One of the latest buzzwords in the Product world is ‘Product-Led Growth.’ But what exactly does this mean? And does focusing on a product-led growth strategy make you a Growth Product Manager?
Let’s examine this “new” trend…
What Does Product-Led Growth Mean?
Product-led growth strategy is a methodology that positions the product as the primary driver of growth for the company. It’s cheaper, reaches more people, and has proven results for SaaS, B2B, and B2C companies.
In a nutshell, product-led growth is a strategy which focuses on the product itself being the primary driver of growth for a company, rather than investing in expensive and elaborate marketing campaigns. When you want to attract new users, you do it by catering for them within your product, not sending out a flashy newsletter trying to convince them to buy.
It’s popular among Product people, because it’s a customer-centric, sustainable way of sharing your product and attracting new users.
As with all new and fashionable concepts, there are many ways to describe it. One of the best explanations comes from The Product-Led Growth Collective:
“Product-led growth (PLG) is a business methodology in which user acquisition, expansion, conversion, and retention are all drive primarily by the product itself. It creates company-wide alignment across teams—from engineering to sales and marketing—around the product as the largest source of sustainable, scalable business growth.”The Product-Led Growth Collective
The thing with product-led growth is that it’s not exactly new. The concept of a product being a driving force for the acquisition of customers is very common with SaaS companies, and has been for some time.
For example Zoom, which was created in 2011, has managed to grow to 10 million users (200 million in 2020…and we all know why!) despite entering the market was full of competitor products from enormous and well-funded companies like Google and Microsoft. The secret? A product-led growth strategy.
So if this was all happening back in 2011, why are we talking about product-led growth all of a sudden, if it’s always been there?
Thanks to rising competition, and more money than ever being plugged into SaaS products, customer acquisition is an incredibly expensive business to be in. According to the book “How to Build a Product That Sells Itself”, it’s getting easier to build a business, but not easier to grow one.
Software also just isn’t as special as it used to be. Costs are rising and willingness to pay for products is going down. Unless you’ve found something truly unique to build, customers are always going to find a cheaper or even free alternative.
You have to find a way to leverage your product, make people fall in love with it for themselves, and then work on retaining them as users.
What Are the Benefits of a Product-Led Growth Strategy?
- It’s cheaper. Sure, you could pour tons of money into Product Marketing and create endless amounts of free content, spend your valuable time hosting webinars, and agonize over whether your LinkedIn bots sound too…robotic. Or, you could let your product do the talking. You’ll always need marketing, but a product-led strategy helps you scale it back.
- It reaches more people. A freemium model effectively speeds the customer along their journey by getting them into your product sooner. The quicker you get them using it, the less time you have to spend nurturing them until they finally hit that ‘download’ button.
You might also be interested in: Yes, Product Managers Should be Growth Hackers, and Here’s Why
Product-Led Growth Real-World Examples
Slack: B2B Product-Led Growth
Slack is a great example of a software company which sells its product…with its product. Product-led growth is increasingly popular among SaaS companies, and Slack is no exception.
According to Statista, Slack has 12 million daily active users in 2020. While it’s unclear how many of those are paid, 37% of Slack’s 8 million users were paying customers in 2018.
Chances are, you’re familiar with Slack! (If not, there’s no better place to get familiar than within our Slack community for Product Managers…just saying…)
Try to think about how you first came into contact with Slack. It might be that you joined a new company who uses it for central communication, or perhaps you joined an online networking community. There are also many online courses, particularly in tech, which use Slack to bring their remote student base together. Many groups working on side projects together use Slack to organize themselves and community as they likely don’t have a shared office space.
Now it’s become the de-facto choice for so many companies because everyone already knows how to use it. It’s even a verb, “I’ll Slack you the details.” which is perhaps the greatest marker for mainstream success!
How did Slack achieve this status, and how do they maintain it? Have you ever seen a viral ad campaign or read their hottest whitepaper on LinkedIn? No, you got to Slack through their existing users.
Here’s how they do it:
- Every department focuses on the product. Marketing wants to make it a lead magnet, the sales team use it to qualify prospects, and the engineering team increase retention/conversion with a quick time-to-value.
- Try-before-you-buy. The freemium model puts the product directly into the hands of anyone who wants it, creating an enormous user base and FOMO for those who don’t have it.
You might also be interested in: How to Get a Product Management Job at Slack
Pinterest: B2C Product-Led Growth
Advocates for product-led growth often point to Pinterest as a shining example of how it’s done, and the incredible results you can achieve. As of 2020, they have roughly 335 million monthly active users.
In an interview with UserVoice, Pinterest’s Engineering Manager talked about how they managed to grow from 1 million monthly users to 100 million monthly users in just 4 years, back in 2016. He went into some detail on how they managed their growth strategy. It boils down to;
- Putting user experience over metrics. Shipping features which drop metrics but overall improve the product for the user.
- Growth teams are full stack. Growth teams must be capable of implementing any features they want for themselves.
- Effective leadership. Setting growth goals the entire company can get behind.
- Cross-collaboration. When Growth is product-driven, PMs, designers, and developers work together to add features.
What does all of this look like in practice? Back in the earlier days of Pinterest, it was decided by leadership that they needed more men on the site. Pinterest was, as is, predominantly used for female fashion and crafts favored by women. Marketing-led growth would probably make little change to the actual product, and focus on targeting ads at men.
However, with their product-led growth strategy, Pinterest personalized the content they served up based on the user’s gender. Making these changes within the product made males one of the fastest growing demographics in their user base.
Learn More and Start Growing
So your interest is peaked, and you want to dive deep into product-led growth strategy? As a Product Manager there are a few action steps you can take:
- Make sure the perceived value and the experienced value of your products are aligned. If you promise that a free trial of your software will give users X and it actually gives them Y, your churn rates will be sky high.
- Rethink the way you think about metrics. Taking after Pinterest, prioritize features which will have the best impact for your user, not the ones that will improve certain marketing metrics. Craft your KPIs and OKRs with this in mind.
- Rethink what ‘customer’ means to you. Freemium users should be handled with the same care as paying users, as they now help to build the demand that drives your growth. You need to make sure this is reflected in their journey.
- Make the sign up process as easy as possible. No product should have a difficult user-onboarding experience, but yours should be your pride and joy. If getting people through the doors is your biggest driver of growth, that process needs to be a priority for your teams.
- Make TTV (Time To Value) a priority. This is especially important if your product is an app, which users only have to click and drag to uninstall and forget forever! You need customers to fall in love with your product hard and fast. Work with your engineers to make this their focus.
Product-Led Growth Resources
- You can read about how Expedia’s Senior Growth Product Manager, Satya Singh approaches Product-Led Growth here.
- Learn how Airbnb Growth Product Manager does it! He’ll guide you through growth teams in B2C companies, key frameworks and principles in growth, acquisition, and retention.
To learn more about growth from our expert speakers, you can find some great talks on our YouTube channel:
And if you are interested in learning more about advanced Product Management techniques, we encourage you to become part of Product School Pro, our Most Exclusive Community of PMs.