4. Aligning Lead Quality and Product-Market Fit Metrics
- Abishek Murthy CGO at Locus, Ex-COS at Freshworks
When I think about product market fit, I think about five things.
- Demand
- Conversion
- Engagement
- Early churn number
- Late churn.
Demand shows that people will buy your product if there is enough time. Imagine 100 people landing on your landing page; if plenty of them sign up, you have good demand. People are willing to at least try your product, or sign up for it.
Conversion tells you if your product has price parity with competitors. How many people convert into paying customers from sign ups tell you if your product is worthwhile for people to buy into.
Engagement is when people use your product. This will be different for each of your products.
Early churn means people have bought your product, thinking it will solve what they thought it would. But, if you're seeing early churn within the first month, second month, etc., it means it's not, and they're leaving. High early churn means you need to fix your product.
Suppose you have a late churn, which is churn at three months, six months, etc., depending again on your cohorts. In that case, it means they found a better product than you from a price-feature parity perspective. This means you must drill down on your cohorts and determine if your competition is better than you.
You need to drive this goal back to the Product team. You can also drive the revenue goal back to the Product team because PMF or post-PMF unless somebody uses the product, what is the whole use of a product? But this does not mean that you build for everyone.
For example, when one of the products I was heading was at five odd million, we had to onboard a customer with $1 million. Think of how skewed the book of business was.
If we’d taken it up, we would have had to stop 100 things we were doing on the product side and focus on solving problems for that one customer, which did not solve many things for everybody else.
You might get inbound from a large audience or a very significant customer, but first, see if there is stickiness or PMF from that segment before committing.
You might get inbound and see if they are converting. If they are not converting, find out why they’re not converting. Is it because of compliance? Is it because of features? Is it because of parity? Integrations?
Once you have a critical mass of users giving you feedback, you decide if it is worthwhile to build for them.
My general gut check is that building an enterprise product and going downstream is easy. When you make an enterprise product, it's easy to cap it for a mid-market to an SMB, etc. But, when you build a product for SMB, going up the market is a Herculean task.
While answering a question about balancing the messaging for PLG and Sales-Led GTM motions.
See, no amount of good marketing and good sales can sell a bad product. But if we believe that you have built the right product, you will have got enough feedback about your product.
Feedback on everything that is good about it, everything that is bad about it, everything that is bad about the competition, everything that is good about the competition, what your prospects or your pilots or your beta customers are saying etc.
From all this feedback, you should be able to clearly state what is your product, what is the problem you are solving, and what are the outcomes you’re delivering to your users.
I’ll give you an example of when we launched FreshChat, all chat products globally were focused on building a product for the admin or they were focused on building for the managers. No product was focused on building for a user, the happiness of a user, whether we can make the product easy for them, light for them, easy access, etc.
You also have to have a critical mass who has told you this is the outcome for the persona. Communicating that outcome to that persona is after engagement, not before engagement.
At the time of trial, you talk about the grassroots level of the product and 30,000 feet view on the outcome. When they have used the product a lot more, you go 20,000 feet or 10,000 feet on the outcome and 30,000 feet on specific product features and engagements.
What you can focus on first is first trimming down the junk. Imagine you have 1000 leads that are coming to the one rep that you have today, you improve the quality of your leads. By improving your messaging, you can only stop some of the 1000 from coming in, but you should focus on who is it necessary for the sales rep to get in touch with.
I’ll probably think of this as MQL, SQL PQL, which is a product-qualified lead. The way I will think about it is, which of these 1000 leads are worthwhile for the reps to be in touch with?
You can use different tools for it which will tell you among 1000 leads, which are important for a sales rep to be in touch and what can be in PLG motion.
Before rushing into PLG, you need to clarify how deal touch and deal conversion happen because you don’t want to be in a place where you get many more leads but don’t know what to do with them.
My call out to you is to focus on redefining your MQL metrics, define a PQL, have the sales manage PQLs, and let your MQL be. Your MQL will be the pilot study for PLG motion, but before that, you need to figure out if the PLG motion will scale or not. And then combine all together.