All SaaS companies live and die by their ability to lead their customers to ongoing success.
From a bird’s-eye perspective, this means ensuring two key things are happening within your organization at all times:
- Continuous product management and development
- Proactive provision of guidance and support to new, current, and prospective customers
In this article, we’re going to explore:
- What product-service management and customer success typically looks like for SaaS
- The importance of cross-team collaboration for both product management and customer success purposes—and how such collaboration can lead to successful product-led growth for your organization.
- Product-led growth metrics every PM should know to keep their team on track and headed in the same direction
Ready to get started?
What Does Product Service Management Look Like for SaaS Product Development Teams?
Overall, product management is the process of developing a product and preparing it for use by your target audience.
As a SaaS product manager, there are a number of tasks you’ll be responsible for as your team navigates the process of product development.
On the whole, you’ll be aiming to create new products and/or improve your existing tools based on the evolving needs of your audience. This goes for your current customers who will become “power users” as they get more acclimated with your products, and also for new target audiences you may uncover as time goes on.
You’ll also need to validate your ideas by assessing demand in a variety of ways. This may mean:
- Analyzing usage rates amongst different audience segments
- Soliciting comments, questions, and feedback from your users
- Analyzing industry trends and other factors that may indicate the level of demand for your product idea
SaaS product managers are also responsible for determining how to best allocate resources when developing or improving products. The goal is to take a lean approach, ensuring that resource consumption is kept to a minimum while also maximizing your team’s output.
As a SaaS product manager, you also play a key role in the marketing and sale of your products. Overall, this involves deciding how to communicate the value of your products to your target audience—and determining the optimal approach to pricing your products, as well.
As Tarif Rahman of Roadmunk found while interviewing a group of SaaS product managers, SaaS companies approach product management a bit differently than traditional organizations do.
Firstly, SaaS products need to be designed with future iterations in mind from the get-go.
Flexibility and open-endedness are vital, here, as you’ll need to make ongoing improvements to your software without completely overhauling it throughout each iteration.
Going along with this, SaaS product management involves rolling out these continuous improvements to your software on an ongoing basis. This is in stark contrast to the traditional approach, where improved product iterations are typically released on a quarterly or even yearly basis.
The SaaS product lifecycle is also much faster-paced than the traditional product lifecycle.
In turn, your approach to marketing, sales, and the like will also need to quickly and continuously evolve, as well. While creating a highly-valuable product is of utmost importance, allowing your audience to see and understand this value is what will get them to pay for your services.
In the SaaS world, customer retention is the key to turning a profit. A SaaS product manager’s duty, then, is to facilitate the tweaks, changes, and improvements needed across the board to ensure your customers always get what they need from your organization as their needs and expectations evolve over time.
Your efforts, in this regard, can be strengthened by the efforts put forth by your customer success team.
The Role of Customer Success Teams in the SaaS World
As we just said, customer retention is the name of the game for SaaS companies.
(After all, the longer they stay onboard, the more revenue they provide your company over time.)
The thing is:
Your customers won’t stay onboard just because you offer a robust, highly-valuable product. Rather, your customers will only stay onboard if they continue to experience success while using your robust, highly-valuable software.
It’s no surprise, then, that customer success is seen as either “important” or “very important” by an overwhelming 95% of SaaS companies with growing revenues.
The question is:
What do we actually mean by “customer success”?
First of all, it’s important to point out that “customer success” is not synonymous with “customer satisfaction.” Reason being, it’s entirely possible for your customers to be “satisfied” with your software and services—even if they aren’t getting maximum value from either.
(In other words, your customers may be content with the value they’re currently receiving from your software simply because they don’t realize how much more they could be accomplishing with it.)
So, enabling customer success goes beyond providing a means for your customers to overcome a certain obstacle or solve a certain problem. It’s more about allowing your customers to optimize their approach and their efforts as they attack said problems—in turn allowing them to experience the maximum amount of growth possible from the efforts they put into the initiative.
Among other things, this involves:
- Enabling your customers to streamline certain processes to maximize productivity
- Allowing them to minimize resource consumption while maximizing the value they receive from using them
- Bringing your customers beyond the immediate problems or challenges they’re facing, paving the way to further growth in the future
To make these things happen, there are a number of things your customer success team must do.
First, they must be able to define success on an individual level for each of your customers. Here, your customer success team will use what they know about the individual’s needs and goals, and combine this with what they know about the products and services you provide. In turn, your team can create an image of what success will truly look like for each customer you serve.
From there, they’ll need to create a game plan to ensure the individual customer remains on their pathway to success. This involves providing a dynamic and personalized onboarding experience, anticipating the customer’s changing needs as they continue to grow, and proactively engaging with them over time to ensure they experience ongoing growth and success with your software.
(As a quick note, this is where “customer success” differentiates itself from “customer service and support”: While customer service and support are offered upon request, customer success teams should often be facilitating engagement with their users at various times throughout their journey.)
Finally, customer success teams are also responsible for reporting their findings back to product managers and developers, as well as to the organization’s marketing and sales teams. In turn, each team will be able to improve their respective efforts based specifically on these findings—which will allow the organization as a whole to better serve its audience.
This is key for SaaS companies aiming to facilitate product-led growth.
Product-Led Growth and the Need for Collaboration in SaaS Product Development
There’s been a lot of buzz surrounding the phrase “product-led growth” in recent years—but that doesn’t mean it’s just a buzzword.
Rather, product-led growth has proven to be an incredibly effective strategy for acquiring customers, keeping them onboard, and generating maximum value from them over time.
As for what product-led growth is, let’s consult OpenView—the team responsible for coining the term and ironing out its definition:
“Product Led Growth (PLG) is a go-to-market strategy that relies on product usage as the primary driver of acquisition, conversion and expansion.”
In the SaaS world, PLG involves nurturing prospective customers by allowing them to use and experience value from your software before they open their wallets. Often, this means providing a freemium or trial version of your software to prospects so they can see first-hand what it can help them accomplish.
(This is in stark contrast to the traditional [and more common] approach to acquisition and retention, which focuses on convincing prospects to convert before they’ve had any first-hand experience with the product in question.)
The low barrier for entry set by PLG companies also leads to increased brand awareness via organic word-of-mouth and other such referrals. Basically, the idea is that your successful users will recommend the freemium or demo version of your software to others in their network—who will then begin their own journey with your brand.
For a prime example of how effective a PLG-based approach can be, consider the massive success Slack has achieved since its inception in 2013.
This success is directly attributable to the product-led nature of Slack’s approach to acquisition, retention, and expansion.
In short, the process looks like this:
- An owner, manager, or team lead hears about Slack, a communication tool for businesses
- The organization begins using Slack on a freemium basis to great success
- The team realizes they could be getting much more value from one of Slack’s premium offerings—and has no problem shelling out the cash to do so
- The team decides which premium version best suits their needs and decides to officially become a paying customer
- The team continues to rely on Slack for communication and collaboration purposes as they grow—potentially leading them to subscribe to Slack’s upgraded services in due time
All of this is, of course, contingent on the software’s ability to provide for the user’s needs—and the user’s ability to derive this value from the software. And, as we said earlier, this is all subjective to the individual customer’s needs.
This is why communication and collaboration between product managers and customer success teams is essential.
For one thing, your customer success team will know exactly what your users want to accomplish when using both free and premium versions of your software. In turn, they can communicate this information to the product manager—who can then work on making improvements to your software with these specific factors in mind.
Moreover, your product manager can collaborate with your customer success team to develop a plan for facilitating successful use of your software by your new prospects and power-users alike. Here, the product manager develops or adds to the software with a specific audience in mind, while the customer success team works to ensure the target audience knows how to use the software to its maximum potential.
Overall, product-led growth is a byproduct of the close-knit relationship between your product managers and your customer success team. With a clear focus on creating a tool that meets the exact needs of your target audience—and a proactive approach to supporting them along their path to success—you’ll have little trouble attracting, engaging, and retaining a loyal following of high-value customers.
Where Do Marketing and Sales Fit Into Product-Led Growth?
Now, you might have noticed we haven’t talked about where your marketing and sales teams fit into everything we’ve said thus far.
After all, if you create a software that essentially sells itself, there’s no need for you to put any extra effort into the process, right?
However, the way in which you approach marketing and sales as a PLG-focused organization certainly differs from the traditional approach.
Regarding marketing, your focus will be less on attracting new users through outbound means—and more on keeping new users engaged through various lifecycle marketing tactics.
- Creating a robust and informative onboarding experience to get new users acclimated with your software
- Delivering triggered and time-based content via email, social media, chatbots, and other channels to supercharge their use of your software
- Providing case studies and other social proof of the value of your premium services
Looking at sales, it’s less about convincing potential customers to buy (since they’ve already been convinced by your freemium software). Instead, it’s about connecting these individuals to the right tier of service for their specific needs.
In both cases, the connection to product managers and customer success teams is clear:
The more your marketing and sales teams know about the products you offer, and about the needs of your customers, the easier it will be for them to nurture new users toward conversion—and to keep current customers onboard and heading down the path to success.
Product-Led Growth: Putting a SaaS-y Spin on “Pirate Metrics”
Perhaps you’re familiar with what have come to be known as “pirate metrics”—that is, metrics that revolve around the different stages of the customer lifecycle.
In the PLG/SaaS world, the customer lifecycle flows as follows:
“AARRR.” Get it?
Of course, your goal at each stage of the customer lifecycle is to nurture the individual to the next stage—and to keep them as engaged as possible throughout. In order to gauge your ability to do so, there are a number of metrics to consider at each of these stages.
Here, we’ll discuss some of the most important metrics to look out for, and point out how your product managers and customer success teams fit into the mix.
In focusing on product-led growth, the most important acquisition metric to pay attention to is Time-to-Value.
As the name suggests, Time-to-Value refers to the average length of time it takes for a new user to first recognize and realize the value of your SaaS product. While this is technically subjective to your individual users, Time-to-Value typically revolves around your user’s first milestone or “aha moment” when using your product.
Needless to say, your goal should always be to keep your Time-to-Value to a minimum. On the user’s side of things, receiving near-immediate value from your product is a pretty good sign that they’ll be getting even more from your brand as time goes on. This, in turn, makes it more likely that your new users will stick around and become paying customers well into the future.
The key metric to attend to when looking at the activation stage is your ratio of Product-Qualified Leads to your overall acquisition numbers.
(Total Acquired Leads) / Product-Qualified Leads) * 100%
Basically, you want to know how many of your demo or freemium users end up becoming paying customers specifically due to their positive initial experiences with your product. These will be the users who have reached their first milestone (or set of milestones), and who actively take the next step to receive even more value from your product and brand.
Here, the focus shifts toward determining the monetary value your new and existing customers bring to the table.
The first metric to consider is MRR, or Monthly Recurring Revenue.
(Number of Customers) X (Average Amount Billed per Customer)
Obviously, this number tells you how much money you’re bringing in on a monthly basis via a specific tool or product.
MRR can be further broken down to shed even more light on your product-led growth initiatives:
- New MRR refers to any additional revenues brought in over the month from newly-acquired customers
- Expansion MRR refers to additional revenues earned from current customers who increased their spend from one month to the next)
- Churned MRR refers to revenues lost from month to month due to downgrades or complete churn
- Net MRR is the amount of revenues earned from new and existing customers, minus any revenues lost due to downgrades and/or churn
Average Revenue Per User, or ARPU, identifies the revenues brought in by your “average” customer in a given month.
(MRR) / (Number of Customers)
This is an essential metric to help identify your most-valuable customers over a single month and overall. Here, the idea is to reverse-engineer their experience thus far with your product—allowing you to better identify other potential high-value users from the onset of your relationship with them. Moreover, you’ll also be able to make further improvements to your product with the needs of these high-value individuals in mind.
Customer Lifetime Value is another key metric to help you identify high-value customers. The difference between ARPU and CLV is that ARPU looks specifically at revenues, while CLV focuses on profits. The idea here is to identify high-spending customers who were also easiest to bring aboard—again, enabling you to better identify potential high-value customers from the get-go.
It’s important to consider all of these metrics in tandem when assessing your product-led growth initiatives. While your marketing and sales efforts will play some role in your ability to generate revenues, looking at the relationship between ARPU and CLV will make clear how much of your users’ purchasing decisions are based specifically on the quality of your product.
Retention is the name of the game for SaaS companies.
Looking at the flip side of this, avoiding churn is imperative to the success of your SaaS business. So, in assessing your product-led growth efforts, you’ll want to look at both sides of the equation, here.
When analyzing churn, product managers should be looking at Net Customer Churn and Net Revenue Churn. These metrics, respectively, will tell you how your audience base and your revenues have shrunken (or grown) from month to month. A significant increase in these numbers is likely a sign that your users eventually “hit a wall” when using your product, reaching a point where the product no longer provides the value they’ve come to expect from it.
On the more positive side of things, your Renewal Rate will give you a pretty good idea of whether your product is providing enough ongoing value to keep your customers onboard and actively using your tool.
Again, though: You also need to consider how much extra effort (i.e., outside of product development, etc.) it costs to keep your customers onboard. The higher your Cost of Retention, the less likely it is that the quality of your product is the main reason your customers are sticking around.
(For example, if you give a potentially churning customer a free month just to keep them onboard, it’s pretty clear their decision to do so will have much less to do with the value of your product than the freebie offer.)
Again, you’ll certainly need to put some extra effort into retaining your customers. But, since we’re looking specifically at your product’s ability to keep users engaged in itself, you’ll want to know with relative certainty just how you’re faring in this regard.
Your ability to generate referrals from your current audience is paramount to product-led growth and success.
Here, there are two key factors to consider:
- Your average user’s willingness to refer your product and brand to others
- Whether your users actually end up making these referrals
In assessing the former, you’ll want to determine your Net Promoter Score. Since the focus is on the quality of your product (as opposed to your overall brand experience), you’ll want to phrase your NPS survey accordingly, asking:
On a scale of 0-10, how likely are you to recommend (PRODUCT) to others in your network?
By focusing your users’ attention on a specific product, you strip away all the other “extras” you might provide them—and allow their decision to be based solely on the actual product in question.
Looking at your actual referral metrics, you’ll want to calculate your Viral Coefficient.
(Number of Active Users x Average Number of Referrals x Referral Conversion Rate) / (Number of Active Users)
That is what product-led growth is all about: Creating a tool that is so valuable to your target audience that they simply have to tell others about it.
In the same way we identified high-value customers and reverse-engineered their experience with your product thus far, you’ll also want to do the same with your high-value referrers. For product managers, this will allow you to make improvements to your products that will actually matter to your high-value customers—and to other like-minded individuals in their network.
Product Development According to Customer Needs
To drive product-led growth, you need to align your customer success and product teams to deliver the greatest level of success to the largest number of your customers. This is what product-service management is all about. People come for your product, but stay because of your services. This can be only possible by really listening to your customer’s individual needs, building and improving your product accordingly, and then measuring the results of those improvements using the ‘pirate metrics’. It’s a win-win situation – your success depends on the success of your customer.
About the author
Josh Brown is a SEO and Content Marketing Manager at HelpJuice – an easy-to-use and powerful knowledge base software is designed from the ground up to help you scale your customer support, and collaborate better with your team.