Product-led growth refers to a business strategy that places a company's software at the heart of the purchasing journey—and, in many cases, the heart of the overall customer experience.
The product serves as the primary driver of customer acquisition, retention, and monetization.
What makes product-led growth different to other growth models?
The primary distinction between product-led and traditional growth is that the product is at the center of all marketing and GTM efforts. In a product-led company, the sales and marketing teams will work together to highlight the product and the positive testimonials it generates.
For businesses that offer a freemium product, for instance, the product itself turns into a sales and marketing tool since it draws in new users without requiring additional spending on advertising or sales staff. In a similar way, product-led growth strategies let users try out a product for free to convince them to upgrade to the paid version.
What role do self-service trials and freemium play in product-led growth?
Product-led growth strategies often start with a self-service trial or freemium option that lets customers try something out independently and without paying, constrained by time and/or functionality, and often without talking to anyone.
Self-service fits with changing consumer preferences, especially during research and evaluation stages. Many consumers prefer to try before they buy, relying less on the advice of a salesperson and more on their own first-hand product knowledge, as well as customer and social proof they find on review websites and social media.
A lot of businesses use trial and freemium experiences to track product usage and engagement, score prospects, and time conversion offers and sales efforts.
Calendly, for instance, has developed their entire business through a freemium model. They are now valued at $3B which is a testimony to the power of product-led growth.
How does it lower customer acquisition costs?
By easing the sales team's workload, product-led growth can lower customer acquisition cost (CAC). The cost of customer acquisition is influenced by sales and marketing expenses, so if a company can squeeze these costs down, it will be more efficient.
Product-led growth is often fueled by raving referrals and well-informed buyers finding the product online. This has an obvious effect on reducing the overall cost of acquiring new users.
How do I connect product-led growth to a company's product-led strategy?
Product-led growth is more than just free demos or freemium models. It goes well beyond a self-service buying process and will include other touchpoints all throughout the user experience. This includes both pre and post-sale, where every interaction has the Product at the center.
A well-developed product-led strategy, for example, may involve incorporating aspects of sales, marketing, service, support, and education into the product itself for a better user experience.
In this model, business operations and customer interactions that were previously handled through different channels will meet inside the product, increasing its usefulness, interest level, and ultimately its worth to customers.
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