How is product-led growth (PLG) transforming the business landscape in our digital era?
This innovative strategy leverages the product itself as the primary driver of growth, shifting the paradigm away from traditional sales-driven approaches. By focusing on user experience and the inherent value of the product, PLG aligns with the modern buyer's expectations, fostering a culture of innovation and customer-centricity.
In this post, we'll explore how adopting PLG can revolutionize your business, enhancing adaptability, efficiency, and setting the stage for sustainable success in today's competitive market.
What is product-led growth?
Product-led growth (otherwise known as PLG) is a business strategy through which customer acquisition, conversion, expansion, and retention are conducted primarily through the product itself.
The product-led growth business methodology has all user acquisition, expansion, conversion, and retention all driven primarily by the product itself. This creates company-wide alignment across teams, including sales, marketing, product, and engineering, around the product as the single source of sustainable, scalable business growth.
This acts in contrast to traditional models where each step of the marketing and sales process is driven by different departments or teams such as marketing, sales development, sales, customer success, and so on. These traditional models are driven by individual contributors through various channels of contact versus the product being the primary vehicle of both growth and communication.
Why is product-led growth important?
Product-led growth is important because B2B buyers now have different purchasing preferences that sellers must adjust to if they want to be successful. These buyers want to immediately interact with a product to see if it fits their needs, and don’t want to waste time talking to sellers.
In fact, 54% of prospects want to learn how a product works on the first call, yet only 23% of sellers are willing to show that.
The shift to remote work, combined with the ongoing changes in B2B buyer behavior has caused business buyers to act more as they do in their normal, business-to-consumer lives.
Now, B2B buyers do not want to interact with salespeople until later in their purchase process, if at all. A study by Forrester found that nearly 75% of B2B buyers say they’d rather buy through an app or website, rather than a salesperson.
Even more so, the age of mass outreach is gone. B2B buyers now expect a massive amount of personalization. Epsilon research has found that 80% of buyers are more likely to do business with a company that personalizes their interactions.
So, product-led growth gives sellers what they want - immediate interactions with the product and the opportunity for endless personalization.
Why is PLG significant?
Product-led growth is the new way forward for B2B SassS companies looking to grow their customer base, retain their current users, and scale effectively. No future organization will be successful unless it adapts to the new PLG methodology.
Examples of product-led growth
Many tools that we all likely use every day are driven by PLG. In fact, product-led growth is actually easy to identify. Companies using this strategy typically have a free offering of their product that is limited in some way, whether it be the number of users, features, or capabilities.
These PLG companies require little more than an email to sign up, and once you begin to use it, you soon realize you can’t live without it!
Some examples of product-led growth that you might be familiar with are:
- Calendly
- Google Apps
- Dropbox
- Zoom
- Slack
1. PLG at Calendly
By now, we’ve all likely either been a user of or interacted with Calendly. Created to solve the back and forth required to schedule a virtual meeting, the popularity of Calendly has taken off in the age of remote work.
Calendly is completely free to sign up for, easily integrates with your calendar, and offers immediate benefits. PLG comes in when a user has a need beyond what the basic plan offers.
Calendly’s product-led growth plan includes several tiers that consecutively add in more and more advanced features for only a few dollars more a month. In fact, a user does not actually need to engage with sales until they require enterprise-level functionality.
What’s brilliant about Calendly is that every time someone interacts with it to schedule a meeting, even if they are only the recipient of the link, they experience its usefulness, furthering their PLG strategy.
Calendly’s VP of Product & Design Oji Udezue says, “I don’t mean ask customers what features will satisfy them – that’s an endless and thankless dark path. Instead, focus on core needs and use the team’s ingenuity to find solutions consistent with your vision.”
2. Google Apps and product-led growth
Yes, even one of the largest companies in the world is driven by product-ed growth. In both our consumer and personal lives, G-Apps are a cornerstone of what we do every day.
Whether it be Gmail, Google Docs, Slides, Photos, and so on, Google invites us to use them for free. We get value through the unlimited use of email, word processing, presentation creation, and photo storage, and only need to upgrade once the storage space is exceeded.
Google’s PLG strategy nets us all as customers because once we have reached the point where we need storage space, we likely have committed so significantly to the platform that we are dependent on it, and will gladly pay a few dollars per month over the cost of switching.
Google not only benefits from users paying to use its services, however. The millions of people using its applications generate a massive amount of data that Google uses to make its products better and teach AI algorithms like those used to detect spam in your email. Thus, product-led growth can actually help grow, scale, and improve products as well.
3. DropBox and PLG
DropBox is another SaaS company that has been around for just over 10 years, and already generates nearly $2 billion in revenue, all accomplished through a product-led growth strategy.
There may not be a single person who hasn’t used DropBox in some way, whether it be for a business or personally. Again, DropBox's ease of use and ability for users to share with non-DropBox users are the keys to its success.
4. Zoom’s growth thanks to PLG
When it comes to video conferencing platforms, Zoom is actually a relative newcomer. GoToMeeting, Skype, Teams, WebEx, and more previously dominated the market.
Thanks to product-led growth, Zoom is now the no-brainer of the video call app industry. Zoom is free to sign up for and to use. Not only is it free, but it is incredibly easy to use. With a simple click of a link, you could join a meeting. There is no mess of getting access, setting up complicated apps, or managing invites.
The key to Zoom’s PLG strategy is its simplicity. Much like Calendly, it is so easy to use, it leaves a lasting impression that makes non-users want to set up.
5. Slack’s success with PLG
Does Slack even need a description? Once again, Slac is another highly successful product-led business, seeing explosive growth and a 27 billion dollar acquisition by Salesforce.
Slack’s freemium model begins with a completely free workspace and incrementally adds value (and cost) until you reach the enterprise level. This means that teams of any size or budget can start with Slack, and as they grow can pay to derive further value.
What are the benefits of product-led growth?
In short, product-led growth provides organizations with faster, more efficient, and more scalable growth.
This is accomplished through lower barriers to entry, lower acquisition costs, greater customer retention, and easier upsells.
PLG lowers barriers to entry
What do all of the above-mentioned companies have in common? How did you hear about them? How did you start using them? In all likelihood, you came across them either because someone else was using it, or because it was a free solution to a pain you were experiencing.
Product-led growth centers on the idea that when your product fixes a true pain or serves a true need, it will grow nearly virally, all on its own. You likely heard of Calendly because someone sent you a link to schedule a meeting. After using it, you liked it so much you wanted to use it too.
Lower cost of acquisition with product-led growth
In a PLG model, the product should have its own methods of capturing paying customers, without the need for support by someone else. Since there is no marketing spend, sales development need, or Account Executive involved, the CAQ is lower.
Further, the best PLG strategies involve products that are incredibly easy to start using. There should be little to no setup and anyone should be able to start using it within minutes. This ease creates a stronger bond with the product and allows it to spread even more.
When users can onboard themselves and experience the product on their own, it makes the job of sellers that much easier. Instead of Account Executives having to convince prospects to buy the product before they use it, they are already in it, and want more!
That’s why product-led growth introduces the Product Qualified Lead. A PQL is a user who has already signed up, used the product, entered their data, and has become a committed user. Rather than filtering through thousands of prospects and wasting their time selling to 80% of them, sales reps can work exclusively with users who have sold themselves and are ready to buy more. Who is more interested in your product than someone who has used it and loved it?
Increase retention and upsells with product-led growth
Just as PLG helps sellers identify the most qualified users for sales opportunities, it also helps Customer Success target the best upsell opportunities while increasing customer retention.
A cornerstone of product-led growth is the data that it provides about product usage. With this data, customer success teams can focus on the best users of the product, or those who show the most potential for a potential upgrade or cross-sell.
Armed with this PLG data, CS teams can identify what features a user or team may benefit from, and either reach out to them to make that purchase, or simply inform them of how they can gain more value to help with retention.
Further, when a user can start with the PLG product for free, they integrate it into their workflow and with other applications, where it makes their lives easier. Therefore, the product becomes “sticky” and harder to move away from. This helps with customer retention as well.
Product-led growth benefits user experience
Since most users begin their product-led growth experience with a free (or very inexpensive) version of the product, they experience the maximum amount of value first.
Unlike a traditional model, where users pay a larger upfront fee, before taking days, to weeks or even months before they feel the return on investment. With PLG, users simply pay when they are ready or when it feels like it is warranted.
This way, they always feel like they get value for their money and are getting exactly what they need. This psychologically increases their happiness with the product and therefore their user experience.
How do I start with PLG?
So you want to get started with product-led growth? Here are the steps you need to take:
- Educate your team
- Assess your starting point
- Shift your team’s roles
- Gather usage data
- Measure and repeat
Educate your team on product-led growth
Despite your product-led growth’s notoriety, do not be surprised if many people are not familiar with it or its benefits. Before you can begin any sort of PLG transformation, you must first educate your team (both above and below) to garner support and understanding for the changes that are about to take place.
Assess your starting point
Each industry and product will need to approach product-led growth slightly differently, but the foundation remains the same. Therefore, there are several key points that must be in place for a successful PLG launch.
- Product functionality - Your product must be second to none, so when users try it, they can’t stop using it.
- User experience - Not only should your product be virtually appealing, but it should be simple and easy to use so users can onboard themselves.
- Product management team - Your product team should be nothing but all-stars since they will be the ones driving the bulk of this effort.
Shift your team’s roles
Product-led growth impacts the entire organization. Naturally, the roles of your go to market teams will shift as well. So, instead of your company’s revenue being primarily marketing-led or sales-led, it is driven by the product.
Therefore, instead of marketing focusing on driving MQLs towards the sales groups, they will push any sort of potential user towards the product, then focus on converting those users into product qualified leads.
PLG offers significant benefits for your sales team in that they will only be dealing with the most qualified users. So, sales will shift from worrying about creating SQLs, any sort of sales development (outside of enterprise deals), and will instead focus on converting current users into paying users. Not to mention, PQLs have a significantly higher conversion rate than SQLs while being less high touch.
Gather PLG usage data
Much like marketing needs data around webpage visits, content downloads, event attendance, and referral sources, PLG requires product data to be effective.
Therefore, it’s important to install applications that allow you to track what users do within your product. Where do they spend their time, what dashboards do they look at, what features do they use? All of this data will help sellers properly convert them into paying users and help you improve your customer experience.
Measure and repeat
With your product-led growth process in place, it's time to measure, establish goals and repeat. See what strategies work and what don’t.
