What Is Product-Led Growth? Strategy and Examples
How can a tech product survive in the market of ever-growing competition? Refocusing your business strategy and putting customer experience and the product's value and quality first can result in a pivotal twist for the better, especially for early-stage startups and growth-stage businesses.
In this case, the product is the main focus and sales driver, and all your business activity revolves around it. The product's quality speaks for itself, making users want to return for more.
But how do you achieve such a transformation successfully? This article will cover everything you need to know about product-led growth (PLG).
What Is Product-Led Growth?
Traditionally, businesses have followed marketing-led or sales-led models, emphasizing these strategies as the primary force for acquiring customers and selling the product. But what's the deal with product-led growth?
The product-led growth definition implies a go-to-market strategy that revolves around reshaping the business to make the delivered product your major growth driver. By highlighting a personalized and flawless user experience and catering to user needs, the product becomes a "self-selling" asset.
In turn, this influences vital product performance metrics like acquisition, activation, conversion, retention, referral, and many others. The PLG methodology doesn't exclude the need for marketing and sales activities, but it has a slightly different focus: building a truly valuable product for clients that's worth buying. It's your traction engine and prime mover.
How Does PLG Work?
Let's put it this way. Imagine you're selling farm cheese on the market. You can go on boasting about how tasty the cheese is, demonstrating mouthwatering photos, and listing which awesome ingredients it's made of. But having potential buyers taste a small sample piece instead can be worth a thousand words.
This tactic allows buyers to experience the product first-hand and make their own conclusions about it. If you think about it, this approach has been around for centuries around the globe, and it definitely makes sense with digital products, especially SaaS solutions.
Another core PLG idea is to shorten the sales cycle. You introduce potential users to the product with a hook to try it and let them explore it on their own. Then it's up to the product to "show and tell" the rest.
As we said, the customer-centric approach emphasizes the product's value and user experience. When these two points become a top priority, you'll build a standalone product that can present itself. This gives your users a chance to discover its value without additional convincing.
But how exactly do you get users to test-run the tech product? Many companies offer free trials or other hands-on onboarding experiences that allow users to check out the product without needing to make a commitment and pay up first. This version of the subscription-based model (the shift to which is among the biggest global trends in business) allows clients to discover the product's advantages by themselves or the "self-service" way.
On your end, you get to convert active users into paying customers who are likely to return to you and recommend the product.
Benefits of Product-Led Growth
Of course, switching to or adopting the PLG methodology is not a simple undertaking for a business. Nonetheless, the effort really pays off as there are numerous product-led growth strategy advantages. Let's go over the main ones.
Improve Conversions and Shorten the Sales Cycle
With the product-led growth approach, you get qualified leads and active users. They experience the product by interacting with it instead of talking to a sales representative. And such "silent encouragement" often leads users to buy the product since they understand its value. This is one of the reasons why the word "freemium" is among the popular startup lingo.
Even if they've only had access to the "freemium" plan, these prospects are easier to convert (and this generally happens faster). Why? Because people are likelier to pay you when they've had a first-hand experience with the product and discovered its strengths.
Consequently, the customer acquisition cost goes down, and CAC is among the most vital metrics as it shows how much you're spending to get a paying customer. Therefore, by allowing a user to "feel" your product, they can make up their mind faster, thus shortening their conversion path and costing you less. So you're likely to save invested money on sales, marketing, and other acquisition costs, freeing up your budget to spend on other business-essential things.
Boosting Product Growth and Simpler Scaling
By shifting to PLG, you invest in improving your offering. Hence, the better your product is, the more chances you'll have to scale it and your business. Add-ons, new features, and other perks appeal to clients and make the product itself contribute to your business growth. This includes the entire path from acquiring customers and engaging users to retaining clients and further product or startup scaling.
Higher Customer Satisfaction
When your users are happy with your product, their loyalty increases. The customer-centric approach brings multiple benefits, including better retention, higher engagement, and visible boosts in other crucial metrics. For example, it'll be simpler to encourage clients who've been using your product for a while to get an upgrade than to sell it to them straight away. That's why some entrepreneurs go for building a minimum lovable product instead of an MVP.
As follows from the above, customers who enjoy the product may become your advocates and driving force for getting more clients. Word of mouth shouldn't be underestimated as it can aid your product in becoming viral.
Be it testimonials or sending a link to a friend, more users can start pouring in without additional marketing or sales input or other classic promotion strategies. What you can do, though, is encourage your customers to invite friends in exchange for a perk (like a discount).
Of course, referrals won't be possible without a top-notch user experience and a well-designed solution. But this shifts the approach from a traditional vertical sales funnel model to a cycle of returning and new clients.
Refocusing Your Marketing and Sales Efforts
As a rule, the product-led growth strategy exists conjointly with marketing and sales efforts. So we're not saying that you won't need them at all. But with product-led growth, you don't have to rely on these tactics as much. It's all about investing your time and resources into making the product better instead of pouring more money into marketing and sales activities.
The three don't mutually exclude each other, yet PLG is a way to enhance overall efficiency. Obviously, this can result in cutting costs on testing new sales and marketing tactics for convincing a customer that the product is worth it.
Giving you a possible scenario, marketing can become more focused on spreading the word about the product, raising brand awareness, and aiding demand (for instance, using paid ads, content, and social media channels). It can urge people to try the product instead of getting them to pay right away.
Similarly, sales revolve around persuasion, but the days of cold calls are practically gone. With proper PLG, sales teams can concentrate on the "bigger fish in the pond", personalizing the offers, or consulting customers with individual cases.
A Better-Aligned Team
Product-led growth implies that various teams in different departments work cohesively. When everyone is on the same page and putting in effort towards a common goal, making decisions becomes simpler, which is crucial both when you're launching a startup and expanding it.
How Can a Company Become Product-Led?
According to a recent survey, more than 58% of companies are adopting the PLG model. So, if you decide to move in this direction, note that the sequence of actions for leveraging this strategy may slightly differ depending on whether you already have an existing product, are planning to build a new one, or are a startup on its way to MVP development.
6 Steps for Becoming Product-Led
The process of organizing or shifting to a product-led growth strategy won't be fast or easy, yet following the plan below can help you get started.
Step 1: First build a decent glitch-free product
We'll cover this point in more detail a bit later. But remember one of the main principles of PLG: your product and its usefulness is in the spotlight. Ideally, you're aiming at building a product that'll:
- solve your user's problem;
- become habitually used;
- and easily incorporated into the user's existing environment.
Step 2: Start spreading the word about the product
You can actually begin doing so before the product is launched to create some hype. The specific marketing channels and tactics are up to you, but you need to target the end users, not necessarily the top executives or "buyers".
Here's an example to clarify what we mean. Suppose you've built a SaaS tool; your end user can be a digital marketing specialist who'll start using the solution and share it with colleagues. If they like the solution and find it handy, they'll ask the boss to purchase the software for all of them to incorporate in their ecosystem. The arguments in favor of the purchase can be to enhance productivity in their daily working processes or complete ongoing tasks or operations more optimally.
In any event, make sure to let your users know what your product is for, why it's reasonable to use it, and how it'll solve their problem. That is, what you're helping them do and why they should use your product again and again.
Step 3: Make the entry threshold easy to pass
For instance, you can simplify the sign-up process for first-time users. Allow them to leave just an email address. Not forcing people to go through lengthy account creation can be a good practice. It's like pouring water on a slide to accelerate the user's "product discovery ride". Moreover, when collecting email addresses, remember about DMARC policy implementation and other security measures to keep email lead data safe from attacks.
Step 4: Make onboarding easy
It should be simple for users to self-educate and experience your product. Explainers and tips can come in various forms:
- videos, tutorials, or feature tours;
- pop-up hints;
- a helper icon offering assistance.
Choose the most intuitive and time-saving options to make it easier for your users to get acquainted with the product and integrate it with their existing infrastructure (if that's necessary).
If you do things right, decent onboarding can influence such metrics as time-to-value (TTV), which marks the period of time it took for the user to go through activation and understand the value of the product.
Step 5: Put advanced features behind the curtain
Partial access to features and limited functionality availability can be enough to "hook" the users. You may add various restrictions to the starter plan, free trial run, or "freemium", such as:
- limited time of use (say, a free one-week trial period);
- limited number of users (eg., 2 people allowed in the free plan);
- limited capacity of data storage or bandwidth;
- action restrictions or included actions (for example, 5 daily searches max.);
- fewer features;
- among others.
All of this can become available to your customers as part of the paid plan. You charge for getting access to the expanded functionality set upgrade, and "bam" you have monetization.
Here's a recommendation, though, choose the time and placement of your upgrade prompt wisely. Apart from listing the options on the pricing page, it also makes sense to timely notify your users that something they want to do will be available after upgrading the package. Make sure to clearly state what they'll be receiving (i.e., what this feature provides or what they'll specifically get).
Step 6: Continue boosting the product
Going for PLG isn't a one-time deal. You'll have to continuously work on making the product even better, add on new features, enhance the existing ones, and review customer feedback after MVP or product launch.
How Do You Shift to PLG?
Now let's dive a little deeper into how to build a product-led growth strategy (that is, create a worthy product and transform the teams' work).
1. Define the Product's Value According to User Needs
It all begins and ends with the product. Delivered value is the centerpiece. So you have to understand your users and what they're trying to achieve when using your product. Then, find ways to personalize the solution and adapt it to live up to client expectations.
Answering the following questions during the discovery phase can help you make decisions:
- Who are your end users? Why do they need this product?
- How does the product solve user pain points and frustrations?
- How do you design and deliver a product that users will enjoy? Is the whole user journey and experience seamless?
- What makes the product engaging? What makes it "sticky"?
- Why do (or should) customers come back to use the product again? What can drive customer loyalty?
- How can you improve the product to make your customers happier and more satisfied?
You most likely won't see the results straight away as you'll need to spend time on research, MVP testing, designing, and tweaking the solution to make it better. This is the standard process of finding product-market fit that's prone to trial and error.
2. Invest Enough Time in a Decent UX/UI Design
Your product must be intuitive in use, so make sure to reduce any friction in the customer journey. Generally, your MVP design process can move from wireframes and mockups to clickable prototypes to show how the product should work when developed.
Yet, keep in mind that user experience is of utmost importance. Omit any unnecessary steps and bottlenecks to simplify the process as much as possible. Then revise the design from time to time to ensure you've done your best.
3. Unify the Goals Across Teams
Transition to the PLG model can't happen in just one team; you need to bring together all parties. Involve numerous specialists in a product's development (not only business analysts but also designers, developers, QAs, marketers, sales, etc.). The more diverse people participate in the brainstorming session and decision-making process, the better the results.
This way, you'll get a complete view of the product's capabilities from different perspectives. Based on that, you can make an actionable plan to bring the ideas to life, assigning roles and distributing areas of responsibility. This includes and isn't limited to choosing the tech stack, working on product feature prioritization, and building a product roadmap.
4. Build the Solution
As you move on to development, make sure to go through a thorough QA testing process. The product should be free of glitches and bugs, easy to use, and appealing. Even if you're just showing the pilot version to your real users, the product has to be neat. Continue testing and validating hypotheses, making tweaks, and adding new features after the product's launch.
5. Mind the Data and Analytics When Making Decisions
Leveraging incoming data may also aid in decision-making. This can make your internal processes more democratic without leaving the big decisions to several people.
Figuring out the right metrics and KPIs that'll show your success is another vital point. This means not only monitoring the product and its performance, but also the progress of your teams. Simple data visualization and easy-to-comprehend data reports may jumpstart your team's understanding of where you stand and where you're going.
6. Make It Easy for Teams to Collaborate
This might be an obvious point, but changes will be needed on the organizational level too. Your teams across departments are focused on their own work scope, yet it should be simple to communicate with each other, coordinate tasks, and stay on track. After all, all cross-department efforts are pointed at achieving a large common goal. Therefore, the teams need the right tools and well-organized processes with timely meet-ups and progress-sharing procedures.
Examples of Product-Led Companies
Multiple well-known organizations are already reaping the benefits of product-led growth adoption. Let's bring up a couple of product-led growth examples.
The following companies have shifted to the PLG model and are working on making their product as intuitive and user-friendly as possible. Most of them offer their users free trials or freemiums. In the list below, we've noted several prominent fields, but there are many more, of course:
- Website builders like Squarespace or Wix;
- E-commerce platforms such as Shopify and BigCommerce;
- Web design tools, for instance, InVision;
- Digital marketing tools such as Semrush;
- Business communication tools like Zoom or Slack;
- Development tools like GitLab, Cloudflare, and DigitalOcean.
Major Takeaways on Product-Led Growth
Fair enough, the PLG path isn't suitable for all tech solutions, especially those that are highly complex and super expensive to build. Yet this go-to-market strategy is forecasted as the future norm.
The PLG adoption procedure will also differ in various companies. It will require a lot of work and investment at first, but reorienting your business processes to focus on the product will raise its profitability and enhance the effectiveness of your investments and cross-department activities in the long run.
Remember that the product-led growth strategy is about showing your users value before they've paid you anything. In this case, you don't speak about value but demonstrate the product in action by letting users test it themselves.
And if you manage to deliver a great product that your customers like, you can leave it to the product to scale the further growth of your business. PLG can become the fuel boosting the sales of your software product on its own. Of course, this doesn't mean that you won't need any marketing or sales input. But you definitely won't go wrong if you invest your resources in making an ultimately valuable product as a path toward sustainable business growth.
Have any questions or would like to discuss your project? Feel free to contact us for a consultation and browse our staff augmentation pricing, Upsilon will be glad to help you skyrocket your product!