PLG only works when...

In today's tech economy, Product Led Growth (PLG) remains a pivotal strategy for enterprise software companies, driving organic usage, accelerating adoption, and significantly lowering Customer Acquisition Costs (CAC). This, in turn, leads to higher margins and increasingly efficient sales motions, where sales teams progressively move into warmer accounts and upmarket. However, the recent cooling off in the tech sector has brought a new level of sobriety to expectations around PLG. It's becoming evident that not every software product company will build the naturally accelerating PLG flywheel leading to the kind of enterprise sales momentum we all desire.

The effectiveness of PLG converting into enterprise revenue hinges on how well the free/low-cost version of your product's technical business value aligns with the needs of enterprise decision-makers that your solution provides. Success stories like Slack and Datadog demonstrate how well this can work when the alignment is right. When you sign up for a free Slack account trial, the person who can decide that streamlined communication in front of them is worth paying for will be part of that trial. When a DevOps engineer or SRE signs up for Datadog to diagnose issues, their VP, Engineering and Product gets to see dashboards showing downtime reduced. However, the challenges become prominent when there's a disconnect between the users and use-cases of your free or low-cost product with a usage growth trajectory, and the value prop they get out of it, vs. areas of value associated with the types of business problems that are on top of mind / and active in dialogue for business executives. For example, developers may adopt some tool that helps introduce some convenience into their CI/CD testing workflows, which quickly gains traction across DevOps teams through targeted product-led growth strategies. However, the Engineering leadership, may not consider that the same vendor has also developed a more comprehensive enterprise version of their offering that solves production use cases. This solution supports critical customer-facing functionalities, such as product integration and iteration within customer environments. The canyon sized challenge arises because the dev tool's narrower value proposition to developers doesn't automatically lead to an appreciation of the larger enterprise value of their enterprise offering, by those who would care, let alone be in power to make a decision. One value proposition is worth $100 - $1k per month, the other $10k-$100k per month, or more.

This type of misalignment between where PLG is effective and where the awareness of your enterprise offering needs to bloom, obviously impedes the scaling of enterprise sales, a reality that's becoming more pronounced in the current investment climate. However, once this nuance is understood there's so much that can be done to both proactively leverage the very real benefits of effective PLG, while ensuring your enterprise sales motions are actually leveraging them in an effective way. So PLG is indeed a powerful, high ROI growth school of thought; it's just also true that its application needs to be more nuanced and specifically tailored for enterprise-level engagements.

In my view, continuing to invest in building a PLG flywheel whenever it has a meaningful impact on building credibility and awareness of your brand within the target customer organization possible is crucial. And for one basic reason: In 2024, with so many people are building software, in order to stand out, your product needs to be good enough for people to want to share. To the extent there remains a gap with the buyer, classic demand generation activities toward the actual buyer, with sales motions focused on the problems your offering solves, need to be executed.

1. Crystallizing the Enterprise Offering Narrative: Developing a compelling narrative that leverages the credibility and awareness built among developers to appeal to enterprise buyers.

2. Content, Content, Content, Public Demos: Using content marketing and public demonstrations to effectively communicate the value of the enterprise offering.

3. Identifying a Bridge Product Offering: Creating a product that acts as a natural extension from the free or low-cost version to the enterprise solution, closely aligning with the enterprise’s business value proposition.

One reflexive motion I often see here is to add outbound marketing and sales to fill in the gaps for product-led growth. Outbound, especially ABM (Account Based Marketing) where you strategically go after targeted accounts with multiple touch-points, is a powerful tool. However, other high dividend Demand Generation activities like producing high value content on a regular basis, webinars, speaking at trade-shows and conferences, publishing credible papers, these pay massive dividends and are often overlooked.

I'd love to hear more of your ideas.

Some questions:

• Are there specific challenges you've faced in scaling enterprise sales through PLG, and how have you addressed them?
• What innovative approaches have you seen or implemented that effectively bridge the gap between free product adoption and enterprise-level engagement?
• To what extent are classic Demand Gen activities still viable or no longer viable?

I'd be interested in hearing insights and experiences from others.