Product-led growth strategies are gaining in importance. In my role as startup advisor, I get more and more questions about what it is and how it works. Therefore, I’ve compiled my most popular questions, answers, and sources into a brief overview.
What is Product-led Growth, and how does it compare to other growth models?
Product-led Growth means that you build the go-to-market strategy using the product as your vehicle. The product experience replaces or enhances typical inbound marketing activities or sales contact by offering early access to the product without talking to sales teams, making purchasing easy and offering friction-less onboarding
Instead of targeting buyers and decision makers, you focus more on users and teams, bottoms-up instead of top-down. Think about tools like Miro, Figma, Zoom or Slack where you download the software and just use it instead of talking to a sales person and running through a manual buying and onboarding process.
What are typical examples for Product-led Growth companies?
Is Product-led Growth a new marketing or sales model?
No, not entirely new. There have also been product-focused self-serve and bottom-up models in the past that worked without sales, such as Atlassian (some people will now cite Atlassian as a PLG example). But the category of Product-led Growth helps to build a consistent approach and most importantly, to think more about users and leveraging the product as a marketing and sales lever.
Does PLG bring new opportunities and perspectives?
Yes. What I find useful is that it triggers a thought process about how to align sales, marketing, product and customer success in the G-to-Market to build a 10X product experience. I find the idea of having a PLG mindset much more interesting than just talking about a new go-to-market model. This is especially relevant for traditional enterprise software companies that must adopt to new buying patterns.
Who invented the term “Product-led Growth?
This question is not relevant to understand PLG but has quite an interesting background. Of course, different people claim to have started the category.
Wes Bush, who wrote one of the first books on PLG, and Blake Bartlett, a partner at OpenView Partners, have done a lot to establish the term “product-led growth.
Wes has focused heavily on the education side, launching his own courses and an accelerator. Blake is a great example of how to create your personal brand around a topic and leverage it for your company.
What are typical go-to-market models and how do they compare?
- Marketing-led: Inbound Marketing with marketing automation for lead generation and nurturing
- Product-led: Product is the main vehicle for acquisition through easy access to testing and using
- Sales-led: Active sales outreach and account-based marketing for acquisition and retention
You find more models like community-led but the above mentioned are the key go-to-market functions.
Spoiler Alarm. I wrote a piece because I didn’t find what I was looking for:
Does PLG mean we don’t need sales people anymore?
In a purely product-led growth approach you wouldn’t involve sales teams. The go-to-market is driven by marketing, growth and product teams. Onboarding mainly from customer success.
Here’s reality: you can grow a business with an ARPA (average revenue per account) of below 1K or 2K per year through PLG. If you want to increase the average deal size, you need marketing and sales for these audiences. Selling an enterprise software with an ARPA of 10K, 50K or 100K needs sales teams. But there are companies like HubSpot who have a strong marketing-led background (inbound marketing), added sales teams and use product-led to approach smaller teams of users in the SMB market.
Why should companies add Enterprise Sales to Product-led Strategies?
You get the most out of it when you combine the different approaches (marketing, product, sales led). If you sell your self-serve model to SMB by targeting the actual users, you can expand your market by adding a sales team. The sales team can go big by taking it from single users and teams to divisions or the entire company. That means you increase your ARPA significantly.
Take Slack, a typical PLG company. Meanwhile, ca 50% of their ARR comes from enterprise sales teams (ARR 100K+ per company). Figma hired a bunch of enterprise sales people in the last months and so do many other product-led companies to increase ACV and growth with existing customers.
What is Product-led Sales compared to Enterprise Sales?
It can be debated whether it makes sense to use a new term or simply align existing sales models differently. Product-led sales is located between the PLG self-serve model and classic enterprise top-down sales.
While enterprise sales often focuses on selling larger deals from the beginning and implementing them centrally, product-led sales focuses more on continuous growth in the teams by using the user as an entry point and expanding with the help of enterprise plans.
What are typical PLG metrics?
Product-led growth uses typical SaaS indicators and focuses strongly on user and product. While traditional top-down sales-led models measure metrics around buyer and acquisition, PLG needs measurability for usage, adoption, onboarding.
The example of product-qualified leads (PQL) versus marketing-qualified leads (MQL) shows where the differences lie.
Is PLG a good fit for every company and product?
This depends on the customers, the product and the go-to-market strategy. If you are SAP or Workday, that might not be a fit in the first step. But you can still pick some elements and learn from PLG companies when it comes to a friction-less buying and onboarding experience.
What skills do my teams need to execute a PLG strategy?
Understanding buyer and user behavior, being able to build the entire journey, creating an experience that feels personal although no human is in touch. Enabling channels like Word-of-Mouth, using the product experience to build the brand, building a community and movement.
What did you learn?
Don’t forget that no go-to-market strategy is pure product-led growth. Marketing is always involved in acquisition, retention and expansion, and sales helps to catch larger accounts.
Now, even if you stick to your top-down sales-led model – just keep in mind that without getting users involved no go-to-market strategy will fly. Think about the PLG mindset and how you can use small pieces.
Dirk Schart is Director Growth & Marketing of PTC’s Vuforia suite and former CMO of the No. 1 Enterprise AR startup RE’FLEKT. He is a brand and growth leader and focuses on bringing B2B software and SaaS products to market —from zero to hero. Dirk is the former Director of SaaS Products at HyperloopTT, and helped scale SkyWork from 30 to 200+ in less than 18 months. He mentors startups at the German Accelerator in Silicon Valley and is the author of “Augmented Reality for Marketing”.