What is Product-Led Growth?

Product-led growth is both a go-to-market strategy and a business growth strategy, however, unlike a traditional sales cycle, where a sales team leads the buyer through a journey, the PLG model leverages the product as the primary vehicle to acquire, activate and convert customers. It creates company-wide alignment across teams—from engineering to sales and marketing—around the product as the largest source of sustainable, scalable business growth.

If you’ve used Slack or Dropbox, you’ve witnessed this first-hand. You didn't request a demo to have a salesperson show you how cloud-based file sharing or instant messaging could revolutionize your work. You just tried the product out yourself for free.

Product (or let’s say in-app) data tells us exactly how the customers feel about our product. Instead of guessing how can we help our customers, we know exactly what we need to do. That could be a quick demo call, sending some helpful resources, or something else. Since it’s the product that’s driving growth now, we need to start using product data to tailor the perfect customer experience. This is the most effective way to ensure a successful long-term relationship.

Unlike sales-led companies where the whole goal is to take a buyer from Point A to Point B in a sales cycle, product-led companies flip the traditional sales model on its head. Product-led companies make this possible by giving customers a way to experience the product for free, either through a freemium product or some kind of free trial. If the customer experiences a meaningful outcome while using the product, upgrading to a paid plan becomes a no-brainer.

Very simply put, product-led growth (PLG) is a go-to-market motion that relies on a product (and its excellent user experience) to drive a company’s growth and all its funnel stages. The app itself, rather than ad dollars or sales outreach, is the engine.

The heart of product led growth is the end user, who can get into the product right away, experience real value, and not have to jump through any hoops to kick the tires. This is why PLG needs great user experiences: it's about helping the everyday human try a product, love it, and share it.

Organic discovery, viral loops, and network effects play important roles. This makes PLG a relatively cost-effective growth strategy, not having to rely on hiring more sales reps and spending a bigger marketing budget. PLG might require more R&D money early on to create a great product, but then it can scale with fewer team resource costs.

That said, PLG can be used in tandem with sales and marketing motions. Companies relying on product led growth are selective about where and when to deploy their toolbox of go-to-market motions — combining these in different ways for different journeys, including:

• Start with a popular free product, then layer on a sales-assisted track for enterprise leads.
• Begin as a sales-led company, then add a freemium or free trial product track a few years in.
• Use product to drive all net new revenue; only use sales and customer success teams to drive expansion revenue.

In this refreshing paradigm shift, companies allow the user to “take the keys” to use the product and go for a “test drive” to experience life with the product firsthand. This leads them to become an advocate, develop a strong desire to become a customer, and — to extend the analogy — own the car and continue the drive.

There are significant business benefits to the PLG model from shorter sales cycles, to lower customer acquisition costs (CAC), better retention, and higher Revenue Per Employee (RPE). Beyond business metrics, the obsessive focus on great customer experiences results in better products.

B2B or not-2B?

A product-led growth strategy requires relentless focus on the end consumer, making it ideal for B2C or "prosumer" (professional consumer) markets. These self-serve products grow quickly with relatively little overhead, thanks to their optimized entry points and network effects.

We’re obviously fans. But we don’t mean to suggest that it’s a silver bullet—more often, PLG is a component of a broader portfolio of GTM and monetization strategies.

A successful B2C SaaS that relies on a PLG strategy may need to go upmarket to continue to scale and reach the upper SaaS echelons. With that often comes sales teams and more marketing.

Nearly all of the companies on OpenView’s list are now B2B, and plenty of them started as B2C and layered in a B2B or enterprise offering later in life. (Some, like Logz.io, go the other way.)

Dropbox and Frame.io are examples of companies that used PLG to build their initial userbase and then brought in B2B sales to drive expansion revenue. Frame.io’s video collaboration tool focused on serving consumers and prosumers for three years before they built out an enterprise sales motion and used a Series C round to formalize and expand their efforts to move upmarket (while continuing to invest in product tracks).