It’s been over ten years since software went cloud-based. Digital experiences are now in peoples’ pockets with smartphones being as ubiquitous as internet access itself. The market is now flooded with B2B and consumer products that meet just about every need you can think of. Last year’s most impressive product experience is no longer exciting, it’s expected.
All this serves to make this new shift bigger than any that has come before – it’s essentially a change in both market supply and consumer demand. The shift toward consumer-grade UX in digital products is being led by tech-savvy customers who demand software be more intuitive, more beautiful, more affordable, and more powerful than anything they’ve used before.
Furthermore, consumers want to self-educate. Buyers want to buy through a website or an app rather than a salesperson and they expect personalization to come packaged. The cherry on the cake? Users crave immediate gratification and will rapidly give up on products that don’t fit the bill. This means they usually expect to find value in no more than three steps.
Now, for the most part, the market is meeting the challenge of these consumer demands. It’s quicker and easier than ever to found a business – and more businesses mean more competition. People have ready access to an ever-expanding list of products that can meet their expectations. The result? A severe lack of user patience for shoddy, legacy software. Users are more willing than ever before to toss products that fail to meet their expectations.
What does all this mean for the future of products?
The truth is, a seamless customer experience was always crucial to the success of a product. Once upon a time, that experience was covered by sales. If a consumer wanted to buy a new product, they interacted with a salesperson. But that time is over. People don’t want to deal with sales or marketing anymore – not when they could be experiencing the product they’re buying first-hand.
To stay ahead of the game and keep up with the market, companies have to overhaul their sales, marketing, and service strategies. They must fundamentally restrategize and change the roles of their customer-facing teams. They must also up their service design approach to help their business polish their end product.
The truth is, marketing-led and sales-led growth have had their time in the spotlight. This isn’t to say they’re obsolete – SaaS companies that are newly emerging will likely still use a mixed strategy as they get on their feet. Once they do have a solid market position, however, product-led growth is going to be the star of the show.
What is product-led growth?
Product-led growth is a go-to-market strategy that involves using your product as the primary vehicle to acquire, expand, nurture, and retain customers.
To understand more about how this is possible, you must first learn about the sales-led strategy. A sales-led company’s whole goal is to transport a buyer from point A to point B in a traditional sales cycle. The customer’s first interaction with a sales-led company is typically a salesperson who acts as a guide, nurturing prospects through to a purchase.
A product-led company flips this traditional sales model on its head by essentially handing the buyer the “keys” to the product. In this respect, it’s not the salesperson nurturing the potential buyer, but the product itself. By giving buyers access to the product from the get-go, product-led companies are able to help leads experience meaningful outcomes while interacting with it. This, in turn, builds customer loyalty and naturally pushes leads to become paying customers.
Product-led growth as a go-to-market strategy
Before we dive into the meat of this topic, it’s important to note that not all businesses will be at a phase in their lifecycle to get the most out of product-led growth. You need to have a clear understanding of your core market strategy (whether you’re dominant, disruptive, or differentiated), industry conditions, and selling strategy. Using this knowledge, you’ll then be able to decide how product-led growth can best benefit your business.
Product-led growth changes your business’s go-to-market strategy by putting your product at the fore. Similar to other go-to-market strategies, product-led growth is a business-wide plan of action that impacts how marketing, sales, engineering, CS, and product teams calculate success and inform growth.
Effective go-to-market strategies will have answers to the following:
- Who is buying the product?
- Where do they find out about the product?
- Why are they purchasing the product?
- How are they purchasing the product?
Product-led growth answers these go-to-market questions as follows:
- Who is buying the product? With a product-led growth approach, you’re selling to users rather than buyers.
- Where do they find out about the product? Product-led growth relies on word-of-mouth and virality as opposed to traditional marketing strategies. In essence, satisfied users will happily share your product with coworkers and friends.
- Why are they purchasing the product? Your product ought to deliver more value, be more trustworthy, and deliver a better UX than that of your competitors.
- How are they purchasing the product? Product-led growth means users will become buyers within the product itself or after experiencing the product first-hand.
Product-led businesses typically rely on a free trial or freemium revenue model. This allows users to use and experience your product without the need for a marketing or sales middleman. This strategy opens up the top of your sales funnel to a massive number of potential buyers far earlier in their journey. However, it also means your product has to be both valuable and able to prove that value efficiently in order to convert users to paying customers.
In a free trial or freemium model, you’re essentially selling to users rather than the organizational higher-ups. Product-led growth is a bottom-up attack that directly addresses the needs of your end-users.
Free trial and freemium revenue models can take on many faces.
The free trial model is the more straightforward of the two. Essentially, users can access the full product experience for a specifically limited time or up to a certain usage capacity.
Freemium, on the other hand, involves allowing the user to continue to interact with the product indefinitely with specific restrictions. The three most common types of freemium are:
- Reduced features Wherein extra functionalities or features require an upgrade to a paid plan.
- Reduced capacity or usage Wherein storage limits, data quotas, etc are used to restrict usage.
- Reduced support Wherein access to customer service or support docs are offered on a tiered basis.
A fair few product-led companies employ a combination of these three types. Some freemium plans might offer reduced support and bandwidth, for instance.
Regardless of the type of freemium or free trial plan, the end goal is consistent: to get users to sign up for your product and allow them to experience its inherent value for themselves.
Why is product-led growth important?
Product-led growth is fast becoming the dominant growth model in the digital sphere and for good reason: by leading with the product, product-led businesses frequently benefit from higher revenue per employee, lower customer acquisition costs, and shorter sales cycles.
Product-led growth isn’t just a disruption of how digital businesses sell their wares, it’s essential for the survival of digital businesses as a whole.
There are three major factors that threaten digital businesses in today’s market:
- Growth is becoming more expensive
- Users prefer to self-educate
- Product experience is now essential
Let’s take a look at these points in depth.
Growth is becoming more expensive
It’s never been cheaper to build a digital company, however, because the barrier to entry is so low, the market is incredibly competitive. As a result, it’s becoming more and more expensive to acquire customers.
Running ads on platforms like Facebook, Instagram, and Twitter is becoming steadily more expensive as demand for them increases. This makes reaching new customers particularly tricky for businesses without a lot of marketing capital.
At the end of the day, growing your business under a sales-led model is becoming less and less cost-effective.
Users prefer to self-educate
Would you prefer to use a piece of software before purchasing it? Or would you rather endure a lengthy sales process to determine if it’s a good fit? You’re in the majority if you chose the former option.
Today’s users want to see and experience a product for themselves before they jump into purchasing it. This makes freemium and free trial models particularly lucrative in the modern digital market.
Product experience is now essential
In the product-led growth model, the complete onboarding and upgrade experience ought to be handled by the product itself. Anything that requires human intervention is likely to alienate modern users and create friction in your sales process. The product experience – that is, the product handling the heavy lifting – is now essential.
The benefits of product-led growth
Product-led growth is the future of the digital industry. Here are a few of the main benefits to be had by switching to a product-led growth model.
Fast and global growth
Product-led businesses grow more rapidly thanks to a wider top-of-funnel and faster global scale. Their virality also allows them to acquire users faster than traditional models, allowing for rapid adoption and global growth. Finally, you don’t require dozens of sales representatives for every geographical location – a product-led growth approach opens your sales funnel to people at the early stages of their customer journey all around the world.
In saying that, it’s essential that your business know it’s market strategy back-to-front in order to push people into the top of the sales funnel. Is your company dominant, differentiated, or disruptive? The answer will dictate how you approach product-led growth.
Low customer acquisition costs
The goal of any digital business is to get its customer acquisition cost to zero. This generally happens when you go from one user to thousands (or millions) of users. The maintenance of your product as well as the effort put into innovation for each user tends to zero out.
With a product-led growth approach, your users onboard themselves with just a few clicks, allowing them to experience your product’s value quicker. This means you’re able to more easily convert free users into paying customers without investing in long sales and marketing campaigns. Gaining customers more rapidly also helps you zero out your customer acquisition cost faster.
Better user experience and short time-to-value
People today hate waiting for gratification. The product-led growth approach prioritizes delivering product value, ensuring users aren’t kept waiting and their patience isn’t tested. It also ensures the user experience is streamlined and solid, providing a strong foundation from which to grow your user base.
Product-led companies often experience a surge in the virality of their products. Because so many users can try your product for free, they’re able to participate in word-of-mouth promotion of it. This is a boon for businesses that don’t want to rely on traditional marketing methods.
Product-led company traits
Before we look at some examples of product-led companies, we should first examine a few of their common traits. These include:
Product-led businesses grow by encouraging sharing within the product or by word-of-mouth. A good example of this is through link-sharing within meeting applications. Odds are you downloaded Zoom through a meeting invite – this is a classic example of a product-led growth model.
Product-led growth businesses make it extremely simple to sign up for their product. Often this means a single sign-on or you having to only input minimal information during signup. The goal here is to make the process of signing up lightning-fast and frictionless so that you can start receiving value from the product as fast as possible.
Deliver value rapidly
Product-led growth businesses deliver value to their customers as fast as possible. There are a number of ways to do this such as through personalization, AI implementation, or gratification practices like service, support, or innovation.
This characteristic is particularly important as most product-led growth businesses rely on social media to grow their customer base. The faster they deliver value, the more chance the new user shares the initial post, creating a viral loop.
Value before money
Most product-led growth businesses have a freemium or free trial business model. This ensures users are able to get value from the product before they invest any money. Users are far more open to paying for a product once they know exactly how they can benefit from it. Furthermore, they’ll be more likely to share the product with colleagues and friends as well.
Product-led growth businesses take a flipped approach to growing their userbase. This is called a bottom-up selling strategy. The customer isn’t the key stakeholder, but rather the end-user. By switching the focus to the user with a problem that requires solving, product-led growth businesses are able to grow far more rapidly. A user is far more likely to tell others about a new product that solved their file-sharing problems than one that simply increases ROI.
The strategy is simple: you create a product that can be adopted in minutes by anyone – a practice that works perfectly with freemium or free trial approaches.
Product-led company examples
Now you know some of the traits product-led growth businesses have in common, let’s take a look at some real-world examples of product-led growth in action.
As the leader in web-based surveys, SurveyMonkey is primed to employ the product-led growth model. As a quick example:
Let’s say you’re an entrepreneur who wants to know how your user base feels about a new feature you’ve just rolled out. A great way to solve your problem is with a SurveyMonkey web survey.
You send your finished survey to your userbase. A few of them may have used SurveyMonkey in the past, a few of them may not have. Some of your users may not have even known SurveyMonkey exists.
Nevertheless, your users have feedback for your business so they all click through to take the survey you sent them. From there, they see that the page is powered by SurveyMonkey. They’ve now been exposed to SurveyMonkey as a brand.
More importantly, because they used SurveyMonkey’s product to fill in their feedback, they’re now users. SurveyMonkey essentially expanded its user base through no sales effort of its own.
This viral method of user acquisition is one of the main benefits of a product-led growth model.
Calendly has a similar product-led growth strategy to SurveyMonkey in that it’s inherently viral in nature. The product was developed in response to a genuine problem for many users – the back-and-forth chaos of meeting scheduling. This alone gives Calendly the perfect foundation from which to build a product-led growth strategy, but what about the product makes it viral?
Simple: Calendly can’t function with only one user. It requires that a single user send a Calendly link to another user wherein they both schedule a meeting. This means both parties receive the value offered through the use of Calendly as a product.
Every time a user schedules a meeting with Calendly, they’re both making use of and promoting Calendly as a product. This makes the product inherently viral and a great example of product-led growth.
Slack relies on a slightly different method of product-led growth than our previous two examples. SurveyMonkey and Calendly encourage users to collaborate outside their organizations and teams. Slack, on the other hand, pushes users to collaborate within their organization.
As more users in an organization use Slack, the more value the group as a whole receives. This is what’s known as the “network effect”. This phenomenon allows products like Slack to grow fast once they infiltrate an organization.
All it takes is one user of the product to convince another to download it. Once the value in the product is apparent, the users do the hard yards of convincing others in their organization to download it as well. The end result is Slack gaining many users with only the resources required to acquire one.
Product-led growth strategies are inherently about products that can grow independently. As the theory goes: if your product solves a pressing problem then customers will find value in it and tell others about it.
Productboard is a platform that helps product managers achieve key product management goals. It helps them gather and process user insights, establish a product strategy, create a roadmap, earn buy-in from the business, and increase transparency in the product management process.
At its core, Productboard understands and addresses the needs of its customers. This drives users to engage in word-of-mouth promotion within the product management community. This word-of-mouth promotion is essential for acquiring new users.
Productboard also encourages collaboration. Its product portals give both stakeholders and users a space to gather and engage with the product development method. This ability to share Productboard’s value as a product with users outside of their customer base gives Productboard valuable exposure and, done enough, it can create a loop of viral adoption for the product.
Dropbox meets its user needs with a straightforward, easy-to-use product, backing everything up with features that drive sharing and collaboration. All it takes is one user to share a file with another person. That non-user opens the link and, just like that, they’re now a Dropbox user.
Dropbox also capitalizes on features like referral bonuses and shared folders – both elements that have inherent virality. The business’s referral program grants users extra storage for each new customer they encourage onto the platform. This results in existing users being happy with their free storage and new users being satisfied that Dropbox addresses their pain points.
Becoming a product-led company
Becoming a product-led company isn’t an easy feat. It requires dedication and a clear plan of action. The following steps focus on three main areas you need to develop a strong product-led foundation:
- Understand your value
- Communicate the value of your product
- Deliver on what you promise
- Minimize friction
Let’s dive in.
Understand your value
A lot of tech companies focus too much on the features of their product rather than understanding the driving force behind why people purchase. This results in bland headlines like, “We create file-sharing software for online use”. Sure, we now know what this company sells, but why should we choose this business over their competitors? This copy makes the assumption that its readers know the problem that file-sharing software solves.
To develop an effective product-led company, you must understand the three main factors that motivate users to purchase your product.
- Functional outcome: the main task the user wants to achieve.
- Emotional outcome: how users want to feel after executing the main functional outcome.
- Social outcome: how users want to be perceived when using your product.
The more you understand what your user wants, the simpler it will be for you to communicate value to them and, subsequently, deliver on your promises.
Communicate the value of your product
Effectively communicating the value of your product is an essential step in the journey to product-led growth. Sales-led businesses tend to squirrel their pricing away, requesting that potential customers ask the price. Product-led businesses go out of their way to eliminate this buyer friction with clear, concise pricing on their starter plans.
This characteristic often means businesses must overhaul their pricing page as they switch to offering freemium or free trial products. There’s no use being coy about your pricing as a product-led company. You’ll just end up gumming up your signup process and causing unnecessary friction.
In a product-led company, your customer acquisition and revenue are partnered. This is different from a sales-led company where the customer acquisition and revenue are kept separate. In order to succeed as a product-led company, you must marry your customer acquisition and your revenue by ensuring your pricing model is as clear and concise as possible.
Deliver on what you promise
When selling software, what you promise in your sales and marketing is its perceived value. What you end up delivering in your product is the experienced value. You must ensure your perceived value aligns well with your product’s experienced value.
When the perceived and experienced value is aligned, everyone’s happy. What your users signed up for does exactly what they envisioned. Unfortunately, many businesses struggle with over-promising and under-delivering.
This is one of the main reasons why product-led companies are so successful. Users want to try the product before they buy it – essentially experiencing your value proposition. Provided you keep your word, this is an excellent way to garner trust and sell your product. However, if you trip up when delivering, your customer will experience a hefty value gap.
The larger your value gap, the more your sales funnel will leak. You’ll see customers sign onto your product but never come back to it. Closing your value gap is the single most important task on your list when it comes to switching to a product-led model.
Friction is the enemy of product-led growth. Think of it as potholes in the journey your user takes to become a customer. Some examples of potential friction areas include:
- An overly complicated signup process
- A lack of onboarding process or effective activation training
- Asking users to do too much too soon
- Including too many unnecessary steps in the UX
To help you identify any points of potential friction, you need to develop a killer customer team. They’ll be able to use analytics tools to help discern these friction points in the behavioral patterns of your users.
If you don’t identify your friction points early you risk limiting your product’s growth.
The future is product-led growth
Product-led growth is essential for businesses looking to stay relevant in today’s modern digital sphere. In a world where consumers demand products that meet their specific needs and expectations, a product-led approach allows companies to remain nimble and agile, able to funnel their efforts into quality products that practically sell themselves.
A product-led growth approach also ensures business teams are able to come together to work toward a common goal: growth. By breaking down the silos between departments, a product-led company is able to offer its products more holistically with all hands on deck.
At the end of the day, sales-led and marketing-led growth strategies have had their time in the sun. The future is product-led and it’s one in which businesses will be able to better meet the wants and needs of their users in a more effective manner.
How Uruit can help facilitate the onboarding process
We at Uruit are hard at work honing our product cycle that takes into account not only our clients’ product strategies and build & ship processes, but also their launch goals and go-to-market strategies. We’re also adding a growth and optimization stage that pushes us to keep growing, discovering, and testing the product to better meet the needs of our clients and their users.
Get in touch today to see how Uruit can help your business get the most out of your onboarding process.