TL;DR
- Product-led growth saas is becoming the dominant strategy for SaaS companies, focusing on letting the product itself drive growth through superior customer experiences and self-service.
- The shift towards PLG is due to its cost efficiency and effectiveness in a market where customers prefer to explore and understand products on their own terms.
- Examples of successful companies adopting PLG like like HubSpot and Slack , demonstrate real-world applications and successes of the strategy.
- The contrast between PLG and other growth strategies like SLG and CLG is that PLG offer a more sustainable and customer-centric approach.
- The six reasons making PLG indispensable for SaaS businesses, include its alignment with market needs, streamlined sales cycles, and enhanced user experiences leading to higher retention and revenue per employee.
- The pillars of successful PLG implementation include designing with the end-user in mind, delivering upfront value, and investing in product development for a seamless user experience.
If you are running a SaaS company, ask yourself these questions:
- Is your customer service lacking lately?
- Are you overwhelmed with all these business model options out there?
- Are you in a dilemma about choosing the best tactic in today’s fast-paced market?
There are a million ways to garner customers and grow a business. However, making your product the centerpiece of your business will almost always be beneficial, especially if you are a SaaS company. In Product-Led Growth or PLG, your product or service drives everything, from customer acquisition and business expansion to customer conversion and retention.
What is Product-Led Growth All About?
Basically, Product-led Growth, or PLG, is about allowing your customers to try out your product before they decide to buy it. Evidently, the product experience is at the core of your customer relationship, driving your customer acquisition and retention.
Hence, the product is anything but ordinary. It is innovative, intuitive, user-friendly, and self-serving. It is designed to enable easy customer onboarding and engagement at their own pace.
PLG is very much the trend and will remain so for many years to come, says a 2022 survey. According to the statistics, about 47% of businesses want to double their investment in PLG strategies, primarily because it is resilient and can withstand harsh market conditions.
SaaS product-led growth is designed to initiate the sales cycle. The customers are first allowed to experience the offerings and their features without committing to anything. Apart from driving customer retention and business expansion, PLG also helps create a more efficient sales process and data-driven product development.
Does that mean there are no other growth strategies for SaaS besides product-led growth? Not at all. However, spending excess money on marketing and sales or resorting to other traditional techniques may give you a different result.
Product-Led Growth Versus Other SaaS Growth Strategies
- PLG Vs. sales-led growth
As the term implies, Sales-Led-Growth or SLG involves salespeople who aim to emphasize the software benefits to a target audience to push sales, upgrades, and renewals. The sales representative’s prime job is to spread the word about the product, whereas, in PLG., the product speaks for itself. Essentially, SLG is a “push” tactic, and PLG is a “pull” tactic where the product is a magnet that attracts customers.
Compared to SLG, product-led growth is a definite advantage. It caters to the current requirement where customers, especially B2B buyers, want to be self-educated about the product rather than have a sales team explain everything. Also, when considering the costs of maintaining a sales team, PLG hardly costs you anything.
However, PLG may not be as effective if your product is:
- Complex to understand or completely groundbreaking.
- Requires a lot of capital to be created. (Hence free trial or freemium strategy may not be worth the trouble.)
On the other hand, it may be faster and more efficient to sell directly to a few decision-makers if your product is designed for large companies. Ultimately, there are no hard and fast rules here, but if your product is SaaS, product-led growth is a better choice.
- PLG Vs. customer-led growth
In customer-led growth or CLG, your customers are at the core of your sales. You rely on their feedback to drive product development, sales strategies, and company growth. Your customer’s preferences influence everything. Rather than resorting to other marketing tactics, you rely on your customers’ word-of-mouth to drive acquisition, onboarding, and retention.
You need a big sales team to talk to your customers and gather feedback in many ways. While this strategy may sound easy, CLG can bite a big chunk off your budget compared to PLG costs. Hence, here again, you need to consider the cost of maintaining such a team, which is why CLG is ideal for seasoned PLG companies with adequate financial resources.
In a nutshell, CLG gives you the best of both worlds (PLG and SLG), albeit at considerable expense.
Hence, it is evident that PLG is the driving force behind SaaS companies. The proof is evident as giants like HubSpot and Slack have started to dominate the SaaS landscape. More statistics also show that organizations are leaning towards PLG. Here’s the evidence:
- The average PLG organization is worth double the public SaaS index.
- Product-led growth is used by 83% of SaaS companies that reach $100m ARR within five years.
- PLG market capitalization has gained popularity, growing from $21 billion in 2016 to $687 billion in 2020.
So it comes as no surprise that product-led growth is touted as the "modern Go-To-Market” strategy and future of development. So, what reasons drive companies (especially SaaS players) to adopt product-led growth? Let’s assess the details.
Also Read: All You Need to Know About Product-Led Growth
6 Reasons Why Product-Led Growth is the Future of SaaS Businesses
1. It perfectly matches the product and the market.
The core concept of PLG is to prioritize customer experience and hoist your product at the center of your growth strategy. Through this process, you better understand your customers' needs, resulting in a refined product that can be developed to meet those needs.
2. It creates a quicker, hassle-free sales cycle.
Product-led growth allows customers to onboard themselves, eventually leading to quicker sales cycles and ROI. It is important for your product to enable users to accomplish a key outcome so that you can convert them from free users into paying users as quickly as possible.
3. It enables a better user experience.
Product-led growth prioritizes a product designed for customers to gain user experience and onboard themselves. This user experience fosters meaningful product value without any need to guide your customers.
4. It lowers your customer acquisition expenses.
When the product itself drives your acquisition costs, there is no need for marketing and sales efforts. The lesser your customer acquisition expenses, the more cost-effective your growth and the better your profit margins.
5. It enables higher RPE or Revenue Per Employee.
Having scalable software and a product-led approach enables you to accomplish more with fewer employees. A smaller team also means higher revenue for every employee, thus creating a win-win situation for everyone.
6. It enables higher customer retention.
When customers are happy with your product, it evidently leads to higher customer satisfaction and retention. Happy customers rarely let go of a product they like, so you have lesser churn rates and better sustainability. Customer acquisition is easier, and existing customers always engage with the product.
That said, there is no tailored solution to implement product-led growth. There are no hard and fast rules nor a set template. Moreover, the PLG approach that works for one business may not work for you.
However, in PLG, there are three pillars and three tactics that all companies should try to adopt.
SaaS Product-Led Growth & Its Three Pillars
1. Always design your product with the end-user in mind.
Creating a customer-oriented product requires lots of groundwork to understand why your customer will want to buy and use it. Secondly, this problem-solving capability needs to be packaged into a user-friendly product. Lastly, it necessitates turning the product into a symbol of prestige.
2. You must deliver value before attempting to capture it.
The first step to achieving success in PLG is to make your customers realize the value of your product. Once they cross that step, only then will they be willing to pay for it. Ensuring that users can effortlessly navigate the product and swiftly address their issues is imperative.
3. Take a GTM approach to investing in the product.
Investing wholeheartedly in your product with a Go-to-Market (GTM) intent is vital. It may seem obvious, but it's essential to fully support your product when pursuing a Product-Led Growth (PLG) model. This means allocating resources to product engineering and development to ensure a frictionless user experience. It's crucial for all departments to align their focus on the product, making it launch-ready and scalable.
While it's natural to make adjustments along the way, launching a product prematurely with bugs, inadequate customer support, or excessive complexity that requires human intervention can have severe consequences. Remember, PLG relies heavily on positive word-of-mouth, so if users have a negative experience, it can spread quickly, tarnishing your reputation.
To ensure success, invest in comprehensive product development, streamline usability, provide exceptional customer support, and prioritize a seamless user experience from the start. This approach will significantly enhance your chances of positive user feedback and foster a favorable reputation in the market.
Product Led Growth - 2 Key Criteria to Consider
There’s no shred of doubt that PLG delivers notable benefits. Your switching to PLG will depend on:
- Your product
- Business model
- Market conditions
- Organizational structure
- Sustainable plans
- Ideal Customer Profile or ICP
There are two key criteria to consider when adopting SaaS Product-Led Growth:
1. Take time to explain the intricacies of PLG adoption to everyone concerned- from the stakeholders to your sales team. To make them believe in the change, explain the benefits, procedures, and the change of roles in every department.
2. Create enough space and time for the PLG approach to take root and grow. Take, for example, HubSpot. The company successfully pivoted and started small, like a start-up within the company. HubSpot evidently expanded with time. So the trick is to start small and wait for it, instead of making significant changes in a single go.
The product-led growth revolution is in full swing, and it's high time for SaaS businesses to carefully consider hopping on board. With our innovative pricing implementation platform, Togai is leading the way in enabling companies to embrace this transformative approach. If you're ready to unlock the true potential of your business and experience the power of product-led growth, don't hesitate to talk to us.
Discover how Togai can implement your pricing strategies 10x faster in less than a day and drive remarkable growth for your business. Don't miss out on this opportunity — schedule a demo now and embark on a journey towards success.
