Why companies, for good reason, are moving to product-led growth instead of sales-led growth.
What would YOU rather do as a buyer of products and software?
OPTION 1: TRY BEFORE YOU BUY
→ Sign up and pay for a monthly service via website/app.
→ Try it out immediately.
→ Have your team give it a test run to understand value/usefulness.
→ If it creates an impact, talk to the enterprise sales team to start the sales process so more people in the company can use it.
→ If not, go on your way.
OPTION 2: BUY THEN TRY
→ Talk to the enterprise sales team first.
→ Schedule demo two weeks in advance.
→ Set up multiple meetings with multiple stakeholders.
→ Negotiate SLAs, contracts, etc.
→ Sign up for 1+ years of service and a lot of money.
→ Get team trained on service.
→ Try out the product/service.
When I put it this way, which I admit is an overly simplified approach, Option 1 looks like the clear winner. It’s, of course, not the answer to everything, but the shift to this model software sales should be on your radar.
The center of power has shifted from the buyer to the end-user. And the consumerization of software means that end-users now demand better experiences from the tools they use.
Software companies must rise to meet the demands of the market—and that means building a product for end-users and then distributing that product directly to those same end users. [src]
Product-led growth (PLG), or Option 2 in my example, is a growth strategy that emphasizes the product as the primary source of customer acquisition, conversion, and expansion.
And PLG companies are seeing a lot of success.
The Shift: From Top-Down to Bottom-Up Sales
I love this graphic. It gives a good perspective on what’s actually changing.
The CIO used to be the head honcho.
They determined what software was built/bought, what hardware would be used, and then informed the business and end-users. The end-users had no say in what software they can use on a daily basis.
Now, in the end-user era, we’re seeing many employees and internal teams trying out the software on a per month basis and proving out the impact. THEN the product starts getting more adoption within the enterprise.
This is not a new or novel concept, either.
A great example of a software product being adopted in the enterprise through the PLG bottom-up approach is Yammer, which was founded in 2008.
Employees signed up for the Yammer service on their own, without their employer's consent. The software started gaining traction within companies. Eventually, companies had no choice but to sign up for enterprise-level agreements to support their existing employee user base.
More recent examples of this are tools like Slack and Zoom. These are product-led companies with thousands of enterprise-level agreements. All bottom-up approaches. In this case, the employees spoke up, not the CIO.
Product Led Growth Is a Company Strategy, not a Sales Tactic
The common factor, and the underlying definition, of product-led growth, is a self-serve product experience. That is what helps you acquire and retain customers. Everything else is tactics that you can modify based on your customer needs. A misconception I see with product-led growth is that people think of it as something the product team needs to do. It's actually a whole company strategy.
You can’t just pivot to PLG or use it as your entire customer acquisition model is flipped on its head.
It can’t be an afterthought.
Twilio, founded in 2008, is a great example of a company that adopted PLG as a core company belief.
You may not know what Twilio is, but if you’ve ever hauled an Uber, received a two-factor authentication text message, or booked an Airbnb, you’ve used Twilio.
The company only scaled its sales teams when Twilio determined quantitatively that there was enough enterprise demand in place (as demonstrated by lead velocity rate surpassing a certain threshold in a segment). The company proceeded to hire incrementally only when the cost of sale and average deal sizes justified an external hire.
Twilio made it as easy as possible to use the service. You didn’t need an enterprise agreement. You didn’t need a demo. You just needed the documentation, a few how-to-videos, and you were on your way to building your product.
Then the word spread.
Now, don’t get me wrong, they still have enterprise sales teams. They’re still signing MSAs and SLAs and everything that takes place in enterprise software agreements. That’s still the same.
What’s changed is how the customers were acquired in the first place.
Product-Led Growth Is a Growth Model That More Companies Should Adopt
Take a look at the options again. Think of yourself as a buyer and not as a software creator. What would work best for you? What would you prefer?
If your customer cannot try the product on their own—whether that's for security reasons or because they're just not a tech-savvy customer base—you’re going to be in a very tough spot. [src]
PLG is still a new term, but every company on planet earth, regardless of size, should be paying attention to the impact of it. It shouldn’t be ignored!