What is Product-led Growth (PLG)? Definition and Examples
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What is product-led growth (PLG)?
Product-led growth, or PLG for short, is an emerging model for business growth in which customer acquisition and business expansion are driven by the product itself. Simply put, in the PLG model, the product sells itself.
PLG has been adopted by many forefront tech companies, including Slack, Zoom, and Dropbox, and has become a common strategy among startups in the last few years.
This method is the exact opposite of its predecessor, sales-led growth (SLG), in which a sales team actively approaches prospects and sells products through their own efforts.
Product-led growth vs. sales-led growth
Sales-led growth (SLG) generally employs the following sales process.
- Marketing and lead generation
- Sales approach and sales meeting(s)
- Receival of order and formation of contract
- User begins using the solution
- Customer success handles onboarding and follow-up
With SLG, users often touch the product for the first time after signing a contract. This is why the sales rep has to be able to convey the benefits and value of their solution via phone calls and meetings, in order to get the customer to agree to try it out.
However, in the case of PLG, the product’s value can be understood without the insistence of a sales rep. This is achieved by having a well-built website, a clear USP, informative and helpful email newsletters, a product demo that can be watched on-demand online, among other methods.
Why is product-led growth necessary?
Until recently, it would take multiple months to years for a company to choose and adopt a new software. However, these days, end-users are more likely to find and decide to adopt a product on their own, and the speed of software adoption has accelerated dramatically.
In line with this trend, more and more software are introducing free trials. With a trial period, users can start the service with just a few clicks, and after seeing the concrete benefits of the product for themselves, they can then easily move on to the paid version.
It is crucial that SaaS companies adapt to the changing buyer’s journey. If you have to negotiate every time they switch, you will not be able to keep up with the speed that users are demanding, which could lead to lost opportunities. Also, if you create a PLG system in which users are encouraged to sign up for the paid version on their own, you can majorly reduce your sales costs (both in terms of personnel needed and the time they need to spend approaching leads).
PLG methods you can start right now
Drip marketing
Drip marketing refers to the process of sending a series of emails to customers automatically, based on their actions. For example, when someone signs up for your free trial, you could set up a drip campaign so that first, an email is sent out explaining setup, and then 3 days later, an email is sent out explaining one of your main features, and then 3 days later, explaining another feature, and sharing a use case from a similar company, etc.
Drip campaigns are essential to PLG because they continue encouraging new users to actively use your solution and provide them with helpful info to guide them through the service.
Your first email might be a fun welcome email to build the relationship, then there will typically be a few onboarding, informative emails, a case study, and then finally a campaign email that tries to lead them over to the paid plan.
Tutorial videos
Tutorial videos and online manuals are key in achieving product-led growth. On-demand videos can guide users through setup and explain how to go about operating the software. While you should still have some form of human customer support to make sure your customers are properly using the tool and getting results, a lot of the initial guidance can be done fully via video. Also, as your clientele grows, you can just as easily offer guidance to 1000 people as you can 30 people by preparing tutorials.
Product-led growth examples
DocuSign
DocuSign is one of the earliest examples of PLG done right. Their value proposition of signing documents online with an e-signature was so straightforward and clear that the service was able to sell on its own. They also achieved PLG by providing a seamless onboarding process. The user can create an account for free and receive an e-signature from anyone, even if they don’t have a Docusign account.
Slack
Slack is a famous example of a product that expanded mainly via PLG. Slack was able to grow rapidly for a multitude of reasons: the extensive word-of-mouth praise, the fact that they offer a free version, the self-explanatory nature of their product, and the solid sales team that handles the larger companies’ introduction of Slack. Note that PLG doesn’t necessarily have to get rid of sales altogether. Slack understood that to scale up their business more quickly, they need a team of sales experts to help out the MNCs where it may be more difficult to integrate a new tool right away.
