Product-Led Growth: What Is It and How Do You Do It?Product-led companies are characterized by rapid growth, little cash burn, and diehard fans, but those results only come to those that follow the product-led growth framework.
Product-led growth, or PLG, sounds self-explanatory. Your product evolves over time, and growth follows, right? If you’ve ever worked at a startup, you know getting the PLG flywheel started is not that simple.
The term product-led growth has a lot more to it than just product and growth. For those that adopt it, the PLG framework becomes a central part of company strategy, affecting the behavior of nearly every department. PLG is so powerful that it’s turned several small startups into behemoths like Dropbox and Shopify.
So what does this nebulous term mean, and how can it boost your growth? Below, we’ll define product-led growth, explain how to structure your startup with PLG in mind, and share a few examples of companies that used PLG to achieve unicorn status.
What is Product-Led Growth?
Product-led growth is an approach to expansion that’s focused on delivering an exceptional end-user experience. You need an incredible product—so unbelievable that users can’t stop using or talking about it with their colleagues, friends, and family. For PLG to work, your product itself needs to drive user acquisition and conversion.
Take Zoom, for instance. While they had a unique advantage during COVID-19, there was already a surge in Zoom use before the pandemic, and much of it had to do with PLG. Zoom addresses a need every company has: communication. While there are other communication tools out there, Zoom took what those platforms did and made the user experience way better. Zoom is free, quick to download, and has an intuitive UI. People who were frustrated with their companies’ sanctioned conferencing software tried Zoom and ended up loving it, using it with internal and external colleagues一even at home.
Eventually, employees ran up against the 40-minute mark, prompting them to ask their IT teams to buy an enterprise version. Zoom became a critical aspect of users’ daily lives, and at that point, procurement had no other choice but to purchase it. Rather than catering to IT departments themselves, Zoom thought hard about what the end-user wanted in a teleconferencing platform and delivered.
Benefits to Product-Led Growth as a Strategy
Ok, so we’ve mentioned Shopify, Dropbox, and Zoom as hallmark PLG companies, but are they just a fluke? What does the average company get out of using PLG as a strategy? Here are just a few of the main benefits to PLG:
- Hypergrowth Post Product-Market Fit - OpenView Partners is a VC firm known for its commitment to PLG companies. Every year, they publish a report with insights, benchmarks, and advice from top-performing SaaS companies. The 2020 SaaS Product Benchmarks Report found that product-led businesses grow much faster at scale. The early days may be tough going, but once customers start to convert, revenue dramatically accelerates, particularly after hitting $10M in ARR.
- Lower CAC - PLG companies traditionally have a freemium model, making acquisition much easier and therefore cheaper. Offering free trials at the top of the funnel hooks people in, and additional non-negotiable features (i.e., Zooms that last past 40 minutes) make converting to a paid plan a no-brainer. The best part is that money that would typically be dedicated to marketing can go towards product development.
- Smoother Upsells - For B2B companies, user acquisition has a ton of power. If you can acquire a bunch of employee users at little to no cost, you’re very likely to turn that into a large-scale contract. And if your product continues to please end-users and you launch even more unbeatable features in your upgrade plans, upsells will be a breeze. Many PLG companies charge per user, meaning that as your clients grow, your contracts will grow.
- Happier Customers - A relentless focus on product all but guarantees low churn rates. Besides the product itself, PLG places emphasis on an effortless onboarding experience, great content, and fantastic customer support. People who love your product and have good encounters with your CSMs will ask for upgrades and even provide valuable feedback for your product roadmap. Last but not least, happy customers are the ultimate marketing tool. Word-of-mouth can go a long way.
What Does Product-Led Growth Look Like in Practice?
In PLG, paying attention to the product isn’t relegated to the product team alone. A true product-led company ties product into everyday operations, uniquely influencing product, sales, customer success, and marketing teams’ work. Let’s take a look at how:
The Role of Product in Product-Led Growth
The fact that “product” is the first word in product-led growth is a dead giveaway that it’s the central component of PLG. On the front-end, product teams should be talking to users regularly, anticipating pain points before they arise, and getting context around feature requests. On the back-end, product teams should be laser-focused on getting engineering to fix all end-user-reported bugs and removing as much tech debt that’s not contributing to user needs as possible. Limiting tech debt will pay off big time as PLG companies scale. Above all, product teams should constantly be looking for new ways to deliver value.
The Role of Marketing in Product-Led Growth
The PLG marketer’s goal is to create “viral loops” in which end-users rave about and share the product endlessly. It’s vital that early PLG marketing teams are excellent copywriters, brainstorming headlines that urge users to make the first download. If marketers can get users to sign up, the product speaks for itself, acting as a lead magnet. PLG marketing teams rely on product data to improve their communication style and nurture campaigns, ensuring that their messaging is speaking to end-user needs.
The Role of Customer Success in Product-Led Growth
Customer success teams bring a lot to the PLG table. Their job is to make users successful at using the product without much help. CSMs might create step-by-step walkthroughs, host webinars, or even contribute to blog posts in an effort to make onboarding a seamless experience and to make sure users are getting the most out of new features. As more and more enterprise-level companies show interest in the product, there is bound to be an uptick in complex use cases and integrations. Customer success teams address those issues and feed the input from these conversations back to the product team.
The Role of Sales in Product-Led Growth
When you think of sales teams at most tech organizations today, you think about a top-down approach. Sales reps sleuth around on LinkedIn to find, contact, and meet executives until they convince buyers to purchase a certain number of seats. Rather than going in at the top, PLG sales reps will primarily serve一you guessed it一the end-user. Reps use the product to qualify prospects for them. They pay attention to how leads are using the product, demoing how the paid version of the product can fit the leads’ needs even better. Instead of just talking about future value like a traditional SaaS salesperson, PLG sales reps drive conversion by actually showing it. Oftentimes, sales reps are the last hires at a PLG organization.
Other Pieces of the Product-Led Growth Puzzle
Besides revamping the way your product, sales, customer success, and marketing teams work, there are three other things PLG companies keep front and center. They are:
1. Virality - If you look at product-led companies, you’ll notice one thing: they hit a point of hypergrowth. Take Calendly, for example. When you first saw a colleague or friend using it, you might’ve immediately signed up, or at least Google searched what it was. Think about that behavior on a larger scale. Once a few people caught on to Calendly, it spread like wildfire. Word-of-mouth helped, too; everyone talked about how much Calendly alleviated the ridiculous amount of time it took to book meetings. PLG companies have a product that naturally encourages virality.
2. Minimizing Friction - PLG products should be cheap (basically free), frictionless, and easy to learn. As a user, you should sign up and start using the product in no time. Think of using SSO or other ways to simplify profile setup, like asking only for Name and Email. Using the product should be intuitive, too. Within the first few minutes of using the tool, it should be obvious how your product solves end-user problems. To help with this, you’ll see PLG companies inserting help text, adding pop-ups, or sending users links to resources to turn end-users into power users. The ultimate goal is to enable users to discover the product’s value on their own.
3. Maximizing Value (Quickly) - People have a limited attention span and a minimal amount of time and patience. Your tool needs to put value front and center to keep users engaged, delivering value quickly and efficiently. PLG companies also tease what’s available in the paid version to give end-users an idea of what they can achieve once they graduate from freemium. People are much more inclined to spend money if they see the value. And because PLG companies rely on count on viral loops to succeed, it’s even more critical to maximize value ASAP.
Examples of Product-Led Growth Companies
There are a few B2B companies that everyone always cites when it comes to PLG, namely, Slack, Calendly, and Atlassian. Although those are extremely successful and popular, we wanted to showcase other PLG companies that are crushing it:
Discord - If you’re at all into games, you’ve heard of Discord. It’s a platform that enables users to communicate with voice calls, video calls, text messaging, and files in group or private chats. Discord came about because many people like chatting with friends while playing video games, but the methods of doing so (Skype, TeamSpeak) were terrible. Discord saw this as an opportunity, creating a superior voice chat app and going to market with the tagline, "It's time to ditch Skype and TeamSpeak." In 2015, someone posted about Discord in a Final Fantasy subreddit and got about a hundred users really interested in the product. With a little creative marketing and continuous product iteration, Discord grew to over 150M users worldwide. While Discord is still relatively small-time, they caught big tech’s attention一Microsoft was thinking about acquiring them earlier this year.
Xero - Xero is probably on your radar if you’re an accountant for a small to medium-sized business. It’s now publicly listed on the Australian stock exchange but started as a way for companies to move their accounting to the cloud. The founder, Rod Drury, knew that desktop accounting software was ineffective and frustrating to use, so he reached out to bookkeepers and accountants directly, selling them on his product’s sleek UI and time-saving capabilities. After a while, he established a dedicated group of partners who advised him on new integrations and features to build─a program that still exists today. In 2021, Xero boasts over 2M users with a market cap of roughly $16.7B.
We’ve concentrated on PLG in B2B companies, but it’s worth mentioning that many B2C companies such as Bumble, Pinterest, and Venmo were already doing PLG before it was even a “thing.”
Product-Led Growth for Startups
Product-led growth doesn’t happen overnight. While it can seem like PLG companies that went viral got lucky, these businesses put in hours and hours of effort upfront before attracting the attention of their user base. And, of course, you need a stellar product. You can throw yourself into PLG and try all the hacks you want, but none of that matters if your product isn’t excellent.
A product-led growth strategy isn’t for the faint of heart. It requires dedication to product in every aspect of your business, but the rapid growth, low cash burn, and diehard fans can really pay off. With product-led growth, you have the potential to become the next Github, DocuSign, or ZipRecruiter of the world.