For years, sales and marketing teams have determined what products to sell. Products are released only when sales teams are confident they can sell them.
Sales teams use aggressive marketing to acquire and even poach customers. The product is used to engage these customers and keep them coming back. The company then offers these users rewards and referral bounties to retain and grow the user base.
The user goes from one part of the sales funnel to the other.
In recent times, however, companies are adopting a different growth strategy. They are moving towards a more product-led strategy.
This strategy involves focusing on the product first. The product is usually offered to the customer on a freemium basis. This way, customers can try out the product and offer feedback.
This feedback is then used to improve the product continuously. The sales team can then let the product sell itself. Word-to-mouth marketing happens a lot in this scenario.
Slack is one of the companies that has greatly benefited from a product-led approach.
So the question is whether product-led growth will dominate in 2022 and replace sales-led growth.
Sales-led vs. Product-led
Sales-led growth, as mentioned above, uses a sales team as the driving force. They use their marketing to move the customer across the sales funnel.
This strategy is helpful in complex products that require a detailed demo and hands-on. Take any software in the automobile or aeronautical space. They all have dedicated teams to help you understand the software.
You will be lost if you don’t use a demo for software like Solidworks or Catia. Everything will be complex, and you’ll waste time.
In this scenario, sales-led is advantageous. That is because —
- The product is complex
- The user is another company.
On the other hand, product-led is essential for companies that go straight to the consumer or a B2C company. They can’t use a sales team to onboard a user. Instead, the user navigates for himself.
The product is used for customer acquisition, engagement, retention, and monetization. User experience and satisfaction move customers across the growth funnel.
Product-led growth also makes use of communities to keep users engaged. Users can interact with other users and voice their opinions and doubts. All focus is on the end-user.
Are companies shifting to product-led growth?
It looks like many companies are shifting to a more product-led growth strategy. One of the reasons is compounding. When a user likes the product, he tells two of his friends. These two friends tell four other people.
Word of mouth marketing travels as fast as the hottest gossip in town.
Companies don’t want to miss out by using an inefficient sales-focused method (inefficient for consumer companies).
When PLG strategies are followed, companies can scale incredibly. Just take a look at the companies that have benefitted.
I already mentioned Slack in the first paragraph. Let’s now take a look at Figma. Figma is a UI/UX/vector tool that uses the freemium model. Anyone can start using Figma if they have an internet connection and a browser. If you want additional features such as extra collaborators, you have to pay extra.
Dropbox has been there for some time. They do the same thing. You can store all of your images for free. If you want extra storage, you pay.
Many upcoming companies like DevRev are also adopting PLG.
New companies can accelerate their growth using PLG. Users use the best product. With PLG, companies can use direct feedback to create the best products.
Faster time to market
Instead of waiting months to create the perfect product, companies can create a viable MVP. They can then build on this MVP to suit the customers’ needs.
Easier to optimize
Companies can use tools like Google Analytics to optimize their products with user behavior. This information, paired with user feedback, can optimize the product for the user.
Better user experience and satisfaction
Since developers use user feedback, users will have the best experience.
Why product-led growth will dominate 2022?
In the previous section, we saw why new companies are adopting PLG. All of the above points help companies beat their competition.
PLG allows for efficient collaborative work. Customer success and marketing teams slowly start to merge to become one entity.
PLG will dominate because of the following features —
Focus on users trying out the product
PLG emphasizes users try out the product in the early stages. Companies using this method will create a public beta for users to mess around with. Users can then give direct feedback.
PLG companies also use freemium to let customers try out their products without making any payments. They get the MVP without any payment.
Customer-centric
PLG companies design products around the customer. This leaves out guesswork and uncertainty. Users get what they want. User retention and satisfaction are byproducts.
Faster acquisition
PLG acquires customers much faster than sales-led strategies. This is because there is very little friction for users.
Some useful tools for your PLG stack
CRMs
CRMs are great tools for analyzing data. You can use usage activity from Salesforce, Hubspot, DevRev, etc., to improve your product.
Segment analysis
Differentiating your customers based on behaviors is very powerful. This can include usage, location, social shares, etc. You can then target particular customers to get the output you want.
Effort analysis
It’s essential to make every process seamless for the user in PLG. If the user is having trouble logging in, it is imperative to fix it. Effort analysis lets you find out where the user is having trouble.
The key components needed for product-led growth
- Create value with the product — The product must sell itself. Create solutions that tackle pain points. Target the user.
- Reduce time to market — The perfect product does not exist. MVPs are the way to go. More features can then be added.
- Minimize friction — Make it very easy for the user. Anything that hinders the users’ experience should be removed.
- Add necessary features — Features should be used to drive new users to the product.
- Deliver — A product should do what it’s supposed to.
