Product-Led Growth (PLG) : A Primer for PMs

Building Digital Products that sell themselves

Introduction: What is PLG all about?

Product-Led growth (PLG) is generally defined as a business growth model that relies on using your product as the main vehicle to acquire, activate, and retain customers. This is a shift from an era which had been dominated by Sales-led models that were human-dependent and costly to scale.

For me personally, PLG is as much a mindset shift as it is a growth model shift. With the customers having a plethora of options at their disposal, it is imperative for the businesses today to deliver value to their customers in the least possible time to win their trust and loyalty. This is where the PLG model provides a major advantage.

Let’s dive deeper into how PLG differs from the traditional growth models and how we can implement it for our own organisations and products.

Traditional Growth Models

Traditionally, organisations have relied heavily on their sales & marketing teams to ‘sell’ the products and its capabilities to the customers. Sales teams had the onus to convince the customers about the value and usability of the products and to give demos to prove their point. Marketing teams created larger than life campaigns to communicate the potential value that their products would bring to the customers.

Though many of these practices are still relevant to gain customer attention, these growth models do not scale effectively in the long run. With the incremental cost getting associated with acquiring additional customers, these models become costly to scale and limit the velocity of growth due to high human dependency.

Furthermore, with the potential customers drowning in a sea of apps vying to grab their attention, willingness to pay for the products without having a taste of it has gone down drastically. This absolutely makes sense - we all wish to upfront experience the value from the things we buy instead of just reading about it or watching a sales demo video. ‘Try before you Buy’ has become the default expectation in this new era of customer centricity.

Product-Led Growth

The Product-Led Growth model is based on one simple idea:?

'Customers will adopt your product and stay loyal if they can upfront derive value from?it.'

This simple idea which looks obvious prima facie, needs an overhaul of the traditional organisational mindset on how to sell products to the customers. Once this mantra is internalised by the product teams and the organisation at large, you will find yourself looking for ways to get that value realised to the customers at the earliest possible. As a Product Manager, you will look out for ways to give the product in your prospects' hands, make it frictionless for them to get the desired job done, and make them realise that your product provides ample value to their life and work. This is all it is to understand the core of PLG!

Now that we understand the heart of the PLG ideology and how it is different from other traditional growth models, let’s see how it works in real life.

The AHA moment and TTV

The AHA moment is that pivotal point during the user journey, when the users realise the real value of your product or the potential of the product to solve their problem.

Hitting this AHA moment leads to user activation, better engagement and long term adoption. The Product teams need to identify the point which triggers this moment of value for the users and optimise the flow to make users reach this point at the earliest and with least possible friction in their journey. To achieve this, talk to your active users to understand what made them gain trust for the product during trial, analyse the product metrics to identify the point of user loyalty (eg. Repeat usage patterns from the users after they crossed a certain point in their journey), and make the users reach this identified moment of activation in the journey without hitting any brick wall.?

Once the users see value in using your product on their own, it will not only activate them and make them loyal to your product, this satisfactory experience will also lead to word-of-mouth growth and creation of viral loops for your product through referrals, thus lowering the marketing spend and customer acquisition cost for the company.

A related metric in PLG is the Time To Value (TTV). It is defined as the time taken by the users to reach their moment of activation or the first AHA moment in your product. The lesser the TTV for your product, lower the chances of the users dropping out during their journey. To reduce the Time To Value for your product, focus on cutting or delaying any unnecessary steps during the user onboarding and helping the users through in-app messaging and cues to reach their moment of value realisation faster.

PLG models

Companies following the PLG approach use different models to help their customers try their product and realise value on their own. Once the customers understand the benefit of the product, they are happy and willing to become paid customers to continue extracting the value from the product offering. Some of the PLG models include:

• Freemium Model: In this approach, companies provide a basic version of their product for free to users. This helps the users understand the value proposition of the product without any upfront cost. Additional functionalities are available in the paid version, which can then be upsold to the users who derive value from the basic version.
• Free trial Model: In this model, users generally have the luxury to use a product and all its functionalities for a limited period of time. Access to the end-to-end functionalities helps the users better understand the value they can derive if they buy that product. This model comes with a time window for free access and the users who find the product useful become paid customers to continue using it.

Attaining the AHA moment -> Paywall for continued usage -> User Conversion

• Cross selling: In this strategy, companies which have multiple product offerings, cross sell their relevant products to the user base of a different product. It is also possible for companies to keep some of their products free to use and cross sell their paid products to the customer base of the free product. This helps them leverage the deep trust of the already established user base to convert them as paid users of the other relevant product(s) with relative ease.

Implementing PLG in your organisation?

It is important to understand that Product-Led Growth does not mean Product Manager Led Growth or Product Team Led Growth. PLG is a model which needs effort and buy in from every department of your organisation. There isn’t one fine day when your organisation becomes Product-Led. It is a continuous journey which first starts from pivoting to a product-led mindset and then identifying the steps you can start with. It is very important to develop a shared vision and get buy-in from across different departments starting from the Leadership to other functions such as Sales & Marketing, Customer Success, Account & Category Mgmt. and Technology functions.

For eg, Sales teams can focus their efforts more on the Product Qualified Leads (PQLs), which means monitoring the product usage and adoption metrics of the users and reaching out to the ones who are deriving value from the free/freemium product to convert them into premium or paid customers. PQLs are much easier to convert than other prospects, because your sales team does not have to sell the value proposition of your product to these users and rather take a consultative approach to educate them on the benefits of upgrading to the premium version. Similarly, the Customer Success teams while continuing to understand customer issues and raising tickets, would also focus on identifying the friction points that customers are facing before reaching their AHA moments and provide this feedback to the Product teams to improve the customer journey.

To Conclude

The world of Product management is continuously evolving. A number of new approaches and mental models continue to evolve as we experiment with newer ways to identify relevant customer problems and solve them through our digital solutions. Product-Led Growth is one such powerful approach which puts the product experience at the centre of customer acquisition, adoption and retention. It not only helps build trust in the customers’ mind for your product, but it also helps validate your solution much faster through the usage and adoption patterns once the product is in the hands of the customers. By leveraging the customer analytics to continuously iterate & improve your product and by creating a seamless product experience, you can unleash the power of PLG to scale your product adoption, user engagement and company revenue.