Product-Led Growth

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.

What is Product-Led Growth?

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.

Wes Bush with his book brought the idea to the mainstream:

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.

In his YouTube course, Wes also rephrases a key idea by Blake Bartlett: How to Build a Product that sells itself:

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.

We prefer following Wes Bush’s definition and see PLG as a go-to-market strategy that aims at using the product itself to win, onboard, support, retain, and expand customers. To what extent that is possible, depends on the product and the domain it is being used in as we shall see below.

Comparing Sales-Led and Product-Led

Sales-Led Growth in a Nutshell

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:

Sales-Led Process
Sales-Led Process
In a nutshell:
  • During Demand Generation, Marketing teams use advertising, social media campaigns, or email marketing to generate interest and make the product known.
  • This results in Visitors to a website, a trade fair, webinars, etc. – often referred to as Marketing Collected Leads (MCL).
  • Based on customer segmentation and other criteria, MCLs are turned into Marketing Qualified Leads (MQL) during Lead Qualification. These MQLs are then handed over from Marketing to Sales.
  • The Sales team, via Prospecting and Needs Assessment, narrows down from MQLs to Sales Accepted Leads (SAL) and later to Sales Qualified Leads based on information such as: available budget, buying power, actual need, and timeline.
  • Only then, the prospective customer and the vendor get in touch, usually by Sales giving Presentations, answering questions, Handling Objections, and finally Negotiation resulting in Closing a deal.
  • After that, Consulting teams get involved in the Implementation which is even required even for SaaS products – for example, to provide initial configurations or set up integrations with other IT systems. Oftentimes, specific Training sessions are conducted, too.
  • Finally, after the system is live and in use, Account Management or Customer Success teams can drive further growth through Expansion.

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.

The Process for Product-Led Growth

Compared to the above, the process looks completely different for PLG:

Product-Led Process
Product-Led Process
  • Marketing is still needed to generate demand, or more precisely Awareness. Using similar methods, the product must be made known on the market. As before, this hopefully results in Visitors.
  • However, since PLG uses the product itself to win, onboard, support, retain, and expand customers, these visitors can directly Sign Up and try the product supported by Self-Onboarding so that users can directly experience the value of the product.
  • After an initial phase, more and more Extended Onboarding can be provided, for example, to explain advanced use case scenarios. The user’s behavior ideally signals the need for Expansion & Upgrades to which Account Management or Customer Success teams can respond.

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.

The Main Drivers for PLG

Essentially three market trends combined push for moving toward PLG:

Growing a startup is getting more expensive.

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.

Buyers want to try before they buy.

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.

Top-notch UX has become mission-critical for buyers.

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.

Key Elements of PLG

In order to successfully implement PLG:
  • Apart from the goal of the product selling itself, we strongly believe that the typical methods of Demand Generation are still needed to create awareness. The goal here is to drive visitors to a website so that they can sign up for testing the product.
  • Different from SLG, some kind of free access is needed so that prospective customers can try before they buy. Typically, two alternative options are provided for this:
    • Either a free trial giving the user access to relevant (if not all) parts of the product for a limited time;
    • or a freemium model providing access without a time limit but only to parts of the software.
  • Beyond free/freemium, it is essential that the product is easy to understand so that it can truly be used in self-service mode. This includes ease of use but also works only in domains that are easy to understand for the target user.
  • To support ease of use, oftentimes in-product tours are implemented to guide users, help them when they are stuck, or indicate when an expansion might be considered.
  • A very important aspect is word-of-mouth: If we want the product to sell itself (after creating the initial awareness), then referrals by users are a necessity. This implies that users are really happy with the product, and hence refer it to others, but also that they are willing to speak about their experience (instead of being embarrassed because they had to use this product).
  • Finally, it’s all about data, data, data. Observing how users get along during their trials, where they struggle, and which scenarios matter to them — leveraging that data and any feedback to address customer needs, identify user pain points, and continually improve the product will help to drive product adoption and long-term, growth. In an extreme case, observing and segmenting users based on that data can even result in adjusting the ideal customer profiles or detecting new ones previously unknown.

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.

When PLG is not a Fit

According to our experience, a few aspects make implementing PLG difficult:
  • When there is no recurring need, repeat usage will not happen which will block PLG. To be fair, in these situations, any kind of product will struggle, regardless of the growth model.
  • In complex domains or when the product requires extensive onboarding, training, or customer support, then PLG might not be a fit. A Sales-Led approach can better ensure the required attention and support during the onboarding journey of the customer.
  • In enterprise environments with a high demand for integrations and customizations, a dedicated Consulting team can help whereas self-service onboarding will be challenging.
  • In industries with a lot of regulatory or compliance requirements, SLG might be needed so that a dedicated team can ensure proper understanding, adherence, and implementation of these requirements.
  • If the sales process involves many stakeholders on the customer’s side, resulting in a complex buying process (see Focus on B2B), face-to-face interactions between the customer and an SLG team will be better suited.
  • We also see challenges with specific types of products. When building a kind of marketplace, for example, it will be impossible to offer some kind of free trial because both, the buyer and the seller on the marketplace, want to receive either goods or money.
  • Last but not least, the market needs to be aware of the problem your product is addressing. Otherwise, Sales teams are needed to educate potential customers and build awareness.
But even in these situations and with a strong Sales team in place, elements of PLG can still be very effective in supporting your growth strategy:
  • Use the product itself for onboarding new users. Avoid separate channels, dedicated training material, or similar collaterals. Try to bring as much of that into the product but make sure you have truly understood users and their needs.
  • Even more, use the product to understand the specific needs of every single user and segment your user base as precisely as possible.
  • After users have been active for a while, offer more in-product tours guiding them through more advanced use cases. Use checklists to create dedicated learning paths — depending on the domain even extended by some kind of gamification.
  • Likewise, use the product itself to announce new features.
  • Don’t show blank pages but use empty states to educate the user on what to do and how to set up.
  • Speaking of signals, use the product to detect when users might be ready for expansion. Maybe they just tried to access a premium feature and didn’t know how to activate it? Maybe they just did something manually that could be done so much better with a hidden functionality? Maybe they dropped off the product in the middle of a →user journey that could have been completed easily with another option? If so, let the Customer Success team step in and manage the up-/cross-sell.

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.