Companies that have embraced product-led growth (PLG) reach customers without paying for expensive marketing and sales. This strategy focuses on delivering a great product that users love to use.
This approach requires internal alignment and more effort from all digital-facing teams, including CS, product, and analytics. It also demands sophisticated, personalized product experiences that serve as a powerful marketing flywheel.
Product-led Growth Models
Product-Led Growth models allow companies to grow and be profitable simultaneously, rather than seeing these goals as a dichotomy. Companies leveraging the tactics associated with this growth model often implement self-service trials, freemium products, or a similar pricing model that allows prospective customers to try out the product for a limited amount of time before they become paying customers.
SaaS product leaders like Warby Parker, Atlassian, Twilio, and Covetrus have seen tremendous success using a product-led growth strategy to drive adoption, retention, and customer lifetime value. By combining their own product analytics with user behavioral analysis tools, these organizations can create personalized in-app messages for new users and provide a guided experience that aligns with each user’s motivation to use the platform.
Becoming a product-led growth (PLG) company requires internal alignment, starting at the executive level. The key is to identify the metrics that are most critical for sustainable growth and rally all digital-facing teams—marketing, product, customer success, analysts—around those measures.
Top-down
Top-down growth models leverage business planning and budgeting techniques that are based on the company’s current performance and forecasts. They start by assessing the market size available to a particular business and then factor in sales trends to estimate potential revenue.
This method takes a macro/outside-in view and is less dependent on specific data points and analysis, which can speed up the process. This approach allows a company to make projections based on its maximum capacity and the main value drivers.
However, a business must focus on building loyalty to avoid losing customers in the long run. This means creating raving fans of the company’s products and services, as well as developing strong internal communications. One way to do this is by providing employees with a clear vision of the company’s purpose and values. Another is by reducing time-consuming tasks through automation. For example, Outdoor Voices used a centralized communication platform to reduce redundant work.
Bottom-up
Many people use bottom-up models to make decisions, including biologists, pharmacologists and homebuilders. They break down complex projects into small parts, analyze each piece and then put them back together to generate a targeted goal. This method helps businesses make informed decisions that will yield the best results.
Bottom-up forecasting takes a granular approach to sales forecasting and projections, using actual sales data rather than assumptions. This allows for more realistic financial forecasts and more focused strategic choices moving forward.
It also gives more granular visibility to the revenue and sales goals of each individual product or customer segment. This can help you identify the critical assumptions that need to be true in order for your growth to occur, and it can help you adjust your strategy accordingly. The key is to ensure that you are scaling up while maintaining a sustainable level of productivity. Otherwise, you may run out of employees or clients before you can earn enough revenue to cover your costs.
Scaling
Product-led growth shifts the balance of a business’s revenue-generating activities away from sales and marketing. By making the product the driver of acquisition, activation, retention, and expansion, companies can free up a ton of money that would otherwise be spent on hiring new reps or running expensive ads to drive awareness. This approach also reduces customer acquisition costs (CAC) by leveraging word-of-mouth, and it increases product feedback as users act as a giant living focus group.
SaaS companies like Datadog, Slack, Calendly, and Figma all use a bottom-up approach, allowing end-users to try their products for free or at a minimal cost. This strategy aligns with shifting buyer preferences as they seek to do research on their own before engaging a sales rep. Additionally, it allows companies to embed their marketing, sales, and customer success communications into the product itself, further reducing costs. A platform that enables this process is essential for successful product-led growth.
