👓 Minute Monday #4: Landing small to win big

The key to unlocking effective Product-Led Sales (PLS) contradicts all conventional wisdom from saled-led businesses.

Why? I hear you ask!?

In traditional enterprise sales-led businesses, you incentivise and reward the largest (ideally multi-year) lands, and worry about user adoption and engagement later.

The focus is on pulling forward an artificial ramp based on some projected (or often perhaps more accurately described, imagined) future usage ramp.This often results in what later becomes clear as OVERSELLING.

Overselling leads to

🔻 Low user adoption

🔻 Low user engagement

🔻 Low user retention

These are all leading indicators of down-sell, churn and lower revenue retention.

So what’s the solution here?

Product-led Sales (PLS)

PLS is a long-term game.

PLS prioritises the health and longevity of the customer relationship and hence customer lifetime value (LTV) and Net Dollar Retention (NDR).

With PLS, you intentionally defer revenue today for greater revenue tomorrow.Self-serve lands will typically self-right-size or purchase at a lower volume than anticipated future usage.

Sales-assisted (driven by Product Qualified Accounts - PQAs) deals should similarly land low.

Put another way, you UNDERSELL confident in the product’s ability to drive retention and acquisition.

✅ Smaller lands

✅ Less churn

✅ More expansion

For this to work well, two things should be present:

1. Product-led retention and acquisition.

2. Sales incentives that support the behaviour you want to encourage.

Compensation plans must reward future expansion revenue at some greater-than-1 multiplier of the reward for net new land revenue.

Nothing prevents those with enterprise sales-led motions from adopting this approach.

However, the cost of nurturing the account to drive future expansion is significantly higher when the product cannot do that for you.

CJ Gustafson of Mostly Metrics (please subscribe if you don’t already!) says:

To caveat - exceptions do exist; there are many sales-led businesses with strong net dollar retention because of things like high switching costs and outstanding post-sales / CX teams, but eventually, they will face tough competition and risk of disruption from product-led entrants where the product does most of the heavy lifting.