In part 1 of this guest series, learn from Elena Verna why leveraging product analytics for PLG is the next big shake-up in B2B SaaS.
Intro
The business software experience is becoming increasingly similar to that of personal software. The trend of consumerization is rapidly spreading throughout various industries within the B2B sector, leading to the remarkable success of companies like Dropbox, Miro, Slack, and Figma.
A significant factor in this transformation is the growing influence of end-users within B2B organizations, allowing companies to target end-users directly and subsequently attract enterprise buyers through existing usage.
What’s the difference between this new generation of B2B companies and the older one?
They adapted the lessons of B2C growth to the B2B market. They build delightful, user-centric products that grow through cost-efficient channels like content, word of mouth, and virality. But there are few key differences in how B2B and B2C should analyze their data. Let’s dig in!
The difference in revenue sources for B2B and B2C
What’s the difference between your business Slack subscription and your consumer Spotify subscription?
Slack Net Dollar Revenue retention is 120%, meaning Slack bill will increase by 20% yearly. This will happen due to higher plan upgrades or an increase in the number of users on the bill. But it is important to note that most of the revenue Slack will make from you is in the future.
Spotify, on the other hand, needs to keep acquiring paying customers to address their churn.
In short, in B2B businesses, revenue growth mainly comes from retention and expansion rather than from acquiring new customers. The benefit of expansion is that, over time, there is a compounding effect.
Analytics differences between B2B and B2C
There are 3 main differences between product analytics in B2B and B2C:
- Revenue concentration
- Account vs. user focus
- Cross-functional collaboration across usage data
1. Revenue concentration: most revenue comes from a few accounts
Slack has 600,000 customers, but 40% of its revenue comes from less than 1% of its customers. Indeed 575 pay more than $100,000 a year for the service*. Conversely, in B2C, revenue is fairly evenly distributed across the entire customer base.
For a B2B, it’s crucial to identify these opportunities as they come through the door. This means profiling and identifying the most promising accounts as they sign up. And giving them a human point of contact to streamline their experience, if needed.
2. Accounts vs. users: Revenue comes from accounts, not users
In B2B, you sell to companies or accounts, not users. In B2C, you sell directly to users. For PLG B2B, it's essential to approach metrics from a team perspective rather than an individual one. New accounts acquisition, engagement, retention, and expansion are the new standard metrics.
Pricing and revenue are tied to product usage. The goal of everyone is to make sure each account gets value, and the company can monetize the value delivered.
3. Cross-functional collaboration across usage data: marketing, product, success, and sales teams.
B2C companies typically focus revenue accountability on marketing and product, as the consumer purchasing process tends to be simpler and more direct, with fewer touchpoints and decision-makers involved.
In contrast, in B2B companies, revenue accountability is distributed across multiple functions such as product, marketing, sales, and customer success. This is due to the complex nature of B2B transactions, where multiple stakeholders are involved throughout the buyer's journey, requiring coordination and collaboration across various teams. Revenue is also heavily skewed towards the later stages of the customer journey (expansion), needing additional thoughtful care throughout the account lifecycle.
- Product teams need product analytics to understand what users want and how they can build a product that can sell and retain itself.
- Customer support and success make sure accounts get more value over time. They need product analytics to understand when accounts need intervention.
- Sales teams close deals larger than the sales floor (typically >$15,000). They need usage patterns to sell, upsell, and renew accounts at the right time and to the right users.
- Marketing needs product usage to understand which channels bring qualified sign-ups that will later need to go through lifecycle marketing to retain and convert.
Final thoughts
The success of companies like Dropbox, Slack, and Notion can be attributed to their ability to adapt B2C growth strategies to the B2B market. In B2B, revenue comes from accounts, not users, and the emphasis is on retention and expansion rather than acquisition.
Three key differences in product analytics for B2B include focusing on team metrics rather than individual metrics, identifying high-value accounts early on, and collaboration around usage data between marketing, product, success, and sales teams.
Stay tuned for parts 2 and 3 of this series to understand better how B2B SaaS companies can grow faster by leveraging product analytics.
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Elena Verna is a Growth Advisor to companies including Krisp, MongoDB, and Maze, and a Board Member at Netlify. She is also a former CMO & Advisor at Miro, SVP for Product & Growth at Malwarebytes, and SVP at SurveyMonkey. Elena has a breadth of experience in PLG models for B2B companies.
