WTF is PLG

Note: This article was written for and first appeared in Trends.co (the Hustle)

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Software Companies Using This Growth Method Are 2.2x More Valuable

Selling software the traditional way is for losers. Companies that follow the product-led model are worth 2.2x more than the median SaaS index. Why? Because product-led growth (PLG) is capital efficient. 

Customer acquisition is expensive. Traditional sales wastes time on deals that never close. That’s inefficient. But when you flip the funnel, early product users pre-qualify themselves and optimize your marketing, sales, and customer support. 

Traditional companies treat product like the caboose of their sales funnel. PLG makes it the engine that pulls the whole thing.

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WTF Is PLG

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“Product-led growth is a go-to-market strategy that relies on your product to drive acquisition, conversion, retention, and expansion,” according to Blake Bartlett, the OpenView Ventures Partner who coined the term. 

You might assume PLG is for small self-serve companies. Not so fast. Plaid uses it to connect 25% of people who have bank accounts in the US. They employ a PLG tactic we’ll get to in a minute. But first, how does PLG work?

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The difference between traditional vs. product-led growth. Source: CXL SaaS Metrics

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How PLG Works

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There are 4 things that make PLG companies different. Copy them (or don’t… but someone in your market will): 

• Operate like a drug dealer. PLG companies target users first, not buyers. Give users a sample of the product to prove it’s valuable. A taste. They’ll become your internal sales champion (and you don’t pay them commission). Think about Zoom handing out 40-minute meetings like Walter White until they owned Webex’s neighborhood.

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• Start with a slippery slope. Most software is like a bad first date -- it wants you to fit its expectations and behaves erratically. PLG makes the onboarding experience seductive. Satisfying experiences leave you wanting more. Netflix originally made people add 5 DVDs to their queue so they could immediately send more after you watched the first 3.

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• Create a flywheel. PLG companies engineer a growth loop in their product to get free marketing. When we ask for feedback using SurveyMonkey, we’re also promoting it because of the Powered By logo at the bottom of the form (our own Brad Wolverton surfaced this Hacker News post about the best user acquisition channel no one’s talking about).    

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• Send in a Trojan horse. Trying to sell directly to the C-suite is like trying to penetrate a heavily guarded castle. You have to get across meeting moats, through demo doors, and up the tower of team decisions. Good luck. PLG companies sneak their sales funnel inside their customer’s walls like a Trojan horse. That's why Slack lets you communicate for free. You hit the 10k message limit, then upgrade to keep your message history. Suddenly you’re paying $12.50/mo for every person in the company.

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Tactics to Take Advantage of PLG 

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When you’re ready to try PLG, there are a few tactics to try. Most of us associate PLG with freemium and free-trial models. Freemium offers a version of your product that limits features, usage, or support. Free trials limit by time or consumption.

You can also introduce a smaller complementary product to your primary offering. HubSpot built a simple email open monitoring tool called Sidekick. It eventually grew into HubSpot Sales (shoutout to new Trends member Brian Halligan, HubSpot’s CEO and co-founder).

If none of this fits your product, then get creative. We mentioned Plaid earlier. They were acquired by Visa for $5.3B in January. Plaid identified low-level bank engineers and gave them a sandbox environment to quickly build cool apps. Then when the boss asked how they did it, the engineers talked about Plaid. 

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