What is Product-Led Growth?
Product-led growth (PLG) is a business strategy that relies on using your product as the main vehicle to drive organizational KPIs like user acquisition, expansion, conversion, and retention. Especially the tech industry has observed the dominance of SaaS companies with Product-Led growth methodology. Widely famous companies like Slack, Dropbox and many others are centered on product-led growth.
What Makes Product-Led Growth Unique?
Traditional sales-led companies approach to move prospects from the bottom of the funnel to the top of the funnel by adopting methodologies. Whereas the product-led companies do not believe in going through the hassle and alter the traditional sales model. Product-led companies make this possible by giving the buyer the “keys” to use the product and helping them experience a meaningful outcome while using the product. At this point, the buyer will realize the value of the product and would opt to upgrade the service to a paid plan.
Benefits of Product-Led Growth:
- Dominant Growth Engine: Product-led businesses tend to scale faster than their competitors. A free trial or freemium model opens up your funnel to people earlier in the customer journey. This is powerful because, instead of prospects filling out your competitor’s demo requests, they’re evaluating your product.
- Lower Customer Acquisition Costs (CAC): By having your prospects onboard themselves, you can significantly reduce your prospect’s time-to-value and sales cycle. The quicker your users can accomplish a key outcome in your product, the quicker you can convert your free users into paying customers. The conversion rate is important to your growth strategy.
- High revenue-per-employee (RPE): Software was always built to scale well, but with a product-led approach, you’re able to do more with fewer people on your team. Less hand-holding means higher profit margins per customer.
- Independent product adoption: Giving your users the ability to onboard themselves to your tool on their own is key to product-led growth. Product-led growth is about getting more out of your product builds by making sure users can discover features and use cases that will activate them (help them first find value), keep them engaged (retained) for the long haul, and better monetized.