What is Product Led Growth?
5 ways to build strong foundations for fast, sustainable growth
Across the startup landscape, there is a growing consensus that product-led growth (PLG) is the future of go-to-market, but what is it really? And more importantly, is your company building for it?
To put it concisely, PLG is a strategy through which your end-user product experience is the primary driver of growth at every stage of the funnel. It starts with building a great product that users love and empowering those users to progress through acquisition, conversion, and expansion while reducing dependence on paid media and high-touch interactions. And while product experience is the focal point, PLG principles apply not only for your product development teams, but also for sales, marketing, support, and any other teams connecting with users and fueling your company’s growth.
PLG is not a one-size-fits-all approach — some tactics will be more effective than others depending on your product and market, and your strategy will need to shift as you grow. However, there are consistent themes you’ll find among successful PLG companies, and here are five common elements of their strategies that you may want to explore:
Minimizing effort required for new users to receive value
New users should understand the value of your product in minutes, if not seconds, which means you need to reduce friction in your signup process and guide users toward the part of your product that will give them their “aha moment.” For most PLG companies, this means removing cost barriers and offering users a free tier or trial. While it comes with risks, allowing users to experience the value of your product before deciding to purchase is possibly the most powerful way to accelerate user growth and maximize the number of people who are willing to pay for your product. Dropbox is a well-established example of a company that uses its freemium model to convert paying customers from its base of hundreds of millions of free users to generate almost $2 billion in revenue annually. And regardless of whether you’re able to offer a free experience of your product, you should implement onboarding experiences that make it easy for new users to discover and engage with your most valuable features.
Leveraging existing users to attract new ones
Just about everyone says they want viral growth, but how do you actually get it? One of the most powerful ways to drive exponential growth is by building strong network effects into your product experience such that a user receives more value as more people sign up. Slack is a classic example of growth through network effects — the more people you have on your team’s account, the easier it is to centralize communication, so there is a natural incentive to bring the people you work with onto the platform. Another pathway to viral growth is through referral programs where users can unlock features or increase usage quotas in exchange for inviting new users. Wealthfront is a great example of a company with a highly effective referral program, through which it offers users additional managed money for free with each new user invited.
Optimizing purchasing experiences for self-serve
While you may always have a subset of customers who want to talk to a salesperson before buying, optimizing your purchasing experience for online transactions that reduce the need for sales interactions will maximize the efficiency of your conversion funnel. This starts with simplifying your pricing and packaging to empower customers to feel confident making purchasing decisions on their own and designing your website to make the checkout process feel well-informed and lightweight. If you have a freemium or trial-based model, you’ll also have the opportunity to nudge users toward your paid offerings through paywalls and usage limits. It’s important to make sure that you aren’t preventing free users from having a positive experience on your product, but well-placed paywalls can be a massive source of upgrades. Just look at Zoom — its self-serve strategy and thoughtful enforcement of usage limits on free accounts have helped it reach over $2.6 billion in revenue in 2021 while consistently maintaining high NPS scores.
Defining success and informing decisions with product data
A critical component of any PLG strategy is having a deep understanding of how users are interacting with your product and how that relates to success for your business and your users. You’ll first need to make sure that you’ve implemented the necessary tooling to accurately track behavior and analyze your data. Once you have that set up, you can identify growth opportunities by finding correlations between specific activities and long-term revenue, cases where feature engagement unexpectedly drops off, or other insights from product activity. And as you use your findings to inform how to improve your product experience, you should roll out your changes as experiments to measure whether they have the expected effect on user behavior and to ensure that your team is successfully pursuing the most impactful opportunities.
Establishing company-wide culture and practices
The most successful PLG companies don’t only rely on product development teams — they establish a company-wide culture where every team influencing growth plays a role in executing the strategy. Marketing teams at PLG companies can incorporate product data into their audience targeting frameworks and craft messaging to increase self-serve conversions. Sales teams can monitor user behavior to identify prospects with a high likelihood to buy and leverage bottoms-up advocacy to close deals. A more recent trend among many PLG companies is building out “sales assist” teams to connect traditional sales and self-serve, helping accelerate self-serve purchasing and identifying opportunities to grow larger deals while partnering with product teams to provide qualitative insights.
–– GC Lionetti and Greg Klausner