What is product-led Growth (PLG)?
Since 2018, the concept of product-led growth (PLG) has emerged as a major tenant of some of the fastest-growing SaaS companies that have exited at eye-watering multiples in recent years. Unlike traditional SaaS go-to-market strategies driven by large sales and marketing teams, organizations that embrace product-led growth place the product and user experience at the forefront of driving customer acquisition, conversion, retention, and expansion.
Companies that adopt the PLG spend significant resources developing and offering a seamless user experience (UX), self-service, and self-learning capabilities baked into the product, and they prioritize finding ways to empower users to explore and advocate for their products in communities that they create, leading to accelerated growth and widespread adoption through customer success and social-proof rather than marketing.
The rise of product-led growth
The evolution of software over the years has played a pivotal role in shaping the PLG movement. To this day, software companies like Microsoft, Salesforce, Oracle, and SAP rely heavily on sales teams to drive new business and revenue through direct sales and complex licensing models. If you’ve ever bought from one of these companies, you’re no stranger to pressurized time-based buying environments, multiple different bundles and editions of different products to buy, add-on services, and pricing in Excel sheets loaded with formulas. However, as technology advanced and user expectations shifted, a new wave of software companies emerged differentiating themselves by prioritizing user experience and self-service capabilities.
This movement was partially fueled by the rise and democratization of cloud computing, which enabled companies to deliver software as a service (SaaS) to customers quickly and iterate rapidly based on user feedback. This foundation, coupled with the common negative customer sentiment commonly associated with the business software sales process through the buyer’s point of view, created the opportunity for companies like Scratchpad, 1Password, Superhuman, Slack, Notion, and more to flip the script by focusing more on the product and the community around it rather than on building the massive sales and marketing engine around it.
How product-led growth differs from traditional SaaS
From a go-to-market perspective, traditional SaaS organizations typically rely on heavy investment in sales and marketing teams to generate demand and drive new customer acquisition through outbound prospecting, demonstrations, long sales processes, and negotiations. In contrast, PLG SaaS companies focus on creating seamless user experiences by offering free trials or freemium models and leveraging in-app experiences that drive learning and adoption.
Referrals and communities drive customer acquisition
By allowing users to experience the value of the product firsthand, PLG companies foster a sense of ownership and enable users to become advocates, driving organic growth and reducing reliance on traditional sales channels. This also enables them to create a culture of true loyalty among their user base that empowers them to sell on the PLG companies’ behalf.
Referral strategies are employed by almost every PLG company. One great example is Scratchpad. In the user interface of the platform next to the settings icon (which is always visible to the user, of course!) there’s an “invite” option that allows you to share the application with your team members or anyone in sales! Since the application is free, you’re simply sharing something because it helps you get your job done. No strings attached. This was an immensely helpful strategy for Scratchpad.
Another great example of a referral strategy at a PLG company is Superhuman, which has a very clever way of encouraging users to invite their team members and non-team members alike. Superhuman has a pinned non-intrusive prompt on your email sidebar that politely prompts you to invite the contact to join Superhuman.
PLG success stories
Several companies have successfully embraced PLG strategies, leading with UX, clever marketing, and bottom-up community-based selling. The classic example is Slack, the communication platform that disrupted the way teams communicate and collaborate. By offering a free version for small teams that brought them into a paid version as teams got bigger, Slack gained widespread adoption that led to rapid growth and market dominance in a short period of time by continuing to add more advanced features for their paid customers, creating even more compelling reasons for free users to upgrade. Similarly, Scratchpad, the pipeline management, deal inspection and sales forecasting application built for Salesforce users, offered a free version that lets users make up to 100 updates to their records in Salesforce per month, entirely free. That means, in order to hit the freemium limit, the users will have to be very actively engaged with the product. The Scratchpad team then user this user loyalty to gain adoption at the company level once enough groundswell among the users is developed.
PLG infrastructure on Salesforce
The tech stack for a PLG company is different than a traditional SaaS company in a few key ways. For one, the technology must be centered around one of four business outcomes:
Acquisition of new customers
Salesforce has many applications that are widely adopted by PLG companies for customer acquisition. For starters, Salesforce Marketing Cloud and Data Cloud empower companies with the ability to uncover and build profiles for users that can be leveraged to develop 1:1 marketing journeys for them. A big part of PLG is education and user engagement, which means the content has to be directly relevant and timely to them as if your company is marketing only to them. That’s exactly what Data Cloud, Marketing Cloud Personalization, and Marketing Cloud Engagement can deliver.
Conversion of free users to paid users
PLG companies should think of conversion as a playbook. For 1Password, the playbook was matching their existing massive paid user base with the companies that they worked for to get on-domain referrals and go wall-to-wall. For Superhuman, the playbook revolved around creating an immense buzz in a premium product, delighting users, and earning their referrals. There are many technologies that can come in handy for this. Salesforce Customer360 and Salesforce Service Cloud can provide a great framework for delightful onboarding workflows triggered by events that occur naturally as your users interact with your products. Taking that one step further, Salesforce Revenue Cloud enables you to put subscriptions in your customers’ hands, by surfacing their account billing, subscriptions, and upgrades from within your product or a billing portal powered by Salesforce.
Expansion within and outside of users’ domains
When we refer to on-domain expansion, we mean expansion within a company’s four walls. For example, if you’re a Notion user for personal reasons, Notion wants you to invite others from your company to use Notion until they can go org-wide and become your company’s Wiki and docs platform. There’s also off-domain expansion, which would be telling a friend that you don’t work with about Notion, and then setting up an account. The cycle continues, and the referrals compound over time. That’s why creating strong user groups and communities is so powerful. Keeping on the Notion use case, there are many local user groups that get together and organize their events through Slack channels created for the Notion community. Many other PLG companies like Apollo, Scratchpad, Mutiny, and more have awesome communities where users and prospective users can digitally convene.
Retention of paid users
Lastly, the metric that’s so closely tied to the hearts and minds of software company executives: net revenue retention (NRR), that is, the % of revenue that your company is able to retain on an annual basis of existing subscriptions + new subscriptions – churned subscriptions. In a PLG company, reducing churn is imperative. That’s why many PLG companies leverage Service Cloud and Tableau/CRM Analytics to create an early warning system that can help predict churn before it becomes an issue. When coupled with personalized omnichannel and in-app support, Service Cloud is a very impactful tool for keeping your customers happy.
Get your PLG strategy right
If your organization has adopted a PLG go-to-market or if you’re charting your path towards one, we’re here to help you map your technology roadmap to achieve the top PLG outcomes we listed above. Get in touch with us today.
