Product Management 101: Product-Led Growth

As software products have evolved, so has the software sales model. Gone are the days of IT officers making the call on whether or not to purchase and implement an expensive and highly technical software solution. Now, it’s more likely that the product “sells itself.” Free trials, freemium memberships, and product tours place the decision of whether or not to use a specific software product directly in the hands of the user. This is what is referred to as product-led growth.

What is product-led growth?

Product-led growth describes a business strategy that places a company’s software at the center of the buying journey — and often at the center of the broader customer experience. A product-led growth strategy counts on the product itself — its features, performance, and virality — to do much of the “selling.”

How do self-service trials or freemium drive product-led growth?

Often central to a product-led growth strategy is a self-service trial or freemium option that allows a prospective customer to evaluate the product independently and without charge, bounded by time and/or functionality, and often without engaging a salesperson. This self-service approach aligns with shifting changes in buyer preferences, particularly in the research and evaluation phases of the buying journey. Many buyers want to try before they buy, relying less on a salesperson’s assistance than on their own first-hand experience with the product, in conjunction with customer and social proof that they discover via review sites and social networks. Many companies use these trial and freemium experiences to measure product usage and engagement, scoring leads and timing, and targeting conversion offers and sales outreach accordingly.

How does product-led growth reduce customer acquisition costs?

A product-led growth strategy can have a positive impact on customer acquisition cost (CAC) by reducing the burden on sales teams. Sales and marketing expenses contribute to customer acquisition costs, thus the more downward pressure a company can place on these expenses, the better their efficiency metrics, such as CAC, will appear.

How do I tie product-led growth into my company’s product-led strategy?

Product-led growth is a subset of a broader product-led strategy that expands beyond the try/buy phase of a self-service buying journey to include other touchpoints, pre- and post-sales, where the product takes center stage. For example, a product-led strategy may also mean bringing aspects of sales, marketing, service, support, and education inside the product for convenience, reduced friction, and greater contextual relevance to end-users. Here, business functions and customer interactions that were previously executed through other channels converge inside the product, all toward the goal of making the product more useful, more engaging, and, ultimately, more valuable for customers and end-users.

Recommended reading and resources

“The Pillars of Product-Led Customer Success” by Aazar Ali Shad

In today’s market, B2B SaaS companies are expanding through product-led growth. But how do they retain their new customers and get them using their product consistently? The answer lies in product-led customer success.

“Product-Led Growth and the Age of the End User” by Kristen Miller

At Pendo’s 2019 Pendomonium event, Blake Bartlett of OpenView Ventures took the stage to discuss product-led growth in the era of the end user. This post recaps the presentation and explains how the growth process has evolved over time, from being sales-driven to marketing-driven and finally, to product-driven.

Product Love Podcast: Wes Bush, Founder of Product Led Institute

How do you make onboarding less painful? In this episode of the Product Love Podcast, Wes Bush,  the founder of Product-Led Institute, shares his recommendations for reducing that “getting started” friction.

“The Path to Product Qualified Leads” by Matheus Mello

You’ve heard of MQLs and SQLs, but what about PQLs? Product qualified leads might be the metric you’re looking for to quantify user delight and success.

Product Led Growth Maturity Grader

Want to see how far along the product-led path you are, and where you might need to adjust your strategy? Open View Ventures, the organization that coined the phrase “product-led growth,” created this interactive quiz to help you along in your PLG journey.

Becoming Product Led: What it Means and How to Get There

Our colleagues at Pendo created this comprehensive e-book on shifting your company from a sales- or marketing-led mindset to a product-led one. Read the full handbook to learn how to center your product at every stage of the customer journey.