Product-led growth (PLG) is a business strategy and approach in which the product is positioned as the primary driver of customer acquisition, activation, retention, and scalable expansion. When a company’s digital-facing teams—marketing, product, customer success, and others—converge on product-led growth, the firm can create an innovative and customized product experience that promotes customer loyalty and retention. Product-led growth is accomplished by maximizing the user experience (UX)—making it simple for consumers to join up, immediately get value from the product, complete their tasks, and share their good product experience (PX) with others, therefore generating word-of-mouth growth.
A product-led corporation centers all of its activities around its product. To ensure scalable and sustainable growth, all departments prioritize development as the primary driver. The product becomes the story’s prominent protagonist, gaining, activating, and keeping clients. Your website visitors will naturally transition into your users, who will be the driving force behind your SaaS service.
In theory, everything sounds great. However, one issue remains: how can we be product-led in practice?
What does it mean to be a product-led company?
Many individuals use these products and services without even realizing what they are. Consider the emergence of video-conferencing: one of your coworkers may have sent you a message that said, “Let’s catch up; I’ll send you a Zoom invitation.” You quickly became a Zoom user, and the next time you needed to meet up with someone, you simply asked them for a Zoom call.
Consider the following scenario: someone wants to share a file with you. They saved it to their team’s Dropbox account and sent you the URL. You open the file, and… you become a Dropbox user right away!
That is where the power of a product-led strategy is revealed: high-quality goods spread like wildfire. You see a user-friendly interface, simply log in, use it for the first time without incident, and you’re hooked.
To be genuinely product-led, your product must provide immediate value to its consumers and address their problems in a manner that your rivals cannot. When your customers enjoy your product so much that they want more, you may give them the option of upgrading to a paid plan. Again, your premium edition should provide excellent value and an expanded set of features.
As a result of a product-led strategy, consumers may experiment with your service with no investment. Before purchasing, they may test its features, fix difficulties, and satisfy specific demands.
Now that we’ve covered the fundamentals of Product Led Growth, let’s go through the frameworks for growth that we must adhere to.
Let’s get started, shall we?
AARRR Framework –
The AARRR Pirate Metrics framework is an acronym for a collection of five user-behavior metrics that product-led growth companies should monitor: Acquisition, Activation, Retention, Referral, and Revenue. The AARRR framework is a critical idea to understand if you want to master the art of growth hacking — finding bottlenecks early in your product-led journey and unearthing that Eureka moment inside the user trip; it’s what everyone is looking for. This approach is usually regarded as the most effective technique to assess the effectiveness of your customer funnel. It aids in the detection of leaks and possible flaws.
Let’s go through the components of an AARRR framework.
Because of the way it is pronounced, it is sometimes known as “Pirate Metrics.”
Now, matey, let’s cruise towards the framework in detail –
|A client acquisition is usually the initial stage in the customer’s lifetime. Simply defined, it is your first victory, in the form of a possible consumer visiting your website or any other acquisition channel to examine your company offering/s. It is a measured effort to target the proper audience via different channels.||Providing a great client experience is the focus of the activation phase. As a result, it is critical that your customers understand the worth of your offering. This is the point at which your clients will either stay or leave. This should happen at the beginning of the customer journey. Please remember that the longer your time to value, the more likely consumers will churn.||Keeping an established user/customer is a difficult task. Efforts are now required to keep consumers hooked on your product since the number of individuals who return to use your product determines its overall success. Retention success for a product-led growth might imply continually analyzing ways to reduce freemium use and boost subscription-based client utilization. To summarise, avoid having a leaking bucket.||Achieving a Netlfix or Amazon-like following might be the objective here. Essentially, transform your current client base into an advocate, or source, of the product’s success. At its core, this means converting your current client base into a vocal supporter and promoter of the product. The product’s expansion into other markets and into widespread acceptance inside businesses will be determined by how well it reaches among consumers.||Your monetary return is the ultimate success measure. The majority of firms who are successful in maximizing the first four AARR indicators will see revenue come in swiftly.|
|Metrics – |
– Customer acquisition expense (per channel)
– Rate of conversion
– Driven traffic to the webpage (per channel)
– Cost per click
– Bounce rates
– Quality of leads
|Metrics – |
– Time to value
– Ratio of visitors to registrations
– Conversion percentage
– How many consumers used an important product feature?
– Drop off Percentage
|Metrics – |
– Retention rate vs dropout rate
– Click through rate of emails
– Net Promoter Score
– Customer churn
– Infrequent logins
– Customer churn
– Open rate of emails
|Metrics – |
– The proportion of consumers who recommend their friends
– Referred clients
– % of all sales generated by referring clients
– Lifetime value of consumers referred
– Positive evaluations
– Social network sharing
– Viral coefficient & viral cycle time
– Net Promoter Rating
|Metrics – |
– Customer lifetime value
– Customer acquisition cost
– Monthly recurring earnings
– How many free clients convert to paying ones?
– Average order value per client
– Multiple purchases
– Revenue churn
– Expansion revenue
Growth Loop –
A loop in engineering is a process in which the output is recycled back into the input. A growth loop in marketing is a self-reinforcing strategy that generates positive momentum over time. It processes a growth indicator, outputs more, and feeds the result into the loop cycle as input. With each cycle, the growth indicator accumulates and grows your marketing efforts swiftly. It happens every time you utilize one user to get another. It might be based on their behaviors, identification, social proof, or even what they do inside the app. Many of the fastest-growing sites employ growth loops. A growth loop occurs when LinkedIn accesses your email account when you join to inform your friends about the network.
Once you’ve reached a critical mass, growth loops need little external assistance. Growth loops may assist you in acquiring new users, increasing returns, and supplementing your marketing efforts. Instead of asking your marketing or user acquisition team to increase user acquisition channels, growth loops combine product and acquisition to create a product with better user experience. In other words, growth loops will aid your company’s organic expansion by maximizing marketing resources while minimizing client acquisition costs. It has the power to transform your whole company. Growth loops allow you to invest in long-term sustainable systems that grow independently. They also assist in organizing your employees and teams around the same purpose, aligning and optimizing stated growth cycles.
Growth loops have helped several organizations grow by making obtaining and retaining customers simpler. They are beneficial because they bring together teams to work toward similar objectives, create long-term, compounding development, and are unique to your product and business, making them tough to reproduce.
Growth loops connect your company’s unique product, channel, and monetization tactics, making it more difficult for rivals to replicate. Unlike conventional marketing, which considers product and acquisition tactics individually, growth loops examine the whole metrics ecosystem by studying the interaction of acquisition, engagement, and monetization indicators.
Here are different types of Growth Loops –
|Acquisition Growth Loops||Engagement Growth Loops|
|The growth loops encourage users to bring in new users and make it as simple for them to do so as possible.|
Instead of continually pouring more resources into the top of the funnel in order to enhance output at the bottom, the product is designed to grow as more people convert. It does not need new expenditures each time you wish to raise brand awareness, making it more cost-effective. The more individuals you attract, the more users you will have. An acquisition loop operates as follows:
– A new user joins your platform.
– They begin to use the product.
– The user recommends the customer to his or her friends.
– The product is discovered by new users.
|An engagement loop is an experience that encourages a consumer to interact with your product more. It increases client retention and decreases turnover. The engagement loop encourages users to return to the site. Instead of attracting new users, like in acquisition loops, the objective here is to engage existing users in order to win their trust and loyalty.|
This is how the engagement loop looks –
– A hesitant consumer acts and utilizes the product.
– The product works effectively and provides a great user experience.
– The user’s faith in the product grows.
– The product is interacted with, learned about, and used by the user.
– Positive feedback is generated, and the user becomes more involved with the product.
Let us now look at how to put a product-led strategy into action.
Implementation of Product Led Growth –
The initial step is to put end-users at the center of all your company’s actions. The economics of attention rules the corporate world, and clients make quick judgments. It will not work if you do not please customers by consistently collecting feedback and improving product quality. As previously said, transforming the organization into a product-led one requires a considerable transformation in operations and mindsets. Are you wondering what actions you should take to ensure efficient product-led growth? Here is a list of important actions to remember.
Establish roles and duties –
Remember that from now on, every employee influences the product. The product’s development involves the whole firm. Customer Success is in charge of communicating with consumers, getting input, and understanding what they now need. Marketing focuses on pitching new features, providing value via documentation, and generating organic traffic to the firm’s website so that more people may get familiar with the product.
And then there’s the product team, the unsung heroes responsible for developing the product and providing value. At some point throughout your product-led journey, the whole company transforms into a product team, a customer success team, and a marketing team. This way, you may collaborate directly with the whole team, be aligned to develop the product, and diversify your efforts. Simultaneously, everyone accepts equal responsibility for the product’s success.
Perform a product audit –
Because your primary purpose is to provide value regardless of the circumstances, you must ensure that everything runs smoothly. Finally, you cannot be product-led if your product is unable to lead your organization towards financial growth. You must perform frequent quality audits to verify that your product provides the value that your customers expect. Take a step back and ask yourself the following questions:
- What do my customers need, and what value do they seek?
- Can my product provide them with a decent solution?
- What can we add, and what can we change?
This reflection might be a starting point for your team’s next efforts in enhancing the product and the customer experience.
Experiment with new products –
Experimenting with the finished product is the critical step in planning your product-led approach. Spend some time considering particular standards and procedures for the experimentation processes before diving into experiment ideas. As previously said, product-led growth involves the whole business in product creation; ensure that everyone also does their bit at this stage.
It is critical to identify particular areas for your trial and error strategy – consider which growth themes have the most potential to drive your product development. Perhaps it’s the acquisition, where you can experiment with features, or an interaction in which you learn how to promote regular product usage better.
Determine the most important development prospects, examine the data, and develop growth models for those areas. There will be disagreements and churn initially. However, to please clients, you must rigorously study the input you get and accelerate the development process.
Remember that product-led experimentation is an ongoing process. There will always be rigorous testing of what your clients could fall in love with. But don’t worry; with the correct mentality and data-driven choices, your product will drive itself to success and delight your team.
Set up analytics monitoring –
You want to build amazing user experiences through product-led growth, which is difficult if you don’t measure your progress.
Some essential KPIs are net churn, customer lifetime value, virality, product-qualified leads, and average revenue per user. You should pick key and secondary metrics that align with your company’s and product’s mission.
Let us identify those key metrics to follow –
There are various measures you may use to track your progress toward product-led success. At the outset, determining which of them are primary and secondary would be a good idea. Below is a list of essential KPIs to consider for your product-led SaaS solution.
|Customer Lifetime Value||Customer lifetime value forecasts how much income you can generate from a single person throughout their customer journey. The significance of CLV is difficult to overstate; even with so many indicators available, it remains one of the most important. Why is this the case? It’s because it shows you what you have right now and helps you see into the future and forecast how valuable your clients will be to you at various phases of their customer journey.|
|Net Revenue Churn||Simply explained net churn is the amount of money lost after accounting for new and expansion income. It may be difficult to accept initially, but some clients will eventually abandon your product. There will be losses in the beginning, and there will be losses when you become a massive corporation – that is how business works. To assess your company’s overall health, you should calculate your net revenue churn.|
|Product Qualified Leads||Product-qualified leads are active consumers who have already discovered the value of your product. It is just a question of counting such users to arrive at this statistic. However, in the case of your product, you must explicitly identify who is a PQL.|
Determine the activation moment and the actions consumers take to signify that they are ready to go forward in their customer journey. To determine the behaviors linked with activation and retention, obtain customer feedback, perform user interviews, and conduct A/B testing.
|Average Revenue Per User (ARPU)||The average revenue per user is the amount of money that a person may be expected to spend. It is an excellent indication of your overall company success and may point towards areas for development.|
When you split your entire MRR (Monthly Recurring Revenue) by the total number of customers, you get ARPU. ARPU is a valuable tool for calculating how much you earn from various user groups.
The principles are grasped, the fundamentals are implemented, and measurements are established. You’re probably wondering what the advantage is. Let’s have a look at it, shall we?
Lower Acquisition Costs –
Adopting the PLG model helps firms save money on marketing since the product is a customer acquisition tool. Consequently, there is no need for a vast sales crew, which aids in lowering client acquisition expenses (CAC).
Increased Customer Retention –
Product firms suffer a high churn rate if the product’s value is not adequately conveyed. When consumers make a purchase, they are already aware of how your product works, which is one of the advantages of product-led growth.
This results in a better user fit and raise the likelihood of long-term retention. PLG also enables your organization to concentrate on product development. As the product develops and evolves to meet the consumer’s expectations, the number of satisfied customers grows exponentially, decreasing the overall churn rate.
Increased Word-Of-Mouth Promotion –
The product is the most powerful marketing instrument in product-led growth. Because there are so many satisfied customers, word-of-mouth marketing has risen.
Product Development Focused –
Product-led growth allows your organization to devote more time and resources to product development. Rather than devising sales methods and efforts to increase sales, you may concentrate entirely on the thing that generates the most excellent sales-your product. Listen to consumer input and utilize their recommendations (or complaints) to improve your product.
Why is product-led growth significant? Product-led growth requires the capacity to accept change and failure. The end-user-centric age necessitates go-to-market strategies that focus on the end-user. This strategy’s dynamic nature includes debugging, problem-solving, and introducing new product concepts that provide a comprehensive user experience. A product-led strategy guarantees that your product serves as a lead-generating engine and an entry point for more refined customers.
Consider your product to be the single most vital sales channel. Data can assist today’s businesses in identifying crucial touchpoints in the customer journey, such as the client’s initial engagement with your product, the location where they first learned about your product, and so on. Ultimately, it all boils down to doing what is best for the consumers. Keep in mind that product-led development is a journey that needs a solid analytical base, consistent resources, attention, and good leadership. the quicker the onboarding and revenue growth.
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