Many companies nowadays want to do product-led growth (PLG). But I don’t think the concept is well-understood. Despite spending about six years at Buffer and a year at ReferralCandy, both PLG companies, I don’t think I fully grasped the concept too. But that’s ok. We are all here to learn.
For the past seven years, I collected many experiences on how to do PLG—freemium, product onboarding, pricing, packaging, and more. But the ideas were a mess in my head until I listened to an episode of Lenny’s Podcast with Elena Verna. She shared a framework that helped me organize all my PLG experiences into three neat buckets:
- Product-led retention
- Product-led acquisition
- Product-led monetization
Retention includes activation (i.e. getting users to understand the value of our product) and engagement (i.e. getting users to keep coming back to use the product).
In a sales-led motion, users experience a high-touch onboarding. They usually need help from customer success reps to implement the product and need training to learn how to use the product. They are often stuck in an annual or multi-year contract, so they have to use the product even if they don’t like it.
In a product-led motion, users go through a self-serve onboarding. Through in-app guides, onboarding emails, and accessible content, they can learn to use the product themselves. For example, in Dashibase, we have a demo dashboard and a tutorial to teach new users how to use Dashibase. Also, users can stop using the product almost anytime because the subscription tends to be on a monthly basis. So we need to ensure our product is constantly providing value to users to keep them engaged.
While the product should be easy to understand and intuitive, it doesn’t mean it cannot be complex. For example, Ahrefs has a complex product but its users are still able to learn how to use the product themselves via the product itself or Ahrefs’ blog and YouTube channel. Figma is another good example.
Product-led acquisition means being able to acquire new users via the product. Oftentimes, this requires an element of virality. The classic example is Dropbox’s referral program, where users get extra storage for getting their friends and family to use Dropbox. Another method is collaboration. For example, tools such as Figma, Miro, and Linear spread in companies because teams would collaborate in these tools. A designer creates a Figma file and shares it with their teammates in product, engineering, marketing, etc. This gets more people to use the product.
If users are not acquired via the product, it is sales- and marketing-led. For example, even though Buffer is generally a PLG company, our acquisition is more marketing-led than product-led. We have some collaboration features, which helped acquire new users, but most users were acquired via marketing and word of mouth2.
It doesn’t have to be only product-led or only sales- and marketing-led. Notion has an interesting mix of the two. It has built a community (marketing-led) that would regularly share its Notion templates for others to use (product-led).
Finally, monetization refers to how users become paying customers. Can they subscribe, upgrade, and buy more products themselves, or do they need to go through an account manager?
In a sales-led motion, software buyers in companies, who may or may not be users of the product, sign a contract from their account managers for the product. They might even need to get a few approvals before signing the contract.
In a product-led motion, people in the company who are already using the product buy the product themselves. Nowadays, it is common for individuals to use their company credit card to subscribe to products that cost $X,000 to $X0,000 without asking for approval. I remember my manager at Buffer paying five figures for Mailchimp with his credit card. Even if it is much more expensive, the users can demand the product to be bought. Software buyers in the companies can see that employees are already using the product and liking it, so they would comply and buy the product, instead of having to shop for and trial another product.
That being said, PLG companies can also have a sales-led motion, especially for enterprise customers. The best PLG companies leverage product usage to identify potential enterprise customers and drive those enterprise deals, instead of switching to a sales-led motion entirely.
A good rule of thumb for PLG is to first make the product fully self-serve: Users can try the product, learn how to use it, pay for it, and even get others to use it—all by themselves. And then to make each step as easy as possible.
By thinking about how you retain, acquire, and monetize, you can come up with more specific ideas to grow your business through your product.
- The credit for these ideas belongs to Elena Verna. Any mistakes in explanation are solely mine.
- The line between product and marketing gets a bit blurry here. Much of the word of mouth was due to a great product.