Tech winter is coming - part 2
How can tech companies develop their growth dragons and ride them through the tech winter
In my previous post (link at the bottom) we covered the harsh funding reality that tech companies are facing heading into 2023. We also suggested that for companies to come out triumphant on the other side of the downturn they must improve their unit economics. one way to achieve that is to implement new low budget, high impact growth strategies. Since despite the absence of funds to grow sales and marketing, growth is still expected in order to secure the next funding round at a reasonable price. To weather the tech winter, companies should act less like unicorns and more like dragons.
In this part we will look at a few examples of growth engines with a relatively low upfront investment and TCO, but that can still deliver high customer acquisition rates and increased conversion. The examples are broken across the key growth strategy pillars: Customer acquisition, retention and upsell, and monetization.
Customer acquisition
when it comes to customer acquisition, especially during a downturn, the goal is always to develop flywheels that deliver customer acquisition costs (CAC) at near $0. Sounds ambitious, but it can be done, and has been done. One of the best examples for a top of the funnel. customer acquisition mega engine comes from Similarweb, as previously covered by Kyle Poyar here: How Similarweb Grew To $190M Revenue Run Rate And Beyond. There is a lot to unpack there and learn from, including the use of sidecar applications and free products for top of funnel acquisition and awareness, such as the traffic analysis tool, browser extensions, and even the free API, to how they publish unique analytics and insights for SEO and web traffic, with their top website rankings. These examples work very well in a prosumer type of market, but do these investments work and can they be applied at more traditional enterprise B2B tech companies?
Well to answer the first question lets consider the following observation, after working with clients across early stage and growth companies, I often encounter the ironic reality in which the product team invests great effort in developing cutting edge capabilities over months and sometimes years, only to realize upon release that no one in the market knows/hears/cares about it. In most early stage companies, the products are taken to market by a relatively small sales team and a fledgling marketing budget, resulting in close to zero discoverability of what may be a new and groundbreaking product, WHAT IS THE POINT? If the product team instead would prioritize the growth concept of designing the product to be discovered, they may ship less features, but get it in the hands of many more prospects.
Now to the second question, can these PLG-like techniques be applied with tech companies across the board to achieve discoverability? Here are a few examples:
The free trial - or better yet, the reverse free trial
For SaaS based products, one of the best customer acquisition flywheel is the free trial, ideally in the form of a reverse trial, where for a limited time the trial unlocks all the premium features, and reverts back to the less feature-rich free trial version after the trial period ends. There are many great examples of how to do that, my favorites are described in Kyle Poyar’s post
as well as this post and presentation from Adam Schoenfeld https://www.linkedin.com/feed/update/urn:li:activity:6988893783115366400/.
The challenge, however, for many tech companies including some of my clients is when the product is not SaaS based, when it is self hosted, and in some cases lacks a self service installation, requiring assistance from the vendor’s technical team. This often rules out any free trial attempt, reverting to a low scale, sales led, pilot based installation with a handful of prospects each quarter. As it turns out, with some creativity a free trial without self service can be solved for. In one example, one of my clients who sells a database infrastructure solution implemented a free trial, with installation assistance included. At first glance this approach seemed cost prohibitive, but with careful planning we came up with the following:
When a prospect signs up for a free trial, they receive a calendly link to schedule the installation with one of the company’s engineers, a typical installation takes 3-5 hours, allowing a single engineer to support over 200 free trials a year. Initially this was supported by the existing support team, and in the future when the rate of free trials increases, the company will add offshore resources, resulting in an investment of $50K for every 200 prospects signing up for a free trial, expensive, but a fraction of the cost of any other lead generation program operating at the time. After a year, we expect the company to go from 10-15 pilot installations per quarter based on the existing sales team, to 50-150 installations per quarter. This will help reduce customer acquisition costs, since some of the free trials will convert to paid subscriptions, but we also expect to receive 100x more feedback on how the product performs across many different enterprise environments, accelerating the development of enterprise readiness capabilities and improving product market fit.
The increase in installations also allows the company to implement and finetune its usage analysis stack, to start collecting useful information on value driving features, user journeys as well as conversion metrics.
Sidecar applications
The goal of letting prospects experience the value from your product, reaching the “A Ha” moment can also be achieved with a sidecar application (I am using this definition loosely to mean a small application that uses your main product capabilities in a limited and focused way). Ideally a sidecar application allows prospects to immediately understand the value from your product without the friction associated with a full blown installation. A good example of this is the SNYK Advisor: Snyk Open Source Advisor letting developers scan open source libraries for vulnerabilities or the SNYK website scanner that allows prospects to scan their website for vulnerabilities by simply submitting their URL - Website Scanner | Website Security Check for Free | Snyk. If you find these example useful, I encourage you to listen to Ben Williams Snyk’s VP of product interview in Lenny’s podcast: How Snyk built a product-led growth juggernaut | Ben Williams (VP of Product at Snyk) his shared experience and examples are a gold mine of best in class growth strategy at work.
A sidecar application becomes even more powerful in the case of non-SaaS products that lack the frictionless sign up to the product. For example, when I was leading the sales team for mobility solutions at HP we set up a sidecar application where prospects could submit their mobile app and get a detailed report of its functionality, performance and user review analysis compared to competitors. This was a very useful tool for the sales team to then take that report and set up a meeting with the team responsible for the mobile app. Response rates were 10X higher compared to a benefits led email outreach campaign. Here is an example of one of those reports performed on the UberEats app
(the team was part of MicroFocus at the time following the Spin Merge with HP Software)
The report is from 2017 so the findings are most likely no longer relevant, but the point of the example remains the usefulness of this technique to secure meetings with your ICP at a high conversion rate. A year after launching this sidecar application we had over 1000 mobile 360 reports for the top mobile apps in the world, more importantly this secured qualified sales meetings contributing to 900% growth for this portfolio in the following 18 months.
In another example, one of my clients is creating a sidecar application where prospects can upload their database scheme and a few rows of data and have it scanned for sensitive data. Upon completion of the scan, the prospect is invited to try out the company’s data masking solution.
Sidecar applications are a great example of how companies can increase their customer acquisition rates with a relatively low investment, a very needed outcome at times when increasing sales headcount is economically prohibitive. In the above examples, the sidecar application not only created a low touch funnel, but also enabled the sales team to proactively direct prospects to experience the product, and in some cases even applied the sidecar application themselves on the customer’s website/mobile app as part of their prospecting efforts, increasing their conversion rates dramatically.
The long tail of additional growth creating flywheel ideas
When applying a growth mindset and focusing on how to get your product discovered, many ideas will surface, here are some of my favorites:
Challenge videos
Let’s say your product’s competitive edge is the ability to perform the task at hand faster than any competitor. This can be a very valuable advantage, and a reason why prospects would choose your product over alternatives, but it is difficult to get prospects to that “A Ha” moment without a full implementation of the product. This is where a challenge video comes in handy, it should be relatively easy to set up a demo environment showcasing the speed of the product, and create a timelapse video, offering prospects the challenge of “how fast can you perform this task?”
Sandbox environments
Another simple alternative to a free trial is to set up a sandbox environment that mimics the most common use cases from your product, and invite prospects to experience the product without the effort of installing it.
Custom product output/reports
Similar to the mobile 360 report example, companies can invite prospects to submit their input (website URL,mobile app APK files, source code, git repo, database, etc.) and have SMEs from the vendor apply the product on that input, delivering a report that will showcase what the customer could expect to receive if they purchase the product. This allows the vendor to control the output by ensuring that his experts are the ones operating the product according to best practices to generate the report.
So far we explored how even traditional B2B can leverage PLG like techniques to improve their customer acquisition costs during tight financial conditions. This is one pillar of the growth strategy, in the following posts we will explore what can be done around growth and retention as well as monetization, so please subscribe so you don’t miss those.
Link to my previous post in this series:
Happy growth explorations - Excelling Growth