As humans, we have an innate desire to grow, progress, to achieve. It's what motivates us to pursue our dreams and strive for success. And in the business world, growth is the name of the game. But how do you achieve growth that lasts? How do you create products that your customers truly love that keep them coming back for more?
In my years of experience as a marketer, I've discovered that the key to sustainable growth lies in a customer-centric approach that few businesses have truly mastered: product-led growth. I first encountered the concept of product-led growth while working with a small startup as a Freelancer. They had a product that was struggling to gain traction. It wasn't until I got to talk to customers that stopped using the product that I realized the problem was that the product itself was an afterthought.
In the world of tech startups, companies that leverage product-led growth strategies are making a big splash. With examples like Slack, Calendly, or Trello, it's clear that this approach can help businesses grow quickly and efficiently by using their products to attract and convert users into paying customers.
In this article, I'll share the principles of product-led growth and show you how to harness its power to take your SaaS business to new heights..
Understanding Product-Led Growth (PLG)
Product-led growth (PLG) is a growth model where product usage drives customer acquisition, retention, and expansion (courtesy of OpenView). If you've ever used Slack, Zoom, or Trello, then you've already experienced it firsthand.
Perhaps you stumbled upon them thanks to a friend, colleague, or online search. Maybe you even saw an ad that caught your eye. Whatever the case, you found yourself face-to-face with a product that you could try out without any commitment. No endless documentation to pore over, no white paper to download, just the chance to dive right in and experience the value for yourself. And when you did, that "Aha!" moment hit you like a ton of bricks. You knew right away that this product was the real deal.
At the heart of the product-led growth model is the idea of aligning different teams around the product itself. When a company is truly product-led, every department—from marketing to engineering to customer success—shares a common goal: to deliver a high-quality product experience that drives growth.
By focusing on the product and the user experience, everyone is working towards the same end goal. This level of alignment is critical for creating a seamless and effective go-to-market strategy. It ensures that the product is always top-of-mind and that all teams are working together to deliver value to the customer.
In short, being product-led is about putting the product at the center of everything you do, and building a team that's passionate about creating an outstanding product experience.
Sales-Led Growth vs. Product-Led Growth
To fully understand what product-led growth entails and why it goes beyond a simple "try before you buy" approach, it's important to explore the distinctions between these two growth models: sales-led and product-led.
In a sales-led approach, the revenue-generating teams on the left (sales, marketing, and customer success) are typically separated from the cost-generating teams on the right (engineering and product). In this approach, the sales team is often given priority over the product team, which may result in the latter being pressured to make hasty modifications to the product in order to close deals with big clients. As a result, the company's focus can be shifted away from building a product that truly meets the needs of its intended users and towards satisfying the demands of potential customers, which can be detrimental to the product's long-term success.
By solely prioritizing closing some large enterprise deal with high ACV, a business may risk missing out on a vast pool of potential customers, hindering their ability to achieve sustainable growth in the long term. Furthermore, placing all emphasis on sales could result in limited resources and a lack of flexibility to compete with newer, more innovative competitors who are targeting the low-end market but growing more rapidly.
In short, if your business prioritizes sales over product, you may find yourself constantly chasing larger and more lucrative clients, leading to an unsustainable cycle of pursuing big deals and neglecting the needs of smaller customers. This can result in missed opportunities for growth and limit your ability to compete with smaller, more agile competitors who focus on delivering value to a broader range of customers.
A product-led approach places the product at the center of every strategy and decision-making process. It focuses on creating a product that is so valuable and user-friendly that it naturally attracts and retains customers, driving organic growth. Marketing efforts are focused on showcasing the value of the product and the problem it solves and generating demand on the fly.
Sales teams are equipped with a set of customers who are already familiar with the product & sell it to users who already understand its value. Customer success teams are empowered to drive product adoption and help customers achieve success with the product. Engineering teams are focused on building a high-quality product that delivers a quick time-to-value to the customer.
With a product-led approach, the product itself is the primary driver of growth, acquisition, and retention. By putting the product at the center of the business strategy, organizations can create a sustainable and efficient growth engine that drives customer satisfaction and revenue growth.
“When you’re thinking about the investment you need to make in product-led growth, think about where ownership lives, and it can’t just be one person that has to wake up and think about acquisition. I think it’s critical to have a shared metric across your product and your growth teams” - Sara Varni, CMO at Twilio
Benefits of a PLG strategy
There are several benefits to a product-led growth (PLG) strategy, including:
1. Accelerated growth
With a PLG approach, customers can try the product for themselves and discover its value, leading to faster and more efficient growth. This is because satisfied customers are more likely to recommend the product to others, which can result in a viral effect that drives growth. Additionally, by prioritizing onboarding improvements tailored to each region, your business can attract more international customers and expand its reach in a shorter time, rather than solely relying on hiring more sales reps to achieve global growth like your competitors may be doing.
2. Lower customer acquisition costs (CAC)
Since customers can try the product on their own, PLG can result in lower customer acquisition costs compared to traditional sales and marketing approaches. This is because PLG companies can rely on organic growth and word-of-mouth referrals. Since time-to-value is quick, sales cycles are consequently shortened. In simpler terms, the faster your users can complete a crucial task within your product, the sooner you can turn them into paying customers.
3. Better alignment between product and business
In a PLG approach, the product is at the center of the business, which can result in better alignment between product development and business goals. This can lead to a more effective and efficient product development process that delivers value to customers and drives business growth.
4. Better user experience
Your product's self-onboarding process allows users to experience the product's value without the need for hand-holding.
"Product-led growth might be buzz-wordy right now but this is going to just be called "good business" very soon" - Val Geiser, Digital strategist
However, this doesn't mean that companies utilizing this growth model can't still be involved in guiding the user's journey toward becoming a paying customer. On the contrary, when comparing the two strategies, it might seem as if I'm presenting the sales-led growth as an outdated relic from the pre-internet era. It’s very much still a viable way to grow a business.
It's also worth noting that it's not a fix-all strategy that fits every company. Right about now, I'm guessing you might be wondering, is product-led the right fit for my business?
Is Product-Led Growth the Right Strategy for Your Business?
A product-led strategy may not be the best fit for every business. It's important to evaluate your specific circumstances and determine the best approach for your unique situation.
When deciding if a product-led growth strategy is the right fit for your business, here are some factors to consider :
1.Product usability & ease of discovery
Is your product easy to use and understand without needing extensive documentation or support? How fast can a user perceive the value of your product? If so, it may be a good fit for a product-led approach. While it's not a hard and fast rule, product-led growth tends to be most effective in mature market categories (red ocean) where users are already familiar with the problem or value that the product is addressing. You can do this by providing a free-trial version (full access for a restricted time period) or a freemium version (unlimited usage but restricted features).
2. Selling strategy
Do you have a top-down or bottom-up selling strategy? The type of selling strategy a business uses can also be a determining factor in whether a product-led growth strategy is appropriate. A top-down selling strategy relies on high-level decision-makers to make a purchase, while a bottom-up selling strategy (such as Slack or Atlassian) involves end-users or individual teams within an organization influencing the buying decision.In a product-led strategy, the focus is on providing value to end-users and allowing them to try the product on their own. This makes a bottom-up selling strategy a better fit for businesses looking to adopt a product-led approach, as it allows end-users to experience the product's value and push for its adoption within their organization.
3. Market size
Does your product have a large enough market to support a product-led growth strategy? If your market is too small, you will probably need a more sales-led approach.
4. Viral potential
Does your product have the potential to go viral through word-of-mouth or social sharing? If so, a product-led approach may be a good fit. At the core of PLG is the ability to create an "aha!" moment for the audience, where the product's value is so compelling that users are won over and the potential for massive growth is unlocked.
5. Competitive landscape
Is your product in a competitive market with many alternatives? If so, a product-led strategy may help differentiate your offering.
Is your product scalable without a significant increase in overhead costs? If so, a product-led approach may be a good fit for your business.
So what does this mean for me?
As I mentioned earlier, it is not for everyone. This growth approach isn't absolute, especially if you're not armed enough, Product-led can end up doing the opposite of helping your business.
However, if you feel that your business relates to these criteria, I highly encourage you to consider this approach. Keep in mind that this also implies that you need to make structural changes where the product always remains at the core of your business.
"Freemium is like a Samurai sword: unless you're a master at using it, you can cut your arms off." - Rob Walling, ex-CEO of Drip
Five Practical Tips To Adopt Product-Led Growth
Product-led growth isn't limited to risk-taking entrepreneurs who have built successful businesses like Hubspot, Airtable, and Typeform. Many companies, both large and small, can adopt product-led strategies and achieve significant growth.
Whether you're considering implementing a product-led go-to-market strategy or looking to shift your growth model, these are some practical tips to help you get started and build a solid foundation :
1. Define your value:
Identify the core value proposition of your product that delivers the "aha moment" for your users. By defining your value proposition, you can better align your product and marketing strategies with the needs and preferences of your customers. I've seen this many times and i myself had to shift perspective to better understand the real value customers were paying for.
Take Slack for example, they identified that team communication was a pain point for many businesses, with email chains, chat programs, and other solutions causing more confusion than clarity. They then created a streamlined, intuitive platform for team messaging. They clearly understood that what businesses needed, was a better & faster way to communicate between teams, not a simple group chat app.
2. Align customer acquisition model with revenue:
In a sales-led business, relationships are often the key to closing large deals. It's not uncommon for such businesses to keep their pricing information under wraps, forcing potential customers to request it. But in a product-led strategy, the customer acquisition model and revenue go hand in hand. If the product doesn't live up to its promise, your business will probably struggle to make payroll. If the pricing model is too complex, potential customers will be hesitant to sign up for free trials or freemium models & that number will drop significantly. To avoid confusion, the pricing page should be designed in a way that can be understood in under five seconds. In addition, offering a free plan without any incentive to upgrade is also not recommended. It is a tough balance to achieve, as it's easy to give away too much for free, or even too little.
3. Focus on user onboarding:
Optimize your onboarding process to help users achieve their desired outcome as quickly and easily as possible, reducing friction and removing any unnecessary barriers to engagement. A good onboarding experience can help reduce churn and increase user engagement.
4. Prioritize user feedback:
Prioritizing user feedback is a critical aspect of a successful product-led growth strategy. By actively gathering user feedback and insights, businesses can gain a deep understanding of their user's needs and preferences, as well as identify areas for improvement in their product. This information can then be used to inform product development and drive continuous improvement, ensuring that the product is always meeting the needs of its users. Two effective ways to gather user feedback are through analytics and user testing.
5. Deliver on value:
Delivering value is a critical component of a successful product-led growth strategy. This includes not only creating a perceived value through marketing and sales but also delivering that value through the user experience when trying the product. Customers are increasingly sophisticated and have high expectations for the products they use. They want to understand the value they will receive from a product before they commit to it, and they want that value to be delivered consistently over time. Most businesses tend to overpromise & under-deliver, and this factor alone can be detrimental on users' trust. You can bet that the next time they hear their friends or colleagues talk about your product, they'd be the first to declare the value gap.
Ultimately, delivering on value is key to building a foundation for sustainable growth through a product-led approach. By prioritizing the customer experience and consistently delivering on the value promised, you can establish a loyal user base and differentiate yourself from competitors in a crowded market.
Also, check out this Twitter thread that reveals how Canva became a $40B business in just a few years and created a viral flywheel.
What if Glovo required you to book a demo before you could get your first delivery? What if Trello asked you to download a whitepaper before you could create your first board? What if Canva asked thousands of potential users to talk to sales before creating their first logo? Would you have even gone through with it? Chances are, you'd close that tab faster than a WordPress plugin can break your site. In the modern digital world, where everyone is just a click away from accessing products and services, the Product-Led Growth (PLG) strategy has emerged as the winning formula for many SaaS businesses. We've discussed the definition, benefits, and practical tips to get started with PLG. But what if I told you that implementing this strategy is not always a walk in the park? For example, have you ever found yourself in a situation where a software company requires you to book a demo before trying their product? That is where PLG comes into play, providing customers with the power of experiencing the value of your product before investing. As Eric Siu said, "The beauty of PLG is that you don't have to have a sales team. Your product is selling for you."
In conclusion, the Product-Led Growth strategy is not only about growth, but it's also about providing customers with an exceptional experience that makes them come back for more. When you prioritize user feedback, define your value, communicate your value, align customer acquisition with your revenue model, and deliver on your value, you create a foundation for your business to skyrocket.
I'll leave you with this insightful video from Product School presented by Amazon Senior Product Manager, Hina Kamra.