Product led-growth (PLG) is a enterprise mannequin that depends on the product as the primary driver for buyer acquisition, engagement, retention, and growth. A PLG enterprise focuses extra on creating nice in-product experiences for its customers versus relying closely on advertising and marketing and gross sales to earn paying prospects.
Historically, manufacturers attempt to present shoppers that their product is effective earlier than giving them entry to it. However giving extra individuals entry to your product by free trials and freemium plans lets the product converse for itself by giving fast worth to your customers. That’s a core factor of product-led companies.
You’re bettering your product expertise reasonably than utilizing gross sales and advertising and marketing to persuade customers that they’ll see worth from one thing they haven’t seen firsthand.
Being product-led means:
- Extra conversions. Product certified leads (PQLs), in different phrases, prospects who’re utilizing your product on a free plan or trial, earn a 5x increased conversion price in comparison with the general conversion price (together with PQLs, MQLs, and SQLs) based on OpenView.
- Accelerated progress. OpenView additionally experiences that when PLG corporations attain $10M in annual recurring income (ARR), they have a tendency to scale at a sooner price than their friends.
- Decrease buyer acquisition value (CAC): When the product sells itself, you don’t must broaden your gross sales crew or improve your advertising and marketing price range as a lot to develop. Any investments within the product result in ongoing elevated conversion charges.
- Better buyer loyalty: Product-led progress capitalizes on sturdy buyer relationships. Product improvement and enhancements occur because of buyer engagement information and suggestions. Loyalty is stronger, and it occurs virtually routinely with out human intervention. So enterprise progress prices much less, and it’s compounding.
PLG corporations don’t eliminate their advertising and marketing and gross sales groups utterly. They nonetheless work in tandem with the product—and you should use their energy extra successfully.
With PLG, gross sales can give attention to growth offers that neeed a extra personalized effect to scale up from freemium to paid, cross-departmental utilization. And advertising and marketing can work on consciousness efforts that carry new eyes to your product. By main along with your product’s worth, although, a lot of the conventional gross sales and advertising and marketing course of turns into automated. It is because:
Finish customers are actively looking for and discovering your product.
- Customers have a necessity, and your product fills it. They’re going to Google search or the App Retailer to discover a product like yours.
- Right here, it’s vital for the advertising and marketing crew to drive consciousness efforts, equivalent to by paid advertisements or web optimization content material.
When customers discover your product, they instantly wish to attempt it.
- By participating with a free trial or freemium expertise, finish customers keep away from “the gross sales slowdown.” They will develop into energetic customers of your product inside hours of listening to about it for the primary time.
Product-qualified leads (PQLs) are simpler to transform into paid alternatives.
- As soon as a consumer experiences the worth of your product, they’re prone to develop into inside advocates for increasing utilization, whether or not by upgrading to paid tiers or increasing licenses (above a free restrict) throughout the corporate.
- At this level, your gross sales crew can become involved to carry these offers over the road, particularly for big enterprise offers that want a extra human contact.
- It’s additionally far more efficient for the gross sales crew to give attention to offers with a better probability of conversion—offers the place there are already advocates contained in the account—reasonably than to waste time chilly calling or sorting by infinite contacts who would possibly be persuaded to attempt the product.
With a PLG technique, each crew wins. Your buyer journey turns into extra dependable and scalable.
The advantages of product-led progress are already clear, however what does that seem like in apply? Use these 5 diagrams to visualise the way it may work for your small business.
- Adopting a product-led progress mannequin results in a faster payoff and compounding progress.
- Product-led progress is cyclical—so progress is fueled by nice product experiences, word-of-mouth, direct discovery, and continued use.
- PLG lets your gross sales crew give extra consideration to enterprise prospects with longer gross sales cycles. You automate extra of the client journey to your SMB and mid-market prospects, so your gross sales crew can provide a human contact to the multimillion-dollar offers that want it.
Diagram 1: Product-led progress means a greater payoff in much less time
Gross sales-led progress is dependent upon numerous upfront investments: constructing the gross sales crew, creating gross sales collateral, investing time in lead qualification, and so forth. And after you’ve made these preliminary investments, it takes time to see a return.
On this diagram by product coach John Cutler, the trade-offs between investing and receiving worth from these investments over time are clear. In each a product-led and sales-led mannequin, you should make investments. Inside PLG although, you see extra fast outcomes. It’s not a straight line in the direction of progress—you should nonetheless work out how you can drive activation, engagement, and loyalty along with your product. However within the time spent doing this work to enhance the product, you’ll already be seeing the advantages of buyer acquisition. Whereas in a sales-led movement, chances are you’ll solely simply be about to receives a commission customers ramped up on the product in the identical period of time that they’d seemingly already develop into loyal advocates by PLG.
In a PLG mannequin, the product is doing the work that your gross sales crew would possibly usually do by freemium merchandise or free trials. In freely giving a part of the product free of charge, you let prospects fall in love with it by firsthand expertise.
Product-led progress requires minimal funding initially—organising the free or freemium plan and activating new customers. You see it repay straight away as individuals begin to use your product. As soon as customers are arrange, you’ll wish to put money into product enhancements that maintain customers engaged and construct buyer loyalty.
With every of those small investments, you see fast payoff as a result of customers’ experiences enhance straight away. This additionally means you may make investments and enhancements extra incessantly than a sales-led crew.
Diagram 2: The B2B SaaS buyer journey for product-led progress
It’s useful to start out by analyzing a typical B2B SaaS buyer journey to realize an understanding of how product-led progress works.
First, a consumer indicators up to your free plan. They use it solo initially. The extra they use it, the extra they combine it with their workflows.
The extra they combine it, the extra snug and reliant in your product that consumer turns into, in order that they’re extra prone to share it with their colleagues to collaborate. For instance, a Canva consumer would possibly create a design for a social media marketing campaign and share it with their crew for suggestions and additional edits.
Then your customers invite fellow crew members to make use of the product. Now, extra essential work is going on throughout the product. As use expands, the corporate wants extra choices or extra entry to get their work finished—in order that they’ll pay for extra options, consumer seats, information storage, or integrations. The connection you have got with this buyer is cyclical and compounding.
Even for those who’re a SaaS firm with multimillion-dollar offers and years’ lengthy gross sales cycles, PLG has huge advantages:
- Product-led progress drives retention. These multimillion-dollar offers received’t stick round if staff aren’t utilizing the product. So PLG continues driving progress after an account has develop into a paying buyer.
- You may automate SMB and mid-market buyer relationships that don’t require as a lot hand-holding within the gross sales course of.
- With energetic free customers in your product, it’s simpler for management to proceed investing within the product as a result of the affect is evident.
Atlassian is well-known for cracking the code on PLG for the B2B SaaS trade. The corporate doesn’t cost groups for his or her first 10 seats—a proposal that goes a great distance in attracting prospects. Then, if free customers wish to develop into paying prospects, they’ll do this self-serve with out gross sales involvement.
Atlassian’s former president, Jay Simons, tells Intercom, “If we add 5,000 new prospects 1 / 4, and add that to the bottom of 120,000 current prospects, it might be very, very troublesome to try this if we needed to contact of all of these prospects alongside the way in which.”
However the place a human contact is required, the crew is able to assist—notably for these enterprise prospects which have extra complicated questions and use circumstances.
Diagram 3: Amplitude’s progress mannequin
To make this buyer journey simpler to grasp, right here’s what product-led progress appears to be like like at Amplitude.
There are two key cycles represented right here. The left facet exhibits growth by word-of-mouth. The correct facet exhibits growth by a consumer’s continued use. Each occur on the similar time.
First, somebody joins Amplitude’s free starter plan. As an event-based analytics platform, utilizing Amplitude requires instrumenting just a few occasions on their web site or app to trace how their finish customers are utilizing their product.
As free Amplitude customers proceed to make use of Amplitude Analytics to grasp in-product buyer habits, they share new insights with colleagues—which piques their colleagues’ curiosity and encourages them to make use of Amplitude, too.
In the meantime, as these free customers proceed to make use of Amplitude, the generated insights inform the product enhancements these customers make. They’ll ship these updates after which instrument extra occasions with Amplitude to trace the efficiency of these modifications. This then results in additional insights that make the product higher; it’s a compounding worth trade.
As Amplitude free customers share extra insights and instrument extra occasions, increasingly more colleagues—even entire departments—come to depend on Amplitude for self-service product analytics. With extra options and merchandise (like Amplitude Advocate for personalization and Amplitude Experiment for A/B testing) out there on increased paid tiers, these free customers usually tend to improve Amplitude plans to help their evolving wants.
Diagram 4: Product-led progress is cyclical
You may condense this progress mannequin right into a five-part steady loop that might map onto most companies, no matter whether or not they’re B2B or B2C.
It begins with somebody changing into inquisitive about your product—both by word-of-mouth or some type of advertising and marketing—after which changing into a free consumer.
In utilizing the product, they see the worth your product offers them (their “Aha! Second”) and develop into a paying buyer.
You keep these prospects by triggers that maintain them engaged and maintain them coming again to the product.
As these prospects have interaction with and develop into extra invested within the product, they share it with different individuals—actually because they created one thing within the product that they wish to share with colleagues or buddies.
Sharing will get extra individuals within the product, reinforcing the cycle.
Diagram 5: A hypothetical PLG mannequin for Spotify
Spotify is a well-liked B2C product that may assist illustrate this five-part cycle to make it extra tangible. And Spotify nails it with regards to in-product experiences.
That is hypothetical, however you possibly can see how product-led progress would possibly develop in these phases for a B2C model like Spotify:
- Curiosity: Advertising and marketing sparks curiosity with, say, an advert selling Lil Nas X. A consumer makes a free Spotify account with extra restricted options and advertisements that play whereas streaming.
- Aha! second: The shopper begins to make use of Spotify and discovers distinctive worth—like user-created playlists and Spotify’s personalised mixes.
- Worth trade: The consumer finds Spotify beneficial sufficient to develop into a daily listener. They don’t need the advertisements, in order that they buy a subscription.
- Set off: Spotify retains customers engaged by suggesting really useful music. At this level, the consumer doesn’t must work together with advertising and marketing in any respect. It’s all product-led.
- Virality: Spotify customers wish to share a playlist with their buddies or begin a group-listening session.
- Curiosity: When Spotify customers share with their buddies, that sparks curiosity for them to hitch too, which begins the cycle once more.
On this cycle, nice experiences make music listeners return. And social-sharing options carry in additional customers, decreasing reliance on advertising and marketing initiatives.
Worksheet: Map your product-led progress technique
Now that you just’ve realized the fundamentals of product-led progress, it’s time to determine your organization’s PLG technique. Obtain this free template—based mostly on Diagram 2 above—to map out the freemium or free trial buyer journey.
It’s also possible to use this worksheet as a team-wide PLG train to:
- establish potential dangers and obstacles
- brainstorm methods to extend monetization
- diagram the “virtuous loops” inside your product that strengthen engagement and retention
Product analytics platforms make product-led progress possible
Reorienting your small business round your product isn’t any straightforward process, nevertheless it’s price it to scale your small business and improve profitability. Begin by defining your North Star Metric and discover ways to establish and amplify the expansion loops—or flywheels—that exist already in your product.
Product insights offer you an edge for product-led progress—and Amplitude is right here to take your progress technique to the subsequent stage. As you embark in your PLG journey, attempt the Amplitude starter plan to:
- Discover product insights
- Improve consumer expertise
- Monitor consumer habits
- A/B check product options
- Personalize advertising and marketing messages
- And handle strong information
No must swipe your bank card. If you happen to want extra options, we’ll be right here to assist take your product analytics to the subsequent stage. That’s product-led progress in motion.