What is Product-Led Growth?
Learn how product-led growth can kickstart your business. Explore key strategies, metrics, and examples, and discover how to achieve rapid growth and success.
What is product-led growth?
Product-led growth (PLG) puts your product in the driver’s seat of your go to market strategy. It’s a customer-centric approach that uses your product’s inherent value to acquire, convert, and retain users.
In a PLG strategy, your product becomes your most essential tool. Users discover and adopt it with minimal marketing and sales efforts, leading to organic growth driven by the product’s usability.
Key characteristics of PLG include:
- Virality: Encouraging users to invite others through referral programs or social sharing features.
- Self-service: Offering free trials for easy sign-up and user-friendly, self-explanatory product features.
- Low- or no-touch sales: Converting users into paying customers with minimal human interaction.
- Customer-centricity: Prioritizing customer feedback to enhance the product.
- Data-driven: Using analytics to track user behavior, identify patterns, and optimize the user experience.
- Expansion revenue: Focusing on upselling or cross-selling to existing customers for revenue growth.
PLG disrupts traditional growth models that rely heavily on sales and marketing teams. It instead places the product at the center of the customer journey, focusing on ongoing value and satisfaction.
Product-led vs. sales-led
While PLG has a product-focused approach, a sales-led strategy uses a highly personalized and interactive sales process, usually with a longer prospect buying cycle.
Sales teams are central to acquiring and nurturing customer relationships, while marketing supports their efforts by generating leads and creating awareness.
A sales-led growth strategy is better suited for complex or high-value products and services, such as enterprise software or business-to-business (B2B) service industries.
Product-led vs. marketing-led
Marketing-led growth uses marketing as the primary driver for acquiring and retaining customers.
It applies various strategies to achieve growth, including comprehensive marketing campaigns, lead generation, brand building, and targeted messaging.
For example, a luxury fashion brand might adopt a marketing-led growth strategy by investing heavily in advertising campaigns, influencers, and social media messaging to attract customers.
The strategy you choose depends mainly on the nature of your product, target audience, and specific business objectives. Many companies blend a range of sales, marketing, and product-led strategies to help maximize their growth potential.
Benefits of product-led growth
Adopting a PLG strategy offers several benefits, particularly if you’re in the technology and software industries. When carried out properly, you can experience sustainable growth, increased profits, and improved customer satisfaction.
Let’s look at some of these benefits in more detail.
- More user-centric: Develop a solid and loyal base of customers by prioritizing user satisfaction.
- Lower customer acquisition costs: Spend less on sales and marketing through self-service sign-ups and viral referrals.
- Faster time-to-value: Accelerate user adoption and conversion to paying customers with a more intuitive product.
- Experience organic growth: Foster a self-sustaining cycle of organic growth by encouraging users to invite others to word-of-mouth referrals.
- Make data-driven improvements: Enhance your product based on real user needs with the valuable user data and feedback you collect.
- Improve market responsiveness: Iterate and enhance your product based on real-time feedback to adapt quickly to changing conditions and demands.
- Reduce churn: Deliver your customers a high-value product, decreasing their likelihood of switching to competitors.
- Align with modern buyer behavior: Adapt to current buyer preferences for self-service and trial-driven product evaluation.
Understanding product-led growth techniques
Harnessing PLG techniques is integral to achieving sustainable business growth.
These essential strategies and tactics can help unlock your product’s full potential and drive user adoption, retention, and expansion.
Affiliate programs involve collaborating with external partners, also called affiliates, who promote your product to their audience and earn a commission or incentive for each referred customer.
You can usually achieve this by using a tracked link on a website or social media, helping expand your user base through multiple channels.
Referral programs encourage existing users to refer friends, family, colleagues, and other contacts to your product. Users typically get rewards, discounts, or bonuses for successful referrals.
Referrals are an effective way to leverage word-of-mouth marketing and make your current users more likely to stick around.
Including this technique in your product flow enables users to easily invite their colleagues to collaborate within the same account or workspace, facilitating team adoption.
A seamless and intuitive onboarding process can guide your users through their initial setup and product use. Helping users onboard smoothly ensures they quickly understand your product’s value, reducing friction and improving retention.
Extensive resource library
Providing users with a rich library of resources, like tutorials, guides, and documentation, helps them learn and make the most of your product.
Accessible, on-demand resources also make users less reliant on your team to answer questions, reducing pressure on your product and customer service colleagues.
Solid feedback loop
Establishing a feedback loop that enables users to provide input, report issues, and suggest improvements is essential for refining your product. Soliciting and acting on user feedback can help you not only improve your product, but increase customer satisfaction and loyalty.
Ensure your product is intuitive and user-friendly to simplify the user experience. The best products make it easy for customers to navigate and use various features.
It’s best practice to ensure your product’s value proposition and benefits are evident and easily communicated to users. This tactic makes your product naturally marketable to users and potential customers.
Building and nurturing a user community where your customers can interact, share insights, and support one another can enhance user loyalty and advocacy.
Product-led growth examples
Some of the world’s most notable names adopt PLG techniques in their business models.
By offering free trials, leveraging referral programs, and providing smooth onboarding, the following companies prove adopting a PLG approach can deliver a massive payoff.
Zoom offers a user-friendly, high-quality video conferencing solution that is easy for everyone. Their freemium model enables individuals and small teams to use the platform for free while catering to enterprise customers with various paid plans.
The virality of Zoom was integral to its initial growth, as satisfied users recommended it to colleagues, friends, and family members to virtually meet and stay connected.
Amazon, particularly its Amazon Web Services (AWS) division, is an excellent example of how you can apply PLG principles in the B2B space.
AWS provides an array of cloud services with a self-service model. Customers can easily sign up for AWS services, use them in a pay-as-you-go manner, and scale as needed.
Dropbox is a classic PLG success story. It offers users a seamless way to store and share files with a freemium model that encourages viral growth.
Users who enjoy the free service often refer it to others, contributing to rapid user acquisition.
Dropbox also uses features like collaborations and integrations to enhance the product’s appeal and stickiness, leading to more users becoming paying customers. Read how Dropbox uses Amplitude to accelerate new product journeys, here.
Calendly’s approach to PLG focuses on offering a user-friendly product and straightforward onboarding process.
Customers start with a free version and can upgrade to paid plans for more features. They can also share their scheduling and availability links with others, making the sign-up process more accessible and user-friendly.
Slack’s PLG strategy uses a freemium model and a self-service sign-up process. The product is user-centric, emphasizing ease of use and integration with other applications.
Users can invite their colleagues to join their work platform with effortless invitations, fostering organic growth within organizations.
How to create a successful product-led growth strategy
A PLG system doesn’t just involve having a fantastic product—though it certainly helps.
A solid product roadmap can help you develop and implement your strategy, making your PLG approach as effective as possible.
Successful PLG strategies combine multiple elements for a holistic approach, often using ongoing experimentation and adaptation to optimize results.
Here are some steps and considerations as you plan your PLG strategy.
- Understand your target audience: Identify your ideal customer profile (ICP) and their pain points. Understanding your audience's needs is crucial to effectively tailoring your product and messaging.
- Build a user-centric approach: Create a product that users find valuable, user-friendly, and easy to adopt.
- Adopt a freemium or free trial mode: Consider offering a free version or limited-time trial of your product to enable users to experience its value firsthand. This approach can be a powerful acquisition tool.
- Use virality and referral mechanisms: Encourage users to invite others and foster organic growth through referrals to quickly grow your user base without heavy marketing spend.
- Implement continuous enhancements: Ensure you continuously improve your product based on user feedback and data to maintain user satisfaction and meet market demands.
5 key product-led growth metrics
If you’ve implemented a PLG strategy, you might be asking yourself, “Is it working?” or, “How can I make my strategy better?”
Tracking metrics can help you answer these questions. Metrics provide insights into your product’s performance and how effectively you acquire, retain, and monetize users.
Understanding which metrics to monitor is key to improving your approach and ensuring you’re on the right track.
Below are five key PLG metrics to consider.
1. Activation rate
Activation rate measures the percentage of users who complete a specific product action or milestone. This action typically represents when users start getting value from your product, like creating their first project or adding team members.
A higher activation rate indicates that users have successfully onboarded and engaged with your offering.
2. Conversion rate
Conversion rate measures how effectively users progress through crucial stages of your conversion funnel, such as signing up, completing onboarding, or upgrading to a paid plan.
Tracking your conversion rate through each stage helps identify where users might drop off in their journey, enabling you to optimize these areas to drive more conversions.
3. Churn rate
Churn rate measures the percentage of users discontinuing product usage. High churn can signal problems with retention and overall satisfaction.
Curbing churn in PLG is vital, as retaining users is usually more cost-effective than acquiring new ones. Satisfied customers also drive referrals, further expanding your user base.
4. Customer acquisition cost (CAC)
The CAC metric measures the cost of getting a new customer. Keeping CAC in check ensures an efficient and profitable PLG approach.
A lower CAC signals you’re cost-effectively acquiring customers—especially important for freemium or low-priced product models.
5. Virality metrics
Virality metrics measure how well your product is organically promoted and adopted through referrals, word-of-mouth, and social sharing.
You can track and analyze referral rates, user-generated content (UGC) sharing, viral growth potential, social sharing metrics, and more. Positive viral metrics indicate your product effectively encourages users to invite and share it with others.
Next steps to get started with product-led growth
On top of this resource, we've put together an in-depth "How to Get Started with PLG" guide that offers insights from more than 30 experts on the tactics and metrics you need to tackle PLG at your organization.
Download it for free today to hear success stories from businesses adopting PLG, and to learn other proven methods for driving acquisition, retention, and monetization.