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Benefits of a PLG Strategy

March 14, 2022
Lantern

Product-led growth, or PLG for short, is a term used for revenue generation that uses the product to acquire interest and convert new customers. While traditional sales and marketing activities can be supportive, a product-led growth strategy is where prospects see a product in action and say "yes, I am interested in that!" The experience and utility of the product itself close the deal.

Benefits of a PLG Strategy

There are several benefits of using a product-led growth strategy. In fact, the popularity of this as a go-to-market strategy is rooted in the fact if you have to build a product anyway, doing so in a way that reduces necessary sales and marketing resources is a huge benefit. In the case of software companies, many of which are founded by engineers with little (or no) sales experience, letting the product serve as the "first salesperson" makes perfect sense.

First, PLG puts the product front-and-center, which can be a huge advantage in today's market where buyers are inundated with choices. A clear understanding of what the product is, does, and the problem it solves helps prospects self-select in a matter of minutes. A long, cumbersome, and complicated process for understanding what your product does is unlikely to hold the interest of your prospect long enough to convert into a sale. Letting the product shine better serves your potential customers and your business.

Second, a product-led growth strategy can help to build a sustainable competitive advantage by differentiating the company's product from competitors. Think of the software you use on a daily basis where you were the decision-maker in purchasing it. There are almost certainly competing products. In fact, you are likely at least aware of at least a few of them.  So why did you choose the product you ended up purchasing? Most likely you decided to purchase because you understood the value proposition and identified a feature or use case that solved a need. If it had taken weeks, days, or even hours to discover that feature or use case, you might have never become a customer. Because the product was front and center for you to experience without the burdens of a complicated sales process, your decision was made easy.

Third, product-led growth can generate more leads because people are drawn to use a product when they see it in action, rather than being pitched about it up-front by outbound marketing efforts. This may well be the most important part of product-led growth. By nature, humans are experiential. Telling someone about a physical product or a piece of software is rarely superior to letting them experience the product or software on their own. By giving people the chance to see a product in action and interact with it via a demo or test account, you will create a stronger sales funnel.

Fourth, product-led growth has the benefit of closing the deal with buyers that are already satisfied, leading to lower churn rates and higher customer satisfaction. Many founders of software companies assume that acquiring customers is critical. Often, however, they overlook the importance of retaining customers.  Churn rates can be the death knell of any business. With a product-led growth strategy, your customers will be making a decision to buy after they have experienced the product. This means that, to a large degree, they are satisfied with the features, functions, and benefits of your software before they enter their payment information. This leads to fewer cancellations and a stronger business for you.

Sales Drawbacks of Product Led Growth

The downside of a PLG growth strategy is that building a great product takes time. From talking to potential customers to set a product roadmap to actually shipping code, even the most rudimentary application requires time to create. Now consider that your application is unlikely to be rudimentary. A traditional sales and marketing engine can begin in earnest while a product is in development. WIth product-led growth, you actually need a product before go-to-market can generate momentum.

Without the pull of outbound marketing, it can be challenging to assemble or find enough interested people to start the sales process. Building a better mousetrap, as the saying goes, is not sufficient to succeed in business. There has to be some pull, some initial ember that engenders customer interest.

Finally, if the company's product is truly different from competitors, it may take some additional effort on the marketer's part to build messaging and branding which highlight the unique value proposition of the product. Yes, users may indeed intuit the key differentiators on their own. Relying on them to do so without any guidance at all is a tremendous risk.

Product Led Growth as Part of Go To Market

This highlights a critical point if you are considering a PLG go-to-market strategy: product-led growth does not mean product ONLY growth. Additional sales and marketing activities can and should augment a PLG strategy. For example, even though product-led growth often benefits from customer acquisition via word of mouth and referral, customers will still need supporting messaging before making a purchase. This messaging may be simple, but it is necessary and cannot be done in a sloppy manner. Consider the importance of an "About Us" page on your website or a series of blog posts about why your product is solving a real problem. A potential customer that is excited for the product and ready to pay will likely need at least a little reassurance that your product and company are legitimate.

From a sales perspective, product-led growth still requires some of the same sales resources as companies that are less product focus. Consider Slack, perhaps the most well-known recent product-led growth success story. Signing up for a new Slack account is easy and intuitive. Inviting friends or coworkers to the workspace is equally simple. But for an organization of hundreds or even thousands of employees, a Slack deployment is more complicated and more expensive. Slack does employ a sales team to work on larger, higher-value opportunities. If your PLG software company is selling or planning to sell higher-value plans to the mid-market or enterprise, you will almost certainly need a sales team or at least someone in the company paying attention to sales.

Examples of PLG Software Companies

Despite these challenges, product-led growth is quickly becoming the go-to strategy for generating revenue and building a successful company, particularly in the software space. Some notable examples of companies that have successfully used PLG include Slack, Atlassian, and Zoom.

Each of these companies offers a product (or in Atlassian's case a group of products) that are easy to start using and solve a single key problem.  Slack is for instant messaging between coworkers, colleagues, or groups. Despite the inclusion of telephony and video call capabilities and a number of other features, Slack is - at its core - a messaging application. Within a few clicks, a new user can install the application, log in, and start communicating with other people via text message.  Similarly, in just a few clicks a user can be on a Zoom video conference. Once the screen lights up and a coworker or family member appears, understanding the value proposition is crystal clear.

In each case, the product is explaining what it does and what problem it solves through the experience of using the product itself.  Try explaining Slack, Zoom, Jirra, or Dropbox to someone.  Wouldn't it just be easier to let them use the tool and see for themself? That is product-led growth in a nutshell.

Best Practices in Product Led Growth

There are several best practices that can help software companies get started with product-led growth. While there are a number of important nuances and details to explore when it comes to a PLG strategy, these core components will help any business get started on the right track.

Clear Features and Benefits

First, the product needs to be core feature-oriented .that is, it should have a central theme or benefit which is easy to understand and use. Think back to the examples of Slack and Zoom; even with a wide range of buttons, features, and functions, both tools have a very clear core feature from which all else derives.

Free Trials and Demo Accounts

Second, free trial or demo accounts are a must. Giving prospects the chance to use the product is at the heart of product-led growth. From a "light" version of the tool that is free to a time-locked trial, conversion rates will improve by an order of magnitude if prospects can experience the product without first entering payment information. Some tools, like Zoom, allow users to join a Zoom meeting without even creating a Zoom account. Which option is right for your company is a question to be answered by each individual company.

Instructions and Documentation

Third, clear instructions on how to use the product if users get confused can go a long way in helping them see value from the product. Even the best products struggle to connect every dot for every customer through user experience alone. From an FAQ to a technical data sheet, there are a number of options available to educate users on how to use the product if they get stuck. Make sure and invest in this documentation so that prospects and new customers are able to fully understand the value proposition of your application.  Otherwise they may churn or never purchase at all.

More (Video) Instructions

Fourth, video clips of different features can help to explain how they are used. In fact, short videos highlighting a function or dashboard or tool not only assist users of the application but also can create marketing momentum. Many people are visual learners, particularly when it comes to software. Showing them via screen capture how something should work and why it matters is often far preferred compared to reading a list of steps in an instruction manual.

Flexible Billing and Account Options

And fifth, flexible billing and account options can be very useful in a bottoms-up sales funnel. An individual user at a Fortune 500 company is unlikely to navigate your tool through a complex legal and procurement process. Giving them the option to pay with a credit card increases the chance they will use the product and share it with other people in the organization.  Many applications, including Slack and Yammer, earned massive enterprise adoption this way. By making it easy for individual users and small groups to recognize the full value of their software, small accounts can grow.

Product Led Growth as Your Go-To-Market Strategy

Product-led growth is becoming the go-to strategy for revenue generation because it puts the product front-and-center and closes the deal with buyers that are already satisfied. While there are several challenges to overcome, the benefits of using PLG make it well worth the effort.

To get the most out of your product-led growth strategy, you need a customer relationship management platform built for PLG. Lantern is mission-built with software companies like yours in mind. From identifying champions and power-users to delivering churn reduction analysis, Lantern bridges the gap between a traditional CRM like Salesforce and the new way of attracting and retaining customers for your SaaS.  To see Lantern in action, contact us here.