This post is by Scott Williamson from Openview Labs
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There are a lot of moving parts to manage a product. In addition to building the actual product and figuring out the best way to get it to market, you also have to prioritize your roadmap, understand the tradeoffs between building new features and optimizing for growth, wrangle pricing, and—as your business and user base evolves—potentially figure out how to successfully launch a new product inside your existing company. It’s a lot to juggle. I’ve had the benefit in my career of working with two distinctly different kinds of companies, one that used a more traditional sales- and marketing-led go-to-market strategy, and one that employed a strongly product-led approach to growth (PLG). At CA (which acquired a startup called Wily Technology), I worked on a single, complex and costly product that was sold to enterprise IT shops with heavy direct-sales involvement. At SendGrid (recently acquired by Twilio
the approach is the exact opposite—a product-led, self-serve model with a much lower price point. Over the years—10 with Wily/CA and 6 at SendGrid/Twilio—my various roles within these organizations taught me some invaluable lessons on a wide range of product-related topics.
PLG – Not Just About GrowthPLG is an enormously effective (and increasingly popular) way to sell a SaaS product, but it only works in certain circumstances and with certain kinds of products. The complexity and price point of the CA product, for instance, required us to engage in a long sales cycle that involved partnering a highly-paid sales rep with a highly-paid sales engineer who could talk about integration into the client’s environment. SendGrid, however, was designed to sell itself, and this was possible because the product was much simpler and the price point was much lower. The dynamics of each scenario create a ripple effect into other areas of the company including things like R&D spend, staff allocation and your product road map.
R&DIf your go-to-market strategy requires a heavy direct sales investment, then the envelope you have to work with for R&D spend tends to be smaller. At CA we spent approximately 15% of revenue on R&D for my particular product line (Application Performance Management), while at SendGrid (where the PLG approach kept us from needing to make such a steep investment in sales) we were able to invest approximately 25%+ of revenue on R&D.
Staffing AllocationThere was also a corresponding difference in the ratio of engineers to product managers based on the demands of each go-to-market strategy. At CA, the ratio of engineers to product managers was 20:1 and we had to share a pool of designers. At SendGrid, we have a 6:1 ratio of engineers to product managers and a 1:1 ratio between designers and product managers. As you can imagine, the variance between the makeup of these two teams creates two very different product development experiences.
Product Road MapAnother area in which these two models vary greatly is who has influence on the product road map, and to what extent. At CA, where the client roster was relatively small, but comprised of very large companies, a single customer could have an inordinate amount of influence over which features we added to the product. When you have a single customer that’s paying you $60 million over the course of 8 to 10 years, you tend to listen to that customer and feel obligated to cater to their needs. The problem with this is that it can very quickly lead to feature bloat, which ultimately leads to long-term subpar product results. SendGrid, on the other hand, has about 80,000 paying customers, and even our Top 10 largest customers represent only a small percentage of our total revenue. Because revenue is spread out over a large number of smaller clients, no one customer can tank our quarterly financial performance. Just as importantly, having a widely distributed customer base means that we can listen broadly and focus on implementing features that benefit the masses instead of the few. While it’s natural to pay more attention to your larger customers, best practice is to focus your efforts on doing things that the majority of your customers will understand and appreciate. We’re pretty ruthless at SendGrid about fighting unnecessary complexity. Our self-serve audience needs to be able to grasp the user experience immediately without the support of a sales team, so we need to be very careful about any changes we make. One way we’ve found to compromise in situations where a larger customer is insistent about a particular feature is to turn it into a service offering for high-end customers. This allows us to keep the core product free of feature bloat that would confuse and annoy our primary audience. It also gives us the opportunity to monetize more complex services.
Development Priorities – Product versus PLG EngineA question that often comes up for PLG companies is how to prioritize product development against development of the PLG engine that drives acquisition. It’s a question that can feel a little like a chicken-and-egg quandary, but if you look at it through a different lens, things clear up pretty quickly. At SendGrid, because 98% of our customers come in through our self-service engine, we view the website and signup flow as part of the product, not separate from it. We have core engineering teams that focus on those parts of the customer experience and how they roll up through the product. This holistic approach allows us to consider all aspects of the user experience together—from the time someone visits the website or looks at our docs all the way through to purchase and engagement. And at each step in that journey, our primary goal is to remove friction. Overall, we prioritize tasks and projects within this holistic view using the RICE system—reach, impact, confidence, and effort. And we look at projects in terms of potential outcomes, comparing potential project-to-project results. This gives us an objective method by which to rank importance. Using this approach, we consistently prioritize smoothing out the onboarding process at least as highly as adding new features. We also invest heavily in foundational things like scaling up and making sure we have the security, availability, and APIs, etc. we need to be able to deliver on our original brand promise. We know both these areas have very strong ROI for the company. Our formal growth team is comprised of three teams that together manage our acquisition funnel.
- Our revenue marketing team handles demand generation to fill the top of the funnel. They’re involved in SEM, SEO, and brand building through various web channels to ensure our customers can find us.
- Our website team is in charge of the initial experience—how we present the product including pricing and our signup page. This is where the whole flow and customer experience begins, so it’s critical to have a team focused on these areas.
- And then our growth engineering team manages the signup funnel and things like in-app messaging and running tests and experiments to reduce friction as people move through the funnel.