Product-Led Growth: The User-Powered Path to Growth (with Examples & KPIs)

Product-led growth (PLG) continues to be a go-to strategy for many successful SaaS startups trying to achieve efficient, rapid growth. 

But what does being “product-led" truly mean? Are you supposed to be firing your marketing and sales departments?

Not yet.

Let’s unpack what defines most PLG companies you’re most familiar with, spotlight companies acing this approach, share the hottest acquisition channels, and look at the crucial metrics most product-led startups live by.

There’s a lot to cover, so follow along and feel free to meander into the various PLG resources we’ve laid out along the path.                                    

What is product-led growth?

Product-led growth (PLG) refers to a strategic approach wherein a company's product is the chief mechanism for attracting, retaining, and expanding its user base. This contrasts with traditional models that primarily rely on active sales and marketing efforts to drive the bulk of the sales cycle.

A core component of most product-led GTM strategies you’ll encounter is a freemium model or  generous free trial offer to grow the overall users in the short term. This ultimately leads to increased revenue as they fall in love with the product and require more advanced features.

Despite its name, PLG doesn’t inherently mean your company will marginalize your sales and marketing functions. In a PLG framework, sales and marketing play a pivotal, albeit redefined, role.

We’ll share some of the nuances below from our experiences working in the PLG SaaS startup space over the years.

Examples of product-led growth companies you’re familiar with

Product-led growth companies come in various shapes and sizes. To give you some examples, here are several companies that scaled with a PLG GTM strategy.

Slack

Slack showcases PLG by allowing teams to start using their communication platform for free, promoting virality and organic growth before upselling to premium features.

Zoom

Zoom became a staple for many by leveraging word-of-mouth referrals to their reliable video conferencing solution’s robust free tier, took advantage of the pandemic transition to remote work, and eventually, ally of us transitioned to their paid plans.

Calendly 

Calendly adopted the PLG model by offering a streamlined scheduling solution for individuals at no cost, banking on businesses to adopt their premium scheduling features.

Canva

Canva's user-friendly design platform encourages creative expression for everyone. Its core functionalities are free, but its value proposition becomes evident with premium design tools and assets.

Notion 

Notion's all-in-one workspace solution empowers users to begin organizing and collaborating without barriers, with the depth of the platform encouraging upgrades for more comprehensive needs.

Implementing a product-led growth strategy at your SaaS company

If your company is looking to fully embrace a product-led strategy, it can be helpful to understand the various company structures and the roles teams will need to play.

Here's a breakdown of these attributes and what is typically required from each department:

Pricing models

• Freemium: This is one of the most common PLG pricing strategies. It allows users to access the core functionality of a product for free, with the option to upgrade to premium features. The key here is to ensure the free tier is valuable enough to drive adoption, while leaving room for monetization.

• Free Trial: This model offers full access to a product for a limited time or with limited actions, allowing users to understand its complete value proposition before they decide to purchase. Timing is crucial — you need to ensure users get enough exposure to see the product's value but not so much that they don't need to convert to a paid version.

Sales teams

• Educational Selling: In a PLG model, the sales team often transitions from aggressive selling to a more consultative and educational approach. This involves understanding customer needs and teaching them how the product can solve their unique challenges.
  
  
• Upselling and Cross-Selling: With many users starting on a free or lower-tier plan, customer success and sales teams should be adept at identifying opportunities for upselling (moving a customer to a higher tier) or cross-selling (introducing them to another product or feature).

Note: Plenty of PLG companies run a hybrid sales model, so if your sales team is driving revenue with a more traditional strategy, feel free to execute in a way that works for you, instead of completely changing everything about how your company acquires deals.

Recommended Reading: Product-Led vs Sales-Led Growth - Try a Mix of Both

Product teams

• User Experience (UX): The product should be intuitive and user-friendly, allowing new users to realize its value quickly, without steep learning curves.
  
  
• Feedback Loop: Establishing mechanisms to gather, analyze, and act on user feedback ensures that the product continues to evolve and meet users' changing needs.

‍PLG companies that implement product development into a web experience often run a product-led SEO strategy alongside their other content. This typically requires finding ways to make a part of the product experience searchable. Learn more here:

Explaining Product-Led SEO: Is It Right for Your SaaS Company?

Marketing teams

• Content Creation: Educational and value-driven content helps nurture users, guiding them through the product's capabilities and driving organic growth.

• Community Building: Fostering a community around the product can significantly enhance its reach and adoption, turning users into brand ambassadors.

You can find a breakdown of product-led marketing activities here, plus the channels PLG companies report are driving the most significant user acquisition growth.

What Product-Led Marketing (PLM) Is, and How to Use It to Grow Your User-Base [+ Helpful Resources]

Customer success and support teams

• Onboarding: Efficient onboarding processes ensure users can get started quickly, reducing the time it takes them to realize the product's biggest value offerings.
  
  
• Support: Prompt and effective support, whether through chatbots, helplines, or documentation, is crucial in a PLG model. It helps in building trust and ensuring user retention.
  
  
• Customer Education: Regular webinars, tutorials, and knowledge base articles help users maximize the product's potential, leading to higher satisfaction and better chances of upselling, while dramatically reducing support tickets.

For a PLG go-to-market strategy to thrive, it's imperative for all departments to work cohesively. Each team plays a critical role in ensuring that users not only adopt the product but become staunch advocates for it. 

Top acquisition channels for product-led growth companies in 2023

Here are the top acquisition channels, according to Openview’s 2023 Product Benchmarks report. Note that the specific product experience has a significant impact on what drives leads.

Organic growth, especially SEO, remains the top lead acquisition channel

By producing high-quality, informative, and optimized content, PLG companies can rank higher in search engine results pertaining to prospects’ pain points, product features, and their broader JTBD. This includes blog posts, webinars, e-books, templates, guides, and tutorials that not only drive traffic but also help users derive maximum value from the product.

For a breakdown of the top content types PLG companies use to maximize organic traffic to their websites, check out this post:

8 Must-Have Content Types for PLG Companies Investing in SEO [+184 SaaS Marketers Told Us Which They’d Build First]

It’s worth noting that more companies are reporting a diverse array of organic growth channels and content types to create an integrated, organic content experience, speaking to their audiences on social, their website, via e-mail, and through video or podcast platforms.

Recommended viewing: Achieving Organic Growth and Expanding Beyond SEO Alone

Paid advertising, especially the use of targeted product demos and tutorials

Paid ads are another potent acquisition component for product-led growth (PLG) companies —  when executed correctly. When done in conjunction with the appropriate positioning, landing pages, and supporting content, here are a few tactics that work well:

Utilize Video Demos and Tutorials: Video ads that offer a quick product demo or highlight a key feature can be highly effective. They allow potential users to visualize the product's value proposition before signing up.

See the entire episode with Jonathan Bland here.

Targeted User Segmentation: Leveraging data to segment audiences allows PLG companies to create highly tailored ad campaigns. For instance, ads can be customized for users who've previously interacted with the product but haven't converted or for those who might have specific pain points the product addresses.

Retargeting Campaigns: PLG companies can harness retargeting ads to re-engage users who've visited their site, signed up for a trial, or interacted with their content but didn't convert. These ads serve as timely reminders, nudging users back to the product.

Sales-generated and Partnerships

You’ll notice in the report that, after organic and paid, PLG companies tend to see a significant drop in acquisition impact, with sales-generated leads and leads from various partnership opportunities playing a similarly proportional role.

For sales-generated leads, these companies are often employing a mix of outbound activities and cold calling, along with in-person events such as conferences or trade shows.

Partnerships can be a mix of co-advertising or co-promotional activities from either integration partners (other tools that plug into your tool or that your tool plugs into) or via incentives for consultants or agencies.

Primary PLG metrics

PLG SaaS companies have their own KPIs, some unique to this particular go-to-market strategy.

Here are the common ones you’ll want to pay attention to:

• Monthly Active Users (MAU): Measures the number of unique users actively engaging with the product per month, indicating product stickiness and market traction.
• Customer Acquisition Cost (CAC): This represents the cost to acquire a single customer, highlighting the efficiency and effectiveness of your marketing and sales efforts.
• Lifetime Value (LTV): Predicts the net profit attributed to the entire future relationship with a customer, informing long-term profitability and pricing strategies.
• Product Qualified Leads (PQLs): Identifies users who've shown buying intent, based on their product interaction, refining lead qualification beyond traditional metrics.
• Churn Rate: Assesses the percentage of users or customers who stop using the product over a defined period, signaling product satisfaction and retention challenges.
• Net Promoter Score (NPS): Gauges customer loyalty and satisfaction by measuring their likelihood to recommend the product to others.
• Free-to-Paid Conversion Rate: Quantifies the percentage of freemium or trial users who upgrade to a paid plan, indicating the effectiveness of the product's value proposition.
• Feature Adoption Rate: Monitors how often a new or core feature is used by customers, highlighting areas of improvement or innovation in the product.
• Customer Support Tickets: Tracks the number and nature of support requests, offering insights into product usability and potential areas of enhancement.
• Revenue Expansion Rate: Measures the increase in revenue from existing customers (upsells or cross-sells) over time, signifying growth opportunities within the current user base.
• Product Engagement Score: Aggregates various user activity metrics to assess overall product engagement, hinting at product-market fit and areas for user experience optimization.
• Average Session Duration: Evaluates the average amount of time users spend in the product during a single session, shedding light on user engagement and product value.
• Customer Feedback and Satisfaction Rate: Aggregates qualitative feedback and satisfaction scores, providing insights into product improvements and market needs.
• Referral Rate: Monitors how many existing users refer new users to the product, showcasing the product's virality and organic growth potential.
• Time to Value (TTV): Assesses the average time taken for a new user to achieve their primary goal with the product, reflecting on the product's ease of use and onboarding effectiveness.

It’s important to keep in mind that KPIs are based on the specific stage of your company, the tools and systems available to you to measure them, and the current goals your company has.

For example, when we interviewed Tara Robertson of Bitly about what they’re currently measuring, she responded:

“Everything is really KPI-driven. We use objectives and key results in the way that we look at the overall business.

There are the company-wide OKRs, and then each department ladders into them.

At the company-wide level, what we look at, first and foremost, is our acquisition numbers, which is our performance marketing – from how many sign-ups do we want for paid acquisition, how many sign-ups do we expect for our non-paid acquisition, down to conversion from sign-up to paid acquisition. Those are your traditional marketing acquisition KPIs that we look at for our brand.

‍We’re focused right now on starting to grow our brand beyond short links, and QR codes is one of the biggest and fastest-growing products in the market. We aren’t known as much for that. So we’re measuring success with brand around market awareness and starting to do aided and unaided reports that we’re looking at bi-annually to look at the overall growth around our paid acquisition.

‍And then, for product marketing, we’re looking at multi-product adoption as the number one metric, specifically for product + marketing KPIs. This gives us insight into the stickiness and shows better net dollar retention”

‍See the full interview and go to this exact conversation at the 33:15-minute mark of this podcast episode.

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Want to see more quotes from interviews like this about measuring marketing success? Check out our newsletter, Optimized.

Employing the product-led flywheel model

Instead of visualizing the customer journey as a linear progression from awareness to conversion (like in a funnel), the flywheel represents a continuous cycle where customers not only convert but also promote and drive further product adoption.

Here's why the product-led flywheel differs from the traditional funnel:

The centrality of the product: In the flywheel model, the product is the main magnet that attracts, delights, and retains users. The superior user experience and value derived from the product fuel its momentum.

Continuous movement: Unlike the funnel, which has a clear end (usually conversion or purchase), the flywheel is ongoing. Happy customers drive referrals and bring in new users, creating a self-sustaining growth loop.

Emphasis on retention and advocacy: While the traditional funnel often ends at acquisition or conversion, the flywheel emphasizes post-conversion actions like retention, expansion, and advocacy.

Collaborative effort: The flywheel approach encourages departments to work more collaboratively. Marketing, sales, product, and customer success teams align more closely to keep the flywheel spinning, rather than passing the customer down a linear path.

In essence, the product-led flywheel shifts the focus from a one-way, transactional journey to a cyclical, relational one. It's about building momentum through product excellence and leveraging satisfied end-users as growth multipliers. 

For teams used to the funnel, the flywheel approach can feel like a paradigm shift, but it offers a holistic view of sustained growth and customer advocacy.

Advantages of being product-led

Teams at product-led companies report several unique advantages that help their businesses scale faster, including:

Lower customer acquisition cost (CAC)

By relying on the product itself to drive growth, product-led companies often experience reduced marketing and sales overhead, leading to a lower CAC. This does vary depending on the particular details associated with the product, the price-point, and how involved onboarding is.

Rapid scalability

If you manage to build the product to successfully be the central acquisition function, it can scale quickly with digital distribution. As more users adopt and promote the product organically, growth can become exponential.

Improved and rapid product-market fit

Constant user feedback allows for agile iterations. This continuous loop helps ensure that the product remains closely aligned with market needs and evolves as those needs change.

Shorter sales cycles

With users experiencing the product firsthand (via freemium models, free trials, or comprehensive demos), the decision-making process is expedited.

Higher retention and engagement

A strong product focus ensures that the user experience is prioritized. Satisfied users tend to stick around longer, engage more with the product, and even become advocates.

Enhanced virality

Product-led models, especially those with collaborative features, naturally encourage sharing. This can result in organic growth as users invite peers, colleagues, or friends.

Flexibility in monetization

With options like freemium models, product-led companies can cater to a broad user base. They can monetize power users while still offering value to free users, widening their market reach.

Data-driven decision-making

Constant user interaction with the product provides a wealth of data. This enables companies to make informed decisions about product enhancements, market positioning, and growth strategies.

Reduced dependency on large sales teams

While sales teams remain essential for upselling and enterprise deals, the initial user acquisition often doesn't require heavy sales intervention. This can lead to cost savings and a leaner operational model at the early stages of the company.

Should you change from a sales-led to product-led company?

While the product-led growth (PLG) approach is being championed by many SaaS companies right now, it's not a one-size-fits-all business model.

A product-led model may not be the right fit for your company if:

• Your product has a steep learning curve or is targeted at an enterprise market with complex requirements.
• You’re in a market where relationships and trust play pivotal roles (like in certain B2B sectors) and sales teams are crucial.
• Your product has a high CLTV, where a direct sales touchpoint justifies the higher customer acquisition costs.
• You’ve positioned your brand as a premium or bespoke solution provider. A hands-on, tailored sales approach aligns more with your brand image than an entirely self-serve product-led model.
• You prefer the predictability of contract-based sales, especially when stakeholders and investors are involved.

As mentioned in the first section of this article, even the most successful PLG companies often incorporate elements of sales into their strategies to varying degrees. There are no laws about how sales- or product-led you must be.

In fact, often, a blended approach ensures you’re set up to succeed where a pure product-led motion can fall flat, such as:

Freemium to Enterprise Transitions: While the freemium model might attract individual users or SMBs, a sales team can work on converting large enterprises or offering specialized packages.

Post-Trial Engagements: After a free trial, sales teams can engage users, address queries, and guide them towards paid plans, enhancing conversion rates.

In essence, while the product-led model offers numerous benefits, it's not the sole strategy for all SaaS businesses. Many find success in blending the best of PLG with traditional sales and marketing practices, tailoring their approach based on their product, market, and growth objectives.

Find out why product-led companies like Bitly, Teamwork, Gorgias, and Spinach choose us as their organic growth partner

Our team of former in-house experts knows the difference between growing traffic and growing pipelines. We advise product-led SaaS startups on SEO and organic content strategies built for short- and long-term sustainable growth.

Learn more about our services here.

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