaction, which ultimately is measured by retention and churn rates.

In his book Sales Acceleration Formula, Mark Roberge explains how Hubspot changed sales compensation plans to address a growing customer churn ratel.

Undoubtedly, the marketing, sales, customer success, and product teams should all be responsible for the customer experience. It is not easy to do. The key is for organizations to align goals and metrics around the customer experience across departments.

To be successful at providing a personalized customer experience, your organization needs a single system of record for all customer profile, company, and behavioral data.

Wondering if your organization is suffering because of these issues? Ask yourself these questions:

A product analytics solution can help teams understand how users engage with the product, but these solutions are often missing the customer engagement piece—or worse, they can’t really connect in-product behavioral data with account data (subscription details, customer lifecycle stage) and profile data (name, title). Organizations need a unified, 360-degree collection of data, generated by pros-pects and customers while using the product, that can serve as a single source of truth.

For example, marketing teams not only need to drive awareness via product trials and signups, but also track if prospects are becoming high-value customers. Revenue is a primary goal for sales teams, but CLV should also be used to evaluate the team’s performance.

8.1 The Four Essential Elements of a Product-Led GTM Strategy

What channels enable the optimal CAC?

9.1 The Four Steps to Leading with a Product-Led Strategy

Step 1: Drive prospects to try the product

First, marketing uses a single CTA, where the signup page becomes a personalized landing page, so instead of creating multiple landing pages and lead forms, as was the case in the MQLs era, marketing can use a product signup page as a landing page for testing and optimizing conversions. Second, a product-led approach provides marketing teams with a new dimension of data: product usage. They can, in turn, use this to develop and offer higher-quality thought leadership content and build marketing campaigns focused on profitable customer segments with a higher potential CLV.

effective. In other words, understanding how customers use your product can directly impact your content strategy and marketing campaigns.

Companies such as Atlassian, Github, and Twilio focused on the developer market, and started with freemium.

The cost to serve free customers (who never upgrade) must be balanced with enough paying customers to enable a sustainable business.

There are many ways to structure a freemium offering, including feature-limited, capacity-limited, seat-limited, customer-class-limited, support-limited, and time- or bandwidth-limited.

Here are questions for your team to ask when considering a freemium model:

How will we nurture and prioritize freemium users that are ready to purchase?

Make sure you articulate how different the user experience is between free and paid versions; prospects need to know what they’re missing.

Measuring free trial success Measuring the effectiveness of a free trial is necessary for optimization and experimentation purposes. These are common metrics for measuring success:

TIP: Analyze prospects’ behaviors during free trials and identify key triggers that cause them to move along their journeys toward realizing initial value.

Prospect (or user) onboarding is how a prospect moves through initial signup, experiences initial value, and reaches PQL status. It is designed to help users become familiar with the product and realize initial value as soon as possible.

How Aptrinsic onboards prospects Figure 9.2 outlines how we at Aptrinsic think about onboarding our prospects and customers.

Our onboarding process may look similar to others, but a couple of notable distinctions make this a product-led approach. First, we base our nurturing campaigns on in-product behaviors. Second, we clearly define a PQL as a prospect who completes milestones one and two (installed JS and set up our Product Mapper). As soon as a prospect reaches PQL status, our SDR is notified to follow up with the prospect to offer a personalized demo of the full product.

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How to Ensure a Successful Prospect Onboarding Experience

Here are nine things you should always do when onboarding prospects.

Connecting onboarding goals with milestones enables your teams to know where prospects fall off and why. Additionally, every milestone should end with a prospect receiving new value from your product. Hitting a milestone should feel like a completed task.

GOAL: Prospect (account) launches first onboarding experience for its customers and sends first engagement campaign.

For example, InVision’s five-step initial signup process doesn’t ask for things that aren’t necessary such as uploading an image for your avatar or connecting to social media sites. These actions don’t help prospects reach their initial value and understanding of the product, so it’s wise not to include them in onboarding.

With a product-led strategy, a PQL serves this purpose. It is essentially an activated user that has realized initial value within your SaaS product, and is showing enough interest to trigger your sales team to engage with that prospective customer.

at Aptrinsic, a PQL is a prospect that completes Milestone 1 + Milestone 2. The most effective way to determine your formula is to get your marketing, sales, customer success, and product teams together to collaborate on an agreed-upon definition.

6. Personalize the onboarding experience with custom journeys If inviting a prospect’s team members into the trial is part of your onboarding process,

Setup wizards, product tours and tutorials, walkthroughs, and tool tips are examples of ways to design personalized onboarding experiences.

7. Nurture with personalized communication An onboarding experience can take a prospect an hour, a week, or even a few months. That said, personalized communication can accelerate the process. E-mail and in-product messages are two primary channels to re-engage and guide prospects when they abandon onboarding journeys. TIP: In-product messages are effective for influencing customers to engage in specific ways, because they’re already in the product. You can configure e-mails to be triggered to send automatically based on a prospect’s action or inaction, reminding them about product value and driving them back into the product with a single CTA. Other examples of action-based (or time-based) communication triggered by a specific action or inaction include welcome e-mails and notifications that the app started collecting data or that a team member joined the product. Here is an example of a time-based trigger: a prospect leaves without completing the journey to initial value, and within 24 hours receives an e-mail reminder encouraging a return to the product to complete the journey.

When using nurture: Behavior-based (or action-based) communication works best Time-based triggers help engage at the right time and in the right channel Transactional and behavior-based communication can be delivered with e-mail or in-product messaging

9. Measure and track prospects through onboarding When it comes to tracking the onboarding experience, you must focus on these two aspects: Understanding where prospects fall off (abandon the journey) Understanding the velocity at which prospects move through milestones

For tracking, consider: Number of prospects signed up Number of prospects that started vs. number who completed journeys and milestones How prospects complete each step in the journey To recap, here are the nine steps: Define onboarding goals and milestones Simplify customer journeys Get to initial value quickly Address “zero data/empty state” Define a PQL Personalize the onboarding experience with custom journeys Nurture with personalized communication Document important customer journeys Measure and track prospects through onboarding

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Step 4: Reaching PQLs and converting to customers As prospects progress through the customer lifecycle, you want them to reach two important milestones. First, newly signed prospects should reach PQL status. Second, you want them to quickly convert from PQL to a closed deal.

To accelerate the sales process, your teams should find the best way to show how your product provides more or higher-value benefits when compared to the other options. Doing so—and moving prospects through the acquisition stage—means addressing the common reasons why prospects choose not to buy:

Prioritize prospects and PQLs based on in-product behaviors

Automate self-service checkout for low-touch customer segments

Automate just-in-time personalized engagements Action-based and time-based engagements can automate some qualification steps that were traditionally part of an SDR process. For example, you can create in-product messages and communications as well as emails to influence prospects to get back into the product and move toward a PQL conversion.

In a traditional GTM approach, marketing and sales build custom campaigns targeting specific accounts based on potential ASP and CLV. With a product-led approach, cross-functional teams identify profitable customer segments among prospects in free trials, and design campaigns to target these accounts through social media and advertising channels. Retargeting meaningful personas in the accounts that are in the free trial process enables more efficient spending and higher ROI.

Deliver thought leadership content at every stage of the customer lifecycle In order to accelerate the sales cycle, cross-functional teams need to understand all personas involved in the buying process. Each persona has a different concern, objection, and perception. One way to engage various personas is with thought leadership content that addresses their individual priorities as well as team-based needs around common concerns and goals.

Create targeted product demos for trial/freemium customers

For example, let’s say your prospect realizes initial value via a free trial, but has not reached PQL status. Your team can offer a sales-guided product demo with an in-product CTA. If the prospect responds to the CTA, you can accelerate their conversion to a PQL.

9.2 Key Takeaways

The first step to product-led customer success is to know your product champion.

If the product champion is not a daily end user, your company should find the most active and engaged user that fits the role of the champion.

To get at this understanding, answer the following: How often do your most profitable customers log in? What features and product-usage frequencies correlate with renewals? What early customer behavior signs can inform an upsell and cross-sell strategy? What usage metrics help predict a user’s desire to upgrade their current subscription?

Here are examples of scenarios your teams can monitor and design behavior-based triggers around: Decline in engagement Increase in engagement Reaching usage limit Readiness to upgrade

4. Anticipate renewal, upgrade, and cross-sell opportunities with behavior-based analytics Behavior-based analytics provide companies with a better way to predict the right time to ask a customer for a renewal or upgrade.

well. A better way is to monitor customers for specific product behaviors that correlate with higher renewal and upgrade rates. Once these behaviors occur, you call upon automated, trigger-based engagement, either within the product or outside of the product via an established digital channel such as e-mail. For example, if your pricing tiers are based on certain usage, then reaching the upper threshold of usage can be an effective trigger to automate an in-product or e-mail message prompting the customer to upgrade.

You can achieve this goal by combining customer segmentation, customer journeys, and nurturing.

For example, say your company provides a solution to streamline expense reports. Your teams originally designed a “first expense report” customer journey that required users to navigate four pages and five clicks. However, a large portion of your users reach this desired outcome in eight clicks. Seeing this, you could segment these users, and closely guide them through this process with a tutorial or walkthroughs. This use case illustrates an effective way to collaborate and experiment within the product before designing completely new product experiences.

Let’s take Salesforce as an example. Marc Benioff has done a tremendous job making the Salesforce brand the most synonymous with CRM.

In its analysis of how software companies scale quickly5, OpenView Investments discovered three ways Slack is smart about the in-product experience:

11.5 Nurturing and Contextual Engagements

With a product-led GTM strategy, your nurturing is driven by real-time contextual insights. Nurturing (or drip e-mail) campaigns within a product-led GTM strategy are triggered by the customer’s in-product action or inaction. Contextual engagement happens when the right customer receives the right messages at the right time through the right channel.

We believe that, as a new organizational culture emerges geared toward generating PQLs, this new customer-centric approach will fuel the next evolution of GTM strategies. This will move marketing away from mass lead demand generation, to tactics focused on creating and curating customer experiences.

Focusing on product signups Knowing which customer segments are the most engaged helps marketing teams build campaigns that better target customers to increase retention, thus increasing CLV potential. With a product-led strategy, marketing teams can also build better retargeting campaigns, focusing on the most valuable accounts.

Instead, a product-led strategy enables marketing teams to understand prospects on the behavioral level, and build strategies to attract the most profitable segments. Marketing teams that build automated behavior-based triggers during the nurturing phase can better engage potential customers.

Developing thought leadership content based on customer in-product behavior Insight into prospect and customer behaviors and feedback helps marketing create more effective thought leadership content.

Prioritize PQLs and improve forecast In-product behavior provides a more accurate signal of buying intent, which helps sales better prioritize opportunities. At the same time, sales teams that determine the stage of each prospect on their trial and adoption journeys can improve forecast accuracy.

Optimize the land-and-expand strategy With a product-led strategy, sales teams are better equipped to drive low-touch prospects to self-service and focus resources on the expansion of highly valuable accounts.

Let’s quickly review the seven user states in the customer lifecycle:

The initial goal for SaaS companies is to convert visitors to signups. At signup stage, the team can collect profile, company, and in-product behavioral data. Using this data allows teams to deliver timely engagements with the customer through in-product, mobile, or e-mail messages. Then companies can nurture prospects until they show enough interest in the product based on their product usage. Prospects that reach PQL stage are engaged by the sales team to assist in buying or in helping them increase product usage. Tracking customer behavior inside the product enables companies to predict and mitigate customer churn, and forecast CLV.

Measuring Effectiveness with Conversion Rates Conversion rate from one state to the next in the lifecycle helps companies understand what part of the lifecycle can be improved. At the same time, sales can more accurately forecast when they understand conversion rates.

MRR Expansion Rate (aka Net Revenue Retention Rate) is the percentage of MRR that is gained due to upsells and cross-sells to existing customers for the period for which MRR expansion is calculated. It is calculated by dividing the amount of expansion MRR by the starting MRR.

The table below summarizes these conversion and effectiveness metrics. Table 13.2 - Effectiveness Metrics

You can find a more detailed analysis of churn metrics in the iconic post “SAAS METRICS 2.0 – A GUIDE TO MEASURING AND IMPROVING WHAT MATTERS”2 by David Skok, general partner with Matrix Partners.

Understanding how long it takes for prospects and customers to move from one customer lifecycle state to another helps companies in two ways. They can better forecast revenue and also understand what part of the lifecycle is the longest and how to shorten it.

The table below provides examples of customer acquisition metrics. Table 13.4 - Customer Acquisition Funnel Metrics

There are three categories of data that define PQL state: profile, company data, and CBI. CBI is an essential aspect of a product-led strategy, as it provides insights into customer intent and predicts how likely a user is to progress to the next stage of the customer lifecycle. So, essentially: PQL = profile + company + CBI

CBI includes, but is not limited to, the following metrics: DAU/MAU, or the number of logins over a period of time Average time spent in-product per session Number of completed core use cases Number of features interacted with Engagements with in-product notifications

The table below summarizes the core metrics for a SaaS company using a product-led GTM strategy. Table 13.5 - Essential SaaS Metrics

Figure 14.1 -The Three Pillars of a Product-Led GTM Strategy

The cornerstone of a successful product-led strategy is understanding: Holistic customer experiences Where they are in their customer lifecycle What journeys have been completed Details about customer experiences across multiple interactions

14.2 Pillar #2: Engagement Engine

Here are two tactics to improve the effectiveness of customer engagement: automating personalized engagement, and omnichannel engagement delivery.

An example would be reminding someone via e-mail to log in to your app when they haven’t done so within a set period of time.

Companies that learn from their customers and iterate fast will be more successful than those that don’t. That’s why experimentation has become mandatory in a SaaS environment.

For example, you could create onboarding experiences for three or four customer segments and test each newly signed-up customer in real time, and adjust your onboarding flows accordingly.

We named a few of them throughout this book: Slack, Zoom, Asana, InVision, Expensify, and Dropbox. These companies realized that nothing is more valuable than understanding how customers use, interact with, and feel about their products.

To achieve that goal, SaaS companies must do three things: Assemble unified customer profile data (including in-depth product usage data) Invest in tools that enable near-real-time customer engagement Design experiments that yield deep and continual insights

However, without focusing on behavioral-driven product adoption, the cost of providing a free offering almost certainly outweighs the benefits.

Gating content as a way to generate leads has become increasingly less effective. Aside from the fact that prospects do not want to share contact information and would rather evaluate a product via a trial or freemium option, lead forms create inefficiencies in the customer acquisition process. A large portion of leads are prospects that will never be your customers: people who do research on the subject, students, and prospects that don’t fit your ideal customer profile. This fills your database with bad lead data, which can be a big problem. Bad data clutters your marketing automation and CRM solutions with duplicates and bogus data. Depending on how you slice and dice SaaS industry data, the average conversion rate from visitor to lead is around 5 to 15 percent. While the research findings vary, the conversion rate from lead to a won deal is anywhere from 1 to 10 percent. Marketing teams spend a majority of their resources and efforts nurturing leads that are never going to convert. (Location 1286)

Nurturing and scoring techniques become arbitrary marketing, automating and personalizing interactions with prospects based on data that is only minimally correlated with buying intent. Plus, most organizations cannot personalize e-mail nurturing campaigns, because they lack customer in-product behavioral data. As a result, companies experience a much-talked-about marketing-sales gap, where marketers pass prospects to sales that aren’t ready to buy, and sales complains about lead quality. (Location 1302)

Instead of driving prospects to lead forms, a product-led GTM strategy drives prospects to sign up for a product or free trial. From that moment on, marketing teams can analyze how prospects use the product to nurture or re-engage them until they are ready to buy. A product-led GTM strategy streamlines the customer acquisition process for SaaS organizations by focusing on one entry point for prospects. When prospective customers sign up for a freemium or free trial, they show a higher buying intent. They also afford the company’s teams the opportunity to analyze how prospects interact with the product in their natural environment8. Furthermore, marketing teams using behavioral data can re-engage customers that have left the product and haven’t returned. Product-led GTM makes it possible for companies to personalize the onboarding experience, and collect insight into what features drive the most value. It also helps pinpoint steps in customer journeys that cause a negative customer experience and result in product abandonment. Today’s sales process rarely incorporates an efficient way for SDRs and AEs to apply product usage data to prioritize their workflow and outreach to prospects. However, sales processes can change in this way when the organization focuses on PQLs instead of MQLs/SQLs. Sales teams can use behavioral data to better prioritize and forecast9. Product leaders can get early feedback on what features drive product growth, what in-product journeys are more effective, and what onboarding process results in higher product adoption. Simply put, this approach works for both the company and prospects by enabling a frictionless buying experience. (Location 1333)

What is important to highlight is that a large portion of the traditional customer acquisition process happens outside of the product. This prevents companies from collecting critical behavioral data that can help improve nurturing and customer interaction. (Location 1359)

Marketing teams are in charge of the customer lifecycle up until prospects become MQLs. SDRs are responsible for quality marketing leads and generating sales-ready (or sales-qualified) leads (SQLs). AEs focus on converting SQLs into won customers, and then pass them to the customer success team, whose task is to onboard newly acquired customers and ensure they become active and loyal customers. (Location 1363)

Essentially, a product-led GTM strategy leverages the product as a leading channel through which the company acquires, retains, and grows its customers. It’s based on in-product customer behavior, feedback, product usage, and analytics. (Location 1411)

8.1 The Four Essential Elements of a Product-Led GTM Strategy Developing an effective product-led GTM strategy requires companies to analyze each of the four must-have elements of a GTM strategy by answering these questions: #1 Customer (WHO) QUESTIONS: Who is your ideal customer? What pains do your customers experience? Can you describe a day in the life of your target customer? How does your product fit into the customer’s daily activities and workflow? OUTCOMES: Ideal customer profile (ICP) Strategic messaging #2 Market (WHERE) QUESTIONS: What markets do you want to pursue? How big is your addressable market? Is it growing, stable, or declining? Who are the biggest players in the market? OUTCOMES: Market segmentation and analysis Competitive positioning #3 Product Offering and Pricing (WHAT) QUESTIONS: What product are you selling? What is your product’s unique value proposition? How do you describe your product’s value? How are you different from your competitors? What is your product pricing strategy (based on usage, features, capacity, seats, etc.)? How do you know which features to build next? OUTCOMES: Product offering Value proposition Pricing strategy Product vision #4 Channels (HOW) QUESTIONS: What are the most effective channels to reach your target customers? What are the most popular publications that your target customers read? What social media channels do your customers use the most? What channels enable the optimal CAC? How do your marketing channels correlate with product signup rates and won deals? OUTCOMES: Demand generation strategy Content and distribution strategy Paid media strategy PR plan (Location 1420)

In the early stages of GTM, finding product/market fit is critical, while a scalable, repeatable customer acquisition process is less so. However, after you find the perfect product/market fit, you should focus on optimizing your customer acquisition process to reach ideal customers in a scalable, repeatable, and profitable way. (Location 1481)

Step 2: Design your free trial process or freemium offer The two most popular pricing models in SaaS are freemium and free trials. Let’s finally define freemium and free trial strategies: Freemium is a customer acquisition model that provides access to part of a software product to prospects free of charge, without a time limit. Free trial is a customer acquisition model that provides a partial or complete product to prospects free of charge for a limited time. Typically, a free trial runs for 14 or 30 days. (Location 1527)

There are many ways to structure a freemium offering, including feature-limited, capacity-limited, seat-limited, customer-class-limited, support-limited, and time- or bandwidth-limited. Lincoln Murphy’s2 article provides a good overview of seven types of freemium to consider. Here are questions for your team to ask when considering a freemium model: How much will it cost to sustain a large segment of free customers? Is a freemium model scalable for your business? Can we provide enough value for users to realize product benefits but still limit value to entice them to pay for a subscription? How difficult is it to get started with the product? Does it require technical integration and broader organizational approval? How will we nurture and prioritize freemium users that are ready to purchase? Are we attracting the right kind of customer (i.e., a customer in our target market with a real need, an urgency to purchas,e and a desire to expand the subscription)? To recap, freemium makes more sense when your organization is facing: A large addressable market Low costs to serve free users Low barriers/commitment for users to start with your product If your company meets these criteria, freemium may be the way to go. Note: Make sure you articulate how different the user experience is between free and paid versions; prospects need to know what they’re missing. Consider a free trial strategy before making a choice. (Location 1562)

TIP: Design a signup process that only highlights one action per step. Avoid asking for personal or contact information that is not essential to get started with your product, unless it increases the value your product can deliver. Also, track the steps in the process so you can pinpoint where prospects fall off and become inactive. Initial value and customer journey considerations Prospects who sign up for your free trials should experience initial value (or a desired outcome), ideally in an experience that doesn’t turn them off. Put another way, you want prospects to start using your product with as little friction as possible. That’s means don’t ask about company size, job title, revenue, industry, or credit card information as a signup requirement. Next, you must enable them to accomplish their goal as easily as possible to reach the initial value. Kintan Brahmbhatt, Director of Product Management at Amazon, describes this as getting them to “perform one meaningful task...that sets expectations for a future engagement.”3 To reach initial value, prospects need to go through a core journey that represents a set of actions leading to desired value. (Location 1604)

Measuring free trial success Measuring the effectiveness of a free trial is necessary for optimization and experimentation purposes. These are common metrics for measuring success: Number of trial signups, PQLs, and closed deals Average time from signup to PQL (time to initial value) Trial-to-PQL conversion rate Average engagement based on features and timeframe Frequencies of login (daily, times/week) Number of prospects per account (Location 1653)

Step 3: Create onboarding experiences (Location 1661)

9.2 Key Takeaways Convince prospects to try the product with a single CTA, such as a product signup page. Understand the advantages and disadvantages to freemiums and free trials, and choose the one that works best for your company: Freemium is best with a large addressable market, low costs of serving free users, and low barriers to start Free trial is best if it can deliver or highlight as much product value as possible in a limited time Any part of a free trial can be personalized, including initial signup, initial value, and customer journey considerations, such as trial duration and usage frequency. Steps for successful onboarding include: Define goals and milestones. Simplify the customer journey Get to initial value quickly Help prospects with empty state during initial signup Define PQLs Personalize onboarding with custom journeys Nurture with personalized engagement, such as behavior-based communication, time-based triggers, and e-mails or in-product messaging Document important customer journeys Measure and track prospects through onboarding—where they fall off, and at what rates they complete onboarding Shorten the time it takes prospects to reach the PQL stage by: Prioritizing in-product behaviors based on their value to you and your customers Automating self-service checkout Initiating just-in-time personalized engagements Prioritizing target accounts with a higher potential to close Delivering thought leadership at every stage of the customer lifecycle Using targeted product demos (Location 1886)

We believe that, as a new organizational culture emerges geared toward generating PQLs, this new customer-centric approach will fuel the next evolution of GTM strategies. This will move marketing away from mass lead demand generation, to tactics focused on creating and curating customer experiences. This approach is more efficient and more CAC-effective, and increases CLV for companies. Focusing on product signups Knowing which customer segments are the most engaged helps marketing teams build campaigns that better target customers to increase retention, thus increasing CLV potential. With a product-led strategy, marketing teams can also build better retargeting campaigns, focusing on the most valuable accounts. Focusing on the right segments and nurturing prospects to PQLs Vanity metrics, such as website visits and scoring leads based on whether a prospect opens an e-mail, do not provide marketers with an accurate picture of the most profitable target customers. Instead, a product-led strategy enables marketing teams to understand prospects on the behavioral level, and build strategies to attract the most profitable segments. Marketing teams that build automated behavior-based triggers during the nurturing phase can better engage potential customers. (Location 2237)

Table 1.1- The Evolution of the SaaS Industry First wave: from on-premise to the cloud Salesforce pioneered and popularized the SaaS model for enterprise software. In the early SaaS 1.0 wave, cloud solutions emerged as the replacements for on-premise solutions, which involved purchasing and installing expensive servers and software and enduring a drawn-out onboarding process. This shift to the cloud provided a tremendous value-add for companies. Early SaaS products were often less expensive and more convenient than traditional client-server options. The SaaS revolution lowered entry cost, and provided flexible pricing with a subscription model. Negotiating a multi-year contract with a vendor became a thing of the past. Buyers no longer had to make the risky and often irreversible decision to buy on-premise software that their company would be stuck with for years to come. Moreover, SaaS companies made obsolete the switching costs when an organization invests enormous resources on hardware, support, and employee training. Second wave: new processes and workflows plus affordability SaaS companies in the second wave (the SaaS 2.0 era) brought more features to customers at a lower cost. These new SaaS solutions helped companies evaluate their current processes and tactics to find more efficient ways of solving business problems. In an essay, Tomasz Tunguz, venture partner at Redpoint, called SaaS 1.0 companies the “displacers”, and SaaS 2.0 companies the “disruptors.”19 He points out that the shift from SaaS 1.0 to 2.0 moved from a system of record to workflow solutions. Earlier systems of record we associate with the SaaS 1.0 era provided a single source of truth about a particular department. Workflow solutions, associated with the SaaS 2.0 era, allowed companies to change and improve organization-wide processes that enabled them to achieve higher efficiencies and effectiveness. Third wave: customer experience and personalization The third wave will turn SaaS products into online services, and will be based on interactions with software rather than with people. This changes how people try, buy, and use software. Buying used to be a more predictable and linear process, requiring direct interaction between buyers and sales teams. But the buying process has dramatically changed. Customers now research, evaluate, select, and share experiences that feel more like consumer experiences, involving numerous interactions across multiple touchpoints. Thanks to digital transformation, buyers can access more product-related and thought leadership content through a variety of channels and devices, including the web, mobile, wearables, social media, and online customer reviews. This leads to more self-directed customer journeys during the buying process. According to Forrester Research, two-thirds to 90 percent of the buyer’s journey20 is completed prior to engaging a salesperson. The challenge is to effectively manage customer experiences and journeys for a… (Location 261)

Let’s look at a few examples of touchpoints, interactions, and engagements for a SaaS company. Table 2.1 - Touchpoint, Interaction, and Engagement Examples in SaaS Touchpoints Definition Examples Exposure Seeing a digital or print ad Noticing a company’s social media post in the feed Recognizing a corporate logo at a conference Reading press releases, annual reports, or blogs Receiving and opening e-mail Interactions Two-way communication Commenting on a company’s social media post Messaging with a company’s customer support Chatting with an employee at an industry conference Sharing an article or social media post Visiting a website Engagements Commitment or agreement to act Signing up for a free trial or freemium Signing up to attend a webinar Agreeing to a call with a sales rep Buying a product or service We recognize that CUSTOMER INTERACTIONS and CUSTOMER ENGAGEMENT are often used in the industry to mean the same thing, and while we provide a strict definition for each term in this book and believe the difference is significant, to accommodate industry acceptance of the terms being interchangeable, we will treat them as such. (Location 375)

Customer experience as a growth engine The long-term economic success of any SaaS company is based on its ability to optimize Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV). In simple terms, a company needs to make more money from a customer over the lifetime of the relationship than it spent on winning her over. How can subscription-based companies become more profitable at a faster rate by increasing the difference between CLV and CAC? (Location 467)

It starts with the experience of a buyer. A study by Forrester has shown that B2B buyers prefer to self-educate, rather than talk to a sales representative to learn about a product, by a factor of three to one8 (Location 471)

A critical step for SaaS companies is to move prospects from free trials to becoming customers. At this stage, companies can engage them with more personalized experiences based on in-product behavior. Examples include relevant onboarding experiences tailored to the user’s role, and what that person is trying to accomplish with the product. Another example is a follow-up e-mail that encourages prospects to continue with the trial they started, but then abandoned. Free trials and signups that are personalized for customers directly impact CAC and reduce the odds of inactivity or churn early in the customer lifecycle. (Location 481)

In this chapter, we cover six essential steps for evolving to become an experience-centric organization: Old Way New Way Focus on the sales process Focus on the buying process Tell me about your product Show, and let me try, your product Align around funnels/product lifecycles Align around customer lifecycles Organize around individual interactions Organize around complete journeys Operate in siloed teams Operate as a customer-experience-oriented organization Execute on a traditional GTM strategy Execute on a product-led GTM strategy First, let’s see how the customer acquisition process is changing. (Location 558)

To summarize, the process of transitioning to a customer-experience company follows these steps: CUSTOMER LIFECYCLE. What is the customer lifecycle for our most profitable customers? How can we make this lifecycle as rewarding and frictionless as possible? CUSTOMER JOURNEYS. What are the most important customer journeys? What milestones advance the customer along the lifecycle? TOUCHPOINTS, INTERACTIONS, AND ENGAGEMENTS. What are the most optimal touchpoints and interaction for each customer journey? Can some be eliminated or simplified? (Location 849)

A customer journey can consist of online and offline interactions. Digital (or online) touchpoints can happen outside of a product, or in-product. Remember, in Figure 3.1, the x-axis divides the customer lifecycle into out-of-product and in-product engagement areas. (Location 862)

John starts the journey by clicking on a social media post, then visits the website and signs up for a free trial; the website visit is a non-product engagement. The free trial signup identifies John as a prospect, and from that point, we track all product interactions. John completes the onboarding tutorial, but leaves right after. We send a reminder e-mail to him; John opens it, but doesn’t return to the product. Two days later, we send another reminder to entice John to come back, create a product, and install JS code. This time, John returns to the app and creates a new product that generates a unique code. Since we are not collecting any data for John’s product, we know he didn’t install JS code, so we send a reminder e-mail. The next day, Aptrinsic starts collecting analytics data for John’s product, which means he installed the JS code. The journey to realize initial value is complete. Reaching this milestone allows John to track and analyze his product inside of Aptrinsic. It also allows us to track his product usage and optimize his engagement. (Location 893)

Danielle starts with the same touchpoint as John, and signs up for a free trial; but unlike John, Danielle engages with the product right away using essential product features that showcase the initial product value to first-time users. During the initial free trial signup, Danielle completes onboarding and creates a new product that generates a unique JS code. She then logs in to the product the next day and receives an in-product notification to install the JS code and start collecting product analytics data. Overview of Danielle’s journey: 1VISITED WEBSITE 2COMPLETED SIGNUP/FREE TRIAL 3COMPLETED ONBOARDING TUTORIAL 4SET UP PRODUCT 5LOGGED INTO PRODUCT AND RECEIVED IN-PRODUCT REMINDER 6INSTALLED JS CODE, DATA IS COLLECTED (Location 924)

You’ll see a metric referred to as PQL. That’s a Product-Qualified Lead. We’ll explore this in more detail later in this chapter. For now, know that it’s defined as a prospect that signed up and demonstrated buying intent based on product interest, usage, and behavioral data. (Location 1187)

Table 6.2 - Customer Experience Driven Departments Involved in Customer Acquisition (Location 1191)

For example, PandaDoc found that shorter proposals, sent earlier in the day, with a deadline attached, are signed faster. In its content, PandaDoc shares insights such as these that it has learned by studying how its product is used. In this way, its product-led approach empowers it to create thought leadership content that helps its prospects and customers learn how to be more effective. In other words, understanding how customers use your product can directly impact your content strategy and marketing campaigns. (Location 1521)

13.6 Key Takeaways A product-led strategy changes how companies track the effectiveness of customers moving through different lifecycle stages. Measuring the conversion rate from one state to the next helps companies understand what part of the lifecycle can be improved. With a product-led approach, there are seven states in the customer lifecycle: Visitor Signup/Trial PQL Customer Active Customer Renewed/Retained Churned A high churn rate can put a SaaS company out of business. Velocity metrics describe how long it takes a company to achieve certain milestones. The CBI is the essential (often normalized) metric for a product-led strategy. It measures how engaged your prospects and customers are based on their in-product activity and usage. Customer satisfaction metrics show how engaged customers are, how much value they derive from your product, and whether they recommend your solution to peers. Customer health (or customer satisfaction) should be evaluated based not only on self-reported surveys such as NPS scores, but also analyzed based on customer behaviors. A product-led strategy enables companies to measure in this way. Customers that are stuck using your product can negatively impact your brand. A product-led strategy brings a new dimension by analyzing product features, core use cases, and other product usage metrics to decide what to build next, what feature to discontinue, and/or what customer journey needs a redesign. Aside from basic revenue growth metrics, such as MRR and ARR, SaaS teams need to closely monitor CLV, CAC, ASP, and break-even. Focus on maximizing CLV both by delivering maximum value to customers and extracting maximum value from them. (Location 2567)

4.2 The Four Stages of the SaaS Customer Lifecycle Now, let’s break down the four critical stages of a SaaS customer lifecycle: acquisition, adoption, retention, and expansion (modified based the following Customer Lifecycle framework)3: (Location 757)

Breaking down churn metrics Churn and retention metrics can be calculated in multiple ways; we have provided the most common measurements. While many in the SaaS industry are aware of the importance of tracking churn rate, let’s highlight a few reasons why. (Location 2370)

Here are a few examples of product engagement and adoption metrics that a company should consider: Percentage of users that use a particular product feature or channel (for example, InVision can track the percentage of customers that use a mobile app on a daily or monthly basis) Number of steps or clicks it takes a customer to complete core product use cases (for example, for Expensify, it could be the number of steps or clicks it takes to file and approve an expense report) Average time it takes for a user to complete core product journeys (for example, at Aptrinsic, we track how long it takes prospects to implement our JS code in their products) Percentage of users or sessions where the number of steps or clicks exceed the optimal number (for example, MailChimp can track the percentage of customers that exceed the optimal—smallest—number of clicks it takes to create an e-mail marketing campaign) Average number of days it takes a newly signed-up prospect to fully onboard with the product (for example, Asana can track the average number of days it takes for a new user to create the project, assign tasks, and complete 10 tasks) (Location 2490)

Monitoring CLV vs CAC ratio and breakeven analysis The ratio between CLV and CAC shows how effective and efficient a company is in acquiring, retaining, and growing its customers. No business can sustain a CLV-to-CAC ratio below one in the long term. Such a ratio means the company spends more money to acquire a customer than the revenue it generates from the customer. (Location 2535)

A product-led strategy changes how companies track the effectiveness of customers moving through different lifecycle stages. Measuring the conversion rate from one state to the next helps companies understand what part of the lifecycle can be improved. With a product-led approach, there are seven states in the customer lifecycle: Visitor Signup/Trial PQL Customer Active Customer Renewed/Retained Churned A high churn rate can put a SaaS company out of business. Velocity metrics describe how long it takes a company to achieve certain milestones. The CBI is the essential (often normalized) metric for a product-led strategy. It measures how engaged your prospects and customers are based on their in-product activity and usage. Customer satisfaction metrics show how engaged customers are, how much value they derive from your product, and whether they recommend your solution to peers. Customer health (or customer satisfaction) should be evaluated based not only on self-reported surveys such as NPS scores, but also analyzed based on customer behaviors. A product-led strategy enables companies to measure in this way. Customers that are stuck using your product can negatively impact your brand. A product-led strategy brings a new dimension by analyzing product features, core use cases, and other product usage metrics to decide what to build next, what feature to discontinue, and/or what customer journey needs a redesign. Aside from basic revenue growth metrics, such as MRR and ARR, SaaS teams need to closely monitor CLV, CAC, ASP, and break-even. Focus on maximizing CLV both by delivering maximum value to customers and extracting maximum value from them. (Location 2568)

Table 6.1 summarizes the metrics each department traditionally tracks throughout the customer acquisition process. (Location 1183)

As you probably noticed, the product team is missing from this equation. In Table 3.5, below, we’ve added the product team to show how its goals, activities, and metrics fit with the whole customer acquisition process. You’ll see a metric referred to as PQL. That’s a Product-Qualified Lead. We’ll explore this in more detail later in this chapter. For now, know that it’s defined as a prospect that signed up and demonstrated buying intent based on product interest, usage, and behavioral data. Note also that SDRs shift from simply converting MQLs to helping and guiding users. This is an important distinction, and critical to success in the product-led, customer experience era. Table 6.2 - Customer Experience Driven Departments Involved in Customer Acquisition (Location 1186)

The two primary aspects of customer segmentation are demographics and behavioral data. (Location 2050)

In its analysis of how software companies scale quickly5, OpenView Investments discovered three ways Slack is smart about the in-product experience: During the onboarding process, new users are taken through a tutorial when they first log in. The Help Center lays out next steps for new customers. Triggered in-app messaging encourages freemium users to convert to paid customers once they’ve reached their usage limit. (Location 2120)

CUSTOMER (WHO): Someone at his tenth day in a free trial process TRIGGER (WHEN): Hasn’t completed the journey to initial value MESSAGE (WHAT): Show the benefits of reaching initial value CHANNEL (WHERE): In-product message + e-mail for a personalized experience A customer reaches the tenth day of a free trial and hasn’t yet completed the journey to initial value. This triggers an in-product message and/or e-mail describing and illustrating the benefits of completing the journey. For inspiration, here’s an example6 of one of these e-mails from a company called RunKeeper offering a fitness app. The e-mail starts by pointing out that the recipient hasn’t used the app recently, and includes tips to get started. (Location 2147)

11.8 Key Takeaways There are eight ways to personalize customer engagement: Segmentation: Based on demographic and behavioral data, including interaction with ads, e-mail opens, and website visits. Customer Journey and Velocity: Understand how quickly customers travel through product journeys, and personalize these journeys to help them reach their goals. In-product Behavior and Habits: Understand the how three essential elements—motivation, ability, and trigger—apply to your customer’s day. Moment of Joy: Create joyful moments and use personalized messages to make customers feel empowered. Nurturing and Contextual Engagements: Based on in-product action, know the who, when, what, and where to help customers complete their journeys. Omnichannel and Real-time: Create and quickly deliver contextual engagements that look consistent across channels. Personalize Everything: Every aspect of a GTM strategy and the marketing mix can be personalized. Experimentation: Experiment to gather valuable data that you can’t get anywhere else. (Location 2177)

13.1 Step 1: Tracking Customer Progression Through a Lifecycle A product-led strategy changes how companies track the effectiveness of customers moving through different lifecycle stages: from signup to PQL, from PQL to customer, and from customer to active customer. Each ratio helps identify bottlenecks in the lifecycle where customers experience a value gap and fall off the process. (Location 2298)

13.4 Step 5: Analyzing Product Engagement and Adoption Metrics (Location 2486)