What is Product-Led Growth? - UserActive

What is Product-Led Growth?

Product-Led Growth

A shift has been occurring in the software industry over the last few years. As technology advances and companies create better products, software buyers have more control and they demand well-designed, intuitive and easy-to-use software. In this article, we’re going to talk about this shift and how it has given rise to Product-Led Growth or PLG. So, what is Product-Led Growth?

What is Product-Led Growth?

It is a term created by OpenView, a VC firm that tends to invest in these types of companies. Here is their definition: 

Product-led growth (PLG) is an end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion and expansion. 

OpenView / Product-Led Growth

When talking about companies that use a PLG strategy, some good examples include Zoom, Slack and Dropbox. These companies opted for a PLG Go-To-Market strategy and were able to support fast growth by creating a pipeline of active users who eventually became paying customers.

Breaking Down the Shift

In 2021, the SaaS market is growing but it is maturing and becoming increasingly competitive. Some reasons the barriers to market entry are getting lower include:

  • Greater access to talent
  • Faster, increasingly efficient languages and frameworks developing software
  • The emergence of no-code apps

Therefore, it’s increasingly important to differentiate your product and deliver an exceptional experience to users.

Top-Down vs Bottom-Up

So what is the shift that this actually represents? Let’s take a look.

Top-Down Model

In the traditional model, software was sold with a Sales-Led approach. This is sometimes described as a Top-Down Model. In this model, you would have a sales executive selling to senior-level decision-makers. This would include long, detailed presentations, and hopefully would result in signing them up for a contract fit for their company. With this approach, the demand comes from the top and the software filters down to the employees who will use it, or the end-users.

Bottom-Up Model

With the Bottom-Up Model, which is more indicative of PLG, the end-users have more control. For instance, employees (end users) can use the software with a trial or freemium version and get a sense of whether or not the software works for them. Moving forward, the person or people at the top will make the buying decision considering the experience and preferences of those at the bottom.

Self-Serve Model

Finally, this brings us to the Self-Serve model. This is software designed in such a way that a user should be able to sign up and adopt the product without help. If they can be self-sufficient, it reduces the requirement for sales representatives and customer support. Instead, you have a greater requirement for roles such as product designers, product managers, marketers and customer success. Subsequently, around 75% of B2B buyers are now leaning towards self-service software (Product-Led Growth Collective). Users want to try and evaluate software in an easy, frictionless way and if they don’t experience value in the first seven days, they often churn.

How to Get Started

There are two big changes you will need to make if you want to use a PLG approach. First with your product and second with your organization.

To begin this process, your product requires change. The key steps are all about reducing friction and increasing access to the value within your product. 

Firstly, a good guiding principle is to consider what you can do to make the experience seamless. You want to solve the user’s problems, and that requires a good understanding of those problems and their journey. If we take a look at one of our earlier examples Zoom, for instance, we can see how they executed this idea. Zoom’s CEO Eric Yuan had his own frustrations with preexisting video conference software. This gave him a deeper insight into the pain points of potential clients. By understanding this, he could deliver an easy-to-use software that was fresh, simple and frictionless. Zoom’s users are self-sufficient and there is no need for training, guidance or excessive customer support.

Secondly, if you want to operate as a PLG company, you need to structure your team correctly. This involves breaking down the traditional silos between departments such as Sales, Marketing, Customer Success etc., and developing cross-functional teams. These teams need to have a customer and product-centric focus. It is key to create units that work together and continually iterate on product-centric improvements based predominantly on contextual and behavioural data and metrics.

Designers Take

So what is a product designer’s take on Product-Led Growth?

I studied product design at university and we were taught the traditional principles of user-centered design. Having also studied the Bauhaus movement and the minimalism of Dieter Rams, I find it exciting that these principles found their way into software.

Dieter Rams’ T3 transistor radio, alongside Apple’s first iPod

Now that Product-Led Growth has become popular in SaaS, it seems principles that I learned a long time ago have gradually become valued in tech, and drive the demand for great design.

Lastly, where I think PLG adds something new is the self-serve element. The onboarding features, checklists, walkthroughs and upgrade flows really add a wonderful layer of user experience on top of a great product.

Need a Hand?

Perhaps you want to start using a Product-Led Growth approach for your SaaS but you’re not sure where to start. If you’d like to know how to implement the most powerful strategies from product-led growth into your product, then grab your copy of our guide Product Growth Engine. I wrote this guide specifically to help you improve your product, get more users and grow. Also check out our related article, How to Retire Redundant Features if you’re considering making some changes to your software.

If you need help with UX, please reach out to us at UserActive.io. In the meantime, remember that feature activation is just one of those tactics you can use to improve your product, get more users and grow!

Citations 

“Product-Led Growth: What It Is and Why It’s Here to Stay.” OpenView, 14 July 2021, https://openviewpartners.com/product-led-growth/#.YYkRd2DMJPZ, November 6, 2021.

“What is Product-Led Growth?” productled.com, https://www.productled.org/foundations/what-is-product-led-growth#Chap2, November 6, 2021.

Peter Loving

Peter helps SaaS companies create meaningful products users love. He regularly speaks at conferences and shares UI/UX related content on the UserActive blog and YouTube channel.

If you’re launching a new product, have some improvements you’d like to make, or simply want to plan for your next phase of gropwth, we’d love to help.

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