Todd has been in the field of software development since he was 14 years old. After graduating from college, he started his first company. For most of his career, he was in a senior technical or product management role, dealing with B2B software.
Pendo, which was launched in 2013, is his third venture-funded startup. The company's mission is to elevate experiences with software through analytics in combination with messaging users in-product.
The definition of "product-led growth"
Product-led growth is a SaaS growth model where product usage drives customer acquisition, retention and expansion.
For Todd, product-led companies are those that put the product central to the overall customer experience:
"Product-led companies start with: 'how can the product create a better user experience?' When you think of Tesla, we don't think of them based on the humans we interact with when we're trying to buy one. We think about the app and the product, and it grows in a viral fashion."
Pendo has helped companies to be more product-led, but he admits that they too are still learning to be more product-led themselves:
"A lot of companies buy us to become more product-led so in that sense, it is very much part of our success. We power so many companies, product led growth teams, we drive onboarding for a lot of customers. It's a wave that we've written as a business.
We ourselves are still pretty early in our own product-led journey. I think we've always been sort of product led, but we've had a sales team since 2015 and we are very effective at selling. Our sales organization is around 400 people. I think we're a pretty good blend and our growth team has grown a lot."
During the early months of the pandemic, Pendo decided to pivot the team and invest a lot more heavily in product-led growth. Two years later, they are starting to see the fruits of that investment.
The inverse of product-led
The opposite of product-led? Todd characterizes this as human-led:
"When a product isn't great or doesn't deliver a great experience, what do we do? We throw humans at it. We'll call users or we'll manually do the task. That's essentially what happens."
And while these human-led activities aren't scalable, this lets companies learn about what works and what doesn't work:
"We throw humans at problems because we're trying to learn very quickly. If a human's on the phone, they're listening and they may be able to learn faster. We see that especially in the B2B.
We have the rise of these customer success teams and what's a customer success team? It's a set of humans whose job is to make sure people adopt the product."
Most SaaS companies have customer success teams to make sure that people adopt the product. Because it involves humans, most people think that this is opposite of product-led growth:
"One could ask, 'why doesn't the product itself do that?' The product probably should, but we've invented these roles to make sure that people actually use the thing that they've purchased, right? They think a lot of these customer success teams are really the opposite of PLG because they're more human driven than product-driven."
Which is why self-serve is part of being product-led:
"If you can serve yourself rather than talking to a human, it's absolutely a product-led experience."
The three pillars of product-led growth
Becoming data-driven
This is the first step in the roadmap to becoming a product-led organization:
"If you don't have a culture of being data-driven, if you don't have a culture of learning and incorporating data into your processes, you're not going to be successful at PLG because the best teams are ones that are iterating, fast listening, measuring and tweaking constantly."
This is especially important when teams run experiments. Data tracking lets teams establish your baselines, observe changes quantitatively, and make decisions from that.
And speaking of experiments, this also helps you establish a healthy work culture where failure is accepted as part of the process:
"I regularly meet with the PLG team and they talk about these 5 or 10 experiments we run. They could say: 'Three of them worked while these didn't work. And we're adjusting this.'
If you don't have a team that's trying things that aren't working, you're not trying enough. So we really coach the teams to think bigger, be creative, and try a bunch of different things. Some things won't work and that's completely okay. But eventually when you're creative enough, you'll find things that do."
When it comes to the scope of data collection, Todd suggests collecting a more expansive set because having an incomplete picture will lead you to poor decision making. This was a concept he borrowed from Robert Austin's book:
"The classic example he uses in the book is if you have a recruiting team and you're only measuring the number of calls or the number of interviews, you're not measuring the actual success of the hired employees.
So what's the ultimate measure? The ultimate measure is the success of the employees. With the incomplete picture, you run the risk of making poor decisions, right? I think the similar concept goes with products."
Putting the product at the center of the customer experience
What sets apart product-led companies is they leverage their product to do more things for the customer experience. In Todd's experience, he saw this in one software he tried out:
"I looked at the browser console through Google Chrome, and a message popped up and it said, 'Hey, if you're looking at this, you're probably a good candidate to apply for a job at our organization. Please email us at jobs@domain.com."
In this novel example, the recruiting team worked with the product team to make sure that they're trying to populate the top of the funnel so they can source new applicants by leveraging their own product.
This example shows how being product-led could be cross functional in an organization.
Evolving the organization to become product-led
And talking about cross functionality, evolving your organization to be product-led should start with having a more cross functional lens around your product:
"The reality is, if you think about products as only a product management thing, you're gonna be far too siloed to really take full advantage of being product-led. You have to break down those barriers and involve these various functions."
At Pendo, their growth team works very closely with the marketing team so that as users come in, the marketing team knows when to send out emails for those in the free trials or freemium experiences — making it one coordinated effort from an organization instead of two different departments.
Another experience they had at Pendo is when a free trial or freemium user asks a question. Their growth leader must be able to work cross functionally to make sure that there would be no dead-ends in the customer experience such as the need to talk to a human:
"If someone says they want to talk to a human as a dead end, that's a bad experience. We hope that they don't have to talk to a human and we hope that it's completely self-serve and they're getting all the answers they want."
But in the case that customers do need to talk to a human, your sales or customer service team has to be armed with data to provide a better experience:
"A great experience is when you do talk to that human, that human knows everything about you, where you are and what's going on. You don't want to rehash and tell them all your data because that's a horrible experience.
We all like personalized human experiences insofar as the system can inform humans on how to have a better experience with that user, which might lead to better sentiment."
The sales process for a highly technical product
What do you do when users ask highly technical questions during demos?
Pendo is arming their salespeople with knowledge (including technical terms, jargon, and lingo) so they can effectively talk to the audience of product managers:
"Our best reps understand all these things. So we have to enable them and educate them: that's why there's a ramp time when you hire a rep right off the street. There's a ramp time where they have to listen, shadow, get enabled to really become effective."
Pendo also has sales engineers who can go even deeper into the issue or customize the solution.
But Todd believes that the customer demographic has also become more knowledgeable through the years and are now asking different questions:
"Before, it was all about features and functions. Now, we're selling use cases, value and ROI."
When does the hand off between sales and customer success happen?
This would depend on the size and scale of the customer. For large enterprise accounts, the customer is handed off to the customer success team before the sale is closed. This is to make sure that they will really be using the solution post-sale.
For smaller customers, Pendo gives them a more self-service approach but also has a scale team in place:
"I think a lot of smaller customers want a more self-service experience. They don't wanna talk to a human, they don't want to do quarterly meetings with someone from Pendo. They just want things to work. So in that case, we don't force ourselves upon them. We make ourselves available for those customers if they so choose and or desire."
The culture of experimentation at Pendo
At Pendo, they usually have two-week sprints to run their experiments. For example, they could have a goal around conversion. The three key outcomes for that goal are:
- The sign up to the product
- The placement of the JavaScript snippet in the application, and
- The second week usage
For this goal, they could be running various experiments within the two-week period — such as leveraging emails or tweaking the product messaging. After the experimentation period, the growth team has a biweekly meeting to discuss the results of these experiments and every executive can sit in:
"We run it like a traditional Amazon-style meeting. You come in, you spend the first five minutes reading this doc in the meeting, everyone's commenting and then we just blow through the comments one by one and get people aligned on what we're doing."
Attributions: traditional vs product-led marketing
Traditional marketing or inbound demo requests is a huge source of demand for Pendo. Regardless if the lead came from a paid or organic source, they see high conversion rates from this type of marketing.
In the situations where free users convert to paid users, they are considered product qualified leads (PQL) and not marketing qualified leads (MQL). These conversion rates coming from their product-led marketing are completely different from their inbound demo requests:
"It could be a PQL because we have a feature turned off in the free product. It could be because we give away certain numbers of monthly active users and think of it as an amount of scale and they have crossed over that scale. It could be for, they just want better support. Understanding the source is all new data for us."
The product-led growth team uses this data to run experiments and see how they can balance conversion rate optimization while still giving free plan users the value of your product.
Offering free plans
Back in 2020, Pendo decided to offer a free plan in response to the challenges faced by small and medium-sized businesses.
"If someone can't afford us right now but still wants to use it, we have to have an outlet for them. We don't want them to go to a competitor."
Pendo took inspiration from other SaaS companies like Mailchimp who launched their free plan during the global financial crisis of 2008. Companies who launched a freemium plan during challenging economic times saw an acceleration in growth when the economy recovered.
But despite having an influx of free users, Pendo has decided to become more reactive — rather than proactive — with support:
"It was a simple version of the product and we decided that we were going to be more reactive on support rather than proactive. You have to have a scale in motion and success if you want to do any sort of free model. You just can't afford to put humans on it."
But when they do receive an issue from free plan users (which is rare), they work hard on it so it doesn't happen again. So far, this method has been working great and there's no need yet to add more people to their customer support team.
Final advice
Do make it someone's responsibility to drive growth.
"A common problem is that people try to make growth a part of someone's job. Make it someone's full-time job and hire someone who has done it before."
Don't deliver a bad experience.
"One of our investors liked to call it 'cripple-ware'. It's common for people when they're doing a freemium or free trial that they put so many gates that users don't get enough value — where they really get hooked on the experience and they just churn. Give away a great experience. Give away more than you think you need to give away."
Thanks for listening! If you found the episode useful, please spread the word on Twitter mentioning @userlist, or leave us a review on iTunes.
