Product-led growth (PLG) is an end-user-focused growth model that relies on the product as the primary driver of customer acquisition, conversion, and expansion. This means that the product is doing some of the heavy lifting that used to belong to marketing and sales and giving them new areas of focus.
This also means that the typical go-to-market playbook SaaS experts used to follow (below) isn’t as relevant as it used to be. Why? Because it assumes that prospective customers will only encounter the product with a sales or customer success representative alongside them. Since product-led products enable users to discover, try, and buy products day or night, the standard “sales funnel” is no longer accurate.
Based on interviews with B2B SaaS experts who have built and scaled product-led businesses, we designed a new user journey. It consists of five stages, which we will touch on in this article:
- Discover: this is the step in the users’ journey where they first encounter your product
- Start: the step where a user decides to sign up and get started
- Activation: the “aha” moment when the user uncovers reasons to keep using the product
- Convert: what we’re all after–when a user trades money for the value your product offers
- Scale: how to keep users happy and capture more value
How this framework can help you build your PLG business
It’s most important to note that this framework is a user journey—not a customer journey. For most PLG businesses, everyone starts out as a user of the product, and a small subset of those users eventually become paying customers. It’s important to focus on those users who become customers from the beginning because their usage of the product, and where they fall off in this user journey, will help you prioritize where your team spends the most time and resources to convert at the highest rate.
As with anything, frameworks aren’t universal. While this framework is a practical guide, innovation and creativity is the key to growing a product-led business and keeping users engaged.
The New User Journey is made up of five steps that follow how a user finds, decides to use, discovers value, pays for, and scales usage of your product.
At this point, it’s a trope—”If you build it, they will come.” Right? Crickets.
Hundreds (maybe thousands) of founders out there have built a beautiful product that solves a challenging problem in a new and sophisticated way. The problem is, no one knows about it. Sure, you can launch it on Product Hunt, to friends, to a few hand-selected influencers in your space, but that’s how you build a lifestyle business, not a large and enduring company.
You need marketing, right? Hard to know. The type of marketing you’re used to is too sales-y, or maybe you experimented with a few things and they didn’t work. At this part of your journey as a founder you might feel like you’re plateauing—but you need user growth in order to understand what to build next in your product. What a pickle.
Discovery: How users find your product
Discovery is how users find your product. It’s the first step that they encounter, and often top-of-mind for founders in the early days after the product has been built. Discovery for product-led products is interesting because traditional SaaS models don’t typically work, especially in the early days.
Imagine what you’d search for in 2010 to find Slack. How could they have scaled keyword advertising? What type of large-scale industry events would Calendly have attended in 2012 in order to get more users? It’s not clear because these approaches just don’t make sense in the New User Journey.
Here are three ways Discovery happens for product-led tools:
- Organic discovery
- Drop-in discovery
- Strong need-based discovery
Each of these ways brings in a different type of user into your product and has different tactics associated with them.
Here are some tactics you can use to attract different users:
Early Adopters
- The Elite Approach: Some companies will only offer their services to influencers, or they’ll create a waitlist. A modern example is Superhuman, but GSuite used this approach back in the day too.
Viral Use Cases
- Exposure Virality: Every time a user interacts with your product in some way, they expose your brand, and they are happy to do it because it makes them look good. An example of this is Mailchimp.
- Collaborative Virality: Users who want external parties to view their work can interact with them and invite them, driving user addition and awareness. Some examples of this are Slack and Figma.
Solves a Need
- Discoverable in Context: Through documentation or support content, users discover the product trying to find a solution for a need. Some examples are MongoDB and snyk. This is covered in-depth in the Developer Go-To-Market-Playbook.
Many businesses spend the majority of their energy on driving discovery of their product, especially in the early days. But without virality and strong organic discoverability, this will continue to be an uphill battle for your team. By leveraging these examples, you can automate organic discovery and focus your efforts on experimenting with new channels to acquire users through other tactics.
Start: The step in which you discover your users
The Start phase is the bridge that connects the discovery with the usage of the product. This can sometimes be the toughest step of the user journey for early startups to tackle, especially if they don’t invest in design or messaging. That’s why it’s so important to hire UX early.
The three levers that drive the likelihood of users to get started with your product are:
- Messaging
- Web design
- Brand/Community
The most important metric to measure this step of the journey is the conversion of website visitors to free account sign-ups. OpenView compiles benchmarks on this metric annually, so check out the report if you want to see how your business stacks up.
Here are some tactics to increase conversions from website visitor to signing up for your product:
- PLG websites revolve around people, not product features. Users want to know how your product will make them look good. Make sure you’re telling the story of the product from their point of view.
- Great websites use an inverted pyramid to tell their story. The most critical, convincing line of copy that answers, “Why should I try this product?” must go at the very top, otherwise skeptics will bounce.
- Show, don’t tell. When possible, show the product in action using a video or animation that plays on page load and loops. Walls of copy aren’t fun for anyone.
- Create FOMO. Messaging must imply that the most intelligent, most in-the-know people in the industry rely on your product—and if you want to keep up with them, you’ve got to get on board. This can be done with testimonials, tweets, and company logos.
PLG Discovery: More than “Going Viral”
If you build it, people will unfortunately ignore you. Growth isn’t dumb luck. Great businesses put forth a proactive effort around product discovery even in the early days. Most tactics continue to pay dividends in growth over time.
Growth is everybody’s job, but it’s helpful to have a quarterback. Here’s how to find that person.
Activation is the moment when your product delivers on the promised value. There’s more than just getting people to sign up for your tool, 40% to 60% of all users who sign up for a free tool never return. Yikes.
According to OpenView’s 2021 product benchmarks, the majority of businesses still don’t measure Activation. One of the reasons for this is that Activation is specific to the product—it’s not a one-size-fits-all metric, it needs to be created by leveraging product analytics data and user feedback.
I vaguely remember reading Dave McClure’s pirate metrics slideshare (circa 2007!) when I started a new job at a startup and was struck by his “Activation” metric, that is, the measurement of when visitors have a “happy” experience with the product.
For many businesses, especially at that time, Activation seemed to be secondary since most USERS weren’t having ANY experiences with the product prior to becoming customers. Fast forward to the past few years, where product-led models have not only emerged, they’ve shown the market that it’s an excellent way to build a software company.
In a product-led motion, that first “happy” experience between a user and a product isn’t just a nice-to-have, it’s crucial. As a result, Activation is having a moment.
The product metric everyone thinks they need but can’t seem to define
Creating an Activation metric for your business should be straightforward. If you’re hiring a data scientist for it, you’re probably trying too hard. This simple framework is useful for filtering which actions in your product make sense to use as a metric.
Finding your product’s activation:
- Easy to achieve by the average user.
- Can be completed relatively quickly.
- Predictive of user retention.
- Correlated to business performance—improvements to activation should flow through to conversion, expansion, and virality.
Once you have a few core actions lined up, see how they score within the framework. We included some example actions below in this table:
After you have an activation metric, that’s where the real work starts. This metric should become a rallying point for your entire team.
For example, your product team should be interviewing users who have reached activation and identifying the qualitative and quantitative factors that drove them there. Your marketing team should be measuring the success of their campaigns based on how many new users were not only driven to sign up, but also to activate. Finally, customer success and support teams should also be pushing users toward this “A-ha” moment in their touch points, too.
It’s not rocket science
Your product is supposed to be doing the heavy lifting, right? There’s no better way to enable this natural rate of growth than by identifying and empowering its engine: the value your product provides to users.
The only thing getting in the way is finding that metric and rallying behind it. The product you’ve built is certainly much more sophisticated, and the problems you’ve solved to get here are much more challenging. Carve out a week or two of your teams’ time to find your activation point, and spend the next six months arranging your business around it. You won’t regret it.
Product-led growth (PLG) is an end-user-focused growth model that relies on the product as the primary driver of customer acquisition, conversion, and expansion. This means that the product is doing some of the heavy lifting that used to belong to marketing and sales and gives those teams new areas of focus—mainly, smoothing and optimizing the New User Journey.
Because PLG software typically has some sort of freemium, self-serve element, pricing and packaging are some of your biggest growth levers. If it feels easy to set up a paywall for your product, you’re probably forgetting something—pricing and packaging incorrectly doesn’t just mean leaving money on the table—in the worst case scenario, poorly placed paywalls can inhibit user engagement, growth, and potentially virality.
The lesson? Be very careful when it comes to placing that paywall in your product, and never rest on your laurels. Every time you release a product or feature, you’ll need to consider its place in your monetization strategy.
Conversion is a dance between value, pricing, and understanding how users engage with your product.
Three drivers for improving users’ conversion into customers are:
- Activation: The value a user has received
- Packaging: Are there strong guardrails that follow the user journey and drive them to pay?
- Pricing: Is the product as it is packaged perceived as a good value?
So how do you combine these 3 key factors into a conversion point?
Common hooks to convert users into buyers are:
- Trials: These time-boxed sessions with the tool drive product use and help create a sense of urgency for users to understand the value of a tool. In the 2020 Product Benchmarks, trials converted better, but didn’t convert as many users over time as free models.
- Volume of Usage: Usage-based models create a free offering for users who have a casual need, but price and package based on increased engagement and success from users. These models also enable pay-as-you-go for users that don’t want a contract and need pricing that scales with their use. With these plans, make it easy to put a card on file and charge for usage every month.
- Feature-Based: Feature-based plans make the product accessible for everyone to get them engaged, then price up for power users and teams that use deeper features.
Keep in mind that sales still plays a crucial role in most self-serve businesses, and respondents to our product benchmarks survey reported that 75% of conversions involve sales to some extent. Learn more about layering sales onto a self-serve user journey here.
So what happens after you’ve converted a user into a customer?
“The beauty of product-led businesses is the growth that comes from retaining paying users indefinitely.” — Sam Richard
Scale: Keeping Users Happy and Growing Your Business
Once a user converts to a customer, your work isn’t done. The beauty of product-led businesses is the growth that comes from retaining paying users indefinitely. What do you have to do? Provide continuous value AND expand the spend of some customers by providing additional value over time. No one likes churn.
Which of these should your team tackle first? Blake Bartlett, Partner at OpenView, explains how terrible bad retention rates can be for a business, and how strong net dollar retention (NDR) unlocks exponential growth:
• Improving retention gives you much more leverage on the go-to-market front (you’re fighting against a leaky bucket)
• The one-two punch of a growing front-end and a healthy back-end is the magic formula for exponential growth and lots of VC love.
So, how can you level up your retention?
Three tactics to consider are:
- Telemetry
- Onboarding
- Community
Applying these tactics is unique to each company. However, there are some tremendous present day examples of how these tactics have driven retention for companies such as HubSpot and Asana.
Read more on how to reduce churn here.
Monetization: More than a Paywall and a Checkout
In a product-led business, monetization is a company-wide effort, not just a number for sales and marketing teams to hit. The best performing product-led businesses are obsessed with ensuring that their monetization strategy not only enables them to make payroll, but also helps them grow user engagement.
Don’t set-and-forget the tools you use to convert users into customers, or else you’ll be leaving more than money on the table.
Source: https://openviewpartners.com/blog/new-user-journey-go-to-market/
- 2020
- 2021
- About
- Account
- acquisition
- Action
- actions
- addition
- Additional
- Advertising
- All
- analytics
- animation
- around
- article
- average
- B2B
- Back-end
- Battle
- Beauty
- Beginning
- BEST
- Biggest
- board
- BRIDGE
- build
- business
- businesses
- buy
- Campaigns
- channels
- charge
- Companies
- company
- content
- continue
- continuous
- contract
- Conversion
- could
- creativity
- critical
- Customer Journey
- Customer Success
- Customers
- data
- data scientist
- day
- Design
- different
- discover
- discovery
- dividends
- Doesn’t
- Dollar
- driven
- driver
- driving
- Early
- encounter
- energy
- engagement
- especially
- events
- example
- Excel
- Expand
- expansion
- experience
- Experiences
- experts
- factors
- FAST
- Feature
- Features
- feedback
- figma
- Finally
- finds
- First
- flow
- Focus
- follow
- FOMO
- Forward
- founder
- founders
- Framework
- Free
- fun
- getting
- Giving
- good
- great
- Grow
- Growing
- Growth
- guide
- having
- help
- helps
- here
- hire
- Hiring
- How
- How To
- HTTPS
- HubSpot
- important
- improving
- included
- Increase
- increased
- industry
- influencers
- Innovation
- Intelligent
- Interviews
- IT
- Job
- journey
- keeping
- Key
- large
- launch
- Level
- Leverage
- lifestyle
- Line
- load
- love
- Majority
- Market
- Marketing
- measure
- messaging
- mind
- model
- models
- money
- MongoDB
- months
- more
- most
- net
- offer
- offering
- order
- Other
- otherwise
- packaging
- partner
- Pay
- People
- phase
- Point of View
- power
- present
- price
- pricing
- Problem
- Product
- Products
- provide
- provides
- punch
- quantitative
- Rates
- Reading
- reasons
- reduce
- release
- report
- Resources
- REST
- SaaS
- sales
- Sales and Marketing
- Search
- secondary
- sense
- Sense of Urgency
- Services
- set
- Simple
- SIX
- slack
- small
- So
- Software
- Space
- spend
- start
- started
- startup
- Startups
- Story
- Strategy
- strong
- success
- support
- Survey
- tactics
- Through
- time
- tool
- tools
- top
- touch
- trades
- traditional
- tremendous
- unique
- Universal
- users
- ux
- value
- VC
- Video
- View
- Website
- websites
- week
- What
- WHO
- within
- without
- Work
- would
- years