In case you missed it, our CEO, Mike, wrote about Natural Rate of Growth in his weekly newsletter last week. In short, OpenView Labs recently featured a new SaaS metric…
How SaaS Companies Can Best Leverage a Product-led Growth Strategy
The importance of executing on the product side of the business has long been a primary focus for countless successful founders and notable startup advisers. So it may come as little surprise that one of…
The importance of executing on the product side of the business has long been a primary focus for countless successful founders and notable startup advisers. So it may come as little surprise that one of the fastest growing trends in SaaS is a renewed focus on product—this time as the primary engine for growth.
What is product-led growth?
Our friends at OpenView have been leading the charge in championing product-led growth as a go-to-market strategy. As defined in this helpful presentation, PLG occurs in “instances when product usage serves as the primary driver of user acquisition, expansion, and retention.” Growth becomes tied to the value of your company’s product. “It’s about product being the core DNA of your company,” Hiten Shah writes. “So much so that the default mode for solving problems—including growth challenges—is to figure out how to use the product to address whatever issue is at hand.”
Like most great startup trends, PLG has its massive success stories that have inspired its wider adoption. The rapid growth of Slack, Calendly and Dropbox have all been at least partially attributed to a product-led strategy to scale. In each case, a product has been offered that is easy-to-use, easy-to-share, and immediately valuable – so much so that it drives user acquisition at remarkable rates, slashes customer acquisition costs (CAC), and surges customer lifetime value (CLV). One of the most valuable upsides of a successful PLG strategy is the overwhelming strong unit economics that can accompany the user growth.
What’s a good product-led growth strategy?
In his review of Blake Bartlett’s PLG talk at SaaStr 2017, Drew Beechler outlines the five traits of PLG success: virality, easy sign-up, quick to demonstrate value, slow to hit users with paywalls, and “a focus on making all customers successful across the sales-to-support continuum.”
A successful PLG strategy gets your product in the hands of your customers as fast as possible and starts solving their problems right away. “Growth in [PLG] companies has a significant viral component.” Jon Falker of GLIDR writes, “Users can get unique value from the product or service right away and can benefit from helping to attract other new users.” This is why freemium models are remarkably effective in a PLG environment. By providing the user with a valuable experience upfront, you can inspire more frequent use, greater shareability, and focus on the premium aspects of your product that will drive purchasing decisions and ultimately retain these customers.
Is product-led growth the right strategy for your company?
Your company’s unique financial, growth, and talent considerations will need to be assessed before you can determine the right investment to make into a PLG strategy. As the OpenView PLG Market Map shows, this strategy continues to be adopted across the globe and among an increasingly wide swath of product categories. Still in order to succeed at the five traits of strong PLG companies listed above, you actually have to be a business positioned to offer these benefits. If a freemium model isn’t on the table at the moment or if your product doesn’t currently offer clear network effects, a more gradual approach to achieving PLG success may be the right course of action. For instance, as Shah notes, a company might hire or retain sales talent to attract large customers early on while product-led growth continues to develop at scale. A focus on product can occur simultaneously in an organization that still needs to execute more traditional SaaS sales to achieve a healthy growth rate. On the marketing side, a gradual approach to PLG may include an increased focus on conversion rates on core landing pages to drive faster user acquisition across all customer types.
But even in a more incremental approach to PLG, you will refocus your entire team on what matters most. “Everyone in the company should be focused on growth. Everyone should be responsible for revenue,” Shah writes. “Exactly what this looks like will vary from company to company based on which teams have the most say on what ends up getting built and shipped.”
Successful PLG companies develop cross-functional teams, demonstrate effective information sharing within their organization, and attach greater significance to shared KPIs with to accomplish to inspire a greater focus on growth and accountability to revenue.
To learn more about PLG and other SaaS trends, be sure to review the results of OpenView’s 2018 Expansion SaaS Benchmarks Survey with responses from more than 400 enterprise software companies.
We are partnering with OpenView again this year on this survey to help gather data on go-to-market strategies like PLG, company growth rates and other growth strategies, budget allocations, unit economics, leadership and talent data and more. If you’d like to participate in this confidential survey, you can help better understand how your business compares to your peers and learn more about the elite differentiators of scaling SaaS companies. Check out more about the survey here.