🍿 The Popcorn Machine Strategy: The secret weapon for product-led growth
To leverage this strategy for software, start by building your own basic productivity block
Markets today tend to favor startups that put profitability first and so the traditional approach to growth for software companies — sales driven and top-down — becomes outdated. This method admittedly gave birth to many success stories, starting with Salesforce and a long list of vertical SaaS. But it shows major pitfalls — to name a few:
- Cost: it's FTE-intensive and drives CAC
- Time: sales processes are time-consuming and administrative
- Scale: this approach doesn't scale well as there is no/limited network effect
Software isn't the first industry to question purely sales-driven growth. Sam Walton, godfather of modern retail and founder of Walmart, was among the first to extensively use a radically new concept in go-to-market that helped reduce sales costs: a loss leader product i.e. a product appealing to the mass, potentially at a loss to bring traffic in.
In his book "Made in America" he showed how placing popcorn machines at the entrance of Walmart stores contributed to bringing continuous traffic - rather than going for the more labor-intensive outbound acquisition approach. The loss leader strategy is to offer products to customers to attract them so they eventually test other higher-margin products.
This might sound obvious today, but at the time it was smart and innovative. This tactic has become widespread nowadays. And not only for retail but also for telecom companies who win over new subscribers with cheap phones or even grocery stores who sell water bottles quasi at loss to stimulate their clients to buy other articles.
In other words: putting forward a simple product at a very competitive price will appeal to the mass and attract customers so that they can experience your overall value proposition.
Basic productivity block
New productivity tools — such as Notion, Figma, Folk or Airtable — have brought the Popcorn Machine strategy up to date. They found a loss leader product within the software and left behind the top-down, sales-driven growth in order to build a bottom-up, product-led growth.
These companies eventually target teams to help them manage complex workflow, that's where the $ are! But to attract users, they have to first build a loss leader product for single users: a basic productivity block
- They have made their product simple, intuitive, and cheap so to be also used by single users. Anyone can set up their account in just a few clicks and start leveraging the power of the tool to increase their productivity. Single users won't use the product to its full capabilities, but rather tackle a basic productivity block e.g. note-taking with Notion, personal CRM with Folk, drawing basic designs with Figma, etc.
- They demonstrate clear messaging and positioning targeted at single users. They clearly communicate the value this basic productivity block brings by showing it solves an issue for the mass. In a way, it comes down to vulgarizing their software by over-simplifying it.
These basic productivity blocks are great entry points for anyone's productivity routine. They are software's loss leader products.
Land and expand
When the user is in, the product can sell itself. The onboarding is designed so the users ramp-up their usage. They discover functionalities progressively and adapt it to their own real-life use cases.
Once the user is conquered, the trick is to turn them into an advocate, so they'll naturally push the product to their team. With an additional layer of collaboration, any basic productivity block may be transformed into a more complex team workflow that will capture more value: from note-taking app to building company wiki with Notion, from personal CRM to managing recruitment, fundraising or sales process with Folk, from drawing designs to managing design systems with Figma, etc.
I'd bet this innovative go-to-market strategy will make champions in the coming years as it has major outcomes:
- It's cost-effective — This mechanically reduces CAC, and helps sales team focus their energy on large, complex and highly valuable enterprise deals.
- It's smoother in time — Cross-selling and upselling will happen over time - smoothly. Expanding along with the use of the product inside the organization. No need for a time-consuming, administrative deal.
- It's scalable — Users will become salespeople. The more users there will be, the more it will sell.
In today's quest for profitability, find out your popcorn machine. Design your product with a simple productivity block that will fuel your top-of-the-funnel. When you land, then expand!
Markets today tend to favor startups that put profitability first