Product-Led Growth: A Guide for SaaS Companies
The SaaS market is a rapidly evolving market in every way, such as the demands, the technology, the products. Even the growth strategies for SaaS companies are changing. What is once beneficial might not be enough for a SaaS company to sustain growth currently.
As the traditional growth strategies become obsolete, novel approaches are brought to the agenda of the companies.
That is why Product-Led Growth (PLG) comes to the attention of many SaaS businesses, and many SaaS businesses have switched from sales-led growth to product-led growth for a while.
In this post, we will elaborate on PLG in a detailed way.
What is Product-Led Growth (PLG)?
Product-Led Growth (PLG) is a go-to-market strategy built solely around your product to acquire and retain customers. In product-led growth strategy, acquisition, conversion, and expansion are the results of usage of the product in the first place. By adopting product-led growth, your strategy for growing the business relies on the value proposition of your product.
Product-Led growth is a revolutionary strategy in a market that was dominated by sales-led growth before. While the sales-led growth overbalances the sales team to accomplish every sale, the product-led growth relies on every team focused on the product to create a valuable experience for the users. And, when the users experience the value of the product due to product-led growth, they will welcome the product to their daily lives.
Considering product-led growth is user-centered and cost-effective besides creating opportunities for users to self-educate, PLG is a suitable approach for SaaS business growth.
Product-Led Growth vs. Sales-Led Growth
There are several essential differences between product-led growth and sales-led growth.
Self-driven Usage
PLG allows users to learn the product themselves to realize the value of the product while enjoying using it.
Unlike sales-led growth, PLG is suitable for self-education. The users onboard themselves and have a space to explore the offerings of the product. This is how the PLG approach is built on allowing the users experience the value of the product.
Cost-efficiency
PLG is cost-efficient. PLG approach allows users to onboard themselves to enjoy the value of the product. Therefore, PLG brings shorter sales cycles. Also, PLG enables SaaS businesses to accomplish more with few team members.
Since sales-led growth has higher customer acquisition costs and long sales cycles, they are not very cost-effective. In order to make a profit with a sales-led growth, the prices are increased continuously, which will lead to customers seeking affordable or cheap alternatives eventually.
User-centered
PLG's approach is built on providing an excellent user experience. Therefore, the PLG strategy involves emphasizing experience value as much as perceived value. In other words, PLG pays attention not to create a value gap.
The sales-led growth approach primarily focuses on the product’s perceived value to make the sales conversion happen. In the PLG strategy, the users first use the product and decide to pay for it. Therefore, it is important to deliver what is promised to the users so that the users can find what they expect.
Benefits of Product-Led Growth
Here are some benefits of product-led growth that is suitable to the nature of the SaaS businesses:
Lower Customer Acquisition Costs (CAC)
CAC is lower in product-led growth than sales-led growth. An important factor that makes CAC inexpensive in product-led growth is shorter sales cycles.
Shorter Sales Cycles
PLG strategy relies on delivering the value of the product early on. Therefore, when the users acquire an outcome by using your product in a shorter time, it is very likely they will convert to become paying customers quickly.
Higher Revenue Per Employee
By adopting a PLG strategy, the business will accomplish more with fewer people. Also, the PLG strategy increases profits. Therefore, a higher profit, which is divided among fewer employees yields higher revenue per employee.
Broad Top-of-Funnel
Free-trial options that come with the PLG strategy appeal to many potential customers. As the number of users that enjoy a free trial increases, the more likely you will get loyal customers if they understand the value of your product in the first place.
Better user experience
Considering your growth strategy becomes user-centered, the relationship between the users and the product becomes more meaningful, so the users feel satisfied.
How to Achieve Product-Led Growth?
Adopting a PLG strategy requires some transformation within the product and the business. We explain those below:
1)Define your value
Before initiating any project, defining your business’ value proposition should be the primary action to take.
In order to understand the value proposition of your product, you need to answer those core questions to find what makes your product valuable:
a)” By using my product, what do the customers achieve?”
b)” What is the desired feeling of the users after they use my product?”
c)” How do the users want to be perceived by the others when they use my product?”
As you find specific answers to those questions that help you to define your product’s value, it will be easier for you to present your product’s value proposition because you will know what to deliver to the customers in the first place.
2)Deliver your value proposition without creating a value gap
When there is a mismatch between the value you promised to the users (perceived value) and the value you deliver (experienced value), a value gap emerges. A value gap should be avoidable because it causes users to lose trust in your product. At the end of the day, users agree to try the product to find the value you have promised before.
To build successful product-led growth, you need to deliver the exact value you promised. When the users understand that their experienced value aligns with perceived value, the trust between your business and your users becomes inevitable. Therefore, they will not hesitate to buy your product.
3)Presenting an effective onboarding process
User onboarding, which is the process where the users start to experience the product’s value, is an effective tool to show the product’s value early on. As the time for users to experience the product’s value prolongs, the more user churns even before experiencing the value of the product. Distancing away your users from experiencing the product’s value is contradictory to the product-led growth because product-led growth strategy aims to deliver the value early on.
In addition, an effective onboarding process includes less friction. It does not include a complex sign-up process or unnecessary steps, does not require too much information from early on. While minimizing the friction, you will increase the number of users that experience the product’s value. Therefore, minimizing friction is essential to sustain product-led growth.
4)Driving demand of the users with the product
No matter how much great your product is, waiting for users to approach the product by themselves will be pointless because they will not. You need to approach the users, explain to them that you have a valuable product, and show them how to access this product.
Therefore, having a great product is not enough to get customer acquisition or retention. It would help if you made an effort to show what you have to the users.
5)Changing the relations between sales and marketing
In a sales-led growth, sales and marketing teams generally work independently. It is now understood that this strategy leads to a dead end.
In product-led growth, every team, including sales and marketing, needs to work collaboratively to acquire better growth rates.
Examples of Product-Led Growth Companies
1)Slack
Slack stands at the top 1% of PLG products. It provides a medium for team collaboration.
The company has achieved enormous value in a short time. It is adopted by many companies and easily adopted by every team member.
Like the other successful PLG products, Slack is built around product features and usage, so upgrading to a paid plan becomes inevitable after the users enjoy the outcomes of the product and accomplish their tasks with minimum effort.
2)Dropbox
Like Slack, Dropbox is another top product-led growth product. Dropbox has a successful product-led growth in two remarkable ways. Firstly, it is a great tool to meet the customers’ demands, such as providing cloud-based storage, enabling access to people who do not have an account. Secondly, Dropbox encourages users to bring virality. The product accomplishes this by incentivizing the users with extra storage when they invite new users.
3)Calendly
Calendly is a great product to arrange an available time for a group of people. It provides effortless scheduling for everyone. Also, the user does not have to have an account to use Calendly. Therefore, there is no barrier to experiencing the outcome of the product.
4)SurveyMonkey
SurveyMonkey is a tool to create and execute online surveys. The virality of SurveyMonkey is due it is easy to use, and everyone who completes a survey on SurveyMonkey becomes a user. Therefore, the rapid customer acquisition of SurveyMonkey is due to the snowball effect they create.
5)Zoom
Zoom is a video conference tool that can be used for video meetings, audio conferencing, recording meetings, and live chat.
It has especially become popular with the increasing demand for online meetings due to the recent Covid-19 pandemic.
As a product-led growth strategy, Zoom offers free 40 minutes video conferences for 100 attendees. Also, anyone who receives a link can enter a Zoom meeting, so Zoom does not require attendees to have an account. Because of their excellent PLG strategy, Zoom was able to replace Skype successfully.
🔥 Key Takeaways 🔥
👉Product-led growth strategy (PLG) is a powerful strategy for SaaS products to acquire, activate, and retain customers via delivering the product’s value in the first place.
👉There are several core differences between product-led growth and sales-led growth.
👉Product-led growth is beneficial for SaaS products because of:
a)requiring less CAC
b)having shorter sales cycles
c)leading to higher revenue per employee
d)widening top-of-funnel
e)delivering a better user experience
👉Achieving a PLG strategy requires some actions to be taken to make the necessary transformation:
1)outlining the value of the product
2)aligning the experienced value with perceived value
3)delivering an effective onboarding process
4)driving demand
5)reshaping the relation between marketing and sales teams
👉There are some successful products or companies led by the PLG strategy we have presented above. They are perfect examples for showing the importance of being driven by the value of the product.
