You've undoubtedly heard of a "product that sells itself." Unlike sales-led methods where the buyer is led from Point A to Point B in a sales cycle, product-led businesses flip the conventional sales model on its head. They make this happen by giving the consumer the "keys" to use the product and help them experience the benefits the product offers with a "try before you buy" approach. Users can easily move beyond the "freemium" stage and reach a point where upgrading to a paid subscription becomes a no-brainer.
If you've used Calendly or Slack, you've observed the power of product-led growth first-hand. There's no lengthy whitepaper on the benefits of seamlessly scheduling meetings or strong internal team communication. You simply experience the product in action to see its intrinsic value.
Product-led growth has become a powerful force in the SaaS industry over the last few years for several reasons. First of all, a number of the fastest-growing companies in SaaS have started without a traditional sales team and relied on the product-led growth model instead. Plus, CEOs and tech investors alike love the product-led method because it revs up revenue with low costs, unlike many traditional go-to-market strategies.
What exactly is product-led growth?
Product-led growth is defined as a go-to-market strategy that relies on using the product as the principal tool to acquire, activate, and retain customers. It's a business methodology that revolves around an end-user mindset. Product-led companies establish their user acquisition, expansion, conversion, and retention abilities around the product. In other words, product-led growth is the effort to create an all-encompassing self-service product that sells itself and grows the business.
Product leaders can start achieving product-led growth by understanding users' needs, problems, and expectations. Successfully achieving a product-led growth framework requires companies to recognize that the product is the best source of sustainable and scalable business growth for them, resulting in a self-serve solution.
Here are a few tenets that make product-led growth stand out from other go-to-market strategies:
Less dependence on traditional sales
Product-led growth means that the company grows without investing in a large sales team and needing them to call and convert leads continuously. The product allows the business to grow and monetize without requiring scalable sales support.
Fully focused on the customer
Product-led growth focuses on consistently delighting customers, who become the leading advocates and promoters of the business. A product-led strategy focuses on solving real customer problems and does everything possible to make the product stand out from competitors. Product-led companies aim to be 100% customer-centric, so the product becomes the primary driver of acquisition, expansion, and user retention.
Allows independent product adoption
A product that lets users adopt independently and self-serve is a massive tenet of product-led growth. Product-led growth is an evolution influenced by customer behavior, lowering the barrier to adoption and creating more scalable self-service interactions with the product. It's all about making sure users can discover use cases and features that will help them find value, keep them engaged for the long haul, and better monetize their experience.
Offers non-committal pricing
A freemium-based pricing model typically fuels product-led growth because users can get started independently without committing to an annual or monthly fee. Allowing users to explore the product for themselves lets them evaluate its value without restraint. It also enables companies with smaller budgets to get started for free, with the idea that they'll eventually commit to paying when it's the right time.
The main benefits of product-led growth
Product-led companies can take advantage of two main benefits: A dominant growth engine and substantially lower Customer Acquisition Costs (CACs).
Dominant growth engine
Product-led companies typically scale faster than the competition in two dynamic ways:
Wider top-of-funnel: A freemium model or a free trial opens up the funnel to users early in the customer journey. This is compelling because instead of potential users filling out competitors' demo requests, they evaluate and interact with the product.
Rapid global scale: While competitors might be busy building out a team of regional sales reps, product-led companies focus on improving the onboarding process to serve more users worldwide in less time.
Substantially lower customer acquisition costs
Product-led companies also benefit from substantially lower customer acquisition costs for these three reasons:
Faster sales cycles: Since potential users can onboard themselves, companies can substantially reduce their users' sales cycle and time-to-value. Then, once they experience the product's value, the next logical step is to upgrade. The faster users can discover a crucial outcome in the product, the quicker it can convert them into paying customers. This conversion rate is essential to a company's growth strategy.
High revenue-per-employee (RPE): Software has always scaled well, but companies can accomplish more with fewer team members with a product-led method. This results in higher profit margins per customer.
Improved user experience: Since the product allows users to onboard themselves, users can experience heightened value in the product without any human interaction or hand-holding.
Why the product-led growth model is so popular
A question many people ask is why product-led growth's popularity is increasing. After all, many businesses still employ large sales teams that snag customers and drive revenue for the bottom line. It's important to understand that product-led growth reduces the need for human labor. The product itself is the primary onboarding, marketing, customer success, and sales engine if you do it correctly.
Sometimes, people want to go through a trial or check out a demo but don't want to speak with a person, and other consumers are willing to buy without any interaction at all. A product-led growth approach lets users try out the product instead of having to book a sales call.
Product-led growth also allows the company to avoid redundancy, employ a smaller sales team, and laser-focus on prospects who have derived value from the product.
What does a product-led company look like?
In a product-led company, the product is the primary indicator of revenue and ultimately the biggest driver of business value and growth. Companies know the price of losing a customer is much higher than acquiring a new one, so they focus on real-time analytics and user feedback to spot issues and pain points before their users discover them. If marketing, customer support, and sales disappeared, the core product would still engage and retain users (just at a slower growth rate).
Product-led companies also:
Make money when they provide value to end-users and monetize it effectively. They can grant free access to users because their product sells itself through a freemium or free trial model.
They use growth loops to become self-sufficient by organically acquiring customers and engaging them in meaningful ways.
They invest in product development, market and user research, and analytics to stay ahead of the competition and become disruptive in their industry. The real challenge is encouraging sustainable growth by monetizing user value and scaling correctly.
Examples of product-led companies
Early product-led disruptors like Dropbox, Slack, and Netflix saw meteoric growth in saturated markets because they provided user value faster, cheaper, and better than their competitors (e.g., file hosting, enterprise communication tools, television networks). There are many more examples today:
Figma - Disrupting collaborative design interface tools
Robinhood - Dominating trading straight from a smartphone
Opendoor - Reinventing the home selling process online
Calendly - Making the cumbersome experience of scheduling meetings more effortless than ever
Lou - A code-free way to build beautiful in-app experiences in minutes
Is product-led growth a fit for your company?
In theory, product-led growth takes a lot less capital than marketing-led or sales-led growth strategies. That's why it's touted as the method of the future by fast-paced companies that have experienced rapid, scalable growth.
The product-led growth method might be a good fit for your company if these tenets are supported:
Robust onboarding processes tied to revenue growth, activation, and retention by making the time-to-activation as straightforward and short as possible
Communicating the company's value proposition clearly across all channels, touchpoints, and facets of the brand
Aligning completely across teams on goals and what they're trying to achieve
The product team is driving real change and growth across the business
Data is crucial in core decisions
Your team prioritizes the customer journey and experience throughout everything they do
Additionally, product-led growth might be a good fit if:
Your ideal buyer prefers to self educate
Your product offers a fast time-to-value and is easy to use
Your product works as a lead magnet
How to implement product-led growth tactics and strategies
We've covered a lot of information on why a company would adopt product-led growth strategies. Now, let's take a look at some tactics that are hallmarks and some common characteristics of product-led growth strategies:
Offering a limited free trial or free tier of the product is the most classic product-led growth strategy that gets users engaging with a product quickly, helping them experience its value from the outset.
Targeted onboarding experience
An excellent user onboarding experience is essential to assist users in getting started and embedding the product into their workflows quickly. Consider implementing in-product announcements, tooltips, and onboarding tours into your to guide and delight users (you can do this code-free with Lou.)
Value-based, scalable pricing metrics
Pricing is something product-led businesses spend a great deal of time perfecting. They work through the data to discover the most suitable pricing model that represents their value while also making the experience frictionless for customers.
Focus on the pain points of customers and users
Product-led growth companies obsess over creating content on their website and app that help customers resolve their own problems.
Creating engaging stories that communicate the product's value
People love good stories. A product-led company understands this and spends a lot of time, effort, and money on communicating its value and brand story to the customer every chance they get. They focus on reminding the user how they can help solve their problems and provide benefits.
Developing referral programs
Word-of-mouth (WOM) is highly prevalent in product-led growth organizations. A product-led company develops and iterates on referral programs that convert its users from customers to evangelists in the broader community.
“Powered by SurveyMonkey”…”Powered by Calendly”…banners around the web introduce products via tools and platforms companies may not have access to through traditional marketing. These free/freemium branding opportunities help spread the word and expand the company's reach.
Learn more: product-led growth resources
If your company is looking to level up and implement a product-led growth strategy, check out some of these trusted resources:
Begin your product-led journey today
Create a free Lou account and begin building product tours and in-app announcements that make onboarding self-serve. No code required.
Published on March 11th, 2022
SHARE THIS POST