Product-Led Growth

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Overview

Sales-led growth

Old marketing playbook was to create content; use landing pages to capture leads; and nurture those leads with automated emails until, one day, they converted into paying customers (or unsubscribed).

Pros of a sales-led go-to-market strategy

1. Ability to close high Lifetime Value (LTV) customers
2. Perfect for hyper-niche solutions where TAM doesn't justify PLG
3. Perfect for new categories where customer education is needed.

Cons of a sales-led GTM

"First $1M ACV customer forced us to get on the elephant hunting treadmill, and we’ve never been able to get off it. Our board, our employees, everyone expects us to only go after customers that were as large or larger than our first customer"

Product-led growth

New product-led growth mode is so start with a freemium or free trial product. By making it easy for people to experience the value of the product, you can transform it into a powerful customer acquisition model.

Pros of Product-Led Growth

You have an unfair advantage when it comes to brand recognition and enjoy access to a dominant growth engine and significantly lower CACs.

Cons of Product-led GTM

• Many ambitious entrepreneurs have tried and failed. Rob Walling, the previous CEO of Drip, offers a warning: “Freemium is like a Samurai sword: unless you’re a master at using it, you can cut your arm off.”
• there’s no battle-tested playbook. You need to figure out whether a free trial or freemium model will work for your business.

Deciding b/w Sales-led Growth vs PLG depends on 4 factors

GTM Strategy

• Do you want to offer the best solution for the lowest price? (Dominant strategy)
• Do you want to offer the best-customized solution for the highest price to underserved customers? (Differentiated strategy)
• Do you want to offer the simplest product for the lowest price to over-served customers? (Disruptive strategy)

Dominant Strategy?

The dominant growth strategy works great if you can do something much better than your market and can charge significantly less.

Freemium can work here, but only if your TAM big enough to support a freemium model and you can walk the thin line between giving too much and too little away

Does your product solve a specific job significantly better and at a lower cost than anyone else in the market? Can your user realize significant ongoing value quickly with little-to-no help from company personnel? Do you want to be the undisputed market leader in your category?

Disruptive Strategy?

The freemium model thrives in the disruptive environment. Keeping costs low draws in prospects using existing solutions. When you provide less value for a cheaper price.

Ocean Conditions

Are you in a red- or blue-ocean business?

If you’re in a blue ocean and have a quick time-to-value in your product, use a product-led model. However, if your product is complex, start with a sales-led go-to-market strategy to educate your audience and create demand

If you're in a red ocean environment and go with a disruptive strategy, freemium can really shine

Audience

Are you currently targeting people who can easily use your product and experience its value? What is your ACV for each customer? Is it high enough to justify a low- or high-touch sales model?

Disadvantages of a Bottom-Up Selling Strategy:

• Low initial contract size
• Many non-paying customers
• Significant investment
• Expertise shortage when you want to convert some customers to an enterprise plan

Time-to-value

To create a successful product-led business, you need a quick time-to-value. New users need to be able to experience a key outcome in your product quickly and without any assistance.

Eliminate unnecessary steps in your onboarding.

Align product pitch to its value

To do this:

1. Understand your value
2. Quantify and communicate the value of your product to users
3. Deliver on what you promise

Understand your value

What outcome do people expect when they buy your product?

There are 3 reasons that people buy a product

1. Functional Outcome: the core tasks that customers want to get done
2. Emotional Outcome: how customers want to feel or avoid feeling as a result of executing the core functional outcome
3. Social Outcome: how customers want to be perceived by others by using your product.

You ideally want to understand all 3 outcomes of using your product, and align them to a value metric. A value metric is the way you measure value exchange in your product. It can be functional or outcome based

• Functional value metrics are “per user” or “per 100 videos.” Pricing scales around a function of usage
• Outcome-based value metrics charge based on an outcome, like how many views a video received or how much money you made your customer.

What Makes a Good Value Metric?

1. It’s easy for the customer to understand. When someone visits your pricing page, will they immediately understand what they’re paying for and where they fit in your packaging?
2. It’s aligned with the value that the customer receives in the product.
3. Grows with your customer’s usage of that value.

People often fall into the trap of user-based pricing without thinking about it too much. It can work, but only if most of the conditions below are true.

Communicate Your Value

Don’t overcomplicate your pricing page

If the pricing page can’t pass the five-second test (i.e. users understand which plan is right for them almost immediately) you’re hurting customer acquisition

Putting together a pricing page doesn’t have to be complicated. You need four elements to make it work:

• Value Metric: what is the metric that you're pricing on?
• Willingness to pay for all packages: are there consumers that are willing to pay for each of the packages
• Valued features: are you feature-gating effectively?
• Customer personas: can you pitch each plan to a predefined customer persona?

Structuring pricing plans

Even if you have a simple pricing plan, you may still run into the trap of giving away too much for free. Don’t create a free plan with no incentive to upgrade. By offering the majority of your product for free on a freemium model, you reduce the incentive for people to upgrade.

It’s also way too easy to give away too little. By doing so, you make it extremely hard for new users to see value in your product—the powerful, fun features are hidden behind closed doors.

Finding an acceptable price range is especially important because we want to avoid two disastrous consequences: We set our price too high and lose out on the majority of sales. We set our price too low and lose out on the majority of profits (while also hurting our brand, which appears “cheap”)

Deliver on Your Value

Be ruthless about reducing friction. Even non-trivial steps like activation emails can crater your free-to-paid conversion rate.

Does the first product experience lead to a specific, relevant, meaningful “quick win”? Do tooltips and hotspots spur meaningful action in the product, not just point at buttons? Do social and directional cues indicate high-value behaviors? Are key task completions indicated with a success state, such as Mailchimp’s famous high-five?

The Bowling Alley Framework

Develop your straight line. Create a product bumper. Build a conversational bumper.

Map Out the Path

There are form fields that you don’t really need to ask people when signing up. There are required steps that first-time users don’t really need to complete right away. And, of course, there are steps that don’t really need to be there at all. So label every step, eliminate everything that's not necessary, and postpone everything that delayable until after the user has signed up and gotten the first taste of value from the product

Develop product bumpers

These help users adopt the product within the application itself. These include:

• Welcome Messages
  • show user a sticky welcome message about what the product can do when after they have signed up
• Product Tours
  • with a focus on what the product can help people achieve, instead of its features
• Progress Bars
  • to show them how far they are from finishing something
  • protip: never start these off at 0 – will make people more invested in the task
• Checklists
  • same purpose as progress bars, but more useful for "optional" tasks
  • same protip: never start them empty. always have some kind of prefilled stuff so that users are invested in the task (I have started this off, so I must complete it)
• Onboarding
  • have an onboarding screen that clearly lists what your product is for and its current limitations (if any), so there is no gap between users' expectations and what your product can currently deliver
• Tooltips
  • For helpful tips about what each feature does. You can make these less prominent in the future
• Empty States
  • Don't just leave something as an empty state! Use empty states as an invitation for people to do a task

Develop conversational bumpers

Conversational bumpers work to educate users, bring them back into the application, and eventually upgrade their account. These include:

• User Onboarding
  • Talk to users – specially early on – before onboarding them. Helps set expectations
• Emails
  • Send people emails to tell them that something new about what they were working on
• Push Notifications
• Explainer Videos
• Direct Mail

Highlights (for my internal reference only – not relevant for most people)

We were using the same-old marketing playbook that everyone else did: Create content; use landing pages to capture leads; and nurture those leads with automated emails until, one day, they converted into paying customers (or unsubscribed).

helped launch a freemium product: By making it easy for people to experience the value of our product, we transformed it into a powerful customer acquisition model.

Trying a product is and always will be an essential part of the buying process. When it comes to software, consumers demand the same experience.

As the SaaS industry evolves, I believe there will be two types of companies: Sales-led companies represent the old way. It’s complex, unnecessary, expensive, and all about telling consumers how the product will benefit them. These companies want to take you from Point A to Point B in their sales cycle.

Product-led companies flip the traditional sales model on its head. Instead of helping buyers go through a long, drawn-out sales cycle, they give the buyer the “keys” to their product. The company, in turn, focuses on helping the buyer improve their life. Upgrading to a paid plan becomes a no-brainer.

Product-Led Growth is a go-to-market strategy that relies on using your product as the main vehicle to acquire, activate, and retain customers.

If you’ve used Slack or Dropbox, you’ve witnessed this first-hand—you

product-led companies often benefit from shorter sales cycles, lower Customer Acquisition Costs (CAC) and a higher Revenue Per Employee (RPE).

The Three Tidal Waves Coming for Your Subscription Business Tidal Wave 1: Startups are more expensive to grow.

Tidal Wave 2: Buyers now prefer to self-educate. Three out of every four Business to Business (B2B) buyers would rather self-educate than learn about a product from a sales representative,according to Forrester.

Tidal Wave 3: Product experiences have become an essential part of the buying process.

The entire onboarding and upgrade experience was handled by the product.

Pros of a sales-led go-to-market strategy 1. Ability to close high Lifetime Value (LTV) customers.

A main lure of a sales-led GTM is that you can close customers with a high Annual Contract Value (ACV). This sounds great but can often lead to poor revenue diversity, with several customers making up a large percentage of your Annual Recurring Revenue (ARR).

2. Perfect for hyper-niche solutions. If you have a product with a small Total Addressable Market (TAM), it often makes sense to forgo a product-led model in favor of a sales-led model.

3. Perfect for new categories where customer education is needed. When you’re launching a new category, you have to change the way people approach problems. This not only takes time but requires you to educate people on how to do things differently.

Cons of a sales-led go-to-market strategy 1. High customer acquisition costs (CAC) A big downside of the high-touch sales model is that the CAC is out of control, and the sales cycles are extremely long. As you might have guessed, high-touch sales is a leading indicator of CAC.

short, a sales-led strategy passes costs to consumers that have no connection to product value.

2. The customer acquisition model is leaky. In a sales-led organization, the customer acquisition model has a big leak.

98% of marketing-qualified leads (MQLs) never result in closed business.

3. The organizational structure hinders great product development.

My biggest regret is that our first customer was $1M ACV. Ever since that first customer, our product, go-to-market, our support model have all been pulled in one direction — high-end enterprise.

"Our first $1M ACV customer forced us to get on the elephant hunting treadmill, and we’ve never been able to get off it. Our board, our employees, everyone expects us to only go after customers that were as large or larger than our first customer. I’ve been watching this new competitor emerge that’s going after the same market as we are, except from the low end. They are tiny but growing rapidly. And it’s too hard for us to compete with them — we don’t have the people, technology stack, support model or frankly, the mindset."

Having the product team involved throughout the business allows for product-led businesses to create a seamless customer experience across every department. What makes a product-led business unique is that all teams leverage the product to hit their goals.

A product-led marketing team asks, “How can we use our product as the #1 lead magnet?”

Pros of Product-Led Growth Product-led businesses have an unfair advantage and enjoy access to a dominant growth engine and significantly lower CACs.

Many ambitious entrepreneurs have tried and failed. Rob Walling, the previous CEO of Drip, offers a warning: “Freemium is like a Samurai sword: unless you’re a master at using it, you can cut your arm off.”

there’s no battle-tested playbook. You need to figure out whether a free trial or freemium model will work for your business.

MOAT framework to help you pick the right go-to-market strategy for your business:

Market Strategy: Is your go-to-market strategy dominant, disruptive, or differentiated? Ocean Conditions: Are you in a red- or blue-ocean business? Audience: Do you have a top-down or bottom-up marketing strategy? Time-to-value: How fast can you showcase value?

The dominant growth strategy works great if you can do something much better than your market and can charge significantly less.

Questions to ask yourself when deciding if a dominant growth strategy is right for you: Is your TAM big enough to support a freemium model?

Does your product solve a specific job significantly better and at a lower cost than anyone else in the market? Can your user realize significant ongoing value quickly with little-to-no help from company personnel? Do you want to be the undisputed market leader in your category?

Disruptive SaaS Growth Strategy

The freemium model thrives in the disruptive environment. Keeping costs low draws in prospects using existing solutions. When you provide less value for a cheaper price.

Questions to ask yourself when deciding on your market strategy: Do you want to offer the best solution for the lowest price? (Dominant strategy) Do you want to offer the best-customized solution for the highest price to underserved customers? (Differentiated strategy) Do you want to offer the simplest product for the lowest price to over-served customers? (Disruptive strategy) Or are you planning on using a hybrid strategy?

Ocean Conditions: Are You in a Red- or Blue-Ocean Business?

Red-ocean companies try to outperform their rivals to grab a greater share of existing demand.

Blue-ocean companies access untapped market space and create demand, and so they have the opportunity for highly profitable growth.

In Blue Oceans, competition is irrelevant. Yes, imitators arise, but experience shows there is a wide window of opportunity to stay ahead of imitators.

Within your market, some segments could be in a red ocean while others are in blue oceans. For instance, one of my clients in the business intelligence (BI) software space knew the enterprise side of the BI market was a bloody red ocean. So, they strategically focused on small and medium-sized businesses where they could operate in a blue ocean—same market, different ocean strategy.

Blue Ocean If you’re in a blue ocean and creating demand, your product may have a steep learning curve. Before you can make the sale, you need to educate your market on why your new way of doing something is better.

Take Salesforce.

The sales team met resistance from companies that, among other objections, worried about their data being lost or stolen.

Had Salesforce started with a no-touch, product-led model, it would have been hard, if not impossible, to combat those objections. As a result, most people wouldn’t buy the product.

most companies leverage a sales or marketing-driven go-to-market strategy in a blue ocean.

if you have a simple application like Spotify that can help users experience the value of your product almost immediately, you can still lead with a Product-Led Growth model.

Takeaway: If you’re in a blue ocean and have a quick time-to-value in your product, use a product-led model. However, if your product is complex, start with a sales-led go-to-market strategy to educate your audience and create demand. Still, ask “when” not “if” you’re going to launch a product-led arm of the business.

Red Ocean In a red ocean, prospects already know how your product can help them, and a product-led model is advantageous

A Product-Led Growth model also helps you convert “non-customers”—people who typically won’t reach out to request pricing or sign up for a demo request.

Audience: Do You Have a Top-Down or Bottom-Up Selling Strategy?

Traditionally, it made sense to sell SaaS products only to executives at the top. After all, these decision-makers had to sign off on major purchases. Nowadays, the tables have turned. Products are a fraction of the price they used to be, and, in many cases, you don’t need to talk to a sales rep to purchase a product.

If you’re selling large deals, top-down systems are essential. Typically, the larger the sale, the more service and training a customer requires. Take SAP.

Bottom-up selling strategies are the norm in the consumer market. Take Facebook, Twitter, or Evernote: Each created a product that can be adopted in minutes.

Typically, businesses deploy a free-trial or freemium model to make a bottom-up selling strategy work. A big reason to choose a product-led model is that if people can’t see the value in using your product quickly, few will upgrade.

A top-down selling strategy pairs well with a sales-led go-to-market strategy. A bottom-up selling strategy works almost exclusively with a product-led go-to-market strategy.

Remember: Once the contract is signed, the sale has just begun. Afterward, you need to convince people at the bottom to use the application. While this is not necessarily a disadvantage, some middle management will work against the product rollout if they didn’t want it in the first place. To

Disadvantages of a Bottom-Up Selling Strategy: Contract size. Non-paying customers. Significant investment. Expertise shortage.

your selling strategy has to align with your go-to-market strategy. If your product has a freemium model and a top-down selling strategy, the two approaches will repel each other. However, if you align your product-led model with your selling strategy, you’ll have unmatchable synergy.

Questions to ask yourself when deciding between a top-down or bottom-up selling approach: Are you currently targeting people who can easily use your product and experience its value? What is your ACV for each customer? Is it high enough to justify a low- or high-touch sales model?

Time-to-Value: How Fast Can You Showcase Value?

“From a marketing and sales perspective, Product-Led Growth is a game-changer. It means you can deliver on your promise to prospects. It also means the product sells itself if you get in front of people at the right stage of the buying process.”

To create a successful product-led business, you need a quick time-to-value. New users need to be able to experience a key outcome in your product quickly and without any assistance.

If your users require extensive hand-holding to get a glimpse of value, most will never return after signing up.

Regardless of your product or industry, these are the four types of users: Mission Impossible Users. Your user has low motivation and finds it hard, if not impossible, to use your product.

Rookie Users. Your user has high motivation but finds it incredibly difficult to use your product. This scenario is often a luxury for companies. It usually pops up when employees are forced to use existing software or have no alternative solutions.

Veteran Users. Your user has low motivation but finds it easy to use your product. This means your user will accomplish the target behavior easily but could flee at any sign of friction—or hunger. Who knows?!

Spoiled Users. This is the outcome to optimize for. Your user has high motivation and finds it straightforward to use your product. This means that you’ll help the greatest number of people in your Total Addressable Market (TAM).

Want to strengthen user motivation? Hire a great copywriter.

Want to increase the number of people who complete account setup? Eliminate unnecessary steps in your onboarding.

Build a Product-Led Foundation

Your free product may cannibalize demo requests. Free users can overwhelm your support team. There’s no shortage of potential surprises!

Understand your value. Communicate the perceived value of your product. Deliver on what you promise.

Understand Your Value

Let’s say you’re selling live-chat software like Intercom. You’re not really selling live-chat software (fun fact). You’re selling a new and better way to acquire customers.

If businesses aren’t able to acquire customers, they experience pain—pain

This kind of pain is product agnostic. But pain is also beautiful in a weird way. Pain makes us want to change so that we can avoid it or prevent it altogether.

What outcome do people expect when they buy your product?

Most technology startups don’t really know why people buy their product. So, they create bland headlines that read, “We sell live-chat software for website and mobile support.”

The copy assumes we know the outcome that live chat solves for.

three reasons that people buy a product 1. Functional Outcome: the core tasks that customers want to get done.

2. Emotional Outcome: how customers want to feel or avoid feeling as a result of executing the core functional outcome.

For a business intelligence tool, this could be the feeling of excitement or surprise as you discover a big opportunity (or threat) for your business with new data.

3. Social Outcome: how customers want to be perceived by others by using your product.

If you can understand the three main outcomes behind why people buy your product—and execute on it—you’re on the right track to building a strong product-led foundation.

Because of how valuable monitoring these usage patterns has become to product-led businesses, they’re often referred to as “value metrics.”

A value metric is the way you measure value exchange in your product.

value metrics are the linchpin to successful execution of a product-led go-to-market strategy. Because you’re aligning your revenue model directly with your customer acquisition model.

For a video platform like Wistia, a value metric could be the number of videos uploaded.

For a communication application like Slack, a value metric could be the number of messages sent.

For a payment processing platform like PayPal, a value metric could be the amount of revenue generated for a merchant.

there are two types of value metrics: functional and outcome based. Functional value metrics are “per user” or “per 100 videos.” Pricing scales around a function of usage. Outcome-based value metrics charge based on an outcome, like how many views a video received or how much money you made your customer.

value metrics outperform feature differentiation with up to 75% less churn. Outcome-based value metrics take this a step further with an additional 40% reduction in churn.

What Makes a Good Value Metric?

1. It’s easy for the customer to understand. When someone visits your pricing page, will they immediately understand what they’re paying for and where they fit in your packaging?

2. It’s aligned with the value that the customer receives in the product.

what core components lead someone to experience a meaningful outcome?

3. Grows with your customer’s usage of that value.

If customers get incredible value from your product, charge them more—your product is worth it. On the flip side, if customers aren’t getting the full value from your product, charge them less.

Slack does a great job emphasizing this on their pricing page by creating a fair billing policy. Given that Slack’s value metric is the number of users you add to the messaging platform, it makes sense to charge per user. However, if you’re an enterprise with a large number of users, one of your biggest objections is not knowing how many people are actually going to use the platform. To combat this, Slack created the fair billing policy—you get charged only for active users.

The Mistake that So Many Make: User-Based Pricing One of the most common traps is charging per user.

If you can check “True” for each of these conditions, per-user pricing is a great fit. If not, well, at least you know that it’s not the right fit.

How to find your value metric

Step 1: Subjective Analysis

Pull out a piece of paper and jot down everything you think could be a value metric. Once you have the list, run it through the value metric scratch pad.

Step 2: Data-Driven Approach

When analyzing usage patterns, it’s easy to focus on measuring your product data without segmenting your users. By doing so, it’s easy to optimize for everyone while creating a worse experience for your best users.

ask yourself these questions when analyzing your data: What do my best customers do regularly in the product? What do my best customers not do in the product? What features did my best users try first during onboarding? What similarities among my best users—demographics, team structure, ability—led to success?

For churned customers, ask: What were some of the main differences between their user journey and that of your best customer? Specifically, what activities were different? What outcomes did your churned users achieve and not achieve? Were these churned customers in your target market? Why did the majority of these customers churn?

Communicate Your Value

Communicating your value is at the crux of a Product-Led Growth strategy. Sales-led companies love to hide their pricing behind closed doors, asking potential buyers to request the price. Product-led companies eliminate this unnecessary friction with up-front pricing for most starter plans.

in a product-led business, your revenue and customer acquisition model are married together.

sales-led business can bank on relationships to sell large contracts. In a product-led company, your customer acquisition model is built around your product. If your product sucks, you’re not making payroll this month. If your revenue model is confusing, the number of people signing up for your free trial or freemium model will take a hit.

Don’t overcomplicate your pricing page

Before signing up for a free trial or freemium model, most users check out your pricing page. If it can’t pass the five-second test (i.e. users understand which plan is right for them almost immediately) you’re hurting customer acquisition. Instead of signing up for your free offer, they’ll bounce.

Even if you have a simple pricing plan, you may still run into the trap of giving away too much for free. Don’t create a free plan with no incentive to upgrade. By offering the majority of your product for free on a freemium model, you reduce the incentive for people to upgrade.

Offering a key feature for free makes your customer acquisition model more powerful—but you’ll drain resources, too. This is a common problem for many businesses that first launch a free trial or freemium model. Without data, it’s easy to give away too much for free.

We made our free service almost too good, so we have a lot of very dedicated, very happy free users, and sometimes we have a hard time upselling them because they’re like, “Hey, why would I need anything else?” Our stiffest competition is coming from ourselves!

it’s also way too easy to give away too little. By doing so, you make it extremely hard for new users to see value in your product—the powerful, fun features are hidden behind closed doors.

Don’t make it a no-brainer for the majority of your customers to downgrade.

Four Common Pricing Strategies

1. Best-Judgement Pricing This is much like it sounds. You and your team decide your price based on what you think is reasonable. Having a low sales month? Discount. Making too many sales but can’t support new customers? Increase prices. It’s simple supply and demand.

least effective pricing strategy because you rely on the collective experience of your team, and you make assumptions about what your buyer values and is willing to pay.

2. Cost-Plus Pricing Cost-Plus Pricing works when you calculate the cost of selling and delivering the product, then add a profit margin on top.

If you use cost-plus pricing, you’re most likely saying goodbye to the majority of your business’ profit potential.

3. Competitor-Based Pricing Competitor-based pricing benchmarks your pricing based on their data. It’s relatively simple if your competitors publicly show their pricing.

Regardless of how you conjure up your competitor’s pricing info, you’re assuming that you sell to the exact same customer who has the exact same problem that you can solve with your exact same product.

you’re assuming that your competitor has done their customer and pricing research, which isn’t necessarily the case.

4. Value-Based Pricing Value-based pricing bases your price on the value you provide. You determine this by taking into account how prospects value your product. A significant benefit of value-based pricing—and, as part of the process, doing pricing and customer research—is that you’ll learn what to include in each package.

Functional Outcome: The core tasks that customers want to get done From a functional perspective, what does your product help people do? Typically, a functional outcome breaks down into factors such as incremental revenue, reduced cost, reduced risk, or time savings. In my experience, many SaaS founders have a good handle on the functional outcome of their product—they often created their solution to solve for their own problem.

Emotional Outcome: How customers want to feel—or avoid feeling—as a result of executing the core functional job Do people really like to “crunch the numbers”?

B2B buyers may, in fact, be even more emotional than their B2C counterparts.

Social Outcome: How customers want to be perceived by others Instead of a chart cobbled together in Microsoft Excel, Marko’s software helps you put together brilliant, professional reports that you can show to your executive team. You aren’t seen as the Excel guru anymore (which is replaceable). Because you didn’t spend an entire week crunching numbers, you had the time to put together a plan of attack for how you’re going to hit your targets.

a very good way to determine your price is to follow the 10x Rule. “We charge this much because our customers get at least 10x that much value.” If I sell something for $100, I want to provide at least $1,000 in value to them… at least. All we can do is get it AS RIGHT AS POSSIBLE out of the gate and understand that pricing is not a “set it and forget it” function, but – just as your overall Marketing Strategy is ever-evolving and changing with market forces, market feedback, etc.

Finding an acceptable price range is especially important because we want to avoid two disastrous consequences: We set our price too high and lose out on the majority of sales. We set our price too low and lose out on the majority of profits (while also hurting our brand, which appears “cheap”).

If the price you were thinking of is below what an average buyer considers to be “acceptable,” then you’re leaving money on the table. If the price is above what an average prospect considers “expensive”, then you’ll probably face adoption hurdles and need to work especially hard at proving the value.

Putting together a pricing page doesn’t have to be complicated. You need four elements to make it work: Value Metric; Willingness to pay for all packages; Valued features; Customer Information.

According to Kyle Poyar, there are only three main categories when bundling: Leaders “are the hamburger in your McDonald’s value meal; they are what everyone wants and comes to you to buy. These must be included in all packages.” Fillers “are the fries and coke. They are seen as nice-to-have and sweeten the deal. Customers will cherry pick fillers when sold a la carte, and so a bundle helps drive uptake and a higher average revenue per user (ARPU).” Bundle killers “are the coffee of your value meal. Few people want a value meal with a burger, fries, coke AND a coffee, and adding coffee to the value meal might even turn people off from buying entirely because they’d end up with more than they need. There will be a handful of caffeine-starved customers who do want the coffee, though, and they can purchase

a la carte outside of the value meal.”

Deliver on Your Value

The same thing applies when selling software. What we promise in our marketing and sales is the perceived value. What we deliver in our product is the experienced value. Ideally, the perceived value aligns with the experienced value.

People want to “try before they buy” and experience your value proposition. If you keep your word, it’s a great way to build trust and sell your product. If you fail to deliver, your user experiences a nasty value gap.

There are three main reasons why value gaps are so prominent in the SaaS industry: Your product has serious ability debt; You don’t understand why your customers buy; You overpromise what the solution is capable of.

The Three Value Gaps You Need to Crush Value Gap 1: Ability Debt

Ability debt is the price you pay every time your user fails to accomplish a key outcome in your product.

To chip away at your ability debt, you need to be ruthless about reducing friction. Even non-trivial steps like activation emails can crater your free-to-paid conversion rate.

Ask yourself these questions while going through your product experience: Does the first product experience lead to a specific, relevant, meaningful “quick win”? Do tooltips and hotspots spur meaningful action in the product, not just point at buttons? Do social and directional cues indicate high-value behaviors? Are key task completions indicated with a success state, such as Mailchimp’s famous high-five? Are all unnecessary points of friction and distraction removed from critical workflows?

Value Gap 2: You Don’t Understand Why People Buy Your Product.

When it comes to onboarding, most businesses walk you through the entire product but bring you no closer to achieving a meaningful outcome in the product.

When you understand why people use your product, you can catapult them to the right destination. If you don’t know the primary outcome behind why people use your product, you’re growing your business on hard mode.

Value Gap 3: You Suck At Communicating Your Value

If someone signs up for your product thinking that it’s a live-chat solution when it’s actually a telemarketing solution, you’re going to confuse users.

This hurts your brand and increases the chances of new users leaving your initial product experience.

In your first meeting with the new trialer, do several things: Qualify them as you usually would. If they’re a good fit, let them dive into using the product

Ask them about the primary outcome they want to achieve with the product. Record these calls and use video so that you can see their body language—they might not tell you that your product is confusing as hell, but a fiery eye roll as you explain how “simple” it is will.

Watch the trialer try to achieve an outcome in the product. Ask your trialer to share their screen.

Do not show your trialer how to do everything. You want to see your trialer struggle. If you don’t let them struggle, the customer won’t remember how to accomplish that particular outcome, nor will you learn about your product’s shortcomings.

The Bowling Alley Framework

To master the Bowling Alley Framework, you need to do three things: Develop your straight line. Create a product bumper. Build a conversational bumper.

most users never make it to Point B—that promised land where they experience the value of your product. Why? Most often, we don’t know the desired outcome people are looking for, the reason they signed up to use your product.

Map Out the Path

There are form fields that you don’t really need to ask people when signing up. There are required steps that first-time users don’t really need to complete right away. And, of course, there are steps that don’t really need to be there at all.

sign up for your product and complete all the steps it takes to accomplish a meaningful outcome.

Label Every Step

Label each step throughout your onboarding experience using the colors green, yellow, or red: Green is absolutely necessary. Ex. Uploading a piece of JavaScript to your website; asking for an email address to setup an account.

Yellow is for advanced features that can be introduced later. Ex. Setting up a custom signature for your email address; running split tests on your video thumbnails.

Red can be removed completely. Ex. Changing the color of your profile picture; asking for someone’s nickname when setting up their account.

One of the reasons I love the straight-line system is because there is no bullshit. You will learn that your users simply need to complete steps X, Y, and Z for you to deliver on your product’s value.

The Two Bumpers You Need

Product bumpers are mission critical. They help users adopt the product within the application itself. Conversational bumpers work to educate users, bring them back into the application, and eventually upgrade their account.

Common product bumpers:

• Welcome Messages
• Product Tours
• Progress Bars
• Checklists
• Onboarding
• Tooltips
• Empty States

Common conversational bumpers:

• User Onboarding
• Emails
• Push Notifications
• Explainer Videos
• Direct Mail

1. Welcome Messages

The message explains why the founder created the product and restates the value proposition. Welcome messages can also increase a user’s motivation for using the product by clearly explaining the value and building suspense.

2. Product Tours

If you have a multi-product business, using a product tour at the beginning of your onboarding can be a gamechanger. You catapult people into the areas of the product that they care most about.

if you have a complex product with features that accomplish different tasks, a product tour is a must.

recommend using a “focus mode” that hides background elements to minimize the initial number of choices. Such product tours are extremely effective because they leverage Hick’s Law (decision time increases with every additional choice) and the Paradox of Choice (more choices make people less likely to choose).

3. Progress Bars Progress bars indicate how far a user has come, and how far they need to go.

Humans are addicted to progress and will work hard to finish something once they think it’s achievable. One caveat: Goals need to seem realistic. Just think of how demoralizing it would be to sign up for an account only to see a progress bar with “0 out of 99” steps completed.

Effective progress bars start with a substantial percentage of the bar already filled. This helps users feel like they’re already underway instead of starting from scratch, and it increases the desire to complete the task.

4. Onboarding Checklists Checklists break down big tasks into bite-sized ones.

you want to get the most out of your onboarding checklists, have them partly filled out by the time the user sees them. This simple tactic employs the “endowed progress effect”40 —people who think they’re close to completing something are more likely to see it through.

onboarding checklists also work well because of the Zeigarnik Effect,42 our tendency to think about incomplete tasks more than completed ones. Not finishing a task nags at us. Researchers call this “task tension.” Only completing the task can relieve it.

5. Onboarding Tooltips Onboarding tooltips help users learn how to use a product. They can reduce the burden on support and scale usability. Here are the main ways you can use hotspots and action-driven tooltips: Show first-time users how to use the product. Offer helpful tips to new users. Think of this like coaching. Show experienced users new areas of the product they might never have tried otherwise. This is great for increasing retention.

6. Empty States Upon first login, most software applications are boring. There’s no data specific to you;

For ConnectHero, this could simply be showing people the steps they need to take to complete their account setup.

To decide what to include in an empty state, ask yourself: What steps does a user need to complete to experience a quick win? What is the most important step in my straight line? How can I make sure that the majority of users complete this step?

Takeaways: Empty states are useful for when a user first lands on a product’s dashboard. Empty states should prompt users to take an action that will lead them closer to experiencing meaningful value in the product.

Conversational Bumpers

top nine user onboarding emails: Welcome Emails; Usage Tips; Sales Touches; Usage Reviews; Case Study; Better Life; Post-Trial Survey; Expiry Warning/Trial Extension; Customer Welcome Emails.

Better-Life Emails Better-life emails communicate the benefits of the product. The main call to action in these emails is often to upgrade an account. But you can also direct people to try specific features.

A common mistake with better-life emails is focusing only on the functional outcome of your product. Remember: You need to account for functional, social, and emotional outcomes.

Before writing your better-life emails, ask yourself these questions: When talking to potential buyers, what benefits get them most excited? What benefits make it a no-brainer for people to upgrade?

Better-life emails showcase the benefits of your product. The call to action can ask users to upgrade or help users experience product benefits for themselves.

Expiry-Warning Emails

Expiry-warning emails remind the user to upgrade before a free trial ends. Freemium models don’t use expiry-warning emails because part of the product is free forever.

If you have an opt-out free trial46 (you require a credit card upfront), you must send expiry-warning emails. If you don’t, you’re guaranteed to annoy users and flood your support reps with refund demands.

Customer-Welcome Emails

To reduce that anxiety, use customer-welcome emails: Reassure users that they made the right decision. Remind users of what they can do with the platform. Set expectations for what comes next (e.g. Will a customer success rep reach out?).

Too many businesses don’t welcome new customers immediately. Most reach out manually, but it takes time. In the interim, new customers become nervous, wondering if they made the right decision. Don’t make your new customer think twice. Remind them why they made the right decision.

Post-Trial Survey Emails Even with the most amazing free-trial experience, most users won’t convert. Some aren’t a good fit. Some might have not have had time to check out your tool. Others, well, they might have needed more time or someone to help them learn to use the product.

There are countless reasons, but you’ll never learn understand them if you don’t implement post-trial survey emails.

On average, a repeat customer will spend 67% more49 than a new customer. You don’t have to be a financial whiz to figure out that an easy, profitable way to grow your business is to sell to existing customers.

How Do You Optimize for ARPU?

Use Value Metrics Whether you’re trying to reduce churn, acquire more customers, or optimize for ARPU, using value metrics in your pricing model will help your business grow.

Improve Your Pricing Tiers

The more choices you have, the less likely you are to choose.

Raise Your Prices with Upselling and Cross-selling

Slay Your Churn Beast

A holistic approach measures churn in three ways: Customer Churn. The number of customers lost in a given time period. Revenue Churn. The amount of revenue lost in a given time period. Activity Churn. The number of users at risk of churning due to red-flag activity

The sales-led way of buying software:

• Read about the software
• create a list of features needed
• let sales qualify you
• do a demo
• twist their arm so they give you a trial

The product-led way of buying software:

• Just start using the product
• Ask for help if you get stuck
• Based on your usage and profile, receive personalized recommendations