Finding marketing tactics that work for businesses can be a hard task. Businesses that follow a product-led growth strategy see positive results in sales and marketing.
Product-led growth is the new way for SaaS businesses to grow through the value that their product brings to its users. Instead of using marketing or sales, the product will be the main growth lever for your SaaS.
How to Achieve a Product-Led Growth Strategy in Six Steps
- Choose a pricing model
- Connect your pricing strategy with a scalable value metric
- Stop counting MQLs and SQLs
- Structure your sales strategy with your go-to-market strategy
- Facilitate user onboarding with the bowling alley framework
- Align the perceived value with the experienced value
Step 1: Choose a Pricing Model
The first step toward implementing a product-led growth strategy is to choose a pricing model for your product.
Your options are:
- Free trial (i.e. Zapier)
- Freemium (i.e. Mailchimp)
When it comes to product-led growth, avoid pricing models that are based on demos. Those are ideal for enterprise solutions with C-level decision makers and long sales cycles. The main benefits of using a free trial or freemium are:
- You have a wider top-of-funnel
- You can scale faster
- You connect the volume of user engagement with revenue
Let’s take a look at each of these benefits:
You have a wider top-of-funnel
Assuming your SaaS business is using a classic AARRR framework (although the AARRR framework is not for everyone), having a free trial or freemium will get more users at your door.
The reason is simple: When something is free, it’s more attractive. It’s also easier for someone to make the decision to use your product and thus experience some kind of value from it.
This practice has been used by companies such as:
It is still used today by companies like Mailchimp:
As seen in the above image, Mailchimp goes through each of their pricing options and what users receive under each.
You can scale faster
Competitors can waste their time trying to acquire new users and retain old ones, and by hiring and training new sales reps and customer service agents. You can get more users by refining the onboarding process and through increasing the value your users experience from the product.
You connect the volume of user engagement with revenue
By offering a value-metric-based pricing model, you educate your users and give them the right incentives to keep using your product.
Thus, the benefit here is twofold:
- You educate users on how to get the most out of your product and don’t alienate product metrics
- Your pricing is fairer, as it is volume rather than feature-based
Choosing the ideal pricing model goes into a variety of techniques and seeing what is right for your business. Users are attracted to the idea of free, so working that into your business is guaranteed to lead to some growth or impact.
Step 2: Connect Your Pricing Strategy With a Scalable Value Metric
Many SaaS businesses charge for features instead of value. However, there are several drawbacks when your pricing is feature rather than value-based:
Users will downgrade or cancel their account if they don’t use features
- Many users inside a company will use your product from the same email—which obviously means lost revenue
- Your pricing educates the user on how to use the product
For example, Zapier’s plans are highly correlated with the value that the user experiences from the product:
As seen above, users can view a variety of payment options under a specific experience. Depending on the services that users require, this strategy allows the average revenue per user to scale, since the value that the user gets scales.
Product-led growth strategies are connected with value metrics that are scalable. As shown in this graph created by Growth Sandwich, when the experienced value and pricing for the user increases, so does the cost of the product:
While this may seem like common knowledge, this factors into a lot of business models and their pricing plans.
Take a look at Slack’s pricing plans that charges for active users:
With this strategy, Slack can ensure that pricing is fair, since users are being charged by the value they’re receiving. It also ensures that users will refer the product to others, since it doesn’t charge non-active users. This showcases how fair pricing can educate on the use of the product and its virality.
Step 3: Stop Counting MQLs and SQLs
Most SaaS businesses are overly obsessed with marketing-qualified leads (MQLs) and sales-qualified leads (SQLs), but they don’t take the value of user experiences into account. While important, these metrics aren’t yet enough to measure product growth.
Defined by HubSpot: product-qualified leads (PQLs) are potential customers who have used a product and taken actions signifying a strong likelihood of becoming a paying customer.”
Thus, PQLs are users who:
- Have experienced some kind of value with your product—what we’ll later be referring to as “first meaningful outcome”
- Are leads who have conducted actions on a product level that indicate they can use the product
- Have indicated some kind of monetization behavior that indicates the likelihood of becoming a paying customer
The first step toward identifying PQLs is to connect these with value metrics. They are different for every business, reflect user values, and are connected to actions that make users want to upgrade to paid plans.
Step 4: Structure Your Sales Strategy With Your Go-to-Market Strategy
If you want to follow a product-led growth strategy, use scalable tactics that will attract leads who will be willing to use your product. For example, if you run a SaaS business and offer a 14-day free trial to all new users, you can’t use demos as a way to activate those users. That should be avoided.
The reason is simple: this process is not scalable and thus contradicts with what you’re trying to achieve through product-led growth. Moreover, in that case, the product should be self-served, and users should be able to onboard and experience value themselves.
According to Ahrefs homepage, 2,212 users have joined Ahrefs in the past 7 days:
Can you imagine if Ahrefs had to onboard each of these users and guide them through every step they had to take when signing up for the free trial? It wouldn’t be scalable.
Having a product-led strategy means you have a self-served product that doesn’t require assistance.
Step 5: Facilitate User Onboarding With the Bowling Alley Framework
The Bowling Alley Framework is a framework developed by Wes Bush that’s used to describe the process of converting free users to paying customers.
Similar to bowling, growing a successful product requires you to get the ball (aka the user) from Point A to Point B. Free users will experience the highest value possible in the shortest time frame possible, and thus will want to upgrade to a paid plan.
To get the most out of the Bowling Alley Framework, you need to do two things:
1. Develop Your Straight-Line
Developing your straight-line product means helping users to reach the first meaningful outcome as fast as possible:
- Make screenshots of all the steps the user has to take, from home page to the first meaningful outcome. Mapping all the steps they need to take in order to move to the next stage of the process.
- Categorize these steps based on how they contribute to the first meaningful outcome.
- Here is how you can categorize these steps:
- Green: Absolutely necessary
- Yellow: Necessary but maybe for more mature users
- Red: Must be skipped
- Keep the steps that are absolutely necessary to help users reach the first meaningful outcome.
Once this is achieved, you’ve then developed your straight line.
2. Build Your Bumpers
Modern SaaS businesses achieve this through conversational and product bumpers:
Bumpers are methods of onboarding users in the best way possible so that they reach the first meaningful outcome as soon as possible, and thus upgrade to a paid plan.
There are many different bumpers you can use, based on:
- The niche you’re in
- Your audience
- What works for your competitors
- Your own resources and capabilities
For example, HubSpot uses a progress bar as a product bumper to get users from Point A to Point B:
Use the bumpers that resonate best with your users and focus on them, rather than on building bumpers that get ignored and don’t contribute to your product growth.
Step 6: Align the Perceived Value With the Experienced Value
There are three drivers that make someone buy your product:
- Functional Outcome: The job to be done needed by the user
- Emotional Outcome: How the user feels when this task is accomplished
- Social Outcome: How the user wants to be perceived by others when performing and fulfilling this task
Product-led growth exists in the intersection of these three outcomes. But there’s a big difference between how a user thinks of your product before signing up for a free trial or freemium account and what they experience when they actually use it.
Thus, we have two types of product values:
- Perceived value
- Experienced value
The closer the experienced value gets to perceived value, the higher the chances that someone will stick with your product. Companies need to deliver on their promises. To close these gaps, you need to get familiar with the term Value Gap.
As you can see in the following graph, the intersection between perceived value and experienced value is the value gap:Source
By identifying the stages where you have the biggest value gaps, you can get closer to your customers and design better experiences that will make them stick with your product.
In any case, your product should always deliver on the value it promises. If it does, users will have no reason to abandon your product or look for an alternative solution.
Growing Your Business with a Successful Product Experience
User acquisition, activation and retention get more difficult every day. In this context, PLG can be the solution to the never-ending problem of SaaS growth. Companies like Dropbox, Intercom, Mailchimp, HubSpot and Slack have invested heavily in the value of their product.
Their number one priority is to create an amazing user experience. Based on the results, it is evident that their product-led growth strategy works. Replicate that success and grow a highly-successful product by finding the strategy that fits your business.