PLG, SaaS, and how the nonsense terms from tech can help supercharge your author career

This is an article requested by many authors I met at NINC, who wanted to read tech articles more thoroughly, but had no idea what the terms meant. They asked for a guide to the important terms, and I went a little overboard, as I often do.

If you are a paid member, I recommend reading Growth, or something like it, Setting up your direct sales environment, and How to reframe capitalism to make sales and marketing work (better) for you to help round out this article.

If you are not a paid member, you can read everything with a 7-day free trial, or give us a one-time tip.

I read a lot of tech articles, specifically about growth and scale, two words that are as exhausting as they are enthralling.

I am the first to admit that these articles are filled with nonsense terms and acronyms that make no sense. It’s almost as if they have chosen the most complicated series of words on purpose to make sure laymen won’t understand them.

Well, while I am not exactly a layman, I have spent my career translating business terms to creative people, and this might be my hardest challenge ever. Today, I’m going to take you through some of the terms that tech articles use, what they actually mean, and why they are important for writers to know.

By the end of this article, well let’s be honest there’s a good chance you’ll tune out part way through because this stuff can be pretty boring, but if you make it to the end, you will hopefully be able to read these articles and understand what they are talking about, at least.

Ideally, you would understand how to use the strategies associated with these terms in your own business, because while tech is a lot of things, one of them is profitable. They have figured out how to create seven, eight, nine, and up figure businesses online. So, they must know something we don’t right?

Well, hopefully soon you’ll know those things, too. I have added handy charts and graphs to explain every one of these concepts. Make sure to go slow and take breaks. I do this for a living and even my eyes were getting cross editing this piece.

*** Please note that if you are reading this via email, Substack only sent out a partial version and the article will eventually stop without notice. If you want to read the whole 6,000-word article, then go to this website.***

Inbound marketing vs Outbound marketing

What it means: Inbound marketing is about creating content that people search out that leads back to you. Outbound marketing is about you pushing your message to people through ads, calls, conventions, etc. If they are coming to you, then it’s inbound marketing. If you are going to them, it’s outbound marketing.

Why it’s important for writers: You need both of these strategies in your business. Inbound marketing usually takes a lot longer to spin up successfully, so you probably need to augment it with outbound advertising, at least at the beginning. In general, outbound marketing has a more immediate effect than inbound marketing, but inbound marketing can generate leads for a longer amount of time.

WOM - Word-Of-Mouth marketing

What it means: Customers share their positive experience with your product with other people. This can be organic, but you can also pay for this kind of advertising through influencer marketing or PR. Word of mouth is the gold standard. We all want it. It’s usually the cheapest form or marketing, but the hardest to predict.

Why it’s important for writers: When we talk about readers talking about our books, this is WOM marketing, as is getting reviews, referrals, or many of the ways writers already want to market their work.

TAM/SAM/SOM - Total Addressable Market/Servicable Available Market/Serviceable Obtainable Market

What it means: The complete market for your product is the TAM. This includes everyone, even if you can’t reasonably work with them. The SAM is the portion of a market that you could work with inside the total market that you could theoretically work with. The SOM is the portion of that market that is reasonably attainable.

Why it’s important for writers: Writers love to think everyone will love their work, but while your work might have a huge TAM, your SOM will be much lower, and possibly too low to reasonably expect to make a living from it. If you can move from TAM to SOM then you can have a more realistic vision for your writing business.

Leads

What it means: People who could potentially become customers in the future. These could be gathered through marketing, advertising, or even outbound sales calls to bring people into your pipeline.

Why it’s important for writers: Writers are often singularly focused on turning leads into customers immediately, but most tech businesses know that it takes time to nurture leads and turn them into customers. This is where places like your mailing list are so important, because they help foster customers by turning leads into buyers.

Cost per lead (CPL)

Sales Funnel (AKA TOFU/MOFU/BOFU)

What it means: The process of capturing potential leads and turning them into buyers. This is often separated into TOFU, or Top Of FUnnel, MOFU, or Middle Of FUnnel, and BOFU, or Bottom Of FUnnel.

Why it’s important for writers: Writers often have no strategy for turning leads into buyers or understand how they make sales. They know that if they turn on ads, money comes and maybe those ads are profitable, but a sales funnel is the first step in understanding how to actually build a process into your business that converts leads into buyers.

Pipeline

What it means: A visual way to represent potential buyers through the different stages of the purchasing process. This is the tactical process you use to draw people through your sales funnel.

Why it’s important for writers: I often talk about the sales funnel as a way to bring leads into your business and turn them into buyers, but a pipeline is the strategy you use to do that. Every part of your pipeline is a different touchpoint that helps turn your potential buyer into a customer.

Flywheel

What it means: While a sales funnel is a process of turning leads into customers, the process of a sales funnel is very transactional and basically ends when somebody purchases. A flywheel, in contrast, centers the customer experience throughout the sales cycle and creates a holistic experience that continues long before and after a sale.

Why it’s important for writers: Writers are often great at creating a good experience for their potential customers, but they are…less good at asking for the sale, which is an integral part of owning a business. The flywheel centers the customer while also leaving room for sales as part of the customer experience. Personally, I think writers need to start with a funnel and turn it into a flywheel. If you know about our Author Ecosystems, we often say a Tundra is a funnel without a flywheel, while a Forest and Grassland are flywheels without a funnel.

Sales Channel

What it means: A platform or market a business uses to sell its products. This can include places like Facebook, Google, or Amazon, but it can also include conventions, billboards, or outbound sales calls.

Why it’s important for writers: Writers are not very good at looking at their business across sales channels, or finding new sales channels to bring into the business. In the world of direct sales, we must be able to pull leads from different channels in order to succeed.

Value Ladder

What it means: A range of products and services at different price points meant to attract different types of buyers.

Why it’s important for writers: Writers are very good at thinking in books, but books are only one price point, and even within them you can offer ebooks, print books, hardcovers, special editions, annotated books, and much more at different price points to attract different readers. You can also include things like an in-person conference, VIP calls, personalized letters, writing people into books, and many other types of rewards to people in order to expand your business and bring in more revenue. This value ladder can be seen most starkly in the reward tiers on Kickstarter.

Continuity:

What it means: In a subscription-based business, the continuity is the money that you make every month. People also talk about this as MRR (Monthly Recurring Revenue) or ARR (Annual recurring revenue) which we will get to in a bit. On Substack, the Gross Annualized Revenue is the “continuity” of your business.

Why it’s important for writers: Subscriptions are an essential pillar of any direct sales strategy. As the above image shows, even in the most successful businesses, continuity runs under everything to help add stability to a volatile market.

Profit Margin:

What it means: When you take your overall revenue and subtract it from your operating costs, what remains is your profit margin. If you’ve ever had a job, you can think of revenue as your gross income, and your profit margin as your net income once taxes and everything else is taken out of it.

Why it’s important for writers: We all want to swim in pool of gross, but we are trapped in net of net. I heard Hector Elizondo say that in a movie once, and I’ve always remembered it. There are lots of “experts” who talk about making six figures a month on Amazon, but when you dig into it they are spending six figures a month to get there, leaving them with very little profit at the end of the day.

CAC - Customer Acquisition Cost

What it means: This translates to how much it costs to find a buyer for a product across marketing, advertising, and other outreach. Depending on the product, it can cost upwards of $150+ to find somebody to start a trial for a product. However, if that product has a cost of $1000+, and is mostly profit, then that cost can be easily absorbed by the organization.

Why it’s important for writers: Just like tech companies, we are trying to find readers and turn them into customers. If we can better understand how much it costs to acquire a customer across sales channels, we can make better use of our marketing spend.

Churn/Attrition

What it means: The amount of customers that leave your business during a given time period. The average annual churn for a tech company is 5-7%, which means a company needs to grow by that percentage every year just to stay stable. Otherwise, their income will decrease.

Why it’s important for writers: Writers often tell me they are happy with the readers they have and don’t want to do more marketing, but the truth is that even if you do everything perfectly a certain percentage of people will stop reading you every year, even if only because they died. If you aren’t constantly finding new readers, then eventually you will have no readers left.

LCV - Lifetime Customer Value

What it means: How much money a customer will spend inside your business before they leave your ecosystem.

Why it’s important for writers: Every author wants to believe their readers will stay with them forever, but every business has a burn rate where customers will leave their ecosystem. Knowing the lifetime customer value of your readers allows you to plan marketing costs effectively. If you know that a reader coming into your ecosystem will spend an average of $50 with you, then theoretically you can confidently spend up to $49 and still remain profitable.

Burn rate

What it means: How much cash you spend over a specific period of time.

Why it’s important for writers: Making money doesn’t matter if you don’t have more cash on hand than you spend. Publishing is a war of attrition. You are often using this month’s launch to pay for next month’s launch and hoping to find your hit that will fund the next year of your business. One of the biggest reasons authors fail is because they run out of money before they find their hit. Knowing your burn rate allows you to judge how much longer you have before you run out of money.

Runway

What it means: How long you have before you run out of money.

Why it’s important for writers: As I mentioned above, a huge driver of authors giving up is because they ran out of money before they find their hit. If you know your runway, then you can work toward increasing it every day. I started with one month of runway, and we have built up a few years of runway over time. What you measure you manage.

DAU/MAU - Daily / Monthly Active Users

What it means: A measure of how many people are using your product on a daily or monthly basis.

Why it’s important for writers: While it’s important to track sales, what really moves the needle over time is how many people actually read your work on a consistent basis. In this way KU is a perfect measure of DAU/MAU. It shows not how many people downloaded you book, but how many people are actually consuming it at any given time. The more people who read your work, the more people will commit to reading more. The longer they read, the more commited they will become.

YOY - Year-over-year Growth

What it means: How much you have grown from one year to the next.

Why it’s important for writers: Revenue is important, but growth is in many ways more important. If you aren’t growing your author business, then you are stagnating, and will soon see declines in your business if you don’t do something to fix it.

KPI - Key Performance indicator

What it means: Quantifiable indicators important to the success of your business. While there are hundreds of metrics one can look at to keep their business going, these are the ones a company is focused on to drive growth at any time.

Why it’s important for writers: KPIs give you focus. What you measure you manage, after all. While there are lots of things influencing your author business, there are probably 3-5 that account for the majority of your revenue. Maybe it’s mailing list growth, or Tiktok views, or keeping your ad spend at a certain level. Whatever it is, if you choose a few that drive real growth, then double down on those, it will help keep you focused, and allow you to give up on a lot of things that don’t serve you. KPIs can change throughout the year as well, but I recommending choosing ones you can focus on for at least a few months.

SaaS - Software as a Service

What it means: Web-based software that customers pay for monthly in order to access their products.

Why it’s important for writers: While SaaS is mostly about cloud-based computing, for our purposes it’s also almost always about subscriptions. SaaS companies are trying to find new customers and keep them happy so they continue their subscriptions. They’re also offering different products to help increase the value of a customer over time. As writers, we should be learning from their strategies, even if the business they are running doesn’t matter to us. SaaS companies are great at creating funnels and flywheels, and they have learned to do it at scale.

PLG - Product led growth

What it means: A business model where everything from growth to retention is led by the product. Companies like Dropbox and Slack, among others, are product led growth companies, where using the product, often through a free trial, hooks people into using it more.

Why it’s important for writers: Does this sound like anyone you know? It should, because almost all writers are using this model. Books, publications, and anything where you are trying to get people to read your work as the main vehicle for growth is a PLG company. Free first in series, a trial membership, free book giveaways, etc, are all ways to hook people through product. PLG companies are wildly successful, with some of the highest profit margins in all of tech.

MRR/ARR - Monthly Recurring Revenue/Annual Recurring Revenue

What it means: How much recurring money you make on a monthly/annual basis. This is really important for a subscription business like Substack, because we make a lot of decisions based on the stability and growth of our revenue.

Why it’s important for writers: Recurring revenue should be the goal of any successful business, as it gives us security in a chaotic world. It’s the same reason we like working for a company. Stability is how we predict the future.

GRR/NRR - Gross Retention Rate/Net Retention Rate

What it means: This is a metric measuring revenue growth over time. A good retention rate is 80%+, but a great company will be able to go over 100% by offering upsells. A gross retention rate measures all revenue, while net retention measures your revenue after expenses.

Why it’s important for writers: I’m starting to sound like a broken record, but we want to be growing our business over time. This is another metric that can help us learn how our business is doing, and how we are growing.

B2B vs B2C vs D2C - Business to Business vs Business to Customer vs Direct to Customer

What it means: When you tease out what they mean, these three are pretty simple to understand. Business to Business means a business is selling to another business. Publishers have used a business-to-business model for generations. Their client is not the customer, it’s the book stores and libraries that stock their books. In general indie authors have run a business-to-customer business, which means selling to customers through a distributor like Amazon. The direct-to-customer model is what’s coming now with direct sales, where we take ownership of the entire customer journey.

Why it’s important for writers: The world is changing and we are writers are taking more control of the sales journey to our customers. In doing so, we have to learn the difference between these three business models. Authors often want to sell to libraries, but they are not set up to do so because those have not historically been our customers. If we want to sell to certain customers, then we have to learn how those types of businesses work.

ICA - Ideal Customer Avatar

What it means: The customer who will cost the least to acquire (CAC) and spend the most in your business over time (LCV).

Why it’s important for writers: Most authors try to appeal to everyone, but that is impossible. Instead, they should be defining their ideal customer avatar and trying to find more of them. With eight billion people in the world, it’s easier to find more excited people than trying to turn people who don’t like your work to people who love it, which is unlikely to ever happen.

NPS - Net Promoter Score

What it means: How happy somebody is with your business, and how likely they are to enthusiastically promote your work to other people. This is a metric usually conducted through surveys, and there are all sorts of these metrics. These are based on a Likert Scale. While a 10 point scale is the more common, you can use a 5 point or 7 point as well, among others.

Why it’s important for writers: The most important thing to note about Likert scales is that unless somebody is a 9 or a 10, they are not going to promote you to other people. If you’re looking for evangelists for your brand, you should look to people who are in the 9-10 range. Additionally, these are the people you should be trying to find more of as often as possible. Develop your ideal customer avatar from these people.

Activation rate

What it means: The percentage of people who take a desired action like making a sale, signing up for a mailing list, joining a promotion, etc.

Why it’s important for writers: It’s easy enough to understand why knowing how many people led to sales can be an important metric, but it’s also important to know this when you join promotions and give away free books so you know which promotions to join, and which are ineffective.

Trial conversion rate

What it means: How many people who started a trial membership continued once the trial membership was over.

Why it’s important for writers: This metric is why I offer free trials for my publication. I figtured that if it was good enough for big tech, it was good enough for me. I don’t have a great trial conversion, but it turns out that 10% is pretty good actually. One reason to look at these metrics is to judge how successful you are and what you should be pegging as your success metric. Additionally, if you are giving away free books, you can use this metric to judge how many people convert to buyers for the rest of the series.

ACV - Average Cart Value

What it means: The average dollar amount somebody spends when they check out from your sales platform. This could be Kickstarter, or Patreon, but it will normally be either your web store or landing page.

Why it’s important for writers: If you know how much somebody spends, then you can work on ways to increase that through cross-selling and upselling. 

Cross-selling vs. Upselling

What it means: Upselling means taking a base product and upgrading it with additional bits and bobs to make it more complete. Cross-selling means taking a product and adding other products to make it a more complete experience.

Why it’s important for writers: If done right, 20% of buyers will purchase an upsell or cross-sell, so it’s really important to add this to your business. Since these upsells and cross-sells are often between 2-10x your base product, it could double or triple your revenue.

LVR - Lead Velocity Rate

What it means: How many leads you acquire and close in a given time.

Why it’s important for writers: Having a ton of emails that don’t convert into sales for eternity isn’t very good for your business or mental state. We need to find ways to take those leads and turn them into money. One of the best ways to do that is to increase the speed by which a lead converts to a sale.

ASP - Average Sales Price

What it means: While ACV judges the revenue from your entire store, ASP deals with the average sales price of each individual item.

Why it’s important for writers: In direct sales, some products are great as add-ons to increase cart value, but they are not very good on their own. This helps you suss our any stinkers and try to find ways to use them more effectively.

EOL - End of Life

What it means: When a product stops being supported by sales,marketing, and support.

Why it’s important for writers: We writers tend to think everything should sell forever, but the truth is that some things should probably not be supported, or only be supported by bundles to retain your own sanity. It’s not so bad to have books up forever on Amazon, or behind a pay wall, but sometimes a product on your direct sales store does more harm than good.

ARPU - Average Revenue per user

What it means: How much you made from each subscriber during a given time.

Why it’s important for writers: When you are trying to judge marketing spend, it’s very important to know how much you can expect to make from them. It’s often not very helpful to judge any single user, but taking a group of useres, or even subscribers to your mailing list, becomes a good metric to judge how much effort to put into a marketing promotion. I find this really helpful for my mailing list, as I know how much I can expect to make from a promotion depending on how many emails I get, even if they came in during a free promotion.

IQL/MQL/SQL - Information Qualified Lead/Marketing Qualified Lead/Sales Qualified lead

What it means: An IQL is the weakest lead. They have just learned your company exists. A MQL is somebody who has seen some of your marketing and is interested in hearing more. A SQL is somebody who is ready for a deeper conversation. You can think of an IQL as somebody at the TOFU, a MQL as somebody at the MOFU, and a SQL as somebody at the BOFU.

Why it’s important for writers: As we are building out a sales funnel, we need metrics to determine where a potential customer is in the decision-making process. These terms gives us language to talk about how measure our funnel, and what we measure we manage.

PQL - Product Qualified Lead

What it means: Somebody who has experienced your product by some measure.

Why it’s important for writers: These are the people who have downloaded and read something you have written. We like to think that everyone who downloads our book reads it, but in reality on a small fraction will read our books after downloading and we need to focus on how to get them to actually read our work.

CRO - Conversion Rate Optimization

What it means: Increasing the number of people completing a desired action on your webpage. This could be signing up for a freebie, or buying a book, or any number of things.

Why it’s important for writers: We want more people to read our books, and we want to spend less money doing it. In order to do that, we have to optimize our conversions.

CTR - Click-Through Rate

What it means: The number of people who have clicked on a piece of marketing dividing by the total number of people who have seen a piece of marketing

Why it’s important for writers: If we are running ads, or doing any sort of promotion, we want to know not only the total number of people who engaged with us, but how many people clicked and how many people saw it. Those optimization can allow us to make the most of a limited budget.

USP - Unique Selling Proposition

What it means: A positioning strategy that tells a customer how you are different from all the other competitors in your industry.

Why it’s important for writers: While it’s good to blend into certain tropes, it’s also important to think about the unique things you bring to your audience. It might be that your books are really on trend, or that they twist a trope in an interesting way. Whatever it is, your unique selling proposition can help you stand out from the rest of the market.

UX/UI - User eXperience/User Interface

What it means: The way users interact with a product. The UI is how the product is designed, and the UX is the user’s interaction with it.

Why it’s important for writers: If we care about readers at all, we should want to deliver a great product they will love to them, but the UX extend into every part of your business, and every way a reader interacts with it.

MUV - Monthly Unique Visitor

What it means: How many people visit a webpage or website every month.

Why it’s important for writers: Theoretically, if you can increase the monthly traffic to your website, you should rank better through SEO, get in front of more people, and have more people will buy your product.

CPM - Cost Per Mille (thousand)

What it means: The cost of showing your ads to a thousand people.

Why it’s important for writers: You won’t usually drive traffic using a CPM strategy, but sometimes it can be very helpful when ads are not performing well to see if maybe there are people bidding on your search terms and driving up the costs, which you can see most clearly looking at CPM.

Conversion Path

What it means: The process by which an anonymous human becomes a buyer.

Why it’s important for writers: Most writers have no idea how to turn an anonymous user into a buyer, which is something that tech companies obsess over and have lots of data to share.

Friction

What it means: Anything that slows down or impedes a potential customer from taking a desired action.

Why it’s important for writers: The one thing almost every writer has is a billion friction points in their business. It’s like they intentionally want people not to buy their work. Then, they complain nobody buys their books. The easier you make it to buy your work, the more people will buy it.

PPC - Pay-Per-Click

What it means: This is a term used for a group of advertising options from Google to Facebook, where you pay when somebody clicks on a link instead of paying by how many people see a piece of advertising.

Why it’s important for writers: At some point in your career, you will do PPC advertising, and tech companies probably do it better than anyone else.

CPC - Cost Per Click

What it means: If you are using PPC advertising, CPC is the cost per click of that type of advertising.

Why it’s important for writers: If you are using PPC advertising, you will be charged by the CPC.

CTA - Call To Action

What it means: A call-to-action is a button or link in a piece of marketing that gets somebody to take an action depending on the page offer. In general, you want one single call to action on a sales page.

Why it’s important for writers: Writers need to get way better at honing in on their call to action and providing one per piece of marketing, instead of 10.

Capital

What it means: The amount of money available to pay for day-to-day operations and growth.

Why it’s important for writers: We need money to do business. Having enough money allows us to stay in business.

Deliverable

What it means: The product that will be sent to customers or offered for sale.

Why it’s important for writers: This is just a fancy way of saying product, and we all sell products, though tech companies say they “ship deliverables”.

R&D - Research and Development

What it means: Research and development is the department that plans future products and services.

Why it’s important for writers: Though we usually do it ourselves, we are always reading books and trying to figure out new trends in the market.

A/B Testing

What it means: A/B testing, or split testing means taking multiple options of something and testing them against each other. This often pops up when dealing with ads or landing pages, but can be used for anything.

Why it’s important for writers: If you’ve ever questioned any choice ever, you can use split testing to see the best path forward.

SEO - Search Engine Optimization

What it means: Improving your website so that you show up higher in search engine rankings.

Why it’s important for writers: If you are a Grassland, then your success path relies on content marketing, which is the cornerstone of SEO. We all want to be found when people search for things, but if you are a grassland then this is mission-critical.

P&L - Profit and Loss

What it means: A report that outlines how much you made, how much you spent, and how much is left over for a given time.

Why it’s important for writers: I can’t ever say this enough. Getting your financial house in order allows you to write more freely.

ROI - Return On Investment

What it means: How much money you have left after spending money on something.

Why it’s important for writers: Anything that has a positive ROI is something you should probably double down on, as long as it doesn’t take too much from you energetically or take you away from doing things you love.

COGS - Cost Of Goods Sold

What it means: All of the costs related to the production and sale of products. 

Why it’s important for writers: One of the most important reasons to care about COGS is that in the USA you cannot deduct the cost of goods (i.e. books) until you sell them. So, if you carry inventory from year to the next, you cannot write off the cost of that inventory.

Data Analytics

What it means: Analytics programs allow people to identify insights born from measurable data. Companies like Google Analytics help people make business decisions by providing ways to analyze data.

Why it’s important for writers: So much success in publishing is based upon analyzing data, whether it’s researching trends, planning ad spend, or deciding what conventions to attend.

BI - Business Intelligence

What it means: Strategies and tactics used to analyze business information and transform it into actionable insights. Usually combined with data analytics.

Why it’s important for writers: When we analyze data to make decisions, we are performing BI.

Benchmarking

What it means: Benchmarking means setting clearly definable goals by which you will judge the success (or failure) of certain business objections and analyze the success of your business.

Why it’s important for writers: By setting benchmarks before performing actions in our business, we can take some of the uncertainty out of an uncertain business.

Market penetration/saturation

What it means: A measure of how much a product is being used by its target customers

Why it’s important for writers: We can use this metric to analyze how many books we’ve sold against how many more readers are in any market.

EBITA - Earnings before interest, taxes, and amortization

What it means: Frankly, this is a dumb metric used by unprofitable companies to show they are doing better than they are to investors.

Why it’s important for writers: None. I only put this in here to tell you if you hear about EBITA, you should assume the company is unprofitable and grasping at straws to prove investors should give them money anyway.

Retargeting

What it means: An advertising tactic to tailor ads to people who have gone to your website and not bought anything.

Why it’s important for writers: Retargeting is the key for direct sales. If you aren’t using retargeting and you have a direct sales offer, this can serious increase your sales.

Final thoughts

Tech industry terms are dumb, but as my wife so astutely pointed out, every industry has acronyms and specific terms. In all cases, they are dumb to outsiders.

I don’t think tech terms are any dumber than any other terms in any industry, and they can actually be quite helpful to writers, especially those of us trying to grow through selling books and/or building a continuity program.

Tech is a great model because they are successful at doing the things we want to do, and have been doing it for long enough that we can glean a lot from their success.

If we can peel off even a small sliver of their success, then we will be well on our way to building successful businesses. It can be frustrating, but once we unlock the terminology, the sky is the limit of what we can do with it.

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If you are a paid member, I recommend reading Growth, or something like it, Setting up your direct sales environment, and How to reframe capitalism to make sales and marketing work (better) for you to help round out this article.

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