Tech companies are increasingly feeling the effects of the recent economic downturn. Layoffs dominate the headlines, stocks have dropped, and funds are drying up. Y Combinator even published this email warning startup founders to 'plan for the worst.'
So how does this economic downturn impact GTM teams and your bottom line?
Capital is Drying Up
When budget and headcount is tight, GTM teams typically have fewer net new prospects. This is because SDR layoffs result in less outbound, and marketing budget cuts means less inbound. "Growth at all costs" is replaced by strategies to drive the same pipeline using less dollars. Even before the economic downturn, the trend of increasingly saturated channels have made traditional lead generation expensive. Now more than ever, companies need to be more capital efficient in achieving growth.
As sales teams pivot to new growth levers, product-led sales emerges as a popular GTM motion. OpenView's third annual product benchmarks report found that 'Product-led companies, especially those with a freemium model, are over 2x more likely to be growing quickly (100%+ year-over-year revenue growth) than sales-led models.'
Product-led sales turns free signups into paid or upgrading customers. Instead of throwing more dollars into a leaky top of funnel initiative, this motion focuses on deepening product usage and increasing deal velocity and deal sizes among existing users.
Is it worth reaching out to every user? No—OpenView's report reveals that 'standout PLG companies reach out to only 14% of signups on average.' There is no question that product qualified leads (PQLs) are an untapped source of quality pipeline. In fact, PQLs have less buying friction and stronger financial margins than chasing and nurturing new deals. Compared to traditionally rigid sales models, these high-velocity deals can keep sales teams nimble and efficient during downturns.
In addition to getting high-intent leads, this diagram highlights that the product-led sales motion fits any budget. Product-led sales utilizes a land and expand motion to make initial deal sizes more digestible. As more and more companies become cognizant of software spend, these initial smaller deals (typically based on usage-based pricing) are more attractive than large upfront commitments. It is a more relevant GTM model during these times.
Product-Led: Costs ⬇ + Revenue ⬆
Product-led adoption lowers Customer Acquisition Cost. Self-serve onboarding allows users to explore on their own prior to jumping on a call. As a result, product-led sales targets more qualified leads who have demonstrated that they're interested in using your product. This reduces your cost of operations and increases sales productivity by automating repeatable onboarding processes.
By eliminating time-intensive discovery calls with prospects who've never heard of the product, salespeople can engage in high-value conversations with PQLs. This includes advising freemium users and crafting strategic business cases for expansion deals. They intelligently reach out to users with the highest chances of conversion and accelerate deals.
Product usage is real intent. When leads are non-users with zero product data, it's hard to generate predictable revenue. Having a product-led sales motion in place offers confidence in win rates, customer retention, and forecasting.
⛈ Weathering the Storm
Product-led sales ensures you have efficiency gains and less friction from self-serve signups, as well as predictable revenue from your existing user base. Rather than pay more for top of funnel, you can leverage product insights to uncover upsell deals.
Many companies become singularly focused on cost-cutting during hard times. Mastering revenue efficiency is often overlooked. An effective product-led sales process requires more than in-house BI dashboards. Cobbling together fragmented systems leads to revenue leakage, because it lacks a streamlined process to find, close, and grow top accounts. Calixa's purpose-built solution enables you to fully implement a product-led sales strategy to protect revenue.
Despite all the economic conditions outside of your control, having strong revenue systems in place is one thing that can help companies thrive—not just survive. Solving for revenue efficiencies is the best way to emerge from the downturn stronger than you went in.
If you want revenue efficiency during economic uncertainty, learn more about how to uncover revenue potential using product usage insights.