The rise of the consumer internet has created a new era in how people buy and use software. People no longer want to interact with salespeople or marketing campaigns—at least not at the expense of experiencing the product they're purchasing. Instead, buyers prefer to self-educate—according to a 2015 Forrester report, nearly 75% of B2B buyers would buy through an app or website rather than a salesperson.
In this article, Anupam Jindal, Founder and CEO at getfulcrum.io shares what founders of early to late-stage startups are now looking to learn about—Product-Led Growth—and how the approach can potentially help businesses expedite growth.
Product-Led Growth (PLG) is a framework that focuses on the product experience to drive outsized growth across the user ladder of acquisition, activation, engagement, and monetization.
The entire business bears the burden of creating a product experience that drives sustained and exponential growth. Simultaneously, a specific PLG function can help to amplify the impact.
One of the most frequently asked questions about PLG Function is how it differs from what typical product teams do.
There are some overlaps across the two functions. However, the core difference is in their respective approaches and the goals they are trying to achieve.
A PLG function is more business metrics and goal-driven process, whereas a typical product team function is user feedback and vision driven. Another difference is that the PLG function gravitates towards data exploration to find growth opportunities, and PLG teams also work across and outside the product. On the other hand, a typical product team gravitates toward user research to build user experiences and focuses only on a niche product area.
Anupam gave an example to understand the difference better.
For example, in a product team, you need to build a new feature because users are missing this feature versus the PLG function, you introduce a new feature, and you want to get people to adopt this new feature. You find a way to get them to know about it. That's where the difference is. We use a lot of data exploration under the PLG function to find opportunities. You are often doing user research on the product team function to build better user experiences.
Until a company finds a good product-market fit, the PLG function has limited value. When the company expands its existing customer base in a repeatable manner, they must hire a PLG leader.
"For me, you need a standalone function when you get to a product market fit because from that point onwards, it's exponentially driving growth. You want somebody focused day and night and thinking about how they can optimize every second. As founders, you are primarily responsible for building that foundation into the company, where it's a much more natural way of using product experience to grow your base,” Anupam says.
It is never too late to begin developing a PLG function. Today's companies like Adobe and Cisco are launching PLG initiatives. Furthermore, PLG motion works better for SaaS companies targeting SMB and mid-market customers through bottom-up sales motion.
Since you’re building the PLG function, you need to know its characteristics. Here are three essential characteristics of a PLG function:
To work the PLG function, you need to look at communication channels that work for users. Businesses should find innovative ways to know where their customers exist and target those channels.
The following channels would serve as a starting point:
Anupam shared a story about how Airbnb gathered website listings.
They were a marketplace trying to find a way to get listings on their website. They were new. So why would anybody come and put their listings on? And until they didn't get listings, nobody would go and book their places on Airbnb. So, it was a chicken and egg problem. What they did was very innovative. Airbnb identified that many listings exist on Craigslist, which is popular in the US, so they dump all their listings into Airbnb. They solved the problem of getting the supply; now, they could generate the demand because they had the reserve.
This is one of the core things about PLG function - finding innovative ways of where customers exist, where supply exists, where demand exists, and being in there and finding ways to get to them.
While building the PLG function, one of the most challenging questions for founders is what goes in the free bucket and what goes in the paid bucket. Naturally, the target market and its behavior heavily influence this decision. For example, if the company attempts a traditional bottom-up motion targeting SMBs and the Mid-market, the customer mix should look something like this:
The following step is to commercialize the Freemium strategy to maximize upgrades on paid plans. Here are several options:
When working the PLG function, you’ll release a new product/features. The new product/feature adoption is an engagement, retention, and expansion play. When companies launch new product lines, they often turn to their existing user base to drive adoption. As a result, raising new product awareness and interest becomes a much easier task. To make it work, here are the three steps:
IT tools are a necessary component of any software company. PLG functions are no different. These tools are essential for maintaining high velocity, being outcome-driven, and pivoting when necessary.
Most of the tools listed below provide some startup credits or a generous Freemium product version.
Mixpanel is a product behavior analysis platform that helps businesses analyze user behavior and measure the effectiveness of their products. It provides a range of features for product managers, developers, and analysts to track and analyze user behavior across web, mobile, and other digital platforms. These features include custom event tracking, funnel analysis, user segmentation, A/B testing, and alerts.
BigQuery is a fully managed enterprise data warehouse that provides built-in features such as machine learning, geospatial analysis, and business intelligence to help collect and analyze data.
GrowthBook is a modern, open-source platform for feature flagging and A/B testing, designed for data teams, engineers, and product managers. It helps companies analyze experiment results and facilitates code deployment.
Figma allows anyone with permission to access projects, files, pages, and frames. This type of selective sharing will enable designers, product owners, and developers to share what is required in bug tracking tools and community software such as Confluence or SharePoint.
There are many choices, and everyone has a slightly different taste in the project management tool.
Notion is a single space where teams can think, write, and plan. Capture thoughts, manage projects, or even run an entire company — and do it uniquely.
Userflow allows an entire team to create customized in-app tours, checklists, and surveys without coding.
Customer.io is a marketing automation platform that enables businesses to create and execute targeted marketing campaigns to engage with their customers. The platform offers a range of features for businesses to communicate with their customers through various channels, including email, SMS, push notifications, and more.