Product Led Growth

There is a lot of discussion around Product Led Growth (PLG) and how it has been a game changer for many organizations. But what is PLG and is it a magic bullet for every organization? I dug into these and many other questions as my own organization pivoted into PLG, and I wanted to share some of my thoughts and findings with those of you that may also be currently, or thinking about, embracing PLG.

What is PLG?

In a nutshell, PLG is a go-to-market strategy that uses the product as the main driver of customer acquisition, activation, and retention.

A great example of PLG that most people have experienced is Dropbox, the cloud-based file sharing app. When you explored Dropbox and its suitability to meet your file sharing needs, you didn’t read a lengthy white-paper on the product or watch lengthy product marketing videos. Instead, you signed up for a free version (freemium), were presented with a brief in-app walkthrough of the product, and then immediately began uploading your files and sharing them with colleagues or friends. The more files that you uploaded, the clearer the value of Dropbox became. At some point, you hit the storage limit of the free version of Dropbox, and you were prompted to upgrade to a paid plan. By now, you were probably dependent on the product. Many of your files were in the Dropbox Cloud and you were familiar with how to operate the product. So, you upgraded to a paid plan. You didn’t speak with a human being to do this. You didn’t fill out a lengthy form. You didn’t go to a separate website to complete your purchase. It was done immediately and directly within the application. (Strike while the iron is hot). In PLG, not only should an organization focus on acquisition (the free Dropbox version) but they should also focus on eliminating as many barriers to activation as possible. In this case, Dropbox provided the ability to subscribe the moment that you ran out of storage space.

In the scenario above, Dropbox eliminated barriers to product adoption and created stickiness in their product that converted into a paid subscription. In fact, analysts have found that PLG generated opportunities (product qualified leads or PQL) close at a rate that is 4-5x higher than marketing qualified leads (MQL) or about a 25-30% PQL conversion. The reason being, you have a customer that is already familiar with how your product works and (hopefully) can clearly see the value in using it.

As you continued to use Dropbox, you were periodically presented with reminders of other add-ons that you should be taking advantage of, for an additional fee of course. Tips and tricks are also provided in this same manner to further enrich the user experience and increase stickiness.

What is also interesting about the Dropbox story is that they targeted the individual user. As more and more users in an organization signed up for their personal Dropbox account, and used that account for business purposes with their colleagues, the IT department was faced with a dilemma. Should they tell their corporate user community that they cannot use Dropbox and should use another product or should they just “go with the flow” and adopt Dropbox as their corporate sanctioned file sharing tool. More often than not, adoption of Dropbox happened before the IT department was aware of what was going on and they were left with no choice but to give Dropbox their IT blessing and sign up for a corporate account. Brilliant! This bottom up approach (targeting the user) is also a hallmark of PLG and why user experience is so important in PLG products. In past, IT buyers or Executive signers were the target of sales efforts. These buyers were usually more interested in available functionality and "checking the boxes" than user benefit and experience. (getting as many features as they could for the price.) Therefore, product teams attempted to cram as many features and functions into the product to appeal to these buyers, with user experience being an afterthought. But the pendulum has swung with PLG and products that leverage PLG must create great user experiences first and foremost. If they do not, users won't continue to use the product and more importantly, they won't convert to a paid plan. I can't emphasize this point enough. The new generation of information workers (think Gen Z and Millennials) have grown up with technology and have had a much different experience than previous generations. It is no longer acceptable to read a lengthy product manual or attend weeks of product training. Todays information worker expects their consumer based experience to carry over into their business applications. They want products to be intuitive, fast, and effective. In fact, when it comes to mobile apps, the average app loses 77% of daily active users (DAUs) by D3 (day 3). By D30, the average app has lost 90% of its DAUs. Ouch! Hear me in the back...USER EXPERIENCE IS CRITICAL IN A PLG STRATEGY!

Dropbox is one example of many companies that have successfully adopted a PLG strategy. There are many, many others such as Slack, Miro (one of my favorite products), Zoom, Calendly, DocuSign, SurveyMonkey, etc. that have been very effective in their adoption of PLG which has in turn driven huge growth.

What PLG is Not

What PLG is not should also be mentioned.

PLG is not Product Management Led Growth

Certainly, the Product team plays a major role in the adoption and implementation of PLG, but PLG is an organization wide strategy. It requires input from many areas of the organization including (but not limited to) Sales, Marketing, Support, Onboarding, and Services. Even the Finance team will play a role in the adoption of PLG. It must be embraced across the organization, or it will not be successful.

PLG is not a replacement for sales or marketing led growth

These two methods of growth are still important and play a vital role in the overall growth of the organization. There are products and customers that will still require sales and marketing services. Not all products are a fit for PLG (I.e., due to complexities), and not all customers will respond to PLG tactics. (Especially Enterprise customers).

PLG is not a fit for all organizations or products

PLG is not a magic bullet for everyone. There are many organizations, such as those that are in a blue ocean market, that may not be able to leverage PLG. There are also many products that cannot take advantage of PLG due to factors such as a complex installation, required training, limited TAM, etc. With that said, companies and products that may not be able to leverage all PLG growth techniques could still benefit from implementing some of the tactics. As an example, an organization may not be able to offer a freemium version of their product due to installation complexities, but they could utilize tactics such as in-app onboarding, in-app promotions, easier access to help and tutorials, etc.

Measuring Success

Implementing PLG tactics is only one step in the journey to becoming a PLG organization. Once implemented, the performance of PLG tactics must be measured to determine their effectiveness and so that adjustments can be made. (And they will need to be made.)

A decision that must be made on a per-product basis is determining when a Product Qualified Lead (PQL) should be created. It’s not enough to say that when a prospect signs up for a freemium or trial version, that they are a product qualified lead. There are certain activities or events that a user takes within the product that indicates their propensity to sign up for a paid subscription. To continue with the Dropbox example, Dropbox considers a user to be a PQL once he/she has crossed a threshold in their storage space limit. They are not considered a PQL simply because they signed up for a free Dropbox account.

The definition of a PQL is a discussion that is best served through cross-team collaboration. These discussions should include at the very least Product, Sales, Marketing, and Finance. It's important to have data to back any hypothesis that is being made. As an example, when implementing PLG for one of our analytics products, I reviewed product usage trends for trial accounts. I looked at trials that converted to a paid subscription, and those that did not. What I noticed is that users who logged in 3 or more days, and who spent an average of 7 or more minutes per session in the product, were likely to convert to a paid subscription. This may seem obvious to you, they're repetitively using the product and spending time working with it, but quantitative data speaks louder than qualitative, so having the data to back up my hypothesis made corporate acceptance of the variables that create a PQL for this product much easier.

A final note on measuring success. As I mentioned previously, PQLs have an average conversion rate of 25-30% when they've been properly defined and tuned. That means that 70-75% of PQLs do not convert. But don't despair, this is a great source of information for the Product team. Be sure that you capture feedback on the product, especially why the user did not convert. You'll find that there are many things that you can do, some of which may be minor, to improve the user experience and increase your conversion rates. So, be sure to take advantage of the opportunity to gather this valuable input.

Wrapping Up

Because PLG is a GTM strategy, implementation decisions should be made well in advance of product launch. This early determination will be especially important if there is effort required to make the product ready to support PLG. In short, discuss this as early in the new product cycle as possible and avoid the mad scramble as you're trying to roll out your product. Which brings me to one last point. PLG techniques and processes should be repeatable. As I laid the plans for PLG in my organization, I called out areas of reusability to the Engineering team and asked that they always consider how new products would be incorporated into the processes we were building. The methodology in determining the PLG techniques to use, and when to use them, have also been documented to help drive future product discussions.

There are many tactics that can be used in a PLG growth strategy. The strategy that our Product team is implementing includes freemium and trials, as well as an automated onboarding experience, in-app signups, in-app promotions, "did you know?" notifications, and context sensitive in-app assistance to name a few. Many of these tactics go hand-in-hand, and are sometimes required, depending on your market strategy. Assess your situation carefully, and be sure to choose the right tactics for your organization. How do I know which tactics to use, you ask? There is a ton of information available on PLG that dives into much greater detail than I have provided here. One of the frameworks that I used as a starting point was the MOAT framework (Market, Ocean, Audience, Time to Value.) This framework was created by Wes Bush of ProductLed. I'd highly recommend his website and his book as a starting point for you on your PLG journey.

Wishing you all the best

Mike