March 13, 2024

Product-Led Growth Is Great. But Product-Led Retention Is Probably Even More Important.

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So somehow, “Product Led Growth” became a seemingly magic savior for many struggling SaaS companies. Or at least, they hoped so. A magic cure for sales costs that are just too high. What if we just add a Free edition?
Sometimes it does work. I mean, Canva’s metrics for example are just awesome. $500k in revenue per employee at $2 Billion in ARR, and profitable. Now that’s a solid PLG motion.
But just as often, if you were any good at “PLG” — you’d already be doing PLG. Still, if you go all-in, truly 100%, add a free edition and a true hands-off free trial if you can. It will make your product better and easier to use, if nothing else. If it doesn’t magically change the trajectory of your startup.
But with everyone discussing PLG, there just isn’t enough discussion in B2B of Product-Led Retention. In fact, I can’t think of a single board meeting where I’ve even seen a slide on it.
Our products in SaaS just don’t tend to automatically retain themselves. To be so valuable, so cost-effective. and so deeply embedded in the fabric of our customers’ businesses that they’d never churn. They tend to come close enough to get most renewals though. Most. But far from all.
But our B2C friends obsess about Product-Led Retention. Sometimes in dark ways — making it hard to cancel. Sometimes in great ways — forcing B2C subscription businesses to relentlessly provide a great end-user experience. Churn is so high in most B2C and B2B2C they have no choice but to obsess on improving their value proposition constantly. Every month, the meal kit, the clothing, the game subscription, the video subscription almost has to be better than the month before.
But in SaaS? Well, we do all track NRR, churn and hopefully GRR too. And then sort of throw Customer Success at it. And usually — that’s almost about it.
I’m not saying the best product leaders don’t think about retention all the time at the product-level. They do. I just don’t see the obsession here across B2B companies, founders and their entire management teams. I just don’t see it discussed all that often.
Some of this may be that in the enterprise, many products really are so hard to rip out, you don’t have to worry as much about Product-Led retention. Look at $100B market cap Service Now, which is very, very enterprise. Customers often sign 3+ year contracts, and architect their entire business processes around ServiceNow. As a result, no one leaves. Renewal rates are steady at 98%-99%.
But that’s not most us. In fact, most of us saw churn rocket the past 12-18 months, and NRR fall. In fact, NRR fell all across the board in SaaS.
Raising prices and making threats at renewals helped a bit in 2023. But that’s not really Product-Led Retention. That’s not making your product so, so, so great and so, so, so important no one will leave.

The original content of the note was published on Saastr.com. To read the full note visit here

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