Growth Hacking vs. Product-Led Growth

AMA with Sean Ellis, Ethan Garr, Wes Bush, and Ramli John

Last week, Ramli John (Managing Director at ProductLed) hosted a Fireside chat with Sean Ellis (author of Growth Hacking), Ethan Garr (Co-Creator of BreakoutGrowth.net), and Wes Bush (author of Product-Led Growth), where they discussed mostly the difference (and similarity) between Growth Hacking (GH) and Product-Led Growth (PLG), how to to get teams engaged with the growth process, and how to pick the right North-Star metric.

It was very insightful (and funny) to listen to them, so I took some notes.

Enjoy!

- Orit

Starting with the best fun question of the day - what is the difference between growth hacking and product-led growth?

First, it is important to say that both are based on the concept that value is what drives conversion and retention. Both are highly effective, and both are test-learn and improve-driven.

However, GH is more appropriate to B2C, since you have data and people volume (with no human touch like CSM or sales as in B2B). PLG is more tailored to B2B - you need to qualify leads with how they’re engaging with the product and deliver experience to ease the sales person’s job. Another way to look at it, is that PLG is a Go-To-Market (GTM) strategy that embraces product as the driver of acquisition and retention, whereas GH is the state of driven rapid test-learn approach to growth (some kind of a mindset/methodology on how to tackle a problem). Still, they’re very much connected and rely on the same thing - value.

How can people get buy-in from other teams, about the growth process?

• Getting teams to agree on some fundamentals is a great starting point. Figure out the value to the end-user, how people experience your product and grow to love it, and get everyone across the organization to buy-in to it.
• Then, we can start laddering up from that and look for a metric or a method/framework that everyone cross-functionally can agree on, to accelerate that value. 

What do you think is the challenge or problem that people have?

• Most companies fail to realize that their embedded structure needs to change: each team (sales, CS, product) lives in a silo, where they have goals and metrics, and those silo metrics may not actually be pointing everyone in the same direction. When we talk about North-Star-Metric (NSM), it’s about getting everyone to pull towards one common goal that everybody can agree on. And when you base that NSM on how customers experience value, it’s a lot easier to get that agreement.
• It is also the habits that companies have of how they’ve executed for a really long time, in their entire career and not just current company (“this is how we’ve always done things”). So, having a common understanding on how we grow today, and then evaluate if it is perfect or is there a potential room for improvements - nurture a growth mindset, and then introducing the process.

Most companies pull for the past (metrics they've set), but they need to push for the future - small things that could help move in that direction.

What are some of the success drivers of today’s fastest-growing B2B companies?

• Identify target audiences - who were and who weren’t our customers, who we can deliver value to.
• Drive growth and adoption throughout the organization, put value first.
• Nailing Product-Market-Fit (PMF) - if you don’t, the sales team might be able to sell something to someone who doesn’t need it, but they probably would not be able to sell them repeatedly (renewals or add-ons). Focus on the must-have experience and how is that value delivered
• Data and metrics, and their quality are important for success - both qualitative and quantitative. Have a very good conceptual understanding of the path that someone takes, to converting and getting the value, and how it is spread across the organization. When you understand the system and the things that work well, you can double-down on them and make them even better, and think of where the real opportunities are. Also, think of the things that don’t work well, and how can we fix those.
• The growth mindset drives the test-learn process. Once you have the data and metrics (both qualitative and quantitative view of things), and you start to look at where are the levers that we can push and pull - putting that into a test-learn process is really important.
• Drive the cross-functional alignment. In B2B there are more functional roles (support, CS, sales, marketing, product, etc.). Most of them didn’t have a NSM, and without it - people are trying to grow, and it is easy to focus on your siloed metric, which creates a lot of friction (conversion decreased due to crappy leads, etc.) that leads to finger pointing, instead of thinking about the value and growing it, which ultimately helps to drive alignment better (hard to drive growth when not all are on the same page).

How can you pick the right North-Star or value metric? 

• Define first what is the purpose of our product, what is the mission of our business, and how can we quantify the footprint over time of value that we’re delivering - something more like engagement of the people who truly use our products. That captures all on the quantitative side.
• On the qualitative side, the PMF question can be really useful cause it puts you in front of the customer, hearing what they’re saying, how they’re experiencing the product or service we provide.

Use Sean's famous question - if our product was to go away tomorrow, how disappointed would you be?

People who say “very disappointed” are those who are having the “must-have experience”. Why they would be very disappointed without the product, what is the primary benefit that they get, and what is the experience they need to have with the product, to experience that benefit. How do I quantify the frequency in which they are having that experience - if they experience it once, then we’re not doing a good job, because we want them to come back on a regular basis and experience that benefit, cause this way we are more likely to retain them long term --> and that is the most important thing for your ability to grow sustainably over time. And long-term customer retention is directly a function of “am I delivering on going value to that customer”.

Questions from the audience:

What do you recommend in terms of minimum monthly budget for a successful growth hacking or product-led or growth process initiative (people, money, etc.)?

[Sean] Sometimes it doesn’t require a budget at all, if you have organic growth that’s happening. Understand where the growth engine is breaking down, and come up with ideas how to fix that. Focus on the conversion funnel, because improving it is an amplifier for every $ that you are spending and for your organic sources of new customers. My goal is to figure out what is the biggest budget I can have within an acceptable payback window. (Dropbox didn't spend money on paid customer acquisition, had free product that cost a lot of money, but WoM helped get ROI).

Is there a way to start PLG strategy without a freemium or trial product? Change process and break silos seems to be part of the journey to be a product-led organization

[Wes] No. Ideally you have to have something free so that people can easily get their feet wet and figure out how to use it, but look at the customer onboarding process - use the first CSM call to guide the users through the product and think how you can automate it or make it less longer, and that’s a quick win! It will prove results and then you can move to a free trial or free model. You can start small and work your way up!

What are some mistakes you’ve seen with freemium that ended up putting companies out of business?

[Ethan] There are a lot of challenges with freemium models, but freemium is not free from the perspective of the business. When people think of freemium, they don’t always think about the full scope of what would be involved, when running that freemium product. The number one killer is if you give so much away for free, then there’s no reason for people to upgrade to a paid plan and you have no revenue to drive success.

[Sean] It’s an art to be successful with freemium - it is about building an economic model that has to work. So, as Ethan said, if you make the free version so valuable, with no differentiation in the premium version - then you have no revenue…On the other hand, if I’m going to make the premium version really good, and the freemium really bad - then why have the free version...

So, for freemium to really work well, you need a really good free product that is so good that people talk about and want to share with other people, so the referral loop is strong. And then have a premium product that is incrementally good enough so that people want to upgrade to it (not necessarily everyone, but enough people to cover the cost to acquire them).