Product-Led Growth Strategy for Product Managers

Product-led growth is giving Product Managers a seat at the table. As more and more companies recognize that customer centricity and quality products are essential to long-term success, Product now has a a bigger role in driving company decisions and direction.

What Does Product-Led Growth Mean?

In a nutshell, product-led growth is a strategy which focuses on the product itself being the primary driver of growth for a company, rather than investing in expensive and elaborate marketing campaigns. When you want to attract new users, you do it by catering for them within your product, not sending out a flashy newsletter convincing them to buy.

It’s popular among Product people, because it’s?a customer-centric, sustainable way of sharing your product?and attracting new users.

As with all new and fashionable concepts, there are many ways to describe it. One of the best explanations comes from?The Product-Led Growth Collective:

“Product-led growth (PLG) is a business methodology in which user acquisition, expansion, conversion, and retention are all driven primarily by the product itself. It creates company-wide alignment across teams—from engineering to sales and marketing—around the product as the largest source of sustainable, scalable business growth.”

The Product-Led Growth Collective

Product-led growth hit the mainstream in just the past couple years, but the concept isn't new. Product as a driving force for customer acquisition has been common practice in SaaS companies for some time.

For example, Zoom, which was created in 2011, has managed to grow to 300 million users (200 million in 2020…and we all know why!) despite entering the market full of competitor products from enormous and well-funded companies like Google and Microsoft.?The secret? A product-led growth strategy.

So if this was all happening back in 2011, why is product-led suddenly popular?

Thanks to rising competition, and more money than ever being plugged into SaaS products, customer acquisition is an incredibly expensive business to be in. According to the book How to Build a Product That Sells Itself,?it’s getting easier to build a business, but harder to grow one.

Software also just isn’t as special as it used to be. Costs are rising and willingness to pay for products is going down. Unless you’ve found something truly unique to build, customers are always going to find a cheaper or even free alternative.

You have to find a way to leverage your product, make people fall in love with it for themselves, and then work on retaining them as users.

The Difference: Sales-Led vs Marketing-Led vs Product-Led Growth

Before product-led, there was sales-led and marketing-led growth. So what’s the difference between these strategies?

Sales-Led Growth:

With a fairly self-explanatory name, sales-led growth puts your sales team at the forefront of your revenue-driving efforts. Sales-led has driven incredible growth in the early stages of some of the world’s biggest companies, such as Microsoft.

With this strategy, all of the leads gained across a company’s efforts are funneled into the sales team, who are relied upon to close the deals and make the final sales.

Marketing-Led Growth:

Similar in style to sales-led, marketing-led growth relies on a company’s marketing efforts to drive revenue. This is usually done through content marketing, with a company creating a learning hub for its users consisting of eBooks, white papers, and webinars. This content creates a growth loop that turns an audience into a loyal community, which generates sales.

Why Product-Led Growth is Different:

The main similarity between these strategies is that they all still rely on each other. With a sales-led strategy, you still need marketing and a product to sell. And a marketing-led strategy still relies heavily on the existence of a sales team. Even so, product-led growth (and I'm very biased here!) is the more sustainable choice.

• It’s cheaper.?Sure, you could pour tons of money into Product Marketing and create endless amounts of free content, spend your valuable time hosting webinars, and agonize over whether your LinkedIn bots sound too…robotic.?Or, you could let your product do the talking. You’ll always need marketing, but a product-led strategy helps you scale it back.
• It reaches more people.?A freemium model effectively speeds the customer along their journey by getting them into your product sooner. The quicker you get them using it, the less time you have to spend nurturing them until they finally hit that ‘download’ button.
• It gets you fast feedback on your MVP.?If you’ve launched your first MVP, the most important thing for you to do is to get it into people’s hands. That’s exactly what this strategy does, allowing you to gather feedback as quickly as possible.
• It prioritizes the product:?Product-led puts your product exactly where it should be: at the forefront of your business. It drives the majority of resources towards making it as great as it can be.

You might also be interested in:?Yes, Product Managers Should be Growth Hackers, and Here’s Why

Product-Led Growth Real-World Examples

Slack: B2B Product-Led Growth

Slack is a great example of a software company which sells its product…with?its product. Product-led growth is increasingly popular among SaaS companies, and Slack is no exception.

According to Statista, Slack has 10 million daily active users in 2022. Of these, 3 million are paying users.

Chances are, you’re familiar with Slack. Try to think about?how?you first came into contact with Slack. It might be that you joined a new company who uses it for central communication, or perhaps you joined an online networking community. There are also many online courses, particularly in tech, which use Slack to bring their remote student base together. Many groups working on side projects together use Slack to organize themselves and community as they likely don’t have a shared office space.

Now it’s become the de-facto choice for so many companies because everyone already knows how to use it. It’s even a verb,?“I’ll Slack you the details.”?which is perhaps the greatest marker for mainstream success!

How did Slack achieve this status, and how do they maintain it? Have you ever seen a viral ad campaign or read their hottest whitepaper on LinkedIn? No, you got to Slack through their existing users.

Here’s how they do it:

• Every department focuses on the product.?Marketing wants to make it a lead magnet, the sales team use it to qualify prospects, and the engineering team increase retention/conversion with a quick time-to-value.
• Try-before-you-buy.?The freemium model puts the product directly into the hands of anyone who wants it, creating an enormous user base and FOMO for those who don’t have it.

You might also be interested in:?How to Get a Product Management Job at Slack

Pinterest: B2C Product-Led Growth

Advocates for product-led growth often point to Pinterest as a shining example of how it’s done, and the incredible results you can achieve. As of 2022, they have roughly 433 million monthly active users.

In an interview with?UserVoice, Pinterest’s Engineering Manager talked about how they managed to grow from 1 million monthly users to 100 million monthly users in just 4 years, back in 2016. He went into some detail on how they managed their growth strategy. It boils down to;

1. Putting user experience over metrics.?Shipping features which drop metrics but overall improve the product for the user.
2. Growth teams are full stack.?Growth teams must be capable of implementing any features they want for themselves.
3. Effective leadership.?Setting growth goals the entire company can get behind.
4. Cross-collaboration.?When Growth is product-driven, PMs, designers, and developers work together to add features.

What does all of this look like in practice? Back in the earlier days of Pinterest, it was decided by leadership that they needed more men on the site. Pinterest was, and is, predominantly used for female fashion and crafts favored by women. Marketing-led growth would probably make little change to their user acquisition; ads targeted at men wouldn't improve their experience on the platform.

However, with their product-led growth strategy, Pinterest personalized the content they served up based on the user’s gender. Making these changes within the product made males one of the fastest growing demographics in their user base.

Learn More and Start Growing

So your interest is peaked, and you want to dive deep into product-led growth strategy. As a Product Manager there are a few action steps you can take:

1. Make sure the perceived value and the experienced value of your products are aligned.?If you promise that a free trial of your software will give users X and it actually gives them Y, your churn rates will be sky high.
2. Rethink the way you think about metrics.?Taking after Pinterest, prioritize features which will have the best impact for your user, not the ones that will improve certain marketing metrics.?Craft your KPIs and OKRs with this in mind.
3. Rethink what ‘customer’ means to you.?Freemium users should be handled with the same care as paying users, as they now help to build the demand that drives your growth. You need to make sure this is reflected in their journey.
4. Make the sign up process as easy as possible.?No product should have a?difficult?user-onboarding experience, but yours should be your pride and joy. If getting people through the doors is your biggest driver of growth, that process needs to be a priority for your teams.
5. Make TTV (Time To Value) a priority.?This is especially important if your product is an app, which users only have to click and drag to uninstall and forget forever! You need customers to fall in love with your product?hard and fast. Work with your engineers to make this their focus.