Is Product Led Growth Realistic?

The Interwebs are flooded with advice on Product Led Growth. Many believe it to be the superior business model.

But as the PLG movement has matured, we are realizing that it is not, in fact, an entire business model, but a GTM motion. In addition, it is no longer the only motion, but one of several motions that can drive capital-efficient growth.

Most of the PLG advice is for companies that are getting started.

But what about companies that have been in the trenches for 5, 10, 20 years and already have a portfolio of customers?

These customers all of purchased from a sales person with a "sales-led" pricing and packaging structure. So how do we "turn on" a PLG motion without completely disrupting our existing customer base?

The Ingredients for PLG Success

Before we send our Product team off to build the free (or low cost) version of our Product, we need to consider the core ingredients required to have success in PLG.

One of our favorite resources for PLG is from Stage 2 Capital (disclosure, Gary is an LP in two funds).

Mark Roberge does an excellent job tearing down the success factors for PLG, which we can also apply to more mature companies in the lower middle market ($5mm - $50mm in revenue).

As we can see, it's not as simple as offering a free trial of our otherwise complex product and calling it a day.

A successful Product Led Growth motion requires that a single user obtain value in as little time and with as little effort as possible.

This value also needs to be retainable, ideally expanding as they continue to use the product.

In order to make acquiring these PLG customers efficient, the value delivered to the end user needs to be easily communicated in something as simple as a digital ad, where space for words and imagery is scarce.

Acquisition also needs to be able to scale, ideally leveraging some sort of virality to mitigate direct costs.

Lastly, once an end user is getting and retaining value from using the product, the company gets even more value from additional users on the tool, for which they are willing to pay.

Getting Started. Crawl - Walk - Run

For companies in the lower middle market, we have grown accustomed to launching revenue projects and seeing those projects generate revenue, in some form, rather quickly.

So when we launch our PLG motion, we expect something similar. And that is the very thing that kills an efficient PLG motion.

Monetization is step 4 out of 4 in PLG.

Once we determine our "offer" to end users (hopefully built with the considerations listed above), we must first establish that we can attract users to this offer. This will require experimentation.

Once we establish that we can indeed get users to our Product, we must next prove that we can actually retain those users and, better yet, their usage actually expands.

Here's the kicker. Lower middle market companies are used to measuring retention based on revenue.

But our PLG offer is free (or potentially very low cost), so we instead need to measure usage. Not just feature usage, but usage that we've been able to prove indicates value delivered.

Be honest. We aren't very good at that.

Once we've proven (usage) retention, we then have to prove that we can add some fuel (time, people, spend) to acquisition to scale getting quality users that retain.

Finally, after establishing that we can do all three steps well, we need to prove that we can take these individual users and pull them together in a way that the company sees value and is willing to pay to extract that value.

Monetization is LAST!

We can't tell you how many PLG projects we've seen launch with an expectation that monetization will being within 1-2 quarters.

That may be possible, but not when there is no plan to rapidly move through steps 1-3.

Implications for the Revenue Org

Launching a PLG motion can come with some unintended consequences. Two of the most common:

The sales team will see the website as "competition" for deals

We are successful acquiring, retaining, scaling and even monetizing users, but they are not our ICP.

Both of these situations result when the PLG motion was designed without a clear connection between the user and the path to the ultimate buyer.

After launching (and scaling) a PLG motion, your Sales and CS teams need to change!

Done well, PLG amplifies your sales efforts. Most often, however, PLG turns out to be a discrete channel with its own customers, which means the sales team keeps doing the same thing.

To REALLY get the juice out of PLG, your motion will become a hybrid, with the Product bringing in users, the Sales team "mining" users (based on ICP attributes and signals) to develop a monetization strategy and CS connecting the dots between activation and expansion.

This orchestration leads to a compounding effect, with a sustainable velocity of new users efficiently being monetized because they are pulling the product into their company (adopting) vs it being pushed (sold).

So before we dive into PLG, let's first assess the ingredients. Are we ready?

Have you launched a Product-Led motion? If so, reply and let us know! We would love to hear about your experience!

We also invite you to follow gtmPRO on LinkedIn.

Thanks and have a great weekend!

Gary & Andy