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Written by Bob Thomas, Principal at Oxx, for Breakit's Leaders in SaaS newsletter
There are many great reasons why product-led growth is one of the most popular topics in SaaS right now. Product-led companies take the best from the B2C playbook: customers can discover, test and buy your products directly, without costly intervention from your team. With software buying decisions being increasingly democratised to teams, the qualities of your product become a revenue driver, and incremental changes within the products can drive user acquisition and adoption.
For many SaaS companies, the principles of product-led growth work well: removing sales intervention steps from the buying process, designing the product for the end-user and encouraging “user virality” dynamics once that value is proven. The driver of exponential growth in SaaS - the ability for your product to generate in-account growth and net revenue retention over 100% - can be simplified to the product level.
“Our product itself will drive exponential growth at lower CAC!” It can be that simple. Right?
Unfortunately, not always. We’ve spoken with hundreds of European SaaS scale-ups in recent months and it’s clear that product-led growth is not one-size-fits-all.
We often see three types of models where implementing PLG is hard: (1) scale-ups selling into industries that have scarcely begun to adopt SaaS as a business model, (2) scale-ups defining a new product category, and (3) scale-ups whose product’s core value is underappreciated if adopted only at an individual user or team level.
Thinking of adopting a product-led growth strategy? Our Go-To-Market Fit playbook will tell you more about how to accelerate, or which other growth strategy could be a better fit for you. Meanwhile, here are 3 suggestions to bear in mind for PLG:
Organic and viral acquisition are key: If PLG is applicable to your business, a viral user acquisition cycle is core to great outcomes. Measure your k-factor, and subsegment by customer type, use case and usage patterns to understand the cycles that are most viral.
Make product responsible for growth. Given the importance of product iteration and testing to the k-factor, to viral adoption cycles and to exponential revenue growth, product teams are increasingly able to develop a data-driven view of which roadmap items will be most impactful. And when in doubt, again sub-segment by customer types, usage patterns and use cases. Telemetry is your friend!
Sales has a role - eventually! Enterprise products often generate most value for customers when they “break out” from initially adopting sub-teams and become team wide or even organisation wide systems. PLG is great to deliver initial bridgeheads into organisations, with inside sales teams identifying and upselling high-growth potential accounts.
Want to discuss product-led growth with Bob and the Oxx team? Reach out on Twitter, LinkedIn or email!
