What is product-led growth?
Unlike marketing-led growth or conversions led by a sales team, product-led growth is a business model that seeks to leverage the product or service itself as the main driver for customer acquisition, retention, conversion and expansion.
While product-led growth sounds simple and is very appealing, it can be difficult for many companies to not only find a product that sparks this type of growth, but also one that can maintain that customer focus over time for sustainable growth. Organizations such as Slack, Dropbox and Expensify have found that sweet spot and are able not only to have a product that defines their brand but also one that is able to create a strong pipeline of users that are happy to convert from freemium users into subscribers.
What factors help to drive product-led growth?
According to one analysis, as of 2019, there are 21 large public companies that are driven by product-led growth, including all of the top initial public offerings launched in 2019. That same study found that companies that benefit from product-led growth can scale faster than their peers because they “aren’t artificially constrained by labor-intensive lead generation sales and customer success” processes.”
While there are several schools of thought when it comes to what ingredients make for powerful product-led growth, at their core they all share some of the same elements. ProductLed, an online community and consultancy for all things product-led growth-related, for example, highlights three key elements a company needs to master this form of growth:
1. Understand Your Value
What sets your company apart from the competition? What would a customer pick your brand over another? This goes beyond just stating what your SaaS product is and touches on how your product can deliver the right functional, emotional and social outcomes that motivate your customers.
2. Communicate the Perceived Value of Your Product
In sales-led businesses, new customers develop relationships with sales representatives to drive growth instead of letting the product, features and pricing do the talking. Product-led growth companies keep lead with the value they deliver for their customers and integrate their revenue and customer acquisition processes.
3. Deliver on What You Promise
The actual customer experience needs to meet the expectations that have been set by the customer based on the information provided about your SaaS service. This is why product-led companies are not afraid to let customers try before they buy. Meeting these expectations is key to developing happy customers that spread the word.
What are some product-led growth best practices?
With the future of your SaaS company relying on the success of your products, how can you increase the chances of them driving sustainable growth? Here are a few key best practices:
- Define & Capture Metrics: Data has always been the lifeblood of SaaS growth. Tap into the data that your customers and your platform generate to measure and monitor metrics such as Net Promoter Score, monthly churn, key feature adoption, adoption and recurring revenue trends.
- Demonstrate Value Before the Paywall: In a product-led growth model, your features are what set your brand apart. Let customers see how your product delivers value for themselves and not just with pre-made demos or stock data.
- Capture a Pre-Built Audience: Conduct the user research needed to understand where your customers are and where they are in their journey so those features can be prioritized in your product roadmap.
- Showcase Unique Value: Identify methods to tailor and personalize your product to individual customers when in use to help them complete the work they need to be done more effectively and efficiently. This can also help to make the product feel more like a key part of their operations instead of nice to have.