Learn How To Drive Sustainable Revenue With Product-Led Growth
The pandemic caused unexpected growth for some companies due to changes in our behavior. Zoom, Slack, Shopify, Netflix, and Square were well-positioned for this growth because they focus on product-led growth, also known as PLG.
These companies were able to experience hypergrowth during the pandemic by delivering an exceptional product experience that meets customers' needs in a rapidly changing environment. By focusing on product-led growth, these companies were able to weather the challenges and emerge as leaders in their respective industries.
1.Ask the right questions to evaluate Product-Led Growth's success.
Here are some key questions that can help assess the success of a product-led growth strategy and where to focus when implementing one.
1.How well is our product meeting customer needs and solving their problems?
2.What is our customer acquisition cost, and how is it trending over time?
3.What percentage of our growth comes from product-led channels like word-of-mouth and organic search?
4.How effectively are we using data and analytics to drive product decisions and inform the go-to-market strategy?
5.What is our net promoter score, and how has it been trending over time?
6.How well are we retaining and growing our existing customer base?
7.What is the feedback from our customers on product features, and how can we improve?
8.How well do we integrate product, marketing, and sales efforts to drive growth?
9.How do we build cross-functional solid alignment across the organization to execute a product-led growth strategy?
10.What are the metrics to measure success and set the right expectations with key stakeholders?
Answering these questions can provide insights into the effectiveness of a product-led growth strategy.
2.Embrace innovation as a critical component of Product-Led Growth.
Innovation is a critical component of product-led growth. A PLG strategy requires continually delivering new and improved experiences to customers. Tweaking, testing, and measuring parts of the user experience helps us keep our users more engaged and drive growth, even as we enter a period of increasing consumer thriftiness. This requires a culture of innovation where new ideas are encouraged and rapidly tested—and failures are seen as opportunities to learn and improve.
A successful growth strategy requires product-led growth and innovation, regardless of external economic conditions. Companies must prioritize the customer by continuously delivering new and improved experiences through innovation to attract and retain customers. This approach can help drive customer engagement and achieve sustainable revenue growth.
3.Build a community that adds value to your customers.
While having an enthusiastic customer base is excellent, if you can turn that user base into a community capable of supporting one another and sharing knowledge, you have the potential for a home run.
With relatively little effort from your company, a community can add exponential value to your users. Establishing a community may be as simple as setting up a Facebook group for verified users to talk with each other, monitoring that, and engaging where appropriate. Tracking the amount of user-generated content and the number of members provides a window into your community's health.
Follow the data—this will help identify the features that are your selling points.
This can show you where to focus your R&D for future iterations. And with a product-led growth strategy, reinvestment in your product is the key to everything.
As businesses look for more cost-effective ways to grow, a product's value proposition that delivers a great customer experience becomes increasingly compelling—and customers are less likely to "churn." This creates new opportunities for companies that have embraced product-led growth and innovation to differentiate themselves from their competition and achieve sustained growth through whatever economic waters are flowing through the moment.
The original content of the note was published on Hackernoon.com. To read the full note visit here
From product-led growth to product-led sales: Beyond the PLG hype
Ever since software-as-a-service (SaaS) innovators, including Atlassian and Slack, pioneered the product-led growth (PLG) model, the strategy has often been viewed as the “holy grail” for achieving efficient growth and above-average returns. Many tech companies, from other SaaS natives to established enterprise software providers to consumer product brands, have embraced this model. By giving customers control from the get-go, with the product at the center of customer acquisition, retention, and expansion, the theory goes, companies can scale their businesses with lower sales costs, greater product virality, and higher net retention.
However, succeeding with PLG is far from a simple proposition. Our research suggests that only a few companies that use it actually achieve outsize performance, and they do so by increasingly developing a hybrid motion known as product-led sales (PLS). This innovative approach combines elements of PLG with the more traditional enterprise model of sales-led growth (SLG), in which a salesperson sells the software in a long sales cycle, typically to a senior executive. Our research further shows that the companies that implement PLS most effectively can enjoy sizeable boosts in both revenue growth and valuation ratios.
What it means to be a product-led company
As the moniker suggests, being a product-led company means giving the product itself a critical role in acquiring, growing, and retaining customers.
All B2B software companies can adopt some aspects of this model in their go-to-market (GTM) motion by investing in the following elements:
.Digital as a demand-generation engine. A well-designed, engaging website with the following attributes is the primary driver of digital demand: interactive, use-case-based product demos; personalized landing pages with value propositions specific to different personas and roles; and simplified trial or live demo sign-ups.
.Seamless access to the product and TTV. Allowing customers to experience the product before they purchase it is an essential ingredient for product-led companies. Try-before-you-buy tools such as trials and “freemium” offers make the research and evaluation stage of the buying process come alive.
.Innovative sales techniques enhanced with product and usage analytics. Try-before-you-buy tools coupled with product analytics can help sales teams implement innovative data-driven strategies to increase conversions by understanding user behavior, segmenting users, and delivering personalized, product-led experiences accordingly.
.Cross-functional growth teams with an experimental mindset. Helping to fuel this seamless customer experience are company growth teams focused on constantly making incremental improvements in key conversion points to improve metrics such as user engagement, adoption, free-to-paid conversion, and TTV. These autonomous and empowered teams of about seven to nine individuals typically include a mix of product managers (PMs), data scientists, demand-generation specialists, content creators, designers, and marketing strategists.
Only a select few have mastered the product-led model
The common perception among software executives and investors is that product-led companies outperform their sales-led peers in revenue growth, operating efficiency, and market valuations. And while this is true in some cases, our recent analysis of 107 publicly listed B2B SaaS providers shows that most companies adopting product-led motions are not enjoying any boost.
A new hybrid approach combines the best of both worlds: product-led sales
The software sector had, for many years, generally believed that a clear distinction existed between the PLG and SLG target markets. Many industry participants and observers were convinced that the pure PLG approach worked best with small and medium-size businesses (SMBs) or particularly tech-savvy buyers, while SLG was the only way to build a scalable business serving enterprise customers.
Our experience and research strongly refute the notion of such a sharp dividing line in the two models’ applicability. Product-led motions exist on a broad spectrum, enabling most, if not all, B2B software companies to embrace this approach to one degree or another. The lines between PLG and SLG are already starting to blur; pure-play PLG companies are hiring sales teams to cater to large enterprises, while more traditional, SLG-driven companies are investing in product-led experiences to help their sales teams prove the value of the product and appeal to a new class of SMB customers.
The original content of the note was published on Mckinsey.com. To read the full note visit here
The 3 Phases of Product-Led Growth: The Triple Whale Method
Truly product-led companies are countercyclical. Even in a downturn, when customers are shutting down or slashing spending, your product or service remains in their stack. You made something they can’t live without.
Love from the market is how the best companies gain ground – in any economic environment. It is the clearest sign of product-led growth. But it doesn’t just happen to you. There’s a playbook for it.
TripleWhale is a smart data platform for ecommerce brands, which unlocks real-time performance metrics that empower brands to make better decisions.
The Triple Whale story is a crash course in product-led growth. Let’s deconstruct their insights and methods for your own startups.
You Can’t Have Product-Led Growth Without These 3 Things
Triple Whale’s growth method, simplified:
1.Find the fast-moving water: Triple Whale identified and quickly jumped into the fast-moving water around new ways that young people want to earn a living.
2.Validate your product promise: The product promise is in fact the first step of finding your product-market fit (a well-known prerequisite for growth), and testing its validity should be done before spending effort on building the product.
3.Set up your iteration machine: See how Triple Whale built an iteration machine driven by:
-Lots of small product releases
-Constantly seeking customer feedback and product love.
Find The Fast-Moving Water
When it comes to finding fast-moving water, consumers are the leading indicator. But they’re often followed by small businesses, medium businesses, large enterprises, and finally governments. Everyone who wants to progress gets in the water eventually – but there is a huge advantage to getting there first.
When you find the fast-moving water, you’ll find that you grow a lot faster, even in a downturn. Underlying momentum pulls you forward.
Validate Your Product Promise
The Triple Whale founders had the great starting point of being a representative customer of their own market. In many cases this is the best type of founder-market-fit. But even if you are not your own perfect customer, you have to aggressively test whether the need that you perceive in your market is actually there. Go beyond yourself. Have the courage to check your assumptions and validate that thesis early on.
Build Your Iteration Machine
A dream product only becomes a dream product because the people who use it, love it.
Triple Whale continuously improved their product by building a customer feedback machine. This machine requires two things: 1. Speed. 2. Asking your users: “What do you think?”
The original content of the note was published on Nfx.com. To read the full note visit here
What It Really Takes to Develop Product-Led Growth
Six years ago, Dynatrace was in trouble, compared with a rival, Datadog. Its cloud monitoring business faced stiff competition from Datadog, a company using a product-led growth (PLG) strategy. Dynatrace revenue stayed flat from 2017 through 2018 while Datadog’s nearly doubled.
Dynatrace wasn’t the first company to face a PLG disrupter, and it won’t be the last. A recent Bain & Company survey of 176 North American business-to-business software senior executives found that nearly 75% of them are concerned about competition from PLG companies.
The appeal of self-service
PLG has caught fire in software markets, spurred by the success of companies such as Datadog, Atlassian, and Snowflake. Yet many companies still aren’t clear on exactly how it works or how to excel in the strategy, and many underestimate the difficulty of building the requisite capabilities.
LG focuses on enabling end users to discover, try, buy, and scale up their usage in a self-serve manner, without prompting from a sales team. Companies can apply the model to select products in their portfolio or use some PLG capabilities in a hybrid approach—for example, relying on a sales team for the initial sale, then shifting to PLG self-service for renewals and expansion.
Firms that rely primarily on PLG are growing faster than companies with limited or no PLG focus and are almost three times as likely to have gained market share in recent years.
This growth leads to strong performance on several important metrics. For example, companies that rely primarily on PLG exceed the Rule of 40 (a combined revenue growth rate and EBITDA margin of at least 40%) and the even more aspirational Rule of 50 at a higher rate than their non-PLG peers.
In addition, investors reward primarily PLG companies with higher valuations, especially at higher revenue growth rates.
So how can an individual software company determine whether PLG will fit its product portfolio and organization? The approach works best in markets where automated deployments are possible; end users can make purchasing decisions; the product is sticky, with usage growing over time; and the potential customer base is broad, with lots of free users who can convert to paid.
What it takes
If the market fits, our research suggests that companies must master five capabilities to deliver a strong PLG experience.
Product design. The most important product feature is easy deployment by end users, removing any friction to getting started.
Packaging. The key to effective PLG packaging is a free version that allows users to try before they buy. This could either be a time- or consumption-limited free trial or a feature-limited free tier.
Digital discoverability. Since PLG companies rely on user-led product discovery and exploration, they need to drive traffic to their website through search, paid media, communities, influencers, and partners.
Self-guided education and support. Users who found the product need to see value quickly. About 95% of PLG companies surveyed offered user-driven onboarding through videos and guides.
Enterprise sales handoff. While PLG is commonly associated with self-service sales, all large PLG companies have enterprise sales teams.
While some observers believe a PLG strategy means companies can reduce sales and marketing spending to fund research and development, our analysis of public company data shows that primarily PLG companies spend more on both R&D and sales and marketing as a percentage of revenue.
Returning to the Dynatrace story, while Datadog remains the PLG leader in its market, Dynatrace has been investing in select PLG capabilities: easy deployment, free trials, scalable pricing, and user-driven onboarding. However, because of constraints from Dynatrace’s pricing model, user buying still goes entirely through the salesforce, and the website does not provide complete pricing details.
Leap, but look first
PLG is a major growth opportunity that every B2B software company should consider. The best practices of any transformation still apply: top-down sponsorship from the CEO, recognition that the company will likely need a different operating model, and thoughtful integration with the legacy business.
Product-led growth can delight customers, spur faster growth, and command high valuations—if a company applies the approach in the right markets, with the right products and capabilities.
The original content of the note was published on Bain.com. To read the full note visit here
How to take advantage of Product-Led Growth opportunities
Companies that understand product-led growth (PLG) recognize that success comes from putting the user first. They develop a deep understanding of how people interact with and use the product. They tailor the product experience to seamlessly move the user from discovering the product, trying the product, experiencing value, buying the product and even sharing with others—ideally, this is done digitally, with no human intervention required.
When done well, the product can truly sell itself.
But therein lies the challenge: when it’s done well. PLG may sometimes be misperceived as easy. For example, some misguided individuals assume they are “product-led” if they simply add a free trial; there is a lot more that goes into it besides a free trial.
Building products that sell themselves is hard work.
What is product-led growth?
Product-led growth (PLG) is, at its core, a business methodology that relies on the product as the driver behind growth. It requires an organization to build the product in such a way that it drives customer acquisition, retention and expansion.
While leveraging free trials to let users experience the product before a purchase is a big part of the success of a PLG strategy, especially in our age of self-service, it is insufficient in itself.
To provide real value to the user, you must invest intentional time and research into understanding the user to ensure the product you’re offering actually addresses the challenges your customers are trying to solve.
Does PLG make sense in today's economy?
Today’s economic conditions are forcing organizations to revisit budgets and streamline their expansion tactics. During this time, some SaaS organizations are evaluating PLG as a leading method to effectively scale.
PLG is not a cost-cutting measure.
Some companies have embraced PLG as a means to reduce costs in marketing and sales. It is true that you build the sales process in such a way that you are less reliant on a salesperson, but you will need to invest in other ways.
PLG requires a different type of investment, like investing in programs such as customer research, user experience (UX) and product management.
PLG companies are more resilient.
Companies that embrace PLG invest greatly in understanding customer needs and solving them in real ways to create a better product. This translates to greater customer satisfaction and better customer retention.
Reap the benefits of a PLG strategy.
Building a PLG strategy is a commitment to building an engine.
PLG is an extremely effective strategy when companies take the time to really understand their customers. This requires an investment and intentional commitment to understand what challenges users are looking to solve, how people interact with their product and the value they expect from that interaction.
The original content of the note was published on Forbes.com. To read the full note visit here