(2021-06-03) Armstrong Product-led Growth's Failure

Evan Armstrong: Product-Led Growth’s Failure. Qualtrics should’ve lost but somehow emerged victorious. By wielding a 3 pronged strategy of utilizing cheap Utah labor, gutsy product marketing, and aggressive GTM tactics, the company resoundingly beat Surveymonkey.

There is a reason almost all software companies are built on the back of outbound sales motions.

SurveyMonkey. Despite having everything that modern go-to-market (GTM) theory is built upon (growth loops, channel sales partnerships, and product lead growth) they failed and they failed hard. As of writing, they have a $2.8b dollar valuation in comparison to their top competitors’ $17.6b valuation.

Their foil, their nemesis, was the Provo, Utah-based Qualtrics. It is utilized by the majority of the Fortune 500, has had speakers like Oprah and Michelle Obama at its conferences, and has created its own software category. The one teensy, kinda weird detail is that their product capabilities are nearly identical to Surveymonkey.

On its surface, surveys are boring. Upon closer inspection, they are still boring. There are essentially 3 things you need to make it work

This is not a technically demanding product to build or maintain. So with this in mind, what do you do?

SurveyMonkey decided to stay hyper-focused on the first layer.

Here’s a chart they made for their S-1 that plots significant events in SurveyMonkey’s history against “Cumulative Registered Users”

Qualtrics took the opposite approach. Whether through strategic genius or fumbling luck, they decided to be full-stack.

The world does not need more data and analytics tools.

Yet again, we are left asking how on earth did Qualtrics win?

If you control F on the homepage of the two companies you’ll find “Survey” mentioned 47 times on SurveyMonkey’s site

Instead, Qualtrics invented something entirely their own, “Experience Management.” What is this? Who cares! Sounds a hell of a lot more valuable than “survey software.” (positioning)

By doing experience management versus selling software they have shifted from selling tools to selling outcomes.

Sales reps (and all Qualtrics employees) are under strict instruction to never make a public-facing statement that uses the word “survey”.

Rather than working through a bottom-up approach, with Product Managers and Market Research Analysts telling their bosses they need this tool, Qualtrics can go directly to the C-Suite. (enterprise)

Outcomes can have identical product capabilities as competitors, be harder to use than competitors, and have significantly higher prices. It doesn’t matter. People will pay for it anyway.

Of course, this strategy came with a cost. By beefing up their appeal to powerful enterprise buyers, Qualtrics had to spend significantly more on sales and marketing than SurveyMonkey, their bottom-up competitor.

Turns out, investing in sales & marketing was critical to winning this market.

This positioning decision also filters down to organizational choices. While SurveyMonkey may spend $300k on a high-quality, well-credentialed Bay Area engineer to build growth loops, Qualtrics can hire 6 entry-level sales reps at $50k a pop in Utah who blanket the country, cold-calling executives, espousing the gospel of insights and experience management.

The choices they made, however strange they may feel, enabled them to build a company that is so scary that when they debuted their financial documents publicly it made SurveyMonkey’s stock price drop 20%. Every other company has been forced to adopt similar business models

SurveyMonkey now has a professional services team (launched ~6 months ago).


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