Product-Led Growth (PLG) CRM — A Primer

Over the past two decades Salesforce has transformed the customer relationship management (CRM) space by moving software from on premise to the cloud. With the movement to cloud data warehouse as the central repository of customer data and to Product-Led Growth (PLG) business models, Salesforce’s core business is ripe for disruption. PLG-focused CRMs are starting to emerge and will become increasingly important so we’ve highlighted seven interesting offerings in the space.

Salesforce has become a behemoth, now worth $203B. Its core business, Sales Cloud, is even second to Service Cloud in terms of annual revenue ($5.2B and $5.4B in FY21 revenue, respectively). As the company has expanded into new areas including customer support, marketing, etc. it has done exceptionally well but hasn’t kept up in the very large CRM market, which Grand View Research claims was $43.7B in 2020 and expects to grow 10.6% annually through 2028. As my teammate Tomasz Tunguz pointed out three years ago, 1% of Salesforce’s revenue makes a unicorn. Now, 1% of Salesforce is a $2B company! By achieving even just a small fraction of Salesforce’s success, a startup can become a billion-dollar company.

As discussed throughout my Memory Leak blog, the movement to cloud data warehouses have had a monumental impact on data teams and businesses. Previously data was spread throughout organizations across internal databases and SaaS application’s backend systems. Now customer information, billing histories, product analytics data, conversational relationship data, etc. can be moved to a central data store and acted upon. Data warehouses enable new applications to be built.

Sales motions continue to evolve, and we are seeing the movement from sales-led to PLG motions. According to OpenView, “PLG is an end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion and expansion.” PLG emerged because buying centers shifted from CIOs to executives to end users. Selling to end users requires a bottoms-up distribution model where the individuals can discover, evaluate, and purchase the solution independently. In turn, the product must speak for itself and shine, providing value before people even pay for it. Companies embodying PLG include Slack, Zoom, Twilio, and HashiCorp.

PLG does not mean the end of sales teams. Instead, PLG changes the role of sales and customer success and minimizes the distinction between the two roles. Salespeople must take into consideration how people are already using the product and the frequency of use to determine if a sale is likely. Reps care less about Marketing Qualified Leads (MQLs) and care more about Product Qualified Leads (PQLs). They need to act as a consultant to encourage adoption even before a credit card is swiped. For vendors applying usage-based pricing, salespeople can’t just be compensated for the upfront sale but also for consumption. In turn, what was traditionally a customer success responsibility of encouraging product usage and upselling after payment is blending with sales. We are starting to see some PLG companies like Snowflake remove customer success entirely.

Why does PLG require new sales tooling? Existing CRMs like Salesforce do a great job as a source of truth for prospective and existing customers’ information, sales engagement history, opportunity tracking, and governance. They don’t give GTM teams visibility into free plans, trial, or non-paying users. Traditional CRMs don’t capture information about product usage and user journeys before payment. This information is crucial for sales reps trying to identify signals of whether a person or account is ready to convert. Without this information it is hard for sales reps to prioritize leads. Traditional CRMs also don’t help sales reps understand the next best action to win an account. We’ve heard some PLG companies have already felt the pain and have built internal solutions using Segment and Looker to solve the problem. A modern PLG-focused CRM is needed.

A PLG CRM ties into the cloud data warehouse to leverage existing CRM, product analytics, helpdesk, conversational relationship system, and billing information. Most importantly it visualizes users and businesses’ product activity and segments users. This helps identify the breadth of usage across an account, champions, and current users with decision-making authority from regular users. It gives sales teams powerful usage data that can be leveraged during sales conversations. Additionally PLG CRMs map product usage journeys over time, highlight key moments that triggers conversion, and provide a set of next best actions for reps like marketing campaigns by tying into other systems like Outreach or in-app notifications platforms like Amplitude. By tying automation to product activity, customer engagement actions can be more tailored and relevant.

Some PLG CRMs allow sales reps to query the system for specific user attributes like “10 page views over the last week” that they think may signal that a user is interested in paying. Others even offer lead scoring to help reps hone in on the accounts most likely to convert in the near time. We’ve heard mixed feedback on lead scoring because it’s often seen as a black box so we believe scoring should include explainability to give sales reps confidence in the score. Leveraging product usage, lead scoring can become continuous versus a point in time. We can also imagine ML being applied to user journey mapping so teams no longer need to tease out the important signals that lead to conversion.

We acknowledge that these new offerings don’t have all aspects of a CRM like full pipeline management and governance. Today, Salesforce is still the single source of truth that PLG CRMs write back to. Once teams create user or account owners in a new PLG CRM instead of Salesforce, the path to disrupt Salesforce has truly begun.

PLG-focused CRMs are a new and rapidly evolving category. Below we highlight seven offerings in the PLG CRM space including Endgame, Pocus, Correlated, Calixa, Poggio, Headsup, and Workbase. While the majority of startups listed sell into sales teams, Calixa sells more to sales operations. Desperate for options, we’ve heard GTM teams use customer success platforms Vitally and Planhat for the sales use cases. It further demonstrates that sales and customer success responsibilities are fusing in this new world and better tooling is needed.

Traditional CRMs focus on managing relationships (contacts) and transactions (opportunities). The rise of data warehouses and PLG has catalyzed the need for a PLG-focused CRM, which focuses on managing value to the customer. This market is incredibly early so we are excited to watch as the ecosystem evolves. If you or someone you know is working on a PLG-focused CRM startup or adjacent offering, it would be great to hear from you. Comment below or email me at amyers@redpoint.com to let us know.