Product-Led Growth
Rob Sanchez
As I mentioned in the last post, I’ve been spending some quality time with the Product School podcast while running and going to the gym. As I listen there are certain episodes that I flag for further review. This is another article that’s spun out of my notes on an episode called Product-Led Growth featuring Amazon Senior PM Hina Kamra!
Before discussing the ins and outs of PLG Companies, it’s important to understand the evolution of PLG. In the 80s sales would occur in the field, folks would go from office to office to make their pitch and present their software or services. This lasted until the end of the 90s when telemarketing was in full swing, most sales would occur via phone calls and jobs were outsourced to call centers. In the late 2000s there was another shift, this time towards content marketing, targeting specific channels to find sales opportunities. In 2010 this ramped up more as automation was brought into the picture to help streamline content marketing and sales. Now here in 2022 Product- Led Growth is sweeping through companies and taking the main stage.
PLG is a business methodology widely followed by modern and very successful tech and SaaS companies where Product sits at the center of the organization for all activities including sales acquisition, retention and expansion. Having Product this way creates and promotes alignment for every department in the organization. Product is the largest source of sustainable and scalable business growth.
Typical sales acquisition models for PLG start with offering the product for free or “freemium” service. Providing these services free of cost at the beginning before requiring payment and\or offering a base level of features and usability for free with more value to be had after paying.
This is often done with demos and free trials to allow the customer to use and experience the product. At this stage companies want to minimize any cost friction to get customers in the app to see the value to be had. For pricing it should be non-committal with no conditions at first, then once the customer is pleased or when they see the benefits of the app they can pay for full service.
When the customer is on the platform it’s all about creating a self-serve experience for them. In PLG we want the customers to onboard themselves and explore the product on their own using self-education materials and documentation. There should be a way for customers to sign up and test things with minimal or no company representation to sign up.
Customers should continue exploring the free or “freemium” product with minimal support. Things like chat services, support desks, documentation and training videos can be used to help with the “self-service” model. The goal of the PM is to reduce any friction during these stages.
The reason why PLG companies start with a free or “freemium” product is to give immediate value to the customers. Which is so important I’ll say it again. Giving immediate value to the customers is why Agile\Scrum and Product-Led Growth are preferred. Give value early and often to help customers and show them the actual tangible benefits of using the product. Take feedback and work via continuous improvement to provide more value. First handle the value, then the financials. This value driven approach provides transparency and builds excellent partnerships between a product and its users. When customers get value early, often and for free the next piece of PLG magic comes into the picture the “network” or “viral effect”! This is the raison d'être of PLG and the success to be had in this model. Users happy with the value they receive will quickly spread the word and invite other users. This can replace and even surpass the efforts of having a big team of sales folks. The user does the marketing and the selling when they are happy, this allows the Product itself to be a channel for expansion.
For Product Managers at PLG companies the number one priority is to create a customer backward product. PMs need to start with a focus on solving customer problems and adding value to the customers' lives. Theories like “Jobs to be done” can help to analyze these potential improvements to focus on the most important things. The PM is responsible for the “wow factor” customers experience in the product and should be hyper focused on the value to be had while creating a seamless customer experience. This is easier said than done of course, but if it’s achieved then the PM has been successful.
The customer experience and product navigation should have zero friction. Onboarding should be very easy and simple for the customer, this also should take no time from the company. Provide the materials needed for the customer to onboard themselves and improve the application to cover any gaps or friction found. The whole process is about signing up customers fast and focusing on them while they use the product. Sounds very obvious but many organizations are not thinking about this at all.
PMs should set goals related to real, actual metrics not opinions and leadership suggestions. See my previous article on OKR Driven Product Management. At every stage PLG companies need to rely on their product data. The product data is the single source of truth for the whole organization. Again this is something many companies are quick to dismiss. You’d be surprised how many SaaS companies have no data on their product other than user count or revenue.
The Product Manager at a PLG company should lean into the network effect and rely on it. Products should be built in a way that generates demand or at least that’s the ideal for PLG companies. They rely on users bringing in other users. Moving reliance off traditional sales channels to focus on products that generate demand and user data allows companies to make the right decisions and continue to grow and acquire new business.
So who is doing this you ask? Well just a few small companies.. like Amazon, Google, Zoom, Atlassian, Dropbox, Mailchimp and many more. The most successful product companies in tech rely on PLG.
One company in particular that has truly mastered PLG is Slack. Slack for those who don’t know is a messaging service that allows team collaboration, sharing, organization and much more. Slack uses PLG as its main driver for acquisition, retention and expansion.
Slack Customer Acquisition: Free of cost for the customer at the beginning with a very smooth and seamless onboarding process (no friction!). It’s crazy simple to try using Slack and it should be just that simple to try any other PLG Products. Slack offers extremely easy navigation for users and focuses on the customer journey and customer centricity of their product to give value at every step starting immediately with acquisition.
Slack Customer Retention: Slack like any good PLG Product quickly becomes part of the users everyday life with a very high engagement rate. This keeps retention very high for Slack as they replace messaging, sharing and team collaboration apps throughout the organization to create a single source of connection. The retention rate is so high for Slack now that it’s a challenge for a company to consider replacing slack with any one system.
Slack Customer Expansion: Users recommend each other in Slack and the company has made it very easy to add outside users as well as to participate in multiple channels and teams. Users can reference each other and use gamification features to build a community within the organization that starts and continues to influence and invite others.
Slack Revenue: While it’s not been mentioned in this article yet Revenue is the most important at the end of the day. Slack gives value to the customer first for free before charging or earning money from them in other ways. It’s very quick for a user to begin using it for free and to understand what they would be happy paying for. Various features, services and add-ins are available which require one time payment or an account upgrade to use.
The Product Team in a PLG company is a pivotal piece as you can imagine. The team should be hyper focused on creating and building products while keeping customers at the center. The PM responsibility doesn’t stop with building the product but should extend to cover the entire lifecycle. Continuous Improvement is the mantra that should ring through the halls of the Product Team and the PLG company.
The Engineering Team is also very important as they are the only way Product Management dreams come to fruition. This team should be focused on the overall contribution to the customer journey not the current feature list or next item on the sprint. It’s important for this team to think big picture as their insight being so close to the code is invaluable. This work is typically done via 2-3 week sprints to roll out incremental features instead of dropping major releases. (See Agile articles on Apt 113 for more details).
The Sales Team is next, despite earlier statements about how PLG does some of their work it doesn’t actually displace the Sales team. Instead it alters the role of a sales rep to act more as a consultant gathering functional requirements, speaking with customers and prospects to understand their needs completely while relaying details in towards the product.
The Marketing Team is extremely important in PLG as they are responsible for creating promotion channels for the company and for showing prospects the value that’s created throughout the lifecycle. The big idea here is that Marketing should be working to earn trust with customers, allowing clients to use the product, gain value and hopefully find the product indispensable.
Customer Support Teams in PLG companies are based on self-service mechanisms to empower the customer to solve their own problems as much as possible. This can be done with Detailed Helper Pages, FAQs and Video training. Customer Support should also have goals for cross and up selling customers. They can be looking for opportunities to upgrade their customer and offer better services while keeping “value for money” in mind.
Last and certainly not least are the Business Intelligence and Analytics Teams. In PLG companies that have mastered the art like Pinterest, Dropbox and Slack all decisions are data driven. The only source of truth in a PLG Company is their data. The BI team should be spending at least ¼ of their time in providing the right set of data to the product, engineers, sales or marketing teams so that informed decisions may be made about planned features and customer needs.
So, what’s next for Product-Led Growth companies? Well, it only gets better from here as more and more companies have adopted the methodology. COVID sparked a big change in the way business was done too which brought even more folks in out of the cold to enjoy the warmth of PLG. Focusing on Product-Led Growth can transform a business quickly and help to take it to the next level.
If you enjoyed this article please let me know and continue to check back for more info and insight on Agile Product Management. If you’re interested in working on Scrum teams or would like certification and training advice Apartment 113 is available for consultations.