Product-Led Growth CRM: Hype or the next big thing?
Recently, there's been a lot of buzz about how product-led growth (PLG) is changing sales tooling. Here's a tweet on the topic, for example:
What is a PLG CRM?
Broadly speaking, it's a tool that allows Sales teams to handle thousands or even millions of users as easily as managing a few key accounts. It should allow for data-driven sales decisions.
For example, such a CRM might take into account how often a user interacts with the product to identify power users or champions. Or it might predict who's likely to convert from the free plan to paid based on a set of behaviours that isn't obvious to the rep (e.g., uploading 5 files to your product within a 7-day period). Other features can include the ability to track users over the customer journey, segment users finely, and identify key moments where an interaction with a rep can prevent churn or enable conversion.
On top of that, this new CRM should automate workflows by integrating with the plethora of tools used by revenue teams. Slack, marketing platforms, and chatbots are some examples.
Do we need yet another sales tool? Here are some reasons why we might.
Three reasons why the PLG CRM is having a moment
Product-Led Growth is at an inflection point
Many SaaS companies right now are thinking of adopting some form of a product-led motion, if they are not already product-led. How big of a trend is PLG, exactly? The combined market cap of public PLG companies gives us a sense:
And it's not limited to the US, either. The Chinese SaaS market is still nascent, but some of the most used enterprise software products there are PLG. Furthermore, as iOS and browsers clamp down on advertising, PLG would also become the edge many startups need to drive organic and word-of-mouth growth. Finally, investors love PLG products too, as they display higher net dollar retention, better growth rates, and trade at higher multiples .
Existing tools are not doing the job
What's wrong with the existing CRM and sales tooling, you might ask? We think the problem is three-fold:
1. They are not designed for handing big data
Existing sales tools were mostly first developed 10+ years ago, when they focused on tracking a handful of account-level relationships. Over-time, people have built on top of these platforms to pipe data into them (e.g., Marketo integrations with Salesforce). However, handling thousands of rows of users does not feel intuitive in them. Even getting dashboards to load can take minutes.
These tools also have limited functionality when it comes to pivoting, sorting, and transforming the data. We know many a rep who would export the data into a csv to then pivot and conduct analyses on. This is all to support a simple analysis like which accounts are growing in usage month on month. That's just not a very satisfying experience.
2. Building them requires the cobbling together of disparate apps
There is nothing built with the workflow of a data-driven sales rep in mind. Most companies wanting to leverage customer data to inform their sales decisions end up building hacky internal tools.
These typically involve a data scientist first sorting through the data collected in Segment or the Data Warehouse, and building the exact metric the sales team is interested in. An example would be the number of times a user used a feature for more than 5 minutes in the last 5 days. Following that, a Reverse ETL tool (e.g., Census) has to pipe the data into Salesforce or another tool. Other internal dashboards to track usage are often built using Looker too.
Sales teams find themselves always having to request for engineering resources, which are scarce in a startup still trying to improve its product.
3. Existing tools lack predictive and proactive capabilities
Most sales teams we speak to count themselves lucky if they had any internal tool to use. The bar today is set pretty low. As a result, most internal tooling built for PLG sales is not predictive. They rely on straightforward metrics like time spent in app to score leads, and depend on sales ops teams to manually decide what are the indicators of a user who is likely to convert. "There is an opportunity to build an intelligent product that recommends the right 'playbook' for each customer depending on their profile", says Zhenya Loginov, CRO of Miro.
Many sales people also do not want to have to check these internal dashboards on regular basis. A PLG CRM should push notifications to reps instead, so that they can reach out to high intent customers at the exact moment where they are most inclined to convert. On top of that, existing CRMs are typically not real-time, which doesn't allow for just-in-time interventions. An example would be calling to upsell a customer the moment they start trying out premium features.
The modern data stack makes it all possible
Almost every tech company is now running on the cloud, and storing data in the cloud data warehouse. Snowflake is a $60B behemoth, which makes it easy to forget that it only launched 6 years ago. By centralising data from billing systems, CRMs, product analytics, and other demographic sources in the cloud data warehouse, the PLG CRM can read directly from this single source of truth.
Product analytics like Amplitude make it easier to collect data. ETL tools like Fivetran can move data into the data warehouse, where it is transformed by dbt. Reverse ETL tools then can push the data back into the PLG CRM, and also connect that CRM with other sales tools like Intercom.
With the groundwork laid by infrastructural players, building sales tools that are data-driven is now a lot easier.
What's next for the CRM
While the tailwinds are strong, it's not all a bed of roses. There are reasons why the CRM hasn't been reinvented. These range from the dominance of existing players, to issues with dealing with disparate data sources, and mapping user records across CRM, usage data, billing systems, and more. But that's a topic for another day.
At HeadsUp, we believe that the way sales and revenue teams work is changing. The tools they use will also be reinvented. It seems a fair number of people agree with us, given the number of founders building in this space and the spread of investors backing these companies. No matter who defines this category, what is clear is that it has massive potential to improve the experience of both sales and customers. It is an exciting time to be building for the next generation of enterprise companies.