Unleashing Growth: Let Your Product Lead the Way

8 min readFeb 16, 2024

Show, don’t explain. Let the product prove its value. Use the product itself to acquire, activate and retain customers.

It’s a growing trend that people prefer to self-serve rather than go through a long Sales process, not just in B2C but in B2B as well. They want to see and use a product themselves before buying it.

This is product-led growth.

Using your product to scale itself

How to scale is the key to this topic. Having product-market fit is a pre-requisite, product-led growth is looking at how to distribute that product: how you get the customers to find, use and ideally pay for it. If you have a great product but no one uses it, that’s not a successful product.

Sales-led vs product-led growth

Sales-led growth

There is value in looking at both approaches, to best understand how to capture the most value from your customers. Product-led growth does not need to work in isolation.

When to be sales-led?

High lifetime value (LTV)

In Enterprise of higher Mid-Market segments, with high-value customers and higher complexity of problems, sales-led growth has been seen as the safe bet as you see in the image above. Higher Lifetime Value (LTV) customers need more of a white glove experience in the long procurement processes and implementation, and the LTV of these customers means this is likely still a profitable approach.

Niche solutions

Where the Total Addressable Market (TAM) is small, the quality of the relationships with this small group of customers is much more important. It therefore may be worth going for a sales-led approach.

A new category

If going into a whole new field, you need to understand customer problems and how best to support them with your solution. Initially, this may be best served through sales to minimise churn, and then as you understand better customer needs you can begin thinking about a product-led approach.

Caveats to Sales-led growth

Higher Customer Acquisition Cost (CAC)

High-touch sales is expensive: the LTV of a customer needs to be higher than the investment in sales to acquire the customer for the model to be profitable.
Customer acquisition is not efficient: potential leads have never used the product and are basing decisions largely on what they have been told and not seen — 98% of market-qualified leads (MQLs) don’t convert into paying customers, that’s expensive.

Lack of revenue diversity

With the focus of efforts on a few high-value customers, the health of the company is vulnerable if you lose even one of them
The product decisions tend to be guided by the biggest-paying-customer needs, the product is an afterthought behind one customer’s needs rather than catering to a wider net of customer needs

The risk is with the customer — the company is trying to match the value of the product with a small number of customers’ needs, and if that value is not seen the company tries to fix it. Success depends on a small group of customers, they hold the risk.

Product-led growth

The caveats you see for sales-led growth are exactly the pros for product-led growth: lower CACs and revenue diversity.

Why be product-led?

Lower individual LTV in a bigger market

In the lower mid-market, SMB and Consumer segments, you have a lot of people with lower individual value, this is where product-led growth has been seen to thrive — revenue diversity.

Increase people going into your funnel: allowing customers to evaluate the product themselves through trial or a freemium model — no friction from sales, no commitment, more people
Scaling is not limited to Sales reps: as you improve your onboarding of customers you can scale globally at a fraction of the price

Lower CAC

Faster conversions: users can onboard without hand-holding, reducing time-to-value. If the perceived value is high, those users can convert into paying customers through upgrading without any sales support (although of course can be there if needed). Lower cost for the company, quicker value for the customer — win, win.
Increased profit margins: with a product-led approach, you need fewer people to do more, meaning more revenue per employee and increasing profit margins by reducing cost.
Improved experience: as the responsibility of acquiring and activating customers falls more on the product, more focus is needed to make sure that user experience is seamless with onboarding, plan selection, and trials needing to be easily navigated and self-served.

The risk is with the business — we provide value to a larger group of potential customers at a lower upfront cost and no commitment for the customer. Success depends on whether the product provides enough value to enough customers, the risk falls on the business. The business has more control over that success.

The move towards Product-led Growth

B2B Product-led growth

Consumers go with and stay with products that prove their value. Product-led growth is a way to prove value faster, to more people, at a lower cost and without friction of payment when starting.

But, isn’t this a bit of a B2C approach? B2B need more hand-holding and more considered decisions, right?

It’s true that traditionally as an individual (B2C), you are used to trying before you buy. Whereas in your company (B2B), you might be more tolerant of going through a longer process to get something signed off.

But times are changing…

B2B buyers are behaving more like B2C users. Three out of four B2B buyers would now prefer to self-educate.

There are more products in the market, meaning we have more options to choose from. To grab the potential customer’s attention, companies need to prove their value faster with less friction — for both B2C and increasingly for B2B too.

Unlocking the value of Sales within a product-led model

For sure, there is a place for Sales in a product-led model, the key is how to combine the best of both. Capturing B2B markets using product-led tactics to prove value quickly to more people, while using sales to capture the potentially higher value customers.

Instead of the traditional tactics of generating sales leads, if those potential high-value customers are already using the product, then you can begin qualifying those leads based on behavioural signals that indicate they have motivation/need and are likely to fall into the high-value bucket therefore qualifying for Sales attention.

How can you qualify these leads in your product? Behavioural scoring. Through analysis, you can determine what to include in this scoring. In the example of Hotjar, we used Recency (days since last active), Frequency (avg. num. active days per week) and Monetary (LTV). You can then go further into this analysis with specific actions users take (inviting other users, visiting specific pages, accelerated use, etc.).

A change in mindset: How can the product itself qualify Sales leads so we save time/money by talking to people who have already seen value in the product?

Behaviour is a much better indicator of motivation to buy, people will be much more open to having conversations with Sales after they’ve seen the value in the product.

Designing for Product-led growth

Right at the beginning we said product-led growth means using the product to acquire, activate and retain customers.

The user needs autonomy in the product to first understand the value and then unlock additional value (convert or upgrade) themselves inside the product: self-service.

A strong self-serve experience in your product is table stakes for product-led growth.

Before thinking about the experience, it is important to align measuring the success of your efforts with product-led growth metrics, these might include:

Time to Value (TTV): how long it takes for a user to read an Aha moment or activation event
Product-qualified leads (PQLs): activated users that exhibit high-value behaviours (see above about behavioural scoring)
Expansion revenue (expansion MRR): revenue generated from existing customers through upsells, add-ons, cross-sells, etc.
Average revenue per user (ARPU): amount of money, on average, that you can expect to make from an individual user
Customer lifetime value (LTV): prediction of how much revenue your business will receive from a single customer throughout your relationship
Net churn: net percentage of total MRR lost from existing subscriptions/customers during a period
Virality and network effects: adoption increases exponentially with each additional user

Experience areas to focus on with Product-led growth

Acquisition

Aim: The user perceives the product as highly valuable and easy to use.

Reduce friction where possible. For example, in the sign-up flow only have the steps which are required (a good example being Intercom). The benefits of reducing friction here to the bare minimum are a high number of sign-ups, a low drop-off of sign-ups, and quicker TTV.

Activation

Aim: get the user to the Aha as fast as possible, reducing the time-to-value (TTV) metric.

Activation is not just about the Aha moment, it consists of 3 key moments to keep in mind:

Set-up moment — configure the product before seeing any value. Keep this as quick as possible initially, this step is often considered friction by the user.
Aha — set of actions the user needs to take in the product to see initial value. Focus your onboarding efforts on getting the customers to take the actions that get them to the Aha moment.
Habit moment — the user continually repeats a set of actions, increasing engagement and use of the product, meaning they will retain over time. This is more a focus for core-tool product teams than growth teams: increasing engagement.

To have strong activation, understand what successful users did during their early usage vs unsuccessful users. Where did people get stuck, listen to their feedback about what was missing or confusing.

Conversion

Aim: the users understands the value of paying, knows which option/plan is right for them and is clear how to progress.

If customers have activated and seen the value in the product, they may want to unlock more value through converting to a paid plan. If this motivation is there, guide them through the process: recommend based on their usage, have easy comparison of plans and a simple checkout process. For bigger companies, consider that the end user might not be the person with the credit card so allowing them to send requests to other people in their organisation.

Retention

Retention is a product of increasing engagement and reducing churn. To break this down… Engagement looks at the use of the product, and the frequency of that use. Churn is the number of people who subscribed to your product but then unsubscribed.

Here, I will focus on Churn (as engagement is a much larger topic that expands far beyond product-led growth).

Aim: get/keep the business to net negative churn (New user revenue + Existing customer expansion > Churn)

Consider different tactics depending on whether the customer is churning at an early stage (after 1 week) or a late stage (after 5+ weeks). If you are seeing more early-stage churn, then you may want to take a closer look at your onboarding flow. Whereas, if you are seeing more late-stage churn, offering incentives might be a better approach.

Final thoughts

If you think about buying perfume, a new gym subscription or a new software for your company, trying the product, seeing the value of it and then buying creates confidence in your decision. Product-led growth doesn’t need to be in isolation — it isn’t sales-led vs product-led, both have their place and it is about capturing the value from different segments based on their needs.

Product-led growth is a trend that is here to stay, so while trying to navigate this world I hope you found my rambling thoughts helpful…