You have a fantastic B2B SaaS product idea, and now you’re wrangling how to get it into the hands of users. So, you’re doing your due diligence. Great! Welcome. You’ve heard the term, you’ve seen the articles, and now you’re asking yourself—what is product-led growth? And how is it different than other go-to-market strategies?
All valid questions.
In essence, when you’re building your SaaS application, there are several go-to-market strategies you could consider.
First, there’s the sales-led growth strategy on the conventional end—ergo, growing your customer base with your sales teams. Cold-calling or -emailing, networking—that sort of thing.
Or, you could go the marketing-led growth strategy route—i.e., getting customers through active and ambitious marketing efforts. Think lead-gen materials such as blogs, templates, ebooks—content that you tailor to keywords that direct high-intent customers into your sales funnel.
And then, there’s the new and shiny approach that’s boosted many SaaS companies to IPO stardom in the last decade or so: product-led growth. Although it doesn’t operate in a vacuum—marketing and sales will almost always be relevant—product-led growth has taken over much of the SaaS landscape.
So what is product-led growth? Well, as SaaS platform developers that prep companies like yours for go-to-market, that’s exactly what we’re here to answer.
Let’s get into it.
What is Product-Led Growth?
Product-led growth (PLG) is the go-to-market strategy of winning sales by first building a fantastic product that drives adoption by the end-user.
Then, because of its stellar customer experience, end-users move to become paying and enterprise customers—and become its viral, organic marketers because of the product’s impeccable, immediate value-add and stickiness.
Think of Zoom, Slack, or Calendly. One person tries out Zoom with its very low (read: free) barrier-to-entry. They send an invite to a colleague. That colleague is like, “Oh wow, this is such a great, easy-to-use, valuable product!”
So they send an invite to a third colleague. With a prospective B2B enterprise customer, eventually, so many colleagues use Zoom that their company sees the value in signing up or simply needs to scale their usage—so they sign up for company-wide services.
And then bam—product-led growth it is.
So, rather than a cold call or content, the customer’s entry point is the product itself. Basically, a hands-on, self-motivated demo in which the user has the opportunity to experience the value of the product in their first interaction with it. No ghosting or sluggish back-and-forths to schedule the demo. Just an end-user who uses the product, loves the product, and then, when relevant, raises it to their organization.
No longer are people *only* downloading and using the software decided upon by the top of their organizations. Nowadays, the end-users matter more than ever—because not only do they need to go along with using the product (because they were told to) but because they drive its company-wide adoption and industry-wide traction.
So, in PLG companies, sales and marketing reorient themselves to let the product—and its virality and social proof—drive their processes.
The VC fund, Openview, defines it beautifully: “Product-led growth (PLG) is an end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion, and expansion.”
And therefore, PLG is also often tied to open-source, freemium, and self-service options. End-users can try the product out first out of their own motivation, tangibly experience its value, share their enthusiasm for it with others, and then—again—bam, product-led growth. You get the gist.
Why Choose a Product-Led Growth Strategy?
1. Lower Customer Acquisition Costs (CAC)
First and foremost, a great product with a PLG strategy leads to virality. With high satisfaction and low friction, your users will generate organic marketing for you. And that means a higher number of self-motivated users. (I mean, who likes changing their workflow because their boss told them to?)
And while it may set off as a slower start for growth, self-motivated users and virality translate into lower Customer Acquisition Costs (CAC.) Since marketing and sales costs factor into CAC, your marketing and sales teams riding on the success of your product mean lower CAC overall.
2. Tailoring to Today’s Audience
Additionally, in many cases, PLG is just more tailored to today’s tech-savvy, independent users who want better designed, more powerful, personalized, and affordable self-serve tools—that demonstrate value immediately. Now, nearly 75% of B2B buyers say they’d rather buy through an app or website than a salesperson.
3. Reduction in Churn and Increase in Retention and Upsells
By having a fantastic customer experience and self-motivated users, and by giving them a direct, frictionless channel to your product’s value-add, you’re going to see lower churn. And lower churn means higher retention, Customer Lifetime Value (CLTV), referrals, and upsells. It also means you and your BOD will be happier 🙂
4. Informing Product Development and Customer Success with More Product Data
Alternatively–say you are experiencing churn in your freemium or trial versions and fewer conversions than expected to your paid version.
Well—since you’ve already gotten customers to begin using the product, you’ll be able to see where things went south in the workflow; where the frustration, abandonment, or high task times happened.
And with that product and usage data—rather than rarely candid verbal feedback you’d get during sales demos—you’ll be able to iterate and further improve your CX and design.
You’ll also be able to inform your customer success processes with product data, as well as how you sell and market the product.
5. Faster Scaling
Successfully executed PLG is an upward cycle—which is why data suggests that once PLG companies surpass $10M ARR, they usually scale faster than their peers.
Unconstrained by demanding efforts of lead generation, sales, and customer success and boosted by high customer loyalty, PLG companies can scale their customer base at a rate that outpaces their abilities to scale organizationally. Moreover, product-led growth companies also perform better than other SaaS companies post-IPO.
Best Practices to Foster Product-Led Growth
1. Demonstrate Value-Add ASAP
Which is why many PLG companies allow users to access some or all of the product in a freemium, trial, or open-source version. You want to offer your users a short time to value (TTV)—meaning, they’re able to capture and enjoy the benefits your product offers as quickly as possible.
Ergo, this means creating features and functionalities that effectively address their pain points and make their lives 1117% better, yes. But, it also means removing distractions or barriers to the product’s actual value.
2. Keep it Frictionless → Design for the End-User
Meaning, inform all design and product build processes with robust data that truly captures the users’ motivations, pain points, and preferences.
Ergo, conduct extensive primary and secondary research, competitive analysis, user interviews, usability tests. And, keep informing your product iterations with the product and user behavior data you aggregate as your user base grows.
3. Invest in Product Development with Go-to-Market in Mind
Basically, create your product with your GTM strategy (in this case, product-led growth) as your intent in the first place.
So, invest in a robust product data infrastructure so that you can continually analyze user behavior. Experiment with a GTM strategy that improves the user journey. And lastly, build out a growth function such that the product enhances its distribution, enablement, and ability to deliver value.
Well, this was a lot. We know.
Coincidentally, hi, we’re Goji Labs—a product and software development consultancy with experience in designing, “rescuing,” and deploying hundreds of products.
Have any general questions about who we are and our authority on the subject?
– Goji Labs