Product-Led Growth is a go-to-market strategy which uses your product as your customer acquisition, activation and retention tool. It puts your product at the center of your marketing, sales and customer success initiatives. If you’ve tried Slack, Miro, Dropbox, Calendly, Hello Sign, or a wealth of other super successful SaaS companies, they are using this strategy. They let you see their product in action.
Product led companies marry up their revenue and customer acquisition strategies.
What’s Special about Product Led Growth?
In contrast with sales-led approaches, the product-led approach pretty much flips the traditional sales model on its head. The key difference is the focus on value. Product-led companies make it their mission to help customers to experience value while using the product - and help them to get there quickly. Often, before they are asked to pay.
If you’re up to speed on the Saas onboarding Aha moments, and building memorable customer experiences, product led growth is at the heart of these initiatives. You demonstrate great value to the client through your product, at which point upgrading to a paid license becomes the obvious thing to do.
“Product Led Growth is a powerful framework, taking the best parts of product development and go to market expertise to build a customer-obsessed and fast-growing business. Putting your customer at the center of the experience helps you tap into their motivations and behaviors, building loyalty and driving revenue!” - Francesca Krihely, Director of Growth Marketing, MongoDB
The Importance of Great Product Design
If you haven’t seen Seth Godin’s talk on “How to get ideas to spread”, do yourself a favour and watch it. The essence of idea diffusion is answering this question: “is it remarkable?”, and that is where you need to start if you want people to talk about your product. What’s at the heart of being remarkable? Great product design. Figure out what people really want, and give it to them.
Doing this in action is surprisingly simple - but involves a couple of essential steps which so many companies overlook.
The first is customer research - you have to really understand why they want and need your product - and what, if any, design improvements are necessary to make it remarkable.
The second, is prototyping and testing of several ideas.
We run workshops for this and almost every time we do, there is a bit of fuss at the beginning “We don’t have time to attend the whole day, can we just show up for an hour?”, but unanimously, by the end, everyone feels they have received new insight and value into understanding the customer perception of the product, and by co-designing better solutions than they had prior to the workshops. In multiple workshops, the results have taken us in entirely unexpected directions, and time and again they lead to shortening the sales cycle, delivering value faster, improving the customer/client experience, removing barriers to entry, and even gaining alignment on messaging across teams.
Taking a product-led growth approach therefore leads to lower customer acquisition costs (CAC), a reduction in churn, and faster growth.
Why Is Product-Led Growth Growing in Popularity?
On first look, product-led growth can look like a simple free-trial or try-before-you-buy model. But on closer inspection, it’s a completely new approach to growing a SaaS business.
“Product-Led Growth means that every team in your business influences the product. Your marketing team will ask, “how can our product generate a demand flywheel.” Your sales team will ask, “how can we use the product to qualify our prospects for us?.” Your customer success team asks, “how can we create a product that helps customers become successful beyond our dreams?.” By having every team focused on the product, you create a culture that is built around enduring customer value.” - Allan Wille, Co-Founder & CEO, Klipfolio
Right now, SaaS companies are facing three mammoth shifts in market behaviour:
1. Marketing Costs are Up
Customer Acquisition Costs went up by 55% in the last 5 years according to Profitwell. During the same period, customer willingness to pay for features has decreased. For SaaS companies dealing with a high churn rate - this is a potentially lethal situation.
2. B2B and B2C Buyers now Prefer to Self-Educate
Three out of four B2B buyers would prefer to self-educate than learn about a product from a sales rep, according to Forrester. “Enterprise buyers also expect to try and evaluate software in an easy, frictionless way” Gainsight notes. Trying out a product through a free-trial or freemium model is less hassle and can help you decide quickly on a product. If your free trial is not designed to wow your user, and get them to see the value up front, you are going to lose them.
3. Engaging product experiences have become an essential part of the buying process
This has only increased with the world in lockdown. Look at how Zoom handled the 300M surge in demand during the initial weeks of lockdown. Offering 40 minutes free meant that millions of teams tried it on the free model, saw it worked, and so upgraded to a paid license. The entire onboarding and upgrade experience was handled by the product. With virtually no need for human intervention.
That’s not to say that sales reps are obsolete in product-led companies. But your product needs to do the heavy lifting when it comes to getting new users up to speed, and demonstrating value - and that is key to scaling your SaaS business.
Is this the death of sales-led GTM strategy?
There are many reasons why successful companies continue to employ sales and marketing led go-to-market strategies. Sales-led GTM strategies are often particularly useful when attracting high lifetime value (LTV) customers, and you can hit your revenue projections faster with a few big clients.
Marketing led strategies are super useful when you have an innovative product that requires some level of base understanding. For these companies, sales and marketing efforts continue to play a huge role in brand awareness and educating consumers on their product. However there’s no reason why you shouldn’t also employ the product led approach for those customers who don’t need the sales guys.
For tech products that aren’t difficult to explain, however, taking a product-led GTM strategy is going to help you save money, scale faster, and ultimately weather the coming storm. You will still need to employ marketing to ensure your value propositions are clear, and aligned with the customer needs. You are likely still going to need sales and customer success teams, to help remove any barriers in the sales funnel - but by leading with the product, you can considerably shorten the customer journey, making huge savings in doing so.
“The sales-led way of buying software: Read about the software, create a list of features needed, let sales qualify you, do a demo, and twist their arm so they give you a trial. The product-led way of buying software: Just start using the product. Ask for help if you get stuck. Based on your usage and profile, receive personalized recommendations. Which sounds better to you as a buyer?" - Peter Caputa IV, CEO, Databox
Ultimately, if you can’t use your product to demonstrate the value of having it, then it most probably could benefit from a redesign.