Product-led growth companies rely on their product to drive acquisition, activation, retention and expansion. This shifts the focus from marketing and sales to the product itself, enabling it to drive revenue with lower customer acquisition costs.
This is different from a sales-led strategy, which requires a large investment in building out a sales team and marketing collateral.
Creating a World-Class Product
Companies that adopt Product-Led Growth have a clear strategy that focuses on making their products as effective and engaging as possible. They also prioritize user experience and ensure that their product can drive customer acquisition, monetization, and retention.
They often use freemium or self-service trials to let users experience the product and then encourage them to upgrade to a paid account. They also rely on in-product marketing to drive adoption of new features and lift product usage among current customers.
Product-led growth requires a company-wide shift in how sales, marketing, and customer success teams work together. It is not an easy transition to make and it takes a lot of time and effort to establish common language and reporting to enable internal alignment. However, the effort is well worth it as it provides a much more sustainable path to growth and success. It can even help companies save tens of thousands in advertising or sales hiring costs.
Reducing Customer Acquisition Costs
Product-led growth can reduce customer acquisition costs by eliminating the need for expensive marketing and sales campaigns. Instead, companies use their products to grow users organically, creating virtuous growth loops that drive retention and expansion.
This approach allows the product team to focus on designing sophisticated digital experiences that help users become better versions of themselves. It also allows the business to gather rich user data and insights, which can be used to inform conversion offers and outreach.
Many product-led companies offer a free trial with minimal barriers to convert users into paying customers. For example, Slack offers free instant messaging for teams of all sizes, and it encourages users to invite friends to join the service with an incentive like extra storage space or a referral reward.
In addition, product-led companies let data on user behavior guide who they call and email to convert them from free or trial customers into paid ones. This eliminates the need for expensive sales calls or a high-cost marketing machine that can’t scale.
Creating a Customer-Focused Culture
Product-Led Growth puts your product where it should be—at the forefront of every organizational decision. It requires cross-functional teams to break down silos and learn new frameworks, but it also enables companies to rethink the metrics and strategies that drive their business.
Increasingly, buyers want to try products before they buy. Free trials and freemium models are a popular choice to allow potential customers to experience the product for themselves, bounded by time or functionality. Often, these users convert to paid plans with little or no support from sales representatives.
Slack, Zoom, and HubSpot are examples of public companies that use Product-Led Growth to drive customer acquisition, engagement, retention, and scalable expansion. In a world where digital-first businesses have the opportunity to scale rapidly, this is no longer a luxury but a necessity for companies that want to stay competitive and profitable. As a result, many organizations will move to product-led growth as they evolve toward a modern customer success strategy.
Creating a Customer-Centric Team
Like a prism, product-led growth breaks down siloes by bringing together different teams (marketing, sales, customer success, engineering) that normally operate on separate wavelengths. This allows the team to be more collaborative and leads to cross-functional discussions that help the company make better business decisions.
As a result, companies that become product-led are much more effective at generating user adoption and engagement without the need for a large sales or marketing team. This can significantly lower a business’s customer acquisition costs and revenue per employee.
For example, Slack routinely achieves product-led growth by offering a frictionless freemium model and nudging users to upgrade to premium features. Or, the design tool Figma grew through a personalized user experience and solved designers’ pain points, which led to a $20 billion acquisition by Adobe in 2022.
Using a product-led go-to-market strategy also allows for reduced cost of service by reducing the need to recruit and train salespeople. As a result, the overall operating expenses for a company can be reduced by increasing its revenue per employee while improving profitability and margins.