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Pleo's PLG Journey with Haresh Bajaj (VP Product Growth)
Insights from the $4.7bn fintech's learnings implementing a PLG motion
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There’s an abundance of literature on adopting a product-led growth motion as a SaaS business, but there’s a scarcity of scaled fintechs that have successfully layered on PLG to a top-down sales motion.
I had the fortune of having dinner with Haresh a few months ago and he immediately struck me as one of the most thoughtful operators I’ve met. Luckily, he’s also one of the best operators in Europe to contribute to this topic. In his current role as VP of Product Growth at Pleo, Haresh is responsible for Pleo’s incredibly successful PLG motion (read on to learn more) as well as its international expansion. Pleo was last valued at $4.7bn in December 2021 and counts Coatue, Bain Capital Ventures and Thrive Capital among others as its investors. Prior to Pleo, Haresh was a Product Director at Klarna and a Senior Product Manager at Barclaycard.
Thank you Haresh for giving us a glimpse into the well oiled machine you’ve built at Pleo. You can find Haresh on LinkedIn.
Haresh, you’ve been a big evangelist of PLG at Pleo and how it assists your top-down motion. In the current environment PLG is of course coming under sharper scrutiny as buying power consolidates upwards to the executives in different lines of business, CFO, CMO, CIO etc. Can you give us a sense of the scope of the product-led mindset at Pleo (e.g. permeating pipeline, bookings, activation, and retention)?
Let’s start briefly with Pleo - so we are Europe’s leading business spend management solution, helping businesses stay in control of all of their spend, freeing them up from unnecessary admin, with things like digitizing their receipts, automating everything from expenses to invoices to reimbursements, and giving them full spend visibility and insights into their spend.
At Pleo, PLG has been driven by 3 core insights:
Customer needs: we see a growing demand from our new and existing customers to self-serve themselves through our website or directly in the product. In some segments and markets, it’s as high as 70%.
Macro situation: moving away from an era of growth at all cost to an era of efficient and profitable growth, investment in PLG, being data driven, AI etc. is much needed for increasing productivity.
Pleo’s own growth: we have grown tremendously over the last few years, 80-100% YoY, present in 16 markets, serving a new mid-market segment, growing brand, etc. Hence, we have been transitioning our human-force (Sales, Customer Success, Support) where we can add increased value in any customer interaction.
For us, PLG layers across the entire customer journey as compared to only on top of the funnel acquisition (as is championed by most companies), hand in hand with our amazing human-force, across 5 distinct stages:
Creating Demand: finding potential customers, making them aware of our proposition
Educating & Selling: helping them assess if Pleo is right for them
Guiding & Onboarding: once selected, helping set them up for success
Adopting & Advocating: once setup, helping them get the most out of the Pleo solution, towards the most relevant features based on their needs
Growing & Expanding: helping them spread to more users, teams, departments
So yes, the buying power has been consolidating to a certain extent, but fundamentally, it’s about 2 main beliefs: (1) giving customers a choice and meeting them where they already are, i.e., in the product. (2) hyper personalization to make it super relevant for a customer’s unique situation, setup and needs.
All of this translates to great customer experience and stickiness, and is good for the business too through higher retention and much stronger unit economics across the entire customer journey (and not just on acquisition).
If we are to zero in on product led acquisition, can you shed some light on what channels have been most effective for you to reach end users and how regularly you've run A/B tests or iterated on product marketing to maximize reach?
Number of channels and investments have been effective for us over the years - paid ads, paid social, organic social through investment into Content and SEO, accounting partnerships, user-led referrals, etc.
One of the biggest success drivers in this space has been bringing our Growth Marketing team, which supports new user acquisition (i.e., bringing high quality traffic to the website) to work in tandem with our Website team especially on Conversion Rate Optimization (CRO) focus to convert those leads to paid (or free yet qualified) sign ups. This effort also ensures our marketing messaging aligns with what users will experience on our website.
In any quarter, we do high double-digit CRO experiments on the website every month playing with assets, asset types, value messaging, social proof, UX, across destinations, etc. driving 20% improvement on cost per lead and ~10% on € pipeline ARR. An example here: after hearing from our leads and new customers, the teams launched an interactive product demo on the website which saw 10x better conversion as compared to any other entry point from the website.
The experiments are evaluated on € pipeline ARR impact rather than just binary conversion impact, and are informed with user research, product marketing analysis, etc. We also have a solid qualification framework for these experiments so we don’t waste time on things that don’t produce statistically significant results. Given the results over the last 9-12 months, we are now expanding our A/B testing experimentation framework across the entire acquisition, adoption and retention motion.
When it comes to closing product qualified leads, how do you think about incentives? Given that in the current climate overselling is probably detrimental to long-term NRR and retention, does this make quotas based on ARR at odds with Pleo's interests versus new bookings?
Given the shifting macro situation last year where it become more important than ever to retain and grow existing customers (when there were stats being thrown like how acquiring a new customer is 7x more expensive than retaining an existing one), one of the key changes we made was to bring our Sales and Account Management team together to make every Sales rep a Hybrid Sales rep.
Each Sales rep has a Net quota target comprising New Business, Expansion and Churn & Downgrade baked in, with softer targets for New Bookings ARR and Net Expansion ARR, while being responsible for a consolidated book of business. A rep is incentivised on their book of business, irrespective of if the selling or growth happens in an PLG or sales led fashion.
In an incentive driven world, this change quickly brought change in behaviour in that reps got better at disqualifying misfit leads, as well as moved towards deliberate underselling with faster sales cycles, higher organic growth, healthier customer relationships and more upsell success. And guess what, better unit economics & cost to serve, and you can handle a much bigger book of business per rep.
To unpack this further, we united bottom up, product-led approach with top down Sales and Customer Success which is powered by an analytical, scoring and optimisation engine. Examples (not limited to),:
More customers getting the value they signed up for with low/no human interaction (through Interactive Demo on the website and/or through Pleo trial)
As a customer utilizes Pleo across 1-2 teams, they become relevant as pipeline for expansion sales
Based on factors such as usage, feature penetration, organic growth, etc., we fuel the growth pipeline and attempt bigger upsell while supporting lower churn too.
I think one of the areas that can receive too little attention is the journey to activation, i.e. onboarding. I've written before about how professional services beget high quality enterprise software revenues - can you give us a sense of how Pleo approaches product led onboarding and activation? Is it entirely self-serve and hence sitting with product to own this or is there a lean onboarding team that ensures maximum likelihood of activation and value creation?
We combine our amazing Onboarding Customer Success team with the efforts in the Product Sign Up, Activation and Onboarding to provide a great experience to our customers.
We offer free trials as a way to let customers experience the value of the Pleo product. Customer’s usage in the trial, along with some other signals like ICP fit, customer intent, overall setup complexity, etc. helps our Onboarding Customer Success team guide the most relevant customers to value quicker.
One of the proxy for value for our customers is when they setup the accounting integration or do customer exports of their transactions for bookkeeping purposes - that’s the real Aha moment for the Finance team (for spenders, it’s when they make their first expense).
Similarly, we flag customers who need help with the setup, with low usage or bad experience (at risk) or customers coming up for renewal to drive proactive churn mitigation plays, and also flag enthusiastic customers who derive value from Pleo but may need some help to capture the full potential of the Pleo offering.
A lot of this is enabled by aligning the team’s efforts, quarterly OKRs and their core KPIs, which are customers’ time to value, sticky feature adoption, and churn ARR.
Lot of these investments have brought down time to value by 20%, with ~25% customers now self-serving to become Pleo customers with no human touch. We have lofty goals for the rest of 2023!
Once the customer is activated, of course the most important marker of product-led success is expansion. How does Pleo approach intra-company network effects and feature adoption - are there any expansion loops that are unconventional?
So we made intentional investment in data and commercial ops to initiate this - basically, we created an engine on top of our existing commercial tools to:
Score - to help prioritize customers in a systematic way (right customer)
Generate triggers - to provide deeper understanding of a customer in real-time so we can personalize the outreach (right time)
Create playbooks - to scale effectively with limited people and resources (right message)
Identify the optimum channel - meet where the customers they most prefer it (right channel)
We brought in various data points together in this engine, like product usage, added users, feature adoption, ICP fit, external enrichment like potential size, industry, etc. We did some simple correlation analyses to identify customers at high likelihood of expansion, churn, stickiness, etc. against various data points. This helped create the score as well as help prioritize certain triggers over others, e.g.:
Proactively deploying resources on accounts by acting on triggers which help us identify customers at risk, e.g., when user count drops, last invoice fails, account balance below a certain threshold, last 3 exports fails, last 3 transactions declined, etc. have helped us attain a world class NRR of 130%.
Proactively acting on triggers for customers who have the highest propensity for upsell or user growth, e.g., high FX spend, organic growth, high employee to user ratio, etc. have helped us increase ARPA by 40% and users per customers by 40%.
One thing that we found to be crucial is to align the KPI for the teams and importantly, make sure the incentives don’t create friction or different agendas. So for example, product led expansion was baked in the variable commission for sales people, but we increased the overall target once we built enough confidence and predictability through product led expansion, otherwise either you risk creating friction between sales and product teams, or we penalize the business by paying out double compensation.
One of the biggest pitfalls I have seen in my career was to bombard Sales or Customer Success teams with tons of data (in a ploy to become “data driven”), and them not knowing how exactly to use it. Especially in a velocity play, you want to engage with more customers. So we brought the exact messaging framework and created laminated playbooks for our folks to follow very clearly the value prop to sell.
This was a rather low hanging fruit as Sales and Customer Success were doing outreach all the time anyway; with this, we made them sharper, more effective and increased their ability to engage with a lot more customers.
Can you also give us a sense of what tools you use for this entire product-led funnel? It's surprising when companies implement tools like Amplitude or Mixpanel later in their journeys, when it's so integral to PLG.
As you can imagine, we use a few tools (not limited to):
Segment: a tool we use on the website that allows us to capture data and events in a single unified way, and then distribute them to multiple destinations for different tracking purposes.
Amplitude: for funnel analytics
Hotjar: behavior analytics and product experience insights service that helps us understand our users, and get their feedback through tools like heat maps, session recordings, and surveys
Pendo (switching to AppCues): in product notifications, nudges, surveys with personalisation and test-and-learn functionalities (no code tool)
LaunchDarkly: controlled and targeted roll-out of features to specific users, and to perform A/B testing
Iterable: email communications
Hubspot: user contact, form generation, CRM - primarily used by Sales and Marketing
Vitally: for Customer Success
You mentioned the investment in data, commercial ops and changes to the sales teams - are there any other functions across the business that you reoriented or strengthened to effectively deliver PLG ?
Alongside intentional investment into data, commercial ops, and the usual product teams (cross functional teams of Product Manager, Design, Engineering), there have been a few areas which we strengthened or realigned.
Net new investment in:
The Content Team
Product Marketing and Customer Marketing
Conversion Rate Optimisation
Aligning KPIs of the following teams for stronger collaboration:
Growth Marketing with the Website Team
Product Sign Up & Activation with the New Business Sales Team
Product Adoption & Engagement with Customer Success Team
Product Growth with Account Management / Growth Sales Team
What are the metrics of success (especially in an environment when PLG takes longer to payback and you need to make investments across people and tooling to succeed)?
At a macro level, you need strong buy in from your Exec Team. PLG can’t be stood up in a month or two.
As Andrey Khusid, CEO of Miro, puts it,
“PLG only works if you truly believe in it. You can’t just read the cookbook; you have to be excited about getting into the kitchen to make something special.”
At the next layer, you need to invest in the foundation - bring the right cross functional team together, investment into experimentation frameworks, tooling, setting up the right collaboration processes, aligning on the KPIs, etc. This investment can’t just be a leap of faith, you need to demonstrate some quick wins like CRO experiments on acquisition, qualifying leads for your Sales teams, helping your Customer Success team focus on most value adding efforts while automating the admin tasks, etc.
At the next layer, it’s to have business level KPIs such as PLG driven revenue (on new business, upgrades, growth), share of customers self-serving on top of the funnel and rest of the key lifecycle (activation, onboarding, adoption).
But you know you have made it when PLG is a recognised distribution motion, when it’s part of weekly Revenue forecasting, PQLs are a key contributor of your new business forecast, PQAs for your expansion forecast, Risk Triggers and Customer Health Score are part of your churn and downgrade forecasting, and when PLG not only carries a substantial (>30%) revenue target for the annual planning, but is a critical part of your Sales & Marketing capacity planning.
One final question I'd like to ask Haresh is how you're thinking about the degree to which your bottom-up PLG approach works as you move upmarket to the mid-market with Pleo?
Even though we started off our PLG efforts as a way to serve our smaller customer segments, very quickly we realized that customers across all of our segments have self-serve needs and preferences.
We see about 10-12% of our mid-market customers happily preferring bottom up PLG efforts on the acquisition side with the numbers increasing up to 30-40% towards the later part of the customer’s lifecycle like feature adoption and expansion. This strongly supports our upmarket movement as a company - our humanforce have naturally started to move upmarket as PLG has started to become the preferred distribution motion in the smaller customer segments.
There are nuances at a regional level though, like in Spain, speaking to a Sales or Customer Success person is very much a preferred way of doing commercial activity. So our efforts have become a little proxy for a cultural experiment across Europe.
A big thank you again to Haresh - fintech founders, operators, you’d find half an hour with Haresh one of the best uses of your time.
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