What the Best Product-led Companies Get Right

Product-led growth (PLG) is all the rage now and with good reason. While traditional and sales-driven growth continues to fall behind both in popularity and effectiveness, PLG-driven startups and companies like Grammarly and Slack continue to post ridiculously high YoY growth.

What in the world is a “Product-led” company?


Product-led companies are companies that have embraced the product-led model for building new SaaS products. They have not only adopted PLG as a mere addition to their “marketing” strategy or because of the buzz about PLG. Product-led companies have built-in the PLG system into the core of their operations and product development.

The result is a clearer focus on user experience and a redirecting of content creation efforts to “show” not “tell” the value of the product. Invariably, this leads to much higher ROI and return-on-effort and almost nothing in customer-acquisition costs.

To put it simply, Product-led growth means that the growth of your users, and ultimately your revenue is tied to the value your customers get from using your product.

As Hiten Shah puts it, “It’s about the product being the core DNA of your company. So much so that the default mode for solving problems—including growth challenges—is to figure out how to use the product to address whatever issue is at hand.”

Why Product-led Growth Wins?

Long story short. PLG wins because it’s about the customer getting a product that does the job it is hired to do very well. Well enough that your customer is happy to share this “hot” solution with co-workers, friends, family and even strangers on the internet.

If you need convincing, here’s a quick list to help you reevaluate your strategy and maybe just maybe, consider building your processes around a product-led path.

1. “Individual users are changing the way software is adopted and purchased”

Product-led growth is more aligned with this shift in how and what type of customers purchase software or sign up as new users.

In its S1 filing, Dropbox, itself a good example of a Product-led company highlighted this shift in purchase behavior, noting “Software purchasing decisions have traditionally been made by an organization’s IT department, which often deploys products that employees don’t like and many refuse to adopt. As individuals increasingly choose their own tools at work, purchasing power has become more decentralized. Bottoms-up adoption within organizations has been critical to our success as users increasingly choose their own tools at work.”

2. Product-led Companies enjoy lower upfront costs

Unreasonably high customer-acquisition-costs crush businesses or at the very minimum reduce or minimize your growth potential. That’s an indisputable fact.

What do you spend on customer acquisition cost annually? Whatever the figure, I’m almost sure you can reduce it significantly by adopting a model where user-generated content forms the larger part of your marketing reach. 

A product-led strategy achieves this by allowing your initial customers to try out, onboard themselves on your product, and usually even invite and demo the product to their friends, colleagues, and even family.

In effect, your customers become part of your sales army without you spending extra or far lesser in sales employee costs, advertising, and other marketing collateral.

3. Being Product-led means shorter sales cycle

Since most product-led companies start by showing value to the customer, it drastically reduces the sales cycle. There is no need for long-winded demo sessions, endless calls, and meetings, and what-have-you – the customer knows almost right away if they want to use your product or not.

Because most product-led companies rely upon a wide TOFU, a product-led strategy usually serves the products first as free trials (Zapier) or Freemiums (Mailchimp).

4. Product-led Growth is faster Growth

Faster growth means larger ARR over shorter timespans which is a direct way to both create value and attract the funding you need to scale. Because you’re growing, you can reap the benefits of user feedback to improve your product as you grow.

Product-led Growth is Not For You, If…

Although there are more compelling reasons (and successful examples) for you to consider building a working product-led strategy, product-led growth is not for everyone. You shouldn’t just jump on it simply because “Everyone is doing it.” 

Put simply, you should never use the “popularity test” or the latest business fad to determine which path to take when your product is ready for the market. As I said, product-led growth is not for you, if…

  1. Your product is completely unnecessary or delivers no real value to the users. That should be obvious since being product-led revolves around the concept of optimizing everything from design, development, marketing, and sales to deliver an initial value and experience that is good enough to grow your userbase rapidly.
  2.  Your product is high-end, high-value enterprise software that typically follows the traditional sales-led approach and where you’ll most likely be speaking to C-suite buyers as opposed to the direct users that Product-led companies appeal to.
  3. If your product has a steep learning curve – that is, your is a complex specialized software that takes time to learn. It also means that your product has a high-Time-to-Value (TTV) ratio. A good example is Microsoft’s Power BI.

As an intelligence and analytic tool, Power BI is both high-value and specialized.

But product-led companies can spring up in the most unlikely places too, consider how Elon Musk’s Tesla upended the automobile business (not a startup-friendly industry) by optimizing the design, production, branding, and sales of its cars.

How the Best Performing Product-led Companies Stay on Top

Enough now, you’ve seen both why being product-led is a great strategy, and when it probably shouldn’t be your approach. If I have to guess, your Saas business is likely a good fit for being product-led.

However, before you jump into the “bandwagon”. You need to learn how to do it right. Calling yourself product-led doesn’t make you one. Understanding and refining your processes to reflect an unwavering focus on creating the best product ever is what does the trick.

Here’s what leading product-led companies do best that sets them apart from the rest of the pack.

1. Top leading Product-led businesses focus on the product.

As Product Led Institute’s prism analogy puts it, “the product-led prism brings these teams together. Their combined wavelengths form the bright, focused light of the user’s experience.” 

2. The best product-led companies grow their users faster than they expand staffing.

By seeking to automate and incorporate learned insights from traditional sales interactions, Saas companies rely on building some of its sales processes into the product itself. By automating as much as possible, they manage to reduce friction, improve the product, and increase their userbase and scale their users faster than staff.

Grammarly, for example, grew its daily active users to almost 7 million, by learning from the lessons of selling its first enterprise product to universities, the traditional way.

Grammarly.com in 2010

3. The best product-led companies rely on product-led content to grow rapidly.

As Victor Eduoh puts it, “Product-Led Storytelling is a dependable (and scalable) way to get new product users without waiting to go viral.”

Victor is an advocate for product-led storytelling, but he’s not alone. The data supports his assertion as do other experts. 87% of B2B buyers do not trust software vendor marketing collateral or even traditional content when making purchase decisions. How do you reinvent your content strategy to match the changing buying climate and fuel your growth?

By telling relatable product-driven stories, you increase your chance of acquiring new customers and supercharging your growth efforts.

4. Product-led companies execute ruthlessly

It doesn’t matter to have a beautiful strategy. Your execution must be top-notch. That is, you must execute as near flawless as possible if any projected or estimated results are going to be reached. For that matter, it might even be better to (somehow, anyhow) execute a top-notch product process without wasting time on beautifully done, long, and dead strategy.

I am not suggesting you don’t have a good documentation process. That’s super important! My point is regardless of nice is sounds, being product-led is ultimately about showing, not telling.

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