“In a freemium world, there’s far less sales involvement. The product does the majority of the selling.” — Jess Iandiorio(Drift)
It was some time ago that SaaS companies discovered that, by aligning engineering, marketing and data teams they had created a new channel for lead generation. Better yet, the channel was usually more effective than the established sales and marketing practices they had previously relied upon in terms of conversion.
The new channel was the product itself and the new leads it produced became known as Product Qualified Leads, or PQLs.
As Tomaz Tunguz observedat the time,
“PQLs are potential customers who have used a product and reached pre-defined triggers that signify a strong likelihood to become a paying customer.”
These qualified leads could be passed to the sales team, where they typically converted at 25–30%.
“The potential to leverage the a SaaS product’s freemium tier or trial period to identify high quality leads has never been greater.”
Fast forward to 2017 and the potential to leverage the a SaaS product’s freemium tier or trial period to identify high quality leads has never been greater, thanks to improved understanding data science and a suite of analytics and instrumentation packages that have shifted the needle definitively from build to buy.
As a product manager, it’s easy to get lost in vanity metrics and data points. But it’s clear to any product team working in B2B SaaS that the real ‘metric that matters’ for qualifying propensity to purchase AND propensity to churn is product adoption.
As Josh Elman recently reaffirmed, the only thing product teams really need to think about are:Are people using your product? Are they using it how you expect? Are they performing at the frequency you expect?
You want to understand which users are more likely to come back than others. Those that are highly likely to come back are your core users. You want to have most of your new users converting to core in the first month
Once you can predict which users are core, you can start figuring out what things they did to increase the likelihood of being a core user. The best starting point is to calculate how likely someone is to return to your product in Month 2 based on how many days they visit in Month 1.
In fact, this ethos now forms the central axis of any high-performing SaaS outfit, aligning Product, Engineering, Customer Success and Growth teams around a central goal (happy, engaged users) underpinned by robust data that provides measurable outcomes.
Long standing principles of marketing, like the concept of ‘The Funnel’, have been irrevocably challenged by social media channels that make it easy for people to become advocates for a brand (like Instagram followers) without ever becoming a customer. Consumer engagement is no longer linear so new touch points have emerged to measure the path to purchase; almost all within the product itself.
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