Are you a startup looking for a faster path to growth? Tired of relying on traditional marketing techniques that just aren’t cutting it? It might be time to try Product-Led Growth!
We sat with Konstantin Valiotti and picked his brains on Product-Led Growth for startups. Keep reading to learn more about how Product-Led Growth can revolutionize your startup’s growth strategy.
What is Product-Led Growth?
Product-Led Growth (or PLG) is a strategy in which the product should promote and sell itself. It’s a marked change from the traditional, sales-led approach in which the sales team tries to sell the product and convince people to sign contracts.
PLG often relies on freemium models or free trials so that users can explore the solution and then make the purchasing decision themselves. As well as solving pain points for potential users, the product also needs to be able to sell itself to the end user.
Slack is a great example of a company that’s excelled through Product-Led Growth. They knew that it was important to engage as many users as possible because that exerted pressure on people to actually buy the solution.
Business-to-business companies have economic buyers (the people who make the decision to buy the software) and end users (who actually use the thing). Smart companies pay attention to both buyers and end-users, but they make sure that users LOVE the product, aiming to make economic buyers actually buy the solution.
Why do startups need to adopt Product-Led Growth?
In my experience, there are three key benefits to choosing Product-Led Growth over any other approach:
- People prefer it: Research from Gartner and McKinsey shows that most buyers prefer to make self-service purchases instead of talking to sales teams. This also has the advantage of shortening the cycle and allowing people to avoid sales conversations and just go ahead and buy things.
- More companies are going digital: This trend was already happening before COVID, but that helped to accelerate the pace at which companies have gone digital. This has led to an expectation amongst people that they’ll be able to try and then buy instead of having to sit through sales pitches and lengthy demos.
- Value needs to come first: Customers expect companies to provide value first. The users should be able to understand how the solution works before they’re asked to pay for it. And they need to be able to experience the solution first-hand instead of learning about it through sales conversations, recorded videos, or product demos.
When should you use Product-Led Growth?
Product-Led Growth doesn’t make sense for startups that are in their earliest stages because the product needs to be ready before it’s used as the juicy worm that brings people in. You need to achieve product-market fit first, as Diego Von Sohsten explained in the GrowthMentor blog.
There are definitely examples of situations in which Product-Led Growth doesn’t quite make sense. For example, Intercom started as a PLG company with Sales in the mix, and they were a poster child of how self-service routes could work. But if you go to them right now, they’re relying on sales leads.
In fact, a lot of companies that start out with PLG end up switching to the sales-led model because they eventually create a complex product that requires deep engagement with the target audience. The more complex a product is, the more likely it is that they’ll need to rely on sales teams to explain it to the customer.
With that said, even with the example of Intercom, you can sign up as a small business and go the self-service route, so companies that focus primarily on the sales-led model can use PLG to support their sales team. The two approaches aren’t mutually exclusive.
We see the same thing happening with a lot of more technical products. If you look at the leaders, most of them allow you to go through the self-service route, when five years ago they would have focused entirely on pushing you to take a sales demo.
The thing to remember is that PLG is just a concept and an umbrella term. At the end of the day, it’s up to you to build out your strategy, and so if it makes sense to start with PLG and then to move into a sales-led model, that’s fine. Your goal is to grow your company. It’s not to be fanatical about the concept of Product-Led Growth.
What are the stages of Product-Led Growth?
It can help to think of Product-Led Growth as being an engine, in that it’s something that you have to start up and which will then work based upon the inputs that you feed it. If you use the wrong fuel, it’s going to stall.
Here are the parts that you’ll want to think about:
Prerequisite: Align your teams
For PLG to work properly, your teams need to be aligned toward building a product that sells itself. You need to unlock the best possible self-service experience across the whole funnel, spanning the acquisition, activation, engagement, retention, monetization, and expansion.
- Acquire and activate users: You’ll also need a simple signup site that shows the product in action and is optimized to acquire and activate new customers. Activation is interesting because it’s not a universal metric, and different companies define it in different ways.
- Monetize and expand: When it comes to monetization and expansion, there’s always more work to be done to encourage people to discover and explore the benefits and features of your products so that they’re happy to spend their money.
- Retain and engage: Usage of the product should make the product itself more valuable. This comes back to your product team and your strategy, which also needs to revolve around your product selling itself. Your management team needs to look for problems, solve them for clients and then hopefully earn more money. In PLG, adoption, satisfaction and usability are what drive the growth.
How to Build a Product-Led Growth Strategy
When you’re ready to start building out your Product-Led Growth strategy, there are three things that stand out in particular.
- Strategic alignment: This is all about getting the entire company working towards adoption, and satisfaction and making the end user the priority for the whole company.
- Analysis: Here, we’re talking about establishing teams that are responsible for owning specific experiences. For example, they’ll target KPIs that are related to activation and onboarding. Other stages will be led by other team members.
- Culture: Your company needs to have a culture of constant data research and experimentation. If you don’t have a consistent focus on research and a strong data culture, you can’t turn quantitative and qualitative insights into experimentation and grow the company as a result of it.
Product-Led Growth Frameworks
When it comes to the theoretical frameworks that you can adopt for your Product-Led Growth, there are two main options to think about.
The first approach is the flywheel, which describes the user coming in through activation and then following that with adoption, adoration, and advocacy. As shown in the image above, this breaks people down into four different groups:
- Evaluators: People who are showing an interest in your solution but are yet to pull the trigger.
- Beginners: People who are just getting started with your solution.
- Regulars: People who are regular users of your solution.
- Champions: People who love your solution and who sing praises to other people.
The second approach is the loop approach, ranging from viral loops to content loops. The concept of loops is important because it unlocks more growth from the growth that you’re already having. The idea is that each customer you acquire will help you to acquire more customers. Viral loops can be particularly good for bringing people in but be warned that they can be quite varied when it comes to the quality of the people they bring in.
Key Product-Led Growth Metrics
As with everything in the world of business, you’ll want to establish some key performance indicators (KPIs) so that you can track performance. The challenge is that there’s no single metric that we can give you because it depends upon a number of different factors, from whether you’re B2B or B2C to whether your tool is collaborative in nature.
Still, there are generally the same dimensions: acquisition, activation, monetization, expansion, retention, and engagement. If you’re particularly keen on measurements, you can also add satisfaction and performance.
Once you understand these dimensions, the metrics tend to be fairly obvious. With the acquisition, for example, you’ll want to monitor things like customer acquisition costs, and payback time.
The most important thing to remember about metrics is that they’re only part of the picture.
For companies with the potential to use loops, such as viral loops, you need to separately add tracking of your loop, including all the loop iterations.
One more metric that is typically overlooked is time-to-value. While many companies track activation (as outlined above), some miss a key component — how much time it takes for a new user to get to the activation moment.
Otherwise, searching for metrics related to each stage (acquisition, activation, etc) should provide you with meaningful metrics.
How to Start with Product-Led Growth
By now, you’re probably itching to get started with Product-Led Growth, so let’s take a little look at what you can do to get started.
To begin with, you’ll want to start following content creators like Elena Verna, OpenView Partners, and even us here at GrowthMentor. They’ll provide a structured guide on how to approach Product-Led Growth. Then you’ll need to define exactly why you want to get involved with PLG. So what exactly do you want to do?
You should start by analyzing the current situation and figuring out how you acquire and activate people. When it comes to retention and engagement, you need to look at your use cases and start to build a map of them. This should show where the most opportunities are.
Then spend some time focusing on acquisition. Your sign-up process should present as little friction as possible and allow people to get value from you early on. If you can, allow people to buy from a self-service platform.
You’ll start with that and then move on to deeper analysis and research before you start work on establishing data culture. Set some goals and then start building out Product-Led Growth across your community from there.
Once you’re ready to implement, there are three main steps along the journey toward full maturity for PLG companies:
- Build your own self-serve platform: This can typically be further broken down into having an auth strategy, and a top-tier first-time user experience.
- Overlay your business model on self-serve and automate: The key here is to ensure that your sales funnel lives inside the product. In other words, sales and products aren’t different aspects of your business.
- Optimize: Once you’ve deployed your self-serve platform and rebuilt your business so that self-service and automation are at the heart of it, you’re ready to start optimizing it. Track your metrics, make changes and keep working at it to make your business more and more efficient.
Product-Led Vs Sales, Community and Marketing-Led
Let’s take a closer look at how Product-Led Growth compares to a few other key types of growth.
The most common alternative is sales-led growth. Here, a company creates a product that solves a problem, just like they do with Product-Led Growth. However, instead of going the self-service route, they ask people to request a demo instead of signing up and going straight into a trial. The problem with this is that it forces you to rely on people to see the value of your product.
Community-led growth is all about building a community around your product or service. For example, Notion offered the feature of creating templates by their community, which propelled the product outside of the Notion core ecosystem. It can be harder to do this, but it can also be super rewarding because those community members will do much of the work for you, spreading the word about your product through word of mouth.
Marketing-led growth is similar to sales-led growth, except instead of relying on your sales team bringing in leads, you rely on your marketing team to educate people by creating various assets, including whitepapers and use-cases about the product so that when they come to you, they don’t need nurturing or product demos because they’re ready to buy. The challenge here is that it forces you to talk about yourself throughout all of your marketing, and there’s a risk that you’ll come across as spammy.
It’s also important to note that each of these approaches isn’t mutually exclusive, though you’ll want to focus on one of them above all others. If you can make multiple approaches work for you then that’s great, but note that it also adds to the challenge and can make your life a little more difficult.
How Does Product-Led Growth Change Product Management?
Product-Led Growth teams should be skilled at traditional product management while simultaneously having a deep understanding of marketing, experimentation, data and research. This changes the game because it calls for superheroes who have expertise across a range of different disciplines.
Remember that whatever optimization you do within activation and onboarding requires you to talk to people to understand their pain points. This has always been important for product management, but it’s set to become more important than ever.
This means that the ideal employee has worked in both marketing and product management. Retention and engagement aren’t something that can be driven by a growth team, because it requires changes to the core processes that the business follows.
The growth team isn’t just some team that goes and creates features, because they’re not just solving problems – they’re also in charge of ensuring that people are adopting the solution and being satisfied by it.
Now that you know a little more about Product-Led Growth, you’re ready to get started with PLG at your company. We hope that the tips and tricks that we’ve shared today have been useful, but we also know that it can be difficult to get the ball rolling.
That’s why it can be a good idea to work with a mentor, and that’s where we come in. We work with a number of Product-Led Growth consultants here at GrowthMentor, so get browsing their profiles today and find the perfect mentor for you. You can also check out Konstantin Valiotti’s profile on GrowthMentor right here.
You can also click here to learn a little more about Product-Led Growth. We’ll see you soon for another article!
Product-Led Growth or PLG is a strategy in which product use drives customer acquisition, retention, and expansion.
The two main frameworks are Flywheels and Loops. Flywheel is a self-sustaining marketing model that generates a steady stream of leads and prospects for your brand. Loops is ranging from viral loops to content loops and it is important as it frees up more growth from the growth you already have.
Adopting a Product-Led Growth strategy has three main advantages: 1. People prefer it, 2. More companies are going digital, 3. Value must come first.
Product-Led Growth involves using products to drive business and revenue growth. Sales-led growth, on the other hand, uses the sales process to move customers down the funnel. The main difference between both strategies lies in the business process.
Start by analyzing the current situation of the acquisition, activation, engagement, retention, monetization, and expansion. Then move on to deeper analysis and research and to establishing data culture. Finally, you are ready to start building your own self-serve platform.