By David Ronald
Everyone is talking about product-led growth these days.
The number of public companies adopting a product-led growth (PLG) motion has skyrocketed since 2012, according to recent research.
According to Bain, companies that prioritize PLG are almost 3x as likely to have gained market share in recent years when compared to their non-PLG competitors.
So, what is product-led growth?
Unlike traditional companies which rely on a sales team to guide a buyer through a selling process, PLG enables buyers a way to experience a product and even purchase it with no, or minimal, involvement by a sales team.
Although this sounds very appealing, PLG is not for everyone.
In this blog post, I’ll provide some guidance on the pros and cos of adopting a PLG strategy.
Key PLG Benefits
While not every business will benefit from a full-scale PLG strategy, there are still ways to be more product-led in your approach to growth that are beneficial to your bottom line. These include:
- Increased customer acquisition and retention—a successful PLG model is often determined by acquiring more customers at lesser costs.
- Better product-market fit—PLG products are purpose-built to meet customer needs, so they require minimal handholding to get started.
- Faster growth—thanks to fewer constraints from large sales teams (ie, no red tape) and resource-intensive lead generation, PLG companies tend to grow fast.
- Improved customer experience—products are designed for easy understanding and onboarding so that users can find value quickly.
- Greater understanding of users—PLG also allows SaaS businesses direct access to their users' behavioral patterns within their service, from which they can extrapolate to refine their product.
- Cost savings—PLG can help businesses reduce costs associated with traditional marketing and sales tactics.
- Higher lifetime value of customers—PLG reduces the need for expensive marketing campaigns and allows businesses to focus their resources on refining the product to meet customer needs.
PLG is especially beneficial for businesses looking to scale quickly and increase their user base.
Some Important Considerations
On the surface level, PLG may look like a simple model for customers to try before they buy.
If we take a deeper look, however, we can see that PLG is a completely new way of growing a SaaS business. Unlike sales-led companies where the whole goal is to take a buyer from Point A to Point B in a sales cycle, product-led companies flip the traditional sales model on its head.
Product-led companies make this possible by giving customers a way to experience the product for free, either through a freemium product or some kind of free trial.
Four key things to consider when considering a PLG motion are:
- Acquisition—how long will it take for a buyer to reach their “a ha” epiphany, that moment when they understand the value that your product will deliver to them (eg, increasing productivity by x%, lowering costs by $y).
- Engagement—how often will a buyer keep coming back to your product? Some people will sign up for a free trial out of curiosity than anything else and may use the product only once.
- Payment—when should you ask a buyer pay? Sure, the obvious time to do so may be at the end of a free trial period, but what if they haven’t arrived at their “a ha” moment by that time.
- Referrals—once a buyer decides to purchase your product how can you incentivize them to share the product with colleagues?
Your goal should be to build a product that addresses each of these considerations with an unequivocal positive response.
If the customer experiences a meaningful outcome while using the product, upgrading to a paid plan becomes a no-brainer.
Guidance on PLG Adoption
So, should you switch to a PLG model?
Well, although PLG offers powerful advantages for many companies, it’s not an ideal strategy for everyone.
One key reason is that not all products lend themselves to a self-service or user-driven experience. Complex, enterprise-level solutions often require significant customization, integration, or specialized onboarding processes that can’t be achieved without the assistance of a dedicated sales or implementation team.
I experienced this first-hand at a former company—due to the complexity of that product, we struggled to make PLG work for us.
Perhaps we would have been better building a simpler version of our product from scratch. PLG, however, requires a significant initial investment in product development and user experience to ensure that the product is intuitive, engaging, and capable of delivering immediate value.
Without a well-crafted user onboarding process or a product that offers a seamless, self-explanatory experience, potential users might drop off before fully understanding the product's benefits.
Moreover, the success of PLG relies heavily on data-driven decision-making and continuous iteration based on user feedback and behavior analytics. Companies that do not have the infrastructure, tools, or culture to analyze and adapt to user data may find it difficult to optimize their product and user journey effectively.
So, in conclusion, a purely product-led approach may not align with the capabilities or strategic goals of every business, making it crucial for organizations to evaluate whether their product, market, and resources support a PLG model before adopting it.
Summary
PLG can be a transformative strategy for companies looking to scale quickly, improve user experience, and reduce customer acquisition costs.
The benefits of a well-executed PLG strategy are undeniable, including increased customer retention, better product-market fit, and a more streamlined path to user acquisition.
It’s essential, however, for businesses to recognize that PLG is not a one-size-fits-all solution and that implementing it successfully requires significant investment in product development and a strong data-driven culture.
Ultimately, organizations should conduct thorough assessments to determine whether their products and target markets are well-suited for a PLG approach.
For those that can support a seamless user-driven experience and commit to continuous iteration, PLG can unlock substantial growth and user loyalty.
For companies with complex solutions or those lacking the necessary infrastructure, a hybrid or sales-led model might better serve their needs and strategic goals.
Did we leave anything out? If so, leave us a comment.
Thanks for reading.
