Article

Georges Fallah
Georges Fallah 15 November 2023

Learning Product-Led Growth: A Simple Guide to Great Marketing Plans and Measures for Success in SaaS

Product-led growth is a strategy where businesses grow by focusing on how customers feel when using their products. They let potential customers try the product for free. The aim is that people will love using the product so much that they'll want to become paying customers.

Leveraging this approach, marketers can effectively capture, activate, and retain customers.

To create a seamless product experience, it's crucial that marketers provide customers with all the necessary resources and educational materials about the product.

Source: LeanDiscoveryGroup

Having understood the essence of Product-Led Growth, it's essential to visualize this concept through a practical model. This is where the Product-Led Growth Flywheel comes into play.

This visual featured below provides a clear representation of how different components of a product-led strategy contribute to driving growth. 

Source: Appcues

The Product-Led Growth Flywheel, a framework for growing your business by investing in a product-led user experience, outlines four key steps customers should take to transition to the next stage: Activate, Adopt, Adore, and Advocate.

According to the PLG Collective by Appcues, the aim is to create an optimized customer experience that promotes user satisfaction, and increased advocacy and thereby fuels new user acquisition.

To learn more about how to drive your business growth with a product-led approach, keep reading this article!

Why is Product-Led Marketing Becoming Important?

1. Every member of the team is involved

Source: ProductLed

The product-led marketing approach necessitates collaboration across the board. Marketing, sales, development, and customer success teams must work together with the common goal of enhancing the product and centering it around the customer.

This calls for a shared mindset among the teams:

  • The marketing team questions: "How can we generate demand using our product?"

  • The sales team considers: "How can we utilize our product to qualify prospects?"

  • The success team contemplates: "How can we engineer a product that ensures our customers succeed without our intervention?"

  • The development team ponders: "How can we create a product with quick time-to-value?"

2. Customers prefer to learn on their own

According to Ramli John, director of programmatic content at Appcues, customers are growing fond of the Do-It-Yourself (DIY) model. Users favor self-onboarding and learning, which leads to efficiencies and cost-savings in sales and support areas.

Nowadays, most SaaS products offer freemium or free-trial plans allowing new users to familiarize themselves with the product’s functionalities before making a purchasing decision. This self-service model mirrors trying on clothes before buying; SaaS customers purchase based on their own discovery and evaluation, often without the need for a sales rep.

3. Product experience influences buying decisions

Product experience is a significant factor in buying decisions. To accommodate this customer preference, the entire organization’s team involved in creating and marketing the product must adopt a user-centric approach.

This approach enhances the product's utility and the overall enjoyment of its use. To facilitate this, businesses should provide ample resources and materials to assist customers in discovering all they need to know about the product. This includes content on the company's website, free trials, and onboarding resources.

Source: TrustRadius

TrustRadius conducted a survey where buyers ranked the resources they relied on during their buying cycle, based on their trustworthiness and influence. As evidenced by the chart, the respondents clearly valued their prior experience with the product as the most influential factor.

On the other hand, vendor-controlled sources such as vendor representatives, blogs, and marketing collateral were ranked as least influential.

4. Less pressure on your sales team

In a product-led growth (PLG) approach, the product is central and serves as the primary engine for driving customer acquisition, conversion, and expansion. This significantly reduces the pressure on the sales team, allowing them more time to focus on other tasks.

While the sales team still plays a vital role, particularly in working with Product Qualified Leads (PQLs), their focus can shift to nurturing warmer prospects and working closely with the marketing team to convert middle-of-the-funnel leads throughout the sales funnel.

5. Lower Customer Acquisition Cost (CAC)

Companies adopting a product-led growth mindset can expect to see a reduction in Customer Acquisition Costs (CAC). This reduction stems from the decreased need to spend time and resources on acquiring new customers, as the focus shifts to retaining existing customers through a value-packed product.

As word-of-mouth marketing becomes more prevalent and the approach yields more educated, product-qualified leads, companies no longer need to spend as much on top-of-the-funnel marketing efforts. This strategy not only reduces CAC but also increases revenue from existing customers.

6. Shorter Sales Cycle

Providing customers with ample resources and materials removes entry barriers for top-of-the-funnel leads. Offering freemium or free trial options lets customers explore your product at their own pace and identify its value.

Simplifying the signup process and making onboarding resources readily available adds to the convenience. This self-sufficiency, in turn, accelerates the sales cycle, as customers can decide to upgrade their plan at their discretion.

The Best Steps to Achieve Product-Led Growth

1. Identify your customers' pain points

Start by focusing on your customers' problems associated with your product, and work towards identifying solutions that meet their expectations.

Collect data through user stories, observing your potential customers' searches, their behaviors on your site (like website page visits, average session duration, exit pages, conversions), the customer’s onboarding process, in-app analytics (such as areas where they are most/least active, their activities), support tickets, top reasons for churn, surveys, and interviews.

With this data, identify areas of weaknesses to be improved and make suggestions to increase your customer’s activation rate.

2. Solve your customers' problems

Upon identifying user challenges, your next objective is to solve these problems.

If your analysis shows a substantial number of customers are inactive due to a lack of resources, consider enhancing your help section, creating new documentation pages, offering a new course to educate them about your business and how to effectively use your product, introducing a chat support service ready to answer all their queries, and providing video tutorials and how-to articles for better understanding.

If your users face barriers such as form fill-outs, booking demos, or waiting for support team responses, strive to remove these obstacles and provide direct access to your product. This approach shortens the time to value (TTV).

3. Optimize your content for search engines

The product-led strategy extends beyond your app or website and can be referred to as "Product-Led SEO". It commences when your target audience starts searching for keywords related to their inquiries.

Hence, it's crucial to understand what keywords your customers and prospects are searching for, and optimize your knowledge-base articles and marketing blogs accordingly.

A more advanced strategy is to target a zero-search result ranking for every page you publish. By presenting yourself as an industry expert, earning authoritative backlinks, and regularly updating your content, Google will recognize your pages as valuable for your customers and prospects.

This approach also helps in hooking customers early on, without requiring a high budget for acquisition.

Source: yellowHEAD

4. Leverage reviews

Third-party testimonials and recommendations are invaluable. They enhance your product’s credibility and motivate prospects to try your product without hesitation.

Display your customers' reviews on your website’s homepage, demo pages, proposals, retargeting ads... It's important to showcase both positive and negative reviews on your website. Respond to each review constructively, demonstrating your commitment to resolving any issues your customers face.

5. Build a product roadmap for feature requests

Allow your customers to voice their opinions and suggest new feature requests by creating a product roadmap on your website. Based on these suggestions, identify the most demanded features and prioritize those for your development team to work on.

On this page, you can include a request form asking for the title of the new feature, an explanation of how it works, previously suggested ideas, and their status (like Under Consideration - Planned - In Development - Executed).

This approach illustrates your appreciation for your customers and makes them feel valued, leading to enhanced customer experiences, increased satisfaction, and reduced churn rate.

6. Providing a seamless onboarding experience

A smooth onboarding process is a potent product-led growth strategy. Upon signup, enroll new users in an automated workflow sequence that sends them daily automated messages through emails, SMS, and web push notifications.

The first message could be a welcome email, followed by others that provide further tips and instructions. Offer resources like help pages, marketing blogs, video tutorials, courses, and pre-recorded demos, and provide instant dedicated support through live chat.

This helps users to explore your product on their own and encourages them to become active, thereby leading to their conversion into paying customers.

7. Offer free trials

When customers have the opportunity to explore your product without immediate commitment, it enhances the likelihood of conversions. Offer freemium plans and/or a 14-day trial period for every pricing tier, giving them full access to all your features along with the onboarding process.

This combination of strategies can improve the odds of converting users to higher plans, thus saving both time and money.

The Product Growth Metrics SaaS Should Measure

1. Time to Value (TTV)

TTV measures the time it takes for your customers to find value in your product. The shorter the time to activation, the better it is for your business. Improving the onboarding experience around your product's key features can reduce TTV.

2. Product Qualified Leads (PQL)

PQLs are customers who have been activated and achieved their 'aha moment'. To identify PQLs, you need to determine your product's activation event and identify the actions within your product that indicate customers are ready to progress in their journey.

This can be ascertained through interviews and session recordings to better understand customer behaviors leading to conversion and retention.

3. Feature Adoption Rate (FAR)

FAR is the percentage of new customers who use a specific feature of your product. While the product adoption rate measures the percentage of active clients using your product overall, the feature adoption rate can provide insights into why customers continue to engage with your product.

4. Expansion Revenue

Expansion revenue accounts for the total sales from existing clients through upselling, cross-selling, add-ons, and more. According to ProfitWell, expansion revenue should contribute at least 30% of your total sales for a healthy SaaS business. It's cheaper and easier to generate revenue from satisfied existing customers than to acquire new ones.

5. Average Revenue Per User (ARPU)

ARPU gives an indication of your business's overall health. It’s calculated by dividing your monthly recurring revenue (MRR) by the total number of customers.

6. Customer Lifetime Value (LTV)

LTV estimates the total revenue you expect to earn from a single customer over their account’s lifetime. It's calculated as follows:

LTV = Total revenue in the period/length of the client’s stay.

To boost LTV in the realm of product-led marketing, the focus should be on continuous customer value delivery. By ensuring your product evolves in line with customers' changing needs and expectations, you can extend their lifespan with your product.

Regular feature updates, maintaining a robust support system, and closely monitoring customer feedback are key actions to take. Remember, a product that consistently delivers value encourages customers stick around for longer, thereby increasing their lifetime value.

7. Net Revenue Churn

Net Revenue Churn quantifies the money lost from new and expansion revenue, expressed as a percentage. It's calculated as follows:

Net Revenue Churn = (Revenue lost in the period - New and expansion revenue)/Revenue at beginning of period x 100).

To combat revenue churn, implementing a proactive approach is crucial. Understanding the reasons behind customers' decisions to churn can help tailor strategies to prevent this.

Consider deploying an exit-intent survey or short questionnaire to gather insights from customers who decide to cancel or downgrade their subscriptions. This feedback can provide invaluable insights into potential product or service gaps, allowing you to address them and reduce churn rate in the long run.

Remember, retention is often more cost-effective than acquisition, so taking steps to reduce churn can significantly enhance your company's profitability.

8. Customer Satisfaction Score (CSAT)

The CSAT metric provides insight into the percentage of customers who have had a satisfying and enjoyable experience with your product. This differs from the Net Promoter Score (NPS) in a significant way.

While CSAT focuses on gauging customer satisfaction with a specific product or service, NPS seeks to measure customer loyalty towards your business as a whole. A notable advantage of the CSAT metric is its simplicity. Data for this metric can be collected easily through a single question posed to customers, typically formatted in a straightforward rating scale.

9. Virality

Virality happens when a product’s adoption rate increases exponentially as more people share it. The formula is C(O) x k = # of customers at the end of the period, where 'k' is the number of invitations sent by each customer times the conversion rate of each invite. For virality to exist, 'k' must be greater than 1, indicating that users promote the product by using it.

Take Zoom as an example for demonstrating virality. By sending a Zoom video conference link to attendees who don’t already use the tool, existing users promote the product in the context of its use. This means the more a user shares the tool with new users, the higher the chances of increasing the user base, hence the virality factor.

10. Network Effects

Network effects occur when a product becomes more valuable to users as more people adopt it. This is common with platforms like Instagram or Airbnb, where user experience improves as more people engage with the platform.

Airbnb provides a clear example of network effects. It's a two-sided marketplace where more listings (from hosts) and bookings (from guests) improve the platform's value. The more people list their homes and the more people book them, the better the product experience becomes for everyone involved.

This is a network effect in action, where the product's value increases with more users, creating a better experience in the long run.

Both virality and network effects are crucial components of the advocacy stage of the Product-Led Growth Flywheel, as they help increase new customer acquisition.

Wrapping Up

Adopting a product-led growth strategy is more than just a trend. It's a sustainable approach that drives long-term value for SaaS companies.

By identifying and solving customer pain points, optimizing content for SEO, leveraging reviews, building product roadmaps, providing seamless onboarding experiences, and offering free trials, businesses can foster deep engagement with their product.

Crucially, by monitoring key metrics such as Time to Value (TTV), Product Qualified Leads (PQL), Feature Adoption Rate (FAR), and others, companies can gauge the health and effectiveness of their product-led strategy.

Taking inspiration from successful models like Zoom and Airbnb can further illuminate the path. In a product-led growth paradigm, the product is not just part of the business; it becomes the primary driver of growth, customer acquisition, conversion, and retention.
 

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