In the past, we’ve stressed the importance of the user experience as a way to influence users’ decisions regarding a product. From user onboarding to converting a free user to a paid customer, the user experience has to be solid. In our effort to better understand how successful SaaS companies treat their user experience, we talked to Scott Tousley, a senior team lead for user acquisition for all of HubSpot’s products.
Scott lives in San Diego, California, and at HubSpot, his team’s goal is to acquire free users for HubSpot at scale. As Scott told us: “Right now, there are two core acquisition channels at HubSpot, SEO and paid and that accounts for the vast majority of leads coming in every month for HubSpot.”
Getting more leads for a tremendous inbound machine such as HubSpot may seem like an easy thing to do, but it’s not. According to Scott, “It’s our team’s responsibility to come up with new acquisition channels that we can diversify our acquisition portfolio.” How can you come up with new acquisition channels and diversify your acquisition portfolio, in a time where most channels seem to be saturated?
Why Diversifying your Acquisition Portfolio is Important?
According to research by ProfitWell, customer acquisition cost (CAC) is up nearly 50% in the last five years. Besides, most traction channels for SaaS have already been saturated. So it is easy to understand that acquisition is getting harder. Thus, companies like HubSpot which master the inbound game, need to find new ways to attract new users.
With more than 7.4 million visitors (traffic estimation, according to Ahrefs) monthly, HubSpot’s website is probably one of the most visited websites in the marketing and sales industry. HubSpot was among the first companies that invested in the inbound way of generating leads. However, today, the company is trying to diversify itself from the organic and paid acquisition channels.
As Scott correctly told us: “You can think of it as an investment portfolio; you are holding stock in Facebook, and you are holding stock in Google, and those are the two only stocks you own. You have a very risky portfolio.” It is in fact that using only those two channels as a way to generate new leads can be risky.
Data shows that 49% of all Google searches across various devices result in no click. Besides, Facebook’s user growth has taken a hit since users have started dropping for the first time in years. Thus, betting solely on those two channels for user acquisition doesn’t seem like a smart thing to do. After all, we’ve how companies lost their power or even shut down their doors after updates or changes in one of those two channels.
Thus, it is only natural that HubSpot is trying to find a way to generate new leads consistently, outside of these two channels. As Scott put it, “my team is trying to find a way to diversify from those two channels.”
How is HubSpot Qualifying Its Users?
For a platform like HubSpot—with many different products for marketing and sales—qualifying a new user might be tricky. This may be the reason why HubSpot is using different pricing models, which partly work as acquisition models. According to Scott, “the reason why HubSpot is testing different models like the freemium or the free trial is mainly because that is the evolution of the business.”
But, it’s another thing qualifying a user on marketing or sales level, and another qualifying them on a product level. Moreover, besides qualification, a company must be in a position to see the differences between those three types of leads. For example, there might be a difference in the rate at which product qualified leads (PQLs) convert for a SaaS company.
As Scott told us, “PQLs will convert the highest. The reason for that is pretty simple: No one likes to have someone else convince them on why they should sign up for something or why they should buy something. They convince themselves.”
It is in fact that users nowadays prefer to self-serve and self-educate themselves. This is probably the reason why a 2015 Forrester report found that nearly 75% of B2B buyers say that they prefer to buy from a website than from a salesperson. The fact that users want to control their experience is also why PQLs have become significantly important for SaaS companies.
When it comes to qualifying users, Scott told us that: “Think of an X-Y axis. On the Y-axis that would be the demographic fit, and then on the X-axis would be product behavior. You can find power users all the way to the right on the X-axis.” This means that someone who is at the beginning of the X-axis hasn’t used or isn’t proficient with the product yet, while someone right in the X-axis is using the product every day.
In the same vein, someone at the bottom of the y-axis isn’t qualified, and the top of the y-axis is highly qualified. Of course, the company wants users that both experience value out of the product and qualify as leads at the same time. As Scott explained, “we are going to take the most qualified early users and not sell them on anything. But, get them to get as much as they possibly can out of the free product.”
This leads to a logical next step: “Users are getting more out of the free product, they are becoming more dependent on it and start running into that wall, and they are like: there is a lot of cool stuff now that I am functioning my whole business on this product, I guess I’ll upgrade.”
As Scott explained, “a lot of this is driven by historical data and a lot of this is driven by historical data between the users that upgrade the most.” Thus, HubSpot is taking data-backed decisions on how to qualify its users and on how (and where) to find more users that are more likely to qualify as PQLs.
The Importance of Product Lead Magnets
How can product lead magnets—standalone products that live outside of the main product—help in that direction? For example, how can products like Sidekick help a SaaS company acquire new users? As Scott explained, “back in 2014—when Sidekick first introduced—it was a standalone product.”
As Scott told us, “Sidekick may now be functioning as a part of HubSpot sales, but back then, it was a standalone product.” The truth is that Sidekick was one of the many great hits HubSpot had. On April 7, 2016, the company announced that the Sidekick would be HubSpot Sales, but until then, the product had its own brand and was functioning as a standalone product.
With more than 200,000 weekly active users, Sidekick was a product in its own right. And, it was experiments like this that allowed HubSpot to grow so fast and become the monolith it is today. But, apart from a significant growth lever, these free tools or standalone products, have yet another benefit.
According to Scott, “free tools like the persona map generator or the invoice for businesses are a great way to “start building a relationship with the user.” If you think of similar initiatives from other SaaS companies (i.e. Moz with MozBar or SEMrush with SEOquake), you’ll understand that these standalone products indeed help the company form a relationship with its users.
Thoughts on Product-led Growth
Product-led growth (PLG) is connected to all the things that we’ve discussed so far. So it is only natural that we asked our guest to share his thoughts on PLG with us. Right off the bat, Scott asked: “If you need to talk to someone to use the product, is that product-led growth?
Even though customer success and sales can be a part of a PLG strategy, in general, PLG is a self-served approach as to how users experience value out of the product. As Scott explained, “you can talk about product-led growth for tools like Loom or Grammarly with a simple interface and quick time to value.”
However, when it comes to platforms with a steep learning curve, product-led growth may not be the ideal approach. Scott mentioned that “when you are adopting a platform to run your business on (i.e. Hubspot, Quickbooks), it becomes much more difficult to do so without having some kind of human interaction, strictly because there is a lot going on and everyone has different use cases for HubSpot or for any platform for that matter.”
If you think about it, when a platform requires you to spend 5x the amount of time to a) get to know its different products and b) get to experience value out of the platform, then there may have to be some hand-holding. This is not necessarily a bad thing. After all, not all companies can adopt a product-led growth approach.
As Scott correctly put it, “When you are adopting a platform, product-led growth becomes challenging to get started, once you get started and once you hit your Aha! moments, then you realize the true value of the product. But, it gets some time to get to that point.” Even for companies offering a free version of their product, 59% of users find it somehow difficult to adopt.
Thus, especially for more complex products, it may be slightly more challenging to reach the first meaningful outcome, but once you do, the chances that you’ll be engaged with the product and convert to a paying customer are much higher. There is one problem here, though: That in many cases, users in such products may need more assistance than usual to use the product.
According to Scott, very often, users in such products are thinking: “Can someone just show me how to use this thing?” And Scott continued: “It’s like when you are just starting out using a design app like Photoshop or Sketch, and you just want someone to tell you what to do. Most users know what they want to do, but they don’t know how the product works. And that can be frustrating when it’s a platform product.”
Scott told us that “platforms like HubSpot are constantly going through the onboarding flow, try to optimize it, try to make it offer the best experience that they possibly can.” Of course, doing that is not easy since a SaaS company like HubSpot has many different types of users who are using the product.
Scott explained that “it’s super challenging to get the right onboarding flow right for different users because different users sign up for different reasons.” With 80% of SaaS companies offering a free version admitting that their “in-product onboarding is lacking,” getting the right onboarding for all users can be very challenging indeed.
The question then—according to Scott—is: “How do you build an onboarding flow, for all of the various segments that use the product, where you can explain the value of the product, where people don’t have to talk to someone else?”
As Scott explained, “this is super challenging, but it’s also a very exciting time because the companies that can get this right, are going to be the ones that end up winning eventually because it’s vital to be able to onboard users at scale.“
One of the last things we discussed was the correlation between the pricing model a user chooses and the possibility that this user is going to convert to a paying customer. According to Scott, “a common theme that we see is that the amount of people who will upgrade based on a free trial is a lot higher than the people who will upgrade based on a freemium model. But, fewer people enter a free trial versus a freemium.”
As Scott explained, “For example, if you have 100 people who sign up for a freemium product, 3 of them will become paying users. If you have 100 people who sign up for a free trial, 6 of them will become paying users. This means that you are going to have higher conversion rates, but with the freemium product, you are going to get more sign-ups—more users.”
Of course, this is not always the case, since every company is different, even if it uses the same pricing model to acquire new users. However, as Scott told us, “the intent in freemium is higher because, in a free trial, people think that they are not going to use that product for that long anyway. But, generally getting value in such a short amount of time is hard.”