Product Led Growth
Notes From My Learnings
For tech companies to achieve profitability, they need to achieve scale to the point where the additional cost of adding a new user or customer is significantly lower than the revenue they make from that user. For scale to matter, companies need to ensure revenue is at a point where their spending no longer significantly impacts revenue.
The problem with tech startups especially those that are Software as a Service(SaaS) products is that there are a plethora of similar products that are trying to outcompete each other and outspend each other for market share.
But what if there was a way for tech companies in red & competitive markets to stand out? How can they drive traction without trying to make the market look like a gladiator’s arena where the customer is the prize?
The answer to the question above is that product teams and tech companies need to be customer-centric and they need to be focused on leveraging their products to drive customer satisfaction from the beginning of the user journey till the point where the customer starts paying regularly. Product Led Growth is one tested and trusted way for startups & product teams to drive product growth by focusing on delivering value to the user via the most effective medium; the product.
What Is Product-Led Growth (PLG)?
According to Gainsight, product-led growth (PLG) is a go-to-market (GTM) strategy that puts the product at the forefront of the customer journey and leverages the product as the key vehicle to acquire, convert, retain and expand customers.
In the past, startups and companies had been adopting the funnel approach to building products which means they had been using a laddered approach to acquiring users. The problem with that approach is that over every step, potential users would drop off.
PLG works with a flywheel, where instead of trying to acquire users out of the product, your implement techniques to acquire them with the product. No user is lost in a funnel and it’s easier to resurrect users that drop off.
Think of it as using the product to sell the product. With PLG, you’ll use the product to attract users, convert these users to customers and leverage the product to retain and increase revenue attainable for every user or customer.
To make PLG work, all teams have to revolve around the product and focus on optimising the experience of the product to deliver value most simply and seamlessly possible.
This means that product teams need to focus on reducing the time to value for every product.
To optimize the time to value and make it easy to acquire users, companies would need to employ a pricing methodology that gives their customers a taste of their product without paying, This is where concepts like Freemium & Free Trial come into play.
To drive adoption, there will need to be in-app engagements, valuable content and a community that turns users into product evangelists. To drive retention and expansion, teams will need to customize feature tiers that offer more value than what is available for free.
Over the past few years, more B2B SaaS companies are leveraging PLG because of its advantages, before PLG, companies used to talk to customers, demo potential users and then offer them the product. Now, they don’t need to do all that, users can start testing and receiving value from the product. Afterwards, they can decide if they want to pay for extended value.
Here are a few companies you may know that execute PLG in some capacity:
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The Goal Of PLG
Reduce Customer Acquisition Cost: Before Product Led Growth, marketing and sales teams would work in isolation to drive users to the product. This method means startups would spend money on ads, demos, events and all forms of paid campaigns and they still wouldn't get a 100% conversion.
Increase Average Revenue Per Employee: PLG requires the team towards driving value to the product with the product and by doing so, every initiative by every team directly affects the bottom line.
Reduce Sales Cycle: A lot of B2B SaaS companies spend hours visiting and demoing their customers. With PLG, a lot of time would be spent converting users to paid customers instead of converting non-users to users and then paying customers.
The Intersection Of Teams To Drive Value
Product-Led Growth requires the input of every team to drive expected outcomes.
For marketing, it means that they will need to drive engagements with the product and create models that will drive leads to leverage the product. Most SaaS products with a public-facing link usually have something called a content loop in their product which is usually a Call-To-Action for anyone with that link to use the product.
Sales will leverage Free users as leads and work towards converting them to paid users. This reduces the sales cycle because normally they try to capture non-users and convert them to users. But with PLG, users already exist, sales just have to do their magic and get them to upgrade to paying customers.
For product, it means designing a seamless experience that will ensure more people seamlessly move through the flywheel. The most important job of the product team is to ensure that there is a short time to value.
The product team will also need to design features that fit both free users and paid users. They will collaborate with marketing to implement in-app engagement that will drive retention.
Can PLG Work In Africa?
The book Product-Led Growth: How to Build a Product That Sells Itself is a great way to model the PLG strategy but it does not dive into geographical context. When you start reading the book, it might sound like you need to take either the Sales-Led Strategy or Product-Led Strategy as if they are sworn contrasts but you’ll definitely need a mix of both in Africa.
Building in Africa means trying to serve a large number of uneducated users unless you are in Fintech which still requires user education for nascent verticals.
Restricting customer acquisition to product mechanisms may not work because you need to sell your early users and you will need to sell paying customers to validate the viability of the product.
Building in Africa still requires PLG methodologies but it cannot make up the entirety of the product’s growth strategy. You need to have sales teams that put the products in the customer’s face.