Product-led growth has taken off significantly in recent years. And that’s amazing – you know I think it’s the way forward for the B2B SaaS world. People just want to try your products before they buy them, and PLG allows them to do that.
But once you’ve let your prospects try your product through a PLG motion, how do you convert those users into paying customers? It can be trickier than it sounds. And that’s where product-led revenue comes into play.
Here are my favorite takeaways from this great Correlated Product Led Revenue podcast episode where Breezy Beaumont and Glenn Weinstein, Chief Customer Officer at Twilio, broke down everything you need to know about this exciting new area!
Twilio’s Product-Led Growth Background
Twilio is one of the OG PLG companies. They were founded in 2008 and have had a self-service motion from the very beginning – they’ve always been developer-led. To this day, free trials are still their #1 lead source.
When Your Prospects Are Also (Free) Customers
Converting a prospect into a customer – that’s the end goal every sales team celebrates. But in PLG, that conversion tends to come easily, and it doesn’t necessarily translate into revenue.
If your prospects are signing up for your freemium version, for example, or a free trial, yes, sure, you can count them as customers. They’re using your product!
But they’re not paying you for it yet. So that user and customer growth, while it’s great, isn’t translating into an increase in revenue.
PLG is a Long-Term Strategy
How does Twilio measure their success and define their wins in this PLG world?
They’re actually not all about the dollar sign when they’re defining their wins. In fact, Glenn says that they’re really focused on the value their users are getting, no matter whether they’re free or paid. “We love developers, and it’s a long game for us. If you don’t ever spend a penny on Twilio, but you’re a successful developer, we consider that a win.”
That approach might seem odd, but it’s because Twilio is focused on the long game. The developer community is fairly small, after all. And those developers who use Twilio for free and see a lot of value from it, but don’t or can’t pay at the moment? They might move to a new role, or a new company, and then they’ll commit to paying.
Twilio’s pricing model is usage-based. Their customers typically pay for the messages/voicemails/emails they send. That works really well for them, but it also makes defining a win a bit harder. Their customers generally aren’t signing huge service agreements – they’re just using the product a bit more until it’s a pretty big account.
They have found that usage-based pricing is win-win – the customer pays only for what they use, and Twilio pays only for what they provide. And if the product is providing a lot of value, customers will naturally use more and more of it because it’s helping them achieve their goals.
And their customers typically spend more and more every year, confirming their value. They’re not spending because they’re stuck in a contract with rates that keep going up, but because they see how much Twilio helps their business.
Twilio tries to engage customers often to ensure they’re on the right path and getting value from their product. But they also know that customers should only receive messages they signed up for and actually want (refreshing, from a company that enables sending sales SMS messages!
They try to model good communication behaviors in their own outbound messaging. For example, they let users opt into their communication preferences, and then stick to messaging them on the channel they’ve chosen.
Looking at how other companies approach PLG and product-led revenue is so helpful since it’s still a pretty new world for most of us. While there’s no one approach that will work for everyone, you can take the learnings from other companies to build your own path to product-led revenue.
Check out the full Correlated blog post for even more great insights from Breezy and Glenn!