Product-led growth - the pocket guide every product person should read




Product-led growth - the one guide every product person should read - the mobile spoon



When you work at a startup, growth is everyone’s goal: marketing budgets are limited, so growth hacking tactics become a way of life. The product becomes the main channel for user acquisition, and retention through a great product experience is a matter of existence.

For the past few years, the notion of placing the product at the center of the business has become very popular among SaaS companies (B2C and B2B), and is known as “product-led growth”. 

A recent report from Pendo shows that 89% of product leaders see their companies as product-led. Startups people may feel like it's old news, but for many SaaS companies, and product people specifically, it’s a real revolution that puts their products in the spotlight as the main pillar for the company's growth. 


Here’s a handy summary for anyone who hasn't joined the product-led bandwagon yet and wants to catch up quickly.  

What's Product-led Growth? 

In a nutshell, PLG is a go-to-market strategy that positions the product as the primary driver for growth. That's user acquisition, conversion rate optimization, activation, revenue, retention, virality, and expansion - all driven primarily by in-product activities rather than relying on activities outside of the product. 

Is it new? 

Well, IT consumerization, BYOD, bottom-up sales, end-user era, product-centric approaches have all been around for years (I remember pitching about BYOD more than 10 years ago 🤮) and represent the increasing power of end-users in bringing-in technologies to organizations. 

Why now? Why again? 

Every few years, a new actor gets to play Batman and technology makes another leap forward (you know the history: Michael Keaton, Salesforce, iPhone, Christian Bale, Dropbox, Slack, Zoom…each one symbolizes a revolution. Except for Michael Keaton...).

Every leap raises the bar, increases competition, but also makes it harder to excel and grow (ask Ben Affleck). It forces the software vendors to find new strategies to get better. PLG is one of those strategies. 

Is it only for B2B? 

No. B2C companies (where user = buyer) have been focusing on product experience for years without calling it "product-led". For B2B, the shift to product-led represents a newer trend, shifting from traditional marketing/sales-led models (targeting the decision-makers) to focusing on the end-users first. 

Wait, isn’t growth a marketing thing? 

No. Growth hacking is a field in marketing that is focused on growth through low-cost alternatives to traditional marketing, but growth goes beyond user acquisition and includes ways to increase revenue, retain users, and expand. 


OK, no further questions your Honor, let's proceed with the things that will make you, or any product person fall in-love with product-led growth: 


What problem does PLG solve?

According to SiriusDecision: 98% of MQLs never result in closed business, which means MQL-driven pipelines kinda suck. 

Marketing and sales activities usually focus on explaining what the product can do and the value it is supposed to provide. It’s done mostly outside of the product: via emails, webinars, white papers - creating engagement with the content instead of letting the users experience the product itself and realize the value it provides. 

Take yourself as an example: I'm sure you've all been reading quality content by Aha, Monday, ProductPlan, ProductBoard, ProdPad, but did it convince you to bring all of those tools to your organization, or switch from one tool to another? 

Buyers prefer self-serve 

According to Forrester, 93% of B2B buyers prefer to buy from a website over buying from a sales representative. Buyers no longer want to “request a demo”, “contact sales” or wait for a "sandbox" to be configured (notice my exaggerated use of "quotations") - they want to get a quick taste of the real product before they make any commitment, and if they decide to purchase, they want to do it without human interaction. 

Enter Product-led growth 

Product-led companies focus on creating a great product experience for their end-users in a B2C fashion. They put the product in the hands of their end-users as quickly as possible, using a seamless onboarding experience and free trials




The assumption is that end-users will quickly feel how the product helps them, and share it with their team. The team will then use it, fall in love with it, and will receive buy-in from the decision-makers who want to invest in software their team is going to use and benefit from. 
The product adoption begins at the user level, before payment, and surfaces bottom-up. 



So basically we're talking about a low-cost acquisition channel, right?

Yes and no. 
Yes, because PLG strategy can lower user acquisition costs using self-serve onboarding, faster sales cycles, higher activation rates, and viral effects. 
And no, because PLG goes beyond acquisition and aims to increase customer loyalty, to the point customers become product advocates that drive expansion and growth. 


Got it, now can we get practical? 

We've gone through the bizarre questions phase, now lets dive into some bullets.

To drive growth, products should shine in the following areas:

1. Sharpen your messaging: 

This one happens before sign-up: 
A strong, fluff-free messaging, targeted for the end-users, and consistent across the different channels (outside and inside the product) will set the right expectations and prevent disappointments in the next stages of the funnel and prevent drop-offs.

2. Value first, money later

Let your users experience the greatness of your product before they make any commitment. 
  • Offer a free trial or a freemium track
  • Don’t lead the users to the pricing options before they get a good taste of your product
  • A good taste requires a big "bite": if the trial is too short, users may not even want to give it a try.
    Read more about the ideal SaaS free trial length.
  • Think about value first, worry about money later


3. Easy to onboard:

Product-led growth is ideal for self-serve & transactional products, make sure it’s easy to get started immediately. 

4. Accelerate time-to-value

TTV is key when bringing in trial users. 
Once a new user has onboarded, the product should be designed to demonstrate value as quickly as possible. For mobile apps, we are talking about a few seconds of attention span. In business products, it’s much longer but the mindset of the user is quite similar. 

Preceived value  =  Experienced value

The goal is to lead the users to quick wins, experience the benefits of using the product, and encourage adoption of features that will make the trial users realize the product value and stick around. 

Educate: 
  • Welcome the users (inside and outside the app) with a few "getting started" greetings 
  • Provide contextual in-app tips to explain how to use key features 
  • Add a chat option so users can "raise their hand" and ask questions when something is unclear
  • Avoid empty states; turn them into engaging opportunities to direct the users to the right way of doing things
  • Emphasize ways to address the user's original problems(s)
  • Don't overwhelm your users with too many interruptions
Engage: 
  • Use social proof techniques to promote best practices ("10 users around you use this genius feature…") or highlight some actions ("most popular tool for…")
  • Simplify complicated features by creating walkthrough’s or pre-defined templates
  • Celebrate small wins whenever the user makes a progress ("Yay! You just added your first team members! Now we can spam with daily highlights too!") 
Excite: 
  • Promote a few “wow” features to create excitement
  • Summarize periodic achievements to emphasize progress 
  • Combine in-app communication with external ones (email, push notifications) 

Monitor your users' activities: every action they make helps you evaluate the stage they are at, and where they need to be next. Use the right message at the right time, for the right user, by segmentizing your users based on their actions.
Of course, the above is not just for new users but also important for retaining existing ones, so think about TTV for both new and existing users when releasing new features: 
  • How to position it, 
  • How to make it easily discoverable
  • How to make it exciting and sticky (more about stickiness below).  

5. Personalize with contextual onboarding

Here’s a number you don't need to remember but sounds very convincing: 80% of people are more likely to do business with a company that offers personalization. If you’ve read my post about data segmentation you already know that each user can belong to multiple segments. 

Personalize your product experience to help different users achieve their goals with contextual onboarding: 
  • Users that just started their trials are still clueless, help them get started
  • Users with low engagement are still evaluating the product - help them achieve the basics
  • Users with high engagement are looking for ways to get more done - show them some power-features. 
  • Power users (I call them addicted, in PLG they are called "champions") are likely to become advocates - help them promote your product with unique referral offers. 
  • Decision-makers (potential buyers) are trying to understand the commercial side - help them figure things up. 
Use all communication channels possible: in-app, emails, push notifications. 

Those principles go beyond just new users as existing customers should also be segmentized by their type and engagement level, and each one can be pushed forward in this endless conversion game... 

More about that in the flywheel model section below. 

6. Virality and network effects 

The more users are exposed to the product (within an organization), the higher the chances that one of them will fall in love with it and become an advocate. The goal is not only to stick around with one user, but it's also to expand within the organization (and even outside of it) in a viral way that will allow more users to get familiar with it. 

With some products, network effects are built-in (i.e. Slack, Trello, Monday becomes more valuable as more users use it), but with others, it might require some creative thinking on how to encourage collaboration (for instance - share to extend your trial or unlock some premium features). 
If you can use your product as an expansion channel - it can become a major growth engine. 

7. Stickiness 

Consider stickiness as something that creates an immediate impact, easy to expand, adds value over time, and hard to replace. If you follow all of my recommendations above - your product will get stickier, but stickiness will not happen if the product fails to deliver value. 
Other techniques involve drip campaigns (emails, push notifications, even SMS) - but you'll need to build a strong user segmentation to understand your users' behavior and send those messages just in time. 

A sticky product will make it harder for your trial users to let it go when the trial ends, leading to higher conversion rates. the same will happen with your long-term customers, improving the product's retention rate


The flywheel model

To succeed with your product-led growth, it's not enough to attract and engage new users to buy
The product should be good enough to delight them and turn them into promoters

The flywheel model defines 4 user stages: evaluators, beginners, regulars, and champions.

The better the product is, the faster the flywheel will spin, increasing the rate that users move from one stage to the next. 

If you're familiar with the traditional marketing flywheel, you will notice some similarities: 


 Product-led growth flywheel model - the mobile spoon

The product-led flywheel creates a positive feedback loop—as more users become advocates, they drive more acquisition, and growth increases exponentially.

Read more about the product-led growth flywheel model compared to the traditional marketing flywheel model


Key metrics to follow

To measure the performance of your product-led growth strategy, you’ll need to define some key metrics: 

1. Engagement score: 

Engaged trial users convert better to paying customers, so measuring "engagement" is key. 
Engagement depends on the product and users, so naturally, there's no generic formula that fits all. 

Here are some examples of activities to measure: 
  • Time spent on product
  • Features used
  • Frequency of use
  • Reactions to in-app tips (digital body language)
  • Additional interaction (in-app chat, emails, content) 
  • Referral activity (if relevant)
To build an engagement scoring model you should: 
  1. Define key events to track
  2. Assign a different engagement score (ES) to different actions 
  3. Collect those actions and store them for each user (they are useful for later stages as well) 
  4. Understand the role of the user (different roles = different expected engagement) 
  5. Collect this information in the user-level and in the account-level (i.e. aggregate user scores from the same organization) 
Here’s how an engagement score formula might look like:

Engagement Score = (ES1 x n1) + (ES2 * n2) + (ES3 * n3) + …

Where ES is the engagement score each action gets and N is the number of times this action happened. 

Engagement score can be measured in different levels: 
  • Per user (can help you identify champions)
  • Per account (can help you prioritize leads) 
  • Across the product (to monitor ongoing progress) 

2. Product qualified leads (PQLs)

A product qualified lead (PQL) is a lead who has experienced meaningful value using the product (during trial/freemium) and is more likely to become a customer. 

Once you have your engagement scoring model in place, you can compile it with the type of users, their industries, team size, and define a threshold to determine who's a product qualified lead and who's not. 

For example, an end-user who has tried many of the product’s power features, used the product each and every day during trial and invited 6 more users to join, might be considered qualified, while a decision-maker, who used the product very little, didn’t share it with anyone, but checked the pricing page, used some admin tools and showed purchasing intent - will also get a high score despite his low usage. 


To track your funnel improvements, monitor the following: 
  • Trial-to-PQL
  • PQL-to-Customer 
  • Trial-to-Customer
To keep marketing aligned on driving quality signups, monitor the following:
  • Visitor-to-Trial
Measure the above 4 KPIs on a cohort basis to keep track of your progress across weeks and months. 

3. Other key metrics

Since PLG goes beyond the acquisition phase, it's important to monitor other key metrics such as DAU, MAU, DAU/MAU, time to value, key feature adoption, churn, LTV, NPS, and others. 

Those metrics should help you measure how "adorable" and sticky your product is, and make sure the improvements you make move the needle in the right direction. 


Summary

Yes, I know... 😩
You keep asking for shorter posts and this one ended up being pretty sick (I guess I'm not the "part I, part II" kind of guy... 🤓). 

My plan was to summarize the main principles of the product-led growth strategy and explain why so many SaaS businesses are opting to be product-led - without getting too fanatic about it. 

I believe in achieving big goals through incremental steps, so my recommendation is to start with the ideas that make sense for your business and can generate good ROI, and gradually add more elements into the mix. 

Here are some references I used as inspiration for this post. Check them out if you want to learn more about product-let growth:

And as usual, before you drop off, don't forget to subscribe to my newsletter and become 23% more awesome than average. 


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