What is a PLG company?

DEFINITION
PLG companies or product-led growth companies are SaaS businesses using their product to drive growth, customer acquisition, and customer retention. 

💡Understanding PLG company

The traditional goal of sales-led companies is to move a potential buyer forward in the sales cycle. The sales personnel explain the product’s benefits and how they can help the potential user.

The caveat here is that the prospect doesn’t get to use the product firsthand to decide whether the product is indeed helpful for them. Even if your product solves a problem, the value gap is wide.

They are also more likely to churn as the prospect might conclude that your product isn’t that helpful to them specifically. 

Product-led growth companies take this problem head-on and solve it by letting the user try their product via a freemium model or a free trial. Such companies don’t need to convince the prospects by telling them the use-cases. Instead, they let the users decide the usefulness by guiding them towards that all-important ‘aha’ moment as soon as possible.

As users only become paying customers after experiencing the value, the chances of them staying longer are higher, leading to a low churn rate.

🖋 Takeaway

A PLG company works on the product-led growth method, where it uses the product to generate revenue. The company offers a free trial or a freemium model, allowing their prospects to use the product without any cost and upgrading to a paid plan only if they find value in the product.

Product-led growth companies have a lower churn rate and are able to scale faster as they don’t need a large sales team to convert users. 

If you’re considering a product-led growth model for your organization, you must ensure you have an ICP and a product-market fit.


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What is a PLG company?

Product-led growth companies implement the PLG go-to-market strategy where they leverage their product to increase sales while keeping customer churn in check. 

PLG companies allow their ideal audience to instantly experience their product’s value. In contrast, most sales-led companies take a long time for their users to experience the core value.

If your user doesn’t understand how your product will help them as soon as possible, they’ll experience a value gap, leading to a loss of interest in your product. PLG companies have a smoother onboarding experience, making it almost impossible for users to not experience the value.

Examples of product-led growth (PLG) companies: Slack, Calendly, Dropbox

Advantages of product-led growth companies

A PLG company has several benefits over a sales-led company:

  • Flexible budget. As PLG companies don’t have to maintain a large sales team, the customer acquisition cost is already reduced. Plus, as customer churn is lower, the lifetime value of a customer increases, adding to the revenue.
  • Focus on product development. As the product is the growth driver and with the availability of funds, the company can focus on developing and improving their product further, listening to customers, and implementing the changes. PLG companies also have access to direct user data, which they can use to understand the needs of their audience better.
  • Higher customer retention rate. Customers upgrade to a paid plan only after understanding the benefits of the product. This makes sure you’re not constantly running the acquisition-churn cycle. Not only that, the constant product development also helps in keeping a customer longer.

Factors to consider before turning into a PLG company

To transition into a PLG company, you must have:

  • Ideal customer profile (ICP). Your product will only convert those users who indeed find it valuable. For this reason, you must figure out who you’re solving a problem for or your ICP.
  • Product-market fit. While there are always ways to improve a product further, you should have a basic product-market fit, where you know your product is satisfying a need. 
  • Smooth onboarding process. PLG motion is only successful when you get the new users to experience the aha moment quickly. The sooner they realize the value, the higher the probability of conversion. So, you have to make sure there are no unnecessary obstacles in their way and the onboarding process is as smooth as possible.
  • Clearly defined aha! moment. PLG fills the gap between the perceived value and the experienced value. An aha moment is the experienced value. Your entire onboarding process and customer acquisition process should guide the users toward an aha moment. Without that, there are high chances of the free sign-ups not returning.

Your ICP is the foundation of a successful PLG company. However, the problem for PLG companies is not being able to be able to validate the ICP assumptions. As a result, they keep pursuing wrong client profiles, wasting time and resources. 

The solution: With Breadcumbs Reveal, your sales team can connect multiple CRMs and validate your ICP assumptions with actual data and/or discover completely new ICPs worth focusing on.

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