Inbound Marketing + Sales Blog

January 7, 2019

What is Product-Led Growth?

4 min read

Written by: Guido Bartolacci  |  Share:

Every company marketing in the B2B SaaS space is looking for ways to grow and scale their business. But for every Slack, HubSpot, or Dropbox that has managed this feat, there are many more that have struggled to do so. So how have these companies succeeded where so many others have failed? Obviously, there is a combination of factors that come into play, but a common theme has begun to emerge: Product-Led Growth.

What is Product-Led Growth?

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Product-Led Growth (PLG) is an emerging term coined by the expansion stage venture capital firm OpenView Venture Partners to help define the way in which companies have built their acquisition, retention and expansion strategies around their product. However, while the term itself has only surfaced within the past year or so, SaaS marketing pros have been using product-led growth strategies for over a decade to acquire, retain and expand their customer base.

At its core, PLG is a go-to-market strategy that relies on the value of a company's product to enable them to attain rapid growth. The principle is that as users gain value from interacting with a product they will begin to weave it into the way they operate day-to-day. As more people at the company use the product, it becomes integral to the business as a whole.

How Slack Leveraged PLG

Slack is a great example of how this works. Slack allows teams to communicate and collaborate together to get work done quicker and easier. Let's say an employee downloads slack to work on a particular project with a teammate. Pretty quickly the rest of the team will join Slack to work on the project with them. Soon enough other teams at the company will notice and join Slack themselves. As this happens other teams will have different needs and features that they will want to access and ultimately purchase from Slack. So from one employee, Slack gains a large number of new users accessing plenty features in a short amount of time.

You're probably thinking, 'well that's great, my product is not viral like Slack or Calendly'. While that is absolutely fair, and PLG does not work the same for every company, I would ask that you temper your cynicism for now. In order for your product-led growth strategy to be successful, you do not need to be Slack, but you may need to consider lowering the barrier for a customer to obtain value from your product. Many companies who have adopted a PLG strategy have used a freemium model or similar strategies to do just that.

Learn how to navigate the product lifecycle. Our Comprehensive Guide to Product  Marketing will lead you from MVP to go-to-market to product-market fit.

How PLG Leverages Freemium Models

Today's buyer landscape is drastically different than it was ten years ago. People no longer want to be sold to. They want to do their own research to find the best solution for their problem and try before they buy. So adding a freemium solution within your product offering is a great way to accommodate for that. The trick is finding where the value of your product lives.

Product features will always come into play, but apart from that Slack cares about how many users you have, Wistia cares about the number of videos you host, HubSpot cares about how many contacts you have - you get the idea. As a customer begins to approach certain thresholds for any of those metrics that will trigger them to become a Product Qualified Lead (PQL), which will alert the sales team to reach out.

So while the value your product provides may not be the same as Slack (nor should it be unless you're trying to compete with them) you can still build a freemium model around the value of your products to obtain the same affect.

How PLG Fits Into the Flywheel

Last year HubSpot introduced a new concept called the Flywheel that killed their marketing funnel. The marketing funnel of old was a linear process where energy was applied to each stage of the buyer's journey to produce customers. Where this approach falls short is that all of the energy it took to produce customers is not recycled. The flywheel changes that by leveraging your existing customer base for growth, and it's broken into three stages:

  1. Attract: by creating helpful content that can be used to start a conversation with a future customer.
  2. Engage: by building lasting relationships and introducing solutions that align with their goals.
  3. Delight: by providing an incredible experience that adds value and turns customers into evangelists.

These three stages revolve around your customer base to create a circular process to continuously drive revenue. As you add value and reduce friction at each of these stages your flywheel will begin spinning faster and faster. A Product-Led Growth strategy fits into the Flywheel perfectly by adding value early in the buying process and nearly eliminating friction along the way.

If you're looking for more ways to grow your SaaS business, then check out our Definitive Guide to SaaS Marketing.

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Topics: Demand Generation

About The Author

Guido is a Demand Generation Marketer for New Breed. He specializes in running in-depth demand generation programs internally while assisting account managers in running them for our clients.

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