Product-led growth: 3 important lessons from the front line
While this model is all the rage as a go-to-market strategy for B2B software companies today, not all products are the right fit for PLG.
Product-led growth (PLG) is all the rage as a go-to-market (GTM) strategy for B2B software companies looking to increase adoption and grow revenue.
From corner office strategy sessions to product development sprint huddles, business and tech leaders are exploring how to build, transform and add a PLG strategy to their business.
So, why PLG now?
The team at OpenView Partners, a venture capital firm, makes this thoughtful observation about the rise and appeal of PLG as a GTM strategy:
“Software has become a fundamental utility powering our working lives — just like water, electricity, the internet and mobile broadband. We used to ‘own’ and then ‘rent'”‘ software; now we simply use it.”The Age of Connected Work
B2B market dynamics are also a driving factor:
- B2B buyer expectations have changed. User-driven control and self-service align with the way many professionals want to buy and use software and apps.
- Traditional SaaS buyer-seller relationships are no longer productive. The SaaS sales and marketing landscape has shifted. Buyers are not engaging as their balance sheet and tech closet are full of half-used subscriptions.
- Capital models have evolved. The “growth at all costs” mindset where capital was cheap is in the rear-view mirror. Profitability, efficiency and precision are today’s expectations for both vendors and the organizations they sell to.
PLG enthusiasm is spreading across software providers, while interest in new ways to buy and use software intrigues business and tech professionals.
As a result, software GTM teams are taking a fresh look at how and what they develop, how they sell and distribute and how they charge and account for their software.
Dig deeper: 5 strategies to become a more impactful, buyer-driven marketing org
What is PLG?
PLG, which stands for product-led growth, is a business methodology and a go-to-market strategy for developing, marketing, selling and using software.
An organization that gets PLG right will have its user/customer acquisition, expansion, conversion, retention and even development priorities driven primarily by customer usage and the product.
The goal is for a product to deliver value so easily and quickly revenue is generated by more efficiently jumpstarting and expanding customer relationships.
Datadog, Confluent, Zoom, Airtable, Calendly and Slack are examples of PLG companies at various levels of maturity and adoption.
Today, thousands of companies are pivoting or exploring PLG GTM models, with many more PLG entrepreneurs readying new solutions for the market.
3 important PLG GTM lessons so far
Let’s explore a few important lessons software companies are learning about applying GTM methods in PLG’s first generation.
1. Not every company has the right product or right customer target for a PLG strategy
Despite the enthusiasm of investors and executives, not all products are ideal or ready to deliver the value of product-led strategies. The success of PLG enterprises (a few noted above) may make it look like the product sells itself, but that’s not true.
Thinking a company can just create a product in a vacuum and it will go viral is unrealistic. In addition, software companies that try to take an existing product and slap on a PLG GTM model without the proper features or support to deliver value through the product’s lifetime are set up for failure.
“One of the most important lessons with PLG is that you can be very successful in getting pros and users signed up to test and use a product, only to realize the product was not ready for self-serve, easy to use, or is ready to expand beyond a single use case,” shares Manuel Rietzsch, B2B demand marketing executive.
Like any good GTM strategy, PLG can be effective when the product is designed and developed for specific use cases and the entire company understands how and by whom the product is purchased, supported, managed and expanded.
Experienced GTM leaders advise PLG will not be successful if the product:
- Is complicated to use or application requires technical know-how and complex integrations.
- Requires hands-on help and is not self-serve, especially at customer onboarding.
- Has a non-intuitive user interface (UI) and customer experience (CX).
- Is not supported by a well-defined and documented strategy to market, sell and expand usage.
2. Developing a comprehensive conversion program is a must
Incorporating a PLG approach in the first motion of your GTM strategy has become an established method of filling the pipeline for big-name companies like Zoom, Slack and Stripe.
PLG builds this incredible base of buyers, but converting these prospects into paying customers requires a full customer lifecycle GTM strategy.
As Rietzsch puts it, “You can spend so much, time, money and resource to acquire new customers, then turn over to customer success or sales only to realize you’re not fully prepared to guide customers, expand use cases and develop deeper relationships required to increase ARR and move to company-wide usage.”
Some of the techniques that PLG veterans talk about to convert initial users into paying customers and accounts include:
- Thoughtful usage paywalls inside the product to access more capabilities and features by more people in the organization.
- On-demand interactive demos to experience new or full capabilities that drive interest, demand and expansion.
- Offering timely smart trials to unlock and expand beyond a single user or use case.
- An ability to share the app with colleagues to either try the product or to collaborate with others using it in new ways.
Done right, these PLG core methods are more natural in a customer’s journey.
A series of relentless marketing-driven subscription or upgrade offers or automated sales outreaches, which have defined the traditional SaaS GTM era, are simply not as effective.
3. Cross-functional and departmental collaboration is key to PLG’s success
PLG is great for stoking buyers’ interest and showing a product’s capabilities. However, once buyers are in, you need data, processes and defined roles to convert usage into annual recurring revenue (ARR). To make PLG scale, you also need key organizational roles to be in sync.
The role of sales is among the biggest changes many experienced PLG pros cite.
“There are two common mistakes: involving sales and not involving sales. Recognize that PLG will be seen as disruptive to your sales team, so partner with them from the start. But resist the temptation to put a revenue target on PLG prematurely. Your first priority needs to be delivering value to future buyers – and that value should be great enough to cause a little discomfort in your organization,” guides Joe Chernov, CMO at Pendo.io.
To provide a flavor, here is a quick snapshot of a few of the changes for marketing, sales, customer success and product teams with a PLG GTM approach.
Marketing responsibilities must be well defined at every stage of the user-customer-account relationships. For example, messaging must be contextual and tailored for every stage of user and customer interaction.
Case in point, webpages must speak to users in the beginning to appeal to individuals and “jobs to be done” mindset. As a user looks to drive more adoption, messaging and outreach must focus on “customer” value and the value to their organization as a whole.
This is the right message, right time that marketers always strive for. In the PLG model, personalized, precision communications are table stakes.
The traditional SaaS model was to hire a software sales pro for every $1M+ in SaaS ARR you want to generate. In the PLG model, sales get involved primarily once users begin adoption.
Account-based models complement PLG but at the right time of gaining user adoption and expansion. Also, successful enterprise PLG models can rely on a “sales-assist” motion to turn users into customer accounts.
The sales-assist motion helps build trust through a consultative approach, not just selling more software during a critical time when your product is establishing value.
This area has the most nuance depending on your product type and applications. The most important move here is to have ample self-service support and the right level of customer success and service to match the user, customer and account stages and needs.
For example, the initial engagement may be all self-serve. With deeper adoption, customer support resources and/or customer success likely will be required.
An often overlooked reality is that the product team must play a lead role in the GTM strategy, not a back-office support function.
Product pros rely on usage data, interaction within the UI and listening to the user base to evolve the tools into products and products into solutions with an eye toward customer use cases and changing needs.
Dig deeper: How to align B2B sales and marketing teams
PLG is a company-wide commitment
What’s clear is the traditional SaaS buyer-seller model is tired and broken. PLG is rapidly rising as a strong GTM strategy.
However, as many GTM teams are experiencing this is not as simple as choosing to implement a new model with a few product features and some tweaks to sales and marketing.
Rather, PLG requires a company-wide commitment and a well-thought-out, user- and customer-driven approach to developing, selling and delivering products.
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Opinions expressed in this article are those of the guest author and not necessarily MarTech. Staff authors are listed here.