Product-Led Go-to-Market (PLG) is a go-to-market strategy (GTM) that relies on product usage as the primary driver of customer acquisition, conversion and expansion.
– OpenView Venture Partners
The term was invented last year (2018) by OpenView Venture Partners. Even though Product-Led Go-to-Market (PLG) is a new term, PLG companies like Slack, Mailchimp and Dropbox have been using Product-Led Go-to-Market strategy for customer acquisition, activation and retention for many years now.
A Product-Led Go-to-Market strategy helps software companies in three ways:
- Acquire more potential customers
- Activate their target customers
- Retain their hero customers
Why Product-Led Go-to-Market (PLG) is important?
Acquiring potential customers becomes really difficult and expensive in our days. Instead of focusing on the sales team and customer success team, PLG companies are focusing more on improving their product experience and expanding worldwide. Here are some of the benefits of Product-Led Go-to-Market (PLG) for SaaS businesses:
1) Product-Led companies have a wider Top of the Funnel (TOFU)
Offering a free trial of a freemium pricing strategy can help you attract your target audience faster and better. It can speed up the process of Activation and get more new users at your door. When you don’t charge upfront or force the users to join a sales pitch but let them experience the value of your product, you will constantly get new users who will want to try out your SaaS product.
2) Product-Led companies attain rapid global scale
Product-Led Go-to-Market (PLG) gives you a competitive advantage. While your competitors are trying to hire sales teams, you are trying to refine your user onboarding and collect user feedback on how your product team can improve your product for your use cases and buyer personas.
3) Product-Led companies have a shorter sales cycle
By letting users onboard themselves with a self-serve manner and experience value right away, you won’t need to spend time on demos, follow-up emails and calls. This way, you’ll get free users to update to one of your paid plans quicker and without any friction points.
4) Product-Led companies connect the volume of user engagement with revenue
By offering a value-metric-based pricing strategy, you educate your users and give them the right incentives to keep using your product the right way. This way: 1) You educate users on how to get the most out of your product and don’t alienate product metrics, and 2) You have a more fair pricing, as it scales through the volume of use.
How Does Product-Led Go-to-Market (PLG) Works?
In order for Product-Led Go-to-Market (PLG) to work for your B2B SaaS business, you need to understand the value proposition that your product brings to users and the pain points it addresses. Once you understand what value you can bring to users, you have to communicate that value effectively through your user and customer experience. Product-Led Go-to-Market (PLG) is a way to reduce customer acquisition costs (CAC) and use your product as the main growth lever for your business. Your marketing efforts evolve into product experience optimisation efforts.
The 6 Steps to Achieve Product-Led Go-to-Market (PLG)
To attain Product-Led Go-to-Market (PLG), you need to follow the 6 steps that follow:
Step 1: Choose a Pricing Model
To achieve Product-Led Go-to-Market (PLG), you have to choose a pricing strategy for your new product. Your options are:
- Free trial (i.e. Zapier)
- Freemium model (i.e. Mailchimp)
A custom pricing model that starts with a live demo is usually ideal for enterprise solutions, with long sales cycles and decision-makers that are mostly C-level employees. Choose between a free trial and a freemium model.
Step 2: Connect Your Pricing Strategy With a Scalable Value Metric
Successful PLG companies connect their pricing strategy with a value metric. This strategy allows the average revenue per user to scale, since the value that the user gets scales and the user experience is significantly better. Product-Led Go-to-Market (PLG) strategies are connected with value metrics that are scalable. As the product experience value for the user grows, so does the cost of the product:
Let’s use Slack as an example. Take a look at Slack’s pricing plans and you’ll notice that it only charges you for active users on your account:
This way, you have:
- A pricing that is fair, since you’re only charging for users who get value out of the product
- Baked virality within your product as existing have every incentive to invite their colleagues and friends if the experience is intuitive
Step 3: Stop Counting MQLs; Focus on Product Qualified Lead Generation (PQLs)
Even though Marketing Qualified Leads (MQLs) and Sales Qualified Leads (SQLs) are important, they aren’t yet sufficient enough to prove user qualification. It’s getting less and less likely that MQLs indicate the intent of the user nowadays. Thus, you should start measuring Product Qualified Leads (PQLs), by taking into account the product experience value as it is reflected by product events. The lead generation now takes place within the product experience.
Step 4: Align Your Sales Strategy With Your Go-to-Market Strategy
If you want to build a Go-to-Market plan that will be Product-led, you need to use scalable tactics that will attract leads that will be willing to use your new product. For example, if you run a B2B SaaS and offer a 14-day free trial to all new users, you can’t use demos as your sales process.
Having a sales team running demos should be avoided if you want to follow a Product-Led Go-to-Market (PLG) approach unless you are dealing with a really steep learning curve. The reason is simple: this process is not scalable and thus contradicts with what you’re trying to achieve through Product-Led Go-to-Market (PLG).
Step 5: Develop Your Straight Line Through Bumpers
Growing a successful new product requires you to get the ball (AKA the user) from Point A to Point B. The reason you want to do this is because that way, free users will experience the highest value proposition possible in the shortest time frame possible, and thus will want to upgrade to a paid plan.
Developing your straight line onboarding means helping users to reach the first meaningful outcome as fast as possible. To do that, you need to follow these 3 simple steps:
1) Make screenshots of all the steps the user has to take, from home page to the first meaningful outcome.
Let’s take Ahrefs as an example.
The steps that someone has to take until the first meaningful outcome are the following:
1) Land on Ahrefs homepage
2) Sign up for a 7-day free trial
3) Insert a keyword on Keywords explorer
4) Get a list of keywords you can use right away for your content
Once you map out these steps, you can move on to the next step of the process, which is to categorize steps based on their contribution to the first meaningful outcome.
2) Categorize these steps based on how they contribute to the first meaningful outcome.
Here is how you can categorize these steps:
Green: Absolutely necessary
Yellow: Necessary but maybe for more mature users
Red: Must be skipped
3) Keep only those that are absolutely necessary.
Bumpers are methods of onboarding users in the best way possible so that they reach the first meaningful outcome as soon as possible and thus upgrade to a paid plan. Bumpers are divided into two categories: 1) Conversational Bumpers and 2) Product Bumpers.
4) Use conversational and product bumpers to get users to the 1st meaningful outcome.
Bumpers are methods of onboarding users in the best way possible so that they reach the first meaningful outcome as soon as possible and thus upgrade to a paid plan.
Examples of conversational bumpers are:
- User onboarding Emails
- In-app prompts
- Target Customers success help
- Email outreach
While some examples of product bumpers are:
- Progress bars
- Locked features
- Welcome messages
Step 6: Align the Perceived Value Proposition With the Experienced Value
There are three drivers that make someone buy your product:
Functional Outcome: The Job To Be Done needed by the user
Emotional Outcome: How the user feels when this task is accomplished
Social Outcome: How the user wants to be perceived by others when performing and fulfilling this task
Product-Led Go-to-Market (PLG) exists in the intersection of these three outcomes.
Credits to Productled.com
We have two types of product values:
- Perceived value
- Experienced value
With a PLG Strategy, you want the perceived value to be as close as possible to the experienced value. The closer the experienced value gets to perceived value, the higher the chances that someone will stick with your product, no matter the marketing channels you are using.