What is Product-Led Growth in 2023

product-led growth vs sales-led growth

If you have been following the SaaS world for the past few years, you must have heard all different kinds of people talking about “Product Led Growth”, or PLG, in short.

The concept isn’t new; it was always around us.

But the popularity is new, and this is because of the rise of digitalization.

TL;DR

Product-led Growth prioritizes the user-product interaction over the sales processes. PLG aims to create an experience where the user has access to (a part of) the product and can decide to make a purchase on their own accord.

Providing a Free-Trial or a Freemium model is considered the first step to becoming a product-led company.

More than 9 of all 10 companies that have used product-led growth strategies in the past are planning to increase their investment in PLG, while not a single one is planning to decrease it.

Some of the most famous PLG companies that achieved success thanks to their product-led strategies are:

  • Slack grew to $26B worth thanks to their user-friendly product-centric approach.
  • Dropbox incorporates word-of-mouth marketing (WOMM) and product-led growth (PLG) together perfectly, which made it possible for Dropbox to make $ 1B worth of sales in only 10 years.

In short, if you want to adapt to the new world, you should know how PLG can save you and your business.

How?

This article will help you get from the A to the Z of product-led success, so buckle up.

We will talk about:

  • What Product-led Growth is,
  • How it applies to real-world situations,
  • Statistics about PLG,
  • What the benefits of a Product-Led Growth Strategy are,
  • And sum up with bullet points.

Without further ado, let’s get into it.

Introduction to Product-Led Growth

Product-Led Growth, or PLG, is a go-to-market strategy that puts the product right in the center of everything.

In other words, it prioritizes the user-product interaction over the sales processes.

PLG aims to create an experience where the user has access to (a part of) the product and can decide to make a purchase on their own accord.

Providing a free trial or a freemium model of your product is one of the simplest examples of PLG.

Instead of relying on long demo calls, cold outreach emails, or advertising budget issues, you can focus on enhancing your product.

And this way, your product will sell itself.

At least, that’s the theory.

There are steps to follow and key actions to take when you are creating a product-led experience for your users, such as:

  • Learning what PQLs are and how to make the best out of your PQLs,
  • Knowing what Onboarding looks like for Product-Led teams and how to implement it,
  • Understing the difference between product-led growth vs. customer-led growth
  • How to balance free and paid features,
  • How to keep your product user-friendly while still keeping it functional,
  • What the key converters are in a PLG strategy, and how you can make the best out of each.

As you see, there is a lot to unpack.

And we will keep you informed and educated about all those topics and help you reach quick success. But before all those, let’s see how Product-led growth strategies helped other companies:

The Application of Product-Led Growth: Real-World Examples and Statistics

product led growth companies 2023
Product led growth companies, according to a study made by Bessemer Venture Partners

Unicorns, huge startups that are on the edge of becoming unicorns, and even giant corporations are switching to PLG nowadays because the ROI of PLG is higher.

All communication is digital, and people have gotten used to fast and efficient processes.

No one has time for email threads just to make a purchase.

And definitely, no one will trust your product unless they get to experience it first.

That’s why Slack, Monday.com, GitLab, Zoom, Dropbox, Docusign, Asana, Squarespace, HubSpot, Shopify, Wix, Zendesk, and many more are focusing on PLG.

Let’s unpack the strategies of some of those companies:

1. Slack – Instant user engagement

Slack is a $26.23 billion worth company. If you aren’t using Microsoft Teams, chances are that you use Slack for business communications.

And not only businesses, but clubs, communities, schools, and other organizations ditched loooo..oong email threads thanks to Slack.

There are 2 reasons why Slack became so popular:

  1. They allow users to get the most out of the product without paying.
  2. They have a fantastic user onboarding journey.

And those two factors combined make the keystone of being a product-led company.

Let’s face it: Slack has way too many functionalities, integrations, benefits, and so on. But most users can comfortably use almost all of them because Slack teaches how to use itself perfectly.

The image below shows how simply they announce a change.

what is product led growth in Slack
Product led growth example from Slack, based on UserOnboarding Academy

But the actual factor that made Slack the go-to tool of large enterprises is the fact that they didn’t leave out the sales team entirely. PLG doesn’t solely rely on self-serve marketing and sales; it still requires marketing and sales efforts.

Slack's product-led onboarding
Slack’s product-led onboarding

The only change is how much importance you put into those.

Slack perfectly onboards users without needing the help of a human, but when it comes to big decisions, Slack’s sales team handles it well.

2. UserGuiding – Transparent pricing and Endless help

UserGuiding is a digital adoption platform that provides onboarding and surveying features.

As an engagement tool that aims to make PLG companies reach their goal easier, there is a thing or two that can be learned from their PLG methodology.

The first and most important aspect is their transparency in pricing. Apart from providing a free trial, they list out all the details of the pricing and what each tier includes.

UserGuiding's transparent pricing for product led growth
UserGuiding‘s transparent pricing

The second great thing about UserGuiding’s Product-led approach is how they provide fast and instant access to both the signup button and the resource center.

Providing self-serve onboarding doesn’t end with walking them through your product. You also have to make sure that they get all the answers to possible questions as soon as they ask one.

UserGuiding's transparent pricing with a support for product led growth
UserGuiding‘s transparent pricing with a support

Providing a live chat option, an on-page resource center or an interactive help center will help you reduce the number of support tickets and convert more easily.

3. Dropbox

Dropbox uses WOM marketing along with PLG strategies, and that is how it still competes with Apple’s iCloud and Google Drive.

product-led growth via referral marketing in Dropbox
WOM marketing is used by Dropbox along with PLG strategies

Never have I ever seen someone that had to interact with a human – even an email written by a human – while deciding to buy cloud software (for personal use). But I have seen and known people that signed up to Dropbox with a referral code in order to get free storage. Well, most of those people paid for more afterward, but the initial reward they got made them stick with Dropbox for longer than others.

product-led growth via referral marketing in Dropbox
Dropbox‘s referral marketing

All in all, Dropbox is a prime example that proves good engagement and a bit of virality are the best friends of a solid PLG strategy.

Impact of Product-Led Growth: Quantitative Insights

  • 91% of companies plan to invest more in PLG, while no companies plan to decrease their investment.

Taking into account that major companies, such as Slack, Intercom, Pendo, etc., are implementing product-led growth as their main focus, the fact that 90% of those companies are increasing their budget proves that PLG has worked best for them.

  • 65% of companies that have $10-20M ARR plan to double their investments in PLG.

When was the last time you responded to a cold-outreach email? When was the last time you even opened it? If there are 2 products with the same capabilities, one requires you to pay upfront, and the other has a free trial, which one would you go with?

The answers to these questions show why the majority of products are willing to invest more in product-led growth instead of a larger sales team or spending more on ads.

The majority of companies used to collect MQLs and create email lists to rely on as their main source of leads. This strategy still works but isn’t as effective as focusing on the users that are actually willing to pay.

The Benefits of a Product-Led Growth Strategy

If you are using a sales-led growth approach right now and have designed your product to fit that model, you are probably wondering, “Is it worth the change”.

It is worth the change.

Here are the top three benefits of choosing PLG over other strategies:

1. Reduced Cost of Customer Acquisition

By turning your product into a self-converting tool, you reduce:

  • The workload of your sales team. This enables them to focus on better deals, enterprise contracts, and a higher conversion rate.
  • The number of low-quality leads that take up the time for your sales and support teams. This makes it easier to keep the motivation of the sales team higher.
  • The number of repetitive support tickets. A key factor of PLG has an amazing onboarding flow. By analyzing the repetitive tickets, you can easily enhance this flow and reduce the friction between support and the users.

In short, you get rid of most of the factors that push you to spend more on the acquisition and raise the CAC.

Instead, you can repurpose all that money to have a better marketing strategy, test more ads, improve development time, or even take the company to a retreat so that they are more motivated to make sales 🤩

2. Enhanced Customer Retention

When you give the customer the liberty of choosing to pay you – without directly being in contact with them during the process – you are increasing the chances of retention.

That user has already been through your product. They experimented with it, completed the free trial, or got the most out of the freemium and decided to pay.

So apparently, they found your product to be a great fit for their needs.

Your great user onboarding convinced them to convert once, and the chances are, they are willing to remain a customer for a long time.

3. Faster and Easier Growth

As the name suggests, Product-Led Growth has the product at the center of all growth operations.

All the marketing efforts are in line with the product team’s ambitions, and the development goes according to customer needs and the feedback you gathered about the product.

Thanks to this alignment and all efforts directed to a singular aim, acquiring growth becomes easier and faster.

Conclusion: The Impact and Future of Product-Led Growth

Product-led growth is a popular concept for a reason – that reason being that it works.

It gives all teams more time to prioritize the product and the customers a better overview of the product before making a purchase.

If you weren’t considering PLG as your main strategy by far, now is a great time to start.

If you were considering it, I hope I could help you strengthen your arguments.

You can also learn more from 10 PLG experts on social media that share invaluable insights and strategies!

Frequently Asked Questions

What is the best definition of product-led growth?

Product-Led Growth, or PLG, is a go-to-market strategy that puts the software/app/product right in the center of all processes and aims for a self-selling product.

What does product-led mean?

Product-Led companies prioritize the self-serve user engagement process over sales and marketing operations.

What is a PLG strategy?

A PLG strategy aims to enable the users to explore the product without external interference (such as emails or sales outreaches) and centers around enhancing the initial user journey with the product.