The Product-Led Growth Playbook: Europe Edition (Pt. 1)
If you are a founder in the B2B SaaS space, chances are high that you have heard of Product-Led Growth (PLG) as one of the most promising ways to grow. Notion, Canva, Airtable, Figma, Atlassian, Twilio, Zoom, and Slack are at the forefront of this new paradigm in software selling that places the product at the core of the go-to-market and growth motion. And they are unlocking huge value! Over the last couple of years, the number and market capitalization of public PLG companies has increased significantly. In 2021 so far, companies like GitLab (Oct, $11bn market value), Freshworks (Sept, $10bn market value), and Monday.com (Jun, $6.8bn market value) went public.
Why is PLG relevant? Traditional (enterprise) software sales and adoption are characterized by long sales cycles and procurement processes as well as complex products with a non-intuitive user experience. Salespeople educate buyers (e.g. C-level, VPs) on the product before a POC is run across parts of the organization. Then, during the implementation phase, the product is spread top-down through the company. Today, many software products just kind of show up in organizations, usually driven by end users trying to find a solution to a very specific problem they experience in their daily work (bottom-up). These end users generally hate demos, talking to sales, running implementation projects and training to use the software — they want to get a job done as quickly and easily as possible. This is where PLG comes to play. Compared to traditional software sales, a product-led growth motion uses the product to drive customer acquisition/distribution, conversion, retention and expansion. Users can try and use the product through self-serve (low friction), pay only as much as they use it (value-based pricing) and get more value out if by sharing it with others (virality). As a consequence, user growth is decoupled from sales headcount. However, it does not mean that sales teams are redundant — in fact, their role is critical for expansion and gets a more consultative layer on top (more on this in part 2 of this series).
Who is PLG for? As a B2B SaaS founder, looking at your users and their problem, you might decide for or against product-led growth to grow your company. Pete Kazanjy, the author of Founding Sales, suggests answering the following questions to come to this decision:
- Is the value proposition simple enough for your target user group to understand through self-serve (i.e. get to the “aha” moment by themselves)?
- Is the product new and differentiated?
- Can the product co-exist with an incumbent in an organization’s tech stack (e.g. note-taking vs. accounting software)?
- If none of the above apply: will you focus on smaller, fast-moving organizations not currently targeted by incumbents?
PLG fundamentally defines the company strategy as a whole, requiring the whole organization to be aligned. It impacts how you build the product, how you generate acquisition and expansion, how you price it, and how you engage with your customers.
Common blog posts and articles on PLG usually describe the growth flywheels of Loom, Slack and the likes which are mostly based in the US. However, we see more and more companies in Europe applying the PLG Playbook. We thus wanted to take the opportunity to have a closer look at it and the (selected) European founders applying the tactics to build and grow their companies. While some companies like Snyk have raised a significant amount of funding, others like Flowrite and Butter are still young.
The PLG Playbook
At Lightbird, we divide the PLG Playbook into the five different steps illustrated below.
This two-part series starts off with the first two steps of the PLG Playbook, which are how to focus on your end users and their pain point as well as how to acquire them in a cost-efficient and scalable way. The second part then discusses onboarding and pricing strategies, gives insights on the PLG tech stack for conversion and retention as well as on how to layer sales on top of the bottom-up approach. Let’s get started!
🎯 Focus on the end user and his/her problem
The first and most crucial part is figuring out who your end users are and what problems they experience with current solutions. Try to find out what they do in their jobs, how influential they are, what they are struggling with on the ground and how they are spending their budget. The more precise you are, the better! In addition: Try to understand how frequently users experience the problem you are trying to solve and what workarounds they have come up with. Ideally, they are actively looking for a solution and are willing to pay for it.
Maze (Location: FR, Founding Year: 2018, Funding as of 11/21: $17.5M), a software for user testing, is focusing on one specific use case, i.e. user testing, and a specific user group, i.e. product teams. A Product Manager immediately understands the problem maze wants to solve for him or her.
💎 Figuring out your end users and narrowing down the use case allows you to a) define the core value proposition of your product; b) nail your product’s positioning and messaging strategy; and c) consequently efficiently allocate marketing spend by focusing on high potential users who immediately understand your value.
📣 Get in front of your end user
Once you know your user segment(s), find out how and where they spend their time to get in front of them in a quick and cost-efficient way. Creating awareness for customer acquisition can happen through friends and family, word of mouth, waitlists, communities, and much more. We want to highlight four core awareness strategies in this article: waitlist & referrals, leveraging utility & virality, SEO and community.
Waitlist & Referrals
One potential strategy to apply before you actually launch your product is the waitlist. Flowrite (FIN, 2020, $660k), a writing tool powered by AI, is growing its waitlist with incentivized referrals. The product gets endorsed by early users helping to increase trust among their peers. There is even a public Google sheet that shows the referral leaders and a ranking. Gamification at its best! According to Samuli Pehkonen, Head of Marketing at Flowrite, this strategy paid out: The waitlist referral program brought in 30% of the total waitlist signups for Flowrite and was essential for customer development. Combining the waitlist with the private beta program enabled Flowrite to iteratively build the best possible product for the ideal users together with them.
Utility & virality
Ideally, the product has strong virality components to it. If the product can only be used with others or gains its value through collaboration, adoption rates can be increased significantly.
Whereby (NOR, 2017, $12M) is our favorite example here. Their video meeting tool makes it easy to join any video meeting without the nitty-gritty challenges one faces as a first-time user. Hosts just copy-paste their personal room link and share it with their attendees (activation). Attendees put in their name, enable microphone and camera and join the room (hook). No need to download an app, no need to set up an account, no extra windows popping up. By sending out the Whereby links, potential new users get instant value without signing up for it. These new users then send out their Whereby room invitation (trigger) and the growth loop starts spinning.
As with the other areas of the PLG Playbook, Product Led SEO also puts the end user in the center of the SEO strategy. This implies asking your end users how you can best close content gaps to help them solve their problem right at the moment when they are looking for a solution. Try to find out how your end users are using the site, what they are searching when they end up on it (via Google Search Console), talk to your customer success team on frequently asked questions (FAQ), and rely on your users to generate content for you (forums). Ultimately, a Product Led SEO strategy is aiming for a programmatic and scalable approach.
Snyk (UK, 2015, $1.3B), the cloud-native application security platform for developers, applies a strong SEO strategy. Francesca Kirhely, Developer Experience & Growth at Snyk illustrated in an interview with OpenView Partners how Snyk focuses heavily on helping developers find the relevant technical resources to their questions by leveraging suitable content. In addition to that, Quora is a way to apply programmatic SEO at Snyk: people are constantly discussing questions on the platform, thus creating content useful for SEO.
The last aspect to help you with creating awareness and driving activation for your product is community. While a community is challenging to build, engage and scale, it is also very difficult to copy.
Butter (DK, 2020, $3.2M), a software making virtual workshops “as smooth as in real life”, strongly focuses on leveraging the community of its existing and potential users. According to Anamaria Dorgo, Head of Community at Butter, it helps them to a) get feedback from a curated, relevant user group; b) create product ambassadors helping them grow; and c) establish Butter as thought leader in the facilitation space. The community has now grown to close to 500 members. They get access to a knowledge base of the tool itself, “How-to-Butter” videos and best practice sharing, community-led events, expert AMA sessions, a discussion space, and much more. Being so close to its community members allows Butter to share future goals, progress as well as things that stand in the way and ultimately build the best possible product for remote facilitation.
💎 Leveraging these PLG tactics to create awareness has a ton of benefits. It allows you to build a close relationship with your end users to develop and sell the product. It helps to lower CAC through organic growth and virality as well as strong messaging. And taking advantage of communities can lead to improved LTV and retention rates if the members are fully aligned with the mission of the product.
Ritika Mehta has written a great article on why the next wave of startups will be community-led. And Sarah Nöckel from Northzone has shared her learnings of launching, managing and scaling a community with Femstreet if you want to dig deeper into the topic.
This first part of the PLG Playbook was all about focusing on the end users and how you can best solve their (specific) problem. The product is the center of your value proposition and your acquisition strategy, built for the end user. In the second part of this series, we will dive deeper into onboarding, converting and expanding your user base.
If you are a founder working on PLG as your growth strategy and want to geek out over it, feel free to get in touch with us via Email & Twitter. And don’t forget to sign up to our newsletter to stay up to date about everything happening at Lightbird. Stay tuned for part two!