What makes SaaS companies like Webflow, Figma, Dropbox, or Hubspot so successful?
They all adopted a product-led growth strategy.
But first, PLG is the latest buzzword in the era of SaaS. It basically means that tech companies use their product to attract, convert, and retain customers rather than a traditional sales team. Think companies with a free trial or freemium go-to-market model.
If you’re a user of software like Hubspot or Pipedrive chances are they didn’t reach you via cold email or phone. They used inbound marketing tactics to attract you to their website. In doing so these companies relentlessly focus on removing friction and getting you the value fast.
The outcome is straightforward: if done right the cost per acquisition drops significantly because there are no human touches in between. And it gives the opportunity to be highly scalable.
When users sign up they must be taken to the core value of the product very fast. It’s the equivalent of the ‘aha’ moment, the eureka effect when new users first realize the core value in your product.
All PLG companies should focus on getting users to ‘aha’ as fast as possible. In most cases, it’s a combination of features that need to be used before users feel the real impact a product has on their problem.
Twitter for example did a deep dive in their customer behavior data and saw that users who follow at least 30 people in the first 2 days after signup are 82% more likely to stick around. Naturally, they restructured the customer journey and started to focus on pushing Twitter accounts that users might like to follow in their own network, along with well-known influencers.
The ‘aha’ for their users was the moment they saw a feed of quality content from people they like or admire. This is correlated to the Time-to-value metric, the lower the better.
The second trait is delivering a seamless sign-up or onboarding process. Think of using single-sign-on, no credit card required, or one-click integrations with tools the customers already uses to pull in the data.
The main goal here is to remove all friction and noise that doesn’t add any value.
Many PLG companies use a virality component natively in their product. Think about Dropbox’s referral program where you get way more storage whenever you invite some friends. Or Linkedin, which lets you pull up your contact book to invite professionals in your own network. The “powered by” tactic is also widely used here by companies like Wistia, Instapage, and Workable.
However, it’s worth mentioning that it’s extremely difficult to get this virality factor positive. So most companies use it hand in hand with other inbound- and outbound marketing, or even a sales team if
Getting users on the platform is nice, but there must come a time when you can convert them into paying customers. If there’s a freemium model at play then the paid pricing tier should deliver even more core features or usage/seat caps, and thus value. If there’s a free trial, users need to be pushed to explore the full product in that time period.
Dropbox’s growth comes from a very straightforward PLG approach. They focused on growing the user base instead of monetization by:
The hard thing, however, is to get to the first critical mass of users. If you only have 100 users, the virality factor won’t help you to get to 10.000 very fast. It only works if saas companies already have a decent customer base.
Slack is well-known (and used) as one of the fastest-growing tech companies. They created a business communication application with perfect self-serve user onboarding. Easy as 1, 2, 3.
And because of its explosive growth, the valuation went from 0 to $8 billion in under five years.
What many don’t know is that Slack uses a hybrid product led growth model where they use the product to attract users, and if your team is big enough they will use a sales team to push you to a paid plan. Especially with enterprises.
Each person who joins can potentially invite a couple of others to join, that way it spreads like a wildfire. Especially if users switch jobs and bring it into the next company.
If you schedule meetings there’s a big chance you used or at least heard of Calendly. The meeting scheduling tool is used by over 6 million daily active users (DAU). And is a pur-play product-led growth company.
The product can’t be used by 1 person. It only works when users send meeting requests to other persons. The other person on their end sees the value of Calendly and might use it again in the future. This can only be done if the product is super straightforward and gets users to value (TTV) very fast.
Another great example of a product-led growth company is DocuSign. The Silicon Valley-based tech giant is active in the legal software industry, removing the friction to get a document approved or signed by multiple stakeholders.
The sign-up process is easy, free, and fast. Like with Calendly you need at least 2 users to really experience the value. Sending a document to another party and getting it signed back without the hurdles of printing and signing it manually. That’s the ‘aha’ - saving manual working hours and thus money.
The bottom-up approach of Airtable. They (currently) don’t focus on a sales team to grow the client base.
From the start, they have used the self-serve product as an accelerator to onboard and retain users. The full self-serve approach works well for products like Airtable since they focus on a horizontal market.
Low-touch and self-serve also come with drawbacks, and Airtable isn’t any different. Because they focus on a more one-size-fits-all product they risk losing clients with advanced use cases.
That’s why they’re looking at a hybrid sales model where bigger accounts get more support in setting up an environment, tailored to their needs. A hybrid sales model means that companies both use the product and a sales team to grow the customer base.
Adopting a PLG go-to-market approach pays off but requires an upfront technical and marketing investment. If you can figure out the best (profitable) distribution channels you’re in the front seat for doing great things. It all comes down to testing different approaches at lightspeed.
In order to test these mechanisms, you need insights to prove you’re on the right track. Curious to see how leading product led growth saas companies use journy.io to grow the customer base and retain clients? Book a demo or start a free trial.
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