Most companies and brands have their own platforms. This could be the case of a SaaS where your platform is your product, or an eCommerce brand with a DTC website and rewards portal. Regardless of how you run your business, getting your customers to fall in love with your online interactions with an intuitive UI, seamless UX, and plenty of benefits they can unlock on your platform is key to fast acquisition and healthy retention. This easy adoption and fast path to value is the foundation of product-led growth (PLG).
In this article, we’ll go over what product-led growth is, and why it’s becoming the go-to growth strategy for so many.
Read on to learn how PLG compares to sales-led and marketing-led growth models, and how it’s re-shaping the way users and brands interact. We’ll wrap up with how to build your own PLG strategy, what to measure, and real-life examples in SaaS.
Background: What is product-led growth?
Traditionally, the growth and success of a business was determined by their marketing or sales activities. This gave way to two growth strategies; marketing-led growth and sales-led growth.
While these are both still viable and valuable growth strategies to follow, new strategies have emerged that challenge the way companies think about growth. The giants of UX now champion a new approach: product-led growth through product marketing.
Let’s talk about all of these factors below.
Marketing-led growth
In the marketing-led approach, you focus on creating brand awareness, generating leads, and nurturing them until they’re ready for the sales team.
On the flip side, marketing-led growth traditionally emphasizes brand building and lead generation. Here, the spotlight is on brand awareness and lead generation. It’s a world of catchy advertisements, content marketing, webinars, and email campaigns. The goal? To capture interest, nurture leads, and then hand them over to the sales team for conversion.
Sales-led growth
The sales-led approach, on the other hand, is all about direct outreach, demos, and closing deals.
The traditional method of sales-led growth relies heavily on sales teams to drive expansion. It focuses on one-to-one interactions, tailored pitches, and demos. This approach prioritizes high-touch interactions, often targeting enterprise clients with bespoke solutions.
Product-led growth
Product-led growth is a strategy where the product is the primary driver of customer acquisition, conversion, and expansion.
At its core, PLG is a paradigm shift. Instead of relying primarily on sales pitches or marketing campaigns to convince potential customers of a product’s value, it lets the product itself do the talking.
However, that means it also needs to be able to walk the walk. As such, product-led growth focuses on creating a product that delivers a compelling, intuitive, and valuable user experience (UX) capable of selling itself.
Imagine walking into a store where you’re allowed to try out products on your own. As you test them out, you come to understand their value and decide on your own whether they’re worth the investment. That’s the essence of product-led growth in the digital realm.
You need to give users firsthand experience with your offerings so they can see the benefits in action. Then, they can make the decision to buy or subscribe based on that experience.
When you embrace PLG, you put the user first. The easiest way is to listen to their feedback and continuously iterate your product to better meet their needs. This strategy recognizes that, in today’s digital age, the most powerful endorsements don’t come from adverts or sales pitches but from genuine user experiences and word-of-mouth recommendations.
But PLG entails more than offering a trial or freemium version of a product. It’s a holistic method that brings product development, marketing, and sales together. PLG bridges the gap between product and growth marketing. As the lines between product development and growth strategies blur, a more user-centric approach to business emerges.
Product marketing
Instead of pushing the product to users through sales or marketing efforts, product-led growth pulls users in by offering a stellar experience, easy adoption, and quick discovery of value. The offering isn’t just part of the strategy — it is the strategy. Prospective customers are able to experience the product’s worth firsthand, often through freemium models or free trials. In this approach, you want the offering’s value proposition to be so evident that leads naturally transition from free to paid users.
Product marketing plays a pivotal role in this approach. It serves as the vehicle that moves the product from development to the market, ensuring its value proposition is clearly communicated and continuously resonates with the target audience.
By leveraging insights from sales, marketing, customer stories, and UX teams, product marketing crafts compelling messaging that both showcases the product’s benefits and aligns with consumer needs and challenges.
Given today’s digital consumer behavior, it’s understandable why PLG is gaining traction so quickly. Modern users prefer to try before they buy. They’re more informed, discerning, and skeptical of hard sales pitches, trusting their own experiences and the recommendations of peers over flashy advertisements. PLG caters to this mindset by offering a user-centric approach that accommodates modern consumer preferences.
Benefits of product-led growth
Shoppers are inundated with choices; from apps to platforms, there’s a solution for almost every need. This abundance of options gives birth to a significant challenge for companies: how to stand out and resonate with users in a meaningful way.
In its simplest form, a product-led go-to-market (GTM) strategy leverages the product as the primary vehicle for market penetration; instead of extensive sales or marketing campaigns, the product takes center stage. It showcases the value proposition directly to end users so they can experience its benefits firsthand.
Traditional GTM strategies typically take a top-down approach, targeting decision-makers and higher-ups in organizations first. In contrast, a product-led GTM strategy is inherently bottom-up: It targets end users — the people who will actually use the product in their daily lives. By wowing them, the goal is to create organic advocacy that flows upward, influencing organizational buying decisions.
You may worry that adopting a product-led GTM means sidelining sales efforts, that’s not the case. In fact, it creates a harmonious blend where sales, marketing, and product-led strategies coexist. While the product pulls users in, the marketing team encourages greater user attraction and adoption, and the sales team focuses on securing larger accounts, upsells, and cross-sells. Together, this leads to a comprehensive growth strategy.
That cohesion is a major reason why so many SaaS companies are gravitating towards a product-led GTM strategy.
1) Prioritize the user experience
Rather than focusing on building a product, PLG’s focus is on crafting an experience that’s intuitive, valuable, and, above all else, delightful. Reduce the time it takes for users to gain value from your product (time to value) and offer them moments of enjoyment along the way. That can take many forms, from small snippets of personality-filled microcopy to unexpected onboarding gifts and above-and-beyond customer support.
PLG also helps you prioritize retention-focused product development. With continuous user feedback, product development can better match user needs, leading to higher retention rates.
2) Seamlessly deliver value
Your users don’t want to wait. PLG understands that; it aims to reduce friction and deliver value to users as quickly and easily as possible. This strategy considers how your product can deliver value through features like demos, onboarding emails, and in-app hints to make product adoption easier. Jakob’s Law can also come into play here by making sure your product works in a similar way to ones they already know and use.
When leads see immediate value, adoption rates can skyrocket. As a result, they’ll be far more likely to integrate the product into their daily workflows, leading to quick adoption.
3) Reduce customer acquisition costs
By delivering value right in your platform, you can also improve customer acquisition. When your product is your best marketing tool, attracting new users can be a more organic and less costly process.
Because the product drives initial user acquisition and adoption, the costs associated with traditional marketing and sales efforts are lower.
4) Empower users with self-service
The modern user is independent, as evidenced in a Frontegg survey, which found that 77% of users prefer to use self-served SaaS products. Users today want to explore at their own pace without being bogged down by sales calls or pushy marketing ads. PLG caters to this consumer-driven marketing approach by empowering customers to dive in, explore, and discover the product’s benefits on their terms.
5) Improve your sales cycles
By allowing users to learn the platform at their own pace, you’ll start seeing more hands-off sales.
Customers learn to self-onboard and discover value directly within your platform, making for less hand-holding, which saves more of your team’s time and resources. In turn, the sales funnel from a new lead to a paying customer is significantly shortened with fewer team touchpoints needed.
6) Understand your customers better
Every user interaction in the PLG strategy provides insights, helping your business make more informed data-driven decisions based on customer behavior and tendencies.
Taking a user-centric approach also allows you to achieve a strong product-market fit that’s more streamlined and accurate to what your users want and need to reach their goals.
7) Build user trust
Most users are skeptical of sales pitches and can readily tell when they’re being sold to. The “try before you buy” sentiment behind PLG enables users to discover the value you offer firsthand.
Letting prospects experience the product instead of trying to sell to them can directly foster trust and credibility.
8) Ensure scalability
A product-led GTM strategy is inherently scalable. As the product improves and evolves, its potential to attract, retain, and upsell users grows exponentially.
In short, product-led growth combines the power of the product, the voice of the user, and the potential of a seamless experience to drive SaaS success. Thanks to its core of innovation and user-centricity, embracing this approach promises sustained growth and deeper user connections.
Building a strong PLG strategy for SaaS
As you can see, the allure of PLG is undeniable. You can craft a winning PLG strategy for your own SaaS company by incorporating the below seven tactics into your growth plan.
1) Understand your audience and product
First and foremost is fleshing out your audience and product. Without a clear understanding of your target segment, any growth strategy you launch is akin to shooting in the dark. Succeeding at this step can be the difference between offering a generic solution and a tailored one.
How to do it: Dive deep into who your users are, what challenges they face, and how your product can address those obstacles. Conduct user surveys, engage in one-on-one interviews, analyze user behavior data, and create detailed user personas to uncover the answers. Be sure to research behavioral responses to your product, your user’s product experience, and how the product fits into the user story.
2) Craft a user-centric product
This step involves designing and refining your product with the user’s needs, preferences, and feedback at the core. A user-centric product has the ability to resonate better, offer more value, and ensure higher retention rates. Effective product positioning is intrinsically tied to this, ensuring the item’s unique value is clearly communicated and resonates with the target audience.
How to do it: Prioritize user feedback loops, conduct usability testing, and iterate new product releases and development based on user insights.
3) Offer users a freemium or full-feature free trial
This tactic reduces the barrier to entry by allowing users to experience the product before making a financial commitment. Offering a freemium of full-featured free trial gives them a taste of your product’s capabilities; they can see for themselves how valuable your product is and whether it’s the right choice for them.
How to do it: Determine the core features to offer in the freemium version or decide on the trial duration, ensuring users enjoy enough value to consider upgrading. This is also a great time to work on a product-led marketing strategy to boost adoption and conversion.
4) Enhance your product onboarding email sequence
Proper onboarding ensures users understand the product’s value proposition and how to harness its full potential. It increases adoption by making it easier for users to understand exactly how to use your product, and how it benefits them.
How to do it: Craft a series of emails designed to guide, educate, and engage users as they navigate your product. Your emails need to be engaging and focused around key features, as well as offering tips, sharing resources, and providing support.
5) Optimize the wider product onboarding experience
A smooth onboarding experience can boost user confidence, reduce churn, and accelerate the realization of value. Beyond emails, improving the onboarding experience encompasses in-app tutorials, tool tips, webinars, and any other resources that enhance users’ product experience.
How to do it: Incorporate tools like in-app guides, create video tutorials, and offer live support or chatbots for instant assistance. Go above and beyond to bake helpfulness into your product.
6) Tap into data-driven iteration and optimization
In the SaaS industry, stagnation can be a recipe for obsolescence. Continuous iteration keeps your product relevant and competitive. So, continuously refine and improve your product based on data-driven insights.
How to do it: Analyze user behavior data, conduct A/B tests, and employ feedback tools to gather user insights, then implement that information to improve your product, positioning, and the user experience.
7) Encourage customer adoption and advocacy
Word-of-mouth marketing remains one of the most powerful advertising tools. Almost half of businesses around the world significantly depend on word-of-mouth marketing. Gathering a loyal community of users can be transformative for your business, as they share their positive experiences. Customer advocacy turns satisfied users into brand ambassadors who actively promote your product, making them a powerful driver of word-of-mouth referrals for your product.
How to do it: Offer referral programs, build communities, and celebrate user success stories. Place their stories at the heart of your marketing strategy for a consumer-driven approach to brand growth.
8 Metrics to measure PLG performance
For most businesses, data is the compass that guides strategy. It’s not enough to implement PLG principles; you must also measure their impact.
By tracking the right metrics, your brand can gain invaluable insights and refine its approach. I’ve compiled a list of eight metrics every SaaS company should track when using a PLG strategy.
Monitor these metrics closely to make data-driven decisions that keep your business on the right path.
1) Net revenue retention
According to McKinsey and Co, net revenue retention (NRR) is the most critical metric for SaaS businesses to track. It calculates the total revenue (including expansion revenue) minus revenue churn from expired, canceled, or downgraded contracts. Your NRR score determines your SaaS product’s ability to retain and expand your customer base.
How to measure it: Add up your starting monthly recurring revenue and expansion revenue to find your total monthly revenue. Then, subtract any churned monthly recurring revenue and divide it by your starting monthly recurring revenue. This will give you your NRR as a percentage.
2) Customer acquisition cost
Customer acquisition cost (CAC) is the average expenses incurred to acquire a new consumer. It encompasses marketing, sales, and any other related costs. This metric provides insights into the efficiency of your acquisition strategies; a rising CAC, for instance, might indicate inefficiencies or increased market competition.
How to measure it: Divide the total cost of acquisition (marketing, sales and other expenses) by the number of new customers secured in a specific period.
3) Monthly active users
Monthly active users (MAU) is the number of unique users who engage with your product in a month. It’s a direct indicator of product engagement and value. A growing MAU suggests your product resonates well with users.
How to measure it: Track unique logins or active user sessions over a month-long period. Consider measuring by cohort as well (for example, following specific users that signed up in a certain month through to either churn or won-closed).
4) User activation rate
User activation rate (UAR) is the percentage of users who take a desired action, like completing the onboarding process after signing up. It gauges the effectiveness of your onboarding process and the initial user experience.
How to measure it: Divide the number of users who complete the desired action by the total number of new users, then multiply by 100.
5) Customer lifetime value
Customer lifetime value (CLV) indicates the predicted net profit a business can expect to receive from a single customer throughout the duration of their business relationship. It takes into account a buyer’s initial purchase, any repeats, and the average lifespan of their relationship. This metric helps businesses understand how much value each shopper brings over time. Your CLV can also influence pricing and retention strategies.
How to measure it: There are several ways to measure customer lifetime value. One way is to multiply the average purchase value per customer by the average purchase frequency rate per customer. Then, multiply that number by the average customer lifespan.
6) Churn rate
Churn rate shows the percentage of customers who stop using your product during a specific time frame. High churn indicates dissatisfaction or lack of perceived value and signals areas in need of improvement.
How to measure it: Divide the number of consumers lost during a certain period by the number at the start of it, then multiply by 100.
7) Expansion revenue
Expansion revenue encompasses any additional income from existing customers through upsells, cross-sells, or upgrades. It highlights the potential for growth within your current consumer base and the effectiveness of your expansion strategies.
How to measure it: Track the additional revenue generated from existing customers beyond their initial purchase.
8) Customer referral rate
This metric indicates the percentage of your customers who refer your product to others. Referrals are a testament to buyer satisfaction and the product’s value, which often leads to high-quality leads.
How to measure it: Divide the number of customers acquired through referrals by the total number of customers, then multiply by 100.
In SaaS digital marketing, these metrics are the pulse of your performance; monitoring them gives you an indication of the health and vitality of your PLG strategy. By closely following these metrics, you can make informed decisions about your future growth plan.
Bonus: 5 Real-world examples of product-led SaaS companies
Now you know the theory of product-led growth, it’s time to discover its full potential through real-life examples. More than a few SaaS giants have embraced a PLG strategy, and their success stories offer invaluable lessons.
So, let’s delve into five such trailblazers.
1) Slack
Slack is a communication platform that’s revolutionized the way teams collaborate. Its freemium model allows teams to experience its robust features without any initial investment or credit card info entry, tapping into the power of PLG. The intuitive interface, seamless integrations, and the promise of reducing email clutter quickly showcase its value and encourage users to upgrade their account.
Almost every client I’ve worked with uses Slack (or Microsoft Teams) for internal messages. Some clients also add contractors and partners to their Slack channels for quick communications. I use Slack in my own company to coordinate with a few of my freelancers.
2) Zoom
Zoom is a well liked video conferencing tool that has become indispensable for businesses, especially during the remote work surge. Zoom offers a free version with a 40-minute limit on group meetings. This “try before you buy” approach, combined with its reliability and ease of use, entices users to opt for premium versions as their needs grow. Zoom leans into creating an easy, seamless product experience for its customers.
I’ve used Zoom to host webinars, do internal company meetings, set up meeting calendars for easy scheduling, and more with their numerous features.
Tip: If you’re looking to host a webinar, check out these other webinar tool options.
3) Airtable
Airtable is a versatile, cloud-based platform that blends the best of spreadsheets and databases, allowing teams to organize work their way. Users can leverage free Airtable templates to customize their product experience to suit their requirements. Its freemium model enables users to experience its flexibility firsthand. But, as they build more complex workflows and require advanced features, the value of upgrading quickly becomes evident.
The company’s tips and tricks blog category helps streamline self-service, allowing users to learn how best to use Airtable to meet their needs.
I use Airtable to run a newsletter interest form that auto-populates responses in easy-to-use and organize tables of data. I can then take that data and splice it different ways to learn trends (what are people most interested in learning per month), insights (what is my audience most curious about), and other aspects of my audience.
4) Notion
Notion is an all-in-one workspace for notes, tasks, wikis, and databases. Notion’s user-centric design is its greatest PLG asset. You can do almost anything with the free version, enabling users to see the value Notion has to offer. As users delve deeper into the workspace and seek to collaborate with teams, the premium version becomes more enticing.
Like Airtable, Notion also offers many free templates that users can download to make the workspace their own. Meanwhile, Notion’s engaged community and team of ambassadors delivers a consumer-led marketing approach, building trust in its product.
I use Notion to share my brand and content guidelines with freelancers, monitor client guidelines, keep a reading list, store notes and other educational boards I find useful, and much more.
5) Shopify
Shopify is a popular eCommerce platform empowering brands to create lucrative online stores. Its 14-day free trial lets businesses set up a storefront and enjoy the platform’s capabilities to entice them to sign up at the end of the period.
Shopify’s ease of use combined with its numerous integrations makes for simplistic user adoption. That makes the transition to a paid plan a tempting next step for aspiring eCommerce entrepreneurs.
To enhance the customer experience, Shopify also offers 24/7 support, detailed how-to guides, a strategy-filled blog, an insightful podcast, and value-driven webinars. The company clearly understands the importance of delivering a stellar user experience at every level of their product.
Each of the above companies exemplifies the power of PLG. These SaaS companies have built products that users love and, through strategic PLG approaches, they’ve transformed user satisfaction into business success.
Wrapping up — Embrace a product-led growth strategy for SaaS success
The future of SaaS is undeniably product-led. While sales- and marketing-led growth may tell users why they should buy a product, product-led growth shows them.
Embracing PLG lets you harmonize sales and marketing with a product-first approach. This holistic strategy ensures every customer interaction resonates with purpose and value. Moreover, prioritizing the user experience and continuously refining based on feedback and data enables your SaaS company to achieve unparalleled growth. For a comprehensive strategy that yields impressive results, look no further than PLG.