Product-led growth models are skyrocketing in popularity. Aside from boosting user retention and loyalty, PLG models also slash acquisition needs and costs.
For instance, PLG companies abandon paywalls, offering free trials and demos. This allows users to activate their accounts without human-assisted activation and shortens the sales cycle. In a similar vein, replacing MQL metrics with PQLs gives teams greater visibility into buyer intent via product usage data.
Activation
Traditionally, companies that want to grow and scale invest in sales and marketing teams. But a more sustainable way to do that is by letting the product itself take the lead. This approach is called product-led growth.
Product-Led Growth focuses on guiding users to the “aha!” moment in which they see the core value of the product. Then, they can decide if it’s worth continuing to use.
The best product-led growth companies use free trials or freemium pricing models to allow customers to experience their products for themselves, with the goal of encouraging them to upgrade to a paid plan once they’ve found that the product is useful. These firms also focus on metrics such as expansion revenue, customer lifetime value, and net churn to measure success.
To implement a product-led growth strategy, you’ll need to change the culture of your company. That involves redefining the definition of success to place a higher emphasis on user delight, rather than merely focusing on new acquisitions or sales targets.
Conversion
For the modern software buyer, it’s all about hands-on evaluation. This is why so many companies follow the product-led growth model and offer free trials or a freemium version of their software. As users experience value and find meaning in the product, they are more likely to recommend it to their friends or colleagues and convert to a paid plan with more licenses and features.
A successful product-led growth strategy relies on the product itself to do as much of the work for customer acquisition, conversion, and retention as a dedicated sales and marketing team. This requires thoughtful user journey mapping, extensive product testing, intelligent data implementation, and sophisticated product experiences that allow the product to be its own onboarding, support, customer success, and sales engine.
Warby Parker, Slack, Twilio, Atlassian, and Expensify are just a few of the companies that have figured out how to successfully implement this growing approach to rapid, scalable growth.
Retention
Using product adoption as a go-to-market strategy allows your product to become a marketing flywheel, reducing customer acquisition costs and increasing retention and annual contract value. Reliance on your product for customer acquisition also frees up resources for other growth strategies, like referral programs.
Getting there takes alignment and commitment from all digital-facing teams—marketing, customer success, and more—to rally around the product as the primary driver of activation, conversion, satisfaction, and scalable expansion. The shift is not easy for teams used to fighting it out over which features are the most important to deliver and whose estimations of customer needs matter most.
The first step in making the transition is changing your mindset about what is possible. You can do that by focusing on the right metrics for your team, such as user and usage engagement. These signals detect precise opportunities to convert users into paying customers, rather than relying on less-precise and discontinuous signals from website visits or outbound sales and marketing activities.
Expansion
For companies that use product-led growth, expansion drives customer acquisition. They rely on their product to drive user growth, which replaces the need for marketing and sales to book demos or send whitepapers.
This allows users to experience the value of a product and self-upgrade to a paid plan without having to wait for a salesperson to call them. The product-led growth model is a popular approach for software-as-a-service (SaaS) companies with freemium pricing strategies.
In order to capitalize on the product-led growth model, teams need to understand how unique users use their product so they can deliver a personalized experience. This requires sophisticated tools that assess account/user-level metrics alongside user feedback analysis to provide contextual recommendations and a more holistic view of product usage. It also necessitates that all customer-facing teams democratize decision-making so they can better collaborate on building and delivering a stellar product. The result is a higher rate of customer conversion and retention, which in turn leads to lower customer acquisition costs and faster growth.
