A recession-ready growth guide for PLG teams
For the past decade, the strategy for many startups has been “growth at all costs.” But we’re now in a new, tougher funding climate. Virality is no longer enough — instead, startups need to focus on how to capture demand.
This brave new market environment will prove especially tricky for startup teams pursuing product-led growth (PLG) business models. This go-to-market motion is built for viral user growth, but turning that popularity into revenue means dialing into precisely the right mix of acquisition channels, features, pricing, messaging, and more. Even teams with the best-laid PLG plans can’t fuel their own growth forever — they’ll eventually need to generate a pipeline and capture additional demand with sales teams to avoid plateauing revenue growth.
That’s not to say the product-led growth playbook is at risk. In fact, it’s never been more relevant, because it’s designed to meet the way today's businesses (and consumers) expect to make purchases: Try before you buy. In fact, Gartner found that software buyers are typically over 50% through the process before their first contact with sales occurs.
Now that virality is no longer enough, it’s time for startups to make a solid plan for how to turn demand into revenue. While it’s true that every business is different, there are a few commonalities in every go-to-market journey I’ve been a part of over the past two decades. Here's my map for the journey from popular to profitable.
5 steps to go from popular to profitable
1. Search for your SAM
It’s vital to understand which market segments your current product can address, and to know that your go-to-market team can tackle their needs at your current size and scale.
Measuring your serviceable addressable market (SAM) is where the go-to-market journey really starts. The SAM is the little sibling of the total addressable market (TAM), a figure often given in fundraising — and it's the piece of the pie you can win right now.
To identify your SAM, there are a few questions you should be asking:
- Which early users are regularly engaging with your product?
- What do those engaged users have in common?
- How are they actually using your product?
- What problems are you solving for them, and what value are they getting?
- Would they pay for your product? And if so, how would they buy it?
Investing the time to establish these criteria will help you define your ideal customer profile. The search for your SAM is a continuous process, especially as the capabilities of your team and product expand. But having a clear understanding of your initial SAM is milestone #1 in your go-to-market journey.
2. Define your product-qualified leads
Your search for your SAM should have given you a sense of the types of signups you’re trying to drive — and with any luck, you’ve won over some active users.
With a few acquisition channels up and running, the next milestone in your go-to-market journey is defining a product-qualified lead (PQL).
To do this, you’ll need to combine three types of data:
- Web analytics: Understand your active users’ pre-signup touchpoints, and map a typical top-of-funnel journey through web analytics tools like Google Analytics and Mixpanel.
- Product telemetry data: Map the behavior patterns of active users, as well as the features or capabilities they're using, with product telemetry data from tools like Amplitude.
- Firmographic insights: Build accurate profiles of users — including company size, sector, geography, role, and department — through third-party firmographic data from vendors like Crunchbase or Clearbit.
Taken together, these data sources can be used to define what I consider the gold standard of a PQL. These leads have the highest adoption and expansion potential, and the best chance of converting to revenue-driving customers.
At this stage of your go-to-market journey, learning to identify and reach PQLs should be your top priority. Because PQLs have already signed up, they represent a live “proof of concept” and provide an effective conduit for targeting their teammates. With relevant messaging and compelling incentives, the chances of converting these leads to a committed, contracted deal are very high.
Optimize your messaging for relevance and build automated, signal-based sequences that deliver the right messaging, and you’ll have the ideal system in place to make it to the next stage of growth.
3. Dial in the right demand-generation mix
When executed correctly, PLG as an initial growth motion gives you a lot of advantages. Since the product drives self-serve engagement, it immediately makes the experience “sticky” and reduces the time-to-value for users. Layer on effective viral growth loops, and the product drives account expansion too.
But even the best PLG motions eventually hit a demand plateau. Your pipeline will need to be kickstarted to keep producing PQLs. Experiencing this firsthand while at Stripe and CircleCI, my advice is this: Don’t fear the demand plateau — plan for it.
When you can no longer rely on brand word-of-mouth and SEO alone, your mission is to find the right blend of demand-generation tactics. Paid marketing, gated content, and events all have distinct advantages and disadvantages, which vary by market. The key is a structured approach to experimentation that helps you land on the right mix for generating leads.
When you’ve found the sweet spot, you’ll be able to overcome your demand plateau and take your business to the next stage of growth.
4. Win market share step-by-step
Now that you’ve opened up new demand for your product with new demand-generation tactics, it’s time to capture it. The most frequent mistake I see go-to-market leaders make here is to treat all leads in the same way, applying the same sales methods and expecting the same conversion rates.
At this point, you’re in the middle of crossing the chasm. Back when your product launched, your early adopters likely didn’t all share a market segment, but they did all share a desire to try out cutting-edge tools. Now, demand-gen is opening up your sales funnel to a broader range of potential customers.
As you reach the mass market, you'll be acquiring leads that want more proof of your credentials and credibility in their specific sector. Before these leads seriously consider buying your product themselves, they'll want to see which of their industry peers already use it — and hear how you're meeting their pain points.
On this side of the chasm, winning market share requires a more systematic approach. Divide your market opportunity into segments (typically either regions or industry verticals, or both), prioritize them on size and winnability, and align your sales, marketing, and support teams toward winning them sequentially — not all at once.
In markets where your product and promise alone aren't enough, your customers' brand names are the key to making headway.
5. Get local to keep growing globally
If you’ve made it this far, you’ve built a world-class go-to-market engine and team for generating and capturing demand. But that still won’t be enough on its own to win your total addressable market. Get ready to invest in regional sales and marketing expertise to find further pockets of growth potential through localization and team presence in the same time zone.
Cultural differences can’t be learned remotely; they need to be lived. To sell effectively, you need to understand who you’re selling to and where to reach these prospects. That requires local knowledge and expertise. If you’re serious about global expansion, this is a critical step.
During my time leading EMEA for CircleCI, I built a team that deeply understood our region’s intricate fabric of local business cultures — and the importance of tailoring regional go-to-market efforts instead of just copying our US model. Together, we were able to adapt what had worked in the US and evolve it to meet the distinct needs of our EMEA-based customers, growing the region to account for 25% of company revenue. Getting this step right can propel you to a global scale.
A powerful, predictable productivity model
The final stop on your growth journey isn’t just measured in revenue dollars, headcount, or market share. You’ll know you’re there when you’ve built a predictable model for closing deals and scaling team productivity.
At this point, you can efficiently acquire new customers through your marketing channels and consistently generate leads and deal pipeline through PQLs. You have a clear template for closing deals — and the more deals you do, the easier it gets. You’ve learned to maneuver the obstacles in your path to signing customers. And you understand how productivity drivers, like through-funnel acquisition rates and self-serve expansion rates, influence your customer acquisition and revenue models. This means you can invest your resources with confidence, knowing that each new sales team head will contribute to your revenue growth.
These are the foundational signs of a business that’s built for the long run. Once you reach profitability (or have a clearly defined path for doing so), you’ll be able to create consistent and predictable growth by delivering effective returns on your investment.
If you’d like to talk about your team’s progress on your growth journey, find me on LinkedIn.
A version of this article originally appeared in TechCrunch.