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Product-led growth was one of the big SaaS trends in 2020, and in 2021 this trend has only multiplied. But what is all the fuss about and why should your SaaS business consider it?
In my role as Co-founder of Userflow and Cobalt.io, I have firsthand experienced the power of product-led growth. In this article, I will explain what it is, what some of the benefits are, and some things to consider if you are moving from a sales-led to a product-led model.
What is Product-led Growth (PLG)
Product-led growth is a modern SaaS go-to-market strategy that puts your product front and center as the growth tool. Everybody in a product-led organization is hyper-focused on the product and how it can help acquire, retain and expand revenue for existing customers.
The opposite of product-led growth is sales-led growth, where you depend heavily on sales and customer success staff to serve the customers. This potentially leads to expensive overhead costs and with sales-led growth you are also not empowering end-users to self-serve.
One of the typical aspects of product-led growth is to allow end-users to touch and experience your product as part of the sales process e.g. via a freemium, free trial, or something similar. This allows them to try-before-they-buy and experience the value of your product firsthand. Thereby they are less likely to be disappointed with the purchase when they do buy your product. When you adopt this model, it also pushes you to build the best product possible instead of selling it via a PowerPoint presentation.
Why Should I Consider Implementing product-led Growth for My SaaS Business?
While a product-led model might not be right for all companies, there are clear benefits for most SaaS businesses. Four of the key benefits seen in the industry are:
Reduce Customer Acquisition Cost (CAC)
By having a lower-touch product-led model for sales and onboarding, you are reducing the need for expensive personnel, and you can focus your employees on higher-value activities.
Empower the End-user
The modern user wants to self-serve. By adding a demo or a meeting you are not empowering them to do so. In a product-led model with e.g. freemium or free trials, the end-user can try your product and make a better evaluation of it and how it will work for them and their business, resulting in better retention in the long run.
Grow Faster at Scale
Openview Partners analyzed 300 product-led companies and saw that when they reached $10MM+ ARR they grew faster than their peers due to a more efficient and less labor-heavy sales process.
Get a Better Product
Product value, product data analysis, and a focus on customer user onboarding are key aspects of a product-led model and by having your entire company focused on building a streamlined product experience, you get focused on delivering value inside your product with a strong UX resulting in the best possible product for the end-user.
Who are Some of the Top Product-led Growth Companies?
Some of the most successful product-led companies that have inspired others are Datadog, Slack, Zoom, and Calendly. What do these four have in common? They allow end-users to trial their product, in many of the cases they even do a complete freemium model where consumer-type users and very small businesses can use the product for free creating a viral word of mouth effect. This viral effect does not happen because of the freemium model in itself, but because their products are of high quality which is the most important aspect of having a product-led model. The great products win and the bad ones lose.
Will Product-led Growth Replace My Sales and Customer Success Functions?
Product-led growth will empower your sales and customer success teams to work more efficiently and potentially focus on higher-value activities and customers. For example, one can . have a pure self-service sales and customer success model for your smallest customers, and then allocate the high-touch staff to support larger enterprises. But even for the larger enterprises, product-led companies should think about how they can better allow them to self-serve in the product.
What are the Challenges of Moving from a Sales-led Model to a Product-led Model?
A product-led model requires everyone in the organization to focus on the product as the key go-to-market lever. This means that product management cannot work in a silo from sales, marketing, and customer success. These teams must come together with a shared alignment on how the user journey should be in the product and how this plays together with potential backend operations. This requires strong top management buy-in as well as operational change management.
One must change the mindset from “Let’s set up a demo or meeting to explain the product to the customer” to “How can we allow the user to self-educate and do actions themselves in the product”. This mindset change is easier said than done, as it can feel uncomfortable leaving a prospect or a customer on their own. But in the long run, you can succeed by empowering the customer to do things themselves.
Three key things to consider when moving from sales-led to product-led are:
Reduce scope – Maybe only start by focusing on moving to product-led for your smallest customers (SMBs), who are often used to more product-led models and have simpler use cases. With a reduced scope, you reach your goal faster, and you can then later expand to other segments.
Iterate – With a big project like this, one tends to overanalyze everything, which slows down progress. Instead, one should do smaller quality iterations that take you closer to the goal.
Appoint a driver/project manager – As this is a project that requires many teams to align, discussions and misaligned goals can delay progress. By having a project manager to drive alignment, you move faster.
What are Some Great Tools and Resources for Implementing Product-led Growth?
Below are some great tools and resources to support your product-led journey.
Product-led Growth Tools
Userflow – In-app onboarding and guides
Intercom – In-app support
Logrocket – Session recording
Iteratively – Data organization
Segment – Data organization
Amplitude – Data analytics
Heap – Data analytics
Stripe – In-app payments
Chartmogul – Subscription / finance tracking
Product-led Growth Resources
Openview Partners guide to Productled Growth
Clearbit – Anatomy of a PLG SaaS
Product-led Growth Stack
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