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).
Product-led growth 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)?
- What Are Product-Led Growth Benefits?
- What Is A Product-Led Model?
- What Are The Most Important PLG Metrics?
- Product-Led Growth Vs. Sales-Led Growth (+ Main Differences)
- What Does PLG Mean In Sales?
- What Is A Product-Qualified Lead (PQL)?
- What Is Product-Led Onboarding?
- What Is Zero-Party Data?
- First-Party Data Vs. Third-Party Data: What’s The Difference?
- What Is Product-Led Marketing?
- What Is An Ideal Customer Profile (ICP) In B2B Marketing?
- Which Is Better: Freemium Or Free Trial?
- What Is An AHA Moment?
- What Is a PLG company?
- What Is PLG CRM?
- What Are PLG Tools?
- How To Achieve Product-Led Growth?
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 from 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 enormous 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.
A product-led model emphasizes the importance of the product and places it at the heart of your company, which is why acquisition, retention, and expansion are considered its most essential pillars of growth.
What Is A Product-Led Model?
Under a product-led model, you may need to reorient many core and secondary company activities, including sales strategies, marketing channels, and customer support.
However, if your goal is long-term success, there are a few non-negotiable components that every product-led model needs:
- User-Centric Design. Make sure you address what your end users want and need. Start with an imperfect product and gradually improve it into a well-designed and essential solution as you gain experience.
- Value Delivered Before Value Extracted. Provide actual value to users fast. The Aha moment should occur within seconds of using your product, and their onboarding experience should be smooth and quick.
- Focus On The Complete User Journey. Don’t look at user acquisition as your end goal. A product-led model must encompass the entire user journey from acquisition to activation, from retention to referral.
What Are The Most Important PLG Metrics?
The alignment of each department toward offering the best product possible and optimizing the user experience is a crucial component of product-led growth. You can’t achieve this objective without adequate data, which is why monitoring PLG metrics is critical.
Product-led growth metrics allow you to understand the customer journey from start to finish. To this end, you’ll need to monitor client actions and product revenue in various methods.
The most crucial PLG metrics are the ones that can help you provide the best experience to each customer at every point in the product-led growth flywheel.
The following are the top six PLG metrics you should be monitoring:
- Time To Value (TTV) is the time it takes for a new user to realize their aha moment and become an active customer. You can reduce TTV considerably by integrating ‘stickiness’ as the driver of any new feature you release.
- Product-Qualified Leads (PQLs) are leads that have recognized the value of your product and can be passed on to your sales teams. These typically use free trials or freemium accounts and are ready to convert to paid customers.
- Expansion Revenue is the revenue earned from existing users through upsells, and cross-sells. These methods are three times less expensive than acquiring new clients, and you should use them with customers in the adoration stage that are ready to use your product more.
- Average Revenue Per User (ARPU) is the average revenue you earn for each user. Your monthly recurring revenue (MRR) is divided by your total clients. ARPU can help you determine how much of your revenue comes from each user segment.
- Net Revenue Churn is the percentage of revenue lost during a specific time when accounting for new and expansion revenue.
- Virality is the number of new people an existing user can onboard and convert into paying clients. Virality is linked with your advocates, the consumers who promote your product by using and recommending it to new people.
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 for 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 depends on your product’s maturity 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 Does PLG Mean In Sales?
The objective of PLG in sales is to apply product-led growth principles to a company’s sales department to accelerate sales. It distributes product-qualified leads (PQLs) to the sales reps, increasing conversion and retention rates.
Your sales team will work more effectively and efficiently if you incorporate product-led growth into your sales process and work with the most promising leads. These are the PQLs that have used your product and recognized its value. With data-driven and context-rich selling tactics, they’re ready to convert.
Here’s a quick primer on the specific steps you need to follow to do this:
- Identify your product-led growth sales KPIs
- Identify your PQLs
- Track in-app user behavior
- Provide value front and center
- Re-activate the non-PQLs
This 5-step overview may assist you in aligning your sales team and your other revenue-generating departments toward a shared objective of using your product to improve sales and gain better acquisition, retention, and expansion.
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 about 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 the 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.
First-Party Data Vs. Third-Party Data: What’s The Difference?
You usually acquire first-party data from your customers via Google Analytics or by tracking user behavior on the website and product and with customer feedback. It is used to create marketing content and ads, and to understand and personalize the user journey. Your product development relies on first-party data, as well.
Examples of first-party data include the time spent on a feature in your product, any information shared with your salesperson, and information coming from email campaigns or checkout.
Third-party data comes from outside your organization via web cookie tracking and third-party data marketplaces such as independent researchers and data aggregator platforms. Predicting whether it will be helpful may be challenging since data collection methods may be too broad or ineffective for your niche or due to changing privacy regulations.
Examples of third-party data include third-party cookies installed on your site and data bought from third-party companies.
There are a few benefits when using first-party data:
- Help in product development. Behavioral data such as feature usage can help you improve your product and market to different segments using specific use cases.
- Better targeting. Data coming from your customers can help shape your Ideal Customer Profile (ICP) and create targeted content.
- Map customer journey. With first-party data, you can discover how a customer moved from an email to your website to your product before purchasing.
What Is Product-Led Marketing?
Product-led marketing (PLM) is a GTM marketing strategy that involves a shift from traditional lead generation and MQLs to helping customers succeed with your product and ultimately help in product-led growth.
Aside from providing your entire team with a shared goal that is dependent on product development and customer experience, PLG in marketing has the following advantages:
- No time to scale: PQLs cut down the need for long sales cycles, accelerating expansion.
- Minimal acquisition costs: The CAC will be lower since your product will sell itself.
- Higher retention: With the Aha! moment already reached, your clients are far more inclined to stay.
- First-party data: User data allows you to improve your product to satisfy your clients’ needs.
PLM focuses on turning your product into a marketing tool. Some ways of leveraging your product are a smooth onboarding experience, optimized product interface, targeted guides, and blogs explaining use-cases.
Here are some ways to integrate product-led marketing into your PLG journey:
- Change marketing performance metrics. Track KPIs that focus on customer success, such as daily active users, overall customer satisfaction rate, usage time, net promoter score (NPS), and time to response.
- Craft content around users’ pain points. Learn who your ICP is and their problems, and then create content that shows how they can solve them with your product.
- Create knowledge centers. Present your knowledge and expertise through content (i.e., guides and courses) to help clients succeed with your product and create a better customer experience.
- Offer free trials or demos. Crafting a great customer experience and giving as much value as possible by offering your users free trials, demos, and freemiums, you can move them down the sales funnel.
What Is An Ideal Customer Profile (ICP) In B2B Marketing?
In B2B marketing, an ideal customer profile (ICP) refers to the client who benefits the most from your product or service and includes data such as their location, company size, and budget. Your ICP supports creating focused sales and marketing strategies and identifying what your customer needs so that you can create alignment in your offer.
- Personalize your message. Once you personalize your messaging based on your ICP, you can create assets like ebooks, blog posts, and whitepapers that speak to your audience that tell them how your product or service solves their specific problems.
- Focus on targeted prospecting. Understanding your ICP also gives you knowledge of the best outbound lead gen channels to use. Also, your sales team can score leads based on an ICP and filter relevant inbound leads.
- Increase Customer Lifetime Value (LTV). Continuously improving your product based on feedback will keep your clients with you longer. You can also tweak your onboarding process and gather accurate customer data, resulting in a low customer churn.
Ideal Customer Profile Worksheet
Learn how to create an Ideal Customer Profile and build a successful sales strategy with this Ideal Customer Profile (ICP) Worksheet.
Which Is Better: Freemium Or Free Trial?
There are a few differences between freemium and free trial. While with a free trial, you get to use a product (complete or limited) for a specific amount of time, a freemium gives you access to limited features of a product without time restrictions.
What to choose for your product? Both freemium and free trial have pros and cons.
|No commitment may mean more people in the top-of-funnel||A lower activation rate to paid may mean less revenue generated|
|More touchpoints with the users may mean better performances without a sales team||A great onboarding experience and an early “aha moment” become critical for success|
|More word-of-mouth may mean more revenue from free users||A high cost of service for new users may mean that a freemium model is not sustainable|
|Time limits may mean a better conversion rate to paid||Not asking for a payment method may mean attracting spammers|
|An opt-in free trial with little to no friction may lead to a higher number of sign-ups||Costs may not be sustainable depending on your product or service|
|More initial trust with your prospects||For specific usage patterns (i.e., intermittent use), it may mean lower upgrade rates|
What Is An AHA Moment?
An ‘aha’ moment is the first time a user understands the value proposition your product offers them, usually accompanied by a sudden realization that could be rephrased in, “Ah, this is what I was looking for.” Without experiencing the aha moment, the probability of users coming back is remote, and in most cases, none.
Identifying aha moments involves researching user behavior and filtering through tons of analytics data to narrow down to the experiences that can drive the highest impact.
Here are three steps to help you discover your aha moment:
- Find what made users stay. Use your analytics tools to identify patterns in the behavior of your retained users and reach out to your current users with a survey to understand what makes them stay.
- Find what made users leave. Next, identify what made users leave. What actions did they not take that the retained users did? Prepare a survey for past users to get deeper insights.
- Pinpoint your aha moments and test. Once you find your aha moments, identify the ones with the higher impact that are easier to implement. Now, create relevant onboarding experiences and test them using in-app messages or onboarding checklists.
What Is A PLG Company?
PLG companies or product-led growth companies are SaaS businesses using their product to drive growth and customer acquisition while keeping customer churn in check.
In product-led growth, the focus is on giving your ideal audience an immediate experience of the product’s value. In contrast, most sales-led companies take a long time for their users to experience the core value.
A PLG company has several benefits over a sales-led company, including a flexible budget thanks to small sales teams, a focus on product development, and a higher customer retention rate since customers upgrade to a paid plan only after understanding the benefits of the product.
Before you transition into a product-led growth company, you must figure out who your ICP (Ideal customer profile) is, have a basic product-market fit, and design a smooth onboarding process that lets users experience their aha moment quickly.
What Is PLG CRM?
PLG CRM is a customer relationship management tool that gives insights into both user accounts and data, and that is often used by product-led growth companies.
Unlike a classic CRM that defines the customer’s buyer journey stage based on the number of phone calls, product-led growth CRM identifies it based on their product usage. It has several benefits for all revenue-generating teams:
- Aggregate siloed data. As the CRM becomes a single source of truth, the operational teams save time by not having to jump across platforms for the data they need, such as customer information and product usage data.
- Identify better-qualified leads. a PLG CRM makes product-qualified leads visible to the sales team. They can identify the chance of conversion with a lead scoring method considering product data as a factor.
- Nurture MQLs properly. With the marketing team having access to customer and user data, you can create targeted campaigns based on the lead scores and nurture the PQLs and MQLs to SQLs smoothly.
- Create more active users. As your development team is able to analyze user activity and behavior, you can implement strategies to engage users and make them more active with your product.
- Improve customer retention. Your customer support team can identify at-risk clients before they churn. You can also spot churn patterns and create strategies to counteract them.
What Are PLG Tools?
PLG tools are used in a SaaS company’s technology stack to make critical operations, such as user acquisition and retention, go more smoothly. Because a product-led growth go-to-market approach for a SaaS business relies on its product to acquire consumers, these product-led growth tools help highlight the product.
Depending on the task, you may use different PLG tools:
- Onboarding is one of the essential phases in a product-led growth approach since it allows you to collect user data that you will use to improve the user experience and, at the same time, familiarize them with your product.
- Customer feedback is essential for making your product better. This is especially significant in a product-led growth GTM strategy since your product is the star.
- The PLG CRM differs from a standard CRM in that it contains integrated consumer data, including consumers who use freemium or free trial subscriptions.
- Product Analytics tools tell you how a user is utilizing your product, the most frequently used product, where users get stuck, and what they do when they’re unsuccessful.
- Marketing Automation tools can assist you in automating most aspects of your marketing, from email marketing campaigns to social media marketing efforts.
- Customer Success is all about giving your current users the best possible experience. Customer success solutions aim to gather customer data to keep track of client health.
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:
- 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.
- 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.
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