What Is A Product-Led Model?

A product-led business model places the product at the core of the business, driving the most important pillars of growth—acquisition, retention, and expansion. The product is also leveraged as the most important sales, marketing, and customer service channel for the company.

💡Understanding A Product-Led Model

The SaaS industry has long been benefitting from product-led models in an age where customer experience is increasingly gaining primary importance. A product-led model differs from conventional sales-led or marketing-led models not only in its perspective shift but also due to the cascading effects caused by adopting the model. 

The Forbes Cloud 100 list of 2021 is dominated by PLG companies. The list, which collects the most valuable private cloud companies in the world, has around 65-70% PLG companies, featuring heavyweights like Asana, Dropbox, Cloudflare, and more.

As a direct result of prioritizing the product as the largest source of scalable business growth, product-led companies end up aligning every department—sales, marketing, operations, and service toward the single, shared goal of revenue growth by way of customer delight using the best possible product experience.

Everything the company does flows from this shared goal. Instead of making heavy investments in sales teams and marketing campaigns only, the company focuses on refining the product to become its biggest sales and marketing channel. Instead of selling customers on its offerings, the company chooses to provide value before extracting value. 

Once users are convinced of the value the product holds for them, they no longer need to be sold to or marketed to. They convert, activate, and remain loyal users solely through an unparalleled product experience.

🖋 Takeaway

A product-led model attempts to declutter the entire customer journey by identifying the most seamless way of connecting your product directly to your customers. Everything else in between is meant to take care of itself as customers discover their own ‘aha’ moment and become lifelong users of your product.

Product-led models are cost-effective, customer-centric, and hyper-scalable. You don’t need extensive sales teams (although you might need one), your product development is driven by customer needs, and you don’t have a limit to how far you can scale your business. 

Adopting a product-led model brings down barriers between departments and aligns every team member to a common set of metrics that are laser-focused on optimizing each stage of the customer journey.

What Is A Product-Led Model?

Product-led models tie your business success to crafting and delivering a great product experience. It can prove to be a fundamental shift in how you view your business and its goals, especially if you’ve operated without one for years.

The decision to adopt a product-led model should arise out of a few key priorities:

  • Making the user onboarding experience as frictionless as possible
  • Designing every feature of the product to solve a customer problem
  • Showing product value instead of telling users about it 

If your business strategy happens to align with these priorities, only then a product-led model makes sense for your company. Otherwise, implementing one in a half-hearted manner will create needless internal and external issues for your business. 

What Are The Components Of A Product-Led Model?

A product-led model involves reorienting a lot of your core and secondary business functions. From sales strategies to marketing channels to customer service, the list can go on and on. But every product-led model needs to have a few non-negotiable components if sustainable success is the goal:

1. User-Centric Design

Your product should solve real problems faced by real people. Product design should showcase an innate understanding of what your end users really want and need. 

The beauty of a product-led model is that you can refine this understanding as you grow and gain first-hand insight into user needs and behavior. You can start with a promising but imperfect product and build it into a well-designed and indispensable solution gradually. 

2. Value Delivered Before Value Extracted

You need to provide true value to users before you can expect them to invest their money into your product. And you need to do this fast. Your customers should ideally discover their Aha moment within seconds of using your product for the first time.

You also need to ensure their onboarding experience should be as quick as possible, without asking them for too much information at the start.

3. Focus On The Complete User Journey

A sales-led or marketing-led model might target user acquisition as the end goal. But a product-led needs to have a broader focus, covering the entire user journey from acquisition and activation to retention and referral (where the user becomes advocates for your product).