What is Product Led Growth?
Product Led Growth is a business strategy where user acquisition, conversion, retention and expansion are all driven primarily by the product itself.
Moving towards Product Led Growth can be beneficial (for the right products), with reduced acquisition costs or reliance on sales teams, as your customers will be the ones promoting your product.
Common growth principles
Adopting a Product Led Growth requires a few shifts in mentality and approach:
- Company-wide alignment, so that growth is not reliant or led only by the product team;
- Showing rather than telling mindset;
- Don’t just rely on sales, invest in customer success;
- Create viral loops, or opportunities to delight customers, that encourage them to refer others; and
- Help your customers succeed in the job they are trying to achieve, rather than constantly trying to cross-sell or upsell them with additional features or products. If you use a Freemium model, are features locked behind a paywall, preventing your customers from winning?
Common growth myths
Like any new framework, there are often misconceptions. Some of the common ones include:
- Only the product team is responsible for growth.
No, Product Led Growth is a business strategy, which requires alignment across the whole company, so that different areas work together as their collective efforts ultimately create the user experience.
- All products can achieve explosive viral growth.
No, growth usually happens through incremental cycles. Help your users be successful, and then make it easier for them to tell other people that might find your product valuable.
- A replacement for your marketing and sales strategy.
No, Product Led Growth should complement your marketing and sales strategy, and can even make it more efficient.
Product Led Growth in Action
Some examples of companies applying Product Led Growth, include:
- Zoom – Referring colleagues and friends combined with their seamless onboarding meant new customers could be up and running, and on a call (receiving value) within 10 seconds. They also employed a freemium model, with free calls up to 40 minutes, and a subscription to unlock longer calls and other features.
- AirBnB – Not only using beautiful photos to make rental listings more attractive (and thereby increasing conversion) they also added value by reverse engineering Craigslist’s API so that they could automatically post on behalf of the owners (and increase reach).
Dave took us through some of his own experiences, as the founder Tuki Health.
Tuki Health was a startup focussed on gut health, starting its journey as a direct to consumer (B2C) offering, providing expert clinical dietician advice and meal plans.
- Acquisition: As part of their initial research, they identified a great number of potential users. Through Facebook groups and targeted campaigns, they were able to acquire 7000+ users, and gain in depth insights about customer behaviour.
- Activation: Beginning with a quick and simple signup process, they eventually introduced friction, to slow users down, so that they could better understand value (access to actual dieticians, etc).
- Revenue (and Pivot): Tuki Health provided some great customer outcomes. However, it was extremely difficult to get people to upgrade past the freemium offering to become paying customers. The unit economics didn’t work, which caused them to pivot to a Health SaaS targeting dieticians.
- Referral: Dieticians had different goals compared to end-users. They didn’t care about collecting hundreds of data points, they just wanted to get the plans, send them out, and move on to the next customer. With this insight, Tuki was able to focus on getting their meal plan creation down from 10 mins to 1 min. This generated real value for the dieticians, and helped them to start referring Tuki Health to others.
- Referral and Acquisition: But, dieticians are bad at sales. So Tuki created landing pages that made it easier for dieticians to refer to others.
- For PLG to work, you need to be providing a lot of value with your product.
- Prioritise analytics.
- Large companies have big silos. Connect and align the different areas with the Pirate Metrics Framework.
- Design and develop viral loops into your product.
- Experiment often and share learnings with key team members.
- Establish psychological safety among teams, this leads to great collaboration and a great team environment.
Dave McManus is an experienced product professional with over 12 years experience. He loves working with multidisciplinary teams to solve problems through thoughtful design and engineering solutions.
He has had the pleasure of working with many great companies from large fortune 500’s like: Microsoft, The North Face and Proctor and Gamble to name a few. Originally from Melbourne, Dave also lived in San Francisco for 5 years and founded a digital healthcare company and worked with many different startups including NextVR (acquired by Apple), Innit, Cool Effect (kickstarter for climate change) and many more.
Further Reading and Resources
- You can find Dave on LinkedIn, Twitter or his website www.djmgrowth.com
- More about Dave McClure’s Pirate Metrics
- Useful Resources on Psychological Safety to help improve your team’s effectiveness.