#55: Freemium Or Sales Reps? Here's Why We Picked Both

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This is a podcast episode titled, #55: Freemium Or Sales Reps? Here's Why We Picked Both. The summary for this episode is: If you liked this episode, we bet that you’ll love our blog content. blog.drift.com/#subscribe Subscribe to never miss a post & join the 20,000+ other pros committed to getting better every day. --- Freemium model? Or inside sales? What about outbound sales? On this episode of Seeking Wisdom we're talking about why we made the decision to "split" our sales funnel in 2017, lessons from Dropbox, and what it might mean for your business. Ways to support Seeking Wisdom if you’re a fan of the show: 1. Subscribe. 2. Leave us a five-star review. Here's how: bit.ly/5-Stars-Only. 3. Follow David (twitter.com/dcancel) and Dave (twitter.com/davegerhardt) on Twitter. 4. Learn more about Drift at Drift.com.

Speaker 1: All right, I'm ready, if you're ready.

DC: You sure?

Speaker 1: Yeah. We're recording.

DC: Let's go.

Speaker 1: You always look at it like-

DC: I've got to double check.

Speaker 1: I slipped one time.

DC: You did slip.

Speaker 1: Sometimes I think you don't remember anything and then you think like that.

DC: Mm-hmm(affirmative).

Speaker 1: So, all right, I want to first apologize. I want to apologize to our fans because I think the secret sauce of Seeking Wisdom is that we make it super tactical.

DC: Yeah.

Speaker 1: I think we slipped a little bit-

DC: A tiny more.

Speaker 1: So the numbers have been growing, the ratings have been growing but I think, the mark of somebody who always wants to get better is even when things are good, we've got to look at our podcasts and say," How can we make this better?"

DC: There we go.

Speaker 1: And so the secret sauce is keeping things tactical and I want to make sure we get back to that.

DC: Bring me back.

Speaker 1: You said it the other day so we're going to get back.

DC: All right.

Speaker 1: So today on Seeking Wisdom, we're going to talk about something new that we're doing here at Drift in 2017. We try to open up behind the curtains and show you a little bit and so we have a new approach, we've been doing it for a little while, but this is the first time we're going to talk about it. So, DC, tell the people about our approach to how we're growing the business this year?

DC: So we went into this year, splitting our funnel. So if we think about our sales funnel, 2016, we had one funnel that we were all part of from a product standpoint, sales, marketing, et cetera. And let's think about it as a, purely freemium funnel. So people come to the website, they sign up for free and then they can choose to upgrade or not. And depending on different points in that throughout the year, maybe there were humans assisting them, maybe there weren't and learned a lot through that, grew 33X.

Speaker 1: Yeah. With 33X growth in customers.

DC: Yeah. In 2016, obviously small base, but massive growth. And we learned a lot from that. And then we started this year with taking that existing funnel and splitting it in two and that funnel being, keeping the freemium funnel on one end, which we can go into, which is touchless and then going in and creating a separate funnel that we call the sales funnel or the enterprise funnel, which has salespeople in it and involves a more traditional inside sales mechanism.

Speaker 1: This is actually a good time because it just came out this week. Dropbox.

DC: Tell me.

Speaker 1: I feel like we just talked about MailChimp. All right. Dropbox, eight years.

DC: Yep.

Speaker 1: Fastest SAS company.

DC: To what?

Speaker 1: To 1 billion.

DC: Wait, was that a B?

Speaker 1: That was a B.

DC: Wooo. I just fell off my chair.

Speaker 1: That's not the number that we usually talk about in SAS, which is valuation. That is revenue.

DC: It's cash money.

Speaker 1: That is cash money.

DC: Wow.

Speaker 1: They might be doing okay.

DC: Everyone stop right now, what you doing? Take your hat off.

Speaker 1: Respect-

DC: Show respect.

Speaker 1: ...to Dropbox.

DC: Salute. Drew Houston, homie I respect you.

Speaker 1: Yeah. So anyway, so the point of us bringing that is, A, it's current. It just happened, but there was this myth maybe-

DC: Not to namedrop or anything.

Speaker 1: Go ahead.

DC: Oh yeah.

Speaker 1: What are you doing?

DC: I just want to share with the community.

Speaker 1: What are you doing tonight?

DC: No. Six of us doing a little dinner with my boy Drew Houstin tonight. I'm going to talk to the billion dollar man himself. See if I can learn some lessons and whatever I learn, I'm going to bring back and I'm going to share with all of you.

Speaker 1: That's when the best stuff happens. We did the usual pre Seeking Wisdom, which is go and get a coffee. And DC has been doing a little, it's not even a weight loss goal. It's a physique goal for 2017.

DC: Yeah. It's called 32.

Speaker 1: 32 waist is the goal. That's the goal. But anyway, you've been doing this whole fasting thing. I'm nervous that you're going to be hanging out with Drew from Dropbox now and you're going to pass out. So try to eat a snack between now and then, it'd be great.

DC: Just green smoothies, man. Green smoothies.

Speaker 1: All right. So anyway, the story in SAS for a lot of people listening, I'm sure-

DC: Why's the billing important with Dropbox?

Speaker 1: Why is that important?

DC: In the context of this podcast that we're doing today?

Speaker 1: Well, for us, it's important because that's the company that we want to build. Bless you. You just sneezed. You try to be excited and sneeze at the same time. Did I get that answer right?

DC: Yeah. And because they have a funnel that looks pretty much like what we're talking about.

Speaker 1: And so the thing that we talked about all the times, like finding patterns. So this is great. We see there is a pattern out there, I think for a while, and you can speak to this more than I can. It's like, wasn't the narrative in SAS? You had companies in early 2000s, 2005, 10, whatever-


Speaker 1: ...OG. Wasn't the narrative like," Oh, let's build amazing product. We don't need salespeople. And people are just going to upgrade."

DC: Yep. Everything goes through cycles. So in the early two thousands, it was all about survival, right. And, post bubble burst. And so most companies, including my own, at that point, we were running towards enterprise field sales. So let's get people face to face. Let's hide the power of the internet behind some people, give them safety and sell big, six figure, seven figure dollar deals.

Speaker 1: That was like, you don't see the product, you don't try it before you buy it. You're signing a multi- year, three year on- prem deal for something. It's the complete opposite of what we're used to today.

DC: Yeah. And then the next model that emerged after that was an inside sales model, many of you know it well, and still you don't see the product that much. But now people are coming to your website, you're turning your website into a magnet. You're getting them to fill out lead forms. And you're routing that to inside sales teams and BDRs, SDRs. And you're closing those customers again, largely without them seeing the product.

Speaker 1: Yeah. And so the crazy thing for me is like, all right, so after this podcast, don't do it while you're listening. If you go to Dropbox's website, the crazy thing to me is 80% of the attention and the calls to action on the website are to get people into free.

DC: Yep.

Speaker 1: Right. But they have this thing that they've nailed, which is they found a way to get the people who are... They want people to self- select into business. They want somebody like you to go to the Dropbox website. And like," I'm not here for this free. I need the security. I need the storage. I need the team members." They have a good pattern. They've found a way to get the teams interested in Dropbox.

DC: Yeah. It's a different software, different job, right. That's a job of a business. And they want those people to know that they have that pain, know that they have to solve that job and self- select into that group. Even that same person, which myself when the job is... I just want to back up some photos from my camera.

Speaker 1: All right. So that's the story, but I want to talk about tactically, how you make a change like this at a company. If you go back to last year, we talked about... And this is on a podcast that we've done, where we talked about how we set one goal for Q2 of last year. And that was let's prove we can get demand. Can we get signups for this thing? We did that. We went on to Q3, which was," Let's prove we can get people activated and active using drifts," right. Q4," Let's prove we can get people paying for it." And we've done all those things. So when you make so much progress in a year only to then turn the page on 2016 and you go to 2017 and you have to rally the team around a completely new mission and add another ball to that.

DC: Yeah. And at each point last year, you're adding complexity because Q2 was our starting point. And so we only had one goal as a team, as you said," Sign- ups," so there was no competition from a goal standpoint, we were all lying around sign- ups. Q3 comes in where we're lying around activations. Signups are still important. So now we've added a second goal, Q. And then Q4, we add monetization. And so now you have three goals that are aligned, but are a little bit different. And then we start all over. As you said, in 2017. And we looked back and said," The freemium stuff has been great for us." There's a different type of user who wants to use us. And I think this is the key and a larger business has different set of demands, just like the Dropbox business example that you used. And they're different and they expect different things. They might not care about free, they might not care about a freemium product. They might just want to go into a trial. They might want to talk to someone. It's a totally different UX case and persona and job that they're trying to solve, but they want to use our software to do that. How do we best handle that? And what we did was to split the funnel into two, and by splitting the funnel, it's not only on paper, we split the funnel, but we have to think about it from a team standpoint and say," Okay..." Let's say engineers are all working on this freemium product now. So how do we slowly migrate some of them, some percentage of them over to this enterprise or sales funnel, which has a lot more complexity in it? How do we migrate? How do we handle from a marketing standpoint, splitting the demands of driving free usage versus driving trials? How do we do that and where do we put sales in CSMs? Obviously we want to put them on the enterprise and sales side and take them out of the freemium funnel. We want that to be touchless. And so it has an effect on every single person on the team. And so we've had to go down from the team and make sure we have alignment across all of the different functional areas.

Speaker 1: So a couple of things that you hit on that I want to dive into. Number one is, you said touchless, right? So it's still the same myth of touchless sales, but that's not the entire business.

DC: Nope.

Speaker 1: But in order for our business to really work, in order for the economics of the business to work, we got to get that freemium to be touchless.

DC: Yes.

Speaker 1: And that's a product thing. Okay.

DC: That's a product thing. And we formed a new team called Growth that totally owns that whole freemium funnel. And they're going to get good at optimizing that funnel and driving touchless usage and doing all that stuff. And we've had that, but we've mixed, in 2016, we mixed the funnels into one. And now we're separating out the Ux cases.

Speaker 1: You brought up the other thing that I wanted you to go at, which is the only way this works is if people have ownership.

DC: Yes.

Speaker 1: Right. If we just said," Hey, we're going to split the funnel," but nobody owns the different pieces. So this is why we launched the... We had people working on different functions, but we didn't have a formal Growth team. I'm using air quotes like," We didn't have a Growth team," but then you guys came up with this idea, like," Look, if we're going to have this freemium and crosstalk has to be fully funded," but not even just fully funded. There has to be a group of individuals that are directly responsible for the success or failure of that, which is a theme that we talk about all the time.

DC: Yeah. And they own it top to bottom and that Growth team includes engineering resources, design resources, a product manager or marketing manager for that group. It has all those people. And they own that whole thing top to bottom, including how are we going to deal with support for the freemium funnel? How are we going to deal with upgrades, billing, all the stuff, all the decisions you need to make from a business standpoint, they own top to bottom. That's not shared across groups.

Speaker 1: It's one team. You've mentioned this a bunch, but wasn't this something that you saw over and over in your career?

DC: Yeah.

Speaker 1: The exec team might say," Hey, this year we're going to do this," but they're just complete bullshit or like, too many blurred lines between teams-

DC: Yeah. Always the case. They want people to have dotted lines. I hate dotted line. Oh, your dotted line to this and that. No, a team needs to have a singular focus. One number, ideally that they're trying to drive to, have autonomy and the accountability to drive those numbers. And that's what we did by forming that team. And then we have the other product teams, other marketing and sales, who are focused on what we call the enterprise sales funnel. And they're working, obviously they're related, but they're very different funnel, very different UX case and job that they're solving for.

Speaker 1: The other thing that I think was super helpful from a tactical, how do we get the team on board with this perspective is, we made this the focus of our kickoff and offsite.

DC: Say more about that.

Speaker 1: So I think it would've been easy for you to just write a post on our Wiki saying," This year we're going to split the funnel. Here's how it's going to work. You guys own this, this other team owns this and here we go, let's get it."

DC: Yeah.

Speaker 1: But I think what happened is we made this a key theme of the offsite and that gives everybody a sense of ownership. And so one of the things that we did for all the people listening, who weren't there, obviously-

DC: Will you have the offsite?

Speaker 1: Maybe we'll post some... I don't think we've posted footage, but-

DC: It was crazy.

Speaker 1: It was great. We split the team up in, so we had our company meeting and then we split the team up into different groups and each group basically... So it was random groups, so it'd be a marketing person, a salesperson and an engineer that never worked together, all mixed up in random groups. And each one of them was given a problem related to our business in 2017. And then they went off, brainstorm about it, talked about it for an hour and then had to come back and present to the rest of the company. I think that was such a key thing because it gives everybody a sense of ownership. It gets a bunch of different opinions in the group. And some of the best ideas came from people who don't work on the business side of the business.

DC: Yeah. Absolutely. It gave everyone that sense of autonomy, accountability that we talk about. And it drove home the why behind the decisions that we were making, where those things would not come out in any blog posts or a company meeting or whatever. They had to think through the problems and try to figure out how we were going to solve these. And maybe they would come up with a better solution. Ideally they'd come up with a better solution then we may have come up with. And so that really drove that home.

Speaker 1: Yeah. And then the other thing is just tactically. We didn't expect this to all happen overnight. It's like, almost every week now we're picking off one or two things that help us inch closer to that. And you talk about roadmaps all the time, but we don't have a roadmap. We know where we want to go. And it's to communicate with the team and share what we're going to do this week to inch us closer.

DC: Sure. We don't have a roadmap, but we have goals, very clear goals and highly measurable goals. And then the teams are finding the best path to get us there.

Speaker 1: Yeah. Oh, you know what we just talked about actually? We talked about setting goals. We ended up using a framework for goal setting. How did you think that went?

DC: I love it, we should do an episode on that.

Speaker 1: We should.

DC: Yeah.

Speaker 1: We don't want to spoil it all.

DC: I know, leave them hanging.

Speaker 1: All right. So that's really the deal. So split the funnel, two funnels. What do you think this means from a sales team perspective?

DC: Right. I think it's a larger trend. I don't want to use the word trend, but I think it's a larger thing that is happening in the market. We talked about Dropbox, they've been running this split funnel. Started with a freemium final added on an enterprise and business funnel. We saw this happen obviously at Slack and freemium funnel, enterprise funnel. We've seen this happen at Envision.

Speaker 1: They go back three or four podcasts episodes. Listen to Ryan.

DC: Yep. Started with a freemium funnel and then enterprise funnel. I think it's not a trend because that sounds like it's something that's going to go away, but it's businesses as SAS becomes more ubiquitous, right. And we get used to buying software, seen SAS platforms like Drift, being able to be sold to the smallest of businesses as well as the largest of businesses. And being able to do that by splitting the funnel because those different buyers have different expectations. If I'm a SMB or if I'm a technical user, single person adopting a product, I might be okay with a totally touchless approach, a MailChimp or Shopify. But if I am a large company who has a hundred sales reps and 200 CSMs and a whole bunch and multiple locations and lots of complexity, I don't want to sign up for your freemium product. I want to talk to someone who's going to help me understand how this model is in my world.

Speaker 1: Like that person, the VP of sales, who would be the buyer for that, isn't going to come to the website with a credit card?

DC: Nope.

Speaker 1: And get on the$ 50 a month plan.

DC: But you know what's the best part?

Speaker 1: What's the best part?

DC: If you're that small individual or you're the largest of companies you can use Drift to speak to both of those people.

Speaker 1: Yeah. That was a good plug. Sometimes I think we don't plug drift enough, but that's okay. We got Playbook. crosstalk we talk about it.

DC: We give, give, give, give, give.

Speaker 1: And all right so anything else we want to talk about this because I got to wrap up?

DC: Let's go.

Speaker 1: So we talk so much about getting reviews. We just crossed 200 by the way.

DC: Wooo.

Speaker 1: 200.

DC: Finally. crosstalk.

Speaker 1: So DG, congrats to me on getting a raise for hitting my 200 quota. I'll buy you guys coffee.

DC: Yeah. He got his regular coffee.

Speaker 1: Yeah. I got it. This is the biggest coffee I've ever had actually. So this show is all about the people and the feedback that we get. So I want to start a new habit of shouting people out-

DC: All right. crosstalk.

Speaker 1: ...some reviews. All right. So this review is from Pete, this was seven days ago. Pete said," Okay. I finally found the right moment to hijack my girlfriend's iPhone. I can now express my rabid fervor for the straight talking. No BS insights offered by DC and DG each week. Seeking Wisdom has become a staple in my weekly podcast consumption. And I find myself recommending it to others regularly. Keep it going, gentlemen, I'm excited for this year's content." And then he went, five star, five star, five star, five star, five star emoji." Sincerely Pete."

DC: Shout it out Pete.

Speaker 1: I mean, you hijack his girlfriend's iPhone because he doesn't use apple products to leave review. Can't teach that.

DC: That's someone who knows how to get it done.

Speaker 1: All right, let them know.

DC: All right, five star reviews only. Hit that subscribe button. We need to climb those charts. Show these people, the Seeking Wisdom community. We're doing big things this year. I can't wait to meet all of you in person.

Speaker 1: Oh, we might have something on that. We're not ready to tell them yet today.

DC: Soon.

Speaker 1: Soon. We'll have more-

DC: All right, stay tuned, man.

Speaker 1: Yeah. And if you just been passively listening, do yourself a favor and subscribe.

DC: See you next week.

Speaker 1: Peace.


If you liked this episode, we bet that you’ll love our blog content. blog.drift.com/#subscribe Subscribe to never miss a post & join the 20,000+ other pros committed to getting better every day. --- Freemium model? Or inside sales? What about outbound sales? On this episode of Seeking Wisdom we're talking about why we made the decision to "split" our sales funnel in 2017, lessons from Dropbox, and what it might mean for your business. Ways to support Seeking Wisdom if you’re a fan of the show: 1. Subscribe. 2. Leave us a five-star review. Here's how: bit.ly/5-Stars-Only. 3. Follow David (twitter.com/dcancel) and Dave (twitter.com/davegerhardt) on Twitter. 4. Learn more about Drift at Drift.com.