Preface
Nowadays, there is another popular word "PLG" in the product field. What does it mean? What new approaches and models are there to focus on product-led growth strategies? Please follow my research notes and study together!
1. What is PLG?
1, name explanation
PLG is the English abbreviation of (product-led growth, product-driven growth). In a literal sense, product-driven growth is an increase in the number of users or product sales driven by product capabilities.
It is a business strategy. Under this strategy, user acquisition, expansion, conversion, and renewal are mainly carried out through the product itself. This requires the cooperation of many teams at the company level, from product research and development to marketing and sales to service operations, to regard products as the largest sustainable and scalable growth channel. PLG is generally opposite to SLG (sales-driven growth), and the two have different focuses. In the past, selling software relied on sales and channels, but under the PLG model, the weight of direct hard sales will become lower. We hope to guide customers to find products through content, register for use, learn by themselves, and pay for themselves. Therefore, under the PLG model, SaaS companies can acquire customers at a lower cost and grow faster. The business strategy of
PLG is fundamentally to seek a large-scale customer acquisition system that drives growth at low cost on the C-side. The underlying logic is: use the product itself as a growth carrier, and use a free version or free trial in the early stage to "convince" customers by itself and promote the flywheel of customer acquisition, retention, and expansion. Once a closed loop of product word-of-mouth is formed, the company will be freed from the human and process constraints of marketing, sales, and customer success, thereby achieving rapid growth while having below-average CAC (Customer Acquisition Cost) returns.
2, development and change
The way humans use and purchase software is in the midst of huge changes.
10 years ago, Salesforce launched cloud software as a service (SAAS). In 2009, Apple allowed people to use electronic devices anytime and anywhere through the iPhone. In recent years, the market has been flooded with B2B products and customers alike that seek to satisfy everyone's needs. Needs that were fulfilled in the past are no longer exciting – customers always want new needs to be fulfilled.
1940 Birth of software
1981 Bundled
1996 Cloud
1997 Bring your own device
2018 Product-led growth
That’s what makes this transformation bigger than anything we’ve seen before – it’s a simultaneous transformation of customer demand and market supply. B2B SAAS products now pay more and more attention to user experience - because as users become more and more familiar with Internet products, they hope that SAAS products can be more beautiful, easier to understand, more powerful, and cheaper than the products customers used before.
Paying customers want to make product decisions on their own (a 2015 Forrester report pointed out: About 75% of B2B paying customers said they prefer to buy through apps or websites rather than through sales).
Personalization is also an important trend: 80% of people prefer to use products that provide personalized features. Salesforce's 2017 Annual Market Report pointed out that 52% of B2C users would switch products if they did not receive a personalized experience. If the product cannot immediately meet the user's independent decision-making or personalized functions, current users will give up immediately: for example, 21% of people will uninstall the app immediately after downloading it; 71% of users will churn after 90 days.
Generally speaking, the market is gradually meeting the needs of these users. It’s easier than ever to start a business — but more companies means more competition. Users now have access to more and more similar products, so they are becoming less and less patient with a single product, and it is easier to simply give up on products that do not meet expectations. For example, in Forrester's 2019 SAAS Trends Report, it was surprisingly found that the average turnover rate of mid-sized SAAS reached 39%.
So, what does this mean for future products?
In fact, excellent user experience has always been the key to success.In the past, sales would determine user experience, so when you want to buy something, you need to communicate with sales. If you're lucky, you'll find a salesperson who has the experience and empathy to help you find the product that meets your needs.
But users don’t want to be exposed to sales or marketing efforts — let alone use those contacts to replace experiencing the product they’re about to buy. In order to continuously acquire customers from the market and ensure the growth curve, the company must fundamentally reposition its market, sales, and service strategies.
Sales-driven and market-driven are outdated, and the future will be product-driven growth.
3, misunderstandings
Product-led growth ≠ Product manager-driven growth (Product-led growth ≠ PM-led growth)
PLG The growth model is to allow all departments of the entire company to work together to create better products, forming a product-led growth model. as the core operational position. All departments need to work together to use products to achieve ultimate growth goals, rather than just one word or product dictatorship.
PLG growth model requires traditional decision-makers to open up the process of production and research decision-making and allow relevant business departments to participate in review and decision-making. Are you worried that this will lead to complex, heated, or even longer discussions? Yes, you are right. But this will lead to better, more innovative business decisions. To prevent production and research from working behind closed doors and causing the company to be unable to adapt to the fierce market competition.
Of course, the company won't change to PLG's operating model overnight. It requires a gradual change in thinking at both the individual and corporate levels, which requires time, effort, and investment of all kinds. But like the companies below, once you've done it, you'll know it was all worth it.
2. What are the successful cases?
"The reason why I love the consumer market is the same as I hate the enterprise market. In the consumer market, users can vote for themselves and decide whether to pay for the product; but in the enterprise market, the people who actually use the product have no decision-making power. People often don’t know what they are doing.” In a speech in 2010, Jobs publicly talked about his doubts about the enterprise market.
1, ZOOM
ZOOM, I believe many people know this company, which has shined during the epidemic. As a video conferencing company, its market value once reached 58.8 billion U.S. dollars, and its peak daily activity reached 300 million. When
was founded, they hoped to compete with Cisco, Microsoft, Adobe, Citrix, and Polycom. It was hard to imagine that they would succeed. But in 2013, 3 million people used their service. In 2014, 3 million became 30 million. In 2015, they reached 100 million users. In 2019, they IPO and reached a market capitalization of US$15.9 billion. ZOOM CEO Eric Yuan once started a business and built Webex, which was acquired by Cisco and joined Cisco. He was dissatisfied with the inefficient services of the video conferencing system at the time, so he later started his own business, ZOOM. ZOOM is so magical, it is extremely practical: frictionless user touch points (free for up to 40 minutes), paid for advanced features, control, and integration with software such as Slack.
2, SLACK
Slack is an instant messaging software that focuses on collaborative work. Their slogan is: choose a better way of working.
This is a product started in 2012. Interestingly, the founding team originally wanted to make a large-scale multi-user online game, and the game name was already chosen, called Glitch. However, because the team was too scattered, communication efficiency was extremely low, and there was no product suitable for them on the market. They were determined to make a product to solve their own pain points, and this is how Slack was born. Founder Stewart Butterfield publicly stated that focusing on customer feedback is one of the keys to their success. As a B-side product, they have polished communication tools to the extreme. In the early stages of product design, they would respond to tens of thousands of feedback messages on social media. Slack quickly developed word of mouth among users and began to spread virally. This reminds me of the early product teams of NetEase Cloud Music. Although the two fields are different, they are both deeply involved in user feedback. Eight years later, Slack was acquired by Salesforce for $27.7 billion.
3 and NOTION
Notion may be relatively niche. They are an online workspace that integrates notes, plans, and databases. The product concept is: All-in-one. The founder of
Notion is a Chinese Ivan Zhao. He went to Canada when he was very young and later went to the United States. The company was also established in 2012. Nine years later, the company is currently valued at US$10.3 billion and the entire team only has about 200 people. Friends who have tried Notion should feel the power of this note-taking knowledge base product. Notion's block editing brings high flexibility, and its support for multi-dimensional icons makes it more playable. It is also the target of imitation by similar domestic competing products. Notion’s efforts in product strength have paid off handsomely. And for paying users of Notion, few people will contact Notion sales.
4, Blue Lake
Blue Lake I believe everyone will be familiar with it. As a product design collaboration tool, it completed a RMB 500 million C round of financing in May 2021 and a RMB 1 billion C+ round of financing in October. This rapid financing speed undoubtedly declares that the PLG model is still feasible in China.
Blue Lake considers three roles: product manager, UI, and front-end. It supports Axure prototype import, has a useful cutting function, and also considers the development code for front-end development engineers. High-quality control of product capabilities has allowed Blue Lake to enter many companies. The process of users using Blue Lake is very smooth and natural. Long-term users used Blue Lake at their previous company. After coming to their next company, they promoted the team's internal purchase of Blue Lake because the basic version did not have enough seats for 10 people. This entire process requires no sales involvement.
5, representative of high-valuation companies
Of course, not every PLG company is guaranteed to succeed. A number of highly valued unicorns, represented by Zoom, Airtable, Slack, Figma, and Atlassian, have emerged in the international market. Perhaps they never imagined the word "PLG" when they started their businesses, and they only explored survival under giants in the B2C2B field. Chance. But most PLG companies are successful - and most of the companies that users like are PLG. Take a look at the list of companies below, and you will find some companies on the market that are extremely well-financed, growing extremely fast, and have extremely sticky products. They are all representatives of PLG practice.
B2B Company
- Airtable: Reported $20 million in revenue in 2018 and created Airtable Universe to scale the inspiration of use cases, a responsibility usually held by customer success.
- Slack: 43% of the Fortune 100 pay for Slack and are loud advocates because of their company -wide devotion to its great experience.
- Figma: Closed a $40 million Series C in 2019 thanks to its product-led approach to solving designer pain points like project organization, file management, and real-time collaboration.
B2C company
- Pinterest: It' curated feed , personalized user onboarding, and inherent virality make Pinterest a poster child for product-led growth—and in 2019, IPO'd with a $12.7 billion valuation.
- Typeform: Launched in 2013 as a free beta, its conversational approach to data collection and beautiful , easy-to-use form builder helped Typeform go viral. They closed a $35 million Series B in 2017.
- Warby Parker: The digital-first eyewear retailer raised a $75 million Series E in 2019, thanks in part to its omnichannel consumer experience and free Home Try-On program (aka free trial).
There are also Twilio, Expensify, Atlassian, InVision, Zapier, Hootsuite, Buffer and so on. Both are extremely successful companies, both experiencing rapid growth.
6, common characteristics
These companies have adopted a bottom-up approach: providing users with free versions or trials of products. Their market direction is to guide users to try it rather than wait for sales communication calls.
Navigation
PLG Research Notes (1) "What is PLG?"
PLG Research Notes (2) "Growth Flywheel"
PLG Research Notes (3) "Growth Metrics"
PLG Research Notes (4) "The Rise of the Growth Product Manager"
Original Text reference: https://www.productled.org/foundations/what-is-product-led-growth
