Product-Led Growth: The Framework behind

Editor’s note: This article is an outcome of the lessons learned on “ The State of Product-Led Growth" .”Authored by Despina Exadaktylou founder Product-Led Growth Hub, World's #1 PLG Academy.

Product-Led Growth as a GTM Strategy

Product Led Growth is achieved when organizations leverage product usage, to drive acquisition, conversions, retention and expansion. Product-Led organizations deliver products that consider and answer customers’ evolving needs. Always by delivering stellar, customer-centric product experiences.

When a Product-Led GTM strategy is at play, the product is not a part of the customer experience. In a Product-Led GTM strategy, the product is the experience. An experience so strong and optimized that is driving conversions in a matter of minutes. While at the same time it is delivered on a frequent cadence to embrace retention and expansion levels. But this is only the tip of the iceberg. A PLG go-to-market strategy also aligns internal teams around product insights. In that way, internal silos are abandoned and an internal feedback loop is created across the spectrum of an entire organization.

THE SAAS LANDSCAPE IS CHANGING: Product-Led Experiences are Expected

1.IT consumerization is Emerging

The frictionless, seamless experiences B2C solutions provide are now expected in B2B too. Organizations have to re‐examine how they drive revenue and use the product as the main growth lever. Companies who adapt to those changes will emerge as winners. Those faithful to the old ways will cease to exist.

2. Customer Demands are Rising

The shift towards a product-led GTM model has raised customer expectations. It is not enough for a product to deliver its value proposition. Customers now expect to have a solution that will enable them to grow. Even more. They expect products to deliver a stellar experience at the same time.

3. Customer Experience is Reconsidered

• Self-Serve Experiences are Emerging
• Customer Feedback is Evaluated
• Product-Data Become the Main Growth Lever
• Customer-Centric Product Experiences are a Given

PRODUCT-LED GROWTH IS THRIVING: Product-Led Organizations Yield Better Results

1. Public PLG Companies: Post-IPO, PLG companies perform better than other companies. Including those organizations built for the Sales & Marketing-Led era.
2. POST-IPO Stock Performance: Product led growth has created more than $200B of market value. And the businesses adopting its practices still realize exponential growth.
3. Cumulative Market Cap for Public PLG Organizations: A Product-Led Growth approach, leads to better ROI for SaaS organizations. This is mostly achieved because it satisfies both buyers and end-users.

SOURCE: OPENVIEW

Paywalls are Abandoned

In a Product-Led GTM model, paywalls follow, rather than lead, and pricing scales as usage levels increase. Product-led organizations adopt a freemium or free trial model. They abandon barriers to entry and allow users to access the product immediately. This fact alone liberates customers. They don’t have to rely on human-assisted activations and long-term sales cycles to seal a deal.

Usage-Based Pricing: But which model is best for your business? Being Product-Led fanatics at heart we trully believe that whichever model you deliver it should align with end users usage levels.

According to Zuora’s subscription institute, companies with over 50% revenue from usage grew 24% year-over-year. That is 1.5x higher compared to companies with no usage-based pricing at all. While it is obvious that subscription companies should leverage usage-based pricing, they should also keep an eye on certain variables like product-market fit, economic conditions, and competition. Even beyond those variables, organizations need to establish a systemic onboarding process helping them increase usage levels.

Usage-based pricing will work only when it enables users to grow within a service. It is not enough for them to realize value in the beginning. They have to keep coming back for more. And this is only achieved when onboarding laser focus on their end goals and is in complete alignment with the pricing model.

Product-Led Growth Levers

1. Reduced Acquisition & Retention Costs: Products’ features are able to acquire, retain and expand accounts. At the same time, the sales cycle shortens and associated costs are being decreased.
2. Sustainable Engagement Levels: The delivery of product-driven experiences powered by customer feedback sustains engagement levels.
3. Data-Driven Onboarding Journeys: Onboarding is now evaluated throughout the customer journey. Its ongoing assessment enables it to become a sustainable system following users’ notions.
4. Organizational Cross Alignment: Internal organizations develop common product benchmarks & KPIs alongside business & marketing metrics.
5. Increased Customer Satisfaction: The delivery of customer-centric products increases customer satisfaction & advocacy levels.
6. Intuitive Product Features: Product management capitalizes on in-product behavior & delivers robust product features meeting customers’ needs.

HOW TO BECOME PRODUCT-LED

1. Embrace a Customer-Centric Mindset: Delivering products customers love is a rather challenging task. Inside your organization, internal teams are competing over another. By trying to prove which features are imperative to be delivered. When delivering a Product-Led growth strategy only product data can justify new developments. This the only way internal buy-in will be achieved both from stakeholders and end-users. A robust set of product analytics help internal organizations to achieve alignment in new product releases.
2. Capitalize on Customer Feedback: When delivering a customer centric approach, capturing customer feedback is not optional. It is paramount to organizations’ success and long term prosperity. Unlike traditional GTM strategies, in a Product-Led one customer feedback is derived both by customer facing teams and the product itself. Considering those estimations alongside business outcomes help organizations, come closer to customer needs and keep delivering their value proposition.
3. Product-Usage Segmentation Criteria: A successful Product-Led Growth strategy requires the establishment of PQL criteria. This is the only way to balance Sales’ involvement in the customer journey. Product-Led organizations’ acknowledge that. Those businesses rely on product data to segment users in-app. Something that allows them to establish Time-to-Value per user-role and discover growth opportunities. In case you’re wondering how to get there, the monitoring of usage patterns in regards to user-role, use case and proficiency levels is a good foundation to adopt when streamlining PQL criteria.
4. Adopt the Required Technology Stack: Unlike the toolsets emphasizing on account/user-level measurements, those capitalizing on Product-Led Growth also assess usage levels alongside customer feedback analysis. Those calculations help internal teams realize where upsell or cross-sell opportunities lie. In essence, these data constitute the foundation, towards new growth and advocacy.

ADOPT A PRODUCT-LED ONBOARDING? STRATEGY

Onboarding Funnel Current challenges

The SaaS industry is still in the early days of smooth in-product onboarding. Most organizations believe that their products are not able to explain their capabilities to new users. Things are even worse for those companies without a free offering. Almost 80% of them admit that the product onboarding experience is a leaky bucket.

1. Activation: Our Product-Led Growth research showed that sign-ups & free trial rates prevail as activation metrics with 66% preference. At the same time, feature adoption and user engagement is an activation criterion by a limited 13% from organizations delivering a high-touch onboarding strategy.
2. Retention: Being subject to Customer Success activations on a high-touch onboarding strategy retention is a KPI for a limited 8%. At the same time on a self-serve one it is important for 33% of participants. Overall, retention is an important indicator for a limited 21% across both strategies.
3. Expansion: While 30% of revenue growth should arise from expansion most SaaS are likely at 10%. Why does this happen? Emphasis on acquisition, low product stickiness and product developments that don’t meet customer needs.

Transform your Onboarding to a Data-Driven Force

1. Product-Led Onboarding? as a Concept: Product-Led GTM practices transform onboarding prevalence. As a process, it no longer includes invasive, out of context in-app interactions presented at large in front of users. Product data capitalization enables product engagements to supplement the systemic process humans deliver. Product Led onboarding (PLO), is a set of data-driven product engagement practices, that consider behavioral notions and users’ proficiency. Strategically, it avoids random feature introduction. Instead, it exploits historic data and considers prospects’ proficiency level when exploring a product for the first time. Contextual guidance constitutes its main pillar and enables product experience to double down on users’ workflow early on by following their progressive route to excellence.
2. Set the Required Product-Led Growth Metrics: The main product-led growth metric established so far is the Product-Qualified lead (PQL). PQLs are limited to the point where a paid conversion is made. Being able to capitalize on product data, onboarding is now able to be measured end to end. Even more, it is now able to develop its own Product-Led Growth metrics. This fact alone, transforms onboarding into a single source of truth when referring to products’ capabilities and product-led experiences’ assessment. Product-led onboarding has as a mission to deliver both initial and repetitive value. This is why it uses Product Onboarding Efficiency (POE) to calculate its activations’ effectiveness. POEs calculations rely on breadth, depth, efficiency, and frequency of use to supplement business KPIs. Product-Led organizations already use metrics like that to yield better results and assess product features ROI.

The Onboarding Funnel is now Product-Led

Product-Led Activation: Setting the right segmentation criteria is only the beginning. Product-Led activation should rely on data-driven, contextual guidance to deliver initial value early on and emphasize on end-users goals. To achieve that, internal teams need to invest in behavioral aspects and usage levels when delivering the onboarding strategy.

Product-Led Retention: Product-Led retention is the ongoing value delivered to end-users, directly from the product itself. To achieve that and increase adoption levels internal teams need to capitalize on three main pillars. Product-led growth metrics, use case variables and customer feedback.

Product-Led Expansion: Product-Led expansion is laser-focused on three important variables. How to excel key features development by capitalizing on the results of product-led-growth metrics. The improvement of broken experiences to sustain engagement levels and boost upsells. The delivery of a usage-based pricing model that resonates with the products’ value proposition.

Keen on learning more about Product-Led Growth best practices?

Claim your copy of the greatest research on Product-Led Growth with lessons learned from 40 Product-Led Growth Leaders

Research Scope:

To uncover the challenges and competing strengths Product-Led organizations employ, we embarked on a mission to define product experience in the SaaS landscape. To achieve this, we surveyed 40 SaaS organizations and interviewed 50 executives who own or lead Onboarding and GTM practices.

The goal of our effort is to map, through real-world examples, Product-Led techniques used and estimate how they affect critical aspects of the customer journey. We believe that our massive data sample and thorough analysis will enable SaaS organizations to align their internal teams and optimize product delivery. Our commitment is to help reshape the SaaS growth mindset via the lens of Product Led practices. The survey’s results directly guide those efforts, and this extensive report will highly reflect on them.

Exemplary Research Participants:

HubSpot, Typeform, Segment, Pendo, Gainsight, Intercom, Drift, Filestage, Appcues, Viral Loops, Chargebee, Vidyard, Lemlist, Supporthero, Salesflare, Close, GoSquared, Autopilot, TravelPerk, Yesware, Receptive.io, and so many others.