October 15, 2021
Product Led Growth

Becoming a Product-Led Growth Organization

Taylor Kratz

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In the past decade, great advancements have been made in Business to Business (B2B) products as digital technology has put in the power at the consumer’s fingertips with mobile devices and applications.

The consumer has choices from a wide range of product choices that promise to meet all of their Customer Relationship Management (CRM) needs.

What once were new and exciting product services have become expected by the tech-savvy consumer as they demand more powerful and affordable Software as a Service (SaaS) products.

There are two factors that consumers expect in the SaaS market. When purchasing a product, a consumer prefers to buy through an app or website with no salesperson involved. The second factor is that consumers demand a personalized experience. 

With today’s expectation of immediate gratification combined with numerous products available at their fingertips, a consumer’s loyalty goes only as far as their immediate needs being met. Therefore, there is a high turnover as consumers jump on the latest and greatest product with ease.

It appears that sales-led and marketing-led strategies for SaaS providers have run their course. So now how does a software company stand out above the rest? 

A group of employees sit and stand at a table looking at a laptop screen.
A consumer’s loyalty goes only as far as their immediate needs being met.

Product-Led Growth

Product Led Growth (PLG) is a business model by which the consumer acquiring, personalizing and retaining the SaaS are driven by the product itself and the User Experience (UX) to address the four most important go-to market questions. The PLG model answers those marketing questions by adjusting the focus of go-to-market strategies.

  • Who is Buying the Product? With a PLG approach, the focus is selling to product users, instead of buyers.
  • Where can Consumers Find Information about the Product? Word of mouth has always been the most cost effective and reliable source of selling a product where satisfied customers will share the product with their friends and associates. PLG focuses on this strategy.
  • Why are Consumers Buying the Product? The product itself should stand above the rest in delivering more value and have a superior UX than the competitors.
  • How are Consumers Buying the Product? Focuses on the UX to drive purchasing the product itself rather than being informed through a sales representative.

Consumer Acquisition and Activation

Free trials or freemiums are frequently the entry point for acquisition and eventual activation by consumers. PLG companies appeal to the users of their product and allow them to experience the product without a sales or marketing representative. The PLG company demonstrates the product efficiently and effectively through an appealing UX with the desired result of gaining a paying customer.

Free trials are the most direct approach which allows the consumer full access for a limited time. A 15 day trial, or a 30 day trial are commonplace for consumers to get the full UX.

Freemiums are a bit different as users have access to the service indefinitely with some restrictions. There are 3 types of freemiums.

  • Extra features and functions that require an upgrade to a paid service.
  • Usage has limits of data and storage that require an upgrade.
  • Access to support is offered on a tiered basis or requires an upgrade.

PLG companies are not limited to any one type of freemium, but can utilize a combination of the 3. Whatever manner of free trial or freemium is chosen, the ultimate goal is to get users into the service quickly and allow them to use and see the value for themselves.

Four employees stand in front of a white board while one of them writes on it.
PLG marketing strategy is all-in, it's not an add-on to sales-led or marketing-led models.

Becoming a PLG Company

The decision to embrace a PLG marketing strategy requires an all-in commitment from everyone involved and is not compatible with sales-led or marketing-led models.

When the decision is made to commit to a PLG strategy, there are two very important evolutions that need to occur. The first in the product, and the second in the company’s culture and focus.

A well designed product is the first and foremost requirement of a PLG marketing strategy. The product must deliver as advertised and be able to demonstrate its own value with efficiency with a top-notch UX.

This requires an empathetic approach in understanding the user’s goals and problems that they are attempting to solve. This demands a unique and personalized experience. An understanding of what results the users are striving to achieve by using the product to effectively serve in achieving their desired outcomes.

Perhaps the most important evolution or transformation takes place in the company itself. PLG organizations are laser-focused on the needs and objectives of the user and often require a change in culture. This can be an overwhelming task for many old-school departmental employees, but their valuable individual skills and experiences can be utilized more efficiently in a more team and goal oriented environment.

Departments or teams must have cross-functionality and have the ability for communication and coordination with everyone focused on the end-result product and UX. 

With a PLG approach, the focus is selling to product users, instead of buyers.

Measuring Success

How do you measure how well your PLG model is doing? Success is measured using 5 basic metrics.

  • Acquisition: The number of consumers that sign up for the freemium of free trial
  • Activation: The percentage of consumers that sign up for the service after the freemium or trial period.
  • Revenue: Measured by an average or monthly recurring revenue.
  • Retention: Measures the consumers who renew their subscriptions month to month, year to year or even day to day.
  • Referral: Percentage of current consumers that recruit others to use your service.

The Benefit of a Product-Led Growth Model

After all of the transitioning of focus and team-building leads to creating the most desirable product for the consumer or user, one can start seeing an improvement in what drives businesses in the first place. The bottom line.

A PLG model allows a company to achieve a greater team alignment and focus on the product, which opens up resources that would normally be expended on traditional department-oriented marketing strategies. This streamlining of the marketing strategy through a PLG strategy leads to a higher financial productivity and is the most efficient marketing model and is the future of SaaS product distribution.

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