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Product-led Growth (PLG) is a strategic trend, most notably for SaaS companies, that is changing the way products are discovered, built, distributed, and sold.
Let’s start by reviewing a few definitions to sharpen our understanding. The term was originally coined by Blake Bartlett in 2016:
Product-Led Growth is a growth model where a product’s experience and value proposition drive customer acquisition, conversion, and expansion. It relies on providing a seamless user experience, creating a product that sells itself and fuels organic growth.
Product-Led Growth is a go-to-market strategy that relies on using your product as the main vehicle to acquire, activate, and retain customers.
So, according to Wes, PLG focuses on using the product as the tool for the complete customer lifecycle. No marketing outside the product but awareness via word-of-mouth. No consulting outside the product but in-product guides. No Account Management team but expansion directly inside the product.
A slightly different definition is given by ProductPlan:
Product-led growth is a business strategy in which a company uses its product as the main tool to acquire customers.
Although usually a great source, ProductPlan is a bit short on this one. PLG is not only about user acquisition but also includes later stages of the customer lifecycle. So, let’s take a look at one more example:
Product-led growth describes a business strategy that places a company’s software at the center of the buying journey—and often at the center of the broader customer experience. A product-led growth strategy counts on the product itself—its features, performance, and virality—to do much of the “selling.”
This one is, again, very much focused on the initial acquisition only.
In Focus on B2B, we have seen how complex a B2B sales process can become. The perspective given in that chapter was very much the prospective customer’s point of view. Not going into too much detail about all the aspects related to Marketing and Sales operations, a typical Sales-Led Growth process looks like this from the vendor’s perspective:
The key thing to note here is:
For the customer, the time to value is very long. Not only is it a lengthy process but it also entails a high risk of failure because a lot of things can go wrong during that period.
For the vendor, this long time-to-value also results in Sales teams often working very much toward the specific needs of a current prospect rather than business visions and strategies — because they try everything they can to shorten the period until the deal is closed.
Compared to the above, the process looks completely different for PLG:
Compared to the Sales-Led process:
The time to value is drastically reduced. Not only does that mean users can perceive the value of a product much faster but it also eliminates a big portion of risks because users can match the perceived value with their expectations.
Essentially three market trends combined push for moving toward PLG:
Building SaaS products has actually become extremely cheap and will probably become cheaper with all the No Code and AI technology around. However, as a consequence of that low barrier to entry, the situation across all markets gets much more competitive. Thus, customer acquisition via traditional Marketing channels has become way more expensive.
More and more buyers don’t want to listen to lengthy Sales pitches but prefer to self-educate. They want to try and evaluate a product before they commit to it. Once they have tried and decided to move forward, there is no more need for over-promising. Instead, the Sales team will have an easier job and conversion rates will go up.
Driven by mobile and a generation that grew up with digital tools, the importance of product experience has grown, most often even to become the #1 decision criterion in buying a product.
These three trends combined are important drivers for PLG as they bring key challenges for the standard Sales-Led Growth approach as we shall see in the next section.
For all of PLG, it is important that the “product” is more than the core tool. It starts with all the material provided beforehand, e.g. during Demand Generation, so that the value proposition is crystal clear. And after the user has been in touch with the core product, aspects like help & support, customer success, and handling of expansions are equally important.
With all of the above, be careful not to overload and annoy users with too many of these hints but instead try to detect signals for when a certain hint might be appropriate. Don’t make them feel like whac-a-mole.
