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What is Product-Led Growth? The Complete Guide

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December 6th, 2023

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Growth is a primary goal for virtually every company. However, achieving consistent, sustainable growth isn’t always easy. Traditionally, a business “growth strategy” would involve an investment in significant resources, hiring more salespeople, and paying for more marketing campaigns.

However, there is an alternative approach. Rather than constantly cultivating new leads with your sales and marketing campaigns, you could let your product do the talking. Product-led growth flips the script of the traditional sales model, where specialists lead buyers through the sales funnel.

Instead, customers are given a way to experience aspects of your product for free, so they can see for themselves the value it has to offer. Here’s everything you need to know about the benefits, challenges, and opportunities of the product-led growth strategy.

What is Product-Led Growth? The Basics

Product-led growth is a business development strategy which focuses on leveraging your product or solution as the main vehicle for acquiring, activating, retaining, and delighting customers. It’s particularly common in the SaaS and technology industries. For instance, companies like Slack, Dropbox, and many others offer access to a free version, or demo of their products, to allow customers to test the features.

The idea behind this method, coined by Blake Bartlett in 2016, is that giving customers an opportunity to experience your product’s value first-hand will increase their chances of converting, while minimizing your acquisition costs. 

Customers get to test products in their own time, without any risk, and make decisions without relying on a sales and marketing team to guide them. They can also freely scale their purchase up or down, depending on their needs, reducing your operational costs. 

Though this growth strategy is common in the SaaS world, it’s also apparent elsewhere. Consultant companies offer access to free initial consultations. Even retailers share free samples of their products through supermarkets and stores. 

The Benefits of Product-Led Growth

The product-led growth strategy makes a lot of sense, particularly in today’s world, where buyers are more empowered to navigate the sales journey on their own. In the B2B world in particular, buyers complete around 70% of the sales cycle without ever talking to a sales team. 

Product-led companies benefit from:

  • Reduced customer acquisition costs: When your product is the key thing driving sales and customer conversions, you can spend a lot less money on expanding your sales team, marketing team, and promotional campaigns. Word of mouth helps to boost your visibility, and new customers begin to appear almost automatically. 
  • Shorter sales cycles: By allowing users to onboard themselves, you significantly reduce your prospect’s time to value, and the sales cycle. The quicker users can accomplish something with your product, the faster they’re likely to convert into paying customers. 
  • Improved customer experience: More investment in developing a product that customers can quickly achieve value with leads to improved customer experience. Product-led growth strategies can also help you capture feedback which you can use to enhance products.
  • Increased retention: Companies using product-led growth strategies don’t just increase retention with happier customers. They also reduce their risk of customers churning because they find a product wasn’t right for them. Customers can test the features of your solution in advance, and “qualify” themselves.

The Challenges of Product-Led Growth

While a product-led growth strategy can deliver a lot of benefits, there are challenges to overcome. For instance, to ensure your customers are entranced by your product, and convinced to upgrade to a premium service, you need to create a user-friendly solution that addresses your customer’s needs.

This means developing a deep understanding of your target customer, their pain points, and their goals. You need to ensure customers can rapidly onboard themselves without support, and find the right balance between free features that delight your audience, and knowing which features you should keep behind a paywall. Other common challenges include:

  • Having the right product: Not all products are suitable for a PLG strategy. Companies selling SaaS solutions excel in this area, because it’s easy to offer pared down versions of a product online, with minimal effort. You’ll need to consider how easy it is to give away a portion of your product, and how effectively you can automate the sales journey.
  • Managing expectations: When accessing a free trial, sample, or demo of a product, most customers expect not to be able to get the “full experience”. However, they still want to feel like they’re getting a comprehensive look at the service. It’s important to manage expectations about what your customers can do with your free solution.
  • Team collaboration: Product-led growth strategies require collaboration between your marketing team, sales team, development experts, and countless other stakeholders. If your teams aren’t aligned, you’ll struggle to create an excellent end-to-end experience for your customers, which could diminish growth.
  • Accessing data: A good product-led growth strategy relies on your ability to collect data and insights from your customers. You need to learn which features convert customers, and what stops them from renewing a paid subscription, and so on. Collecting and analyzing data can be a challenge, particularly among smaller teams. 

Key Strategies for Implementing Product Led Growth

Similar to any marketing, sales, or business growth strategy, the key to success with product-led growth is taking the right approach. Here are some tips that can help you to develop a powerful product-led plan, that drives new revenue to your business.

Create the Right Sample Product

A product-led growth strategy requires a free version of your product, or a demo that users can access to evaluate and test the features. To ensure you’re getting the right results, you’ll need to ensure you’re offering a consumer-grade product experience that’s enjoyable, effortless, and valuable.

Start by capturing as much information as you can about your target audience. Find out what problems they most want to address, or what goals they hope to achieve with your product. This will make it easier to determine which features you’ll want to showcase. 

Next, make sure the solution you’re offering has the smallest possible learning curve. Remember, you want your users to onboard themselves and experiment with your solution without having to rely on support from your team. Creating an automated onboarding experience can be helpful here, alongside providing your customers with free educational resources and tools.

Choose the Right Transparent Pricing Model

Once you’ve got your sample product ironed out, the next stage is to determine a transparent pricing model. There are various ways to approach product-led growth. One option is to simply give customers a free trial of the entire solution you offer for a limited time. 

This can be a great way to highlight all of the unique benefits of your solution. However, if your solution is complex or multi-faceted, you’ll need to ensure you’re giving each customer enough time to fully explore the offering before they’re cut off from their account.

Another option is to create a freemium plan, where you offer customers access to a limited number of features, or a pared down version of your solution for as long as they need it. The idea here is that once they’ve seen the potential of your offering, they’ll want to pay for more features. 

Whichever method you choose, make sure you’re transparent about your pricing strategy, and what customers can expect from each plan. Remember, you might offer multiple plans to customers of different sizes, to help them customize their purchasing experience.

Prioritize Time to Value and Product Stickiness

When customers experiment with the free or demo version of your product, it’s up to you to convince them they can’t live without your solution. One way to do this is to ensure they can access “quick wins” with your service or product as quickly as possible. 

Give customers step-by-step walkthroughs they can follow to discover the benefits of your solution, and make it easy for them to see the results. To make your product “stickier”, or more essential to the customers you serve, focus on delivering solutions that are difficult to replace. 

For instance, if you’re selling AI software, such as a generative AI chatbot, show customers how they can improve their own customer retention rates and sales with reports and insights. This will ensure they can see what they stand to lose if they don’t upgrade to your paid plan.

Invest in Virality

Though many customers in different industries will gravitate towards free products naturally when they’re searching for a solution to their problems, you still need to make your offering stand out. Boosting your chances of going viral means attracting more beta testers to your service. 

For instance, creating refer a friend or reward schemes like Dropbox did when it first launched is a great way to encourage your customers to support your marketing teams and drive new leads to your business. You can also use the onboarding experience to spread the impact of a demo or trial.

For example, Airtable asks users to “invite team members” to their account, even when they’re just testing out a free trial. The more people in a business you have using your demo, the harder it’s going to be for stakeholders and executive teams to ignore its impact.

Built in Opportunities to Expand

Expansion is often a focus for product-led companies. However, it’s important to approach it the right way. For instance, as tempting as it is to build on your early momentum with new product features, introducing new capabilities before users have time to master your existing ones can be dangerous.

The key to sustainable expansion is making sure you and your users can discover the full benefits of the solutions you already offer, before you dive into something new. The best way to iterate over your core features and improve their value, is to gather feedback.

Collect as many insights from your customers as possible, sending out surveys, monitoring adoption and conversion rates, and listening to reviews and testimonials. This will not only ensure you make your core solution the best it can be, but it will also ensure you focus on the right areas when you do start to expand. 

Make Upgrading Simple

Finally, not only is it important to make it easy for customers to onboard themselves onto the free version of your solution, but it’s also crucial to ensure they can easily upgrade and switch to a paid plan when they’re ready. Customers don’t want to have to wait for a sales and customer service team to be available when they’re ready to make a purchase.

They want their upgrade to be as simple as clicking a button, and immediately accessing all the features they need. When customers upgrade, make sure they have access to all of the self-help resources, training, and solutions they want to continue making the most out of your products. 

This will help them to continue seeing value from your solution, until your customer support team has a chance to reach out and address any specific concerns or needs. 

Embracing Product-Led Growth

A product-led growth strategy can be an excellent opportunity for the right company. It’s a chance minimize your customer acquisition costs, reduce the strain on your sales and marketing teams, and even improve customer experience and retention. 

While this methodology won’t work for every business, it makes sense for companies who can already automate a lot of the sales journey for their target audience. If you’re selling software, for instance, a product-led growth strategy has been proven to work by countless other organizations.

Need help finding the right strategy for growth in your business? You can find more tips on the HSE blog, or connect with our community for gamified sales and marketing training. 

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