Impact Pricing Podcast

#377: What Is Product-Led Growth? The Whats, Hows, and Whys with Kyle Poyar

Kyle Poyar is a product-led growth expert who worked for Simon-Kucher & Partners for six years where he was a consultant, senior consultant and manager, and director. Currently, he is the operating partner of OpenView, a firm that helps build software companies into market leaders by helping them hire the best talents, acquire and retrain the right customers, and partner with industry leaders so that they can dominate their markets.

In this episode, Kyle talks us through the details of product-led growth and how it became popular in the recent years. He also shares some tips on how to make it work on businesses in certain industries.

Why you have to check out today’s podcast:

  • Learn the definition of Product-Led Growth
  • Find out if Product-Led Growth model is suitable for your business
  • Learn how to shift from Sales-led model to Product-led model

 

“With the reverse trial, your customers land in a premium version of your product, have a time-limited period that they can access it, and then they can either convert and essentially purchase, or they can keep using a free version of the product. What ends up happening is you get the best of both worlds between freemium and free trial, and so you don’t actually have to choose between the two.”

Kyle Poyar

 

Topics Covered:

01:17 – How Kyle got into pricing

03:04 – More than just about numbers pricing has qualitative aspects as well

04:12 – What is product-led growth?

06:50 – Product-led growth is more than just prioritizing product over sales and marketing people

08:17 – Most companies strategized product-led growth from scratch until it was standardized

10:04 – Can companies do freemium that is not product-led growth?

11:47 – When product-led companies bring salespeople into the process

14:49 – Salespeople in product-led companies are not prospecting

15:28 – Self-serve sales work most of the time, but some transactions require salespeople

18:40 – The types of companies that does and doesn’t work for product-led growth

22:26 – How Kyle would coach a sales-led company who wants to shift to product-led growth model

25:50 – Does it make sense for PLG companies to spend more on the expand side of “land and expand”?

27:07 – Kyle’ pricing advice

28:33 – Connect with Kyle

 

Key Takeaways: 

“In my mind, why product-led growth has taken off is because end users, as opposed to just executive buyers, have more and more power in bringing software into work. And so, you can actually make your product discovered by those users, show value to those folks and enable them to become champions in your buying process” – Kyle Poyar

“Freemium is a subset of PLG. If you’re doing freemium by default, you’re taking steps into product led growth. But freemium isn’t required to be a product-led company by any means.” – Kyle Poyar

“I advise companies to think in terms of where there’s the most friction in their current motion and what are product-led solutions that can help solve that friction and improve upon a KPI that we want to improve on right now, and that takes us on this path to doing more PLG in the future.” – Kyle Poyar

 

Connect with Kyle Poyar:

Connect with Mark Stiving:   

 

Full Interview Transcript

(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)

Kyle Poyar

With the reverse trial, your customers land in a premium version of your product, have a time-limited period that they can access it, and then they can either convert and essentially purchase, or they can keep using a free version of the product. What ends up happening is you get the best of both worlds between freemium and free trial, and so you don’t actually have to choose between the two.

Mark Stiving

Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the growing relationship between them. I’m Mark Stiving, and our guest today is Kyle Poyar. And here are three things you’d want to know about Kyle before we start: He worked for NOAA. I find that fascinating. He worked for SKP for six years, and anybody in pricing certainly knows who Simon-Kucher & Partners is. And now he’s a partner at OpenView, a venture capital firm. And by the way, he’s extremely prolific on what we’re going to talk about today, which is product-led growth. Welcome, Kyle.

Kyle Poyar

Thanks for having me on, Mark.

Mark Stiving

Hey, I’m sure I asked this when you were on the very first year of this podcast four years ago. But remind everybody, how did you get into pricing?

Kyle Poyar

I kind of stumbled into it, which I think many people can probably relate to. It’s not normally the thing that you go to college for, right? I was an environmental studies focused person in undergrad, and that’s where I spent time at NOAA in the unclouded climate adaptation space there. But realized what I really enjoyed doing was strategic problem solving and using data to solve problems that would ultimately have a real meaningful impact.

So, that led me to look at consulting roles where I could really just play a bigger role and learn about things that I previously had very little exposure to. And within the consulting world, you’ve got the revenue growth side of things and the cost cutting. I definitely preferred the revenue growth. And within that, pricing just became such a fascinating topic because of the blend of the economics and quantitative aspects of pricing, but also the art around it and some of that customer psychology and behavioral economics aspects of pricing. I just fell down a rabbit hole and so I got hooked very fast.

The other thing I just add is that I come from a family of entrepreneurs. My dad actually founded and ran a used car business for a long time. And so, from that standpoint, every single day, there was a pricing conversation and a pricing decision. And I had that instilled in me from a very young age and so had been thinking about price even outside of, you know, professionally working on pricing have thought about price really every day of my life.

Mark Stiving

I think being raised around used car sales would be amazing. But my favorite thing on what you just described, though, and I’m sure I thought of this, but it never hit me as clearly as you just said it: We all look at pricing like it’s a number, right? There’s some quantitative stuff that’s going on, but there’s so much qualitative that goes on behind it and around it. And that’s what makes it fascinating. And that’s probably why not a lot of people do it.

Kyle Poyar

Well, it’s very misunderstood, certainly. And I think that the qualitative or the art aspects of pricing are overlooked or maybe underappreciated. But to me, it’s so fascinating. And as I work at the intersection of pricing and product-led growth, a lot of the same ways that I was trained to think about pricing from a kind of customer perception, customer perceived value lens are very comparable to how you actually have to think about product-led growth. And so, I found that the training and the mindset has been very applicable beyond pricing.

Mark Stiving

Great segue, let’s jump in. I too, every time I think about pricing, I think it’s way bigger than putting a number on a product. It’s actually all the strategy that goes around it. What’s the product packaging that we’re going to use? What are we going to charge for? What market segment we’re going to go after? All of these are really smart decisions companies have to make around “How does our customer perceive value from our products”. So now, you are the expert, from what I can tell, on product-led growth. And I’ve had a couple of questions lately about pricing for product-led growth. And I said, we’ve got to talk to Kyle, figure out what’s going on. So, what is first of all, let’s start with what is product-led growth.

Kyle Poyar

At a high level, product-led growth is where the product plays a major role in how you acquire, convert and expand your customers. Framing it differently had to unpack this. We’ve usually thought about “the product exists over here, and then we’ve got sales and marketing on the other side” that gets people to get interested in and buy the product. But we can actually think about the product as a key element of the growth model of a business, whether that’s thinking about product trials, or freemium experiences, product virality, self-service monetization, or even elements like usage-based pricing where you charge more as your customers use more of the product. It’s all elements of that product-led growth equation.

The other aspect that I would add, too, is that normally for software companies, the way to grow faster is very reliant on scaling up your team, right? So, if you want to double growth next year, you actually have to hire – in a normal software environment – a lot of outbound reps to go cold calling, building pipeline, got to hire up and ramp a bunch of AEs to be able to close that business. Got to hire up and train a bunch of services folks to onboard. And then customer success and account manager folks to retain people. You have to do a lot of hiring ahead of that growth, and your growth rate is usually limited by your ability to hire quickly. And all of these takes a lot of money in order to do. The investments happen well before the cash happens.

And so, another way to think about product-led growth is that you’re taking things that would normally be done in a manual, resource intensive and just human intensive way, and you’re finding product solutions that allow for less friction, less cost, and just as importantly, a very consistent customer experience that can work at scale.

Mark Stiving

So, if I summarize what you just said, it was, “Can we use the product instead of hiring sales and marketing people ahead of our growth curve?” Or is there more than sales and marketing that we’re missing out on?

Kyle Poyar

I think it’s bigger than that. I mean, that is certainly a part of it. And that’s what you just described as a rationale for people to adopt elements of product-led growth. But I think the story is bigger. And even when we zoom out around why has product like growth taken off, in my mind, part of why it’s taken off is that end users, as opposed to just executive buyers, have more and more power in bringing software into work. And so, you can actually make your product discovered by those users, show value to those folks and enable them to become champions in your buying process.

And so, essentially, more than just reducing sales and marketing costs, you’re actually creating differentiation and expanding your addressable market through product-led growth. In my mind, product-led growth for the best companies ends up being more of a mindset and a company DNA thing as opposed to something like your small go-to market tactical changes to reduce costs or reduce reliance on sales and marketing spend. So, there are elements of both, but I think that the bigger picture is what gets me excited.

Mark Stiving

Do you think the original companies in product-led growth – Do you think they fell into it and then said, “Wow, this is really cool”, or was it a conscious strategy upfront that says, “Hey, we’ve got to make our products so good that it sells itself”?

Kyle Poyar

For a while it was something that a lot of companies adopted, but they saw it as they were creating their own playbook for how to bring their specific product to market. Sometimes it was a founder was very averse to hiring sales reps and they just wanted to go self-service. Sometimes it was, say, in the case of Atlassian, the founders were based in Australia, but the market opportunity for their product was in the US and they wanted to be able to offer products at a low cost. And the only way to do that was this PLG approach to building a business.

And so, I think every company in the early days had their own rationale around PLG and was actually creating their own playbook. I mean, there wasn’t a consistent term for it until OpenView created the term product-led growth. But before that, you’d hear things like consumerization of I.T., bottom up, freemium, B2C2B. There were a lot of other terms for it, but each of these companies felt like they were building their own playbook from scratch that was really custom to their products. And it wasn’t until we started working on it as well as a lot of others in the community around OpenView started saying “Hey, actually there’s some similarities in how these businesses work and what tends to be successful and not successful. And let’s start documenting those, sharing those across the community to create an operating manual for how to how to do this”. And, you know, that next task update is going to take off.

Mark Stiving

Totally fascinating because as you started listing some of those other names: freemium, B2C2B. It’s like, “Oh yeah”. And I still hadn’t translated that to product-led growth, which I find fascinating.

So, let’s just specifically talk about freemium for a second. Can companies do freemium that isn’t PLG? I mean, are they two different things or are they the exact same thing?

Kyle Poyar

I’d say freemium is a subset of PLG. If you’re doing freemium by default, you’re taking steps into product-led growth. But freemium isn’t required to be a product-led company by any means. There’s plenty of other sort of things that folks can do with things on the table. But I do think they’re highly related because with freemium, you’re really treating your product as an acquisition vehicle. And in fact, a lot of folks treat maybe even the cloud costs of their freemium users as a sales and marketing cost as opposed to treating it as a cost of goods sold. So, with freemium products, you’re really saying, “Hey, we believe in the product. We think people can discover this, sign up, start using it, and then our users are going to be our best marketing for the company.” And so, it can be really powerful, but it also requires having very fast time to value being able to self-serve on the product. So, having that kind of product experience that is aligned with PLG, if you were to say, “Hey, we got a freemium product”, but you’ve got to talk to a sales rep to get implemented. You got to actually bring in a services person to help you train the team on how to use it. Odds are that freemium strategy isn’t going to work super well in the business.

Mark Stiving

And it’s high cost to serve that customer. So, you’re not going to do well on the free side anyway.

Kyle Poyar

Exactly.

Mark Stiving

So, what about salespeople? Do PLG companies have salespeople? And when do you bring them into the process?

Kyle Poyar

They absolutely do. The way I think about it is that sales comes a little bit later in the lifecycle of a business. There used to be this dichotomy of like, “we’ve got self-serve and self-serve can be good enough. We don’t need sales reps.” I think no sales was to Atlassian was like no software was to Salesforce is sort of a message to the market. But what we’ve realized is that with PLG, it’s really great for getting users to see value in a product, even converting those users into teams or small purchases. All of that works really well.

But then, there’s often friction points that you’re creating without having sales, and you can see it in things like support messages where folks actually need help filling out a security questionnaire. They need help navigating a procurement legal. They want an invoice payment versus paying on a credit card. They want additional training for their team. There’s a number of reasons why folks might want a deeper engagement and a closer personal relationship with your team, and by not making that available via a sales representative, you actually are adding friction into the customer journey. So, a lot of times in a PLG context, sales comes into play after you have this bottom-up base of users that have product interactions, that love the product, and sales can go partner with those users to navigate getting to the decision maker, getting to the budget holder, explaining the reasons why the product actually works better when deployed across the department or wall to wall in in a company.

And so, sales, has a very important role and sales is hired at very rapid rates once a company has reached scale. But in my mind, the sales process looks a bit different than a traditional company. And PLG companies should, in theory, need less investment on things like sales and marketing relative to investments in, say, product and engineering compared to their more sales-led peers where that ratio is flipped.

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Mark Stiving

Right. So, the salespeople aren’t necessarily prospecting. They’re using current usage data, customer data to figure out who they’re going to go talk with.

Kyle Poyar

Exactly. That’s where folks might have seen the term product qualified leads or my preference is product qualified accounts, where you’re able to use product data to sell to the right person at the right time with the right message based on what you know about them. It’s very powerful because this product qualified lead is going to convert at such a higher rate compared to an outbound prospect that you’re emailing with an SDR but has no context on the business and has never seen the product before.

Mark Stiving

When I talk to companies, I in my mind I always have a rule of thumb that if it isn’t $10,000, you shouldn’t have a direct salesperson. Does that number go up or down because of PLG or do you even think that way?

Kyle Poyar

I don’t necessarily think of 10,000 as a cut off. I guess in my mind folks are very hesitant to spend more than $10,000 on a credit card via a self-serve interaction without talking to a human. And so, to me, there’s this gray area where self-serve works really well. Call it from 0 to $5000 a year. Sales, especially enterprise sales, works great above 10 to $20000 a year, especially if you’re bringing in sales to do the outbound prospecting.

And then there’s this like messy middle area where someone could self-serve purchase or they could interact with a sales rep. And that’s where the interaction just looks different from that traditional sales process. You’re able to hire a sales rep that’s more like a customer success person that has, you know, you’re getting a fast time to close. You’re maybe not paying as much in commission as a traditional sales rep because that sales rep isn’t doing as much. The product is taking on more of that kind of jobs to be done in the process. And so, there’s this kind of middle ground for product-led sales that can be at these kind of lower deal sizes that might not have traditionally made sense for an enterprise-focused company, but still makes for a very efficient business model and a better customer experience compared to what self-serve can do on its own.

Mark Stiving

Yeah, that makes sense. And that messy middle, I have no idea how you handle that. That’s really interesting.

Kyle Poyar

Well, it’s typically about giving the customers multiple options and allowing them to go down the self-serve path if they want to, but then also letting them opt in to this different path. I do think one thing that ends up being challenging in these environments is like if a rep is reaching out to an account, maybe that has some interactions, but that account buys via self-serve, do you give them do you copy them on that deal? Do you give them quarterly for that deal or was it churn to self-serve? And in my mind, I actually prefer to think in terms of the overall company objective as opposed to like “We’ve got a self-serve revenue number and a sales revenue number”. It’s more about having a cohesive customer journey and aiming towards broader company and north star KPIs.

Mark Stiving

Yeah, and you can imagine how a salesperson getting a customer to buy through self-serve actually reduce the cost of serving that customer. So, that’s not a bad thing at all. We ought to not penalize the salesperson for that.

Kyle Poyar

Exactly. And you know, there shouldn’t be unnatural acts to try to get that customer to not be able to purchase via self-serve, which can happen if that’s where the incentives are.

Mark Stiving

So, talk to me about what types of companies this makes sense for, or maybe it’s easier to say these are the types of companies that doesn’t make sense for.

Kyle Poyar

It’s a great question. And what’s been fascinating for me is seeing the applications of PLG come to just about every kind of industry and type of companies. So, there used to be some rules of thumb like “PLG won’t work for selling it to enterprise level companies.” That has been disproven. Or “PLG won’t work for selling it to industry verticals that haven’t been historically tech savvy.” That’s been disproven. Even like “PLG doesn’t work well when selling security products because there is a lot of hesitation with those specific products around adopting them via self-serve”. That’s been disproven, especially as you see the likes of Snyk take off. But in my mind, there are some areas that make PLG harder, I wouldn’t say impossible, but harder to do, harder to be successful at. That would be first off, if you didn’t start at PLG and you built a pretty sizable business basically with a traditional software mindset. It is quite difficult to pivot and rebuild that company for a variety of reasons. But you see more PLG companies going upmarket and adding more traditional sales-lead motions than you see sales-led companies being successful going the other way around.

The other thing for me is if the main way that folks are going to see value from the product is when you’re talking about being adopted by just about everyone in a company or an entire use case, and you can’t really start small and land and expand. If you really have to start wall to wall, PLG is just going to going to be harder to make it work. It is just by nature of the product you’re selling, the product that requires more stakeholders, more buy in, really that change management and stakeholder management of getting that commitment to go wall to wall.

And PLG works better, I think, when you can have value points along the way. Like at Countly, which is an open view portfolio company that I think a lot of people probably either used or seen Countly links thrown around. There’s a value prop for an individual where, “Hey, I hate the back end or the scheduling meetings. I wish I could just send someone my Countly link”. But it’s also value prop for teams where you can do scheduling with multiple people at once. Saves even more time. There’s also a value prop for the company. You could use Countly for your sales team, for your recruiting needs, for a bunch of other use cases. And so, if Countly was only something that was valuable, if it was used across the company, PLG Would it work nearly as well as it does by having these sort of value points that can happen regardless of how bought in that that company is.

Mark Stiving

So, it sounds like if you’ve got this brilliant idea for enterprise, you really need to find a way to break it down to make it valuable to an individual, so that you could get an individual to adopt it, lots of individuals to adopt it. And then over time, we get it into the enterprise.

Kyle Poyar

Yeah, exactly. It’s finding those champions who probably are the budget holder just yet. But finding a value proposition that helps them solve a pain point in their workflow or accomplish their objectives, and then provide a bridge to get from that individual to the decision maker.

Mark Stiving

If you are coaching a large company that already has sales-driven organization and they wanted to shift towards PLG, how would you coach them to do that?

Kyle Poyar

Well, first off, I’d say expect it to take a while. Longer than you might want. Talking of maybe even 12, 18 months, maybe even more than that before the company is going to see real, meaningful returns. And in fact, things like costs, and even cash payback might go up in the interim because you’re essentially building for multiple motions, but only having success with one of them. So, you’ve got a plan, and that also means having really clear alignment across the leadership team, having buy in, having that commitment to put the resources in that are required.

I also think to me, because of this lengthy process, it takes to be able to fully swing the pendulum towards PLG, I advise companies to think in terms of where there’s the most friction in their current motion and what are product-led solutions that can help solve that friction and improve upon a KPI that we want to improve on right now and that takes us on this path to doing more. PLG in the future.

And so, you might say, “Hey, our challenge is we just spend all this money on paid ads, and very few people are willing to request a demo with our sales team”. In that case, a product-lead solution might be putting a product tour on your website so folks can play around with it. It kind of nurtures people to engage with your product, understand how it could fit their needs, and then gets them to contact sales. That’s a PLG oriented solution, but it’s not going all the way down the path to freemium and self-service.

And so, there’s a lot of those kinds of opportunities that might be available that will get you a lot of buy in for doing more of these types of things, but don’t create challenges around things like channel conflict, cannibalization, rise in payback as you try to manage multiple channels at once, like there’s just a lot lower risk.

Mark Stiving

I’m going to restate what you just said, and I want to say it slightly differently. And that is “Every friction point, every problem that you have, can you think about how you might address it with your product instead of with your sales and marketing team?”

Kyle Poyar

Yeah, that’s a great example or a great way of framing it. And there’s so many things that that folks could do if they have that mindset. I mean, don’t want to knock at Forrester or at Gartner, but if you were to think about marketing line at MQA, trade shows with them or you know, TEI study with Forrester or Gartner, that might cost $100,000. Could you actually take some of that budget and build something product-oriented that helps actually unlock that same friction point in your customer journey, but is now building this path towards product-led growth? I think from that framing, people can uncover a lot of interesting opportunities for their business.

Mark Stiving

The other thing that you made me think about is we often talk about land and expand, and when we think of product-led growth, we think of, “Oh, we need the freemium or the free products somehow to get people into our world”. Does it make sense – I’ve already got a product, a SaaS product out on the market – Does it make sense to spend my time for product-led growth on the expand side instead of on the land side, or at least a start?

Kyle Poyar

It certainly can. And that could take a couple of different forms. One is, is there some sort of usage-based expansion where you can focus on product solutions to drive more adoption of your product and more overall usage and therefore more revenue? Those are pricing engineering investments around product-led growth, but focused on moving that expansion number higher.

Or if you have net new products that you’re trying to get folks to adopt, your customers have already implemented the product. They’ve already set up integrations and they’re familiar with using it. So, you could maybe have self-service trials of new product functionality that might usually be gated or paid for, but that it gives folks a taste of that value and drives more seamless adoption of some of these kind of paid add-on features that you want to sell.

Mark Stiving

Awesome. Kyle, I think I could talk to you for hours. But sadly, we don’t have that much time. Can I ask you the final question before we wrap this up? What is one piece of pricing advice you’d give our listeners that you think could have a big impact on their business?

Kyle Poyar

One piece of pricing advice. I have got so many pieces of advice that could have an impact, so boiling down to one is tough.

I think, for companies that have a PLG model or are investigating it. There’s a lot of folks that are debating, “Should I go freemium or free trial?” And each has their own pros and cons. It’s sort of a topic that’s been debated ad nauseum. Increasingly, I see more companies having success with a reverse trial, and I think Elena Verna might have coined that term. And it’s another one of those things that’s like companies were doing it, but there wasn’t a term around it. There wasn’t a playbook around it until she started our thought leadership. But with a reverse trial, your customers land in a premium version of your product, have a time-limited period that they can access it, and then they can either convert and essentially purchase, or they can keep using a free version of the product. What ends up happening is you get the best of both worlds between freemium and free trial, and so you don’t actually have to choose between the two. That would be my quick tip of the of the day.

Mark Stiving

That’s really interesting. I want to go back and think about that one. That’s nice. Kyle, thank you so much for your time today. If anybody wants to contact you, how can they do that?

Kyle Poyar

Best way is adding me on LinkedIn or subscribing to my newsletter. Growth Unhinged.

Mark Stiving

And I read that newsletter all the time. It is very good. Thank you.

Kyle Poyar

That’s awesome. Appreciate it.

Mark Stiving

And thank you all for listening. If you enjoyed this, would you please leave us a rating and a review? The easiest way is to go to ratethispodcast.com/impactpricing. And speaking of reviews, Arto in Finland left this review on Apple Podcasts for us:

“Impact pricing is a source of knowledge and inspiration. The depth and breadth of impact pricing podcasts are awesome, lots of value. When you really focus listening, you capture a lot of insights that help you to become better in pricing.”

Thank you, Arto.

And finally, if you have any questions or comments about this podcast or pricing in general, feel free to email me at mailto:mark@impactpricing.com. Now go make an impact.

Mark Stiving

Don’t forget to attend our workshop. “How to Fearlessly Raise Prices Now” go to impactpricing.com/rpn.

 

Tags: Accelerate Your Subscription Business, ask a pricing expert, pricing metrics, pricing strategy

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