How to Achieve Product-Led Growth [+Webinar]

What is Product-Led Growth?

If you keep up on the latest Product Management best practices, you’d have a hard time missing the bustling discussion around Product-Led Growth, or “PLG” as it’s termed. PLG is among the fastest-growing practices for companies and products at all lifecycle phases. Like many fast-moving forces, it also threatens to disrupt the status quo for so many companies in the way they have managed their growth via traditional marketing and sales teams and programs. In this article, we will pull back the curtain on just what PLG is, and what it promises. You can watch our on-demand webinar where we did a deeper dive on the topic.

Defining Product-Led Growth

Product-Led Growth is an end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion, and expansion. It starts with product principles that are user-centric, value-first, delivers that value immediately, strips out all the non-critical parts, and makes the product stick. When done well, PLG will start to supplement and replace a lot of your traditional marketing and sales activities. Your product becomes a primary part of your marketing channel and may even allow your product to become more viral. For your sales channel, proper onboarding and gamification of the product can help drive in-product purchases and renewals. You can get your customers to try the new product, receive value from it, then buy the new product, all without the assistance of Sales reaching out. For pricing, you can enforce a paywall after the value has been delivered to the customer. This allows you to use product data to feed back to customers to upsell.

What does it mean to be Product-Led?

In essence, being Product-Led is nothing short of a complete reinvention of long-held sales and marketing practices. What used to require the allocation of teams and the creation of stand-alone assets can now be embedded within your product–with corresponding substantial savings in spend and increase in customer conversion efficiency.

The Difference Between Product-Led and Sales/Marketing-Led Go-To-Market Strategies

The traditional Marketing and Sales funnel approach

For many B2B and B2C products, the framework of a Marketing and Sales “funnel” is well-known and widely-practiced by many software and services companies. In this model, your marketing and sales teams create campaigns and assets which are focused on achieving several key goals:

  1. Creating Awareness: The first step in the typical marketing funnel is for you to let as many prospects as possible know that their problems are well understood and that you offer a unique solution to them. This is also where you capture some initial information about the prospect, e.g. on their specific needs, the size of the opportunity, and their urgency. If the prospect agrees that you can potentially serve their needs, they respond to your Call to Action, which guides them to take the next step to learn more–typically getting more in-depth information, or perhaps scheduling a demo or conducting some evaluation of your product. If your story is compelling enough, some percentage of prospects will “convert” and advance to the next stage in your marketing funnel. Importantly, you may have already invested a fair amount of money in advertising, Search Engine Positioning, promotion, and etc. just to get your prospects to this stage. So, the conversion percentage from prospects to “leads” is a critical measure for your marketing ROI. It is not uncommon for less than 10% of all initial contacts to convert!
  2. Creating Preference: For those prospects who have now become leads, it’s time for you to convince them that your solution is superior over competitive offerings. Do your research and extensive competitive analysis. You might provide leads with technical information, white papers, third-party endorsements or testimonials, or accomplish this via your demo or evaluation. Once a lead is qualified, you might guide them to a purchase page on your site to close the deal. If the lead has been characterized as particularly High-Value or Hot, you might instead immediately direct it to a salesperson for follow-up, who begins the process of trying to close a sale. Here again, you have spent additional money, and time, in moving qualified leads along to the next stage of your funnel. And once more, only a percentage of leads will convert to the next step.
  3. Creating Urgency to Purchase and Closing Sales: The final stage of your pipeline is generally executed by your sales team, and typically requires several more touch-points, each one consuming more time and money. If you are fortunate to close a sale, congrats! At this point, you may have invested anywhere from one to twelve months of revenue, depending on your product and market. This aggregate investment in marketing and sales, termed your Customer Acquisition Cost (CAC), can be substantial and require an extended period of time for their corresponding revenue to pay back your initial outlay in CAC.

So what have we accomplished, so far?

  • You’ve invested all this time and money to land a new customer. Yet in many cases, they have not yet experienced your product–they’ve bought on faith. Let’s hope they love your product once they start using it, so you can retain them!
  • When it comes time to renew, you will likely need to again dispatch another salesperson to convince the customer to stay with you and re-up for another cycle. That means more cost, time, and risk for you to take on just to secure retention.
  • While your customer remains active with you, each time you have additional products or services to offer them, you need to start the Customer Acquisition process anew each time. And spend, and wait.

Now that you see what’s traditionally required to acquire, retain, and expand customers, the good news is there’s a better way!

The Product-Led Growth Approach to Customer Acquisition

As noted above, in this approach, we “let our product do the talking!” Done right, the “funnel stages” above can be collapsed and accelerated–often without requiring the investment of any additional sales staff or marketing spending.

Creating Awareness and Preference: Once you succeed in bringing a prospect to your site–which still requires some investment–the PLG approach dictates that you guide them to try your product, with no further obligation, as quickly as possible! After all, they’re already in the right place. Here’s the place where you can innovate on pricing and packaging to offer a free trial, or perhaps a Freemium version of your product.

The “Try Before You Buy” Concept

Free trial: A free trial version of your product is typically fully-functional for some period of time and provides customers an immediate sense of what value they can expect from it. If the customer agrees they have received value, they then opt to purchase it–often eagerly!

Freemium: In contrast, a Freemium version of your product offers baseline capabilities without expiration, and these capabilities often provide ongoing value for a large segment of your users, as-is. Rather than attempt to convince customers to purchase your product through an external campaign, many companies find it far easier to convert those already-satisfied customers to purchase an upgrade directly within their product as they’re using it.

Either of these approaches is far more effective than merely providing product info in convincing a customer that your product is the best choice. In one transaction, you can capture essential info about the customer and send them on their way to experience your actual product.

PLG based Customer Retention

Similarly, and not surprisingly, it’s also far easier to retain an existing customer if you remove the friction from the renewal process. In-product renewal offers and promotions can be cost-effectively delivered, at just the right time, without requiring a sales or retention specialist to intervene.

Customer Expansion

Finally, offering product upgrades (up-sell) or additional products (cross-sell) to existing users directly within your product can be done at a fraction of the cost and time of the traditional marketing and sales approach.

Enabling a Viral Product

Finally, by removing all that traditional friction from outbound processes, you not only deepen customer engagement, retention and renewal, but you also set your product up to really go viral. This requires that you add the ability for your customers to quickly and easily invite others to try out your product for themselves. This is yet another powerful aspect of Product-Led Growth–being able to drive referrals directly from the product itself.

The big difference in each of the above PLG scenarios from the traditional funnel model is that customers first receive value, then determine they will purchase your product. We refer to this as Customer Activation preceding Customer Acquisition. Why does it work? Less cost, less time, less friction, more delight!

Ensuring success with Product-Led Growth

It takes time to transition from a traditional marketing and sales funnel approach to PLG, so be sure to work closely with Marketing and Sales to make this transition smooth, or you risk seeing a drop in prospect engagement. You’ll always need some of the funnel approach, particularly for “top of funnel” activities that lead your prospects to your product in the first place. And there are of course opportunities to use both approaches in parallel, particularly for B2B markets where large purchases will still require at least some of the traditional approaches to engage with non-user personas that are involved in the purchase decision.

Learn More About Product-Led Growth

Dive deeper into the concept of product-led growth and how it can become part of your marketing channel with our on-demand webinar, Tackling Digital Product Management Part 3: Achieving Product-Led Growth. We discussed some implications for your product​ and the role of the Digital Product Manager in facilitating successful PLG​ for your company. After watching, be sure to download our free Product-Led Growth Maturity Assessment to benchmark your readiness.

WATCH NOW

About the Author

David Nash - Principal Consultant and Trainer
David Nash is a Principal Consultant and Trainer at 280 Group.
David is a recognized expert in Product Management, Product Marketing, Entrepreneurship, and Team Development. He has delivered generations of successful technology Products (Hardware, Software & SaaS, Systems) and Services, and is expert in B2B SaaS, Pricing, User Experience, and In-App User Engagement. 280 Group is the world’s leading Product Management training and consulting firm. We help companies and individuals do GREAT Product Management and Product Marketing using our Optimal Product Process™.

What are your thoughts? We’d love to hear from you.

Your email address will not be published. Required fields are marked *