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Scaleups , Startups , User — 09.16.2022

What is Product-Led Growth?

Katie Lukes, Principal, Product Strategy & Research

Sales and marketing have long carried revenue for digital and non-digital companies. But as digital products continue to take a front seat in both the B2C and B2B markets, new strategies are emerging for revenue leaders and product leaders. 

One of the most well-known ideas is product-led growth. 

Coined and defined first by OpenView Ventures, product-led growth, or PLG, is a go-to-market strategy that relies on people using your product as the primary driver of acquisition, conversion and expansion. Let’s break that down. 

  • Acquisition: how you acquire new prospects
  • Conversion: how you get new prospects to become paying customers 
  • Expansion: how you get paying customers to use your software longer and more extensively

How can product impact these three areas? Why should it? What should you know to get started? Who is doing it well? Let’s dive into those specifics below so you can start benefiting from PLG. 

Why Product-Led Growth Is Here to Stay

The Old Days of Product

Remember when we received CDs in the mail for software products? You might remember the first Adobe Photoshop CS4 arriving in a big, white box with lots of booklets on how to use the product. 

It’s been a while since we purchased software that way, and for good reason. It was difficult and expensive to get updated software to market that there were heavy downstream effects, such as: 

  • Sales teams only interacting with the highest-level person at the company
  • Extensive customizations for big buyers 
  • Static training and documentation
  • A lengthy buying process 

The processes of acquisition, conversion and expansion were all sales-led or marketing-led. A sales team or a piece of marketing material was the buyer’s only way into the software, whether it was to learn about it, try it, buy it or upgrade it.

The New Days of Product

Some things have changed. That Photoshop box is now an email with a download button thanks to the rise in cloud computing and SaaS, or software-as-a-service, delivery. 

The ability to purchase software directly as a one-click download made CDs obsolete. It also required product leaders to consider more flexible upgrades and training mechanisms. 

On the buyer side, anybody at an organization can purchase software with a company credit card, no longer requiring sales discussions to only happen at the top. And with all of this happening at a rapid pace, consumers are now driving product updates and looking for best-in-class solutions. Buyers know they can try multiple software products before making a long-term purchase thanks to easier implementation and independent training. 

With this unprecedented level of easy access for anyone, software can now be product-led. The product itself can be the channel for users to learn about it, try it, buy it and upgrade. 

How Does Product-Led Growth Work? 

Let’s break down the three revenue functions that product-led growth can support and identify best practice examples for each.

Acquisition

Acquisition means people are aware of your product. They have a way to experience your product and a reason to come back.

If there’s no salesperson to explain what your product does, who it’s for and what the benefits are, then your brand, your website and your product are your only representatives. They can do the heavy-lifting by ensuring: 

  • The brand conveys who you are. It’s approachable and has a recognizable identity that a user will want to engage and work with. 
  • The site properly guides a user. Your website helps users understand why they should engage with you, and most importantly, it gives them a mechanism to engage with your product.
  • The product has features that anyone can use. The features immediately demonstrate your product’s value and why users should come back.

Slack is a common example for discussing product-led growth in the acquisition cycle. And it’s easy to see why: 

  • The brand is friendly, personal and inviting. 
  • You can set it up right away, without account reps or sales hand-holding you through the onboarding process.
  • You can invite someone and immediately start seeing value.
  • A friendly onboarding process guides you and points out the value along the way.
  • The “freemium” tier lets you enjoy the product, bring other people into it and build it into your daily routine without committing to a purchase. 

Remember these key takeaways about how PLG can be applied to acquisition:

  • Brand identity must be powerful and speak for itself 
  • There must be a “way in” (“get started” or “try now” invitations) so users can experience the value prop for themselves
  • The value prop must be obvious and available to be experienced easily
  • The experience must be intuitive, uncomplicated, empathetic and enjoyable

Conversion

Conversion means turning a prospective user into a user, and a user into a paying user. It happens when you provide users with the right value proposition, the ability to inform themselves and a way to start paying. 

You’ve likely been a customer for another product where you participated in their conversion funnel through a product-led growth tactic. Great PLG tactics don’t feel like sales or marketing tactics. They feel organic. 

Ask yourself the following questions to see how your product supports conversion: 

  • If you have a free tier, what value triggers do you have to move people to a premium tier? 
  • If your product is fully premium, how have you created ways to try out the product, maybe via a free trial? 
  • How do you move people from the trial to a paid account? 

Consider these takeaways about applying PLG to conversion: 

  • Value builds trust and trust (with good UX) will enable conversion
  • Identify use cases that people are willing to pay for 
  • Build pathways for people to see what they can pay for and to start paying for it

Expansion

Expansion is turning your users into a marketing channel while growing your user base, and then upselling within that base. 

Once a customer starts using your product, you have their valuable time and attention pouring into that product—it’s the most effective time to help them understand how to get the most out of it. You can point out what value they might see from upgrading and give them tools to share it with others.

There are several expansion tactics to consider building directly into your product:

  • Easy to share: Provide ways for your users to show off the value of your product to others by sharing it. For example, when you share an online photo album with someone else, they get to enjoy the value of the photo app and see how they might use it themselves. 
  • Just in time upgrading: Make your premium features visible to lower tiers of users in the natural workflow of the product so that they can see what is available to them if they upgrade, understand how they might use it, and even kick off the upgrade process from there. 
  • Incentivize invites: Your existing users are often your most enthusiastic and trusted channel. If you provide an incentive for inviting other people to your product, you not only have a chance to gain users but you increase the loyalty and usage of those existing users. 

Remember these takeaways about applying PLG to expansion: 

  • Don’t make it hard for people to give you their money 
  • Show users how they can get more value when they need or want your product
  • Capitalize on your value to incentivize your users to invite others 
  • Give users pathways to share your value with others to create digital word-of-mouth

What Product-Led Growth Is and Isn’t

PLG is more than providing a free tier, and it doesn’t mean replacing sales and marketing with product-led growth features. 

It does mean you have new tools in your toolbox to capitalize on the buyers and users who are ready and willing to learn about what you do. PLG is a way for them to try your product and see if it solves their problems. This is an opportunity to show if your product provides the right value, all before a purchase. 

These tools work alongside your existing teams—and they even provide ways to make them more efficient and more successful. 

Partner with Innovatemap to build a PLG strategy that scales your company faster and stronger. 

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