Product-led growth (PLG) originates from the SaaS industry (software-as-a-service), where the emphasis over technology purchasing decisions has shifted from a single executive buyer (such as the CIO) making decisions, to individual employees and teams choosing the best tools they can find to help them do their jobs.
OpenView Partners define PLG as:
“a go-to-market strategy that relies on product usage as the primary driver of acquisition, conversion and expansion.”
If you have ever used Dropbox, Slack or Trello, you will have been influenced in some way by a product-led growth strategy.
What’s different about product-led growth?
Unlike a sales or marketing-led organisation, product-led businesses focus on enabling users to succeed with their goal as quickly as possible.
Typically they will offer some of the key features of their product to users for free and aim to eliminate any barriers or friction blocking onboarding and use.
Once users experience value from a product, they are more likely to use it again and recommend it to their peers.
This flywheel effect can proliferate quickly and pretty soon whole teams or organisations are regularly using the product and a company-wide decision takes place to upgrade to unlock further features.
Compare this with a sales-led approach, where customers need to complete forms and engage with a sales representative before they even get sight of the actual product. Very few of us have the patience to do this, unless there was a very specific motivating reason.
How does an organisation become product-led?
While product-led growth works best for technology product companies with low marginal costs per user, it is not just a case of offering a ‘freemium’. The ‘build it and they will come’ option is not enough.
Users need to be aware of the problem to be solved (and sufficiently bothered by it), they need to know the product solution exists and they need to be able to easily access and use it to reach their desired outcome.
This means different functions of the business must align and work closely with each other to drive product-led growth:
- Marketing must continue to drive awareness and recruitment of new users, but also find ways to nudge existing users into becoming paying customers,
- Design must ensure the product is useful, usable and desirable,
- Sales can become more strategic and focus on upselling additional value to organisations where there is mass-usage of the product; and
- Operations must ensure reliability and support for users to get the best value from the product.
Being product-led is a cultural thing and requires strong cross-functional working and alignment around the same goals. Think about it is as a system that is designed and continually fine tuned to deliver customer value.
User experience is key for product-led growth
With a focus on getting users to engage with the product and reach their ‘a-ha’ moment as quickly as possible, it becomes very clear why user experience is such an important part of product-led growth.
At a minimum the product needs to be easy to find, onboard and use – enabling people to quickly achieve a useful purpose. But these are no longer differentiators. The product also needs to be highly desirable and engaging, so that people really want to use it – and that is the challenge!
A selection of useful in-depth guides and opinions on product-led growth
Thanks for reading 🙂