What Are The Benefits Of Product-Led Growth?

DEFINITION
Product-led growth is a strategy that uses the product as the primary tool for acquisition, retention, and expanding a user base. The benefits of product-led growth include faster scalability, lower cost of acquisition, higher customer retention, and access to first-party user data.

💡Understanding The Benefits Of Product-Led Growth

Today, users don’t choose software the same way they did decades ago. We’re in the age of self-serving. Most people don’t want to buy products based on a sales pitch–they want to experience the product, understand its use cases, and then judge whether it’s the right fit for them.

This is what product-led growth (PLG) helps companies to provide their potential customers: a self-serve model to explore how a product can be used.

As a result, product-qualified leads are easier to convert and retain. When compared with traditional growth models like sales-led growth and marketing-led growth, product-led growth is an alternative that promises much better customer acquisition rates and creates a loyal user base.

Product-led growth often sees a large number of users acquired through the freemium model, giving you plenty of feedback to act on. 

Since the focus is on creating a simple-to-use product, making it easier for customers to get started, it helps the sales team to narrow down leads to reach out to and turn them into paying customers.

🖋 Takeaway

Product-led growth is a newer approach, and transitioning from the traditional sales-led or marketing-led methods, at least in the initial stages, will be challenging and require greater efforts and dedication from just about every employee in the company.

So, the question arises, why? What makes it better? The simple answer: Money.

It’ll help generate higher revenue while keeping the costs low–a boon for any business, especially a new one.

If your company is following the PLG model and your competitor is not, you’ll have the advantage of having a lower marketing cost, and your ability to serve self-service clients will attract customers out of their reach.

While there are huge benefits of the product-led growth model, there’s no salesperson to communicate how your product can help end-users. So, you have to make sure you convey the value of your product very clearly at every touchpoint.

From the website copy to the CTA, use every piece of content to tell potential customers how exactly they can benefit from your product. Your product has to sell itself–without a set of clear instructions, the model can fall through.

Benefits Of Product-Led Growth

Faster Scalability

Being driven by free trials and freemium models, with no dependency on time and availability of sales personnel, product-led growth marketing can be scaled up easily. You just have to focus on building an ideal customer profile (ICP) and then creating an efficient strategy to attract them. So, while your competitors are focused on building their sales team, you can use your resources towards expansion efforts. 

Lower Cost Of Acquisition

Adopting the PLG model helps organizations lower the funds needed for marketing since the product itself acts as a customer acquisition tool. As a result, there’s no need to have a large sales team, which helps reduce customer acquisition costs (CAC).

Higher Customer Retention

Product companies face a high churn rate if the value of the product is not communicated properly. One of the benefits of product-led growth is that customers are already aware of how your product works when they make a purchase. 

This creates a better user fit and increases the chances of retention in the long run. PLG also allows your company to focus on product development. As the product improves and evolves with customer needs, the number of satisfied customers increases exponentially, leading to a lower churn rate all around. 

Increased Word-Of-Mouth Marketing

The product is the most important marketing tool in product-led growth. Because there’s a high number of happy users, the direct result is increased word-of-mouth promotion. 

Focused Product Development

Product-led growth gives abundant time and resources to your company to focus on product improvement. Rather than coming up with sales tactics and campaigns to boost sales, you can focus solely on one thing that drives the most sales–your product. Listen to customer feedback and use their suggestions (or complaints) to further enhance and better your product.

Access To First-Party User Data

Changing privacy policies make first-party data a goldmine for product companies. As your product is at the center, you have access to an enormous amount of customer data. You can use this to understand your customers’ behavior better and market your product efficiently. In the long run, this will directly lower your advertisement cost and increase your conversion rate.

What This Means For You

Whether you’re a start-up or an established company, PLG can help you disrupt the most saturated markets. It pushes you to make your product the best, attracting more users and boosting growth.

You can deploy your capital in a way that gives you a better ROI. Financial productivity is increased because the product is what drives acquisition and retention. Funds, which would otherwise have been spent on traditional sales or marketing-driven models, can be reallocated to product development without having to sacrifice revenue.