Slack is a company that needs no introduction. They went from zero to a valuation of $7 billion in only five short years, and have become a poster child for the freemium, bottoms-up go-to-market strategy. Their early success with product led growth (PLG) has also made them a leader in this emerging discipline. But, despite their consistent attainment of stratospheric heights, it turns out that they have built their empire on some pretty down-to-earth concepts and philosophies.
Fareed Mosavat, Slack’s Lifecycle Product Manager, came to the company with multifaceted experience. In addition to working at a variety of startups (including Instacart, RunKeeper and Conduit Labs) he also spent seven years working in computer graphics at Pixar. Throughout his career, the one through line has been consistently working at companies whose products exist at the intersection of technology and the most fundamental parts of our human lives—health, sustenance and communication.
At Slack, Fareed plays a pivotal role in the company’s ongoing achievements. His broad experience within the organization gives him insight into all aspects of Slack’s growth—from the foundational philosophy to the tactical strategy to the minutia of metrics.
Living by a Different Kind of Growth Philosophy
Slack’s philosophy is reflected in the fact that Fareed’s team is called the Lifecycle Team rather than the Growth Team. “Our role is all about customer experience,” Fareed says. “Our mission is to help every company effectively adopt and scale Slack within their organization. For us, growth is a natural side effect of the customer impact we have, not the primary goal. It’s how we measure our success at helping customers use Slack.”
This unique perspective—looking at growth as an outcome, not an objective—helps Slack maintain a truly customer-focused approach to how they think about problems. It also serves as a touchstone for everything Fareed’s team does. And they do a lot. “We’re a full stack product team,” he explains. “We own the underlying systems, not just driving growth or the marketing on top of that. We own billing, user administration, signup and login along with the elements that are traditionally part of a growth team such as onboarding, free-to-paid conversion and so forth.”
On the other hand, Fareed’s team does not own acquisition channels like paid marketing, SEO, or content. “We work closely with those teams, but we’re focused entirely on the customer experience,” he says. “From the second a user hits Slack and starts to use it, we’re there to help them enable Slack within their organization.”
Getting Freemium Right
Having worked on a variety of B2C and B2B products that used a freemium go-to-market model, Fareed has gained a good sense of what it takes to make this kind of strategy work. It’s not right for every product, but when there’s a good fit, it’s a powerful tool. His rule of thumb is that a product needs to have three attributes in order for freemium to work:
- Viral: Successful freemium businesses are able to leverage virality, usually because they are naturally collaborative. Offering a freemium option means that one user can easily invite other users, leading to additional adoption and growth. Fareed warns against trying to hybridize this approach with an “almost free” option. “If you’ve ever heard of the penny gap, you know that getting people to pay even a single dollar creates major friction.” The goal is to reduce friction as much as possible, ensure a strong understanding of the basic value proposition, and make it easy for teams to adopt your product from the bottom up.
- Sticky: The second attribute is all about retention. The product has to be easy to set up and activate so that users can instantly engage and see value. And the value should scale nonlinearly with usage, meaning that the more someone uses it, the faster they’re able to generate value. This value acceleration might be due to a network effect, volume, or accessibility. Dropbox, for instance, becomes more valuable as a user adds more files and collaborators; Slack becomes more valuable as the message archive grows.
- Upgraded via Usage: “The third thing a product needs to make freemium work is an alignment with a value metric or usage quota around which to build the upgrade path,” Fareed says. “Freemium models built around premium features are really hard to get right. It’s easier to succeed by scaling usage.” The trouble with premium features is that different users will covet different features, so it’s difficult to find a universal path that will move everyone. Building an upgrade path around usage allows you to tap into an aspect of the product that affects every user.
Which brings us to the challenges of the free-to-paid conversion. “Awareness is a huge problem area for freemium,” Fareed says. “People can use your product for months as a free service and not have any idea how you make money.” To combat this, Fareed and his team make sure that customers really understand not only what the paid plan options are, but also how they provide additional value to the customer. “Timing is important,” he says. “We make sure we have the surface area within the free product to explain details about features and value at exactly the right time.”
To effectively communicate with users about the upside of converting to a paid option, Fareed recommends being really clear on two specific fronts:
- Know your audience. “You need to really understand your target customers,” Fareed says. “Not only who they are, but also what kinds of plans will be right for them.” For instance, the Slack team puts a lot of thought into how different size companies use their product so that they can build a tier structure that makes sense to those audiences.
- Be clear about your core value metric. For Slack, this is the size of the archive. Users get 10,000 messages for free, and after that there’s a rolling window of 10,000 messages. Fareed’s team makes sure that they’ve built surface area and paid future awareness inside the product so that users are constantly reminded about this threshold and what to do to increase it.
Prioritizing Efforts Between Free and Paid Users
Every product team has to grapple with the question of how to allocate resources between freemium and paid users. On the one hand, it’s important to provide an excellent freemium experience for new users. On the other hand, there’s a strong argument for prioritizing the needs of paying customers so you can keep them around. To make smart decisions, you need to really understand your customer lifecycle.
“The most effective way to drive the size of our paid user base is making sure customers understand Slack, can use it inside their organization, and are happy with it right from the early days,” Fareed says. To ensure all of this, Fareed’s team expends an enormous amount of energy on early onboarding to get new users successfully through the first few days of using the product. The primary goal is to get new users to a place where they feel comfortable inviting coworkers to Slack. As Fareed points out, Slack is collaborative by nature and doesn’t really have a single-player mode, so it’s critically important to help users over the initial hurdle of getting other teammates on board.
Once a user has become more deeply engaged, Fareed’s team transitions to thinking about how to move that user (and the associated team within the customer organization) to a paid plan. The approach to facilitating this conversion is very focused on the customer experience and looking at things from the customer‘s perspective. “Mostly, we tend to think about how to stay out of the way of early adoption,” Fareed says. “We make sure that anything a user needs to gain a basic understanding of Slack, collaborate, or experience the usefulness and value of the product is part of the free version of the product.” The goal is for Slack to be highly valuable to every user on the first day.
The kinds of things that fall into paid plans include expanded usage options and features that are valuable only once Slack has been deeply integrated into an organization, often as a formal or official solution. These include advanced administrative tools (such as an IT team might need), single sign on, interactive screen sharing, group calls, and so on.
“Overall, we’re not just building for new customers who have just signed up and are ready to pay,” Fareed says. “We also want to be sure that those who have already chosen to deploy Slack within their organization (and are already happily paying for it) continue to get more and more value over time and always feel like they are getting more for their money.”
When it comes to metrics, Fareed recommends keeping it as simple as humanly possible. “We define activation around the moment at which someone begins getting initial value,” he says. “That’s the point after which we see consistency in retention and engagement.” Fareed refers to this point in the customer lifecycle as the moment of first value.
Every product has a moment of first value. For Instacart, it’s the moment a user places and receives their first grocery order. For RunKeeper, it’s the moment a user finishes their first run. The moment of first value is about getting the full experience of the product and seeing the value once the loop is closed. Ideally, you’d like users to reach this moment of first value in the first few minutes or even seconds, but it’s reasonable to look at a longer period of time. The important thing is to clearly understand how and when a user experiences this pivotal part of their relationship with the product.
“For Slack, we build activation around having a certain number of users—usually three—in the product and having them send and receive approximately 50 messages,” Fareed says. “This is the point at which we see higher customer retention.”
More importantly, Fareed and his team understand the role they need to play in helping each user to the next level of engagement. “Getting into that first conversation is the moment at which a new user starts to understand the basics and value of Slack,” he says. “From there, we have a ton of work to do in order to demonstrate the full value of Slack throughout the lifecycle of the customer, but it’s at that first moment that we know we have a shot at building a long-term relationship.” Fareed’s team is working on mapping out the full customer journey in order to build product experiences around how users deploy Slack. While no two customers are exactly the same, there are similarities in the journey from week one to week two and month one to month two. Fareed uses insights into customer behavior and needs to uncover ways to increase value and conversion.
Failing Forward (But Not Fast)
While Fareed and his team may appear to always be one step ahead, the chaotic reality of a high-growth startup means that there are plenty of failures to go along with the wins. This is something that Slack has built into the DNA of how they operate. “We recently did some analysis on past experiments, and our hit rate is less than one in three.” Fareed says, “So, we’ve just embedded that reality into our process. We understand that the vast majority of things we do won’t work, and we’re building learning loops around that. This isn’t just about success. It’s about updating your priors.”
With this philosophy in mind, the team works hard to ensure that every experiment they release helps them learn something that will increase their chances of success the next time around. They think about the process holistically. Rather than measuring the success or failure of each experiment in isolation, they look at each test as a stepping stone to the next test.
Within this framework, they are careful to stay focused on maintaining good customer experiences. “I don’t believe in the ‘fail fast’ mentality,” Fareed says. “With a business product, you’re dealing with customers who are paying you real money and have a low tolerance for problems, mistakes and failure. You don’t want to get in the way of the work they are doing, so you can’t just throw things at the wall. You have to really understand why things work or don’t work and have high confidence that every experiment has the potential to deliver a good experience, even if it doesn’t end up having the impact you hoped it would.”
Fareed expects to see a fundamental shift in how SaaS companies approach growth. “For a long time, growth teams were seen as separate and only there to solve a very specific problem,” he says. “We need to think about growth more holistically, We have to move beyond thinking that a marketing team just drives leads and a product team just builds product. All the teams are part of a more comprehensive and consistent system.”
Based on his team’s approach to product management as a very data-driven discipline, Fareed also expects to see more growth teams adopting the lifecycle approach and using data as part of their core practice. Eventually, he surmises the need for separate growth teams might diminish over time as the role will be more fully integrated into the way companies develop and market products.
“At the end of the day, customers aren’t concerned about your org chart or who owns which pieces of the product,” Fareed says. “They just want to have a great, holistic experience from end to end. We need to be thinking about growth in the same way – through every part of product management.”