Product-led growth puts your product front and center in go-to-market efforts. This approach relies on your product to drive purchase, activation and retention rather than relying on sales and marketing tactics.
Software development company Atlassian focuses on product-led growth with their freemium model. They make it easy for users to sign up and upgrade to a paid account.
In product-driven companies, the product itself drives customer acquisition, activation and retention. Instead of having to invest in marketing and sales to attract and convert leads, users find value in the top-notch product and keep coming back for more.
To make this work, every digital-facing team needs to be connected and focused on delivering a world-class product experience. This includes marketers, customer success, analysts and more.
Product-led growth also means bringing aspects of customer service, support, and marketing within the product for convenience, reduced friction, and greater contextual relevance to end users. Software development giant Atlassian uses this approach and, as a result, generates revenue from its SaaS products without the need for traditional outbound sales strategies. Slack is another great example: Its simple, easy-to-use instant messaging platform makes it an essential part of many teams’ internal workflow, and it’s built a strong user base that’s constantly increases. Once users see the value in it, they are happy to upgrade from freemium to paid plans.
Product-led growth is a powerful strategy that centers the product as the primary source of business success and scalability. It replaces traditional ways of growing a business, such as hiring additional salespeople or spending more money on marketing advertising.
For example, a freemium product allows users to experience the product for free and then encourages them to upgrade to a paid plan, resulting in more customers without additional sales or marketing investment. This product-driven model is used by SaaS companies like Dropbox, Slack, and SurveyMonkey.
By allowing users to experience the product for free, product-led growth models can also leverage the power of word-of-mouth marketing, which is recognized as one of the most reliable and scalable growth engines. And by prioritizing the best-in-class product experience, these companies are able to increase retention and drive recurring revenue. These are key indicators to drive customer lifetime value and reduce customer acquisition cost. Using these methods, a company can grow rapidly and become profitable much faster than with more traditional approaches.
When companies rely on their products to attract new customers, they don’t need a sales team or marketing materials to convince them to buy. These companies are often self-service, allowing users to try their product for free and only charge them when they are ready to upgrade to a paid plan. This business model is known as product-led growth and is becoming increasingly popular for SaaS companies.
Unlike other types of businesses, which need a finely tuned network of salespeople and marketers to bring in new customers, product-led companies let their world-class products do the heavy lifting. This allows them to scale much faster and focus on building features that solve real problems for actual customers. That’s how Pinterest and Slack have built such large user bases—and commanded such high ratings. It also allows them to avoid a high customer acquisition cost, since their product is bringing in new users. It is important to note that not all companies may adopt this approach.
Product-led growth puts the product first and directs most resources toward delivering a world-class experience. This requires internal alignment across all digital teams—marketing, customer success, analytics, and more—to rally around a common goal.
Product teams use behavioral analytics to understand user habits and identify in-app messages that resonate with users. They prioritize features that improve the experience over metrics and aren’t afraid to ship features that might negatively impact a metric in the short term.
Instead of investing in expensive and ineffective marketing campaigns, product-led companies focus their efforts on optimizing the product itself to win customers and reduce churn. This is often achieved by catering conversion offers and targeting sales to specific groups of new users based on their product behavior. Examples of this include Slack, a popular instant messaging app, and Citrix, which used product analytics to identify patterns in free trial usage that led to conversions, then created targeted in-app messages to encourage users of young people to convert.