What is Product-led Growth (PLG)?

DEFINITION
Product-led Growth (PLG) is a popular SaaS business methodology where the product primarily drives a business’s success and growth. Acquisition of revenue, expansion of revenue, and retention are mainly led by delightful experiences of the product.

Understanding Product-led Growth (PLG)

Product-led growth (PLG) is a go-to-market strategy that focuses on your product as the primary channel of customer acquisition, conversion, retention, and expansion. It’s a show-don’t-tell strategy in which users sign up for a free trial or freemium, experience the aha! moment after using the product and upgrade to paid customers without interacting with the sales team.

Benefits of product-led growth include lower cost per acquisition, better customer retention, in-depth feedback on your product that informs future development, and access to first-party data.

The challenge with an entirely product-led strategy is that it simplifies the complexity of businesses as they scale. Before going fully product-led, consider:

  • Your product maturity. Ask yourself: is your product mature enough to support self-serve use cases? If not, consider sticking to a sales-assisted motion.
  • Your ICP. SMBs are different than mid-market or enterprise, each segment should have an ad hoc strategy.

Even if your company is not ready to go fully product-led, you should consider adding PLG as part of your strategy.

This means using your product as one of your channels to increase adoption and conversions (i.e., having messages that guide the user in-product) and reinforcing its perceived value (i.e., clearly indicating the value of additional features when introducing paywalls).

Takeaway

PLG is a go-to-market strategy that turns your product into a large sales force.

Product-led growth has several benefits, including lower cost of acquisition, higher customer retention, and access to first-party user data. Before going fully product-led, you should consider your product maturity and ICP to decide whether product-led growth should be your primary (or only) strategy or part of your go-to-market motion.

Regardless of your primary GTM approach, you should consider using your product as part of your strategy to increase adoption and retention and reduce customer churn.


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What is Product-led Growth (PLG)?

Product-led growth (PLG) is a “freemium or free trial done right” strategy that turns your product into a highly effective sales force.

To start with PLG, you need a solid product. You also need to build in opportunities to monetize features or behaviors natively in the product and find ways to make the product sticky through the experience or interject when it seems like a user is on a path to churn. 

As you scale, however, you have to consider different factors. If you are a company that is going to serve consumers or the SMB space indefinitely, then a fully product-led strategy may work. Still, as you shift into mid-market and enterprise potential customers, product-led becomes a part of your strategy, not your only strategy.

In reality, for most businesses thinking about product-led approaches or strategies is part and parcel of everything. Ultimately, you’re looking to do what you have always done through other channels, just with the product as your most important conversion channel.

Whichever your GTM approach, you need tools that are able to tell you what users are doing to have a holistic view of what activities and actions are driving certain behavior. Those tools would also need to allow you to communicate with that audience. You can then quickly trigger actions like help tips or upgrade prompts as a result of those insights.

What are Product-led Growth benefits?

There are many benefits when implementing a product-led strategy:

  • Lower cost of acquisition. With a PLG strategy, the product itself acts as a product acquisition tool, lowering acquisition costs.
  • Higher customer retention. Customers are already aware of how your product works when they purchase it, thus creating a better user fit and increasing the chances of retention in the long run.
  • Focus on product development. Listen to customer feedback and use their suggestions (or complaints) to further enhance your product. As the product improves and evolves with customer needs, the number of satisfied customers increases exponentially, leading to a lower churn rate all around.
  • 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 better understand your customers’ behavior and market your product efficiently. This will directly lower your advertisement cost and increase your conversion rate in the long run.

Product-led Growth vs. Sales-Led Growth (+ main differences)

While product-led growth leverages your product to acquire and retain your customers, sales-led growth is an approach where your sales team takes on the responsibility of your business growth.

Product-led growth vs. Sales-led growth main differences:

  • Point of contact. For product-led, the point of contact is the product. For sales-led, on the other hand, it’s the sales development rep, account executive, and customer success manager.
  • Buying cycle. Product-led focuses on SMBs (short sales cycle), whereas sales-led targets enterprises (long sales cycle).
  • Cost-efficiency. Product-led doesn’t require a huge sales team like sales-led.
  • Control. Because of its self-served nature, product-led doesn’t give you complete control of how users experience your product. However, sales-led allows you to personalize prospects’ experience from the get-go.

There is no right or wrong when choosing whether you want to be product- or sales-led. It really depends on the maturity of your product and the market segment you are targeting (and it changes over time too!) Even product-led growth companies employ a sales team when growing rapidly.

What’s important is creating a fine balance between the two and choosing a tech stack that will allow you to use both based on the business opportunity. Integrating all the collected data is what will help you scale quickly and accelerate your revenue.

What is a Product qualified lead (PQL)?

A product-qualified lead (PQL) is a user who has experienced the value of your product through a free trial or freemium account. Since they’ve already experienced its value, there’s a higher chance of conversion.

Before beginning lead generation, you must establish specific criteria for your PQLs. A PQL isn’t simply someone who has joined up for the free trial; they must engage with your product in a certain way to qualify as the PQL.

Here are some indicators to look for when identifying your PQL:

  • Ideal client. A PQL has to match your ideal customer profile (ICP). If their demographics and firmographics aren’t the same as your ideal customer, they’re not a PQL.
  • Product usage. The lead should be utilizing your product while also generating high value from it. If your product isn’t solving a significant problem for them, they may not become a long-term customer later on.
  • Purchase intent. You can identify the buying intent of the lead from their actions while using the product. For example, a lead visiting the pricing page is indicative of their purchase intent.

What is product-led onboarding?

Product-led onboarding introduces users to features according to their needs and position in the customer journey. This means users are shown features that are best suited for them, rather than trying to familiarize them with everything at once.

While PLG businesses focus on the “try before you buy” strategy, product-led onboarding focuses on making that “try” a delightful and memorable experience to convert users into lifelong customers. 

To make that first product experience so impactful that the user doesn’t need any more convincing about the usability of your product, you need to:

  • Understand user success. How will your product transform the life of your user? What need or want will your product fulfill? Look at your product experience from the user’s perspective and tailor it accordingly. Keep the end goal in mind before designing your product onboarding process.
  • Segment and design user journey. Not all users are the same, but some have a few similarities. Identifying the similarities and creating cohorts based on them help you design the user journey in a personalized way.
  • Craft each step carefully. Create each and every step in your product experience with intention. Taking your customers through unnecessary steps will only delay their first valuable experience, which can negatively impact conversion rates. The sooner your customer experiences value from your product, the better.

What is zero-party data?

The data a user provides to your business voluntarily and proactively is known as zero-party data. It offers insights into purchase intentions, personal contexts, communication preferences, and how the individual wants to be recognized by the brand.

Let’s look into how this data can help your business:

  • Drive product-led growth. You can keep improving your product by asking strategically framed questions around how a customer uses your product, their likes, dislikes, and future expectations.
  • Better quality data. Purchasing data from third-party sources increases the risk of getting ineffective or outdated data. This may pose greater challenges like poor targeting, lost customers, and wasted money. With zero-party data, you’ll not only get reliable data but you can even ask for data that you actually need.
  • Better personalization. With zero-party data, you can create personalized campaigns throughout the customer journey. When you have information like customer preferences and buyer intentions, you’ll be able to craft personalization strategies that drive conversions.
  • Gauge brand’s trustworthiness. The more customers are willing to share and exchange data with your brand, the more trust they have in you to keep their data secure. You can let customers know why you are collecting the data so that they feel comfortable providing it.

How to achieve Product-led Growth

Product-led growth is about turning the product into the sales force to a large extent. To be able to do that, you need tools that:

  1. Tell you what users are doing and what behaviors they’re taking, which leads to some analysis to determine flows, traction, conversion points, and so on. Deep product analytics tools including Mixpanel, Segment, and Pendo are excellent for diving into and getting insights, but they’re not particularly action-driven. They are essentially a siloed subset of data; they are the product data
  2. Allow you to communicate to that audience, ideally in-product, but also through other channels to ensure you get the message across. CRMs and marketing automation tools like Salesforce, HubSpot, Marketo, and Intercom are great at connecting with your prospects or clients but not so much at connecting the dots between customers and their actions on your website and/or product.

At Breadcrumbs, we believe that to enable a robust product-led growth strategy, you’d need to be able to connect data across all of your touchpoints: your marketing automation platform, your CRM, and the actual product usage tools.

After doing that, you’ll have a genuinely holistic view of what activities and actions are driving behavior. Then you can quickly trigger actions as a result of those insights or the rulesets around those insights.

With Breadcrumbs, you can connect CRMs and marketing automation tools like HubSpot or Salesforce. That gives you access to a wealth of information about how trial users, prospects, and customers interact with your brand. You can then connect product analytics tools like Pendo, and Mixpanel, which have a lot of information about how they engage with your product, or use tools like Segment to help you integrate your product analytics tools.

You can build models which create scores that can then be used to drive workflows, such as in-app messages, email communication, or emails from a salesperson – enabling you to implement a robust and product-led strategy and also transition to product-led sales