Girish Mathrubootam is the Founder & CEO of Freshworks, the fastest growing SaaS company out of India. After a string of startup experience and full-time job at Zoho, he felt the time had come for him to take advantage of rising cloudification of businesses and build his own SaaS company. He took 8 years to take Freshworks from 0 to 100 million in ARR, and just 18 months to double it up. Freshworks ended 2020 with 40% growth at $300 ARR.
The secret sauce of his success has been using product led growth at the core of his business strategy.
In traditional sales led growth model people – the sales team members – are used for every step of customer acquisition, from lead generation and conversion to adoption and onboarding. In product led growth the product is used for all these activities. Whether it is acquiring customers, converting from trial to paying customers, retention, expansion, everything is done through the product.
Freemium is the most common example of how product led growth functions. A trial version of the product is offered to the potential customers, which is then used as the vehicle for acquisition, adoption, conversion, retention and expansion.
Why product led growth is all the rage
Product led growth is not a new phenomenon. Over the past 12-13 years, it was very much there but only in small pockets. Through small tools that never got scaled up. Take for instance Google itself. It has been refining its ability to find online products relevant to the search terms, because not many people were aware of Google AdWords initially.
Or Basecamp. It grew through word of mouth and still available for those who visit its site.
Slack and Zoom are some of the big names that have reaped the benefit of adopting product led growth. Slack has been around for quite some time and Zoom really scaled up over the COVID-19 pandemic period.
Which brings us back to why this new fascination with product led growth?
Earlier only big companies could afford software to solve their problems. But now even the SMBs are adopting digital transformation because that can enable them to compete at par with some of the big names in their domains.
The moment digital transformation penetrates beyond the large enterprises, the playing field for SaaS startups widens immensely.
Girish Mathrubootham, freshworks
With cloud becoming more accessible, customisable and affordable, every single workflow in small and medium businesses is getting cloudified. This cloudification is an immense opportunity for launching a SaaS product that handles a single workflow or all the workflows within a single department of an organization.
Product led growth makes it easier to launch a startup. Global market, nice product features, some word-of-mouth publicity. That’s all it takes to launch a product led SaaS business. Especially for Indian markets, starting with product led growth is a boon because sales led growth is pretty time and resource intensive. Two things all startups are always short of!
Product led growth is also a model of scaling up fast. Not all companies, especially startups can hire enterprise sales reps and go after the big names that can afford the software. With product led, the whole global market is available at fraction of resource requirements. And if you can get some virality built into your product design, encouraging users to share with others, rapid growth is easy.
What to do differently in product design to ensure good product led growth
Product led growth is not just a go to market strategy, it’s a complete business growth strategy. Product led everything, from product management and design to marketing and sales. Still, here are the three most important things to keep in mind.
Always think of what the real end user wants
The products must be built for the end users who are searching online to solve their pain points. Even if you are targeting a business, you need to remember that it is an individual who is going to use that product. And it is for these actual users for whom the product must be designed.
As most of the potential customers come through online searches, it is important to have a well-designed website. The landing page should quickly explain how the product can solve their specific problem and motivate them to sign up for the trial or freemium, whatever your model.
Girish puts it succinctly when he says,
It is very important to look at how your website is designed, will the people coming quickly understand what you are offering and if it is a good fit for them. How easy it is for them to sign up and start using the product.
After a visitor signs up for the trial version, product design is the single most important tool you have to convert them into paying customers. It is important to design a beautiful and intuitive product interface. The assumption here must be that if the users do not like the product in the first 2-3 minutes, they will veer away to your competitors. Unless you have a unique product that no one else offers!!
Remember that the trial user came through online search. If your product does not make an impact within the first couple of minutes, the visitor will just close the browser and move away. They should look at the aesthetically and intuitively designed interface and say to themselves that the product looks good and they must explore it further.
Focus on single workflows within an enterprise
Enterprise purchases have lots of friction because there are multiple teams and stakeholders and decision makers involved. When you focus on a single team, chances of converting the leads into paying users is easier because there is just one person, usually the team leader or the department head, who has to make the purchase decision and then see it through. If there are multiple departments involved, the time to reach a decision multiplies exponentially.
When it comes to corporate buy vs team buy, team buy is much quicker and frictionless. Having a product that can be purchased by a team on their own is the best for product led growth. The scaling can come later when you have multiple teams within the same organization using your product.
Design pricing in a way that motivates purchases
Even in sales led growth there are many products like customer help desk or ITSM that are team buys. But for the product led growth the price point has to be suitable. It should be easy enough to start, so per user pricing should be considered. There is no corporate approval required, the whole sales process is frictionless and you have new clients on board.
Plan upgradation is very essential for upselling, and that must be part of product design. Say, your product provides advanced reports and analytics but only to premium users. What you can do is to have a button for viewing the reports for everyone. When the user clicks on it, you can show a sample report and tell them they need to upgrade to premium to access all the reports. If your product has been performing according to the user’s expectations, probability of the user upgrading to premium is very high.
Which brings us to the most pertinent question – how to approach designing and building a product that enables product led growth.
How to approach product design to provide superior value
The upper limit for product led growth is different because the buyer is different. Earlier the CEOs and CIOs were making the purchase and they had large budgets at their disposal. The sales led growth had high ticket sales (think millions at the disposal of the CEOs and the CIOs) but for product led growth magic lies in number of customers. Each sale is a small ticket sale but this also enables people managing just a small or large team to decide whether they want to buy your product.
As this decision is based on experienced value and not some perceived value promised by a sales guy, the success probability is really high.
There are two things that product design teams need to ask themselves.
One, can the user start with the product without any training or help video?
If the answer to this one is yes, you are in a good place.
Users love it if they can configure the product themselves and start using right away. Share on XOf course, in a real-life scenario, if a team lead is checking out your product, they might have team members who would actually be configuring the product. But if they can do it themselves, the chances of signing up increases manifold. Also, that feel-good factor can go a long way in convincing them about the product’s user-friendliness.
Two, do I need to send the user outside the product for any information?
If the answer to this one is yes, you are in trouble.
The product led marketing has to happen inside the product, once the customer has signed up. Each and every aspect of the business must be thought out according to the user journey. If the user is already inside the product, there is no point in putting the help videos on the website. Makes sense, right? So link those product videos inside the product, not just on your website!!
Disadvantages of product led growth
On the face of it, product led growth sounds so doable that most startups begin with a very grand vision of what they wish to achieve. Whereas in reality, they need to start small and gradually step up to reach their grand vision.
Churn is the biggest problem in product led growth. If you are doing your online marketing correct, a lot of people will come in and sign up for the trial version. The problem crops up when they try for a couple of months and then leave. Because you are still spending top dollars to acquire them. If the conversion rate is exceptionally good, churn can be neglected. Otherwise, acquisition cost per user increases greatly.
Another disadvantage of product led growth strategy is that product execution must be stellar. If product experience is not great, users will move elsewhere. In sales led growth there are other measures like executive level contact, annual contract etc. to buffer the effect of bad product experience. But not so in product led growth.
Churn rate is a good metric to judge how good your product execution is. As a startup founder you should look at turn on a daily basis so that you can judge how it can be mitigated through product improvements.
Product led growth is capital efficient. Share on XIt is very easy to go from 0 to 100 million in ARR. But beyond that sales led growth is more effective because the brand is set and it is easier to move to enterprise level. all you need to do is look at your users and if multiple teams of an enterprise are already using your product, you just need to go out and ask them if they would like to consolidate their workflow and bring other teams under its ambit for consistency.
Does that mean a hybrid model should be the right way to grow?
Is hybrid growth model feasible?
Having two strategies can create friction, so for early stage startup it is essential to decide on either of them. And as we have discussed till now, adopting product led growth makes sense for early-stage SaaS startups based out of India. Once you have used the product led growth to find that wedge into the enterprises, you can consider sales led growth.
The point to remember here is that demands on the product team increases dramatically once you pivot to sales led growth. You are no linger thinking of single workflows or single teams. Your focus must shift enterprise wide and there can be no compromise on API coverage, customization or integration.
So yes, a hybrid growth model is feasible but lots of preparation is required. Companies have done it in the past and continue to do so.
Girish shares his own experience with Zoom. When Zoom approached him with an offer to consolidate the workflows within Freshworks, he realised so many of the teams were already using Zoom that the decision to go with the offer or not had already been taken out of his hands!!
Let’s talk of organizational structure
Is product led growth strategy part of product or marketing?
That’s a tricky question to answer because there is lots of collaboration and overlap in the initial stages. Organisational structure in an early stage start up is optimised according to the people and their skills. So, the structure is anyways very fluid; you just need to hustle, see what is working, and get the ball rolling.
But if you must have an answer, product led growth is part of product because even the marketing strategies are implemented through product design.
Girish goes a step further and says,
Even on the website you should talk about product features and not business value. Because the end user coming to the website is worried more about how their pain points can be solved and less about the business value
As the founder you need to put your growth hacker cap on and analyse each step of the sales funnel minutely. How you can ensure more people are coming to the website, signing up for the trial offering, adopting and converting. You need to check for leaks and plug them.
Rather than siloed existence of different departments you need to have all the team members on the same page so that you can brainstorm and come up with ideas to improve product design in a way that increases conversion and retention.
Product led growth helps you land those coveted logos you can flaunt in your marketing collaterals and land other big-ticket clients.
girish mathrubootham, freshworks
Final Thoughts
These insights were shared by Girish during the online Product Led Growth conference held by SasSBOOMi in December 2020. With COVID-19 pandemic forcing the world to work from home, adoption of cloud even for critical workflows like finance is no more out of the question. This is a big opportunity for launching SaaS products that focus on solving typically single and niche workflows. Indian startups have an advantage here as it is cheaper to start. Which makes it even easier to iterate faster, deploy dedicated teams to manage churn and use product led growth strategies to scale.
This post first appeared on the SaaSBOOMi blog.
