Mapping three pathways to growth
This is Part 2 in a blog series on Customer Relationship Marketing. You can find Part 1 here.
In the previous post, I discussed the fundamental pattern of customer quartet inside a company and how this four-way user/buyer and business/tech split shapes all business marketing for tech products.
When a new tech product appears on the business landscape, the power dynamics within this customer quartet can affect the adoption of the product within a company. In this post, I discuss how a tech company’s offering maps to a business customer and the three common growth pathways for the tech brand.
What’s A Tech Offering?
A tech product is more than a bundle of technology features. In fact, the “whole product,” called the offering, includes all elements needed to generate value from the product for both the user and the buyer.
For a product aimed at business, the tech offering includes:
- Product: all the features, capabilities, and unique tech “magic” of the product
- Price: a catalog of standard pricing and ability for custom pricing for different customer segments
- Terms: commercial agreement over product lifetime, including warranty, regulatory, legal, maintenance, and end-of-life terms. Again, these range from standard terms and conditions (T&C) to complex master service agreements (MSA)
- Services: specialised labor needed, especially for complex tech products, to install, deploy, customize, train, and operate the product
- Network & Marketplace: includes both the network of people (partners, analysts, and experts) and the cluster of complementary products that enhance or extend the solutions. In some tech categories, such a network may coalesce into a marketplace around the core product technology.
Key Customer Relationships for Tech Offerings
How does a company deliver its tech offering to a business customer? For many tech products, the company’s employees engage with customers to deliver the offering through a series of long-term relationships. To better navigate this process, we need to map such relationships between customer-facing employees of a tech brand and their business customers.
If we apply the framework of the customer dyad from the previous post, we see key relationships emerge as follows.
User Relationship to Product & Growth Managers
- Users primarily interact through the product: they discover, try, onboard, and use the product to get a set of jobs done.
- This relationship is therefore mediated by tech product managers who engage with users to improve product experiences and capabilities. Over time, growth managers also support these users by offering incentives and campaigns to attract, engage, and grow the user base.
- In some segments like small businesses, where users are the buyers, product and growth managers also mediate other elements of the offering such as pricing and support.
Buyer Relationship to Sales & Success Managers
- For most business products, buyers are separate from users, and the buyers care about the business value released by the product. Hence they negotiate on pricing, terms, and services.
- This relationship is mediated initially by sales teams who ensure the product value is understood and deal terms negotiated.
- Once the product is purchased, customer success or account teams ensure delivery of the tech solution. They also care about the ROI generated over time to enable account expansion and renewal.
Network & Marketplace Relationships to Partner & Channel Managers
- Complex software often needs specialized service teams from third parties (e.g. Accenture and Cognizant) to deploy and maintain it. Typically, the account teams may get called to recommend or mediate this for the customer. More likely, partner managers mediate this relationship.
- For networks and marketplaces, the relationship is mediated through a channel or marketplace partner who ensures a customer is getting access to the right experts and additional products without leaving the tech product ecosystem.
IT Enabler Relationship to Tech Service & Support
- Most tech products, even simpler SaaS ones, require initial setup, approval, and ongoing support from customer IT teams. For newer, complex tech products (e.g. cloud and AI tools), IT teams may need extra help and training to provision the product, which is a prerequisite for user access and to deliver business value.
- Such relationships are mediated by tech service and support teams at the tech company. Specialised engineering services (“sales or solution engineers”) may be called for in case of technologies that require retooling of the customer’s IT environment.
- For some operational technologies, IT enablement becomes a persistent role (e.g Salesforce Admin) to ensure the system is configured and maintained for the users all the time.
Mapping Three Pathways to Growth
Now there are many ways to grow a tech product within a business. However, two factors are foundational: 1) how the tech offering interacts with the user and buyer dyad to create value, and 2) how key relationships between the company and the customer mediate this value creation. Together, these two factors can create the pathways to growth. In this section, I shall focus on how these two factors significantly determine growth potential as well as limits for a tech product in the B2B market.
Once we outline the customer quartet (user/buyer and business/tech) for a tech offering and add customer relationships supporting this quartet, we discover three common growth pathways for B2B tech products:
- Product-Led Growth — driven by increasing the number of users or having deeper engagement with the same users. The key metric for this strategy is USAGE, which is mediated by product managers who ensure long-term product experience and capabilities and through growth marketers who provide user incentives through various programs.
- Account-Led Growth — driven by increasing revenue within an account by delivering more business impact for buyers over time. Obviously, this can be through higher product usage, but as often could be through price increases, additional services, or new products added to the portfolio. The key metric for this strategy is REVENUE, which is mediated by sales and customer success managers.
- Channel-Led Growth — driven by increasing the network of partners and marketplace participants around the tech offering. The key metric for this strategy is ACCESS to more users and accounts, which in turn drives channel revenue.
These three pathways are not mutually exclusive and are often used together depending upon where the product fits in the business-tech continuum (business apps, business platforms or tech infrastructure & tools: See Part 1).
Let’s look at these three pathways in more detail.
For disruptive, new tech products with great user experience and ease of use, the path into a company can be bottom up led through organic user discovery, free trial, and adoption of the new product.
This is true in both business apps and infrastructure products: the growth of Slack among business users and of Splunk among IT ops are examples of product-led growth. The buyers were engaged later in the direct sales process around the broader economic case of the product in the company. The deal sizes increased over time as buyer adoption through top-down sales caught up with user growth.
In the software infrastructure category, open source software adoption follows a similar pattern: developers and data engineers are the users who drove the early growth of Kubernetes, Kafka, and TensorFlow OSS projects, among others. Only later did the cloud providers (Azure, Google, AWS, and Redhat) cater to IT data and infrastructure buyers to build the economic case for managed services of these technologies.
Fast-growing tech SaaS companies that had 2019 IPOs like Datadog, Fastly, and Cloudflare all have product-led growth.
In the last decade, marketers have begun to realize this, and we have the nascent practice of product-led growth based on this growth pattern. This strategy works best when:
- The product has great user experience, especially for onboarding and engagement
- The product fits in progressing the user’s Job To Be Done (JTBD)
- Buyer approvals are not critical to user adoption
- IT enablers can activate and maintain the user experience easily
- IT security and governance issues are not show stoppers in early trial and adoption
While this new practice is all the rage these days with SaaS companies, many of them are discovering that as deal sizes grow, and after their offerings get early adoption in an account, they need an account led growth strategy as well.
For established tech companies where sales teams already have incumbent relationships with buyers, new products can be “adopted” top down. Sales can persuade buyers through bundled deals and pre-existing contractual terms (MSA). In many such cases, business buyers may limit user choice, and the users follow, even if reluctantly, as the tech product becomes default enterprise standard. For example, Microsoft Office 360 and SAP ERP applications have this pattern.
Among tech buyers, this pattern is common when major architectural choices carry security, privacy, compliance, and regulatory risks. For example, recent shifts to cloud computing, new data platforms, or IoT/edge networks is likely to be constrained at the account level by tech guardians. More on this below.
This approach is also preferred when a tech product requires significant services and customization to deploy, run, and extend at a company. In B2B marketing, the top-down adoption pattern has been the legacy practice for the last three decades and is still critical in regulated industries where buyers and IT enablers are strong gatekeepers to users.
Salespeople and marketers have long realized that top-down account selling is expensive and slow but can drive high revenue. With new martech stacks and data/AI tools, a new practice of account-based marketing is emerging. This is suddenly the rage when product-led growth alone is not enough to drive revenue.
This growth strategy which works best when:
- The buyer needs to centrally control tech product vendors
- The business value of products trumps the product user experience
- The business user can be made to comply with a standardised product
- The business user’s JTBD is not business critical (e.g. expense management)
- The tech buyer needs to standardize tech tools and architecture at the expense of tech user choice and often productivity
- The tech buyer doesn’t have access to tech talent to deploy and run the product
- IT security and governance issues can limit business and tech user choices
Palantir is a textbook case of a top-down account-based growth pattern. With only 125 customers, the company has grown through the “acquire, expand, scale” method within each account (IPO teardown).
Snowflake, the fastest-growing enterprise software company, has also grown mainly through top-down, account-led GTM, although it does have free-trial, user-focused motion as well (IPO Teardown).
Unlike the previous two strategies that target users and buyers directly, this is a secondary strategy to get access to more users and accounts. In this strategy, the tech company has to build up the network of partners and products around the tech offering into channels, and in some cases, a marketplace. Traditionally, tech companies with complex products end up with service channels where they drive revenue with and through partners. And companies that have tech platforms requiring adjacent products to complete a solution end up having marketplaces that let customers discover and purchase such solutions.
For example, Nutanix helps enterprises modernise their data centers with a vast array of IT infrastructure, storage, automation, and orchestration products. Their recent growth is assisted by seven different types of channels with over 10 thousands partners.
In summary, these three pathways to growth are available to tech companies based on how they map their offering to customer relationships and which of these three pathways are important to them. These pathways are complementary and can be orchestrated within a customer segment. In the next post, we shall explore the common patterns to do so.
- Mapping relationships between a company’s tech offering and business customers can be a useful way to understand how to drive adoption of tech products.
- A tech offering is more than the product; it is the product, price, terms, services, network of partners, and product marketplace around the technology.
- The user relationships around the offering should be mapped to product and growth managers.
- The buyer relationships should be mapped to sales and customer success managers.
- Network and marketplace relationships should be mapped to partners.
- The IT enabler relationships should be mapped to IT support and services.
- These relationships open up three growth strategies for tech offerings.
- Product-led growth drives bottom-up usage among users.
- Account-led growth drives top-down revenue among buyers.
- Channel-led growth is a secondary strategy that provides access to more users and buyers.
- These three strategies are complementary and can be orchestrated with a customer segment.
- Product-led Growth Institute
- Account Based Marketing — Practice
- Platform Strategy Explained — MIT
- Software DevOps LifeCycle blog; and article
- Jobs To Be Done; Competing Against Luck, Clayton Christensen; JTBD — Anthony Ulwick
- Value Chain — Michael Porter
This is Part 2 in a blog series on Customer Relationship Marketing. You can find Part 1, Who is the Customer in Business Marketing? here.