The evolution of product-led growth: we're entering the "choose your own adventure" era
The evolution of product-led growth: we're entering the "choose your own adventure" era
Table of contents:
I’ve spent the last 15 years working in B2B SaaS.
I was one of the first 200 employees at HubSpot, and saw first hand what high-growth felt like from the inside. Then I joined Wistia, where I started and scaled the growth team and helped the company acquire hundreds of thousands of users. Later, I worked in the trenches at Postscript as their head of growth, where we grew revenue by 5x in 16 months!
I’m addicted to the action and energy of working at these early-stage companies.
The one common strategy at each my stops? Product-led growth. Right now, everyone in the start-up world is excited about product-led growth.
It isn't just early stage start-ups looking to use that strategy anymore. It's become the darling go-to-market strategy in the tech world.
New companies want to adopt PLG
Existing companies are exploring how to make it work for them
VCs recommend it left and right
People are writing books about it
The buzz around PLG is only getting bigger.
We’ve been in peak product-led growth mania for the past 3 years.
image source - Google trends
And, I think things are going to get even crazier over the next year or two as every SaaS company focuses on improving margins and overall efficiency.
What is product-led growth?
The idea behind product-led growth (PLG) is fairly simple: use your product as the primary tool for customer acquisition, conversion, and expansion instead of scaling big teams of sales & customer success folks.
Want a deeper dive into the definition? OpenView coined the term in 2016 and has some great resources.
Why is product-led growth important?
Customers are more inclined than ever to figure out what they need on their own and then find a solution that works for them—without talking to a salesperson first.
In fact, the vast majority of B2B buyers leaned toward a self-service model. The study is from 2015, so you can imagine it’s much higher today. Buyers want control over the process, not to be sold to.
PLG also helps you scale faster & more efficiently. When analyzing IPOs, OpenView found that product-led businesses outpace their public-market SaaS Index Fund peers in both revenue (14.3% higher) and valuation (30% higher).
So, if you can get your product to work as its own sales tool, you're basically feeding two birds with one scone.
Sales and customer success teams exist in this model, too, but those teams aren’t the only ones working to acquire, onboard, and keep customers. Your product becomes the primary tool for that.
To get started, PLG typically involves making a frictionless version of the product users can try (like a free plan or free trial) and allowing website visitors to sign up for it directly from your website.
Then, the product-led growth strategy is this:
Optimizing the new user experience to deliver as much value as possible.
Creating incentives for free users to convert to paying customers.
Implementing paths to move users between plans and drive upgrades.
And using product data to guide your decision making along the way.
It's a really effective go-to-market model when done right.
Product-led growth strategies aren’t new
SaaS companies have been using product-led growth strategies for years. They just didn’t call it that, specifically, because PLG didn’t really have a name until recently.
Mailchimp is probably the best known example here. They launched their free forever plan in September 2009. One year later, they’d grown to 450,000 users. Two years after that, they hit 1.2 million users. And as of Sept 2021, over 13 million users!
Though the Mailchimp team didn't call their strategy "product-led growth" originally, they were inspired by the idea that they could use their product to market their product—and they were excited about the low customer acquisition costs.
I personally saw this work first hand when I was at Wistia.
The Wistia Product-Led Growth Example
Back in 2012, Wistia launched their Free Plan. At the time, it was a relatively simple product that helped users embed videos in a customizable player.
The free plan helped them to capitalize on the viral nature of the product (being embedded & shared all across the internet). It helped drive hundreds of thousands of free users, and thousands of happy paying customers––without anyone working in sales.
Around 2016, we noticed some free users writing in and asking questions.
Some asked basic questions about how the product worked, and about some of its features. Others had more complex questions about integrations and customizations. Others, still, explicitly asked to speak with someone in sales.
That is when we realized we should have people available when those users had questions. The sales team was then born.
But we didn’t want to follow a traditional inside sales model by sending every new free account to our sales team. We knew most people were happy to use the product on their own, and buy without help––and we didn’t want to interrupt that process.
We analyzed the accounts that were asking for sales help and noticed some interesting patterns. Certain use-cases and profiles were more inclined to speak with sales. Eventually, we learned to identify them at the moment they signed up, and route them accordingly.
The result? More sales, more revenue, and happier users.
Today, that routing is a core part of the product-led model. But at the time, it was just a focus on helping users, on their terms––and not disrupting the self-service motion that was already working.
Mailchimp and Wistia weren’t the only ones with this approach early on. Here are more companies that have successfully used the PLG model:
SurveyMonkey
Typeform
Dropbox
DocuSign
Slack
All of these companies had similar versions of the product-led growth go-to-market model in the early 2010s. So even though the PLG movement is popular now, innovative SaaS brands have been refining this playbook for a while.
Here is what those teams (and myself!) have learned first hand.
The two (historic) pitfalls of product-led growth
At first, a PLG strategy seems easy. You just need to get new users to activate. To reach that "aha" moment with your product––that moment that makes them come back for more.
If a new user activates, it's much more likely they turn into an active user and eventually a paying customer.
This is why activation is commonly used as a “north star” metric for a lot of product-led SaaS businesses. It’s a predictor of future purchase behavior. Growing the number of activated accounts directly correlates to growing your new MRR.
So, as you might expect, SaaS brands have spent lots of time improving activation.
They’ve created slick onboarding flows.
They’ve enhanced these flows with behavioral-based emails, videos, and popups.
They’ve layered on checklists to direct users when they get stuck.
These things are all effective––to a degree.
In my experience, there are two bigger problems to solve that impact the number of activated accounts: poor acquisition rates at the top of the funnel and a lack of in-product guidance to turn casual users into active users.
Improving acquisition rates
With the current PLG playbook, users can't even begin to experience the true value of your product without signing up for it first.
That's a problem because most SaaS websites only convert 2-4% of their visitors into new accounts.
That means 96-98% of SaaS website visitors don't sign up for the product –– and don’t get to experience any value.
And you can’t activate users who don’t see value, don’t sign up, and don’t ever spend a minute with your product.
Guiding users towards value
Most users have no idea where to start with your product. The best way to illustrate this is with an analogy.
Say you’re trying your hand at Photoshop for the first time. You’re excited, but then quickly overwhelmed. You get intimidated by how much the tool has to offer. You’re overwhelmed by the amount of help documentation. You’re staring at a blank project and don’t know where to start. Soon, you find something else, something simpler, and resign Photoshop to a tool used by “experts.”
That’s how many of your users feel the first time they see your app. Without the right guidance, they’re unlikely to get much value.
Solving for pre-activation issues
Both of these contribute to the activation challenge, and it’s why so many people sign up for your product and never return.
I call these folks “pokers.” In my experience, 25-35% of new accounts sign up. Poke around for a few mins. Then leave, and never come back. They saw zero value, and are definitely not making it to the activation stage.
If users don’t receive value from the product, there’s very little chance they come back again.
Yes, activation is a huge opportunity, but it can't be solved with a single popup, video, or checklist. You need to provide users with an experience that helps them experience your product’s value on their terms.
The choose your own adventure era in PLG is here
To solve the common challenges in product-led growth strategies, the next generation of SaaS products are giving new users multiple ways to explore.
These companies aren’t forcing every user down a one-size-fits-all onboarding checklist. Instead, they're asking new users how they want to explore the product, and then customizing the user experience based on their preferences.
There are two exciting and new product-led approaches emerging:
Ungated product experiences
Pre-built product templates
Let’s explore each of these. I’ll share what I’m so excited about, what they look like, and how you can get started today.
Ungated product experiences
The whole point of PLG is to create more opportunities for people to try your product and fall in love with it.
The ungated product experience approach attempts to remove anything standing in the way or slowing users down.
This involves embedding an ungated interactive version of the product directly on the site so visitors can play with it and get a feel for how valuable it might be for them. No form fields required.
Then, after some meaningful interaction––maybe the visitor is using it for a few minutes or for a specific number of interactions––that is when the suggestion to try out the real version of the product pops up.
Because this approach helps site visitors engage with your product without having to fill out a form first, it is like a SaaS version of “try it before you buy it.”
It is effective for a few reasons:
The ungated experience engages a much larger percentage of your website visitors. Instead of 2-4% of your website visitors creating an account, your product gets shown to every person, typically with double-digit interaction rates. This means that you deliver value sooner, and to more people.
This approach typically leads to less total signups, but a higher number of activated accounts. This is because when visitors do sign up, they’ve already received a ton of value from the product - and built up momentum. They’re way more likely to become active users & paying customers.
You also get more actionable usage and retention data by weeding out the “pokers.” After removing the noise in your numbers, you’ll be able to make much better decisions about which use-cases and features lead to conversions and retention. Sharing this feedback loop with marketing enables them to run campaigns to find more of your best users.
I'm seeing example after example of companies doing this. Want to see what I mean?
Unbounce’s ungated product experience
Check out Unbounce, a tool for landing pages. The screenshot below is an interactive page on their website. It is essentially a lightweight version of their product.
Unbounce could have adopted the traditional SaaS PLG playbook and made everyone create an account before seeing their tool in action. Instead, they’ve embedded the product directly on their site so users can play with it before making an account.
Veed’s ungated product experience
Video editing tool Veed takes a similar approach.
The main CTA on their homepage is to “Upload Your Video.” Instead of making you create an account to get started, they specifically encourage visitors to “Try it now, no account required.”
They lead with the interactive product experience and encourage website visitors to try out the tool immediately.
After clicking upload, you’re in! And now, you start using their editor. You can add filters, change the speed of your clips, add text and subtitles, watermarks, logos, and even draw on the screen––all of this without being asked to pay for anything or create an account.
Then, Veed converts visitors into accounts with a prompt to “Save your project for later,” which leads you into their signup form. But, you don’t have to do that. You can still use their product without saving the project. But it’s not required to use the product.
In all, they’re delivering a lot of value.
Octopus’s ungated product experience
Octopus is another great example of this in action. They help companies create visual sitemaps.
Check out their homepage. It doesn’t talk about the product, or pain points, or benefits. It doesn’t even have a CTA to try the product.
No, instead, the homepage is the product.
So when users land on their site, they can see exactly what the product does.
How it looks
How it works
How it solves for their needs (or not)
It takes about 3 seconds to get started using the product, and the team gives you a prompt, too, to build your site map directly on their homepage. When you’re ready, the save button on the bottom of the screen brings you into their signup flow.
It looks pretty slick to me. More importantly, it seems to be resonating with their users, like Gary Magnone.
How to get started with an ungated product experience
After building these types of experiences at both Wistia and Postscript, I’m extremely bullish. Our teams saw first hand how these drove engagement and influenced activation. We also constantly heard from customers who said it influenced their perception of the brand and purchase process.
I suspect we’ll see the words “Try it now, no account required” on a lot more websites over the next few years.
But not everyone is convinced.
Whenever I talk to people about this concept, there are always a few typical objections that come up from folks, even some of my SaaS hero’s, like Elena.
She raised some great points and started some healthy discussion among experienced SaaS folks when I originally started talking about this concept a few years ago.
Ultimately, I recommend testing this yourself versus plowing ahead, as every product, customer, and market will have different results.
The most effective way to implement these kinds of experiences is to create a lightweight version of your product, then embed it on your website. If you have the engineering resources to make it happen, it’s worth doing.
But for many SaaS brands, engineering resources and product constraints make that hard. Or, you might just want to validate this concept provides value for your brand before investing too many resources into it.
If that's the case, there are some great no-code tool options––like my friends at Navattic––to help you get started. Going the no-code route gives you the ability to build interactive product demos and embed them directly on your site without dev help.
Pre-built product templates
Pre-built templates are another exciting evolution in product-led onboarding that helps users experience value on their own terms. These pre-built templates are essentially product playbooks designed to help new users get ramped up without having to start from scratch.
We’re seeing savvy SaaS brands create these templates for specific use cases and encouraging users to choose a template during the onboarding process.
New users don’t need to go through a 15-step onboarding process before understanding how they might use the product. With templates, they can get started fast, and experience value custom to their needs quickly. This is especially true with complex products.
Here’s how SaaS brands are using these:
Uncover the 4-5 most common use cases
There are many ways to do this. My personal favorite is to run a survey for a few weeks.
You can use any survey tool and present users with a question on the signup page, or directly after they are in the product. The key is to leave the question open-ended. Here’s an example:
“Hey, thanks for being here! Mind sharing the reason you signed up today?”
Why do you want the question to be open-ended? Because you want to see the words customers use, and how they phrase the benefit they are getting.
Then, export the responses into a spreadsheet and review them. There will be a lot of different words used. But you should see 4 or 5 common themes in the answers. Those are your use cases.
Make pre-built templates specifically for those use cases.
The idea of "building templates" might bring to mind the kind of stuff you find in an outdated Microsoft Word template library, but that's not what we're talking about.
Nowadays, pre-built templates drive activation––and keep users engaged.
The exact templates built vary depending on the product and use case it supports. But the goal is always the same: to create something that makes it easy for users to quickly tweak and customize without having to start from scratch.
Users can simply edit any part of the template they choose, or replace it with something entirely new if they want. You’ve already done the hard work of figuring out what kind of content works best for their use case.
Now, build use case identification into the product flow.
Now that you’ve got your 4-5 use cases, don’t stop! Turn the results of your survey analysis into part of the signup flow. When a user signs up for your product, ask them to identify which use case is most relevant to them.
Here’s a great example from MIRO.
And another example from Canva.
The goal here is twofold:
Gain information about the user and their needs so that you can make the experience better for them
Give users an idea of where they should start (by suggesting the appropriate template) based on their unique circumstances.
Combined, adding this into the sign up flow gets you the data you want while solving for one of the historical PLG pitfalls: speed to finding personalized value.
Suggest the appropriate template based on their use case
Use the answers they provide to tailor their first experiences with your product. This helps them get up and running quickly.
Here’s the next page in MIROs onboarding flow, after you select Strategy & Planning in the screenshot above.
They suggest pre-built templates to help you get started on your first MIRO board.
This helps new accounts that aren't ready to import, upload, or enter their own data yet. Or, are too intimidated to get started.
They get to receive the full value of the product. And they can do it fast, without any effort.
Templates are all about helping your users by providing a low friction path to fast value. That's good for them. Good for your brand. And good for your conversion rates.
We’re even seeing advanced companies put templates on their websites, letting users sign up for an account pre-loaded with useful content. That's a pretty slick acquisition play that also helps activation.
Here’s a great example from Airtable. They have an entire template library available on the website.
When you click “Use template,” the tool automatically puts the template inside your account. This allows you to focus on how you might use the data versus spending lots of time importing.
By giving users a template, you're giving them a way to hit the ground running and start using your product right away. You're also giving them a sense of what's possible, and inspiring ideas for how they can use it for their own unique needs.
The success of product-led growth is still just getting started
The future of product-led growth is really exciting. Most companies are still focused on implementing the fundamentals, but those who have been executing & refining this playbook have shown us the way for the next generation of PLG.
The future is all about users choosing their own adventure.
Does your team need help implementing PLG foundations or setting up these more advanced use cases? There are 3 ways I can help:
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First published on deliveringvalue.co on April 22, 2022 - updated on March 5th, 2024.