What Is Product-Led Growth?
Product-led growth is a business strategy in which a company uses its product as the main tool to acquire customers. With this model, a business offers users free access to its product with the expectation that the product itself will persuade them to become paying customers.
Some organizations offer full-featured products for a limited time. Others give users access to limited product functionality indefinitely but charge users to upgrade to a more feature-rich version.
What Are Examples of Product-Led Growth?
The AOL model
In the 1990s, internet provider America Online (AOL) mailed CD-ROMs with its application and hundreds of free hours of internet service included.
The company’s strategy was to make users both comfortable with browsing the internet and familiar with AOL’s web portal. This way, when the 500 or 800 hours of free access ran out, users would choose the service they felt comfortable using to access the internet: AOL.
The Facebook and Amazon models
For years after their respective launches, both Facebook and Amazon faced skepticism and criticism from Wall Street and the business analyst communities. Although their businesses were amassing enormous numbers of users, neither company was turning a profit.
What the analyst community missed, however, was that these companies were being strategic, playing the long game, and using the product-led growth model.
Facebook was adding hundreds of millions of users to its platform. Amazon was growing itself into one of the world’s largest online retailers (and eventually the world’s largest). Both companies later became profitable. Facebook did so after it began monetizing its enormous base of highly engaged users. Amazon did so as it began pulling market share from millions of other retailers to its platform.
Both Facebook and Amazon gave users plenty of time to become familiar with their digital products and, in fact, dependent on them.
What Does the Product-Led Growth Model Look Like?
A company employing the product-led growth model will exhibit several characteristics, such as:
Prioritizing product quality and user experience above all else
In a product-led growth company, the product itself is largely responsible for the heavy lifting of bringing in new users. This type of organization will not devote as many resources as other companies to sales, marketing, advertising, or other strategies for acquiring customers.
For this reason, the product team understands it will need to prioritize building a world-class product. One that can solve real problems for its market quickly and easily. This way users can benefit right away.
Relentlessly analyzing and acting on usage data
Product-led companies know that their products are their best—sometimes their only—sales and marketing reps.
They need to monitor how users are interacting with their products. First asking, where they are finding value in the products. Then asking where the product could be frustrating them or letting them down in any way. Only with this relentless focus on usage data can a product-led team make smart decisions. Decisions about where to prioritize its limited resources to continually make the product better for its persona.
Trusting their product to sell itself
The best indicator that an organization is product-led is how the company launches and sells its product.
Most companies still follow the revenue-driven model. Their go-to-market strategies rely heavily on expensive marketing campaigns and preparing their sales reps to blitz their target markets. In many cases, these approaches result in success. But they also send a signal to the market that the company believes selling its product will require a lot of help and hype.
If, on the other hand, a company’s efforts are focused on persuading people to use the product for free, that signals the team trusts the product will sell itself—and users will become paying customers.