Over the past few years, how people engage with technology has changed. Now users are more tech-savvy, want instant gratification & prefer personalization. The growth strategy for companies has also been evolving from sales to marketing to a product-led approach.
What Is Product-Led Growth?
According to Forrester, 93% of consumers prefer buying online instead of a salesperson. Moreover, almost 75% of B2B buyers find it convenient to buy from a website rather than a sales representative. Hence, companies, in their effort to meet market needs, are shifting to product-led growth.
Using this strategy, companies offer limited access to their full-featured product (trials) or unlimited use of particular features for free (freemiums). In a product-led company, the product is the key driver of revenue and retention. Product-led growth focuses on optimizing the digital product experience to propel user engagement and loyalty.
This article is your handbook for product-led growth. It explains the importance of product-led growth and how you can drive a product-led business. We’ll also explore examples of successful product-led companies.
Product-led growth doesn’t disregard sales and marketing efforts for growth. Calendly, Shopify, Zoom, Pinterest, and Stripe are the most popular product-led growth companies.
In the words of Kelly O’Connell, Director of CXA Innovation and Product Strategy at ActiveCampaign,
“PLG is building a company and driving growth through a product that solves real customer problems. Understanding customers’ needs and pains, driving to build a product that solves those pains, and then aligning the company to support the product and mission.”
Why Is Product-Led Growth Important?
Product-led growth is the future of SaaS businesses. It offers many benefits for companies that use it. Here are significant features of product-led growth to look up to.
Interesting Read: How we made $120,260 in 3 weeks of launching our SaaS
The sales cycle is shortened when you let users try your product for free through a trial or freemium.
PLG operates on the idea that you give the user something to receive value in return. It could be in the form of a solution to a problem or providing ease of doing a tedious or time-consuming task. In return, you generate revenue for your business.
PLG offers a shorter time to value (TTV) by leading users to an ‘aha’ moment between a user sign-up and payment. With your product in the hands of potential customers, they are more able to see if it meets their needs. As a result, they can gain immediate value and convert into paying users.
Improves User Experience
Product-led growth focuses on the end-users, which are people. It pushes organizations to deliver an exceptional user experience of the product that solves their problem efficiently. For a product to speak to the end user, it must provide value by letting people onboard themselves.
In other words, companies need to understand the end-user, what they do, and their pain points. It requires a deep dive into the customer persona. Thus, building, designing, and improving your product for the end-users leads to an improved user experience.
Lowers Customer Acquisition Cost
Companies lower customer acquisition costs (CAC) by offering a self-service experience. Companies must create a product that promises a robust user experience for this to happen. In addition, companies must design a user journey free from barriers and distractions.
Instead of investing in the sales team to lead the customer to an end goal, invest in the product to offer a seamless transition from one stage of the customer journey to another. You can achieve this by making user onboarding smooth, developing a knowledge base, and providing online customer support.
Increases Revenue Per Employee
Product-led companies also enjoy more revenue with fewer employees, unlike businesses with traditional growth models.
A good example is Ahrefs. It had over $1 million ARR per team member in 2019 with a small team of 45 people. In 2022 it has 51-200 employees with $100+ million ARR. So while their annual revenue has grown significantly, their team is still around 200 employees.
It depicts a product-led company’s success story with increased revenue per employee.
The 5 Steps to Becoming a Product-Led Business
There needs to be more than just a free trial for a company to transition to product-led growth. At worst, this step can backfire. However, becoming a product-led company is more than that; it requires a shift in the business priorities. So let’s go through a 5 step process to implement PLG.
- Setting Product-Led Growth as a Goal
It all starts with a shift in focus. First, you must reconsider how you look at your product and its relationship with the customer.
According to the Head of Growth & Marketing, Breezy Beaumont, product-led growth is a company-wide strategy. Its scope is not limited to just marketing or product. It’s a go-to-market strategy that involves your entire organization.
Becoming a product-led company starts with a cultural shift. PLG shift encompasses all the teams, be it sales, operations, customer success, marketing, or development team. Internal alignment is critical for adopting this growth model.
2. Determine the North Star Metric for your Product
PLG aims to deliver a seamless customer experience, and it’s only possible when all the teams are striving towards a common goal. As a result, a company needs to determine a north star metric for its product.
The NSM is based on the customer success moment. It helps businesses to focus on delivering value to their end users, which creates value for the company in return. The north star metric is the critical measurement of a business’s growth in the form of customer success.
It provides clarity to the stakeholders, team alignment & accountability, and ensures to deliver value to the customers.
Depending on your business and product, another critical decision is to choose the PLG framework that works best for you. Some options include growth loops, the bedrock method, the hook model, and the Fogg behavior model.
3. Accelerate Time-To-Value
Customers look for satisfaction in the shortest amount of time possible. And if a product fails to deliver that in optimal time, customers will switch to many other products available in the market. As a result, startups are more likely to experience higher churn rates than high-growth companies. It means that a product-led company needs to design a customer journey with time-to-value (TTV) at clear sight.
To reduce your TTV, you can use the following techniques:
- Provide ease to the customers from the moment they onboard.
- Offer built-in personalization with your product so users can reach their ‘aha’ moment in the shortest time possible. You can personalize the customer journey with the help of a customer success manager.
- Work on your product’s usability so that it’s straightforward and intuitive.
- Provide support every step of the way with the sales and customer success team. Be proactive in addressing common questions via knowledge-base, live support, etc. Use content to connect with your audience and drive them down your funnel.
- Measure the impact of your efforts on the TTV to see what worked and what did not. Set goals given the industry benchmark, measure, and repeat the process.
4.Do a Product Audit for Opportunities
Product audit is an excellent way to:
- See the performance of your product
- Stay relevant to the market
- Identify the areas for improvement
Here’s how you can conduct a product audit to identify growth opportunities.
- Focus on one goal for an audit. As an example, you can choose to find answers to the questions like, “How to reduce the bounce rate of a particular page?” or “What channels are bringing more traffic to the landing page?” etc.
- Involve the relevant team in finding answers to your audit goal. It helps you gain insider information about the team’s and the product’s performance. Track product data analytics in place. Also, you can find and mitigate any misalignment among different teams working on a product.
- Get an outside perspective on your product in the form of feedback from customers. Look for problems they face and how your product can solve them. Their perspective can help you improve your value proposition, fill the gaps in your funnel, and better your product.
- Based on your discovery from an audit, implement the changes and see their impact. You can perform audits to find insights about different aspects of a product.
Start by assessing opportunities across your product with the most impact on ROI. While at it, map out the user journey with key points identification (points of action, aha moment, etc.). Based on your findings, remove friction by taking concrete steps like onboarding flow change, UI change, and adding taxonomy.
5.Use Product-led Growth Metrics to Measure, Learn & Repeat
One of the essential aspects of PLG strategy is to make data-driven decisions. Thus,behavioral analytics are critical to analyzing. With these insights into how users interact with your product, you can improve the user journey and provide product personalization.
The product analytics platform like Usermaven makes this step easy and a no-brainer. Usermaven help companies track product-let metrics throughout their journey, from acquisition, onboarding, engagement, feature adoption, and retention. Suffice to say, Usermaven has everything you need to know about product analytics like activation rate, churn rate, engagement score, and active users.
How to Lead an Innovation Strategy That Promotes Product-Led Growth?
An organizational shift to adopt a PLG business strategy can take time and effort. PLG is a product selling itself. And to design, such a product that speaks for itself requires design-led thinking and support for innovation. Below mentioned vital rules can help companies nurture the necessary mindset to promote PLG.
Embrace User-Centric Mindset
Since the product is for the end-user, understanding what the user needs, thinks, and feels is crucial to designing a transformative experience. Focusing on how you want to see a product without regard to user research is a red flag. A user-centric innovation and growth strategy is at the heart of PLG.
Empower Your Team
The user-centric approach to product sets the tone of organizational vision. Moreover, it provides the basis of each team’s roadmap in its domain. Designing a value-based experience for end users requires that all project stakeholders collaborate and bring their expertise to the design table. Empowering teams for a collaborative culture can improve the product; otherwise not possible.
Any robust user experience is a result of an iterative process. Traditional structures don’t encourage change and operate on a top-down model. That’s why transitioning to a PLG strategy requires all engine parts to adjust to the new car frame. Support and alignment ensure that all teams are well-oiled.
Another important thing is to include the user in the iterative process to improve the product experience. Since the user has to see value in the product, their feedback is invaluable to creating one.
Product-Led Growth in Practice - Examples From the Industries
Slack is a leading communication tool for businesses. It was founded in 2009 and has over 12 million daily active users.65% of the Fortune 100 use slack. Slack thrives with a product-led growth strategy by selling not a product but a positive user experience. Slack is revolutionizing how teams interact to improve productivity.
Notion is an example of a product-led company that uses social proof to influence potential users to try their product. Well-known companies and successful businesses use Notion. The testimonials displayed on their pages clearly show how Notion helped them problem-solve.
MongoDB is a product-led company that delivers a personalized user onboarding experience. As the product matures, the new users that onboard don’t come under the ‘one size fits all’ status. Thus, delivering a personalized experience is essential. MongoDB does so by asking users about their objectives and project. It then guides users in choosing the configurations that best meet their needs.
Offering tools that users can benefit from in their everyday life is one of the ways companies drive PLG. It helps them convert and become advocates of your product. Companies build trust by providing free solutions to the user’s pain points. DigitalOcean is a good example of a product-led company. It offers six free tools to the developer community that they can use to save time.
Shopify makes product adoption and onboarding frictionless. It does not ask users to verify their emails which can spoil the fun of trying their product. You can sign up with an email and password to set up an online store with Shopify. It is another great example of a company doing product-led growth right.
Email verifications can be painful, causing users to abandon trying your product. That’s because nobody likes to receive a pile of emails (once the verification is done) from a tool they haven’t yet committed to using.
Lean into Product-led Growth with a Product Analytics Tool
PLG is one of the most popular business growth methodologies for SaaS. Product-led growth is an independent product adoption, customer-centric, and has non-committal pricing.
But how do you keep track of the user journey and see that the user is getting value out of your product? That’s where the product analytics tool helps companies visualize their product metrics. Usermaven does precisely the same for SaaS businesses. With its 360 Profile View, you get a detailed, step-by-step user journey for every visitor’s interaction with your business.
Most tools provide complex analytics that makes extracting meaningful insights a challenge. Usermaven is centered on delivering value to its users, just like a product-led company. It is easy to set up and has ready-made templates to generate actionable insights for making data-backed growth decisions. It’s like having a data scientist on your team that’s affordable and simple to maintain.
Try Usermaven for free today and accelerate your product-led growth using real-time actionable insights.