3 reasons going product led helps you outlast any downturn

Published Jul 5, 2022

You’ve read the headlines, watched your portfolio slide, maybe even frozen hiring or delayed a major financial event. We’re here, an economic slowdown, one that’s had an outsized impact on software companies. It’s still unclear how long it will last or what the long term impacts will be, but the reality is that things have changed quickly.  

For such an uncertain time, one thing has been made very clear by the market: growth still matters, but efficient growth matters even more. The winners in this next chapter of software won’t be the speed demons, it’ll be the fast and sustainable players. Companies who abide by the “Rule of 40” and have the ARR to back up their mythical valuations. And companies who eliminate high burn, high churn, and are still able to hit ambitious goals—without increasing spend and headcount. 

It’s no surprise that product-led companies are best positioned to outlast the competition and emerge quicker from this downturn—they already operate more efficiently. Let’s take a closer look at the three biggest benefits of being product-led in a downturn. 

1. Product-led companies control costs

Product-led companies use their product to multiply the effectiveness of their people. They do this across research and development (R&D), sales, marketing, and customer service—opening up access to their product to teams beyond just engineering and using it to help each team achieve their goals and reduce manual, repetitive labor.

Save developer hours
Product-led companies democratize access to product data throughout their organization. This reduces the need for engineering to pull data for other teams, and frees up developer hours to focus on the most impactful work. We know Pendo customers reduce support volume by as much as 15%, in part by opening up product data so support teams can help customers more easily.

Prioritize with confidence
A whopping 80% of features in the average software product go unused—a clear sign of waste that should be avoided at all costs. Product-led companies use product and sentiment data to ruthlessly prioritize engineering time and focus their teams on the right work. Engineering time is valuable and should be spent building features that are informed by and validated with data.

Efficient support and onboarding
Onboarding new users can be an expensive and time-consuming process, but it doesn’t have to be. Product-led companies reduce onboarding time by 27% by using data-driven in-app guides to onboard, educate, and support users at scale—without ballooning headcount costs. 

With the help of Pendo, Restaurant365 reduced the cost of onboarding new users. Pendo made it possible for the team to onboard tens of thousands of restaurant employees to a new mobile app, with almost zero training or support required. “Our [team] hasn’t really taught 22,000 people how to use [the Restaurant365 application]. The guides from Pendo and intuitiveness of the app were enough to get 95% of these restaurant-level employees to use it fairly quickly,” said Joe Hannon, product manager at Restaurant365.

2. Product-led companies grow efficiently

Product-led companies put their product at the center of everything they do, including their go-to-market motions. By leaning more on the product to educate buyers and generate and qualify leads, these organizations enable their marketing and sales dollars to go much further. 

More efficient marketing
Product-led companies use in-app communication to deliver data-driven messages to customers. These messages are rich in context, convert at a higher rate than email, and are quick to implement and test. Plus, in-app communication is much cheaper and more effective than traditional advertising channels. 

Product generated leads
Product-led companies create freemium products and nurture users into Product Qualified Leads (PQL) for sales. The result is more qualified leads that marketing and sales teams don’t have to spend time creating or warming up. We know Pendo customers generate 30% more qualified leads after implementing Pendo.

Automated and efficient expansion
Product-led companies are great at understanding user behavior and upselling or cross-selling users the right products, at the right time, within the product itself. This results in increased sales and a growth in accounts with less effort required from the sales or customer success team. We know Pendo customers see a 28% increase in total active users after implementing Pendo by reaching and engaging existing customers inside the product, while they’re engaged with it.

Take Citrix ShareFile as an example. With a goal to make free trials more personalized to user’s preferences, they needed a way to tailor their onboarding messaging to resonate with the reason each user signed up in the first place. By creating a personalized experience right off the bat using Pendo’s in-app guides, Citrix saw increased engagement with their in-app messaging and, more importantly, a 60% increase in free trial conversions. 

3. Product-led companies retain more customers

Product-led companies retain more customers and expand existing accounts with less effort. They do this by leveraging data to focus their work and by using their product to augment—or even eliminate—manual support tasks. 

In-app self service
Anticipating customer problems—and leveraging the product to solve them before they happen—is what sets product-led companies apart from their competitors. Achieving customer goals without human support (with in-app guides, for example) creates a positive user experience and saves the company huge amounts of time and money. And building a Resource Center creates a helpful, always-on channel for self service, product updates, and direct ways to contact support. 

Better onboarding
An easy, efficient, and educational onboarding process is essential for a positive user experience. Product-led companies are positioned to better understand usage flows and build in-app onboarding that helps users achieve their goals. This results in a 27% reduction of user onboarding time, and a 15% increase in net revenue retention.

Increase product adoption
Product adoption is directly correlated to a reduction in churn—and educating users about features and functionality is key. Product-led companies use targeted in-app messages to increase awareness and educate users on how new features can help them solve their challenges. 

Identify “at-risk” accounts
Product-led companies stay ahead of churn by using product data to proactively identify accounts with low adoption rates. This allows customer success teams to better prioritize their books of business and prioritize helping at-risk users and accounts first. After implementing Pendo and product-led tools like product analytics, companies see an average 5% reduction in churn.

The Jungle Scout team used Pendo Analytics to learn the behaviors of their most successful users. Armed with six critical product usage metrics, the team built guides and tooltips to help new or less successful users replicate the actions taken by the most successful ones. Danny Villarreal, director of customer experience at Jungle Scout, says those activities have led to a significant reduction in churn. He also noted that Jungle Scout users who interact with Pendo guides are three times more likely to remain customers.

A time to adapt 

Our industry will recover from this slowdown. How fast or slow that happens for individual companies depends on a lot of factors—some within our control and some not. But there does seem to be one constant when we look back at the companies who emerged from similar historical downturns the fastest: adaptability

How quickly and effectively businesses adapt in the face of change is what separates the winners from the losers. And accelerating your product-led efforts will help—especially when it comes to reducing costs, increasing customer retention, and growing efficiently.