Product-Led Growth; The Intersection of Product Development & Sales
Product-led growth (PLG) has been an active focus of mine for the past few years and my interest is only growing. So let’s explore the topic in detail.
What is Product-Led Growth?
PLG is a paradigm shift in the way software companies build and sell their digital product or service. At its core, PLG empowers end-users to independently discover, try, purchase, and scale product usage without the need for direct sales involvement. Companies can selectively apply PLG to specific products or opt for a hybrid approach, integrating traditional sales for initial purchases with PLG for renewals and expansions.
Traditionally startups would go about building a product, releasing it and instructing a sales and marketing team to go sell the thing. This approach struggles as there’s not a strong connection between the sales, marketing and product team and that creates a disconnected user experience, adding friction to the growth machine.
Companies that have adopted a PLG approach are experiencing accelerated growth rates and are more likely to gain market share compared to peers with limited or no PLG emphasis.
In simple terms, PLG is really just thinking holistically about the best way to attract prospective users and convert them into long-term customers who will go on to evangelise your company. This involves making it quick and easy to understand your value proposition, try your offering and convert to a long-term paying customer who will love it so much they’ll tell their friends about it.
This requires designers, developers and the rest of the product team to think with more of a sales hat to add friendlier copy, to remove obstacles in the product journey, to add pricing and self-signup into the app experience rather than something that’s pigeonholed to the /pricing page.
You quickly realise it’s just about making a great, well-rounded product that has the customer at the heart of it.
Is Product-Led Growth always the answer?
Broadly speaking I think most tech products need to embrace elements of PLG but it isn’t a panacea.
I think the main pre-requisites to warrant doubling down on a PLG focus are:
Self-serve purchasing
There has to be a horizon where end-users could be making the purchasing decisions without the involvement of a sales function.
If your organisation has firm requirements that there’s a sales wall between the customer then a lot of the effort would be wasted as the customer could be hand-held by the sales team.
Long term usage
PLG mostly solves the problems around funnelling unfamiliar users into a complex product that’s designed to be used over a long timeframe.
If your product is more transactional, like an e-commerce store, it’s likely you’d benefit more from traditional marketing as users will be familiar with the purchase flow.
Try before you buy
PLG typically has a broad customer base with a large pool of free users who can potentially convert to paid.
I prefer getting users to part with nominal sums of money as it’s more likely they’ll make use of your service.
The important part is embracing the idea that users need to build trust in your service, so by lowering the upfront paralysing purchase decision-making process, it’s best to just get them onboard to experience the value.
If you can’t lower your initial offering to free or nominal, PLG probably isn’t relevant, yet.
The Five Pillars of PLG
If your market aligns with PLG prerequisites, mastering five essential capabilities is vital to delivering a robust PLG experience:
1. Product Design
Prioritize user-friendly design, enabling end-users to deploy and derive value quickly. Incorporate triggers and nudges for upselling and cross-selling. Leverage advanced telemetry for personalization and continuous testing.
Linear, Superhuman, and DigitalOcean are companies that have embraced a design-led ethos to stand out in a sea of competitors. You can feel they sweat every detail to delight you every step of the way from the landing page, and onboarding through to transactional emails.
2. Packaging
Offer a free version that allows users to experience your product before making a purchase. This could take the form of time or consumption-limited free trials or feature-limited free tiers. Ensure pricing scales logically as users derive more value.
Fly.io does this well with their pay-nothing if your bill is below the $5 offer. Perfect for lots of small projects to get you hooked.
AWS is the master of the free tier offering under their Activate program. Get $100,000 in credits for a year or $10,000 per year for 2 years which means you don’t need to worry about cloud spend when you’re building your startup, only when you offramp when you gain traction. This is a great ploy to ensure you use all of their cloud offerings to keep you away from competitors.
3. Discoverability
Drive website traffic through various channels, including search, paid media, communities, influencers, and partnerships. Tailor marketing efforts towards end-users rather than traditional corporate buyers.
Dropbox has done this exceptionally well; marketing to and winning over individuals and small teams which unlocks a bottom-up sales route into large and enterprise companies without the traditional long and expensive enterprise sales cycle.
Digital Ocean used to do this particularly well with a simple message that seemed like it was advertised everywhere “Launch a VM in under 60 seconds”. Clear and actionable.
4. Self-Guided Education and Support
Ensure users realize value quickly through user-driven onboarding, educational resources such as videos and guides, and comprehensive product learning materials.
Duolingo is the one to study on setting yourself up for success. They’ve taken all the learnings of how complex games get you set up with a fun, friendly, and guard-railed onboarding process making it impossible not to understand how everything works.
Stripe also does this well with their documentation on how to get started on their landing pages. You can copy the code they generate and paste it into your editor to have a working payment provider in seconds.
5. Sales Handoff
Even in PLG-centric companies, enterprise sales teams play a role. For newer PLG companies entering this space, a well-thought-out plan for enterprise sales and its integration with self-service is essential.
GitHub is the place developers host their code. You’ll start as an individual, working your way to a team and at some point, you’ll be requiring enterprise features which are covered by their specialist offering.
Investment Considerations
Contrary to the notion that PLG reduces sales and marketing expenses in favour of research and development, data reveals that primarily PLG-driven companies invest more in both R&D and sales and marketing. This investment pays off, as PLG-focused companies experience more substantial revenue growth for every dollar spent on sales and marketing.
Conclusion: Embrace PLG
In conclusion, Product-Led Growth represents a potent opportunity that every B2B software company should consider. However, implementing PLG necessitates a cultural and technical priority shift. Support from the top, a willingness to adapt the operating model, and seamless integration with the existing business are prerequisites.
Once the PLG flywheel is in motion, you’ll start to see growth and growth fixes everything.
