Strategies of Product-led Growth Companies

Product-led growth has been a hot topic in the product and growth space. However, there are oftentimes misconceptions. In this guide, we’ll provide clarity on the questions: What is product-led growth, why is it important and what are the strategies of some of the best product-led growth companies out there?

Table of Contents

What Is Product-led Growth? πŸ’‘

Product-led growth is a go-to-market strategy in which the product is the primary driver of customer acquisition and growth. This is in contrast to other go-to-market strategies such as sales-led or marketing-led growth, in which the product is secondary to other drivers such as personal outreach or brand awareness.

Go-to-market Strategy 🎯

A typical go-to-market strategy describes how a company will approach a market with its product or service. The strategy includes information about the target market, the company’s value proposition, the product or service, and the sales and marketing strategy.

A go-to-market strategy answers the following questions:

  • Who are our ideal customers?
  • What needs of our customers does the product or service address?
  • What is our company’s value proposition?
  • What are our sales and marketing strategies to acquire customers?
  • What are the key metrics to measure success?

The go-to-market strategy should be closely tied to the overall business strategy. It should also be reviewed and updated on a regular basis as the business and market evolve.

Growth Marketing Funnel πŸš€

A typical growth marketing funnel comprises six stages that potential customers go through. It starts with building awareness around your product or service all the way until they become a loyal paying customer and tell their network about it.

  • Acquisition: How will you acquire new users?
  • Activation: How will you get users to try your product or service?
  • Retention: How will you keep users coming back?
  • Revenue: How will you make money?
  • Referral: How will you get users to become advocates who tell their friends and colleagues about your product or service?

Product-led Growth vs Sales-led Growth ⚑️

Here are the main differences between product-led growth and enterprise sales-led growth:

  • Product-led growth: Companies use their product to acquire customers and drive growth. Oftentimes, the primary goal is to get as many people using the product as possible first, and then monetize them. One of the key principles is to let users experience the product and get value out of it by themselves
  • Enterprise sales-led growth: Companies focus on creating brand awareness and generating leads through marketing initiatives. Sales teams then take it from there, giving leads a product demo and trying to close the deal. Once they convert to paying customers, customer success teams focus on retaining and monetizing them
What Is Product-led Growth? Tactics Per Funnel Stage
Product-led Growth Tactics Per Funnel Stage

Product-led and sales-led growth are fundamentally different approaches to driving growth. Yet, they can be combined.

As an example, a company may be sales or marketing-led when it comes to customer acquisition (e.g. through content marketing and sales calls), but product-led when it comes to monetization (e.g. by letting customers try a new paid feature and offering the ability to buy it within the product).

Benefits of Product-led Growth ⭐️

Product-led growth is vital to companies because it allows them to scale more efficiently by relying on the product to drive growth, rather than on less efficient and costly channels such as sales or paid ads.

In sales-led companies, organizations need to spend time hiring and building up sales teams to perform manual tasks such as customer calls, demo presentations, and negotiations. This is not scalable, as the more customers a company aims to close, the more sales resources are needed.

In addition to the scalability point, another important aspect is that product-led growth helps companies build better products by relying on customer feedback to drive their product development.

Product-led companies aim to drive growth through their product, so it needs to solve real customer problems and offer a great experience to convince prospects to pay for it and stand out against the competition. Therefore, these kinds of companies emphasize continuous user research, UX design, and following good product development practices.

The Top 10 Product-led Growth Principles πŸ’Ž

10 Principles Of Product-led Growth
10 Principles Of Product-led Growth

Here are the top 10 principles that distinguish a company that is truly product-led when it comes to driving growth:

  1. Product as the primary driver of growth – This can vary by funnel stage in combination with sales-led approaches
  2. End-user focus – By letting the end-user experience the product and become an advocate within their organization, there’s less need to try and convince the buyer
  3. Quick time to value – This is about letting users experience the value of the product as quickly as possible, e.g. through a freemium pricing model
  4. Self-serve capabilities – The product offers the ability to customers sign up and get started with the product without sales involvement
  5. Scalable distribution – Expanding to other markets, customer profiles, or closing more customers can be achieved with minimal product development instead of ramping of sales teams
  6. Straightforward pricing – Enabling prospects and customers to understand how the pricing model works
  7. Product drives expansion – The product offers the ability to customers to buy additional features or upgrade without sales involvement
  8. Product drives virality – Turning customers into advocates to drive referrals and word-of-mouth growth
  9. Data-informed – It’s crucial to have data analytics in place to understand what’s happening within the product to identify gaps and take measures
  10. Experimentation-driven – Companies follow a hypothesis-driven approach where they test assumptions and iterate through testing

Strategies of Leading Product-led Growth Companies πŸ’»

Here are five examples of leading companies that follow a product-led growth approach:

Figma

Figma, the innovative design tool, has masterfully leveraged product-led growth by offering a robust freemium plan. This strategy isn’t just about attracting individual users; it’s a calculated move to penetrate enterprise markets. By delivering exceptional value to individual designers, Figma turns them into internal advocates. These users naturally promote Figma within their organizations, leading to wider adoption and ultimately, enterprise sales.

Lesson for Businesses: Startups can learn the importance of creating evangelists out of individual users, who can drive adoption in larger teams and organizations.

Miro

Miro’s journey as a virtual whiteboarding solution exemplifies product-led growth through collaborative incentives. By allowing users to start with up to three free boards, Miro taps into the natural desire to collaborate. As users experience the benefits and reach the board limit, they organically advocate for the enterprise version within their teams.

Key Insight for startups: Encourage users to invite others and make your product’s collaborative features a key part of its growth strategy. This not only increases user engagement but also paves the way for broader organizational adoption.

Slack

Slack’s ascent as a premier communication platform is rooted in its freemium model, positioned as an email alternative. By offering core functionalities for free and more comprehensive features in its paid versions, Slack entices teams to try and gradually shift their communication paradigm.

πŸ‘‰ Check out our guide to learn more about freemium and other pricing models for SaaS Pricing Models for Software – How to Choose the Right One

Takeaway for Businesses: Startups can learn the effectiveness of challenging traditional tools (like email) and offering a more efficient alternative, leveraging the freemium model to lower entry barriers and encourage widespread adoption.

Canva

Canva, the graphic design platform, is a shining example of product-led growth. Canva’s intuitive, user-friendly interface makes professional design accessible to everyone, not just designers. By offering a seamless experience with basic features for free, they attract a wide range of users. The platform’s ease of use encourages users to explore its capabilities, leading them to discover the benefits of premium features.

Insight for Businesses: Canva’s strategy highlights the importance of solving real user problems and offering a delightful user experience. Startups can learn from Canva’s approach to make their product indispensable by focusing on simplicity and user empowerment.

Dropbox

Dropbox’s file storage and sharing service shows the power of incentivized referrals in a product-led growth strategy. By offering additional storage for each successful referral, Dropbox not only expanded its user base but also encouraged existing users to become active promoters.

Insight for Startups: Utilising incentives for referrals can be a powerful tool for user acquisition and retention, turning your customer base into a driving force for growth.

Pinterest

Pinterest’s growth is fueled by a self-sustaining loop of user-generated content. Users are drawn in by content through search or social channels, and as they engage, they’re encouraged to contribute their own content. This UGC is then indexed by search engines, attracting more users.

Lesson for Businesses: Startups can replicate this model by focusing on creating platforms where user interactions fuel content creation, which in turn drives further user acquisition and engagement.

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