Sales-led and marketing-led approaches have had their time in the spotlight, but the future of business growth lies in embracing product-led growth (PLG).
We are currently witnessing a significant shift in how people use and purchase software. The era of cloud-based software and user-friendly digital experiences ushered in by the likes of Salesforce and Apple’s iPhone has given rise to heightened consumer expectations. What was once extraordinary is now the norm.
This shift isn’t just about changing consumer preferences; it’s also driven by market supply changes. The demand for consumer-grade user experiences in B2B SaaS products, known as consumerization, is increasing. Tech-savvy users expect software to be beautiful, intuitive, powerful, and affordable.
Buyers today prefer self-education. A 2022 study by Considered Content found that 53% of buyers prefer making purchases without interacting with sales. Personalization is now a given, with 80% of people more likely to engage with personalized offerings. Moreover, a 2020 Adobe study revealed that 89% of marketers see a positive return on investment from personalization in their campaigns. Users also expect immediate gratification and tend to abandon products that don’t deliver it. For example, 21% of users open a mobile app once and then abandon it entirely, with 71% churning within 90 days.
In response to these evolving demands, the market has become flooded with products, intensifying competition. This increased competition has made users more willing to switch to products that meet their expectations. Recent economic conditions have further accelerated software turnover, with 67% of respondents in a 2023 report by RevOps reporting budget cuts.
So, what does this mean for the future of products?
A great customer experience has always been essential, but in the past, it was primarily the domain of sales. However, people now prefer experiencing the product they intend to buy without interacting extensively with sales or marketing campaigns. To stay competitive and ahead of the curve, businesses must reshape their strategies and reconsider the roles of their customer-facing teams.
The future of business growth is product-led growth (PLG).
What Is Product-Led Growth (PLG)?
Product-led growth (PLG) is a business methodology where user acquisition, expansion, conversion, and retention are primarily driven by the product itself. It aligns various teams across the organization around the product as the primary driver of scalable growth.
PLG is about harnessing the contributions of your entire company to build better, more engaging products. It requires traditional decision-makers to involve a broader, more diverse group of stakeholders in the decision-making process, leading to more innovative business decisions.
Scaling primarily through hiring, as opposed to PLG, often results in slower growth, an inability to respond quickly to market changes, increased operational costs, and lower profit margins. If you’re not actively reducing friction at every customer interaction, maximizing product adoption, and fostering customer loyalty and advocacy, you should be concerned about your product-led competitors.
Examples of Successful Product-Led Companies
Several companies have achieved remarkable success through a product-led approach. Zoom, for instance, entered a competitive market but rapidly gained traction through a product-led strategy, ultimately going public with a $15.9 billion market cap in 2019. Airtable, Slack, and Figma are other examples of companies that thrived in their respective markets by focusing on user experience.
In the B2C realm, Pinterest, Typeform, and Warby Parker have embraced product-led growth, achieving significant results through freemium or free trial models, user onboarding, and in-app communication.
Product-Led Growth as a Go-To-Market Strategy
PLG profoundly influences a company’s go-to-market strategy. It prioritizes the product as the driving force behind user acquisition and expansion, leading to adjustments in how sales, marketing, customer success, engineering, and product teams measure success and contribute to growth.
PLG answers key go-to-market questions:
- Who is buying your product? In PLG, you’re selling to users, not buyers.
- Where will they find out about your product? PLG relies on virality and word of mouth from happy users.
- Why are they buying your product? Your product should be more trustworthy, valuable, and user-friendly than competitors.
- How are they buying your product? Users should become buyers within the product itself, rather than through sales reps.
Product-led companies often employ a freemium or free trial revenue model, allowing users to experience the product directly, which expands the top of the funnel to a larger number of potential customers early in their journey.
Becoming Product-Led
Becoming a product-led company involves two critical transformations: one in the product and one in the organization.
First, you need an exceptional product that delivers on its promised value. Design-led thinking is crucial, as it ensures an intuitive, low-friction experience with a short time to value.
Second, the organization itself must change. Cross-functional teams should break down silos and work collaboratively to inform and align decision-making.
Product-Led Growth Metrics and Principles
To succeed with PLG, it’s crucial to establish a common language and reporting system for internal alignment. Key metrics in a product-led growth model include Time to Value (TTV), Expansion Revenue, and Average Revenue Per User (ARPU).
Embracing a product-led growth approach is a transformative journey for any organization, but it’s one that promises to shape the future of business growth.
