The Future is Product-led Growth: Here's What You Need to Know
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What does Slack, Zoom, and HubSpot all have in their common? All of them are software, don't they?
Yes, but that's not all. These three companies are leaders in the new product-driven growth technology of growth marketing software.
The companies that are successful can expand faster and with greater efficiency by using the customer experience and value embedded in their products and services to create a wave of global demand.
The past was when we thought of these companies as becoming "viral." However it is a matter of why were they experiencing exponential growth? What did they do to change the direction of virality and generate huge consumer interest?
The answer is product-led growth or PLGan entirely new way of growth in software.
In this article we'll teach you everything you need to know about product-led growth, including what it is, why it's important, and how to implement it. Plus, you'll see a handful of examples of businesses who have grown successfully by implementing a strategy of growth driven by product.
What Is Product-Led Growth (PLG)?
This growth model is built by connecting different teams that range from product development to sales and marketing, to customer service to assistance -- and linking them closely to the product for scalable and sustainable business growth.
An Introduction to the History of growth driven by products
1. In-Place Software (1980s/1990s)
A flashback to the 80s. What was software like back then? The truth is, it was not widely available since the internet was still in the early stages of its development. Instead, software was something that was installed from a physical box.
The mammoth-like machines needed to be built on-site for hundreds of thousands and occasionally even millionthousands of dollars.
For the sale of these six or seven-figure equipment, companies are dependent on sales-driven growth. Field sales reps would hard-sell clients after spending lots of time socializing with buyers in restaurants and on golf courses.
One of the main things buyers had to be concerned about is whether or not the software could be used with their existing IT infrastructure.
2. Cloud Software (2000s/2010s)
Software could finally be quite compatible with nearly all business settings. So, outbound sales teams were no longer required to talk with super techy executives anymore. They could reach out to executives and discuss KPIs and ROI in order to understand what software could assist them to achieve their goals.
3. PLG Software (2020s)
At the beginning of 2020, growing based on products started to dominate. Now, users have begun adopting workflows that are fully integrated and fueled by automation.
Growth driven by products was the result of the potential of user-experience. Today, with software that is so readily available and the demand for marketing and sales-led growth was slowing, and demands for effectiveness of the software increased.
Exemples of PLG Companies
To help you understand more of the ways PLG businesses succeed, take a an examination of some of the most popular PLG-led businesses around the globe:
Slack
The business was able to tap into a type of virality once the early adopters started convincing colleagues to join. Slack was able to increase the price of an annual subscription, allowing users to save their entire message history. This is essential for big companies.
Dropbox
That meant that each moment a Dropbox user shared a folder, an opener could become a member of the service without signing up. But plenty of these users signed up after seeing the benefits of this platform.
The Dropbox referral program lets users gain extra storage space for every referred user. The program also helps new users to join to test the service, thereby advancing the PLG strategy further.
Notion
One of the keys to using PLG is by making it easy for people to utilize the service. Notion makes it super easy for novice users to begin by offering free templates through their platform. There are also webinars and tutorials that help users understand Notion's different tools.
HubSpot
HubSpot is another product-led company which figured out a strategy of offering the services of a sales staff and a customer success teams for users of freemium. The additional assistance offered early enhanced the user experience, allowing plenty of product education early on which fueled signups.
Through the use of segmentation techniques The team can invest their resources (primarily their teams) in qualified leads. By investing plenty of their funds in support and resources they can improve their products to boost the growth.
How does PLG compare to other Growth Models?
Sales-Led Growth
Sales-led growth is pretty straightforward. The majority of companies' growth efforts are driven by their sales team. Everything the company does supports the sales department. Major and minor decisions in every department filter actions by asking "Does this assist the sales team convert more buyers?"
What do you think? 53% buyers would rather make a purchase without any interaction with sales teams!
Marketing-Led Growth
Even though sales departments still perform their roles in concluding deals, the marketing team is driving the expansion through various strategies for advertising and research on customers.
In industries where software and products are alike It's usually the marketing teams who make the difference as to which of their companies can generate more profit.
Product-Led Growth
In both designs, a buyer must be sold on the value of the product they're thinking of purchasing. Alternatively, product-led growth will focus on prioritizing the product to let the value of the product speak for itself.
Instead of investing heavily into sales or marketing teams, product-led companies concentrate on developing products. That doesn't mean sales or marketing teams aren't active.
Their primary goal is to get potential buyers to take the first step in trying their product using the freemium model. By getting prospects into the user's door this product has been designed to allow users to experience the value firsthand to show its real worth and convince users to keep using it and many opting to purchase a paid subscription.
What Is the Importance of PLG?
The need for growth driven by products is an essential requirement for any software company today. Businesses don't have the keys nowadays. Instead, they're in the control of the customer. Selling customers hard and using strategies to increase sales isn't enough to make a person want to join the age of digital to be an actual client.
The final decision is with the consumer so the top product is going to win.
Below are some motives to think about why PLG is an essential method for SaaS and software firms to employ in the present:
1. Better Customer Experience
When you implement PLG, you will be honing your product to make it superior in the marketplace. A major part of the procedure is to focus on the customer satisfaction. That means that the product is designed with the end user in head.
It's not all about the features. It's how the features interact with one another and the end user to make the experience enjoyable. In most cases, this involves increasing the duration between your first contact with a prospect and the moment they begin using your product.
2. Better Acquisition
If you're focusing on your product development this means improving the user experience. As a result? More customers will be attracted to you.
PLG signifies that your purchase will be integrated into the product through free trials and signups. This lower barrier for entry means that you will make money out of marketing and sales initiatives that can be spent to encourage even more acquisition through your product's experience.
3. More Growth
4. Greater Company Valuation
One of the main reasons PLG to be implemented into your company is due to its value for your business. Product-led growth companies can be more beneficial. It's not just a flims view. It's supported by research.
Based on OpenView Partners, product-led firms are 30% more valuable than those who aren't product-led.
Essential Product-Led Growth Principles
Now that you know the concept behind product-led growth and why it's essential for businesses to implement this strategy today, let's take the time to look over some of the most important PLG growth concepts.
1. Begin with the End User
The principle that drives PLG is that you start with the end user. Every aspect of your company is focused on your customer. In focusing on providing quality to the consumer and generating product innovation, you'll be able to create products that will benefit the customer.
2. Create Products That Live Where Your Customer Lives
It's not enough just to make a great product. You have to build your product where your audience is. That means you must do every effort to make your product accessible and usable places your audience already is. That means that you should allow your software to easily integrate to the areas where your audience lives and works. If it is easy to integrate in with the workflow of a user and workflow, the more likely to adopt the product.
3. Build Open Source
Let your product be driven by APIs. Open-source your product to make it easy to access, modify, and easily integrated into workflows. Your product will be beneficial to more users.
4. Design for Flexibility
Flexibility is a key function of PLG. Your product needs to be flexible to the end consumer. Give them the features and tools they will require to adapt the product for their individual demands to offer the best benefit.
5. Develop Community and Build the Product
The product you create is not complete without a community. While you're developing your product, develop your community. A community shouldn't be added on.
It must be included in the product, built into it. The product you create should also be built into the community.
It will help build ownership for your brand and create superfans who will drive growth through brand evangelism.
6. Offer Value before requesting payment
This is one of the main pillars of PLG. It is essential to provide value upfront before asking the customer to pay their money. By offering your product in the freemium model You are taking the risk so the consumer isn't forced to.
It means that there's less chance for them to be at risk, which lowers the friction, and they're less reluctant to try the item. In lowering the hurdle to trying your product, you'll encourage more customers to try onto the product. This can result in higher conversions of users.
Product-Led Growth Metrics
Now that you understand why PLG is crucial and what are the essential principles you should incorporate on It's time to take a consider how you will determine if you're in the right direction or not.
Here are a few of the most popular product-driven performance metrics that you can employ to make sure you're moving forward.
1. TTV stands for Time To Value (TTV)
The amount of time it takes for new customers to reach the first activation events. For instance, signing up for your product isn't necessarily an TTV occasion.
It's likely that it's the time that more actions are happening, like the import of customer information, or integrating other tools or inviting friends or finishing an onboarding procedure.
The goal for this metric is to reduce it by as much as possible. The closer you can get to zero, the greater. Many SaaS applications have a lengthy TTV. You could accelerate the process by optimizing the user experience onboarding in order to increase activation.
2. Product-Qualified Leads
While marketing-qualified leads (MQLs) are a standard kind of lead viewed by the marketing team, product-qualified leads are those that have experienced your product's value before. It is usually a sign that users already have a freemium or trial accounts.
The definition of the term PQL can differ based the goals of your business and its objectives. It's usually the warmest type of lead that you could pass to your sales staff.
3. Achieved Adoption Rate for Feature
Another metric that you must consider tracking with the PLG approach is the feature's adoption rates. Although features adoption rates are often tracked in product teams an important metric to track in PLG is feature adoption.
This rate, measured by a percentage, shows how many people are using each feature of your application. The key information you can get from this data to fuel your product development and drive user growth.
For instance, you may find that a new feature that you have introduced with a very high rate of adoption which is causing your overall use of the product to rise.
4. Expansion Revenue
This is a vital measure you can utilize to monitor your growth in sales. PLG strives to provide an upfront value to customers. It doesn't stop at the end of the tunnel.
The goal is to provide enough value to ensure that a proportion of users who are free eventually upgrade to a paid plan. You can also generate revenue through further improvements, upgrades, added-ons as well as cross-sells.
Expansion revenue is a measure of revenue earned from customers who are already clients.
Are a PLG strategy right for your Company?
How do you know if product-led growth is the most effective strategy for your company?
Before you begin to implement the process, it's crucial to think about what kind of business will find product-led growth more appealing.
If you own an SaaS business, then take the time to look over the following three aspects: markets, resources, and product availability:
1. Markets
The first consideration you need to look at is to look outward at the market and the competition.
You can ask yourself:
- Is there a product-market fit?
- Is there a growing market?
- Are there underserved consumers?
- My competitors: Who are they?
- What do they have to offer in terms of strengths and weaknesses?
- How much will it cost you to find a potential client?
2. Resources
If you see that there is an opportunity in your market to make your product successful using PLG Then you should move on to resources. The key is to create the appropriate mindset and culture for this to work led by product development.
Ask yourself:
- Are I blessed with the right ability?
- Can I convince my team to use this model?
- Am I willing to invest time, effort, and money to track PLG data?
- How can I justify my company's decision to invest in these resources?
- Where will I sacrifice for the sake of investing in PLG?
- Have I got the marketing expertise to execute PLG?
3. Product Readiness
If you've determined that your market is in good shape and you've got the resources to get it done now is the time to determine your product's maturity.
You can ask yourself:
- Is my product intuitive?
- Does it resolve the audience's problems?
- Does it make sense to use?
- Does it have competitive features?
- Are you able to differentiate it on the market?
- Is the product reliable?
- Is it scalable to handle increased use?
- Can my audience realize product worth quickly and on their own?
- What differentiates us from our competitors?
Product-Led Growth FAQ
Do you have any questions about the impact of product-driven growth? Here are answers to some of the most common concerns:
What challenges can be faced when Using Product-Led Growth?
There are two major challenges that occur with PLG: the first is bringing your whole team to embrace the growth plan that is centered on the product, vs. the marketing and sales teams. Another challenge is gaining insight into information. It's difficult to understand how your PLG efforts are working this is why it's essential to rely upon PLG indicators like time-to-value as well as leads with a product qualification. feature adoption rate.
Consumer-Led Growth vs Product-Led: What's the Difference?
The growth of user-led businesses is dependent on the insight to provide the most effective customer experience. Growth driven by products focuses on the customer experience in order to generate revenue growth. These two models don't compete. They are meant to be used in conjunction. It is important to create a great product and ask for their feedback and then utilize that feedback to enhance the product.
What is a product-led culture?
A culture based on product is one that is focused on the product and the value the product offers to its end-user. Every department is thinking about how its actions will improve the product to create the best product possible.
Summary
If you're planning to begin implementing a product-led growth strategy it is best to begin focusing intently on your users. Do a deep dive into your current users. Learn how they navigate your site and learn what they like and don't like so you can optimize the product experience.
Jeremy Holcombe
Content & Marketing Editor , WordPress Web Developer, and Content writer. In addition to everything WordPress I like the beach, golf, as well as movies. Also, I have height problems ;).