July 12, 2024

The Chief Mag

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3 Ways Businesses Can Transition to a Product-Led Growth Model

4 min read

The rise of product-led growth (PLG) strategies is reshaping many aspects of modern businesses, from customer acquisition and retention to the way we create and build software. PLG is well-documented as an effective and profitable strategy given that 50 percent of software-as-a-service (SaaS) PLG companies hit $100 million annual recurring revenue within the first five years. Additionally, Gartner predicts that by 2025, 75 percent of SaaS providers will implement product-led growth techniques to foster expansion among their existing customer bases. 

PLG places the product itself at the center of a company’s growth model, rather than relying solely on traditional sales and marketing tactics. Companies like Stripe, Slack and Zoom have demonstrated the power of PLG via rapid scaling with relatively lean teams compared to traditionally sales-driven business models:

  • Stripe’s seamless payments integration allowed it to expand quickly by making its product a delightful experience that developers both wanted to use and tell others about. 
  • Similarly, Slack’s acclaimed collaboration tool spread virally as individual users joined and invited their teams based on positive word-of-mouth from its incredibly intuitive product experience. 
  • Zoom is another great example due to the product’s easy-to-use system and the features and functionality embedded within. Thanks to remote working during the pandemic, Zoom has now become a verb in many of our nomenclatures.

Rather than relying on large sales teams, companies could grow efficiently — despite macro-economic pressures and trends — by prioritizing the process of crafting an exceptional, user-centric product.

3 Ways to Transition to Product-Led Growth

  1. Champion product-first thinking across the organization.
  2. Prioritize your end users and their feedback.
  3. Empower your product as a marketing engine.

More on Product-Led GrowthProduct-Led Growth: A Guide

 

The Cultural Shift Behind Product-Led Growth

The shift to PLG is harder than it seems. It’s not just one singular action, but a cultural shift, moving away from a sales-first mentality to a product-first focus on delivering exceptional user experiences. Historically, companies like Salesforce and ServiceNow have allocated close to 40-50 percent of their spending to sales and marketing. Yet, with the rise of PLG, customer acquisition costs have come down significantly because the product leads the charge instead of a human.

In a traditional sales-led growth approach, the sales team, talent and processes are in the driver’s seat. Sales representatives must convince customers to buy a product or service through various tactics like campaigns, promotions and even relationship-building. In a SaaS organization, this paradigm often creates a short-term focus on closing deals, rather than a longer-term eye on creating value for your customers through the product itself. 

In contrast, a PLG strategy enables companies to prioritize product development and user adoption, both of which are equally vital to growth. An organization’s newfound relationship with the user means the product must be easy to learn, easy to use, easy to scale for the user’s needs, and perhaps most importantly, has to create value for the user quickly. 

 

How to Transition to a Product-Led Growth Model

For those that are looking at the PLG strategy as an exciting opportunity but feel the cultural shift may be daunting, here are three ways businesses can transition to a PLG model.

Champion Product-First Thinking Across the Organization

In a PLG approach, product teams can no longer operate in isolation. They must collaborate closely with sales, marketing, and customer success because a modern, effective PLG strategy requires a holistic user experience at all stages of the journey, from initial adoption through ongoing usage and expansion.

When all teams are benefiting from the value that PLG provides, the customer can feel the difference. PLG tools like in-app guides, onboarding flows, contextual video and support articles, and chat experiences exist to support collaboration across teams by putting the user experience first and therefore breaking down organizational silos.

Prioritize Your End Users and Their Feedback

Product-led companies put end users at the center of their strategy and build each feature with a specific user need in mind. This value-forward, user-oriented approach to product building makes for a more delightful product experience and a stickier use case. Along with this, consistently soliciting and incorporating user feedback is paramount with PLG. Modern analytics, onboarding and customer feedback tools have popped up to enable data sharing across the organization for a multitude of uses.

The end result? Retention improves when those using the product can’t imagine life without it. PLG teams use a blend of quantitative and qualitative feedback loops to identify top priorities and building solutions that their end users adopt, and they continuously survey — via methods like NPS and CSAT — to understand how well these features are working for users.

Empower Your Product as a Marketing Engine

With PLG, the product experience becomes a powerful marketing channel in and of itself. When users love a product, they naturally invite colleagues from their personal networks to try it out, similar to how Slack propagated virally. This organic, reputation-driven adoption reduces customer acquisition costs and emphasizes building a remarkable product over expensive sales and marketing campaigns. Whether this virality occurs through organic word-of-mouth activity or if it is engineered through a referral or affiliate program, the result is the same: more efficient business growth. 

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PLG Leads the Way

Making the transition to PLG involves fundamental changes like placing product at the center of problem-solving, crafting artful user experiences and continuous iteration versus employing humans to mitigate poor product experiences. 

At its core, PLG reorients an organizations culture and problem-solving approach around developing innovative, user-centric products that sell themselves. This ethos of product craftsmanship transcends any specific growth strategy and will be imperative for businesses to thrive in increasingly competitive digital markets.

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