If you’ve ever watched the show Ted Lasso, you’ve noticed that it is in many ways a tale of two coaches: Ted Lasso and Coach Beard.
Ted is emotionally intelligent and people-focused, getting the most out of his players. Coach Beard is focused on data and results, using his expertise in the game to push the team toward winning. One of the lessons of the show is that to be successful, the team needs both skill sets. And for businesses looking to drive retention and expansion post-sales, the same lesson applies!
That’s because when companies are looking to optimize the customer journey for conversion, renewal, and expansion, they achieve the best results when Customer Success and Product Development are working together. Customer success managers (CSMs) often have an intuitive sense of customer health, based on conversations and other interactions with customers. But Product typically has the hard data, derived from tracking customer actions in-product.
Working together, these two disciplines can create powerful strategies to increase Net Revenue Retention (NRR) and Customer Lifetime Value (CLV). These strategies rely on complementary efforts that achieve results that are more than the sum of their parts.
The art and science of CLV
Product generates tons of raw usage data by tracking the actions that users take in-product, and then pairs that information with each user’s unique characteristics. This process of Product Analytics uncovers usage patterns, habits, and preferences of the user base. This analysis will produce insights into how users find value, what challenges they face, and the role each feature plays in the overall product experience.
Customer Success then works with Product to develop a sophisticated system for engaging with customers. That means in-product messaging, email alerts, playbooks, and more. It’s all about personalization—not cookie-cutter documentation.
One example of a powerful strategy based on these principles is the use of product qualified leads (PQLs).
Putting it all together in a PQL strategy
A PQL is a prospective customer who tries a product via a free trial or freemium model. The customer gets a chance to see what the product is all about and how it fits into their specific use case. Meanwhile, the company monitors their usage behind the scenes, such as which features they use, how often they log-in, and how long each session lasts.
Freemium is a model in which a company provides potential customers free access to a limited number of features within their product. While they can use the limited version of the product as long as they want to, they can only access additional features by upgrading to a paid account.
A free trial is a model where a company provides potential customers unlimited access to the features of their project for a limited time. Typically, these are 30-, 60-, or 90-day periods, after which the potential customer either upgrades to a paid account or loses access to the product.
Intuitively, it makes sense that a customer would be more likely to buy a product if they have actually experienced its value firsthand. And the data bears that out. Findings from the Product-Led Growth Index 2022 indicate that free trials using PQLs result in a 2.8x higher conversion rate than those who don’t use PQLs.
And while PQLs are gaining widespread adoption as a sales strategy, they are useful for more than just conversions. PQLs are also an effective approach to adoption, retention, and expansion.
By tracking usage data throughout the customer journey, Customer Success and Product teams can identify when a user becomes a PQL for the next sales opportunity, whether that be simply a renewal, or for an upsell.
A force multiplier for Sales
PQLs aren’t just effective, they are also cost-effective. Normally, customers buy a product or feature based on research, digital marketing, referrals, or sales conversations. While all of these channels can be effective, they are also expensive—just take a look at any company’s customer acquisition cost (CAC).
High CACs are a big reason that there is so much pressure on Customer Success to achieve a high CLV—to recoup those costs. By identifying PQLs based on in-product behavior, you are taking a lot of the guesswork out of the sales process. Sales can prioritize and target prospects much more efficiently, and in many cases, direct Sales isn’t needed at all.
As Gainsight CTO and Founder of Gainsight PX Mickey Alon put it, “Free accounts not only hook new users, they can also accelerate deal cycles by enabling sales teams to engage with users that demonstrate a propensity to buy. A product-led growth (PLG) strategy that uses PQLs will convert accounts at a significantly higher rate.”
Collaboration in action: examples of PQL plays
Let’s take a look at a few specific ways that CSMs can use Product Analytics in a PQL strategy.
- Create journeys that lead prospects to PQL. As any experienced CSM will tell you, the customer journey begins long before onboarding. In a conversion PQL strategy, you have access to actual user data before your prospect has even become a customer. By analyzing this data, you can construct a high-quality customer journey map and identify points along the journey where free trial users typically are primed to convert to customers. Once you have identified these conversion points, you can deploy a range of engagement tactics like emails and in-app engagements to make the conversion.
- Write a conversion playbook. Once you have gone through the iterative discovery process of learning who your customers are, what they need, and how they interact with your product, you should begin to codify best practices for successful conversion in a playbook. A playbook will help get everyone on the same page, avoid wasting time reinventing the wheel, and enable you to scale faster. These living documents can then be updated in real time as new information is gathered.
Product analytics: An untapped resource for Customer Success teams?
Product analytics goes way beyond old-school metrics like page views and downloads. By leveraging deep usage data from the product itself, Customer Success teams can accurately map the customer journey, revealing how one event leads to another and predicting where engagements can produce the right outcomes.
PQLs are a great place to start, but they are just the tip of the iceberg in terms of collaboration between Customer Success and Product. Increasing CLV is all about building relationships with customers based on understanding how they achieve value. And nothing helps you get to know customers more than seeing how they actually use the product.
To read the latest benchmark report on PQLs from the 2022 Product-Led Growth Index, click here.