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In the last decade, B2B companies have hailed Product-Led Growth as the next big unlock for B2B companies. But too often, people think of PLG in terms of product tactics like a self-serve check-out or a free trial.
This limited understanding of product-led growth often manifests as a single change to the user experience or monetization strategy inconsistent with the rest of the product and business model.
This disconnect, in turn, leads to user confusion, churn, and misaligned expectations for KPIs across product, growth, and marketing teams.
We spoke to Elena Verna, Growth Advisor and former Head of Product at Amplitude, and Kelly Watkins, Reforge Partner and former CEO of Abstract, who recognize PLG as one of two major growth motions — product-led growth (PLG) and sales-led growth (SLG) — and take us through a holistic look at its elements and benefits.
In this article, we will:
- Define Product Led Growth
- Share a few examples of product-led growth companies
- Emphasize why it’s important to implement PLG
Meet the Experts
What is Product-Led Growth?
In its purest form, a company that is product-led or implements product-led growth means that the product itself acquires, activates, engages, monetizes, and retains users, funneling them through a payment flow, most commonly without human touch.
Essentially, it’s a very different model than a sales-led or marketing-led motion, where most leads are acquired and funneled through the user journey using traditional marketing tactics and sales intervention prior to monetization. However, most companies today use a combination of product-led and sales-led growth strategies.
To really understand this loop, it’s important to take a step back and recall that the growth model has four parts.
Four Parts of the Growth Model:
- Acquisition: A user signs up for your product. Virality and advocacy are key drivers for new user acquisition, where an existing user experiences your product’s value and shares it with their network, leading to more new user sign-ups.
- Activation: A user experiencing the core value proposition of your product for the first time.
- Engagement: A user establishing habitual workflows around the core value proposition of your product.
- Monetization: A user paying for the value of your product or upgrading their current spend.
Some of the fastest-growing companies — like Slack, Zoom, Atlassian, and Dropbox — are taking on a product-led growth model, prioritizing product-qualified leads (PQLs) and Product Qualified Accounts (PQAs) alongside traditional marketing or sales-qualified leads (MQLs & SQLs) to funnel users from that acquisition stage to monetization.
What are product-qualified accounts or product-qualified leads?
A product-qualified account (PQA) is a sales lead generated by product usage rather than information collected at the marketing stage before product usage even happens. Similarly, a product-qualified-lead is also qualified by product usage, but also has buying power.
So in a product-led growth model, the leads are generated from a product growth loop.
Product Growth Loop
The new user signs up → they use the product → they invite others through the product, or generates other forms of value generation → they then attract more users and repeat steps of the loop.
In other words, as users use the product, their usage qualifies them as a PQA. The key here is that the product in the software is doing a lot more of the "qualifying work" than salesmen, and their users are qualified primarily through the usage of their product, vs. just demographic information.
As a result, PQAs and PQLs drive a much higher-efficiency, product-led growth model.
Benefits of Product-Led Growth
The primary benefits of a product-led experience are twofold:
1. First, products can scale to many users quickly.
For example, consider a product with self-serve activation and monetization like Zoom. Any user who wants to use the product can sign up today and purchase an upgraded account with very little friction because the product can sell itself.
2. Second, changes can be shipped to optimize the overall experience regardless of scale.
For example, Airtable, a database tool, embedded prompts in its onboarding flow for the user to import data from existing tools. This feature scales to all new users and ensures new customers receive value faster.
Benefits of PLG Come at a High Upfront Cost
However, a high upfront cost is needed to build and launch a new product experience.
For end-to-end product-led experiences to drive growth, the product needs to be truly optimized for the self-serve user because you don’t have people to guide the user through suboptimal technology.
In other words, an individual needs to be able to adopt the product on their own without a ton of setup, support, or hands-on help from another human.
This is when PLG is most effective because it enables a land and expand strategy, where individual users can try the product and spread it to other members of their team and potentially their whole company seamlessly.
"With PLG there are no bandaids. The user has to be able to understand and use the product entirely on their own. Sales and marketing doesn’t do as much to tape together the imperfections."
– Elena Verna, Growth Advisor and former Head of Product at Amplitude
Delivering this kind of experience requires enormous resourcing and organization-wide strategic alignment.
In these situations, if companies can successfully clear the upfront cost hurdle, a product-led experience will increase value exponentially with minimal cost per additional customer.
Due to its capabilities and cost implications, product-led experiences best solve frequent, straightforward problems. If your product can help users solve a well-understood problem or complete a recurring task on a regular cadence, a product-led experience is typically best.
Consider workplace productivity tools like Slack, Notion, or Gmail. Or developer tools like Gitlab. These tools help individuals solve simple, recurring problems that emerge in day-to-day tasks.
The product experience enables companies to scale value exponentially with minimal cost, decreasing friction for users to experience value and solve their problems.
Examples of Product-Led Growth (PLG)
Let’s bring this definition to life with a few real world examples.
Notion: A B2B Example of Product-Led Growth
Consider Notion, the simplified online scheduling tool.
We can imagine they have a few different use cases including individual, team, and enterprise.
They rely on product-led experiences to drive all growth outcomes for individual and team use cases, as illustrated in the image above.
- An individual can sign up and invite others to collaborate easily .
- Individuals have a self-service way to pay for upgraded access to more features, making monetization seamless.
- Team plan managers can also add users and manage payment completely self-served.
PLG Qualities paired with Sales-Assisted Qualities:
Meanwhile, their enterprise use case relies more heavily on sales.
- Acquisition, activation, and engagement are still product-led because an enterprise end-user can sign up for and use a lower-tier version of the product to realize the value. Assuming human touchpoints help enterprise accounts activate and engage, these growth outcomes are also sales-assisted.
- Monetization is sales-led because enterprise plans have no self-service monetization option. These larger transactions require support from a human being to help the buyer understand the plan benefits and overcome objections to purchase. We can assume that the revenue from an enterprise plan supports this sales-led monetization effort.
Notion’s growth hypothesis is fairly typical, with PLG leading the way for individual users and layering on SLG for larger accounts. But it’s not the only model that works.
Superhuman: A B2B Example of a PLG and SLG Combination
Let’s contrast Calendly with Superhuman, an email client that aims to increase productivity by reducing the time you need to spend in your inbox. Superhuman also has an individual, team, and enterprise use case, but their growth hypothesis is not identical.
Similar to Notion, they have product-led acquisition, engagement, and monetization for their individual and team use cases, as illustrated in the image above. But, they also leverage sales for larger revenue team and enterprise accounts.
PLG and SLG Combination Qualities:
The most striking difference is in activation, which is not self-service. Instead, Superhuman onboards customers individually with a 30-minute call to get the user set up and teach them how to use the product.
Why does Superhuman activate users with a sales call when flagship competitors like Gmail and Outlook do not? Well, there are a couple of reasons.
- Superhuman doesn't see itself as just another email service provider. They serve businesses and entrepreneurs who rely on elegant, easy-to-use, products that help them uplevel their work by helping them stay on top of all their communications.
- This enables them to charge more – so they have the revenue to fund individualized onboarding
- And, without this touchpoint, fewer people would set up correctly and discover advanced product features, leading to lower engagement and retention.
Notion and Superhuman are similar – they are both B2B, subscription workplace productivity tools. But they use different growth hypotheses given the nuances in their product and business model.
Slack: A B2B Example of PLG Monetization
We’re going to walk through an example that zooms in on product-led monetization because it’s a common fail-point for most PLG models.
In fact, many companies believe that product-led monetization only requires standing up a free or self-service option. In reality, these are necessary, but not enough for increasing revenue.
As we saw in the last example, for companies to optimize PLG, they must also have a plan for transitioning users to more advanced use cases over time — from individual to team to enterprise.
In this example, we're going to focus our energies on how to make those transitions work. It’s about creating a clear path to uplevel users from individual paid subscriptions to enterprise-level subscriptions.
Slack is a stellar example of PLG individual-to-enterprise conversion done successfully.
Slack allows any team of individuals to try the product for free; users can sign up without having to enter credit card information.
PLG Qualities that Optimize Collaborative Expansion Features:
Many teams love the product and upgrade to a paid plan because they want more product integrations, messaging history, or seamlessly calling with Slack huddles. As teams evangelized product usage, they advocated for enterprise-wide adoption.
Slack’s enterprise plan, with SSO, unlimited message history, and even HIPPA compliance made it easy for companies to adopt. As of 2022, nearly 80% of the US Fortune 100 businesses had enterprise slack accounts.
3 Reasons Why Product-Led Growth is Important
Overall, product-led growth models drive a much higher-efficiency growth model than sales-led or marketing-led models.
Let’s look at some of the direct benefits offered by a PLG model.
1. PLG can enable scalability. It’s often why businesses embark on a PLG journey. This is because certain product solutions will allow the business to scale without the need to scale human operations at a linear rate.
Most companies find success in achieving additional scale by layering in PLG motions across acquisition, activation, monetization, or engagement to augment existing marketing or sales-led growth motions.
2. PLG can also reduce costs in traditional sales and marketing.
“Paid marketing has become a war of attrition to try to outspend other people; what PLG does is it open up new channels versus bidding against others on the same keywords.”
— Kelly Watkins, former CEO of Abstract
With that said, it’s important to understand the investment tradeoffs.
“It’s not always that PLG is cheaper, it’s more about where you choose to shift your costs, like toward investments in your product versus paid marketing channels.”
— Elena Verna, Growth Advisor and former Head of Product at Amplitude
Although product investments imply real costs — for example, PLG products often offer some sort of free option, which will incur costs like storage and support — the benefits can often outweigh those costs.
For instance, Miro and Slack both entered the market without much spending on traditional marketing channels. Instead, both invested in free versions of their products and brand marketing efforts in lieu of channel marketing. Each company built individual champions that escalated through paid, team, and finally, enterprise usage.
3. Finally, PLG can build early users into product advocates by putting value realization before monetization.
“I have found that in the long term, building these advocates leads to greater lifetime value from customers. In many cases this is because companies can break the cycle of competing on price and avoid direct price competition.” — Kelly Watkins, former CEO of Abstract
When does product-led growth not make sense?
While we've seen that taking a product-led approach can be extremely valuable in creating a land-and-expand opportunity, it doesn't mean that PLG is for every type of product and audience.
In order to land, that product needs a robust individual use case at that low or free price point to get users to try that product. If you have the individual use case but it's really high-priced, it's going to end up having too much friction for that individual to adopt it.
It also really needs that quick time-to-value. If that product requires a ton of setup to experience that value prop, then it typically isn't great for a PLG strategy.
Then, for the expand part of that strategy, you need collaborative features that encourage individual users to spread the product to their teams, often without formal management involvement.
Shaun Clowes, former Head of Growth at Atlassian, says that users would install Jira on a random computer in the engineering department, and they'd watch it grow exponentially — from 10 users to 15 users to a ton of users.
In a few cases they had some large financial services clients that, by the time they realized how many of the engineers were using the product, already had 8 different licenses within the org. These clients were generating over a million dollars in revenue for Atlassian without necessarily any manager or IT department person even knowing it.
Product-Led Growth Drives Acquisition, Monetization, & Expansion
Product-Led Growth (PLG) is not just about quick-fix tactics like self-serve check-outs and free trials. Rather, PLG is one tool in your growth arsenal; it’s a holistic approach that focuses on acquiring, activating, engaging, monetizing, and retaining users through the product itself and expanding their user base further with collaborative features.
Companies like Slack, Calendly, Zoom, Atlassian, and Dropbox have successfully embraced PLG by prioritizing product-qualified leads (PQLs) to drive growth, revenue, and expansion.
While implementing PLG requires upfront investment, the long-term benefits can outweigh the costs. PLG's higher efficiency and ROI make it a compelling strategy for many businesses, but it's important to note that PLG may not be suitable for every product or audience.
To learn when and how to apply product led growth in more detail, take our full-length program “Product-Led Growth.”