Product led growth (PLG) has emerged as one of the most popular and effective growth strategies for software and digital businesses over the last decade. Unlike traditional sales or marketing led user acquisition models, PLG puts the product itself at the core of how a company attracts, converts, and retains customers.
By building products focused on driving user adoption and retention through features like free trials, in-product engagement, and virality, product led growth companies can acquire customers in a more scalable way. This helps reduce overall customer acquisition costs, creates long-lasting user relationships driven by product value, and benefits businesses through sustained, viral growth.
As more companies realize the high costs and overhead with traditional sales models, product led growth frameworks offer an appealing alternative. PLG shifts resources directly into making products so useful and engaging that they essentially sell themselves. Companies that get PLG right, like Slack, Dropbox, and Calendly, are reaping the rewards of hypergrowth, industry disruption, and Sky-high valuations from investors. This blog post will dive deeper into what defines product led growth, the core benefits it provides, and how businesses big and small can start implementing PLG effectively.
What is Product Led Growth?
At its core, product led growth ties the journey of user onboarding, conversion, and increasing loyalty directly to your actual product experience. It is a framework centered around using your product itself as the main vehicle to acquire, retain, and expand your customer base. Every aspect of the user experience, from first discovery to regular usage, is optimized through careful product design, customer feedback loops, and user research to drive better results when it comes to user adoption and revenue growth.
As opposed to sales-led growth where a business relies on outbound sales, cold calls, or manual touchpoints to land new customers, product led growth happens almost automatically, virally, and at scale due to the inherent pull of an excellent product. Some core principles that define PLG include:
- Self-service onboarding
- Viral loops and referral programs
- Value-driven free tiers or freemium models
- Expansion of revenue and upselling within the product
- In-product drive engagement and messaging
- Automated and targeted communication
- Optimization of critical tracking metrics and ROI
By combining these tactics, PLG companies build growth engines that propel themselves over time, with far less overhead than traditional growth models once a product reaches market fit. Companies successfully leveraging PLG today include Slack, Dropbox, Notion, Canva, and Calendly. Their growth has been bolstered by viral factors and word of mouth instead of costly sales teams, allowing rapid scale and adoption across segments.
Benefits of a Product Led Growth Strategy
Adopting a product led growth framework has compelling benefits, including:
Puts the Product at the Center
PLG means your product development roadmap, resource allocation, and talent hiring centers around optimizing the customer experience of your product above all else. This leads to products better suited to user needs.
Viral Adoption
Great self-serving products build their momentum, with users inherently promoting and sharing your product for you via word of mouth and tool integrations. This leads to highly efficient customer acquisition.
Higher Loyalty & Retention
When customers get their core jobs done effectively through your product, it leads to higher retention and lifetime value over manual touchpoints alone.
Lower Customer Acquisition Costs
Scalable product led growth happens at a fraction of the cost of traditional sales team models, with far less overhead required as organic reach and referrals kick in.
Expansion Revenue Potential
The more engaged your product users are, the easier it is to drive additional purchases of premium tiers or upgrades over time within your core platform.
Implementing Product Led Growth
The key ingredients to prioritize when building PLG include:
Define Your “Aha” Moment
Identify the core user benefit and key differentiator to highlight front-and-center during onboarding flows. This could be ease of collaboration for Slack or seamless file syncing for DropBox. This core utility and “aha” moment keeps users engaged.
Offer a Free and Generous Tier
Providing extensive functionality in your freemium offering removes friction for signups while generating power users over time who convert or refer others. But be wary of excessive free riders.
Focus on Self Service Onboarding
Make it as easy as possible for new users to get ramped into core features with as little instruction as possible. Leverage in-product tips, prompts, and tutorials.
Key Components and Best Practices
Successfully implementing a product led growth strategy involves bringing together a range of tactical elements into a comprehensive framework, including:
Frictionless Signup & Onboarding
Require only essential info to sign up and get started quickly. Guide new users on key features and values without excessive tutorials.
Value-Driven Free Tier
Structure a free tier to make it simple to explore value, while limiting the ability to use your product at scale without upgrading. Prioritize key features to hook users.
Effective In-Product Messaging
Prompt for specific calls-to-action at critical points in the user lifecycle. This includes highlighting new features, offers, requests for feedback, and tips for getting more value.
Automated & Event-Based Emails
Send customized emails to users when they hit milestones like finishing a tutorial, idling for a while, or failing to use a key product capability. Guide them to the next steps.
Integrations & Partnerships
Increase distribution by integrating with popular external services. Drive referrals by making your product easy to naturally showcase to new networks.
Ongoing Testing & Optimization
Run A/B tests frequently to improve conversion rates across signup, adoption of key features, and paths to paid conversions.
Overcoming Challenges with PLG
However, effectively implementing product led growth comes with some inherent challenges, including:
Identifying Core Value Prop
It can be difficult to articulate your distinct value prop or “aha” moment relative to competitors. Without core product differentiation PLG fails.
Managing Free Usage
Offering a free tier means scaling costly infrastructures and supporting users who may never convert or pay. Limitations are required.
Preventing Abuse
Bad actors can take advantage of free tools. Implement throttling limits, analytics to tag abusive accounts and policy safeguards.
Balancing Automation & Human Touch Users still expect human connections as part of onboarding and support. Provide communication channels and empathy at key times.
Avoiding Feature Bloat
It’s tempting to keep adding more functionality to try and satisfy every niche. Prioritize the 20% of capabilities that drive 80% of user value.
Product Led Growth for Different Business Models
While pioneered by SaaS and cloud software companies, a product led growth framework can be adapted across models:
PLG for Enterprise Software
- Drive bottoms-up adoption by offering free versions for small teams
- Partner with influencers at large companies to become champions
- Scale up features and support as large customers streamline buying processes
PLG for E-commerce & Digital Goods
- Offer free samples or limited versions to demonstrate the value
- Recommend complementary products in user flows
- Spotlight best sellers and personalized recommendations
- Enable direct in-app purchases and upsells
PLG for Mobile & Games
- Prioritize viral channels like social media sharing or referrals
- Structure compelling rewards for engagement milestones
- Limit access to advanced features until reaching certain levels
- Promote new levels, characters, and upgrades in-app
Examples of Product Led Growth
Slack’s Viral Onboarding & Adoption
Slack delivered a highly useful, consumer-like B2B product. Features like seamless onboarding, integrations, and customizable bots made the user experience intuitive and valuable for teams. Shared channels also facilitated viral adoption across companies.
Dropbox’s Referral Program
Dropbox focused on a simplified cloud storage platform with file sync. Referral signups got free storage space – an incentive for customers to add contacts. This self-perpetuating viral loop helped propel Dropbox’s rapid user and revenue growth.
Calendly’s Landing Page Optimization
Calendly zeroed in on a dedicated use case – scheduling meetings easily. A focused free offering, paired with highly optimized landing pages for SEO, organic reach, and conversions enabled Calendly to grow quickly.
Key Takeaways
The success of product led growth strategies points to some key lessons, including:
- Success comes from simplicity and ease of use above all
- Think viral loops first
- Overdeliver on your free offering
- Continual optimization and testing beats big launches
- Stay laser-focused on your “aha” moment
Implementing PLG provides advantages:
- Asset & cost-efficient growth
- Closer customer connections
- Enhanced brand loyalty
- Revenue growth built-in
Product led growth puts the customer experience with your actual product at the core of your strategy. Companies that adopt PLG frameworks are realizing outsized benefits when it comes to growth, scale, and profitability over organizations reliant on traditional sales or marketing-led funnels. This reflects the impacts thoughtful, user-centric product design and go-to-market models can achieve.
Conclusion
PLG upends traditional software business models to drive scalable growth and efficiency. Companies who master demonstrating their core value, and distributing it virally through highly optimized funnels, set up themselves up for success. We foresee more industries adopting product led techniques, customizing the framework based on vertical needs. Ultimately, PLG may become the de-facto standard for any business selling products and services in the digital age.