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What is product-led growth? The go-to-market strategy taking the SaaS world by storm

Product-led growth — it’s the new gold standard SaaS companies strive for as the market becomes increasingly competitive. Every company now uses 100s of SaaS and SaaS companies needs to find a way to standout, acquire and convert new subscribers.

Product-led growth is currently poised to be the latest marketing strategy that does just that.

What is product-led growth?

Product-led growth is exactly what the name suggests. It’s a marketing strategy that uses the product to bring in more subscribers. Rather than focusing on sales pitches, whitepapers, and fancy marketing strategies, product-led growth simply lets the product do the work for you.

The basic idea is that a potential customer will jump straight into using the product and, with time, use it enough to want to become a paying customer. Common examples of this include free trials or a free but limited tier. A no-obligation entry point to your product with the option of paying for further usage down the line.

Unlike sales-led growth — which focuses on getting money from the customers before they try your product — product-led growth is a much more consumer-friendly approach to marketing. There’s no heavy pressure put on the customer, and they can see the value on offer first-hand.

Why SaaS companies should adopt product-led growth

Product-led growth isn’t just a trend — it’s a necessity in the extremely competitive SaaS world.

The SaaS sector is growing increasingly dense as the cost of creating a start-up has plummeted. It’s even possible to create a SaaS with a budget of £0, according to Hackernoon (well, as long as you are ready to eat some ramen)! With such a low barrier to entry, it’s become increasingly expensive to acquire customers who are now bombarded with platforms that offer similar features.

Marketing costs are skyrocketing, but customer willingness to pay for features has dropped thanks to the internet's sheer number of free products.

Thankfully, while marketing costs increase, customers are increasingly less susceptible to traditional advertising. This is especially true on the internet, where users are tired of banner and pop-up adverts. By the end of 2019, there were 763.5 million adblock users worldwide, a number that has likely increased over the past few years of increased internet usage.

On the flip side, sales teams are expensive to recruit, train and run. And sales isn’t necessarily appropriate for a lot of startups who have a product with a low price point.

This has meant that businesses needed a new strategy to get customers to use their products and of course, pay for them. This is just a small part of why product-led growth has become so popular.

Benefits of product-led growth

Product-led growth also has several great benefits for businesses, beyond getting your product out to more users.

Lower customer acquisition costs

The most obvious benefit of product-led growth is that it’s much cheaper to gain customers than sales-led strategies. Alongside reducing the size of your sales team, product-led growth marketing strategies allow businesses to acquire customers for less through the following:

Shorter sales cycles: With a product-led growth strategy, customers essentially onboard themselves to your product. You don’t need a sales team explaining every little feature to someone who may not understand the technical language. Instead, the user can get their hands on the product and learn how to use it by themselves. This helps the user realize the product’s value sooner, speeding up the time it takes for them to convert to a paying user. This faster conversion is crucial to product-led growth.

Better user experience: Those using product-led growth for their SaaS company will make sure to build some form of guidance within the platform. This could be a tutorial that loads when users first create an account or occasional tips and tricks to help the user get to grips with the software. This self-service learning process gives the user a stronger sense of accomplishment when they achieve their goals without needing customer service or sales teams.

Higher customer retention and lower churn

One of the neat things about product-led growth strategies is that the customer has time to let the platform become part of their daily life.

We see this with music streaming platforms like Apple Music or Spotify, which offer generous free trials or free tiers. These let users integrate the platform into their everyday routines. Then, when it comes to the end of the trial, they convert to paying customers as they can’t imagine their lives without it.

This effect is even more apparent with SaaS, because businesses integrate the platforms into their processes and strategies. Switching SaaS platforms can be disruptive, so businesses will rarely take this decision lightly. Allowing them to get started with your platform for free brings a strong chance that they will stick around for the long term and convert to a paying customer.

There’s also a nice little benefit that, according to OpenView, product-led businesses are valued more than 30% higher than the public-market SaaS Index Fund.

Who's using product-led growth?

Maybe the question here should be, who isn’t using product-led growth? You would be hard-pressed to find a successful SaaS business that doesn’t use some form of product-led growth strategy. Let’s quickly check out who is leading the way for product-led growth.

Slack is a communication platform with over 10 million daily users. They used product-led growth to go from a $0 to a $7 billion valuation in just five years. Their freemium plan is a perfect example of product-led growth done right.

Calendly is a scheduling platform with less than 250 employees that used product-led growth to gain unicorn status, a $3 billion valuation and over $100 million in revenue! Their secret? Every time someone uses Calendly, it acts as a free promotion. It’s so simple but so very effective.

Dropbox is a leading cloud-based storage provider that uses a freemium model with a twist. Their referral system encourages users to share the platform with friends by offering extra storage for every referred user.

Learn more about product-led growth for your subscription business

It’s clear that product-led growth is one of the best ways to launch your SaaS product to the market. To learn more about how you can leverage product-led growth with embedded subscription commerce, get in touch with the Limio team.
Limio is a startup in London helping launch and scale subscription businesses — and we’d love to help you!

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