The current software market is highly saturated, and marketing alone isn't enough to make people buy anything. Wouldn't it be great if businesses didn't have to rely so much on increasingly ineffective paid marketing efforts?
What if your users and customers were the main driving force behind the popularity of your SaaS solution?
Many businesses feel exactly the same way. Modern growth experts don't believe that you can sell anything with good marketing alone. Those who are up to date and follow the current trends are putting more and more effort into product-led growth, which sits on the service team.
This article is the only introduction to product-led growth you need. We'll explain what it is and show you examples of companies that have successfully created products that sell themselves. In fact, I happen to be a product owner at one of them.
But first, let's define this concept.
What is Product-Led Growth?
Product-led growth emphasizes the product as the main driver to acquire, activate, and retain customers. It builds a company-wide alignment across all departments and teams, focusing on the product as the primary source of scalable and sustainable business growth.
You have probably heard terms like 'freemium,' 'try-before-you-buy,' and 'free trial'. All these definitions go hand-in-hand with the product-led approach.
Tidio, for instance, is a freemium service. The product is an ecosystem of chat and mailing solutions, including chatbots, live chat, and email marketing templates for e-commerce.
The forever free plan allows users to have up to three chat operators, send 500 marketing emails per month, install desktop and mobile apps, have 3rd party app integrations, and unlimited chats. Paid plans provide an enhanced version of these features, e.g. additional notifications and bot triggers. This way, users can play around with the service without spending a cent, see how it solves their problems, and later make a purchase.
Product-led growth is inseparable from a product experience that expands your customer base. The core principle is to deliver value long before you ask a customer to make a purchase.
An excellent example of this approach is Visme, an all-in-one platform for businesses to build a visual brand. It started as an alternative to Canva and PowerPoint but developed into a unique visual branding ecosystem.
Visme offers advanced features for creating charts, reports, and presentations. It offers team collaboration possibilities and grows exponentially as more teams join and make it their default visual tool.
"With our freemium model, we have always been able to hand over the "keys" to our customers so they can try our product and its features for as long as they like before they decide to buy, and have the features of our platform do the selling." -Farzad Rashidi, Director of Marketing at Visme
A significant factor in their growth was their team functionality. They adapted their product for teams to collaborate through the whole creation process and share their content. It helped them introduce many more people to the service, meaning the product and its features did a significant part of advertising on their own.
But isn't it the case that every company is product-led in some way? After all, you won't make waves in the SaaS industry if you don't have a great product.
It's true. But it's only recently that companies have begun to recognize the importance of growth and product departments working together. Introducing features that become "viral" among end-users is usually at the bottom of the to-do list.
Over the years, however, this approach has changed dramatically. How?
Historical Overview: The Rise of the End-User
Since the introduction of software, we have traveled through three different eras:
- The Sales Era: Back in the 1980s-1990s, the first software solutions came in bulky boxes and took hours to install. Sales-led growth depended on salespeople's abilities to convince CIOs, aka the buyers, that they needed those sturdy boxes and that they had required IT compatibility.
- In the early 2000s, we entered the era of Marketing-led growth. It started with companies like Salesforce putting software into the cloud. Thus, non-technical executives became the new buyers. They paid attention to KPIs and ROI to test how software could help them.
- Finally, we've landed in the Product Era. Customers seek sustainable and scalable day-to-day solutions with exceptional user experience possibilities. That's where product-led growth came into the game and refined the way companies operate and sell.
So, what changed over the years? Well, now it's not supervisors, but the end-users who make decisions. And they definitely won't use tools they don't like. Here's what Eduard Klein, a growth expert, noticed over the years of working with international A-level companies:
"The main change that I noticed was the user's impatience, getting distracted easily, and therefore the need for a short time to value. We all seek instant pleasure, want to avoid pain and search for a shortcut to save time and energy. If the user does not understand the product or the user interface immediately, they give up." -Eduard Klein, Growth Expert
The change is pretty significant. Now, let's further dive into the primary differences between product-led growth and traditional tactics.
The Difference Between Product-Led Growth and Traditional Growth Approaches
To get a complete picture of the product-led growth approach, it's a good idea to compare it with a Marketing/Sales-led one. And that's what we did below.
- Traditional acquisition approaches start with paid ads on Facebook or Google. As soon as a potential client shows interest, they become MQLs (Market Qualified Leads) and are passed over to salespeople.
- Salespeople empower prospects by highlighting the benefits the customer will receive. The lead is at the conversion stage.
- They pay and become a user, passed over to the Customer Success Team. After all these steps, the user can potentially become an advocate for the company.
You get the drill - the client is tossed around from department to department without even a chance to play around with the product itself. It's all talk and no action.
In contrast, the product-led approach:
Here, we can observe a primary difference - the product itself guides the customer's first experience. And everyone is a customer by default!
- Marketing focuses on efficient thought leadership and knowledge sharing as their primary occupation. Ads are in place, too, but not as the main communication channel.
- Signed-up visitors are PQLs (Product Qualified Leads) who are able to play around with the product. Interestingly, PQLs convert 3-4x higher than MQLs. Salespeople keep an eye on the users to help them overcome any hurdles and understand the value the product brings.
- Customer Success here is not just a team - it's the end goal, the big vision. The whole company is aligned around the product that brings value to the end-users. Self-onboarding proves very successful - today, 75% of B2B buyers are leaning towards a self-serve model.
Currently, the product-led growth world is full of big names - think about Slack, Zoom, or Dropbox, which offer unique solutions to customers' pain points. They all allow users to test their product's characteristics before the purchase.
Do you remember the first time you used Zoom?
Probably someone wrote you a message like, "I'll send you a link to our Zoom meeting". And after the meeting, you thought that it was indeed a very convenient tool. And next time, instead of exchanging emails with someone all day long you invited them to a quick call on Zoom. That's how it spreads. Before you know it, the whole company uses it.
The same happened with other product-led giants. The new employee comes to the company and says, "Hey, in my previous company we used Slack for communication, and we could get everything done 5 times faster than by email". Suddenly, the whole team discovers what a great tool it is. Quality products spread like wildfire.
Eventually, they are growing fast and with little cash spent - their products alone supply excited users who convert to paying customers.
Looks very promising but still a bit abstract. What specific value does this approach bring?
Why Your Company Should Go "Product-First": The Benefits of Product-Led Growth
The good news is that the end-user growth model is beneficial both for businesses and their customers.
1. Fast and global growth.
Product-led companies grow faster due to a wider top-of-funnel and rapid global scale - today, product-led businesses are valued 30% higher than the public market SaaS index fund.
Additionally, you don't need dozens of sales reps for every geographical location - a freemium model opens your funnel to people early in their customer journey all over the world.
Zoom didn't send you to sales representatives to explain why you should choose them for your remote office; they let you have hands-on experience and try all of the features. And the product skyrocketed.
2. Low customer acquisition costs (CACs).
Your customers onboard themselves with a few clicks and see your product's value faster. Thus, you convert free users into paying customers without spending too much on long marketing and sales processes. It's a win-win.
3. Better user experience and short TTV (Time to Value).
You create a product to provide value and customer success instantly. Nowadays, people hate waiting for gratification. For instance, 21% of people open up a mobile app once and then abandon it completely by the 90-day benchmark.
So, if you are good with timing, they'll happily convert into advocates for your product. But if you're too slow to show your value, don't expect much.
You even don't have to wait for people to sign up for your service. Instead, start with your blog content. Here's what Max Benz, a SaaS content marketing expert, suggests:
"If you run a blog (or any kind of content engine) you should think about embedding your product experience in your content. Of course, this won't be possible for every product out there but in most cases, you can find an angle that works. For example, a graphic design SaaS company that blogs about graphic design templates could integrate suitable design templates directly into their content. This way, people who are looking for a template can simply use the software to solve their problems." -Matt Benz, SaaS Content Marketing Expert
Since many people can try your product for free, they can tell others about it. This opportunity creates virality and word-of-mouth advertising. Your product advertises itself!
A product-led approach directly impacts your growth strategy by shifting a focus on how the product itself can attract more end-users. When every team focuses on exceptional user experience, it leads to faster growth, excellent customer expansion, and stable retention.
Rashidi says, "Our marketing department, in conjunction with our customer success team, is a major source of information on what our customers really need. This directly impacts and guides the development of our product and the new features we regularly introduce."
Okay, at this point, you might realize that this approach is right for you. But how do you set it up?
4 Best Tips on Using Product-Led Growth for Better Customer Acquisition and Retention
1. Understand what value you bring.
What core tasks does your product do for customers? What feeling does it bring? You need to be in tune with the users and answer these questions in detail. For instance, people don't use Dropbox because their manager told them to. They use it because it's convenient.
If your app users beg their bosses to upgrade because the whole team uses it anyway, it's an example of end-user, product-led growth. If your sales department needs to prepare demos to convince team leaders, but the end-users struggle with using your app, and the training process is lengthy, then you're not a product-first company yet.
2. Communicate your value to customers.
Your revenue and acquisition model must go hand in hand. Your pricing plans have to be transparent, while the product has to match its price.
If your revenue model is confusing, users will be discouraged from signing up. For example, Slack clearly states what you get for what price and who can benefit from each plan. All top features are clearly indicated, so users quickly connect the dots and buy the most optimal plan for them. It's a good example to follow for your business.
3. Keep your promises.
Your perceived value has to align with the experienced value. Don't over-promise to under-deliver - this is a one-way ticket to failure.
We all have friends or family who tend to exaggerate their experiences. You don't want your business to be like that. If you promise 5 free live chat operators in the free plan - deliver that.
Not 4, not 6 - keep your original word, and your freemium plan will pay off.
4. Develop product features that create customer acquisition loops.
You want your product to be a never-ending attraction to new users. If one person signs up, it's vital to make sure their friends or colleagues do as well. It could be a virality effect like Slack workspaces that the whole office uses or networking opportunities like Airbnb provides.
The more users sign up using your link, the more discount you get, so you actually make an effort to advertise the service to your network. Users bring more users, who bring more users, who… Sounds like a dream, right? It's already the reality, though.
You might be wondering: apart from giants like Slack, Dropbox, and Zoom, what are some other companies successfully implementing a product-led approach? We got you covered with some real-life stories.
Product-First Companies: Examples
Tidio is a product-led company focusing on chatbots, live chat solutions, and email marketing. We let our products speak for themselves wherever you encounter them on the Internet. For example, there is our clickable logo saying "powered by Tidio" placed on our customers' chat widgets. The more people see it and click on it, the more people find out about our freemium plans and sign up.
"One simple design feature creates a never-ending cycle of traffic and sign-ups. In fact, Tidio gets 47% more customers from this "powered by Tidio" growth hack than from its three major app stores!" -Marcin Stoll, Head of Product at Tidio
The users easily onboard themselves to Tidio: instead of coding manually, they use a ready-made chat builder and email marketing templates. In our freemium plan we give three chat operator seats for free, and because of that Tidio can be used by the whole team, creating a virality effect. If 3 seats aren't enough, users can pay for an upgraded plan with unlimited functionality.
With Tidio being product-led, customers can play around, personalize the service to their needs, and see how it can solve their pain points, all before making a payment. As simple as that!
Visme is a team collaboration tool. It grows together with its users, making their needs a priority.
One of the most impactful product changes for Visme was enabling users to import their ready-made PowerPoints to edit them in the tool. It was difficult for users to recreate a lot of content manually, so some would unsubscribe. This change was a very successful upgrade:
"We had a ton of technical challenges while implementing this feature. But it proved to be worthwhile and paved the way for a whole new group of people to use our platform. -Farzad Rashidi, Marketing Director at Visme"
Visme's example shows how vital it is to enable a smooth transition between old tools and new ones. Product-led growth is not only about introducing something groundbreaking; it's also about making sure you minimize the friction when people choose your innovation over something they are used to.
Mailshake is an email-automation software. A product-led approach helped them align all teams to make customer success a focal point.
They get their Marketing team directly involved in building the product. Marketers write an email announcing new features months before the features even start to get built.
"If marketing can't come up with a substantial audience and angle for the feature, it will go back to the product team. They will come up with a "pitch" that the marketing team may have missed. If neither team can find the marketing value of the feature, it's deprioritized or removed from the list of features altogether. -Sam Molony from Mailshake"
This way, the approach is diversified, and every team takes equal responsibility for customer success.
So, what are the key takeaways from these stories?
What Is the Future of Product-Led Growth Strategy, and How It Will Transform Customer Acquisition Models
It's clear as day that product-led growth is very promising. Let's summarize our main takeaways:
- Product-led growth focuses on the product as the main driver to acquire, activate, and retain customers. Every team is responsible for customer success.
- We live in the Product era, where customers seek exceptional user experience. The days of Marketing/sales-led growth are soon to be over.
- The main difference between a product-led approach from traditional ones is that the product guides customers through their whole onboarding process. They play around with it long before making a purchase.
- The main benefits of this approach include fast and global growth, lower acquisition costs, better user experience, and virality.
- To succeed in product-led growth the company needs to understand what value it brings to the customer, communicate this value, and finally deliver it.
- The product is the main acquisition driver, so it's vital to ensure it promotes itself and creates acquisition loops.
- The most famous product-led companies include Zoom, Slack, Airbnb, Dropbox, etc. Success stories from businesses like Tidio, Visme, and Mailshake prove that a product-led approach is the way to go.
Today, a product-led approach is still a buzzword; but tomorrow, it will be the standard. It's time to think about what your company is doing to adjust to this norm.
Originally published Aug 4, 2021 8:00:00 AM, updated August 04 2021