Pod Insights Lenny's Podcast The ultimate guide to product-led sales | Elena Verna About this episode Elena Verna is a leading growth expert with over 15 years of experience in tech. She was SVP of Growth at SurveyMonkey and interim CMO at Miro, where she built high-performing teams that drove significant growth. She recently served as interim Head of Growth at Amplitude and currently advises and is a board member for early-stage startups. In today’s podcast, we discuss:
• What product-led sales is
• How product-led sales differs from product-led growth
• Unpacking common acronyms: PQAs, PQs, PQLs, and MQLs
• When and how to consider investing in PLS
• Metrics for identifying qualified accounts
• The team, data, and tooling required for implementing PLS
• Common pitfalls to avoid when adding PLS
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Find the full transcript at: https://www.lennyspodcast.com/the-ultimate-guide-to-product-led-sales-elena-verna/#transcript
Where to find Elena Verna:
• LinkedIn: https://www.linkedin.com/in/elenaverna
• Twitter: https://twitter.com/elenaverna
• Newsletter: https://elenaverna.substack.com/
Where to find Lenny:
• Newsletter: https://www.lennysnewsletter.com
• Twitter: https://twitter.com/lennysan
• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/
In this episode, we cover:
(00:00) Elena’s background and what she’s doing now
(07:13) Product-led sales (PLS) vs. product-led growth (PLG)
(12:47) How sales solutions can be applied to enterprise-level problems
(15:06) Defining enterprise-level problems
(17:51) How product-led companies start with PLS
(20:30) When to add sales
(22:36) Two ways to get to PLS
(24:27) Why every sales-led-growth company needs to add PLG
(26:50) Two ways you can own revenue
(28:37) PQAs, PQs, PQLs, and MQLs
(37:17) How to get started adding PLS
(42:01) Metrics to identify PQAs
(47:00) Why sales should be carefully applied
(49:07) Systems, infrastructure, and tooling
(50:59) The people and resources required for PLS
(53:42) Why you should have a clear ROI for every new hire
(55:05) Why product needs to be accountable for monetization with PLS
(59:57) Revenue-based goals product teams should have
(1:06:28) Common pitfalls startups run into when implementing PLS
(1:09:15) Benchmarks and the amount of time needed for implementing enterprise solutions
(1:12:04) Using onboarding to profile users
(1:13:08) Will AI be the next sales movement?
Referenced:
• Elena’s previous episode on Lenny’s Podcast: https://www.lennyspodcast.com/elena-verna-on-how-b2b-growth-is-changing-product-led-growth-product-led-sales-why-you-should-go-freemium-not-trial-what-features-to-make-free-and-much-more/
• Miro: https://miro.com/
• Figma: https://www.figma.com/
• Elena’s PLS funnel diagram: https://www.linkedin.com/posts/elenaverna_b2b-product-led-sales-guide-activity-7052664130763206658-yxLK/?utm_source=share&utm_medium=member_desktop
• Elena’s memes: https://www.elenaverna.com/memes
• Mixpanel Signal reports: https://mixpanel.com/blog/mixpanel-signal-launch/
• Amplitude Compass chart: https://help.amplitude.com/hc/en-us/articles/235147347-The-Compass-chart-discover-your-users-a-ha-moments
• Looker: https://www.looker.com/
• Tableau: https://www.tableau.com/
• Salesforce: https://www.salesforce.com/
• HubSpot: https://www.hubspot.com/
• Marketo: https://nation.marketo.com/
• Waitlist for PLG course on Reforge: https://www.reforge.com/programs/product-led-growth
Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email [email protected] .
Transcript 13,115 words · 2 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Elena Verna? The most important thing in product-led sales is that there is a different configuration internally of collaboration that needs to occur. In traditional sales world, marketing creates pipeline for sales. Sales sells product. Product engages with the paid user to drive retention. In a product-led sales, product acquires and activates a customer, and product creates pipeline for sales. So, relationship is not that there is a go-to-market org with marketing and sales, and product just kind of throws features across the fence for them to sell. The collaboration here is between product and sales.
0:43 Elena Verna? But that means that product has to take on accountability over pipeline. The worst thing that you can do is to say, "I'm gonna do product-led growth, or I'm gonna do product-led sales, and I'm gonna do it in marketing." Recipe for disaster, you will be failure mode within six months, because product has to take accountability over selling of the product itself.
1:09 Lenny Rachitsky? Welcome to Lenny's Podcast, where I interview world-class product leaders and growth experts to learn from their hard-won experiences building and growing today's most successful products. Today, my guest is Elena Verna. That name sounds familiar. Elena is a return guest, and you be the judge, but I think this episode is even better than the first, which is a very high bar, because that first episode continues to be one of the most popular of the podcast. Elena has worked at or advised companies like Miro, Amplitude, SurveyMonkey, MongoDB, Netlify, and a dozen others. She's also a longtime instructor and EIR at Reforg, where she helped create their experimentation, monetization, growth leadership, and their soon-to-be-released PLG course.
1:51 Lenny Rachitsky? And in this conversation, we go incredibly deep into the emerging space of product-led sales. Elena explains what exactly is product-led sales, how it fits together with product-led growth and sales-led growth, who and when you should consider investing in product-led sales, how product-led sales changes your product. Approach to sales and marketing, what sorts of data, tooling and people you need in place to do it well? And what common pitfalls you need to avoid? I've said this before and I'll say it again, Elena is possibly the smartest and most experienced growth person in the world, especially when it comes to B2B, and I never get tired of learning from her. Enjoy this episode with Elena Verna after a short word from our sponsors.
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5:06 Lenny Rachitsky? Elena, welcome back to the podcast.
5:09 Elena Verna? Thank you for having me back. I thought I would be the first returning guest. I'm a little bit upset that I've been beat by Casey. So you should explain yourself on that one.
5:19 Lenny Rachitsky? Okay, here's the explanation. You're the first that we rebooked back and then this one just kind of got pushed a little bit and Casey had a slot earlier. So technically, you were the first scheduled return guest.
5:30 Elena Verna? All right, all right. I'll accept that.
5:32 Lenny Rachitsky? Okay, great.
5:35 Lenny Rachitsky? So I guess I'll just say I'm really excited to have you back. Your episode that we did maybe a year ago is still one of the most popular episodes of all time. I still see people tweeting about it and sharing it. And so I am really excited to have you back and have a take two.
5:48 Elena Verna? I'm excited to be back. Let's dive in.
5:51 Lenny Rachitsky? Before we get into the content, when we met last time, you were interim head of growth at Amplitude. What are you up to now? What's happened in the past year?
6:01 Elena Verna? I just wrapped up interim gig at Amplitude in February. So it's just been a couple of months since then. I'm passively exploring if I'm going to take another interim position. But between interim roles, I always take about six to eight months a break because interim roles are very intense because there's so many deliverables that are loaded in in the first year that you're working at the company. So I'm just advising. I have incredible companies that I started advising, such as Veer.io and Sanity, Clockwise. And I'm building up my next level of frameworks that I'm going to dive into potentially new interim position to prototype.
6:37 Lenny Rachitsky? If people are listening to this and they're like, how do I get to work with Lena? Should people reach out to you? Are you booked up? What do you suggest?
6:46 Elena Verna? I'll never take down an opportunity to have a great conversation and to learn about the business and to see how I can be helpful. But I'm not proactively sourcing clients, but that doesn't mean that I don't have availability to schedule something in the future.
7:02 Lenny Rachitsky? Awesome. So if it's amazing enough, you're open to it?
7:04 Elena Verna? Absolutely, always.
7:06 Lenny Rachitsky? Okay, here we go.
7:07 Elena Verna? Always have to be open to new opportunities. Yes.
7:10 Lenny Rachitsky? I love that. I feel the same way. FOMO. FOMO kicks in. Anyway, as you know, we're going to be devoting this entire podcast to just one topic, which is product-led sales, which is this go-to-market motion that seems to have emerged over the past year, maybe a bit longer. And it just feels like there's this increasing amount of interest and also this increasing amount of confusion around what it is, how to approach it, who it's right for. And so we're going to spend the next hour diving really deep into product-led sales.
7:38 Elena Verna? Let's go for it.
7:39 Lenny Rachitsky? Let's do it. Okay, so let's just start with a bigger picture kind of question of just how do you define product-led sales? What is product-led sales, especially when it comes to what is it versus product-led growth?
7:54 Elena Verna? Great question. So let's start with product-led growth. We've talked about it a little bit in our first episode, but let's revisit the topic. Product-led growth is all about products' ability to self-serve activate, self-serve engage, and convert that usage to a monetization opportunity. So you bring people, you get them to an aha moment into the habit loops, and then you able to extract value back out of them. Extraction of the value can be direct, where you're actually capturing revenue from them, or it can be indirect, where they're participating in your growth model via virality or user-generated content and bring additional business through the doors. But let's talk about direct phase to capture that value.
8:37 Elena Verna? There's self-serve monetization. So I'm using product self-serve. I go to the pricing page. I find the plan that best suits me on features that I want to unlock or usage that I want to unlock, and I buy it. However, that's not the only way to monetize that usage. You can monetize that usage with sales too. Why? Self-serve monetization has a cap of about $10,000. That's just how much we're able to process on the credit cards before they start getting flagged and declined by the banks. And so much we as a consumers and prosumers are even willing to put on our credit card because not all credit cards have limits of over 10, 20, 30, 40,000 dollars. So self-serve monetization is very much a prosumer use case where an individual is trying to solve the problem on their own.
9:21 Elena Verna? Product-led sales converts the usage that you've generated via self-serve into a sales opportunity. And it attaches a salesperson to close a much larger contract, which can be 15, 20, 100,000 dollars in order to bring an enterprise-level solution to a company that has already been using it in a self-serve manner.
9:44 Lenny Rachitsky? Amazing. Would you say that product-led growth has always been, in a sense, product-led sales because sales was involved? And there's this been kind of like way of describing it? Or is this a new trend and way of approaching product-led growth?
9:58 Elena Verna? So product-led growth has actually started more on individual use case. So an individual has a problem, they have a job to be done, they come into the product and they solve it. And that was product-led growth in a nutshell for a lot of the B2B companies. However, if you're going to attach a salesperson, there is nobody in the company that is going to pay 10, 15, 20,000 dollars for one individual to solve their problem. So product-led sales assumes that there is a migration from an individual use case that you acquired an end user with and then escalation into an enterprise-level solution that solves enterprise-level problems.
10:42 Elena Verna? Let me break it down and let me use, for example, Amplitude as an example. So Amplitude, individual, what does individual one with Amplitude? I need Data at my fingertips to make better decisions for my product. So I'm gonna put an amplitude SDK into my product and it gives me behavioral data to help me build my pillar better. What is the company level? Solution. Well, it's more self-serve ability of the data, it's democratization of data, it's enhanced insights in the more data-driven culture. That's what company is solving for. Individual is not solving for data-driven culture. Individual is just solving for data insights for them. Company is solving for data-driven culture.
11:24 Elena Verna? So in product-led growth, you can just have an individual be very happy with their solution for their job to be done. However, what product-led sales assumes is that there is an escalator to an enterprise-level solution. And enterprise escalator is valuable to attach sales resources to because products fundamentally do a really bad job at communicating enterprise-level value prop. They're very good at showing you as a user what you can do. They're very terrible at showing what organization actually can benefit out of the solution. So sales can tell that story, sales can bridge that gap.
12:06 Elena Verna? And then you can increase the perceived value in order to bridge the gap to that $15,000, $20,000, $100,000 contract. So I would say self-serve monetization is very much an individual use case versus product-led sales is turning that individual use case and self-serve usage into a sales pipeline with enterprise-level value.
12:28 Lenny Rachitsky? I really like that way of thinking about it. Basically, product-led growth has a ceiling. You're only gonna get so high in terms of spend. You can only explain things so much to a potential user. And then sales comes in and solves a lot of those problems. And product-led sales is essentially this, I think you even have this visualization now that I'm thinking about it as a bridge, right? Yeah, there's a bridge between the two. And so in this world of product-led sales, does sales as a function, outbound sales continue to exist? One, and then two, is it radically different in this world of product-led sales?
12:59 Elena Verna? Yeah, so to understand how sales should be applied in this situation, you need to understand end user's motivation, ability and permission, some organization. So for example, if the user, end user is very motivated, they have full sense of ability to solve the problem and they have all of the permission from organization, or maybe not even permission, maybe forgiveness from organization to go and explore and bring in a new solution, then it can be a very much organic motion up that escalator. However, that's not always the case. A lot of times, the end users miss permission of solving enterprise level problems. There's lots of stakeholders, there's a committee that has to make a decision.
13:44 Elena Verna? It impacts departments outside of their purview and maybe they even lack ability to do it. Maybe they can do their little job to be done, but not the entire enterprise level integration. So in my Amplitude example, yeah, I can drop an SDK in my product area, but how do I convince entire product to adopt Amplitude and put an SDK on every single interaction across the entire app? There's different level problem statements. And this is where product-led sales is either can be a truly organic motion where people raise their hands, they submit sales forms and there's already a need and desire and understanding of it. Or end user might hit friction points
14:27 Elena Verna? and product-led sales has to bridge those friction points by either attracting the right decision makers to the process so they can find an enterprise buyer out there. They can understand who's the champion and what their capabilities and what their permission levels are and they can create a committee for the decision. So there is, they almost slap a Band-Aid on the problem of people not wanting, not be able to and not wanting to necessarily resolve the problem on their own. And they can be very powerful with that as well as marketing. Because we cannot forget about marketing where they can educate of how to help people bridge that gap and how to sell things internally.
15:06 Lenny Rachitsky? You mentioned this idea of enterprise level problems. It might help if you give an example or two of what those might be. And then also just what are companies, examples of companies that are doing enterprise or product-led sales well? Just to kind of give people a mental model as you're talking about some of this stuff.
15:22 Elena Verna? Sure, so let's go through a couple of them. Let's go through Miro. Miro is an online whiteboarding platform. What is individual problem that people come to Miro to solve? They have a workshop they need to facilitate. Maybe they need a board to just do brain writing in. And they use Miro for individual jobs to be done. However, what Miro is designed for is a team level problem. So I come in and I bring you in and we collaborate together. So now there's two, three, four people involved. But even that is still on the project level. It's on the team level. Nobody's gonna pay a hundred thousand dollars to solve a team level small problem that is solving. What is the enterprise level problem? It's increased innovation. It's increased productivity across the entire team
16:06 Elena Verna? because now we have this new outlet in which we can collaborate. Now, can Miro very clearly show increase in productivity across the organization by using the product? No. Can sales tell the story? Yes. So Miro takes you from an individual user to a team step, and then sales bridges the gap to an enterprise. Let's give another example of Figma. In Figma, I come in as a designer and I just need a better way to capture feedback from my stakeholders. A more scalable way to capture it so I can iterate on the perfect design. What is it at the team level? Now there is a team that can collaborate with me more openly. I can capture more feedback from more stakeholders faster
16:51 Elena Verna? and get the project done sooner. What is it on the enterprise level? Well, on enterprise level, our designs are just better fit the business needs. They have faster turnaround time and our product is performing better. That's the enterprise level value prop. And again, we're, I think, in the product development space, gotten a little bit lazy of actually showcasing that enterprise value in product. So we rely on excellence of sales team to tell that story. I do hope that changes, by the way, in the future, that we put more pressure on the products to take it all the way up the escalator. So we don't have to be... A hundred percent dependent on the sales team going and showcasing that story.
17:35 Elena Verna? And the product can really empower that escalator from the starting point till the end on its own.
17:42 Lenny Rachitsky? I want to dig into that for sure. I know that's something you just shared on LinkedIn recently, and I thought that was a really interesting topic. But before we get there, we'll talk about this bridge a little bit more. So people might be listening to this that are maybe a product-led growth company, and they may feel like, hey, wait, we're already doing this. We have this product-led growth motion. We have a sales team. They figure out who to talk to. What exactly is in that bridge that makes product-led sales so interesting? I imagine it's like helping you identify who to go after, helping people go further and further and escalate themselves. How do you think about that, that bridge between product and sales?
18:15 Elena Verna? Let's talk about how product-led growth companies start with product-led sales.
18:22 Elena Verna? It usually starts by an organic demand from a user base. They reach out to them through support channels by just pinging people who work at the company, saying, hey, I want to purchase this for my entire company. That's an organic pool that you start feeling from product-led growth model into enterprise sales world. And by the way, you should never hire any salespeople until you feel that pool. Because if nobody's asking to purchase, then you cannot just hire an SDR and make a purchase happen. So you need to see those handraisers. You need to see those people demanding an enterprise-level adoption. Then you hire, start hiring, salespeople to actually suffice that demand. And that's great. And you're starting to do sales and surfacing, really addressing
19:08 Elena Verna? organic demand within your product. But that organic demand very quickly dries up. If you rely on handraisers of your champions, if you rely on having enterprise buyers in your user base that are asking to just sign on the dotted line, then you have a very limited ceiling for your growth. Because what majority of the usage transforms to be is to have product qualification, that there is a meaningful sales conversation that could occur based on the signals within usage. But the buyer is missing. Ninety percent of product-led sales is converting the usage.
19:48 Elena Verna? Into an opportunity by finding a buyer outside, by finding the decision maker outside. This is where marketing and sales are so crucial in the process. Connecting that decision maker to the usage. And then driving an opportunity through sales funnel all the way to close one deal. So it's great when you start having sales team and you surfacing this organic demand. That's beautiful and power to you, just it doesn't last very long just because end user fundamentally does not equal enterprise buyer. And that organic demand ends up plateauing very shortly because you cannot just make enterprise buyers happen from your users.
20:30 Lenny Rachitsky? If a founder is listening to this right now and they're like, okay, so I have maybe a product led growth component or self-serve. Maybe I have a sales team, maybe I don't. What's a sign that your product is a fit for investing in product led sales? Essentially, every product led growth oriented company should be eventually investing in this area. Or is there certain companies that like, no, you don't need to worry about it. Just stay product led growth forever or just stay sales led growth forever?
20:57 Elena Verna? To have product led sales means you're going up market.
21:04 Elena Verna? Period. That means you're going for contract values that are probably over your sales floor. So the minimum that the sales is willing to engage and close, which is traditionally around fifteen thousand dollars. If you're going for contract values of fifteen thousand dollars, that means you're probably trying to close a hundred, two hundred thousand dollar contracts as well. Who can handle a hundred, two hundred thousand dollar contract? It's not going to be a small startup. It's not going to be an SMB. It's probably going to be higher end of more of a mid-market segment, so two hundred employees plus. More likely it's going to be towards the enterprise segment of a thousand employees plus.
21:44 Elena Verna? So if you are not ready to go up market, I would say, keep it easy on the product led sales. Because sales means quotas, sales means large contract values, sales means you are going up market, whether you like it or not. And some products, they should stay in the prosumer individual space. Maybe they're geared towards contractors or freelancers or squarely towards startups. Those personas are not interested in talking to sales in the first place. They have much lower.
22:19 Elena Verna? Bearing of the how much they're willing to spend. So their price sensitivity is much higher. They prefer to do all self-serve in the first place. So it's really need to be conscious about what that will do to your go-to-market motion, because it definitely skews it and pulls it up.
22:36 Lenny Rachitsky? Got it. So what I'm hearing is that if you're starting as a self-serve oriented product and you're starting to maybe hire your first salesperson, is the approach start approaching it from product-led sales motion versus now we're going to add the sales independent team that's kind of doing their own thing?
22:55 Elena Verna? Right. So there's two ways to get to product-led sales. First wave is that we talked about. I start as product-led growth company. I really started with this individual use case and I'm escalating to a company-level value prop. And this is what I need product-led sales for. On the other side, I might start as a top-down sales traditional organization. So I have product that I only sell through sales. Those are usually anchored at larger segments in the first place. In order to build a top-down sales engine, you're most likely going after enterprise segment of a thousand-plus employees or maybe upper mid-market of 500 employees plus. And the reason to go into product-led sales is either your existing top-down motion is not working
23:38 Elena Verna? because customers need to see value before they sign the contract. So they want to see that usage and at least the first signs of perceived value before they sign on the dotted line. Or you're going down-market and your fixed cost of sale that you have from the traditional sales motion does not scale. It stays fairly constant, yet your contract values are starting to drop as you're going down-market. So you want to create a lot more automation in the selling process to remove as many as possible humans out of it. So you can approach it from both ways. Adding PLS on top of product-led growth or adding PLS on top of existing sales-led growth. For PLG?
24:20 Elena Verna? You're going up market by adding PLS for SLG or sales-led growth by adding PLS, you're going down market.
24:27 Lenny Rachitsky? Awesome. And we're going to talk about how to actually build this infrastructure and what's required. But it reminds me, one of the biggest takeaways from our first podcast, and something I've quoted many times now, is your bet that every sales-led growth company needs to add a product-led growth element, otherwise they'll be disrupted by someone that does. Is that still your perspective?
24:49 Elena Verna? Absolutely. Now, I think there's different stages of what does it mean to add product-led growth elements. I think every sales-led company should be putting pressure on product to assist with the sales process. That does not mean that there is product-led growth, but there is a product assist in the existing sales-led motion that can materialize into product-led growth if you can truly solve for self-serve activation, self-serve engagement, and have product be able to sell itself. Because the biggest difference here that starts to come in, and that is so apparent in every single company, is that in B2B, unfortunately, we've let go of the products having accountability over monetization model. We've gotten into
25:32 Elena Verna? the spiral of product, just builds a product and it throws it over the fence to marketing and sales, it's to sell. And marketing and sales have done an incredible job over the last couple of decades of coming up with these stories and elaborate playbooks of how to attract enterprise buyers and how to sell them this product. And product literally only obsesses after contract is closed and there's usage that starts materialize after contract closed. So we've alleviated our product management in B2B from monetization ownership. So when SLG company actually goes into product-assisted tactics or product-led growth, the biggest pain point is actually educating product team on how can you get
26:13 Elena Verna? product to sell itself, which is all about monetization awareness, monetization friction of conversion to get into the P E C plan, and then having actual correct value metrics that are understood self-serve by the customer. So it's a I mean, yes, I agree with you. Every single, I agree with myself, so I should say. That every single sales-led company should at least add some product-assisted tactics. But I would even take it further that every sales-led company should start educating and putting pressure on the product to own monetization components of the business.
26:50 Lenny Rachitsky? Let's pull on that thread a little bit more. What does that actually look like? Does the head of product for that, or the head of product or specific group PMs, let's say, have revenue goals and responsible for P and L and things like that? Or what does that generally look like when they start to own revenue?
27:07 Elena Verna? So there's two ways that you can own revenue. Revenue stream number one will be your self-serve revenue. And if there's self-serve revenue, that means product is selling literally itself. So yes, there has to be somebody in product that has self-serve revenue target. Now, a lot of times it doesn't fall on the core product managers. A lot of times it falls on the growth team. And that's because core product management is really focused on feature deliverability and just that incremental expansion of the core use case. And growth product management owns the product distribution strategy. And in the PLG case, it would be a true self-serve monetization model.
27:49 Elena Verna? Now, when it comes to PLS, you don't own revenue target, in my opinion. But what you do own is the pipeline that was created by product that you have a handshake with sales team over. So what that materializes in is product-qualified accounts. And it's actually a product threshold of engagement that differs from activation and that differs from core engagement. It's what volume, velocity, feature breadth, or behavioral signals that account is throwing that says, hey, right now is the time to engage with sales. And that Is the bridge to monetization that product team should own as even on the core team
28:33 Elena Verna? in order to drive healthy, predictable and sustainable pipeline to sales.
28:38 Lenny Rachitsky? Okay, so this is a really important topic. There's this concept you just described, product qualified account. It might be a good time to define a couple other acronyms and kind of compare them. So there's PQA, there's PQL, product qualified lead, there's marketing qualified lead. Can you just maybe describe this suite of acronyms? And then I want to follow up on the PQA because that seems really important.
28:59 Elena Verna? I'll start with PQA just because we just know, we just breezed over it. PQA is product qualified account. It's on account level, it's aggregation of multiple users that are using the account. It might be on the overall logo level. So let's say you've attracted a company, so you qualify PQA across the entire company usage. Or it might be on a specific team or workspace level, depending on what is the better predictor for you and who the sales team is going to be engaging with. So product qualification is very much product metrics. It's the volume of use, it's the velocity change. So for example, yesterday I've been adding one user per day and then today I've added 15 users to account.
29:43 Elena Verna? That's a velocity change that you need to pay attention to. Or there is a feature usage that can be highly correlative to enterprise interest. The product should be driving towards every single account reaching in order to qualify them for sales conversation. Now, within a PQA, there may or may not be PQL. So PQL is a product qualified lead. Lead assumes there is a person in the account that I can go and sell to. Now, leads are those buyers, they're those decision makers in the account. And if you have a smaller segment, so for example, you are more in small businesses or lower end of mid-market segment, you may very have PQLs in there because user is maybe equals buyer.
30:30 Elena Verna? And user can make those buyer decisions. However, the more you move up the market, the more end user is many steps separated from the buyer. So you might have very healthy usage and you might have a PQA that is off the charts, but you don't have a PQL in it. So if you just seek your sales against that account, you're gonna have a very terrible situation, a very terrible user journey where users are like, why is sales talking to me? I have no decision-making power in my organization. I love the product, but please leave me alone. And this is where you get a bunch of cold outbound, and I put big quotations on outbound emails that are just not getting returned. So you need to very clearly understand who's your buying persona? And are they in your user base?
31:14 Elena Verna? And if they are, you have a PQL. Has them go for it. But if they're not, go find it out there. And this is where MQL concept really comes in into play. Because then, marketing has to still qualify a lead to bring it and connect it to PQA. So PQA can have a PQL as a user already in the user base, or you might need an MQL with marketing or sales bringing that lead over and connecting them with the usage.
31:43 Lenny Rachitsky? Amazing. So we're gonna share a link. You have this awesome visual that shows kinda like the funnel of PQAs and PQLs funneling to sales along with marketing-qualified leads. Basically, there's a kinda, instead of one path to sales knowing who to talk to, now there's two. Product is funneling you people that are qualified and then marketing's funneling you people that are qualified.
32:06 Elena Verna? And there is a third path. There might be a marketing funneling people that have no usage whatsoever. And that is a true top-down lead. So you have three buckets of lead attribution that is coming in. I have usage and one of the users is my lead. I have usage, I have no lead on the account. Marketing is bringing me the lead, but I have to leverage that usage against that lead. Or I have a lead coming through, there is no usage. I have to sell the entire thing still to them. So there's no context that I can use of existing usage. And those three channels are super important to identify. They all have very different conversion rates. They all have different playbooks of how you close them. And honestly, they require often different sales team to go after them because it's a very different sales enablement.
32:51 Lenny Rachitsky? You remind me of, you have so many hilarious memes that you share on LinkedIn. By the way, everyone listening should go follow Elena on LinkedIn and subscribe to her newsletter because it's hilarious and also informative. It's a magical combination. One of my favorite memes of yours is the shining one that we just kind of touched on, where someone's just like using a product for five minutes and then, hey, do you want to, a sales guy just reaches out with like the axe, "Hey, do you want to chat?"
33:17 Elena Verna? So that actually, it's painfully true. That's one of my most highly engaged memes that I've that I've put out there. I have also one of the urinals where the man is using a urinal and then like one comes over, a salesperson comes over, "Would you like to chat about our enterprise plan?"
33:33 Lenny Rachitsky? There's like 10 urinals and he's like right next to yours.
33:35 Elena Verna? Yeah, exactly. So the piece here that a lot of companies miss, unfortunately, is that they jam product-led sales into a traditional top-down sales playbook. Now, what does that mean? A traditional top-down sales book, an MQL that you have, or a lead that you gather, already is in consideration cycles for your enterprise-level offering.
34:04 Elena Verna? However, in product-led sales, a new user that signs up, they know we're close to enterprise-level consideration. They're just trying to complete an individual job to be done. They're not solving a problem for their company. So if you can imagine it as like a very large funnel, you start with just users looking for problem solve, then you transition to awareness consideration and intent channels for team-level problem, and then you escalate for awareness consideration and intent channels for enterprise-level problem. Top-down sales process goes after
34:44 Elena Verna? the bottom of that funnel, where there's already an intent to solve company-level problem, versus at the very top is where product-led growth starts on individual-level problems. It's a different timeline. So if you go after individual user that just signs up for the account and you reach out to them 10 minutes later after signup, asking, "What's your budget and are you ready to buy?" It's a, it's a complete mismatch of where they are in their consideration journey. So you cannot consider a new product signup and MQL in the traditional sense. They're just not there yet. They have a fraction of the enterprise problem that they're solving and they're not ready to buy.
35:26 Lenny Rachitsky? And it's especially annoying because there's so many SaaS products now and everyone is coming for you, especially if you're at an awesome company that they're trying to sell. So you gotta be.
35:34 Elena Verna? Yeah, I mean, every anytime I even started, I remember I started at Amplitude when I started a year ago. It's like my inbox was just filled with like, now you're doing this, now you're doing this, buy, buy, buy. I mean, it's, I don't know, it's, I, I can't even, I can't even notice anything in that outbound. So unless somebody reaches out to me with something authentic that is already usage based, it's ignore.
35:58 Lenny Rachitsky? And it's going to get worse with GPT oriented cold outbound emails.
36:02 Elena Verna? Absolutely.
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37:17 Lenny Rachitsky? Okay, so let's shift to actually, how do you actually do this? How do you actually build a system of product-led sales? And I feel like there's maybe three buckets. There's what data do you need? What infrastructure systems do you need in place? And then what are the people you need in place? And how do you resource it? So maybe let's start with the data. What sort of data do you need in order to do this well?
37:36 Elena Verna? There's different levels of scale on how you should be attacking this problem. First of all, it starts with just top-down intuition.
37:47 Elena Verna? What are the signals that you're seeing around the accounts? That are highly correlative to sales being very excited about this hand raiser or about the sales form submit out of the usage? And you just start with that. It's as simple as that. How many others are exhibiting those signals? When you have very low lead volume still, you don't want to get too complicated with it at the beginning. You want to be very transparent. You want to just understand what sales are seeing, what they get excited about and feed them as many accounts that fit that model. The one thing is not to do is just to start sending every single user to sales, because that's the fastest way for sales to say, this product channel is garbage and I don't ever want to see a lead from it again,
38:32 Elena Verna? because they have such low close rates and their quota, their salary depends on their ability to close, that they just start disregarding this as a meaningful channel. Now, the second escalation to it is, okay, now you will know intuition, but now let's actually look at the reality of who is hand raising in the product. So you look at the signal of who looks like a hand raiser, smells like a hand raiser, acts like a hand raiser, but is not hand raising. And that's a maybe very simple regression model. It might be just a simple histogram analysis that you do of what differentiates people that are hand raising from people that are not hand raising and who else.
39:13 Elena Verna? Fits in into criteria and looks like a hand raiser based on those differences. And that should be your first PQA model. It should be very simple. It should just be if you can run a linear regression against some of the top coefficients that you that you noticed, so you know which has the biggest weight to predictability. And you go with that. The main piece here is to involve sales very early on. So you're partnering with them. You're not just dumping it on them. And that you have a very strong feedback cycles from sales of whether what you've identified is correct or not correct. Because PQA definitions should not be static. They're constantly evolving. So just because it's right, right now, that does not mean it's going to be right next quarter.
39:58 Elena Verna? So you have to have a lot of rituals with sales team to gather that feedback.
40:03 Lenny Rachitsky? One thing I'll mention is Amplitude and Mixpanel both have a regression tool that help you identify correlations and causal kind of connections between metrics. So maybe shout out there. I think it's called Compass.
40:15 Elena Verna? Yep.
40:16 Lenny Rachitsky? And then and then Mixpanel, I think it's called Signal.
40:19 Elena Verna? Yep. Honestly, to be fair, I've most of the time I've done it manually at first because it requires so much understanding of the data and if the data is correct. And if I'm even seeing, because you don't want to throw in too many correlated variables into the model, because then you have issues of those variables like describing themselves, so to speak. And even if they're firing, there might not be actual predictive. So it's partnership with analytics team and it's partnership with the intuition from the sales team. And then you can start throwing it into regression model and start to automate and think about scaling it, which there is a lot of PLS platforms that are coming up and finding their product market fit at the moment that can do that for you.
41:03 Elena Verna? But I don't know if I would start there right from the beginning unless you actually understand the data, because buying a platform will not bridge the gap for you understanding what actually matters in your data. Buying a platform or using a third party solution will help you scale your efforts once you hit the first, I would say, data sales fit.
41:25 Elena Verna? That you can then scale and just increase distribution of.
41:29 Lenny Rachitsky? Data sales fit. Wow, that's a new term. There we go. I have not heard that before. Data sales fit. I love it. So you're saying basically start manually to make sure you fully understand what's going on.
41:40 Elena Verna? That's my take. Yeah, I just, I don't, I don't, I have a hard time scaling something that I don't fully understand because data can tell you lies. And you can just fit any story that you want into data and you to really understand it and how it fits. And what you are observing and that it makes sense before you go and start using automation on it.
42:00 Lenny Rachitsky? Cool. Okay. And then just one last question on what you were just talking about, which is finding correlations and causal relationships between usage and users and understanding who to send to sales. What are some common metrics and attributes that you've found that are indicative of they should go to sales?
42:18 Elena Verna? So one of the most important things is to create network effects within the company, within a team, which each additional team member added to an account benefits from everybody else. This does not mean you have to have platform network effects. So you're not trying to be LinkedIn. You're not trying to be Instagram. Those are platform network effects. What you are trying to create is the value of each additional user into account. What that means, I'm going to go through slight deviation here, is that there not should not be only pulling mechanism where I pull you into my account. There also should be pushing mechanism. Any new signup that happens from the company that already has an account in my system should be presented with an option to join
43:03 Elena Verna? that account, not just create a brand new account. What you don't want to create is hundreds of rogue individual accounts that don't know about each other. We as humans, we are creatures of community, we're creatures of, we like to be surrounded by people, to be validated by people. And at least you want to create that herd mentality inside of the company and push and pull people into the account. So one of the biggest peak ways is number of users in the company using your product. By the way, the magic number is usually seven. The more time you have seven or more users in the company and there's like some. Some weird parallel here to seven friends at Facebook and seven collections at LinkedIn,
43:48 Elena Verna? but seven I've seen very often as a checkmark. Hey, there is enough value here distributed across multiple people inside the company that there might be an enterprise conversation to be had. The second most important is usually some sort of volume threshold. So for example, for amplitude, it's number of events that you're sending through, which means that you are really starting to tackle your entire application with analytics as opposed to just a small portion. Or with Miro, it was number of boards that you have in the account. With Figma, I think it's number of revisions that you have on any given design. And the last one I would say is velocity. Velocity is the trickiest one, just because we don't have a very easy way to measure
44:33 Elena Verna? velocity in our transactional data. But it's actually one of the most powerful one that triggers the right timing for the involvement, because the change in velocity, either in number of users being added or events being sent or storage that is being utilized is usually a fantastic predictor.
44:54 Lenny Rachitsky? Amazing, okay. So kind of like the simplest model to tell you there's a PQA is number of users, usage and velocity.
45:04 Elena Verna? Yep.
45:04 Lenny Rachitsky? Amazing.
45:05 Elena Verna? And users, by the way, can be either usage or velocity metric too. It's just like, if you're gonna do anything, just look at whichever accounts have most users. It's like an 80/20 rule. For 20% of the efforts, you're probably gonna get 80% of the value.
45:19 Lenny Rachitsky? Love it. Okay, so I took us off track and you were talking about what data you may need in places. Is there anything else along those lines?
45:25 Elena Verna? I would say that it's very important to identify behavioral signals as well. And I'll give an example. At Miro, we had a very strong behavioral signal that if there is an admin switch in the account. Some sort of evaluation is happening.
45:46 Elena Verna? So admin transfer, new admin being assigned. That should be ding ding ding. All of the bells are ringing that you should maybe reach out to that person and see what's going on. The other one that is fascinating is your terms of use pages, your privacy and policy. Nobody cares about it unless they're considering enterprise deal. If you see anybody from account, land on your terms of use pages. Reach out to that person. More likely than not, you have a buyer on the hook and you can assist them in increasing their perceived value.
46:19 Lenny Rachitsky? Wow, that is so interesting. That's the kind of stuff you only learn having done it.
46:24 Elena Verna? Many, many times, yes. But those signals are, by the way, universal. We looked at it at MongoDB, it was very much true. So these things of when you, what in product constitutes evaluation process? And what are the enterprise buyers are looking for? I wouldn't say, by the way, like watching a webinar or landing on an enterprise landing page is a good behavioral signal. Because it might be annoying that I just like on accident landed on a landing page and now I'm being spammed by an outbound SDR sequence. But more meaningful actions that are deeper within engagement, user journey are incredible predictors.
46:59 Lenny Rachitsky? You talked again about this idea of spamming from sales and it made me think about, like, I don't even know if I want to ask this, but is there? Have you seen downside to sales just continuing to hammer you as a potential user? Like, does that actually hurt? Like, I don't want to know almost because I feel like the answer is no, but what do you think?
47:15 Elena Verna? I think you have to look at the channel effectiveness. You have only so many channels to communicate with the customer. Email is obvious. You can communicate with them in app. You can have some sort of chatbot. Maybe you can deploy some sort of paid marketing, maybe social or retargeting display ads, but those are very expensive to utilize. So stepping back and thinking when it's the right time to reach out? How can I grab their attention? And if you highly saturated the channel that you are is your primary for reaching out to the user, they're not going to react even if it's more of a right time for them to react. So will it hurt you?
48:00 Elena Verna? I don't think you'll notice it right away, but over time, I think people become blind to channel communication if it's not applicable to them because fool me once, shame on you. Like, fine, like you tricked me to opening this email. Fool me twice, it's shame on me and I'll be a lot more frugal of which emails I open or which notifications I react to. So I think that you have to put user journey first and you have to really think about the timing that it's right for user and PQA. All it is, is the right time to engage with the customer and then go hit them hard over all of the channels of communication.
48:43 Elena Verna? But then also know that accounts go in and out out of PQA. So today I might be in the PQA, next week I might not be. So you need to sunset the efforts. If you didn't get in touch with the customer and wait for the next PQA moment. It will happen if your product is holding that goal and is accountable for getting more and more accounts to reach a threshold for PQA.
49:06 Lenny Rachitsky? Wow, that's really interesting. I'm also happy to hear that answer. Great. Okay, so let's continue down this track of what it takes to implement a product. Let's sales motion just talked about the data component. What about just systems and infrastructure and tooling? What do you recommend there as a start?
49:22 Elena Verna? I approach the subject always as an evolution, not a revolution. So start with your existing systems as much as possible. I would say the biggest mistakes to avoid, if your sales team is very heavily embedded in the sales force, don't try to have them switch to a different solution. It's just not going to work. You need to try to figure out how to embed what you need, the data in the sales force, not get them to use some other third party tool. And then I wouldn't jump into any big commitments until I really prove out viability of product let's sales motion before automating any of it. So I'm more of. It's kind of Wizard of Oz it as fast as much as possible to get the initial traction.
50:07 Elena Verna? So then we can validate that there is investment to be had in scaling it. And there's a business value in it.
50:14 Lenny Rachitsky? And the tools you're using at that point is like Google Sheets or is there something else involved?
50:17 Elena Verna? Uh, it's Google Sheets, it's your Looker Tableau dashboards, it's your amplitude charts and reports. It can be widgets within Salesforce or ETLs that you pipe through HubSpot, Marketos into Salesforce. Or it can be CRM solutions or PLG specifically that you literally deliver in Excel sheets to sales team to prototype a different outreach.
50:41 Lenny Rachitsky? Have you shared any of this kind of like MVP product led sales stack that you recommend? And if not, I think you should, because that seems pretty useful.
50:49 Elena Verna? Yeah, I think I definitely should.
50:51 Lenny Rachitsky? All right.
50:52 Elena Verna? I have my idea for next blog post. Done.
50:54 Lenny Rachitsky? Yeah, okay. Got anything out of this chat, we've got that. Okay, in terms of people, so we talked about data, we talked about tooling, infrastructure. What do you suggest in terms of people and resources to invest in this area as a start? And then also as you evolve?
51:09 Elena Verna? For PLS, the people that you need is product managers that will be able to get account to PQA stage. You will need salespeople that will understand which usage triggered PQA and how to apply that information to find a buyer and to enable a buyer to convert them to an opportunity. You need marketing to educate both the end user or enterprise buyer on why the value of this enterprise solution is going to make sense to you. And you need analytics team.
51:47 Elena Verna? You need a data analyst that will continuously dig in the data to find correlative signals that you can test causation in. Those are the four people that you need. Product, analytics, marketing, so I should say engineering too, obviously, but I kind of bundling them together with product. Now. It's an evolution, not a revolution. So if you're starting from sales-led growth, I would highly suggest of you going to a sales team and asking for somebody to run a pilot with you. So don't just throw these leads into the top-down sales process and assume that everything is gonna be just fine. Attach to yourself a pilot AE, so account executive, or an SDR and see how that works.
52:31 Elena Verna? So you kind of separate yourself from the mothership of the sales engine, and you actually prototype this separately in a little bit of a vacuum, not under pressure of the top-down quota relief. And if you're in a product-led growth company, then I would suggest do your own sales. It's kind of like a founder-led growth. So like, think about it like, hey, you need to close maybe first couple of deals yourself first, so you truly understand what's happening. I would not get first-hand razors and say, "Oh, we can't close it unless we have a salesperson." No, just have somebody on support to do it. Have somebody on finance do it. You do it. I've been on chat myself plenty of times, trying to close the deals just to understand what the sales process for the customers looks like. And then you can figure out who to actually hire and who to actually scale.
53:15 Elena Verna? But for PLS that starts in PLG, you actually just start with more of blend of an SDR and AE together, because you don't need two separations. So the same person can both outbound to a customer and close them at the same time. And then you can go into specialization of the role. So start small, start nimble, prove it out, scale along the way, but have marketing and analytics support you the entire journey.
53:41 Lenny Rachitsky? That is really simple. What I'm hearing is you don't need to hire someone new necessarily. You have the resources, most likely, and then it's just, how do you allot some time of this team to start investing in piloting?
53:53 Elena Verna? Yeah, I'd say that my philosophy is that I want to have an ROI for a new hire before putting a job rec out there. And to create an ROI, I need to prove it out of what potential can there be myself first. So I can almost like fund this hire with the revenue that we can generate out of this channel originally. But obviously, that includes a lot of individual contributor work that you have to do in that area, potentially that is not comfortable, but that's the fastest way to grow in your career. So. I think that's a necessary step for successful execution.
54:29 Lenny Rachitsky? You wanna hear a crazy stat about product-led growth and not hiring sales?
54:34 Elena Verna? Sure.
54:35 Lenny Rachitsky? Okay, great. I was chatting with the founder of Notion for this series I'm working on, and Notion didn't hire their first salesperson until they were past 10 million ARR.
54:47 Elena Verna? I believe it. Miro did not hire their first salesperson until they were like 5 or 7 million in ARR. They were literally closing the contracts through support team, and it was just fine.
54:57 Lenny Rachitsky? Same with Notion. It was their customer success and support team.
55:00 Elena Verna? Yeah.
55:00 Lenny Rachitsky? That is some product-led growth right there.
55:02 Elena Verna? Yeah.
55:03 Lenny Rachitsky? I love it. Amazing. Okay, so we've talked about data, tooling, people. Is there anything else that you find is really important to being successful with rolling out a product-led sales bridge motion?
55:19 Elena Verna? The most important thing in product-led sales is that there is a different configuration internally of collaboration that needs to occur. In traditional sales world, marketing creates pipeline for sales. Sales sells product. Product engages with the paid user to drive retention. In a product-led sales, product acquires and activates a customer, and product creates pipeline for sales. So, relationship is not that there is a go-to-market org with marketing and sales, and product just kind of throws features across the fence for them to sell. The collaboration here is between product and sales.
56:02 Elena Verna? But that means that product has to take on accountability over pipeline. The worst thing that you can do is to say, "I'm gonna do product-led growth, or I'm gonna do product-led sales, and I'm gonna do it in marketing."
56:16 Elena Verna? Recipe for disaster, you will be failure mode within six months. Because product has to take accountability over selling of the product itself. And that is not to be taken lightly. Because so many product teams are deeply, deeply uncomfortable with owning monetization targets. Now, I'm not saying that product should just be gold on revenue. Because that's a very short term, short outcome, past performance. There has to be a very clear designation onto long-term goals and long-term objectives and revenue ownership. And by revenue ownership, I don't mean that individual product manager also should have a revenue target on their back. What I mean is that the product leadership should be accountable for the revenue target.
57:01 Elena Verna? But the product people should be responsible for more of KPIs. Free-to-pay conversion rate, package mix, PQA, maybe even PQLs. But those are all of the KPIs into revenue. So the piece to me that is of utmost importance is to keep product accountable. Like you cannot start this product-led sales motion and marketing and sales and think that you can continue with the same configuration inside the company and still succeed. Product has to have a seat at the table and product has to feel accountable and responsible for it.
57:36 Lenny Rachitsky? And when you say accountable, what does that actually look like? Is it like their OKRs have certain goals around here? How many PQAs you're driving? Is it a number? Like, what does accountable mean in this?
57:45 Elena Verna? I think so. Every product has some sort of goals and they definitely should have goals on keeping healthy, engaged user base. They should definitely have goals in terms of maybe feature utilization or customer satisfaction. But what I'm saying is to have also some sort of monetization goals. What that is for each company, I think, differs depending on their level of comfort and how close they are to revenue capture mechanism. But let's say at Miro, our head of growth product had a self-serve revenue. Target on her back. She drove it. She had revenue goal that she had to hit in product. And she shared marketing, because I ran marketing in that, in that company.
58:28 Elena Verna? We shared a pipeline goal creation because pipeline cannot be created without marketing too. Marketing will need to educate. Marketing will need to find the buyer. Marketing will need to do accounts based marketing in order to attract the buyer and connect it with the usage. So product and marketing now pull together to create the pipeline and, and give it to sales. But product can no longer sit in this island as a feature factory. It's a, it only works for the top down sales organizations, um, which as I said, I think are going to be heavily disrupted over the next 10 years with value first product led growth.
59:04 Lenny Rachitsky? This is another hilarious meme that you shared on your LinkedIn. So another reminder, go check out Elena's LinkedIn with this hilarious meme of product teams being presented. Hey, you're going to own some revenue targets. And they're like, oh no. Yeah, exactly.
59:19 Elena Verna? It's actually super interesting because a lot of growth leaders shy away from revenue targets. Acquisition target, sure. Retention target, engagement target, sure. But monetary target, oh no. How can I possibly own a revenue target? I think we all in tech, and I specifically point a finger at my industry and B two B industry, just got a little bit complacent with revenue ownership from product side. And I, I, I do think it's catastrophic for us in the long term if we don't fix it.
59:48 Lenny Rachitsky? I love it. I want to do a whole podcast on your meme strategy and your, uh, parodies that you put out, but we'll stay on track here. In terms of the revenue target, what is that goal like? Is it just in this quarter, X million dollars of revenue? Is it a growth rate from your quarter over quarter? How do you find people actually define that revenue target?
1:00:11 Elena Verna? Right, so there's, there's different targets that you would have for self-serve revenue versus product-led sales revenue. So for self-serve revenue, your KPI should absolutely be free-to-paid conversion rates or trial-to-paid conversion rate. It's the package mix, it's the average revenue per user or ARPU. It may be retention rates, first-term retention rate, second-term retention rate, in order for you to sustain the healthy revenue. That's what outputs self-serve revenue. Those should be the pieces. Do I, do I have a problem and friction in acquiring new paid user in maximizing their value or in retaining that paid user? Those are the three inputs that go into self-serve ARR targets. And you should just understand where the biggest opportunity for your team to focus in driving it.
1:00:56 Elena Verna? In any of those cases, most of the time, free-to-paid conversion is the biggest focus of any given team, just because we want to better convert and inflow into our user base, assuming we have good product-market fit, so we have a solid retention happening. In free-to-paid conversion, there's three pillars that you constantly need to work on. And one pillar dominates them all. It's monetization awareness. Simple as that. If you have a freemium product, I guarantee you 75% of your customers in freemium product are not aware of what you're selling. So only focusing on monetization awareness can give you incredible output on driving monetization.
1:01:40 Elena Verna? And it's really, it's products' ability to communicate via feature walls, via usage walls, via trials, of what the value of the paid offering is. And I've seen, I've heard stories from Slack of just showing message limits messaging and how big of an improvement on conversion rate it had. I've had it firsthand at SurveyMonkey, where just adding consistent
1:02:03 Elena Verna? UI across all of the paid triggers that were that Amazon gold color. And making sure that each user has been able to see at least three of them. There's a rule of three that goes into advertising that we need to see things three times in order to remember them. That drove monetization awareness and conversion rate up. But that's basically consumes eighty percent of your work. The second one is just conversion rate optimization. So your pricing page optimization, your checkout page optimization, your currencies that you offer. The payment methods that you offer to make sure that there is as little friction as possible in order to actually pay. And then the last one is what you're selling. Do people want to buy? This is where you actually go after monetization model change. Which features are in each plan?
1:02:47 Elena Verna? What are the price points in each plan? How does the upgrade path look like? Do you have add-on strategy? Do you have just pay to paid monetization plan strategy? And that one is like the last one that you should cross because it involves a lot of cross-functional effort in decision making. But free to paid conversion, upsell potential and retention. That's for self-serve AR. For product-led sales, what product should own in PQA? But who defines PQA? That's the big question. And who iterates on PQA? And then how do you actually get people to get to the PQA stage? And just like product often will own engagement metric or maybe even activation target. You would own PQA target.
1:03:33 Elena Verna? So that just becomes one of the goals. And depending on where the biggest effort that needs to be, it can be in activation, it can be engagement, it can be PQA. But more and more, I see product-led, especially mature companies needing to focus their product teams on PQA. Yet they don't have a clear definition because sales kind of goes rogue and does their own thing. And product fails to deliver predictable pipeline to sales, which pushes sales into a top-down motion prematurely.
1:04:02 Lenny Rachitsky? And a PQA target would be like one thousand PQAs this quarter. Is that the way you?
1:04:06 Elena Verna? Yeah, yeah. So you usually actually look at it almost from conversion rate. So you look at, okay, how many, how many teams do I have in my ICP? So ideal customer profile segment that are active. That's my denominator. And how many of those teams are reaching PQA target this month? So it's like a conversion rate to PQA out of engaged ICP teams.
1:04:28 Lenny Rachitsky? One thing that I love that you touched on is this awareness of monetization.
1:04:33 Elena Verna? Yeah.
1:04:33 Lenny Rachitsky? People knowing that you have more features and that you may get access to more if you pay. How do you track that? Is it just like people seeing it per account or per user? Like what percentage have seen one of these upsells or seen them three times?
1:04:45 Elena Verna? I track it fairly simple, two ways. One qualitatively, I just run surveys against people and say, do you know what we're selling? It's shocking how many just have no idea what's in our paid plans. You know, like we have a major issue here. Or I just track pricing page views per activated account. So how many of the activated accounts landed on the pricing page at least once? Because that's at least a level of exposure that they hit some sort of trigger that pulled them to explore pricing page. One of the things that just want to give a hint to anybody who's listening from a sales top-down companies. One issue you might have is that when your product is developing functionality, especially paid functionality.
1:05:29 Elena Verna? They just design review it and ship it for paid plans only. So if I'm in the free plan or in the lower tier plan, I don't even see it. I don't even know of it existence because it doesn't exist in the app. Cause it was never designed for me to even see it. So just doing one small change of pushing your design reviews. To review functionality from every single state of the customer, free state, lower paid state. And target state that this functionality is actually unlocked. Can do all of the difference in the world. Because then you'll actually understand how that pink functionality is being exposed to a free user.
1:06:10 Elena Verna? So them to become aware in self-serve manner of its existence.
1:06:15 Lenny Rachitsky? I love, love, love all these little tactical little insights and tips. So thanks for sharing all these little, little things that end up being the most useful to people. Just a few more questions and then I'll let you go. One is around pitfalls. What have you found are the most common pitfalls that startups run into as they're trying to invest in product-led sales? You touched on a few, but what comes to mind when I ask you that?
1:06:39 Elena Verna? Let's just go through some summary that we've mentioned already throughout our conversation. Don't treat PLS as a traditional top-down sales process. Every single user does not equal. It's an opportunity for you to co-chase after. You need to understand the right triggers and usage. They can help you automate qualification process. So it's almost automating some of the SDR efforts to say, when is the right time for my sales, for my human, that I'm paying a lot of money to intervene into this account and add value? Because sales interaction has to add value to user journey, not be disruptive or create additional friction.
1:07:21 Elena Verna? Because I've seen so many even people posting of like, why am I getting a phone call 10 minutes later? It's annoying. I'm gonna stop using the product because of it, because they feel misunderstood. For that, profile your customers, understand whether you have buyers, whether you have users are there in your ICP segment. Know this information of friends so you can serve a best experience possible. Number two, hold your product accountable. This cannot be just executed through marketing and sales. Product has to have a seat at the table and product and sales relationship has to be one of the closest ones in this motion.
1:07:58 Elena Verna? And that's really hard to change, especially in the traditional top-down sales company where marketing and sales have closer relationship. So try to create new rituals, try to create the new ways of communication between the teams for them to be aligned behind the same goals. Number three, don't leave marketing out of the equation. Majority of your usage will not have a buyer in it. You will need marketing, your enterprise marketing, your account-based marketing to go and find and hunt that buyer and to bring them and connect them with usage. So lean on your marketing team. Just because you're doing product-led growth and product-led sales does not mean you don't need marketing.
1:08:39 Elena Verna? And strong product marketer can do wonders here in helping you with messaging, with outreach and sales enablement materials. And number three, don't.
1:08:51 Elena Verna? Wait on data efficacy too long. You might be using your intuition at the beginning very well, but start thinking about how you will need to scale your data issues. Because product led sales is all about leveraging usage for pipeline creation. So you need to be able to measure that usage, understand that usage, track it and evolve it.
1:09:14 Lenny Rachitsky? Amazing. Two more things. One is you shared before we started chatting that you have some benchmarks around some of these metrics that you've mentioned of just what is good? So that people can understand what their goals might be. What can you share there?
1:09:29 Elena Verna? Yes, so in terms of benchmarks. First of all, it's time to get from individual usage when that user comes in to have a single job to be done to creating an enterprise level contract. It does not happen in hours. It does not happen in days. It doesn't even happen in months of usage. So a couple of benchmarks for you all across Netlify, Miro or Amplitude, which are all of the companies I've worked at. It was 12 months plus of usage that had to happen before sales contracts can be created on a sustainable way. Now, that's not an all encompassing rule. You will have very high intent buyers coming in sometimes and you'll be able to close them within a week.
1:10:11 Elena Verna? But on average, it takes a year of usage to escalate the problem from individual to a company level solution. It takes time. Be patient. So this is not the problem of get more signups this quarter and close more pipeline in the same quarter. This is you're building for long term growth and you're closing contracts on the signups that's happened really last year in the best case scenario. Number two is don't confuse user and buyer. Please, please, please profile your users upon signup. Do not skip those onboarding questions. No, they do not detract for your onboarding completion rates and people that do drop off in the profiling stage.
1:10:54 Elena Verna? They were low intent anyways. They were never going to be activating if one extra question deterred them from completing, um, from continuing with your product. So profile your people know who you're talking to. It's more important than couple percentage drop off that we'll never going to activate in the first place. So, um, no, no, no die user, please, because, um, all of us are tired of receiving outbound that is not relevant to us. And then the third one is conversion. Uh, so conversion rates here actually stand from the true PLG companies. So freemium conversion rate is usually around five percent. Trial conversions are more closer to ten to fifteen percent. But your contract value start to go up.
1:11:39 Elena Verna? So it's not so much that you increasing conversion rate because a lot of those companies will still go through self-serve monetization flow before they become your sales pipeline prospect. So conversion rates stay the same, but your contract values and your lifetime value of the customer is what starts to increasingly, uh, go up and that you can influx into creating a smile revenue curve.
1:12:03 Lenny Rachitsky? Incredible. The question you had about profiling your user, I was going to ask what questions to ask. I'm guessing maybe a better approach is just go to Miro or Amplitude and just go through the sign and flow and see what they're asking.
1:12:13 Elena Verna? Yeah, I would give some couple parameters in place. Number one, limited to maybe three to four screens. Because otherwise it starts to feel too long. Uh, make sure they only ask information that you're either going to use in the data segmentation that then you can escalate to personalization and messaging. But at least that you're going to use on data segmentation. And experiment with the how deep of an information that you can ask. You should always be able to ask about company size, about the department, which customers coming from, about their seniority on the team and about their use case. Those four questions are uniform. Everybody's used to answering them. The rest, um, like phone number or like some, maybe like if you need to know the address or so, so on, those experiment.
1:12:56 Elena Verna? How much you actually want to make them required questions versus optional. So, but please, please, please experiment on your onboarding questionnaires, all of you.
1:13:07 Lenny Rachitsky? Closing question. Everyone started with sales, sales-led growth, and then product-led growth emerged. And now there's this bridge between the two of sales-led growth. Feels like there's always this new way of growing a business and approaching go-to-market. Is there something beyond product-led sales? What's next, if anything?
1:13:27 Elena Verna? Well, I wonder how much a rise in AI is going to automate some of those sales conversations. So it's not going to be truly product-led growth, because it's not like just the product is going to sell itself. What if on the other side of that chat, or other side of that email, or even a Zoom call, because they can do a deep fake of anybody, is going to be AI selling to you and giving you very deep and personalized answers? I am curious to see how that's going to evolve, because the plethora of information that AI can surface to you in a very personalized manner in a matter of seconds is far stronger than any human or even content management system can do at the moment.
1:14:12 Lenny Rachitsky? Do you want to coin an acronym right now for what that might be?
1:14:16 Elena Verna? Have to be AI Sales.
1:14:19 Lenny Rachitsky? A I S L G.
1:14:23 Lenny Rachitsky? It's a mouthful. Elena, this was everything I was hoping it would be. I imagine this episode will be even more popular than your first one. Thank you so much for making time and getting into such detail in all the things we talked about. Two final questions. Where can folks find you online if they want to reach out and learn more? And how can listeners be useful to you?
1:14:41 Elena Verna? I'm on LinkedIn a lot, but I have started my own Substack, so please subscribe to my newsletter if you can. I put more short content on LinkedIn and longer-form explanations in my Substack, not to compete with your Lenny newsletter, but...
1:14:56 Lenny Rachitsky? Plenty of room for everyone. I recommend yours within Substack, and we're going to link to it. And definitely, there's like no reason not to subscribe if you're listening to this podcast. It's only upside.
1:15:07 Elena Verna? Well, thank you. We're also creating PLG course with Reforge that is going to go into very nitty gritty details of everything that I'm talking about to help you operationalize these concepts. It's launching in the fall 2023. So do check that out. And other than that, I'm a really big believer in democratizing knowledge. So we don't have to all make the same mistakes over and over again. So the biggest way that you can help me is just share your insights, share your knowledge and share your learnings. So we can all grow so much faster together.
1:15:36 Lenny Rachitsky? Well, you're one of the best at doing that. And thank you again for doing this.
1:15:41 Elena Verna? Thank you for having me, Lenny.
1:15:42 Lenny Rachitsky? Bye, everyone.
1:15:45 Lenny Rachitsky? Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. Also, please consider giving us a rating or leaving a review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lennyspodcast.com. See you in the next episode.
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