How Does Being Product Led Influence Your Product Development Process?

My first attempt at building a startup was in 2018. I and a couple of friends originally intended to help entrepreneurs in our local community display their products on an eCommerce portal to boost sales for their businesses. We eventually pivoted to helping people shopping for clothes online find clothes that actually fit them as against having to return clothes after purchasing over the internet (The idea was to use AR (Augmented Reality) technology to size clothes uploaded to the platform, while allowing users who register to size themselves with the same AR technology from a smartphone application and show users clothes that would automatically match them based on their “Fit Preferences”).

The reasoning was also clear; fashion eCommerce was (and still is) the largest single eCommerce category, and allowing people “try before they buy” is one of the core propositions of in-store clothing purchases that hadn’t scaled to the internet.

Needless to say, we never fully launched (story for another day), however, years later, a company called Fit Analytics which did exactly what we intended to do got acquired by SnapChat for US$124 million. Excluding the fact that it reinforces the notion that plans are nothing, and execution is everything, I still sometimes think to myself what color my Lamborghini would have been if my 20% ownership had gotten acquired for the same amount. But I digress.

This is the section where I regurgitate what you’ve probably read in articles and books, so please bear with me ;)

What is Product Led Growth

Product-led growth is basically defined as a GTM strategy that utilizes your product as the core acquisition, retention, and monetization tool for your product. In simpler terms, product-led growth is basically allowing your users to "try before they buy" to experience your product, the value it brings and eventually make a buying decision based on that premise. At the core of product-led growth is creating a product that users can understand simply, effectively navigate around, and extract value from without having to even talk to a person.

Some great examples of product-led growth companies are Slack, Zoom, Calendly, and a host of other B2C products like Youtube Music (which I am personally a heavy user of), Netflix, etc.

Why Product-Led Growth

The opposite of product-led growth is usually sales-led growth. Sales-led growth involves salespeople engaging in outbound calls and engagements with prospects to close deals and bring in revenue. Sales-led growth usually involves multiple meetings with key decision makers (B2B), product demos along with back and forth negotiations before contracts are signed and customers are onboarded.

To be clear, certain deals can only happen from a Sales Led perspective; selling to large enterprise buyers, government institutions, or complex products that require a lot of hand-holding. In these cases, product-led growth may not always be the way to go based on these unique situations. It is therefore important for Product Led Growth and Sales Led Growth to co-exist than to be mutually exclusive of each other.

Some Benefits of being Product Led include:

Lower Customer Acquisition Costs: Product-led growth leverages the quality of your product to close deals and as such less emphasis is placed on sales teams talking to prospects that may or may not close. While there are sales teams in the product-led growth methodology, in most cases, they actually begin to act when a customer is really at the tipping point of becoming a paying user and not before.

Wider Top of Funnel: At the core of product-led growth is offering a freemium or free trial to your users to actually try out your product and extract value from it before committing to a payment. The advantage of this is a lot more users who may not be ready to pay right now but are nonetheless interested in your product can come on board to use it. This tends to widen the top of funnel for your marketing strategy.

Quicker Scale: If you run a sales-led approach, you most definitely have to open offices and/or hire salespeople if you want to expand globally to new regions. With a product-led approach, this may not always be the case; your major requirement would be to rejig your onboarding to cater to the new geography (depending on how regulated the new market you’re entering is).

Now to the Practical Part

Enough theories; how does product-led marketing actually manifest itself in a real product and what are the likely levers you need to tweak when developing a Product Led GTM approach?

In a previous article, I talked about a fictional product called Tomer. Tomer is a B2B SaaS product targeted at SMEs that allows them digitize their business payment processes. Tomer helps SMEs with book-keeping, omnichannel collections (offline and online acquiring), invoice generation, tax computation, inventory management, disbursements (to employees and vendors), and credit provisioning (Ideally Tomer achieves this by leveraging embedded finance APIs from companies like Stripe i.e Stripe Connect, Stripe Payments, Stripe Treasury, etc).

Tomer leverages a modular business model that provides services like book-keeping, invoice generation, tax computation, and inventory management on its core SaaS bundle (monthly/annual payments), while other services like omnichannel collections (offline and online acquiring), disbursements (to employees and vendors), and credit provisioning are charged on a PAYG basis (largely because these products are made available by integrations with third parties i.e Stripe, Adyen etc. and Tomer charges a markup on those fees).

So, what does being product Led mean for a business like Tomer? It involves optimizing the business in four key ways.

1.??????Onboarding: At the heart of being product led is making it exceptionally easy for customers to come on board your platform and begin to transact as quickly as possible. To do this, you want to remove as much friction as possible when it comes to making that happen. Friction is bad. According to research from Gitnux, friction in product onboarding is responsible for 40-60% of customer drop-offs in the onboarding process. We don’t want that to happen.

Tomer’s approach to onboarding is very straightforward; remove as much friction as possible and ask for only what is necessary. Since Tomer is targeted at SMEs, Tomer has two core expressions; a web portal and a mobile application (hosted on either the Playstore or IOS store).

Certain users may prefer to use the Tomer web portal to manage their business by giving multiple staff within their organization access to the web portal to either generate invoices, manage inventory, and/or compute taxes.

If you look at the core architecture of Tomer’s product features, you will realize it cuts across three main parts of an SMEs org chart –

o??Finance: Bookkeeping, invoice generation, tax computation, disbursements, and credit provisioning.

o??Operations: Inventory management

o??Sales (depending on how the org is structured): Collections

Therefore, having a web portal where multiple users can log in and use may be of value to a business of that scale using Tomer.

There are two core reasons for a mobile application:

·????????One is flexibility; the founder would like to be able to monitor their business in real-time from a mobile application regardless of where they are. There may also be a need for approvals for certain transactions that occur via Tomer (depending on how API partners for disbursements structure their systems).

If someone in finance processes a disbursement to a flour supplier for instance (assuming this business makes bread), having the CEO approve those transactions before they eventually get to the supplier would be great.

·????????Two would be for one-man SMEs who will probably never interact with the web portal and would want to conduct all their business on the go within a mobile application.

How will Onboarding work?

When users visit the Tomer website and decide to sign up, they are either prompted to download the app or sign-up directly on the web portal.

To remove friction, users are given only six fields to fill in: Name; Business Name; email address; confirm email address; password; confirm password.

The minute they click on sign up, they are immediately logged into the platform (if both email addresses and passwords match). The reason we ask to confirm the email address is for two core reasons:

·????????We want to confirm they actually own that email address, so they don't jump into the platform and realize the email confirmation was sent to the wrong email address because of a typo error.

·????????As stated earlier, our core objective is to get them into the product as quickly as possible so telling them to leave the signup page at onboarding to go to their email to either click a link that directs them to a login page to input credentials again feels counterintuitive.

The minute the user gets onto the platform, there is a bar at the top of the screen that tells them to “Input the Code” sent to their email address to enable them to unlock full functionality of the platform. At this point a user is already within the platform, they can choose to go to their email inbox, get the code in their inbox, click on the link in the bar, and paste the code there. The minute that code is consummated, the bar disappears, and the user can access all services excluding those gated behind a KYC requirement.

The onboarding approach for Tomer is to get people onto the platform with as little information as possible and collect information on a graduated basis as users begin to demand access to more functionality. So, for instance, considering Tomer is a somewhat financial product (Tax Computation, disbursements, credits, and collections), users will be required to do KYC at different points of their customer journey. There is however no need to gate the product behind arduous onboarding requirements when the customer doesn’t even know if your product will solve their problem or not.

The Tomer interface is so well designed that customers can intuitively know where each service is located (the user is also greeted with a quick product tour that shows them where the most important sections in the product are). Also, the word “omnichannel" only exists in pitch decks and presentation documents, what users see on the platform is "Collect Payments". There is also a conspicuous help tab that links to multiple product help videos that can help users navigate the product in real time. The same experience is replicated on both app and web platforms.

The core goal is to make the onboarding as simple, self-explanatory, and quick as possible. Get them in first; ask questions later.

2.??????Value Gears: The next key proponent of being product led is understanding your value gears. By value gears, I mean what services are key to your users. At the heart of being product led is choosing to offer either a freemium or a free-trial product to allow your users to test your product before they commit to paying for it.?A freemium service is perpetually free with limited functionality hinged on an upgrade by the user. A free-trial service is free for a period.

Choosing to go freemium or free-trial are very tricky conversations to have. With freemium, you want to make sure you’re giving your users enough value to make them want more, but not too much that they’re comfortable where they are and never upgrade.

With a free trial, you want to make sure your users have enough time to see the value in your product and commit to paying, but not too little time that they can’t really do anything meaningful with your solution that pushes them to pay.

Value gears in this context are those key functions you only open to your users if they move to a paid plan. You also want to be careful not to have too many freemium users burning through your cloud resources with no hope of converting to paid users.

For Tomer, there are two main ways to look at this;

·????????Tomer adopts a freemium model; because Tomer is a somewhat modular product that allows users utilize certain aspects of the business while leaving others out (i.e you can use only payment products and leave out any SaaS solutions (Book-keeping etc), freemium will ideally be the way to go. Some users may only want to use Tomer to receive payments, or credit via our payment partners. The business model in that regard is to keep a markup on transactions processed. So, although the user is freemium, they are still generating revenue for the business (Tomer).

·????????User groups and tendencies: Assuming the majority of Tomer’s users are SMEs that have multiple employees, your value gear may be to give access to all services within a freemium model, but mandate users to upgrade to paid if they want to extend this to other employees to manage from their end (i.e finance, operations, etc.).

If the majority of Tomer’s users are one-man businesses, then limiting the number of invoices, inventory items, and book-keeping records that can be done on the freemium model per month may be the best way to go about it. Ideally identifying value gears is a process that may involve some research into your target users to identify what is meaningful to them and what is not.

3.??????Product Quality: The most important aspect of being product led is product quality. Being product-led will in most cases restructure the focus of your org teams to being product oriented. If the product is the main avenue for acquiring, retaining, and monetizing users, then there is no doubt a direct correlation between the quality of your product and the existence of your business. Product-led businesses tend to have higher quality products because it’s almost instinctive that if your product isn’t working well, then you probably won’t be in business for too long.

For Tomer, this puts an exceptional amount of pressure on teams involved to not only make sure the UI is intuitive enough but provide a truckload of information (in both written and video format) that details key aspects of the product and how to use it regardless of how simple that feature may be. This cascades from how to onboard at different phases (initial signup; merchant KYC; payment and credit provisioning onboarding, multiple user onboarding), to how they find key functionalities on both the web and app platforms to even how they set up payment processing on their websites/mobile applications and request for terminals from local partners.

This instinctively puts a demand on Tomer to work with partners with great solutions that keep to strict SLAs that are readily enforceable when due.

4.??????Data Centricity: The final optimization layer for a business like Tomer is data centricity. Companies that are product led live and breathe on data. Data enables these firms to properly monitor feature adoption within their solutions and also optimize to increase usage within the product.

For product-led businesses, this is where the sales teams come in. By being data-centric, sales teams can monitor customer usage in real-time and observe when customers are getting closer to their value gears and start prompting them to move to a paid version. Third-party solutions like Userpilot can also be a great way to monitor usage across various value gears and drive sales awareness to begin to engage.

In essence, the sales teams use real usage data from actual users to qualify if a lead is ripe for harvesting and should be engaged.

For Tomer, when data shows a user continually has issues with invoicing limits on the app (considering they are on a freemium plan that limits them to a certain amount of invoices per month), an in-app notification can push that user to upgrade to a paid plan (or if the user seems hesitant, move them to a free-trial plan with a credit card commitment). The idea Is to be able to effectively identify those triggers and make the most of them in real-time, and being data-driven helps.

If Tomer for instance is seeing low adoption of a certain feature, the first step could be to run an in-app survey to find out why this is the case and if the problem is poor UI or no value proposition to the user, those insights could inform product development initiatives to help position the product on the right trajectory going forward.

Conclusion

While being product led is easier said than done and requires a lot of research and optimization to find out what models actually work for your business and which could be detrimental, in a world of rising cost of marketing, and an increased customer propensity to self-educate, being product led may just be the way to go to avoid being disrupted and to guarantee you provide what is a high-quality product to your users.

Inspired By The Holy Spirit