What is PLG and why you should consider it in your SaaS Business Model
Historically
capturing revenue from a product was a sales-led process. Whether it was enterprise software or
door-to-door vacuum cleaner sales, the skill and tenacity of the sales team was
the critical asset to success. In early
2010's, digital presence matured around the realization of the buyer-led
purchase. It's well understood that
buyers prefer to do their research online and marketing stepped up to carry the
first 60% of the sales process. Inbound
marketing took a seat at the table for revenue generation. Today we've evolved once again with the
product itself as the agent for customer acquisition and upselling.
Atlassian famously
created a large business without a sales force. They did it with Product-Led Growth
strategies, or PLG.
Today, many
categories of products, including B2B and enterprise, are being
consumerized. This means adopting
consumer expectations into the design of the product. Self-service, personalized experiences and
instant gratification are the keys to success.
Online, the buyers want more than simply to read or watch videos about a
solution, they will take it for a test drive to see for themselves if it solves
their problem. Buyers expect to receive
value quickly and with no hassles.
What causes friction
and slows down this new customer experience?
Sales, marketing, and complicated products. Old-style sales wants to gate product
access until buyers talk to them or get a demo. Marketing wants to funnel buyers through an
online process to turn them into a lead and convert them to opt-in to drip
marketing. Neither of these steps
benefit the consumerized buyer. Buyers
have a problem and want instant gratification.
The Buyer wants to try your product and then, if they have an
outstanding experience, adopt it and buy it without talking to a person.
This is a key
philosophy to Product Led Growth, give the customer easy access to a great
product and let the customer experience do the selling. Design the product to upsell valued
features, deepen engagement and make the user an advocate to spread their
satisfaction to others.
PLG is more than
self-service trials and freemium access.
PLG incorporates two other key goals:
- Upselling: Designing the product to convert the frictionless initial experience into a paying customer and continually leading the buyer towards higher sales tiers. The product is the sales person.
- Virality: Design the product so that it naturally spreads and pulls in larger groups of users. The product does it's own marketing.
- Upselling: Designing the product to convert the frictionless initial experience into a paying customer and continually leading the buyer towards higher sales tiers. The product is the sales person.
- Virality: Design the product so that it naturally spreads and pulls in larger groups of users. The product does it's own marketing.
Why SaaS and PLG are intrinsically linked
One of the many
benefits of the SaaS business model is cloud-based deployment. With cloud based deployments product owners
receive two great benefits related to PLG:
- Fast release cycles
- Real-time measurements and analytics across all users
- Fast release cycles
- Real-time measurements and analytics across all users
These two characteristics allow a rapid, virtuous cycle of testing, analyzing, and refining different techniques in the software. The tests are vital to understand how key aspects of the customer experience are working and constantly improving the outcomes. Is the customer investing time, experiencing key features, adding more information, converting to paid and spreading the experience others? With these goals in mind a PLG company can use the benefits of SaaS to systematically test new ideas and iterate their way to success.
Waterfall releases
and installed software are not the appropriate approaches to the fast iteration
needs of a PLG strategy.
Five traits of successful PLG companies:
Many fast growing
B2B and B2C companies are using PLG to attain success and swift adoption, to
name but a few:
Zoom,
Slack, Airtable, Figma, Pinterest, Twilio, Expensify, Atlassian, InVision,
Zapier, Hootsuite, and Buffer
Here are the common denominators of their strategies:
1. Virality
PLG companies have an inherent consumer-like virality
component. They have invested heavily in user research, UX and UI design, and
product marketing, focusing on building product features to engineer virality.
Linked and Venmo both want to connect to your address book and make it easy to
share information, this is a natural virality.
Zoom exposes it's own value to all the participants in every web
meeting. Social and team tools have a
natural virality and there are many other means for your product to share the
word about it's own abilities.
2. Easy Sign-Up
An easy sign-up process is a key to success. The most important goal is to get users to
engage the product, not feeding the information needs of marketing. From very simplified account creation that
asks the most minimal information, not requiring a credit card, passwordless
access, and other approaches to make it as easy as possible to get to the
value. You should be looking to minimize
any and all friction in your sign-up process.
3. Deliver Value Quickly
Going hand-in-hand with an easy sign-up process is the
ability to deliver value, not features, quickly to new users — as immediately
as you can. Product marketing is
critical to your success - truly understanding the core value your users want
from you product. When this is know,
the customer journey can focus on delivering the value immediately upon
onboarding. Less valuable capabilities
can be pushed back and introduced after the flagship values are delivering for
the user. Knowing the core value and
measuring Time to Value provides a valuable metric to iterate and optimize.
4. Value First, Money Later
Instead of trying to capture credit cards and get new
users into a pricing tier from day one, you need to be solely focused on first
delivering value. Your paywalls and upgrades can follow in your product
experience after the user is getting value.
Be generous with your users to make products they love. This means that your time to revenue will be
slower than hitting them upfront with a paywall, but with far fewer interested
users balking at your sign-up requirements, your Cost of Acquisition will be
more efficient and you will learn faster how to improve your products.
5. Rethink the definition of Customer
Prospects, free trial accounts, and freemium accounts
are all non-paying “customers” and you should think of them as customers. Treat them well and support them fully. The ideal customers are broader than just
those that pay the most. Dropbox was a
great example of this thinking. Free
users who invited other users, including other non-paying users, allowed
DropBox to generate a very large body of loyal users to spread the word. This gave DropBox a tremendous platform of
subscribers to convert over time to paying subscriptions. Slack welcomes free users indefinitely with
strong useful functionality.
Successful PLG comes from an offering that is
easy-to-use, easy-to-share, and immediately valuable – so much so that it
drives up user acquisition at remarkable rates, slashes customer acquisition
costs (CAC), and extends customer Lifetime Value (LTV)
If your B2B SaaS
company needs help shifting from Sales Led or Marketing Led revenue to a
Product-Led Growth strategy, schedule a free 30-minute call and learn how we can
help you get there fast and increase your revenue growth rates.
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