What are the mechanics of Product-Led Growth?
The last time I heard someone talk about product-led growth, the crux was that product managers were making all the decisions in relation to a product. Whilst that is surely worth talking about, it doesn’t accurately explain product-led (‘PLG’) growth.
PLG offers an alternative way of going to market with a product. It’s about designing and building products in such a way that the product itself can drive user acquisition, expansion, and retention. Things like subscription renewals or account upgrades are all done through the product, with the user being in full control.
Contrast this with a sales-led approach, where you need a sales organisation to get people to buy and use a product. PLG is particularly relevant with respect to ‘software as a service’ (SaaS) products. These products traditionally required sales and a dedicated ‘buyer’ to get the software purchased, after which the rest of the organisations could start using the software.
If you think about well-known SaaS products like Calendly, Dropbox, Salesforce and Zoom; they all apply PLG principles and mechanics to grow their customer base and usage. I’ve identified three key characteristics that these and other PLG products have in common: no barriers to entry, built in viral loops and offering free trials or freemium.
1. No barriers to entry — Products have been designed in a way to remove as much as friction as possible. Friction that stops people from signing up or using a product. Think of complex sign-up processes or lack of guidance on how to get started. Products like Shop Pay and Superhuman are good examples of products that have removed friction from the sign-up process and aim to make user onboarding as intuitive as possible. They also offer simple but engaging product tours for people to get started on a product, as illustrated by Ghostwriter.ai, Miro and Typeform.
2. Built in viral loops — Product led growth involves applying viral loops to both marketing tactics and the product itself. Take Calendly, an app that takes the pain out of scheduling meetings. The product is inherently collaborative since you need at least two people to schedule a meeting :) Each time a person sends a Calendly invite to someone, the product is both used and promoted. This creates a viral loop with the product effectively marketing itself.
Loom, a popular video recording product is used by people wanting to share their video content with others, and multi-player mechanics have been built into the product. Think about how Loom notifies the content creator every time someone views their content or offers the ability to leave comments on the video.
Companies like Miro and Airtable offer templates for common activities like daily stand-up meetings and managing projects. Not only do their template libraries help users get started (avoiding a ‘cold start’ problem), the activities covered in these templates are collaborative almost by default. As such, more people will be encourage to use the product and invite others.
3. Offering free trials or freemium — Especially for SaaS products, freemium pricing and free trials have proven a good way to get people to use your product, eventually converting them into paid customers as their usage and value perception of the product grows. I recently reviewed a product called Compose AI which doesn’t charge users for its sentence auto-completion capability. Users start paying for the product once they want further customisation of their writing automation.
Similarly, companies use free trials for people to get used to the product. When contemplating offering a free trial of your product, it’s important to consider aspects like the duration of the free trial and whether users need to provide their credit card details so that they can automatically become paid customers.
Main learning point: “Product-Led Growth: How To Build a Product that Sells Itself” is the title of a well known book about PLG. Whether you work on a product that sells itself or your product does need sales support, the mechanics of PLG offer us valuable ways to improve the ways in which customers engage with our products.
Related links for further learning: