User-led growth relies on user insights to create the best customer experience. Product-led growth leans on the product experience to drive revenue growth. These two models don’t compete. They should be used together. You should create an amazing product, ask users for feedback, then use that feedback to improve the product.
What Is a Product-Led Culture?
There are two main challenges that occur with PLG: the first is getting your entire team on board with this growth strategy centered around the product vs. the marketing and sales teams. The second is understanding data. It can be challenging to understand how your PLG efforts are working, which is why it’s important to lean on PLG metrics like time-to-value, product-qualified leads, and feature adoption rate.
Product-Led Vs User-Led Growth: What Is the Difference?
According to OpenView Partners, product-led companies are 30% more valuable than those who aren’t product-led.
Essential Product-Led Growth Principles
To help you understand more of how PLG companies succeed, take a look at some of the most popular product-led companies in the world:
Slack
The main thing buyers had to worry about was whether the software was compatible with their current IT infrastructure.
2. Cloud Software (2000s/2010s)
Now that you know what product-led growth is and why it’s important for businesses to implement it today, let’s take a look at some of the key PLG growth principles.
1. Start With the End User
This will cultivate ownership in your brand and create superfans who will drive growth through brand evangelism.
If you’re looking to start implementing a product-led growth strategy, the easiest way is to begin focusing intently on your users. Do a deep dive into your current users. Learn how they navigate your product and what they like and don’t like so you can optimize the product experience.
Product-led growth was born out of the power of user experience. With software so accessible nowadays, the need for marketing and sales-led growth began to slow, while the need for the product’s performance accelerated.
Examples of PLG Companies
Dropbox
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1. On-Premise Software (1980s/1990s)
HubSpot is another product-led company that strategized by offering a sales team and customer success team for freemium users. This additional support early on enhanced the user experience, allowing plenty of product education early on which fueled signups.
The goal is to provide enough value that a percentage of free users eventually upgrade to a paid plan. Additionally, you can drive revenue through further upgrades, upsells, add-ons, and cross-sells.
This means there’s less risk for them, which reduces friction and makes them less hesitant to try it out. By reducing the barrier to trying your product, you’ll encourage more users to get their hands on the product, which will fuel premium user conversions.
Product-led growth is a relatively new concept. It’s only a few years old. But, the principles of PLG are centered around a common goal: to create a product-first, user-first experience growth engine around a SaaS product rather than a sales or marketing-first approach.
A Brief History of Product-Led Growth
Yes, but that’s not all. These three companies are pioneers in the product-led growth era of software growth marketing.
HubSpot
Your product is nothing without community. While you’re developing your product, develop your community. A community shouldn’t be added on.
How do you know if product-led growth is the right strategy for your company?
Now that you understand why PLG is important and the core principles to lean into the strategy, it’s time to look at how you can tell whether you’re on track or not.
This is one of the pillars of PLG. It’s crucial you offer value upfront before asking your prospect to hand over their hard-earned cash. By offering your product in the freemium model, you are taking on the risk so the consumer doesn’t have to.
This is a crucial metric you can use to track your sales growth. PLG seeks to offer value upfront to the user. However, it doesn’t end there.
It’s not just about features. It’s about how those features interact with one another and the end user in an enjoyable way. Oftentimes, this means tightening up the timeframe between the first interaction with a prospect and the moment they begin using your product.
2. Better Acquisition
For instance, you may find that a new feature you introduced has a high adoption rate which has fueled your overall product adoption to increase.
4. Expansion Revenue
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In the past, we thought of these companies as going “viral.” But, the question is, why did they have exponential growth? How did they flip the switch on virality and generate massive consumer interest?
Another core metric you should consider tracking with a PLG strategy is feature adoption rate. While product adoption rates are commonly tracked in product teams, a key metric for PLG is feature adoption.
While sales teams still have their roles in closing deals, the marketing team is primarily driving growth through different advertising strategies and customer research.
Finally, if you’ve assessed that the market is ready and you’ve got the resources to make it work, it’s time to assess your product’s maturity.
In this article, you’ll learn everything you need to know about product-led growth, including what it is, why it’s important, and how it works. Plus, you’ll see a few examples of companies that have successfully scaled using a product-led growth strategy.
What Is Product-Led Growth (PLG)?
Notion
What do Slack, Zoom, and HubSpot all have in common? They’re all software, right?
The company tapped into a type of virality once early adopters began convincing co-workers to hop aboard. Slack began upselling to a paid subscription by convincing users to store their complete messaging history, which was crucial for large companies.
Dropbox
Sales-led growth is pretty straightforward. It’s companies whose primary growth efforts are driven by their sales teams. Everything the company does supports its sales department. Major and minor decisions in every department filter actions through one question, “Does this help our sales department convert more buyers?”
Software was finally able to be quite compatible with nearly any business setup. So, outbound sales teams didn’t need to meet with super techy executives anymore. They could reach out to execs and talk about KPIs and ROI to see how certain software would help them reach their goals.
To sell these six and seven-figure machines, businesses would depend on sales-led growth. Field sales reps would hard-sell buyers after spending plenty of time schmoozing with them at dinners and golf courses.
Ask yourself:
Is there a product-market fit?
Is there a growing market?
Are there underserved consumers?
Who are my competitors?
What are their strengths and weaknesses?
How much will it cost to acquire a customer?
2. Resources
Another common growth methodology is called marketing-led growth. Companies who employ this strategy focus on supporting their marketing team in every decision to help convert more leads into customers.
Here are a few reasons why PLG is a crucial strategy for SaaS and software companies to use today:
1. Improved Customer Experience
The amount of time it takes new users to hit their first activation event. For instance, signing up for your product isn’t necessarily a TTV event.
Let your product be driven by APIs. Make it open-source so it’s accessible, customizable, and easily integrated into workflows. This will make your product valuable to more people.
4. Design for Flexibility
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Product-Led Growth Metrics
This rate, measured by a percentage, shows how many people are using each feature of your product. You can gain key insights from this data to fuel your product development and drive user growth.
But guess what? 53% of buyers prefer to make a purchase without any interaction with sales teams!
Marketing-Led Growth
One of the keys to leveraging PLG is by making it easy for people to use the product. Notion makes it super easy for new users to start by offering free templates on their platform. They also offer webinars and tutorials to educate users on Notion’s different tools.
HubSpot
It should be part of the product, built into it. And your product should be built into the community.
PLG, community strategies, and examples (Source: OpenView)
6. Deliver Value Before Asking for Payment
The answer is product-led growth, or PLG — a new era of software growth.
The goal for this metric is to reduce it as much as you can. The closer you can get to zero, the better. Many SaaS products have a long TTV. However, you can speed up the process by focusing on optimizing your user onboarding experience to drive activation.
2. Product-Qualified Leads
Product-led growth is the new era of growth for SaaS and software companies. However, many companies are still using other growth models, such as sales-led growth and marketing-led growth. Here’s how the different growth models compare.
Sales-Led Growth
Flashback to the 1980s. What was software like back then? Well, it wasn’t available to everyone since the internet was still in the early stages of development. Instead, software was something that you had to install from a physical box.
