How Product-Led Growth can boost revenue and valuation in B2B SaaS
Product-led growth (PLG) is a business approach where a company uses its product as the primary driver of user acquisition, conversion, retention, and expansion. There are many benefits to this methodology as the majority of efforts to scale are centered around the product itself, rather than marketing and sales — meaning it can be effective in keeping down cost of acquisition (CAC).
Some of the benefits product-led companies realize are:
Shorter sales-cycle
Product-led companies take full advantage of self-service by allowing user onboarding from the moment a customer begins a free trial. User onboarding is effective for expediting the most important value drivers you have for your customers from the beginning.
Lower Time-To-Value (TTV)
Because you’re leveraging user onboarding to propel your customers into the immediate values and benefits of your product, the time it takes for prospects to activate into paid customers can be reduced.
Lower Cost of Acquisition (CAC)
Product-led companies have self-serve models for upgrading their plans to allow for explosive growth that doesn’t need to go through sales teams or other processes.
Best-in-Class User Experience (UX)
Companies that rely on their product for the center of its growth will invariably have a better user experience because of the constant feedback and iteration that is required to generate the product value that your customers crave.
But when thinking about product-led growth, how exactly can a B2B SaaS company execute on an effective strategy that focuses on the product as the driver of the aforementioned areas?
Let’s look at some key areas to focus on to derive the full value that this approach has to offer.
👉 Strive for Exceptional User Experience
You’ll need to invest in creating a product that delivers an exceptional user experience so the product becomes irresistible for your customer’s needs. Prioritize usability, simplicity, and an intuitive design to ensure that users can quickly understand and receive the full benefits from your product. By addressing your customer’s pain points and providing a delightful experience they can’t live without, you’ll increase the chances of users becoming advocates and referring others to your product — more on that later.
Ultimately, if you are to rely on the product for the growth of your business, it’s paramount that the user experience is superb. Are your competitors easier to use? Do they have a more delightful interface? Customers will have a preference for these things and if your product misses the mark, it will miss the customer conversion.
👉 Freemium or Free Trial Offering
By implementing a freemium model or offering a free trial, you’ll allow potential customers to experience the value of your product firsthand. As mentioned above, this approach shortens the sales-cycle and lowers TTV because of the removal of barriers to entry. It enables users to explore the core features before committing to a paid plan and grants them a moment to become captivated by your solution. A free version should provide value while encouraging users to upgrade for additional functionality or advanced features. And as for upgrading, Millennials and younger generations favor self-service options over having to contact a person to change plans — a trend that is surely going to continue.
👉 Product-Led Onboarding
Develop an onboarding process that guides users through the initial setup and helps them experience the product’s value quickly. You should have a strong understanding of your product value proposition and the exact problems your product solves for its customers, then leverage that to focus the onboarding experience on providing quick, insightful, and in-depth educational material to propel their TTV. You can leverage in-product tutorials, tooltips, and guided tours to educate users about key features. The goal is to demonstrate the value and enable users to achieve their jobs to be done as efficiently as possible. Be sure to follow user-onboarding best practices so as to not cause friction in this process.
Now that customers are entering free trials via self-service and they’re realizing value immediately from user onboarding, CAC is effectively at the mercy of the performance of these processes — which can be a real driver in revenue and valuation.
👉 Data-Driven Iteration
Iteration must never seize in today’s world. Everyone who stands a chance is leveraging this idea to its fullest capacity. Analyzing user data and feedback to identify areas for improvement must be done continuously. This will lead to changes in features, user flows, and product enhancements that better serve your ideal customer. User behaviors can change over time and must be monitored alongside usage patterns, and engagement metrics. This data-driven approach allows you to make informed decisions to optimize the product experience, increase user satisfaction, and drive customer retention.
If revenue growth and valuation is desired, it is absolutely crucial to focus on the evolving needs of your customers while maintaining positive customer satisfaction (CSAT). When a product solves a customer’s needs while delighting them, retention will go up. With retention up, longtime customers can be a driving force for increasing customer LTV by targeting additional value-add features. Which takes me to my next point..
👉 Viral Loops and Referral Programs
With longtime and loyal customers, you can encourage and incentivize them to refer new users to your product. You can implement viral loops and referral programs that offer rewards or discounts to customers who successfully refer others. This approach leverages the power of word-of-mouth marketing and helps decrease CAC while increasing customer acquisition through trusted referrals. Referrals live at the bottom of the funnel so other areas should be prioritized early on, but the power of referrals should not be underestimated.
👉 Customer Success and Expansion
Another benefit of having longtime customers and their loyalty is the ability to upsell based on their needs and concerns. If a lot of customers are having similar suggestions or issues, it may present an opportunity to expand into new value-add areas and drive expansion revenue. Continue monitoring customers’ evolving needs for these gaps. By driving customer adoption, expansion, and upsells, the power of customer Lifetime Value (LTV) really starts to gain traction and should increase.
👉 Analyze and Optimize Metrics
You’ll need to regularly track and analyze key metrics to identify areas for improvement.
These metrics can include:
- Acquisition
- Activation rate
- Customer Lifetime Value
- Time to Value
- Conversion rate
- Expansion Revenue
- Average Revenue Per User
Any of these metrics should be able to tell a story if something isn’t right. For example, If customers aren’t converting after the free trial then that should raise questions. It may even merit a discovery session to determine the cause of this drop in conversions. Is the trial providing enough features? Is it a delightful experience that shortens customer TTV? Are customers understanding how to use it?
Conclusion
By implementing a product-led growth strategy with a focus on enhancing the user experience, leveraging freemium offerings, driving customer success, and continuously iterating and improving, you can increase customer LTV while decreasing CAC to drive revenue and increase valuation. This approach empowers your product to be the main driver of growth, acquisition, retention, and expansion within your B2B SaaS business.
👋 Thanks for reading!
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