To maximize revenue growth via user engagement and adoption, product-led revenue models have grown more popular in recent years. The premise behind these models is that firms may attract a huge user base by providing free or low-cost versions of their goods and then monetizing that user base via various revenue sources. OpenView Partners indicate that product-led adoption across tech firms grew from 45% in 2019 to 55% in 2022.

Seeking to explore the intricacies of product-led revenue strategy, this article uncovers the main product-led revenue models as well as some guidelines around how to decide which one of these might benefit your business.

Exploring the Different Types of Product-led Revenue Models

Overall, there are four main categories of product-led revenue models:

Freemium Model

This paradigm entails releasing a free basic, feature-limited version of the product, charging more for access to advanced settings or more use. Products with a low marginal cost of production often benefit from the freemium model since it encourages consumers to try the product before making a purchase decision. Businesses may gain a huge user base by providing a free version and converting a portion of those people into paying subscribers. Dropbox and Evernote are examples of organizations that have successfully embraced the freemium model. 75% of product-driven businesses select either a free trial or freemium approach, according to StatHeap.

Premium Model

Premium, which is central to this business strategy, encompasses an upgraded, more expensive version of the product. This pricing strategy is well-suited to items that substantially benefit their consumers. To attract customers who are prepared to pay more for a higher level of service, many companies now provide “premium” or “upgraded” versions of their products. Spotify and LinkedIn are examples of organizations that have effectively used the premium model. 

Pay-as-you-go Model 

As opposed to a flat rate, consumers are charged depending on their actual usage under this approach. This pricing strategy is convenient for items with irregular consumption since customers pay only for what they consume. Many consumers are hesitant to sign up for a service on a monthly or yearly basis, and companies may win them over by providing a pay-as-you-go option. Companies like Amazon Web Services and Twilio demonstrate the viability of the pay-as-you-go model. 

Subscription Model

Last but not least, the subscription model involves charging customers on an ongoing basis to continue using the product. Products like software and content services provide consumers with continuous value and work well under this paradigm. Businesses may attract and retain customers in the long run by using subscriptions. Netflix and Microsoft Office are two examples of subscription-based business models that have found success.

Start by Looking at the Competition

It is important to evaluate your competition and see their revenue models. This can give you ideas and help you differentiate yourself from the competition. For example, if your competitors use a subscription model, you may want to consider offering a pay-per-use model instead.

Bain & Company recently surveyed 176 top executives in the North American business-to-business software industry, and they discovered that roughly 75% are worried about competition from PLG businesses.

Deploy A/B Testing

A/B testing may be a great avenue to examine the effect of changes to the price structure, but it’s vital to avoid testing the dollar amount as the variable. Alternatively, organizations may test multiple value measures or price tiers to find which resonates best with consumers. This may help a corporation determine the best price structure that optimizes income while simultaneously giving value to the client.

Assess Your Pricing Strategy

When considering your pricing strategy, it’s important to determine what your users are willing to pay for your product. Conducting user research or surveys can help you gather this information. When determining your pricing strategy, you should also consider factors such as customer acquisition costs and customer lifetime value. Overall, you may consider a freemium model, where users can access basic features for free and upgrade to premium features for a fee. This can be an effective way to attract new users and generate revenue from existing users.

Define End-User Success

The success of product-led business hinges on how well it solves a problem for its users. To ensure that your product meets your users’ needs, it is important to start with an end-user success statement. This statement should outline what success looks like for your users and what value your product provides them. 

Unlike a sales-led company, where success is closing a deal, in a product-led company, success is defined by user success. In a product-led growth (PLG) model, the company’s success depends on whether users can see the product’s value. The company’s bedrock should be set up to support user success since it is the foundation upon which the company’s success is built.

Review Your Product-led Model

Once you have chosen a product-led revenue model, it is important to test and iterate. Start by testing the model with a small group of users and gather feedback. Use this feedback to iterate and improve your revenue model. Continuously testing and iterating your revenue model can help you identify new revenue streams and improve the overall user experience.

Arising as a cutting-edge solution for innovative enterprises, the PQL scoring system is a powerful tool to help your business streamline its lead generation and sales process. Accenture indicates that PQL usually generates 5x higher conversion rates than MQLs. However, according to Open View Partners, only 25% of companies have deployed a PQL strategy.

Deploying the Advent of PQL 

Overall, the Product-Qualified Lead (PQL) scoring system effectively identifies leads most likely to convert into paying customers. This system uses a scoring mechanism to evaluate leads based on their engagement with your product, including their product usage and behavior. By analyzing this data, you can identify leads more likely to purchase and focus your sales and marketing efforts on them.

Businesses that employ a PQL framework will utilize a scoring system to evaluate and rank PQLs. After that, they utilize the use of that rating system as a single source of truth to prioritize the time and efforts of the sales team in addition to those of the other departments. Automating the lead qualifying process is essential for businesses to effectively identify and prioritize the most promising leads. Defining a PQL is the first step, but implementing a scoring model for each action is equally important. The scoring model allows businesses to evaluate the activities of each lead and assign a score based on their level of engagement with the product or service.

Manual lead qualification can be a time-consuming and challenging process, especially for businesses with many leads. However, with the advancement of technology, several lead qualification software options are available in the market to make this process easier. These software options use artificial intelligence and machine learning algorithms to analyze and score each lead’s actions automatically.

Uncovering the Types of PQL Scoring

As highlighted by Clearbit, the PQL scoring process entails the calculation of two distinct fit scores, namely, the domain score and the persona score, to provide a comprehensive overview for the sales team. This approach is particularly significant for product-led companies transitioning upmarket, as product champions may not always be the decision-makers.

The domain score serves to evaluate whether an account has the potential to become a top 100 customer in the future. Additionally, typical personas, such as decision-makers, billing contacts, power users, and community champions, are identified within each domain based on available data. The sales team then utilizes the resulting information to update Salesforce and send out notifications through a product like Census, thus enhancing the quality of leads for sales development representatives.

Exploring the Process of Implementing PQL

When implementing a PQL scoring process, it is important to integrate it into your CRM or marketing automation platform. This allows for the efficient tracking and management of PQLs, ensuring that sales and marketing teams are equipped with accurate and up-to-date information.

Integrating the PQL scoring process into your CRM or marketing automation platform involves setting up a scoring model that assigns scores to leads based on their level of engagement with your product. This can be achieved by tracking user behavior and product usage, as well as other relevant metrics, such as the number of users, frequency of usage, and level of engagement with support and training resources.

Taking a systematic and thoughtful approach to defining the criteria for a qualified lead is essential to developing an effective PQL scoring process.

Step 1: Defining the Criteria for a Qualified Lead

Overall, the PQL scoring should start with determining the specific factors that make a lead a PQL in your business. This could include factors such as product usage, feature usage, user behavior, referral sources, or account data.

Step 2: Identify the Target Accounts for Your Ideal Customer Profile

This phase involves analyzing your current customer base and identifying common characteristics such as industry, company size, and revenue. By identifying these target accounts, you can focus on leads most likely to convert into paying customers.

Step 3: Segment Target Accounts

Next, you should categorize these target accounts into domains based on shared characteristics such as use case, vertical, or product suite. This allows you to develop a more focused and targeted approach to marketing and sales.

Step 4: Develop Buyer Personas

Within each domain, it is essential to identify the personas or stakeholders involved in the purchase decision, such as decision-makers, end-users, and influencers. Developing a deep understanding of these personas and their unique needs and challenges is critical in crafting effective marketing messages and sales strategies.

Step 5: Assign a Score for Each Domain & Persona

Establish the scoring system that assigns a score to each domain and persona based on their fit with your ideal customer profile and PQL criteria. This can involve considering factors such as company size, industry, and level of engagement with your product. Developing a robust and accurate scoring system allows you to prioritize leads and focus your sales and marketing efforts on the most promising opportunities.

Step 6: Monitor & Update

It is essential to ensure that the PQL scoring process is regularly updated based on changes in usage and engagement. This means the scoring model must be flexible and adaptable to user behavior and product usage changes. For example, if a user’s engagement with your product decreases over time, their PQL score may decrease, and they may no longer qualify as a PQL. Conversely, if users’ engagement with your product increases, their PQL score may increase, making them a more valuable lead.

In an age of constant innovation and fierce competitiveness, companies invest major resources to gain even the slightest advantage.

That’s why we started the Growth Matters series of interviews, where experienced industry leaders share key insights everyone should know in the domains of revenue, customer success, sales, and product.

In this installment, we have Zahi Malki, who’s been in the tech industry for over 20 years, and VP of Customer Success & Professional Service at WalkMe for the last (almost) 4 years.

Check out his thoughts on the role, challenges, and responsibilities of the modern CSM.

You’ve been in the customer success game for a long time! How has the role of the CSM changed over the years?

Over the past 10 years, the role of the Customer Success Manager (CSM) has undergone significant changes. It evolved from a reactive, support-focused function to a more proactive, revenue-generating one. Today’s CSMs are expected to drive adoption, upsell and cross-sell, and build strong relationships with customers.

In the past, the CSM was primarily responsible for ensuring customer satisfaction and reducing churn. However, today’s CSMs have a much broader mandate that encompasses the entire customer lifecycle.

One major change has been the increased focus on revenue generation. CSMs now play a critical role in driving upsells, cross-sells, and renewals. They work closely with the sales team to identify opportunities for growth and with the product team to ensure that customer feedback is incorporated into product development.

Another important shift has been the increased use of data and analytics. CSMs are now expected to have a deep understanding of customer behavior and to use this knowledge to proactively identify and address potential issues. They use data to track customer engagement, measure success metrics, and develop targeted outreach programs.

In addition, the role of the CSM has become more strategic. CSMs are now providing insights into the customer experience and helping to shape the company’s overall strategy. They work closely with senior leaders to develop customer-centric initiatives and to ensure that the company is delivering on its promises to its customers.

What are some industry trends, when it comes to technology, that you’re excited about?

One industry trend that’s particularly exciting is the increased use of artificial intelligence (AI) and machine learning (ML) to improve customer experiences. With these technologies, companies can analyze customer data and behavior to gain insights into their needs and preferences, predict potential issues before they occur, and provide personalized support and recommendations. 

Additionally, the use of chatbots and other automated tools can help provide quick and efficient support to customers, freeing up human agents to focus on more complex issues. Overall, the adoption of these technologies is expected to lead to better customer satisfaction and retention rates, as well as increased efficiency and cost savings for companies

What KPIs do you measure your team with and why did you choose these in particular?

The KPIs for measuring customer success teams can vary depending on the company’s goals and priorities. 

Some of the most commonly used key performance indicators (KPIs) in the customer success world are customer retention rate, customer satisfaction score, net promoter score, NDR, and churn rate.

They are widely recognized as important indicators of CS, and they provide valuable insights into the health of the customer relationship. 

Customer retention rate, for example, measures the percentage of customers who continue to do business with a company over a certain period of time and can be used to gauge the effectiveness of a company’s customer success efforts. 

Customer satisfaction score and net promoter score are both measures of customer satisfaction and loyalty and can provide valuable feedback on areas for improvement. Finally, churn rate measures the percentage of customers who stop doing business with a company over a certain period of time, and can be used to identify areas where customer success efforts may need to be improved. By tracking these KPIs, companies can better understand how well they are meeting customer needs and identify opportunities for improvement

What are some common challenges that your team faces when working with enterprise customers, and how do you overcome them?

Working with enterprise customers in the customer success world can be challenging, as there are several factors to consider, including communication, alignment of goals, and handling complex customer needs.

One of the biggest challenges is communication, as enterprise customers often have multiple stakeholders and decision-makers. Effective communication is key to understanding the customer’s needs and expectations, as well as ensuring that everyone is on the same page. 

To overcome this, customer success managers should establish regular touch-points with customers, develop clear communication channels, and make sure that all parties involved are aware of the project’s progress.

Another challenge is aligning goals between the customer and the vendor. Enterprise customers often have complex needs and may require customized solutions, which can make it difficult to align goals. To overcome this challenge, customer success managers should work closely with the customer to understand their needs, establish clear expectations, and create a plan that aligns with the customer’s goals.

Lastly, to overcome the customized solutions challenge, CSMs need to dig deep into understanding the customer’s needs, collaborate with product and engineering teams to develop customized solutions, and provide ongoing support to ensure that the customer is satisfied.

Overall, customer success managers should prioritize effective communication, alignment of goals, and flexibility to handle complex challenges.

As VP CS, which other departments do you work most closely with and how do you manage the cross-department alignment?

As VP of CS, it’s important to work closely with sales & presale, marketing, professional services, support, finance, and product development teams, to ensure cross-department alignment and collaboration. 

The most important cross-department alignment for CS is between the product teams, presale, and support teams. This alignment is critical for ensuring that customers have a seamless and positive experience throughout their journey with a company.

Establishing open and clear communication channels between these teams can be achieved with regular meetings, shared documentation, and various collaboration tools.

Additionally, avoid conflicts and misunderstandings by figuring out clear roles and responsibilities for each team, so that everyone understands how they fit into the overall customer success strategy. 

Overall, fostering strong alignment between companies can ensure that they are providing the best possible customer experience, which is critical to driving long-term success and growth.

How do you prioritize different accounts? Is it just a matter of focusing on the biggest fish?

Prioritizing accounts is not just about focusing on the biggest customers. It’s important to consider factors such as customer value, growth potential, strategic fit, and resource availability.

Prioritizing the right accounts is crucial to ensure that resources and efforts are utilized efficiently to achieve the best outcomes.

Customer success teams typically consider several factors such as the revenue potential of the account, the level of engagement, the customer’s needs and goals, the complexity of the customer’s business, and their overall fit with the company’s product or service.

Customer success teams typically provide different levels of support based on the type of customer (segmentation). For instance, premium or high-value customers may receive more personalized attention and dedicated support, while lower-tier customers may receive more self-service or automated support.

To ensure that all customers have the best experience, regardless of their payment level, customer success teams may focus on providing consistent communication, clear and concise documentation, and easy-to-use tools and resources. They may also offer training programs and educational resources to help customers maximize the value of the product or service. 

Ultimately, CS teams strive to build long-term relationships with customers and help them achieve their desired outcomes, while also driving business growth for their company.

What are some major misconceptions you see about the role of customer success?

One major misconception about the role of customer success is that it is solely responsible for customer satisfaction and retention. While customer success teams do play a crucial role in these areas, it is important to recognize that every department and individual within a company contributes to the customer experience.

This misconception may have arisen due to the increased emphasis on customer-centricity in recent years, which has led to a greater focus on customer success as a discipline. However, it is important to remember that customer success is a collaborative effort that involves everyone from product and engineering to sales and marketing.

To change this misconception, companies need to ensure that all employees understand the importance of customer success and are aligned around a shared customer-centric mission. This can be achieved through regular training, communication, and incentives that reinforce customer-centric behaviors and attitudes.

There may be differences in the way companies approach customer success depending on their size and stage in the industry. For example, smaller startups may have a more hands-on approach to customer success, with founders and early employees directly engaging with customers to ensure their needs are met. On the other hand, larger enterprises may have more established customer success teams and processes in place but may struggle to maintain a customer-centric culture across all departments. Ultimately, regardless of company size or stage, a strong customer success focus is critical for long-term business success.

From your experience, what can SaaS companies do better to reduce churn?  

To do better at reducing churn, SaaS companies must focus on providing excellent customer support and creating a product that meets their customers’ needs. They must also regularly communicate with their customers to understand their pain points, address their concerns, and offer solutions.

In the short term, focusing on customer success can lead to increased customer satisfaction, loyalty, and revenue. And the long term, it can help the company establish a positive reputation and attract new customers through word-of-mouth referrals.

Some actions that SaaS companies must take today include investing in customer support, creating a user-friendly interface, regularly monitoring customer feedback, and incorporating customer feedback into product development. They should also provide training and resources to help customers make the most out of their products. 

By systematically presenting potential buyers with products and services tailored to their specific needs, a well-developed “product funnel” may increase the likelihood that these individuals will make a purchase. Attracting new clients is just half the battle; a successful product funnel also has to provide them with a satisfying buying experience that encourages them to become loyal to the company. Salesforce indicates that more than 50%% of customers consider that companies must fundamentally transform their engagement. Furthermore, 64% of the customers expect tailored engagements based on past interactions.

As a business owner or marketer, you must clearly understand how your customers engage with your product or solution at each customer journey stage. In this pursuit, a product funnel is a powerful tool that helps you visualise and understand the different stages of your customer journey and the interactions at each stage. Emeritus estimates that more than one-third of businesses believe that increasing the level of engagement with their customers is the best method to boost sales.

Phases of the Product Engagement Funnel

At the top of the funnel, you have your potential customers or leads. These individuals have expressed interest in your product or solution but may not be ready to purchase yet. They become more engaged and likely to purchase as they move through the funnel.

The middle of the funnel is where you convert leads into customers. This is where you provide more in-depth information about your product or solution and begin to build trust and credibility with your prospects. At this stage, you may offer a free trial, a demo, or other incentives to encourage them to take the next step.

Finally, you have your loyal customers at the bottom of the funnel. Adobe highlights that retargeted visitors are 70% more likely to convert than non-retargeted visitors. These individuals have purchased and are now repeat buyers or brand advocates. It’s important to continue nurturing these relationships and providing excellent customer service to keep them returning.

Utilise Customer Data & Product Engagement KPIs 

Defining your target audience is a crucial first step in improving your product engagement funnel, and it starts with data. You can collect demographic information, behaviour patterns, and customer feedback to understand your ideal customer comprehensively. This data can be obtained through surveys, customer interviews, social media analytics, and website analytics.

Product engagement KPIs help firms assess product health and identify areas for product enhancement, such as retention rate, conversion rate, and customer happiness. They enable companies to focus on issue areas in the product engagement funnel. To explore this, a poor conversion rate might mean that firms need to concentrate on giving more information or incentives to convert leads into consumers. In a similar vein, a low retention rate may indicate that a company’s efforts might be better directed at enhancing the experience provided to its most loyal clients. Organisations may improve the efficiency of their product engagement funnel by monitoring and evaluating key performance indicators.

Integrate Social Proof

Social proof, defined as the influence of other people’s actions and opinions on our behaviour, can be essential to building trust and credibility with potential customers. By incorporating customer testimonials, user-generated content, and case studies on your website and social media channels, you can showcase the positive experiences of previous customers and provide evidence of the value your product or service offers. 

Ultimately, this can help to increase engagement and conversions by reducing perceived risk and uncertainty and demonstrating social validation. Encouraging your customers to share their experiences with your product provides valuable feedback that can be used to improve your offering and serves as a form of word-of-mouth marketing, which can be incredibly effective in building brand awareness and credibility.

Improve Your Copy

Getting people interested in your product and using it requires compelling product copywriting that attracts and retains your target demographic. If you want to create content that gets people to take action, consider the following suggestions. Instead of emphasising your product’s qualities, stress its advantages. 

Furthermore, it is important to highlight the beneficial effects your product will have on their daily life. Moreover, deploy storytelling to your advantage in your product copy; readers will relate to your words. Use a narrative to illustrate the issue your product addresses or to provide a personal account of how your product has benefited a customer. 

Implement Customer Feedback

Continuously modifying your product based on customer feedback is crucial for keeping your customers engaged and satisfied. Listening to customer feedback can help you identify areas for improvement, feature requests, and pain points that must be addressed. By acting on this feedback and making changes to your product, you can show your customers that you value their input and are committed to delivering a product that meets their needs. It is feasible to acquire customer feedback through surveys or user interviews. 

This avenue can help you understand how customers use your product and what features they want to be added or improved. In addition, you can monitor social media and online forums to see what customers say about your product and address any issues or concerns. Finally, making product modifications doesn’t have to be lengthy or complex. Simple changes like adjusting a button’s placement or improving your product’s speed can greatly impact customer engagement.