In 2016, Twilio, an american company that provides programmable communications tools had a billboard up in San Francisco, CA with the Message “Ask Your Developer”. While everyone was wondering what this was about. Many later understood that this was a bold display of Twillo’s confidence in its product and users (developers from different companies). Twilio users displayed their love for the product so much that they became Twilio’s biggest advocates of the product. Twilio focused on building a very simple, yet easy to adopt tool marketed to developers. And because of its simplicity and frictionless adoption, developers started using twilio extensively and persuaded their managers run with it. This happened across various organizations in the developer community and before you know it, Twilio grew from 900K developers to 10 million users in 2020.
Our product story is not very different. pCloudy (an Opkey product) is one of the largest cloud infra for App Testing. From inception we were focussed on helping our users experience the product in a smooth and frictionless manner. The entry package of our paid versions was priced more like a paid trial where users could easily purchase without any approval hassles. Within the first 3 years, we grew to 50K+ users without a sales team. The next two years were game changers as the market conditions for adoption of cloud became more favourable as the pandemic hit. And since we already had a strong user base, we witnessed a massive growth as users shared the product with their peers for their app testing needs. We have tripled our user base and are now riding the wave of Product Led Growth Model.
I’m sure you understand the big picture of what’s happening in the market today with both these stories. The Era of End-User led growth/Product Led Growth(PLG) is taking over the traditional sales models and welcoming massive growth for those who adopt this method. But before we dive into PLG, let’s dwell on the Evolution of the growth models to get a fair understanding of growth.
Evolution of Growth Models
The SaaS Sales strategy has evolved over the years and people have tried and tested different product sales models to see growth. Here’s how far we have come.
- Traditional Sales – These are your hunters, warriors in the field who go after enterprises and pitch their product. Likes of IBM perfected this approach.
- Inside Sales – This model took off when the sales reps started to move from the traditional sales approach to generating leads through cold calling, Email marketing, etc. Salesforce grew their company the first five or six years by talking to senior management folks and convincing them for recurring annual purchases over the phone.
- Inbound Sales – In this model, potential customers are chasing you with enquiries about your product through Request a Demo or Enquiry forms. Inside sales teams pick up such leads for qualification. Hubspot perfected this model of marketing by driving inbound lead generation.
Above three are typically high-touch, top down selling approaches where the target customers are CXOs or Senior leadership. Preference is to close customers with high Annual contract Value (ACV). But the flip side of such a model is that these have high cost of acquisition and low conversions. This model is considered to be prohibitive for early stage product companies.
- Product Led Growth (PLG) – PLG is more of a Go-to-Market (GTM) approach which uses Product to build a flywheel to acquire customers and scale the business. Most SAAS businesses are adopting this model as their growth engine. Companies that own Slack, Canva and Twilio have mastered this approach and scaled rapidly. However, it might not be the best fit for products which are very niche, like an enterprise security software or a banking risk management product, where your customers are very specific and not the general audience.
Product Led Growth (PLG) as a Flywheel
A flywheel is really just a heavy revolving wheel that helps build momentum and stability. Because it’s so heavy, it’s hard to push—but once it gets spinning, all that weight helps it build the momentum, and more momentum, making it ever faster and stable. Product-led growth is like the flywheel. It’s hard to push initially but once it starts moving, you see a stable growth and momentum unmatched in any other growth model.
What are the conditions for the flywheel to take effect?
- Product Should be in the Red Ocean – Easily Discoverable
It’s not a general rule of thumb but a trend that PLG works best when the market category for your product is mature. Meaning, your users already understand the value or the problem statement that the category of your product is trying to solve. In the case of Zoom, users already knew the importance of having a Video Conferencing App to communicate. It’s just that Zoom outdid the competitors like Webex and GotoMeeting within the same category.
The above situation is typically called the red ocean. Here, the focus is on harvesting the existing demand among users.
However, if your business is in the blue ocean, you are focussing on generating demand. Where you end up spending time educating your customers and bringing awareness about your product to generate the demand. For this you might need a strong sales team who can talk to customers to generate demand and convince them of the value.
Ideally, Product led growth works best when your product is in the red ocean. But, exceptions are found everywhere.
- Evaluation of Product Features is Hassle Free
Product led growth works when you allow your users to try the product before investing in it. This can be done by providing a free trial version (time period based full access) or by providing a Freemium version (unlimited time access with restricted features) of a product. Talking about Zoom, we know that almost everyone could create an account for free and use the trial version to evaluate and see if it works for them, and it did. There are ways to figure out whether you should adopt a free or the freemium version for your product and what will work for you, but that’s for a separate topic altogether .
- Users Experience an Aha Moment at First Glance of the Product
The “Aha Moment” is at the heart of product led growth. If your product is able to woo the audience with its value, chances are it will ride the wave of the PLG model and witness massive growth. Zoom’s 40 mins trial was good enough for anyone to realize the value of the product. And Canva had made it ridiculously simple to create your first design. And that was enough to spur the Aha moment for a huge fan following. A question to ask yourself is – does your product propel an Aha moment in those first few minutes of use on the trial version? If not then, you must seriously consider reconstructing the value realization early on.
6 Practical Tips to Adopt PLG Flywheel
So as a business what are some practical things you can do to embrace PLG as your GTM strategy?
- Focus on Easy Product Discovery – Build a strong online presence on all digital platforms, discover where your audience are and just show up.
- Make Product User Experience Simple – PLG is all about simplicity, the more easy the UI of your product is, the more fan following it will have. Take Canva or Slack for example, they have such a simple UI that doesn’t require any manual or book to operate. Does your product need a manual? If yes, then design a product that doesn’t need one.
- Free or Freemium Version – PLG thrives on hands-on experience. Let your users find value in your product before investing in it.
- Build guardrails – Use marketing automation to nudge and engage so that they stay on course before their Aha moment. Hubspot is a great Marketing Automation Tool to track your user’s journey to nurture them into customers.
- Track Usage Analytics – Monitoring product usage analytics will help you focus on improving the right features avoiding any energy leakages.
- Excellent Product Support – Invest in product support that will resolve your users query on the go, provide excellent documentation and help. Ideally, the PLG model thrives on simple products that don’t need a manual per se.
If you are an early stage company, choosing between sales-led vs product-led is not an easy decision to make. You have to carefully analyze conditions mentioned for the flywheel to kick-in and until that moment it is best to find the ideal mix of product, sales and marketing to get the ball rolling. I should also mention that new age SAAS companies have shown amazing success with the PLG approach. Signing off, Godspeed.