May 24, 2022
Why is everyone talking about product-led growth (PLG) lately in the software as a service (SaaS) industry? Why are venture capital (VC) firms firms so obsessed with it? Finally, is it something applicable to any company?
PLG: A business strategy that depends on using your product as the primary method of attracting and keeping customers and organically expanding to others (Productled).
After reading the book written by Wes Bush, one of the pioneers in this space, I want to share with you the key takeaways and highlights.
- Data is crucial to understanding your user’s needs.
- Onboarding should be frictionless and personalized.
- It doesn’t mean you don’t need a sales team.
- Adoption is the North Star. Without user adoption, there are no enterprise sales sustaining a real business anymore.
I believe every SaaS company will adopt this strategy somehow in the next few years. We can’t deny the SaaS space is crowded, and traditional channels are becoming more expensive. The user experience is more important than ever.
Successful companies such as Grammarly, Slack, Dropbox and Typeform have grown exponentially following this model.
With that said, this might not apply to the company you work for if your TAM (total addressable market) is small or if your ACV (annual contract value) is very high and concentrated in very few clients.
Why does PLG matter at all? The only reason why SaaS startups are allowed to lose money for many years before they become profitable is because of their growth, high margins, and a good LTV/CAC ratio (Customer Lifetime Value to Customer Acquisition Cost).
VC firms love this strategy as their game is to invest in outliers that can return 3x their fund. Even if it is difficult to succeed with this strategy, the winners are more winners, because of the scalability and efficiency that can be achieved with PLG.
When adopting a product-led growth strategy, users play a critical role. They want to extract value from the product before buying it, and we believe it is fair! Don’t you want to try on clothes before buying them?
It is not just a thing for the sales team, the whole company culture needs to be aligned to become successful with the PLG strategy: engineering, marketing, sales and customer success, all in unison.
Finally, each SaaS company is different, and what has worked for others won’t necessarily work for you. Wes Bush developed the MOAT framework, to help each startup define its ideal GTM strategy. He even has a quiz for it!
- Market strategy: Is your GTM strategy dominant, disruptive, or differentiated?
- Ocean conditions: Are you in a red or blue ocean business?
- Audience: Do you have a top-down or bottom-up marketing strategy
- Time-to-value: How fast can you showcase value?
Depending on your business, you’ll use the free-trial, freemium, or demo model, all of which are part of the product-led growth strategy.
If you execute well, your company will have an unfair advantage to reduce CAC significantly, grow faster and offer a much better user experience to increase LTV and margins.
Application of the PLG strategy to Gretel’s go-to-market
We began to develop the product-led growth (PLG) strategy across the entire organization, not just the sales team: engineering, marketing, sales, and customer success. Here are some of the strategies and tactics we have used so far:
