Growth: Self-Serve Sales Model (Part I)
Self serve model has been a major source of customer acquisition. However, like any other sales model, it has its own downsides. In this article, I will try to delve deeper into various aspects of self serve model such as when to use, risks and mitigation strategy, how to evaluate whether it is right for the business, how to launch, what to measure post launch, and what to do once the launch is successful.
Self serve model serves the long tail of the market, more specifically small and micro-businesses (Business with < 10 employees) and also individual users. More detail on when to use which model is enlisted below:
Self serve model helps with product qualified lead
A product qualified lead (PQL) is a lead who has experienced the desired value from the product through a free trial or a freemium model. As a result, The probability that a PQL converts is much higher than the conversion of any other leads.
The idea is to wait before reaching out to PQL, so that they understand the value proposition of the product.
On that aspect self serve model helps create a frictionless and low touch model for users to self sign up and start playing with the product either freemium or free trial or small value account. Empowered users love the aspect of being able to explore a product before converting to either a paying user or upgrading to premium account.
Product qualified lead friction should however match to ensure by the time sales reach out to PQLs
Perceived value of upgraded account > Perceived price + Friction
This is where it is important for growth product managers to evaluate the friction in the self serve model to ensure users are able to achieve their objective with the product. If we want a user to invite her friends to the platform make the onboarding fluid. Empathizing with the users and helping them achieve will eventually align the customer objective with the business objective and
When users are finally ready to pay, help them convert as seamlessly as possible
Which means focus on removing any friction in the path to monetization. If you expect users to add credit card to their accounts, it should be simple, seamless.
Why a self serve business model?
Self serve model if implemented right could create a huge competitive moat for the company. Some advantages of evaluating the model are listed below:
Strategic and Competitive advantage:
a) Catch them in the cradle: As small businesses grow so will their purchasing power leading to organic acquisitions. This is the same strategy that Amazon AWS adopted by allowing small business to onboard the platform. As they grew so did AWS.
b) Rapid global expansion: Expanding to different geography or international expansion requires either huge investment in scaling the businesses or taking a more organic route of product led growth that self-serve model can provide. This is an opportunity to grow fast and grow wide before competitors can catch.
c) Refine product with the feedback from the beachhead segment to gain competitive advantage: It is easier to to win back big accounts as sales are more relationship based and thus are not tenable in the long term. Self-serve business access to individual users. It will be difficult for competitors to change habits of individual users without significantly changing the playfield
d) Word of mouth: WOM of sales people in small and micro business and their network help widen the reach among other similar customer base and thus gain scale
e) Higher stickiness and higher barrier to entry: Economies of scale will create a significant competitive advantage as more and more such small and micro businesses onboard the platform strengthening the barrier to entry
f) Growth mindset: Orient the whole company around a growth mindset and strategically orient them around failing fast and iterating
g) Network effect: More specifically a data network effect: As more users use the platform, they generate data that strengthen the recommendation engine around what techniques work better that can be used by others
Revenue and growth:
a) Wide top of funnel: Allows to reach wider customer base in SOHO and Small businesses who are tech savvy and do not want to engage with sales people
b) Non-linear scale: Scales non-linearly unlike transactional model or enterprise model that relies on sales reps to scale
c) Diversifies business model: Reducing dependency on few big key clients
d) Up-sell and cross-sell opportunities through product qualified lead: As discussed above self serve model helps develop PQLs that later could either be converted into a paying user or upgraded to a premium account user.
e) Simplified Decision making unit (DMU) and short sales cycle: Decision making unit is small as most of the time the one who are using self serve model are individual users. This shortens the sales cycle .With a free trial/freemium plan, a great onboarding flow, and a highly sticky product, customers can experience immediate value and upgrade in no time.
Operational efficiency
a) While self-serve model may add operational complexity in the short run, in some cases, in the long run as economies of scale sets in, per customer support cost is much lower
b) SDRs can focus on bigger clients who have higher ACV and thus increase ROI for the company
c) Act as an economic acquisition strategy if embedding in the product is done right as Calendly does.
In the next article I will dive deeper into the risks and mitigation strategy of the self serve model, whether self serve business model is right for your product, how to collect data before launching the product in the market, and finally how to measure the success. Read part II of the article here.
Hope this was helpful. I enjoy writing on growth and monetization. Feel free to connect on Linkedin.
