with Peter Ikladious, Co-Founder at Unlocking Growth
Peter Ikladious, co-founder at Unlocking Growth, talks about the main struggles in trying to layer a PLG approach in a sales-led motion, using PLG to feed sales, incentivizing sales in a consumption-based model, and strategies to get pay-as-you go customers into annual contracts.
Peter Ikladious is one of the co-founders at Unlocking Growth, a growth consultancy helping start-ups through established companies drive growth through Product-Led concepts. Based now in Sydney, he has previously worked in New York, Boston, Malaysia and Belgium. Prior to co-founding Unlocking Growth, he held executive positions leading Marketing at SafetyCulture and building out growth at IBM, where he drove a PLG agenda across 350 SaaS, software and hardware products. His earlier career in media, telco and software development has also informed the cross-disciplinary approach he takes to Growth, whether he’s helping product teams, marketing teams, sales teams or customer success.
What are some of the core struggles people run into when trying to layer a PLG approach in a sales led motion?
I'm seeing this a lot with clients here in Australia, so in the smaller economies. Fundamentally, I’ve observed three key inhibitors to create that bridge between sales and PLG.
First, there’s the cultural baggage. Classically, when you see smaller companies with sales-led founders, and sales organizations built by leaders of sales who've come from very traditional enterprise type sales, they haven't yet understood what PLG is. They have a misperception that it's competitive between sales and PLG; it has to be one or the other, especially in the B2B space. It's this culture of saying, “I can't sell an X, I can't sell the multi tens of thousands, hundred thousand dollars, or million dollar deals without a handshake, without a physical sales process,” without understanding where PLG fits in. So the first one is this cultural element.
The second one is differentiation and really understanding. We saw this a lot where you've got not just sales conflict, but conflict between PLG and sellers. Who gets the credit? BDR? The salesperson? Or was it because of PLG? Without that understanding, I’ve seen gaps and this inhibition.
The third one is related to both of the previous two. The core behind it is a misunderstanding of PLG and there’s a false dichotomy. I was speaking at a conference a few weeks ago in Sydney in front of a few hundred people. We were talking about this exact topic. I brought some key PLG companies up there. The classics: Canva, Slack, Zoom, Calendly. I had actually done some research around what proportion of those companies have employees in sales. I asked the audience how many employees do you think are sales in these companies? They always underestimated consistently. What we found in the broad majority with just one or two exceptions of these companies was roughly 30% of companies we call ‘classic PLG companies,’ have sales teams.
Going back to that earlier part of sales-led founders or companies that are really growing, sales people might say, “I sold because I knew Jim and Jim knew Jane, and Jane knew Bob, and Bob knew Fred,” and so they sold through this traditional sales-led approach. So saying you need to adopt this PLG, they don’t understand how to model that in a scaled environment.
Those three things around the culture of differentiation and really understanding what PLG is are the inhibitors when it comes to execution of PLG. PLG actually becomes quite simple to execute, but you've got to get over that fear of the first step of seeing where PLG fits and where a sales motion fits. When you understand those two intersections and how they interlock, then sales is all on board. You find you have this cohesive PLG motion that's collaborated or coordinated by marketing, product, and sales, where they're working together to define PLG and then, when appropriate, sales comes in.
Are sellers hunters or farmers in a PLG motion?
When you see how the hunter versus the farmer operates in PLG versus sales, that's really where that beauty comes in. You see sales focusing on fishing in a barrel, they're no longer just driftnet fishing in the middle of the ocean. Let the PLG motion do that because it's a cheaper channel. You let it go and churn through people as it's bringing in the fish. So it's like when dolphins herd the fish into a giant ball. Once it's herded them into a ball, then the dolphins go into attack and they have a feast. That's really what a PLG motion with sales is. You take all those prospects together, they're high intent and then sales can go feasting.
Safety Culture had a great model in which a PLG motion just drove people into using the freemium free trial. Once they were driven into that model, a lot more people with high intent started coming through, before being nurtured to success. That was through the self-serve kind of model.
When sales came in, they didn't need to look at LinkedIn. If they did, it wasn’t for the purpose of outbound. Instead, they wanted to look at who was already using the platform because there you've determined two things. Number one, you’ve determined their intent. You can see their intent, and that they've been educated on the tool. Second, you can determine their behaviors. Based on their behaviors, you can work out whether they are a high value prospect. The upside is your high cost sales model. You've got to pay for higher acquisition, but it gives the sales team higher value contracts. Your ACV goes up. Therefore you're only paying for high ACV, not the credit card swipes.
Safety Culture was differentiated between your broader base free trial freemium model and your higher touch where you were selling into some of the biggest retail chains and hotels in the world. In those, you absolutely had that high touch model. And so you then had investment in teams and investment in structures, but on the low touch, it was very automated. There were very few humans in that process.
How should AEs be incentivized in a consumption based model?
This is where we are seeing an evolution of a few models. Originally the model was if a customer swiped a credit card and the SDR was involved in a conversation or an interaction, they got credit for it. This wasn’t a great approach because salespeople would game the system. They’d reach out to say, “Hey, how are things going?” in a live chat or send a simple email and get credit. That was just enough for them to kind of get tagged to the swipe. You don't want that to happen.
Where the AEs get real value and you can build great comp models is to do the classic, here's a coverage, here is a quota, but it only applies for a contract. The contracts can still be consumption based, so it's not as a pay as you go model. Pay as you go is credit card usage based. You can go to a contract where you can take that consumption model and then turn it into an annualized contract.
For example, if on average we pay $20 a month for a hundred units, then what I'm gonna do is I'm gonna do an annualized contract for the year. You pay $2,400 and I will give you a hundred units per month. And if you go over, I charge you an overage or come up with a model there. So it's still consumption based, but you've got a minimum layer. You can incentivize the AE on just the contracted part, not any potential overage. That creates the incentive in the AE to try and get that contract as large as possible. You want the minimum monthly commit from the customer to be as high as possible. If there are overages, there's some upside, and they get it. A classic AE in a smaller company where you are on the transaction, you get credit, that's great.
Where you've got an account manager, account director, and you've got a slightly larger ownership of the account, then they can also get credit on the overage because now it's back to the CS plate. In larger accounts in moderate, mid-size to larger companies, you've got a dedicated salesperson, your account manager is linked to that account. So it's the total spend of the account. So that makes sense in that. It's about tiering your top end accounts, your larger accounts, your fortune fifties that are your customers. You want to have focused sales teams and make sure that they're successful and those account teams are working hand in glove with customer success and they own the total revenue. The ones in the middle, it's based on just the minimum commit of the contract. And so you're giving them a percentage of that.
What are some plays that help companies to go from a pay as you go style model into annual contracts?
One misperception is that customers are happy with pay as you go. The reality is that they've got different mindsets. One mindset is to solve a tactical problem today here and now, and they don’t want to deal with overhead. They’re going to pay as you go. But there is a shift that happens. They either have to scale up the product or the usage within the company. They’ve got a budget to commit to. They’ve been given a budget by the CFO. As we are getting into really rough times ahead, people are getting stricter with budget. If you’re scaling, there are things that you don't know. There may be things that worked great for your team, but you’re not sure if they’re ready for the whole company.
At IBM, I would easily have a few hundred to a few thousand dollars a month on my corporate credit card with consumption-based tools to test out, but they weren't ready to scale to IBM. They were just to validate whether it makes sense and does it work. Then I had to switch gears and run to a sales led model. I need to talk to a sales person and do an annual commit for those other reasons. To scale at IBM, there are problems I hadn't even thought about when I scale out an automation tool, a data tool, an analytics tool, or any of those other solutions that you could potentially be thinking about. You need that support of that salesperson.
So first, there’s a mindshift. Let’s say a customer's happy on the consumption model. They're not massively increasing or decreasing or expecting much change. They say they don't really need anything. But the moment something changes, like budget constraints, scaling out, or looking at different use cases, then they want that support and they're looking to an annual contract. What does the annual contract give them? It gives them visibility of advanced spending. When the CFO asks how much something will cost, they already know they’ve spent X dollars per month for the last 12 months, and expect it to be the same. If the CFO asks how they can be sure because inflation is at seven to 10%, and whether they can lock in that rate, they can say, “Well, now I'm in an annual contract.” In the annual contract, the seller has some incentive to provide a discount.
Second, selling to a sub-team has a different challenge. A sub-team has a very siloed view. All they are thinking about is their particular use case. If your product works in other use cases, they're not thinking about that. Especially mid to larger size companies, they're already in silo mode.
There are a number of companies I go to where I interview the whole C-Suite. I speak to one team and they tell me while they're using A, B, C, D, while the other team is saying they’re looking at using B. I ask them if they know that they've already got a contract for B and they don’t. It’s not intentional, that’s just the nature of large organizations as you start to build in a couple of layers of management. Even if it's super flat, there's no way everyone knows everything that's going on across the company.
So there is a natural incentive as you scale, completely natural and it doesn’t need to be economic. Then there is an economic about visibility, purely visibility. Then there’s the obvious one about the discount. Such as I’ll give you a 5% discount if you sign a 12 month contract because when the 12 months is due, they’re going to increase and continue on the assumption that they are using the product.
