The Playbook to Blending Product-Led Growth with Sales-Led Growth: Amplitude VP of APJ Mark Velthuis

Hello everyone. Good afternoon. Thanks for coming and listening to my story. Mark Fothuis, been in the region for the last 20 years, 10 years here in Singapore, and prior to that living and working in Hong Kong and Shanghai. Originally from the Netherlands. Now I feel almost Singaporean after such a long time. It's great to be here. I love what SASTA does. Um, for those of you that are unfamiliar with Amplitude, we're a digital analytics platform and we bring power to the products of our customers. Some of the brands that you probably notice or recognize here in region are Atlassian, Canva, uh, EntityDocomo, So we're very proud to help them with probably one of the most important digital assets, their products. Product-led growth, that is the story of this afternoon. One of the reasons our customers love us is that we bring power to their products. A show of hands here, just really quick, who has heard of PLG before? Not bad, not bad. And out of the ones that raised their hands, who has cracked the code and has the product as their main driver for growth? No one? Okay. I was gonna invite you up here on the stage to help me out this afternoon, but I guess I'm gonna be doing this on my own. I mean, it's everywhere. When I joined Amplitude 4 months ago, PLG for me was a It was a bit of a buzzword even. What does it stand for? But I like to compare it a little bit to the music industry and songs. Songs are their most important product, the artists, right? And a good song sells itself. You hear it in the taxi. You hear it at a barbecue. You hear it at the gym. And ultimately, you shazam it. You check it out. You go online. You buy the album. Maybe even go to the concert in Singapore if they're coming over here. And before you know it, you're a BTS fan. You're part of the army. But product-led growth is more than just a good song, a good product. There's a lot more to it. And what does it mean to you here in the audience as technology companies? PLG in our eyes is a product-led go-to-market strategy where the product is the main driver for growth. So basically, Your product is helping your customers, people, try, buy, and ultimately grow with your product. You want them to fall in love with your product. You want them to be so in love with your product that they end up saying, well, you know what? I'm going to spend some money on this. And after they spend some money on this, hopefully they grow, and as they grow, you do. Why is PLG at the moment such a hot topic? Everybody's talking about it. I see a few hands here in the room. I expected a few more, but I'll let you know why it is a hot topic. Digital products have grown massively over the years. We actually think that by the end of 2023, um, we'll double the amount of digital products out there in the market. Can you think of any company that doesn't either use a digital product to deliver the service or has a digital product as their core of their business.

Do you mean 500 billion, not million?

No, million.

Okay.

Yeah. Million. Even the hawker centers here in Singapore, right? PayNow, PayWave, PayLah, and there's several ways in which you can settle the bill. So digital products are everywhere. The second reason the digital products are everywhere and everybody talks about it is because the buying patterns have significantly changed. In the 1980s to 2000, and this is where roughly I started my career, the CIO had all the buying power, right? Long RFP processes, security was everything, the look and feel of the software wasn't really top of mind. I remember when I was When I was— my very first job, there was a gentleman in the office that actually used a green screen to get his work done. We've come a long way since then, but sales-led growth was at that point in time the number one growth driver. We then move 10 years, 20 years forward, and we're now in 2000 and 2020, and the executives are taking control of the buying decisions. So very departmental solutions had to be solved. The CFO was looking for budgeting and planning. The CRO was looking for revenue forecasting. The CHRO was looking for a payroll solution. So marketing-led growth and the messaging, specific messaging for these target audiences was the number one growth driver. Now we're in the digital stage, digital era. The power has shifted to you, us, the end users. McKinsey published a report not too long ago where they stated 70% of all buying decisions are currently done remote or through self-serve. The end user is finally getting the power that they've wanted, right? They try the product, they swipe their credit card, and they are in control of what is going to be the next step for an organization. When I, in my career, it was often referred to by the CIO, who found it really frustrating this was happening, as shadow IT. Now we're referring to it as product-led growth. But when you put the user experience front and center, customers are far more likely to end up growing with you. And the final reason is the economy. We're feeling it everywhere. A little bit more churn than last year, a little bit less pipeline than last year, and friends and colleagues that, that are looking for a job and have been unfortunately asked to go. Last May, I think it was Sequoia Capital, who hosted some great drinks last night, and I saw a few of you out there. They published a paper to their portfolio group in which they advised them to let go of the fat and build some more muscle. Let go of your sugars and move to protein. And that was a bit of an analogy for being fat being sales and marketing and— sorry, the sugar being sales and marketing and the protein being the product. Their thinking is that the cost to acquire a customer should not sit at the front end of your organization, but should actually move towards the product. Now, as you can probably tell from my presentation, we at Amplitude and myself, we absolutely love PLG. But PLG is not the one-size-fits-all, right? PLG can solve for a whole raft of use cases. But for the large enterprise opportunities, it's going to be really tough to work with PLG. So pure PLG is not realistic in those scenarios. But I've got good news. There is a hybrid model that we actually use within Amplitude, which is a combination of sales-led growth and product-led growth, which we refer to as product-led sales. Product-led sales combines the power of your product with the power of your sales teams. This means that your sales team can spend less time on cold calling and then might end up closing very small deals, and your product team can focus on the customer journey and actually spend time on how you take your customer from a try to buy. To a growth phase. We at Amplitude have seen a massive positive impact of applying this to our part of the organization. As a result of product-led sales, we have tripled our lead-to-pipeline conversion rate. So that means that our sales team is 3 times more effective in closing a product lead opportunity versus your traditional MQLs or hand raises. So this is the tough bit. First, you need a good product, right? Without a good product, all of this comes to a grinding halt. How do you create a new good product? The model on the screen here is one way to think about it. Clearly, I won't be able to solve building a good product here in one slide, but when you're thinking about building a good product, these are some of the steps that you consider, can consider. Number 1, you need to spark curiosity around your product. You need to create a pull. You need to create that audience to come towards you, and that is a very traditional way of marketing, ads, promotions. If you're in the B2C, you maybe use influencers to get people to come and check out what it is that you have. The second thing you need to do, and that is probably the most important part on this slide, is to create that aha moment. And the aha moment is the point where the user goes, ah, now I understand why everybody talks about this. Now I see what the value is that everybody is, is after and talking about. So you have to think through what those values are and then design a relatively simple experience for your users to get to that value point in the shortest time possible. For example, with Canva, it could be a user finding out that it's super quick and super easy to set up a very beautiful personalized template. The third bubble is around the value exchange. Now the customer, your user, has gotten so far into your product that they're ready to spend some money on it. The value is enough to spend some money on it. Think of Spotify. I had it— I went to a paying user in Spotify when I was out there doing my run. I have my playlist selected on 120 beats a minute, I'm in my routine and halfway through I get a Shopee commercial, which is great, Shopee is a fantastic brand, but not when you're in the zone and trying to go as fast as you can. So that's when I thought, you know what, that $10 or $20 extra, I'm going to buy Spotify and I'm still there. Once you're in, you don't really go out. All right, so the next step, Step 4 is the actual trigger. Your product needs to constantly engage and delight your customers. They're not going to stay around forever. So how do you create something that they will keep coming back to you? I think Slack has a very good example where they keep building new native integrations, right? HR is integrated into Slack. Budgeting is integrated into Slack. Collaboration tools like Miro. Is integrated into Slack. And as you, as an organization, grow, you will have a need for more integration. So you keep coming back and using Slack because it is a step ahead on the needs that you might have. And finally, you need to prioritize virality. Virality is the buzz that spreads and the circle can start again. I think Zoom, most of us would agree, is probably the best business-to-business example of a product-led growth model is where I myself was a Microsoft Teams user, pretty happy until I got an invite to Zoom call for conference. I attended that, downloaded it, play with it, and I thought, "Ooh, this is pretty good." I then ended up going into the aha moment, exploring it further, and again have become a paying Zoom user. All right. Now you've got a good product. Now you need to think about a free way or a way of offering it to your market for free. How many here— how many people here in the room offer their product for free? Okay. Cool. That's a pretty big group, actually. The best companies do this. So maybe it was you with your hand up. The best companies do this. Snowflake offers a free trial. Zoom and Slack went viral. Canva gave Adobe a good run for their money when their free product took off. And so by offering a free version of your product, you're basically creating a steady pipeline of customers to come towards your business. This is a huge part of our strategy at Amplitude. I can tell you that 50% of all my customers, my install base, started off as a free customer and they're now paying customers. So if you don't have a free plan in place, now is the time to start considering. And here's 3 things that I would suggest you think about as you do. Number 1, do you want to offer a free trial or do you want to offer a freemium? My recommendation is that you offer a freemium. A free trial is time-bound. I don't know if you've experienced, but I certainly have, when you download something, you register, you play with it once, the business then takes over different priorities, you come back to that and you still have 2 or 3 days on the clock. And it doesn't really allow you to experience the product So don't tie it to a time, don't tie it to a clock. Let the users use it when they are ready to use it. The second thing to consider is, do you want to offer something specific for startups and SMBs? Clearly, they have small budgets, but they could be the future Canvas, they could be the future Atlassians. So we at Amplitude, we actually offer a scholarship plan. These are for startups that have less than $5 million worth of funding, VC funding, and less than 20 employees. They get quite a rich feature set that they can use. It's for free. And as they take off— and that is what we're betting on— we will be in their slipstream. And the final thing to consider is the actual sign-up experience. My advice is to keep it self-serve, simple, fast, free, frictionless. You don't want any salespeople or BDRs involved when people trying to sign up for your piece of software. All right. We got a product. We got a way for people to try it for free. Now you need those customers to actually move from a free user into a buying user. You need to identify clear product signals. When is your customer ready to graduate to that paying customer? In order to do this, you will need visibility into their customer journey. You need to understand that which action they do within your software is going to lead to what type of outcome. If you don't have that visibility, then basically it's going to be a black box. There are lots of different product signals, and we've got a few here on the slide that you can consider. And frankly speaking, it's going to be different for each one of your businesses. But here's two to just think about. One could be volume-based. Let's say you only allow your customers a number of free queries a month, or 3 events a month. And you want to monitor that when they hit the 80%, 90% of that usage. So you can then reach out to them and say, hey, you're using the product to its almost maximum capacity. Is it time to consider buying some extra capacity as you continue to use it? And then a different way of looking at a product signal is the type of user. If you all of a sudden see licenses being handed out to the marketing department, maybe there's a marketing use case that you were not aware of. So pick up the phone, speak to them, and ask them the question, hey, what is the marketing problems that you're trying to solve? And we're actually having features for it that sits on the paid side of the equation. Again, these things are a huge part of my expansion strategy, Amplitude's expansion strategy. So what this will result into is you're going to have a batch of PQLs, product qualified leads, instead of your traditional MQLs. You need to then build a playbook for your sales team. Your sales team needs to understand how they interact or need to interact with these PQLs because it's a new way of working and it's very different from how they have used to do sales in the past. So this is a couple of the recommendations that I think you should consider. Number 1, I think your sales team will need a deeper understanding of how the product works at a technical level. Understand how users behave through the product, and so they can read and interpret the product signals correctly. We had our sales kickoff a month ago, I think, in San Diego. Everybody within Amplitude, from the intern up until the CEO and founder Spencer, so he was flawless, had to do a test on our product. So product accreditation, both theoretical as practical, and it gave me as a relatively newcomer a lot of insight into the power of our product and how users interact with it. The second thing is now that you have those PQLs, your sales team needs to monitor this on a daily basis. So my sales team has access to a couple of dashboards in which they can actually see how the free users are interacting with the software. And that is from a volume base, that is from a use case base. There's a few other product signals that we look at. And then thirdly, And this is an important one. You do not want your sales team to pick up the phone and say to this free customer, "I've been watching you. This is how you interact with me." You don't want to be creepy, right? So there's a bit of training to be done also on what do you do next, right? You see that one of these customers is getting to a maximum capacity. How do you then speak to them? What is the right approach? I can tell you though that All of this is far more difficult than what I pretend here on the stage. My sales team was initially very reluctant to adopt PLG. The reason for it is that they were afraid that it would cannibalize their business and they would, as a result, do less commission. And especially on the lower end of the average deal size, right? You get to the end of the quarter, and you have 7 more days on the clock, and it's easy to close maybe a $10K deal, and that, you know, $100K deal or whatever it is, is going to be— that's not going to fall in the next 7 days. But the exact opposite is actually true. It doesn't cannibalize the sales. It actually frees up the sales team to go after those larger and more complicated deals. And frankly speaking, if you think of an OTE, to ACV or ARR ratio, you're using your sales capacity, your CAC, your cost of acquisition, a lot smarter by letting them chase the larger stuff instead of chasing the stuff that the product can help fix. So to put it very simple, product-led sales will accelerate deals as opposed to cannibalizing them. When I was in Q4, My first Q4 at Amplitude, we had a CEO that was checking out a paid feature over and over again. We saw it, we picked up the phone, we reached out to him, we had a few discovery calls, we built a proposal, we started to negotiate, and as it was Q4, I was probably a little bit more lenient than I would be now in Q1. But we ended up signing this customer and converting it to a paid user, and we would have never been able to do that if we had not monitored these product qualified leads. All right. So getting towards the end. When this is done correctly, the product is there to assist the sales. All right. The sales can still score the goal and the product is there as a partner to the sales motion. Together, they will bring power. To your products. All right, the key takeaways for this afternoon, let me just try to summarize and recap. PLG is an amazing growth tool, but it's not all or nothing. The best teams combine the power of the product and power of product-led growth with the power of sales-led growth. I call that product-led sales. To pull off the product-led sales, you need to get 4 things right. Number 1, you need to have a great product. Number 2, you need to build a free plan, and my suggestion is you do a freemium. Number 3, you need to identify those product signals so you understand how your customers are behaving within the product so you know when they're ready to convert. And number 4, You will need to train your sales team on how to follow up on those leads. Now, if you can do all of these 4 things, your team is going to be better and more efficient, and your sales teams are going to be stronger. All right. My QR code is here. The QR code gives you access, I think, to my LinkedIn profile. So you can go there and ask a few questions. I'm happy to take— we have 6 more minutes. I'm happy to take 1 or 2 questions if there are questions. Otherwise, I'll be in the room in the back with 2 of my colleagues that sit over there. And we're happy to— yeah, if you wouldn't mind doing it on there so the recording will catch.

Hi, my name is Marika. I work for TestGorilla, an HR tech company. We're struggling a bit to decide what we should put in the free plan and what should be paid. Do you have any advice on how to assess that properly?

That's a tough one. Yeah. You wouldn't ask me if it was an easy one. What we have done within Amplitude, we have decided to expand it on feature sets to an as rich as possible feature set combined with what is our cost. So features that actually drive a lot of cost, that where we said no, we can't, we can't do that because there's no returns. And clearly volumes are pushing those costs up quite high. So economies of scale, you think about your entire price book and you think about this business case or model, and you need to find a way to justify which features they can use and the cost footprint that it will carry, but knowing that it will lead to, as with us, a 3x more a 3x better conversion rate than in the past. But ultimately, a free version needs to give them enough experience to come away and say, wow, this product is amazing. If you can't achieve that, then free version is going to fall on its backside. Yes?

That exactly was my question, your last point. So a free version has limited capabilities, but an enterprise which has a large number of users, how would they get the feel in the free version that this product is right for me? Because they are in a different class, they want more features which are typically not there in free. So they won't be able to taste all the features to become a qualified lead for the sales team to become paid versions. How do you—

100%. Yeah, 100%. And you're not going to offer those features, you can't be as feature-rich. And as you think about it, as an organization grows, or if your success within an organization grows, then at some point it's going to get to department head, or it's going to get to the CIO or the CPO, pick any of the C-level guys, and then a larger procurement process kicks in. So you need to layer PL, product-led sales and product-led growth, or sorry, product-led growth and sales-led growth to get it to product-led sales. You can't just rely on that free version to drive, but it will give you leads. It will give you signals. It will give you stuff that you can act upon. You need to think about what is the most important value driver if, for instance, you sell into the Office of Finance, right? What can you offer within your software that makes the FP&A team go, "That's it. That makes my life so much easier. I now understand." And he will talk to his colleague, and he will talk to her, and everybody starts using it a little bit in the shadow of the rest of the organization. But if you then follow up and see that usage and then follow up with the sales team at the CFO level, You've got a story to tell. Because you know that half of his team is already interacting with your software and getting value from it. And now you can start talking about potentially a bigger deal size if they were not already paying in some shape or form. That's a great point. Thanks.

Yeah, you're welcome.

Yes.

Just following up to that, Mark. What if the end user is not the beneficiary or the decision maker? How does product-led sales work in that? And give you some more context, we're a cybersecurity company for enterprise, for example. My CISOs and CIOs and CTOs probably never look to try a free product by themselves. And so how do you kind of build this notion in, knowing that this is much more scalable than the classic SLG?

It's a tough, tough answer, a tough question with a Probably not an easy answer for me. I think a better understanding of your business would help. But when it comes to product-led sales, it is some products. My previous company, planning and forecasting solutions, it needed a lot of backend integration into existing Excel spreadsheets, existing finance stacks. How are you going to get somebody to explore your product for free without the data ingested into the software? Right. Impossible. So then you stay at a very simple surface level where— or service where you do some basic integration with maybe half a day of a consultant to help you do some integration. So you can see all the dashboarding. I get some feel for it. But— and that's what I tried to say earlier— it's not a one-size-fits-all. You need to look at your— and the most important thing, I think, if you think about a customer lifecycle, the retention part is where product-led growth plays an extremely important role. If you don't have that one right, if you don't have the one right where what I call the trigger effect, where they keep coming back because you keep innovating, it's going to be super tough to, to, to get product-led growth to become successful in your business.