What Is PLG?

Growth at all costs is no longer an option. Under pressure to do more with less, businesses have increasingly found themselves confronted with the question of how to efficiently drive growth. For a growing number of them, the answer to that question is product-led growth (PLG).

It’s easy to see why PLG is having a moment. The strategy keeps customer acquisition costs (CAC) low, primarily by cutting back on sales and marketing spending. It’s also uniquely calibrated to today’s era, where end users have more purchasing power and a try-before-you-buy mentality.

That said, PLG is not a magic wand that will instantly solve your growth challenges. PLG is a growth motion, and while it can help teams cut back on sales and marketing, it’s not a substitute for either. Success hinges on knowing how to use all three in the right sequence. In addition, PLG may not be right for every business—a certain set of conditions must be in place for it to work.

In other words, PLG is complex. It’s impossible to copy and paste other companies’ successful PLG strategies because they are specific to those companies’ customer journeys and value propositions. But that’s also what makes PLG appealing to so many businesses, especially digital natives born in the digital-first era, which are predicated on the idea that users will discover a product’s value on their own (think Miro and Slack).

Of course, along with a shifting market and buyer behaviors, success stories such as Miro and Slack have only driven interest in PLG. But new adopters will need to practice some patience. Although it will eventually yield a more sustainable revenue stream, the strategy may initially mean a dip in the average contract value (ACV). PLG is an investment—a worthwhile one.

Elena Verna, Amplitude’s former Head of Growth, characterizes growth as “your ability to predictably, sustainably, and competitively answer the question of how you acquire, retain, and monetize customers.”

PLG is one way to do that—it’s a growth motion that leverages the product, rather than marketing or sales, to drive acquisition, retention, and monetization.

While there may be consensus around this basic definition, the reality is more nuanced. “There are very few, if any, companies out there that are 100% across acquisition, retention, and monetization,” Amplitude Head of Growth Marketing Franciska Dethlefsen says. “Most companies still rely on marketing to drive users into their product and have a sales-led monetization motion in place.”

Yet the idea that PLG is a kind of panacea is one of a number of misconceptions that continue to surround the strategy. Another is the notion that PLG is merely an acquisition tactic. But as Amplitude VP of Global Marketing Ashley Stepien notes, “you can use PLG tactics to nurture or engage users down-funnel to increase usage, loyalty, and attachment.” Indeed, PLG works well beyond acquisition to drive growth across the customer journey.

Acquisition occurs when prospects turn into customers. With PLG, the product drives new users to sign up through tactics like virality and user-generated content.

Retention, the result of activation and engagement, occurs when users build a habit with your product and return to it after their initial use. With PLG, the product drives ongoing habit formation through usage triggers.

• Activation is when a user experiences their first “aha” moment and finds value in the product. With PLG, it’s critical to have a simple setup and onboarding process so users can quickly reach the “aha” without intervention.
• Engagement measures how “sticky” a product is or how much users interact with it. With PLG, the product delights users with their current use cases or prompts them to explore net new ones.

Monetization involves gleaning revenue from the value users find in your product, such as by turning free users into paying ones. With PLG, users self-serve checkout by purchasing the product without help from sales.

As Amplitude VP of Product Ibrahim Bashir says, you need to “put the product front and center of every moment in the customer journey.” That means considering a spectrum of customer touchpoints, such as demos, forums, docs, and help services.

Culture

Even the most thoughtful, carefully considered PLG strategy can fail without the right combination of culture and technology. That includes a focus on data. After all, without a full picture of how customers interact with a product—informed not only by qualitative but also quantitative data—it would be impossible to create a user experience so singular and satisfying that it could drive growth on its own.

“You need to have a data-driven environment, so you’re not just working from intuition or the opinions of the highest-paid person in the organization,” Verna says. More reliable—and more useful—is behavioral data that reveals behavior across the customer journey and the psychology behind it. When you democratize self-serve data and make it accessible to teams across an organization, anyone can leverage insights without relying on analysts facing deep backlogs of request tickets.

Also key is a culture of experimentation. Experimentation is essential to making decisions that create a better user experience and meaningful business impact. Intuition might yield good results, but it won’t produce a decision-making process that’s sustainable or reliable. Experimentation pays off in a big way for growth, asAmplitude Head of Product, Experiment Wil Pong put it.

Since all workflows in a PLG model are designed to move business outcomes around acquisition, retention, and monetization, experimenting with those variables directly impacts the business. For example, experimenting with onboarding flows can increase product activation.

Experimentation is also an effective means of promoting a “growth mindset” that allows you to continuously refine your product knowledge rather than relying on assumptions. It bridges the gap between your perception and the reality of what customers need, which becomes especially important as you scale and it’s harder to glean customer feedback.

Indeed, at the broadest level, PLG might be said to promote a kind of radical honesty—honesty about when a product works and when it doesn’t. “It’s about being ready to expose where the product fails,” observes former Amplitude Product Analytics Lead Storm Hurwitz. He noted that product teams in sales led organizations are often shielded from those hard truths by sales and customer service teams who help guide customers around any of the product’s shortcomings.

Technology

The right technology is equally important—specifically, a modern growth stack that addresses the following needs:

• Access management. Offering a way for prospective customers to sign up or try a product is arguably the first step in any PLG strategy. But asking for a lot of personal information upfront can deter leads. Platforms such as Cognito and Auth0 make it easy for users to sign up with their existing accounts (think Google, Github, or LinkedIn).

• User onboarding. If first impressions are everything, a good onboarding flow is essential. Userflow, for example, allows teams to build customized onboarding flows without code.

• Customer Relationship Management (CRM). Nurturing users with regular, personalized communications helps keep them engaged and retained. Hubspot and Intercom are two of many CRM tools on the market.

• Lead scoring. When it comes to converting free users to paying ones, it’s critical to cut through the noise and focus on the most promising leads. Tools such as Sherlock score product engagement. Others, such as Clearbit, enrich your user data to help flag high intent.

• User support. Quick, accessible support goes a long way in preventing churn. Fortunately, numerous solutions, such as Intercom, Zendesk, HubSpot, and ReleaseNotes, are designed to do just that, and the latter few even keep users up-to-date on feature releases.

Another must-have is a modern data stack for growth, including collection, warehousing, analytics, and activation tools that provide the following services:

• Collecting event data from first-party data sources, such as your product or website
• Storing this data in a cloud data warehouse
• Analyzing this data to understand user behavior and identify friction points
• Activating the data in downstream tools to build personalized customer experiences

Digital analytics platforms like Amplitude provide essential insights into the customer journey—and how to optimize it for growth. They also foster experimentation by making it easy to track results in real time and course correct when necessary. Amplitude, which offers features and functionality with PLG at the core, helps you activate your data through integrations with other tools, such as CRMs.

Skills and capabilities

Given the complexity of PLG and its application across the user journey, it’s unsurprising that the skill set it requires is diverse and varied. The skills you need include an understanding of digital interfaces, consumer psychology, content creation, customer modeling, and perhaps most of all, data analysis. “In many cases, you don’t have firsthand interactions with the customer, so you can’t use qualitative data,” says former Amplitude Product Coach and Evangelist John Cutler. “This means that you need to be very thoughtful about your use of quantitative data.”

Similarly, knowing how to conduct and run experiments is critical and requires an investment in analytics and research. But done right, experimentation can pay dividends. As Hurwitz, now Director of Product Analytics, Commerce and Growth at Peacock, notes, the teams that “test and evaluate their hypotheses about why people use their product in the first place end up having the most creative approaches to letting their product be a big growth channel for their organizations.”

More broadly, PLG requires a holistic view of growth, what Cutler describes as an “end-to-end, full systems” perspective. As Stepien put it, it’s a matter of cultivating a “constant curiosity about all of your growth levers and what you could do to improve those things.”

And that goes for every facet of an organization. When it comes to sales, for example, it means knowing how to sell based on a customer’s usage, examining how they are using the product today, and finding additional use cases for them in the future.

Organizational structure

There are a few ways to approach the question of how to structure your teams around PLG and where PLG should live within an organization.

Product

As you might expect, the most widely used model has the growth team reporting to the product team. One of the benefits of this approach is that team members report to managers in the same area of expertise (e.g., designers report to designers and engineers to engineers). It also positions PLG as core to the product team’s strategy. Adding growth product managers helps teams focus not only on a best-in-class user experience but one that drives growth.

Growth

Another approach is to position growth as its own department. A VP of Growth would oversee a team that includes growth marketing, product growth, and, potentially, analytics. The entire team would be responsible for self-serve revenue. This model helps ensure alignment among team members who share the same roadmap and metrics, as demonstrated by PLG successes Postman and Snyk. The downside is that reporting lines might not be as clear as in the first approach.

Dual Model

Another model—one that we use at Amplitude—has several teams co-owning growth across marketing and product. In our case, both teams report to the VP of Marketing and the VP of Product, respectively, ensuring that reporting lines are clear. While collaboration can be a challenge, shared product metrics help reinforce alignment. At Amplitude, for example, teams share the same metrics across acquisition, retention, and monetization and collaborate on moving those metrics forward together.

Once you’ve landed on a structure for your PLG team, how should you embark on a product-led approach?

Adopting a product-led motion requires a shift in mindset. As former Amplitude VP of Global Sales Development John Black sums it up, it’s a matter of changing how an organization operates and measures success. After all, he notes, “PLG motions won’t always follow the traditional, human-led sales cycle,” he says. “It’s a fundamentally different motion.”

Sales

PLG means recalibrating an organization’s entire sales strategy, from a “top-down” sales motion that focuses on closing enterpriselevel deals to a longer game of cultivating accounts to grow over time. What that looks like in practice: a “land and expand” approach that secures more customers with cheaper entry-level or trial plans that customers can upgrade as they use the product. “PLG is an expansion game,” says Verna. “It’s all about growing with the customer and expanding with their usage.”

It’s also a volume game. Free or low-cost entry plans help rapidly expand your customer base, providing a pipeline of active and loyal users. And by focusing on the most promising of these users, sales can turn them into expansion opportunities or enterprise plays. Indeed, one of the advantages of PLG is that it allows sales to cultivate product evangelists that help them expand into enterprise-scale solutions.

All of this makes education and training about the benefits of PLG for sales teams essential. The first lesson: PLG does not cannibalize sales teams’ revenue. In fact, as Stepien notes, it will “unlock a new part of the market that they hadn’t previously had access to.” To secure internal buy-in, Bashir suggests framing PLG as “a way to increase the quality of sales pipeline, maturity of the customer, and the overall awareness index—all of which make the lives of various GTM teams easier.”

Indeed, while PLG may often be viewed warily by sales organizations, there are numerous reasons for sales to get behind the strategy. Not least is the simple fact that the way customers buy things has changed. Today, end users have more buying power and prefer trying goods and services before buying them—while avoiding lengthy sales calls and deal cycles. And while it’s true that average contract value may dip, it also means many more opportunities, including new users that would have been too small for sales to bother targeting.

Even better: PLG unlocks product signals that indicate the most promising prospects, what Stepien calls “the most qualified leads that any sales organization will ever touch.” In fact, OpenView research shows that product-qualified leads convert at a rate five times higher than the overall conversion rate. Bashir puts it this way: PLG can “cheaply, programmatically reveal how customers are engaging with the product. On the lead-gen side and the prepaid activation side, it’s a huge efficiency driver.”

How can you adopt sales-led growth?

Already product-led but trying to add sales to help scale? Focus on moving upmarket. It’s a change of direction that requires partnering with sales to find ways of creating leverage. Consider taking the following steps:

• Engage with champions who have indicated they have a positive experience with your product. They are more likely to help evangelize your product within the broader organization.
• Seek out more complex use cases as expansion opportunities for customers already using your product for simpler ones. Offer them upgrades to unlock more premium features.

Customer Success

Aaron Bird, Co-Founder and CEO of Inflection.io, a PLG-minded marketing and communication platform, pointed to the importance of having the right customer success capabilities to support an influx of users drawn by free or low-cost entry offerings. “Your existing motion for getting customers set up, activated, and supported throughout the lifecycle is not going to work because you’re offering something that’s much lower cost,” Bird said. “You have to make sure that you’ve got the resourcing to support what happens on the front end.” Bird says that means implementing a system for “one-to-many” communication for account managers or your customer success reps. Much of that one-to-many support may have to cover educational ground, with customer success team members doing triple duty as onboarding specialists and sales reps.

Marketing

Just as sales and customer success are key players in a PLG model, marketing also plays an important role. Marketers source new personas that drive acquisition and boost retention and monetization by generating content that spans the entire lifecycle. Examples include emails focusing on onboarding, usage changes, and product notifications, as well as newsletters that help build relationships with users. “Marketing amplification becomes absolutely critical to success in PLG,” Verna says.

PLG is a powerful strategy. But putting it into practice before an organization is ready can do more harm than good. According to Verna, the following should all be signs that you have more work to do before adopting PLG.

Current sales and marketing-led motions aren’t predictable

For PLG to be effective, practitioners need to know what works and what doesn’t in their organizations. If existing sales and marketing motions are not predictable and sustainable, there’s probably a gap between what organizations think users want from their product and what they actually want. Determining first how users interact with the product, how it meets market demands, and how the organization can support the product internally, will go a long way to identifying sales and marketing loops. Once you’ve established those loops, you can start to experiment with PLG.

Customers can’t activate product on their own

PLG hinges on whether customers can reach an “aha” moment without intervention. Businesses that need sales or customer support teams to make that happen aren’t ready for PLG. After all, those activation moments are critical to creating habit loops. User-friendly platforms such as Asana, Atlassian, and Calendly lend themselves to self-activation, but complicated tools such as those for enterprise resource or customer relationship management need to connect to backend systems—a process that, at least for now, requires human guidance.

Of course, that may change. Just think about how the advent of no-code, website-building solutions has enabled users to self-activate financial products such as Stripe, which even 20 years ago would have required support to set up.

The product value isn’t immediately apparent

How customers experience the product’s value—without human help—is critical to PLG. But it’s more of a hurdle for some products than others. Take passive products such as cybersecurity software. If they work well, customers might not even remember they have them. And because there’s not much to do after setting those tools up, there’s no chance for an engagement loop and no way for the product to drive retention or monetization. In other words, there’s no way for PLG to work.

Enterprise buyers have all the decision-making power

While free trial, reverse trial, and freemium plans reflect a shift in the balance of decision-making power from enterprise buyers to end-users, it’s a different story in highly regulated industries such as healthcare, government, and law. And that makes PLG difficult. After all, PLG only works when end users discover and become hooked on a product’s value, eventually bringing the rest of the organization on board. (Think of Canva, which manages to find enterprise success one employee at a time.) So what’s a business to do in these industries? One option is a low-key disruption, with a freemium model focused on the simplest of use cases, then building toward an enterprise solution.

PLG is more of a marathon than a sprint. It won’t yield results overnight. And even after getting started, there’s always more to do to drive growth through the product. Pinpointing an organization’s PLG progress could come down to how many of the following parameters are met:

• Growth: You don’t have to use a product-led approach for every stage of the customer journey right away, but users must be able to experience your product’s value in a self-service way. Verna observes that the “heart of PLG” is self-serve activation and retention.
• Culture: Does the organization understand its customer journey and ground its product decisions in data? Is the business aligned internally across product, marketing, sales, and other functions? And is the organization frequently experimenting and testing new bets?
• Infrastructure: Does the organization have the right internal tools and systems to easily visualize customer journeys through a product? Do these tools offer the insights needed to leverage the product for acquisition, retention, and monetization?

It’s important to note that an organization doesn’t need to reach peak PLG maturity to succeed. In fact, many of the above questions would also apply to the maturity of marketing or sales-led approaches. As Dethlefsen puts it, PLG comes in many “flavors.” It’s a question of finding the right one.

While PLG may take many forms, one thing holds true across the board: adopting it successfully requires understanding the customer journey. With analytics, you can ask critical questions such as:

• What are your top performing acquisition channels?
• Where are users experiencing friction during onboarding?
• What are your “aha” moments and the paths to get there?
• Why are users dropping off or getting stuck before activation?
• Which features bring users back to the product repeatedly?
• What is the user journey from free to paid conversion?

These insights are essential to developing a product that users love—and one that sustains and grows your business. Amplitude’s free plan can help you embark on your PLG journey with tools that map customer behavior throughout their lifecycle.

This guide is based on interviews conducted with industry experts. A special thank you to the following interviewees: Aaron Bird, Abbie Kouzmanoff, Alec Kriebel, Alex Simmons, Andrea Wang, Asavari Tayal, Ashley Stepien, Brian Abad, Carmen DeCouto, Dave Bonlander, Elena Verna, Franciska Dethlefsen, Hien Phan, Hiral Shah, Ibrahim Bashir, John Black, John Cutler, Kayli Berlin, Rachel Herrera, Rob Bow, Storm Hurwitz, Trevor Hadley, Wil Pong, and Will Newton.