How to Enable Product-Led Growth

The rise of the consumer internet has created a new era in how people buy and use software. People no longer want to interact with salespeople or marketing campaigns—at least not at the expense of experiencing the product they're purchasing. Instead, buyers prefer to self-educate—according to a 2015 Forrester report, nearly 75% of B2B buyers would buy through an app or website rather than a salesperson.

In this article, Anupam Jindal, Founder and CEO at getfulcrum.io shares what founders of early to late-stage startups are now looking to learn about—Product-Led Growth—and how the approach can potentially help businesses expedite growth.

What is Product-Led-Growth? 

Product-Led Growth (PLG) is a framework that focuses on the product experience to drive outsized growth across the user ladder of acquisition, activation, engagement, and monetization.

The entire business bears the burden of creating a product experience that drives sustained and exponential growth. Simultaneously, a specific PLG function can help to amplify the impact.

PLG vs. Product Function

One of the most frequently asked questions about PLG Function is how it differs from what typical product teams do.

There are some overlaps across the two functions. However, the core difference is in their respective approaches and the goals they are trying to achieve.

A PLG function is more business metrics and goal-driven process, whereas a typical product team function is user feedback and vision driven. Another difference is that the PLG function gravitates towards data exploration to find growth opportunities, and PLG teams also work across and outside the product. On the other hand, a typical product team gravitates toward user research to build user experiences and focuses only on a niche product area.

Anupam gave an example to understand the difference better. 

For example, in a product team, you need to build a new feature because users are missing this feature versus the PLG function, you introduce a new feature, and you want to get people to adopt this new feature. You find a way to get them to know about it. That's where the difference is. We use a lot of data exploration under the PLG function to find opportunities. You are often doing user research on the product team function to build better user experiences.

When Do You Need a PLG Function?

Until a company finds a good product-market fit, the PLG function has limited value. When the company expands its existing customer base in a repeatable manner, they must hire a PLG leader. 

"For me, you need a standalone function when you get to a product market fit because from that point onwards, it's exponentially driving growth. You want somebody focused day and night and thinking about how they can optimize every second. As founders, you are primarily responsible for building that foundation into the company, where it's a much more natural way of using product experience to grow your base,” Anupam says.

It is never too late to begin developing a PLG function. Today's companies like Adobe and Cisco are launching PLG initiatives. Furthermore, PLG motion works better for SaaS companies targeting SMB and mid-market customers through bottom-up sales motion.

Characteristics of Product-Led-Growth

Since you’re building the PLG function, you need to know its characteristics. Here are three essential characteristics of a PLG function:

1. Outcome Over Output (OOO): The outcome over output is the critical question for a product company. If the company wants growth, the focus should be on results. Did the implemented function drive an outcome? Did it move the business metric or not?
2. Velocity: The PLG function is more velocity-driven than product teams, who spend much time understanding the user research feedback. If a hypothesis moves the needle in the PLG function, the team will double down in that area. If it doesn't, there will be a change in the direction and work on something more impactful.
3. Pivot: When a strategy seems not to work, there is a quick turnaround of work, focusing on something more impactful rather than getting into a deep rabbit hole.

Core PLG Channels

To work the PLG function, you need to look at communication channels that work for users. Businesses should find innovative ways to know where their customers exist and target those channels.  

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The following channels would serve as a starting point:

• In-App: Communication with users inside the app gets the most hit because while in the app, users think about the product, use the product, and carry a high brand perception (in most cases) for the product. In-app callouts should be part of the core workflow. If the goal is to drive attention to a new feature, identify how it can be helpful to core users and how it extends the core product's use cases. Then, serve relevant call-to-action (CTA) in those connecting places.
• Email: Emails have long been an important marketing channel. Companies frequently send emails announcing new signups, free trials, feature launches, and other promotions. The email channel has become standard, but it is no longer practical for marketing. Email clients already route these emails to promotional sections, or users have become accustomed to ignoring them. As a result, everyone's emails are bombarded with millions of promotional materials and drive limited action. Conversely, the email channel continues to serve relevant operational updates to users (e.g., subscription changes, user invites, critical alerts).
• Integrations/Messaging Platforms: Slack and Discord are emerging as new platforms for expanding customer reach. However, one must exercise extreme caution here and keep the information relevant and focused. Otherwise, there is a risk of losing integration adoption, which will almost certainly hurt business goals. Worse, some may criticize the business on social media platforms for creating noise on these highly productive channels. 
• Community Forums: These communities exist in various formats and places, including public Slack or Discord channels, podcasts, technology or interest-specific communities like Python or ML-based communities, meetup groups, or forums. Pick a few communities that align with the target user persona, become deeply involved in those places, and constantly nurture these communities for a long time. It is almost impossible to drive short-term ROI in these places, and rightly so.
• Website: The website has a variety of channels for users to communicate. For example, websites are used for communication between each other or with the site's owner. The most common form of communication is through comments on posts or the posts themselves. Users will usually click the comment button on a particular position and can then type their thoughts into it.

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Anupam shared a story about how Airbnb gathered website listings. 

They were a marketplace trying to find a way to get listings on their website. They were new. So why would anybody come and put their listings on? And until they didn't get listings, nobody would go and book their places on Airbnb. So, it was a chicken and egg problem. What they did was very innovative. Airbnb identified that many listings exist on Craigslist, which is popular in the US, so they dump all their listings into Airbnb. They solved the problem of getting the supply; now, they could generate the demand because they had the reserve.

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This is one of the core things about PLG function - finding innovative ways of where customers exist, where supply exists, where demand exists, and being in there and finding ways to get to them.

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Freemium/Free Trial Strategy

While building the PLG function, one of the most challenging questions for founders is what goes in the free bucket and what goes in the paid bucket. Naturally, the target market and its behavior heavily influence this decision. For example, if the company attempts a traditional bottom-up motion targeting SMBs and the Mid-market, the customer mix should look something like this:

• 50% of customers on the free plan: Create features that most users get value without charge. They should be able to experience the core value proposition and use the product regularly. As they adore the product, word of mouth is crucial for these people.
• 45% of customers on a self-serve paid plan: (Across all self-serve paid tiers): The self-service tiers are most likely divided into 1-3 paid tiers. The 80/20 rule is applicable here. More customers are in the lower-priced tiers, while fewer are in the higher-priced tiers. These features should be simple to implement and provide significantly more value than the free tier.
• 5% of customers on the enterprise plan: This will account for 80% of the company's revenue in the later stages. There can be expansions in this tier without slowing down the previous levels. The features here need more than an account manager and premium support. Otherwise, the sales team will struggle to get anybody on the call. The elements in this tier are often complex to set up and provide organization-wide value to customers.

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The following step is to commercialize the Freemium strategy to maximize upgrades on paid plans. Here are several options:

• No Free-Trial: It’s a strategy but significantly limits growth potential for the bottom-up approach in the SMB and Mid-market.‍
• Only do an opt-in Free-Trial after activation: The goal is for customers to want access to more features eventually and, as a result, to begin their Free Trial. It might work if the free plan is good enough to keep users interested. Then, later, they will realize a more pressing need for a paid feature.‍
• Default everyone to a Free Trial on sign-up: Get users to realize the maximum product value during their first few days of trying it. Then they can choose whether to keep using the paid version or return to the free tier. As a result, users are more likely to set up and explore premium features in the first few weeks of their journey than later.

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New Product/Feature Adoption Framework

When working the PLG function, you’ll release a new product/features. The new product/feature adoption is an engagement, retention, and expansion play. When companies launch new product lines, they often turn to their existing user base to drive adoption. As a result, raising new product awareness and interest becomes a much easier task. To make it work, here are the three steps:

• Find it: The goal here is to increase the discoverability of the new product/feature. 
• Want it: Once the discoverability is sorted through, the next step is making the value proposition of the new feature clear. Messaging is important. It should be clear, concise, and answer the WHY for the target persona. At the same time, often, words are not enough.‍
• Do it: Through the last parts, the companies hope to convince users to test this excellent new product/feature. It will be a shame to lose this interest from users when they are ready to act.

Tools For the High Velocity Product-Led Teams

IT tools are a necessary component of any software company. PLG functions are no different. These tools are essential for maintaining high velocity, being outcome-driven, and pivoting when necessary.

Most of the tools listed below provide some startup credits or a generous Freemium product version.

• Product Behavior Analysis: Mixpanel

Mixpanel is a product behavior analysis platform that helps businesses analyze user behavior and measure the effectiveness of their products. It provides a range of features for product managers, developers, and analysts to track and analyze user behavior across web, mobile, and other digital platforms. These features include custom event tracking, funnel analysis, user segmentation, A/B testing, and alerts.

• Business Metrics Analysis: BigQuery

BigQuery is a fully managed enterprise data warehouse that provides built-in features such as machine learning, geospatial analysis, and business intelligence to help collect and analyze data.

• Experimentation (A/B Tests): Growthbook

GrowthBook is a modern, open-source platform for feature flagging and A/B testing, designed for data teams, engineers, and product managers. It helps companies analyze experiment results and facilitates code deployment.

• Product Design: Figma

Figma allows anyone with permission to access projects, files, pages, and frames. This type of selective sharing will enable designers, product owners, and developers to share what is required in bug tracking tools and community software such as Confluence or SharePoint.

• Project Management: Use What Product Teams Are Using

There are many choices, and everyone has a slightly different taste in the project management tool.

• Internal Documentation & Project Scopes: Notion

Notion is a single space where teams can think, write, and plan. Capture thoughts, manage projects, or even run an entire company — and do it uniquely.

• In-App Notifications: Userflow

Userflow allows an entire team to create customized in-app tours, checklists, and surveys without coding.

• Marketing Campaigns: Customer.io

Customer.io is a marketing automation platform that enables businesses to create and execute targeted marketing campaigns to engage with their customers. The platform offers a range of features for businesses to communicate with their customers through various channels, including email, SMS, push notifications, and more.

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