Product-led growth was all the rage for a while there. The idea is admittedly appealing.
Build something genuinely impressive, and people will come a-running to give you their hard-earned money, all for the privilege of engaging with your earth-shatteringly novel/functional/sexy SaaS product. Call the developers!
There's only one problem with this line of thinking: "Build it, and they will come" has worked exactly once in all of human history, and that was for Kevin Costner back in 1989. End of list. The rest of us have to do things the hard way.
You can't simply throw a great product up on the internet and expect everyone to recognize its genius. This cold reality has led many people to conclude that product-led growth is dead … or was never a thing in the first place.
This idea is, however, predicated on a misconception. It assumes that product-led growth (PLG) is a go-to-market strategy devoid of sales and marketing, and that's not true.
Any positive product experience – for the audiences of SaaS companies or anyone else – requires channels by which the organization shares functionality, customer success stories, and signup information with potential new users. These are unavoidable parts of the customer lifecycle for any B2B SaaS company.
Rather than ditch sales and marketing, intelligent PLG companies let their product play the primary role in sales and marketing. In short, product-led growth isn't dead at all.
People Want to Interact with Products More Than Ever
There's good reason to believe companies are trying to backpedal their in-your-face sales and marketing tactics.
Many of today's prospects want to explore products independently without listening to a sales pitch. They want their exploration to involve actual face time with the product, not the people trying to convince them to buy it.
One of the best ways to get people excited about your product is to give them a great customer experience without requiring a credit card. Letting them play with the product before they pay increases retention in the long run and reduces churn. It also makes product management easier for software companies.
So yes, you should give product-led growth a try. Or, if you've already done so and found it was lacking, give it another try. Today, let's look at what it is, which benefits you can hope to experience, and how to get started.
What Is Product-Led Growth (PLG)?
According to OpenView, "Product-led growth (PLG) is a growth model where product usage drives customer acquisition, retention, and expansion." In a product-led strategy, you put your SaaS offering front and center, then let people engage with it.
This differs from a marketing-led growth model, where the marketing team works hard to rustle up qualified leads and feed them information about a product's value. It's also different than a sales-led growth model, where sales reps spend a lot of time with potential new customers addressing their pain points and walking them through all the reasons to adopt.
In the product-led growth model, the software is the A-list actor, while each salesperson and marketing honcho plays a supporting role.
Typically, companies take a freemium approach to customer acquisition. Think of companies as wide-ranging as Slack, Dropbox, Calendly, Salesforce, HubSpot, Microsoft, Zoom … the list goes on. In each case, the company offers a version of its product for free, either indefinitely at a lower level of feature value or with full features and functionality, but for a limited time.
The customer can self-serve, engaging with the software using the freemium model. When they're ready to upgrade to the full weight of the SaaS product, the sales team has a much easier time convincing them that value matches pricing. The customer has already used it, so they need a little convincing to move forward.
That's only one of the reasons why a product-led growth strategy is a better business model than traditional marketing- and sales-led models. Let's take a look at seven more.
7 Benefits of Product-Led Growth for B2B SaaS Companies
All right, what benefits of product-led growth can you expect from taking this approach to the customer journey? Check it out:
- Greater efficiency: You will enjoy this in the arenas of content marketing, sales, onboarding, and customer success teams.
- Faster growth: A good PLG strategy means product-led businesses can expect to capture new leads and onboard new users more quickly.
- Higher customer acquisition: You can also expect to get more of those customers.
- Reduced churn: The customers you bring on board, under their previous engagement with the software before they had to pay for it, are likelier to stick around longer.
- Better organizational de-siloing: A PLG strategy requires that everyone, from marketing to support, be on the same page and put the product front and center, which naturally aligns goals and breaks down barriers.
- Higher CLV: Customer lifetime value will naturally go up because more users stay on longer.
- More useful analytics: The people using your software will already have a working knowledge of it and think it has use for them by the time they're paying for it. Therefore, when they get stuck on churn, the metric is beneficial.
Metrics Used to Measure PLG Strategy Effectiveness
Mapping out the customer journey, creating fantastic onboarding experiences, and prioritizing the end-user at every step are all excellent ways to keep people coming back for more. If you want to reduce churn and increase profits, these are all worthy goals with their metrics.
However, if you're going to succeed with a product-led approach, then you need specific growth metrics to measure how well your PLG strategies are working. That includes the activation and onboarding process, the user experience before and after opting into payments, and referral and word-of-mouth traffic.
Why must you take all of these into account? Well, it's helpful to think of product-led growth metrics in the context of the people who use your software rather than in the context of facts and figures relating only to your bottom line.
That's where the flywheel comes in.
The flywheel is a concept you may have encountered in other marketing contexts. The flywheel rotates endlessly, spinning new customers into active users, loyal fans, and promoters.
The happier they are with your product, the more enthusiastically they will advocate for it, bringing in more new customers who can become active users and, eventually, loyal fans and promoters. And so forth. Play your cards right, and you can see that coveted exponential growth any company seeks.
Of course, when we say "play your cards right," we mean you've got to know what to measure.
The truth is, there is no one "PLG metric." There are, instead, several to which you must pay attention to ensure success. Below are the most important of these.
Shocking no one, revenue is at the top of the list. All the marketing campaigns, content optimization, friendly salespeople, and product teams are worth little if you aren't making money. When you adopt a product-led growth strategy, one of the best ways to ensure it's working is to keep an eye on those revenue numbers.
What percentage of your users adopt your product and then leave? In what amount of time? At what stage of use? These numbers can tell you a lot about how well your SaaS works for your customers, and intelligent product-led growth companies pay attention to them.
After implementing, you should retain your customers longer and see less churn overall.
3. Conversion Rates
When folks use your software before paying, how do their conversion rates compare to when they must pay for it first? How do conversion rates compare between opt-in and opt-out models or organic vs. paid traffic to your site?
4. Adoption of New Features
New features, workflows, and integrations make the software more useful. However, your users must know they're there to make use of them. Ditto if you want to upsell and cross-sell software features. The number of feature adoptions, whether they can have them for free, tells you a lot about how well you serve your audience.
5. Customer Acquisition Cost (CAC)
How much time are you putting into acquiring new customers? When you total up the money you spend on marketing, sales, content creation, onboarding, and so forth, the numbers can be a bit staggering – so you want to keep them as low as possible.
Happily, if your product-led growth strategies are working, you should see a decrease in customer acquisition cost (CAC) after implementation.
6. Time to Value (TTV)
At what point on the user journey does the customer realize they've got a good thing going with you? This is time to value, the time it takes for the user to get what they want from the product. A smart PLG strategy should shorten this number considerably.
7. Customer Lifetime Value (CLV)
As a result of all of the above, your CLV metrics should improve. Each customer should become, on average, more profitable than they were before … assuming you're doing it right. And that means customer obsession.
Software Companies Are Moving From PLG to Customer OBsession and Lifecycle Revenue Marketing
Now that you've taken a deep dive into product-led growth, you probably can easily see the value of customer obsession. As in, a company's obsession with its customers – although their obsession with your product is always a nice bonus, too, of course.
When you become captivated by their needs rather than your P&Ls, you build something more significant than your ledgers. You create an audience and the product toward which they continue to flock.
Today's users are intelligent and savvy. They don't want to be handheld or sold to; they want to feel in control and develop a personal relationship with your software. If they forge one with you along the way, so much the better, but they don't care about your profits, your brand recognition, or your reach. They'll bounce to your competitors if they suspect you care about those things more than them.
The bottom line is that if you don't put your customer first, you won't see the results you want … which is why product-led growth is so valuable. Rather than telling and selling, you can put your product forward to do the work for you, letting them get their feet wet and solve their problems from the first use.
The best way to do this is an intelligent onboarding system to ensure they get the most possible value out of your product right away, and Raven360 is here to help you do that. If you'd like to learn more or schedule a demo, we invite you to reach out today!