Why Your Software Business Needs a Product-Led Growth Strategy and How to Create One

“Product-led growth” is a term that’s gaining traction in the software world. In PLG, the business approach is to focus first and foremost on product excellence, then position the product to do the work of customer acquisition and retention for the company.

However, a product-led growth strategy can’t succeed without customer self-service. Users discover products online, try them out, develop a relationship with a product, and move on to purchase or subscription, usually without ever interacting with anyone in the company directly! In the software space, product-led growth is rapidly overtaking marketing-led growth, as evidenced by the free product trials you see everywhere online.

Now let’s unpack why your company needs a product-led growth strategy to boost revenue and stay ahead of the competition.

What is product-led growth?

Product-led growth is exactly what it sounds like: the product itself, not a sales team, drives business growth. A PLG strategy invites customers to experience the product before they commit. However, free trials are not the whole picture of product-led growth. An ideal product-led business strategy positions the product to do most of the work involved with:

  • consumer engagement
  • new user acquisition
  • product monetization 
  • customer retention

To envision product-led growth, consider any famous musical artist who got their start on YouTube. First, they engaged people via an existing platform that’s free for both creators and users. This product-led exposure strategy allowed a desirable product to spread virally, acquiring enthusiastic fans. These new customers then sought out monetized experiences: subscription streaming services, concert tickets, merchandise, etc. From there, product development (creating more music) drove customer retention while users “marketed” the product to their friends.

Product-led growth looks a bit different for a software business, but the essence of the strategy is the same.

How does product-led growth differ from sales-led growth? 

Picture the door-to-door sales approach common through much of the 20th century. A company identified a likely geographical target market, then used sales associates to acquire new customers. Door-to-door salesmen sold customers everything from encyclopedia sets to kitchen knife collections – one customer at a time. This is a sales-led growth model.

This door-to-door sales-led strategy feels outdated to us now. However, intensive sales-led growth was a viable business model in its time. In some industries forms of sales-led growth still work, but software is not one of those sectors. Let’s examine why.

Why is PLG so important in a software business?

We can’t all be YouTube sensations turned millionaires, but this strategy has plenty to teach software development companies.

Lower barriers to entry mean stiffer competition.

In a software market flooded with cheap or free apps, ultra-easy product access is essential to customer acquisition. We expect free shipping and returns on our physical products, and free trials of our software products. If a user can’t trial your product in a few clicks, they’ll likely move on.

Customer experience expectations are high and growing.

Stiffer competition also means higher user expectations. As customers, we want our software experience intuitive and frictionless, and we have little patience for anything less. When it comes to customer retention, then, user interface design and freedom from bugs is everything.

People demand self-service models.

Customers now overwhelmingly prefer to use their technology without ever speaking to a sales rep. An ideal PLG strategy means most users can discover, trial, purchase, and use your services without ever interacting with your customer care department.

What does product-led growth look like inside the business?

A product-led growth strategy doesn’t mean sales and marketing teams are out of a job. Product-led marketing teams position the product to do its own sales work, meaning product-led growth requires a product that’s excellent enough to lead the way. Its promoters highlight why it’s unique, place it where users will find it, and the product does the rest.

Importantly, product-led growth is a mindset and a culture, not a business afterthought. In a PLG company, every team focuses on the product: its quality, accessibility, and continued development in response to the highest customer priorities. People and teams in product-led companies ask these questions:

  • Product owner: “What features does our core customer base want most?”
  • Product manager: “How do I prioritize development work to continuously center the customer experience?”
  • Designers: “What user experience is our customer seeking? How can the software be as intuitive as possible?”
  • Testers: “Is the execution flawless? Is the experience friction-free?”
  • Marketing: “How do we invite users to test the product and remove all barriers to this decision? How can the product itself lead us to the right platform for reaching prospective users? How can we set the stage so that satisfied users spread the word and generate new sales?”
  • Sales: “How does the product transition the customer to a paid subscription? What does our conversion rate tell us? Is our approach too generous or not generous enough?”
  • Customer success: “How do we help people succeed with this product? How do customer inquiries inform product development or help desk content?”

What are the benefits of product-led growth?

A product-led strategy drives software company success in several interconnected ways.

The sales cycle is shorter in product-led growth.

With product-led marketing, users adopt products independent of direct company involvement. Satisfied users then transition to paid services in the time frame allotted by the marketing strategy: for instance, after a one-month trial period. This product-led customer acquisition process significantly reduces the sales cycle length, bringing revenue into the business faster.

A product-led company produces better products.

Any business has limited resources to allocate. If your company focuses heavily on marketing and sales, you’ll have fewer resources for proper research and development. 

Additionally, if sales and marketing are incentivized towards short-term wins, they aren’t focused on product improvement. A product-led company centers the user experience, and every interaction informs the central question: “How can this product deliver more value to the customer? How do we create a user experience so appealing customers don’t need persuading to stay with us?”

Effective product-led growth produces higher profits.

Companies relying on sales-led growth have to recoup significant customer acquisition costs. Even with a respectable conversion rate, this sales strategy can be prohibitive. Every paid customer subscription has to bring in revenue sufficient to cover marketing outreach to several people who didn’t convert.

With a PLG strategy, the product leads and customers follow. The same conversion rate is now sustainable because the sales team investment per user is marginal. A company that sees the same revenue with a smaller sales team can allot more resources to continued product improvement.

Product-led growth is more stable long term than sales-led growth.

When a company pushes growth through sales, it risks sales analytics becoming an end unto themselves. In this business environment, early sales success can set an unrealistic growth precedent the company nonetheless keeps chasing – including at the expense of product development. 

Initial sales success can also inflate the product’s true value in the rapidly evolving software marketplace. If your company creates a splash but isn’t positioned to maintain dominance, savvy startups will use a PLG strategy to slowly (or quickly) compete with a higher-quality user experience. In short: if it were 2007, you’d want to be Facebook, not MySpace.

How do I follow a product-led growth strategy?

Whether you’re just starting out or transitioning an established company to product-led growth, your PLG approach should be specific to your product and customer base. Strategy details will vary from company to company, but the common thread is that the product leads the way at each step.

To brainstorm your product-led growth strategy, analyze how your customer relationships develop and how your product is positioned at each stage. Then ask how your company can enhance and reposition the product to do the growth work for you.

1. Exposure and engagement 

To kickstart your PLG strategy, consider the initial user contact with your product offerings. Ask:

  • How do customers discover our product? 
  • What about that context prompts them to engage? 
  • What captures their attention enough for them to pause and investigate? 
  • Do our self-service avenues accommodate different users – for instance, options to read, watch, listen to, or otherwise interact with the product or content about it?
  • What voices outside the company are promoting our product?

Consider your product’s main value propositions (novelty, design, convenience, accessibility, etc.) and what sets it apart from the competition. That’s your hook. If you can’t pinpoint this instantly and clearly, revisit your business model using our Guide to the Business Model Canvas

Lead with your company value proposition and stay focused. Remember that your product is not right for every user. A business that tries to appeal to everyone satisfies no one. A restaurant can make the best tacos in the world, but not everyone likes tacos. Enthusiastic patrons dragging their friends to the restaurant are its primary customer base, but some of the friends are not. The restaurant does itself no favors by branching out endlessly to accommodate them. 

Similarly, product-led growth means leveraging platforms that reach the best audience, not the widest one. Your product needs to find the customers who love what it delivers, then grow alongside them. Position the product where the right customers will run across it and immediately understand the value it brings to them. Get the product right, tell the right customers what they can expect from it, and steps 2-4 are just about tweaking the details.

2. Trial and acquisition

Once your company engages the right customer base, users need to interact with the product enough to develop a relationship with it. Ask:

  • Should we offer a free version of our product? 
  • How can a user test the paid product, and why would they do this? 
  • What are the trial signup steps, and are any of these prohibitive? 
  • Does the free trial offer the exposure users need to experience the product’s benefits? 

As software users, we expect to try out products for free. As of this writing, even household names like HBO, Prime, Peacock, and other streaming services offer customers some form of free trial or content access. This product-led growth strategy is a staple of customer acquisition.

When designing a trial, consider how long a user needs to test your software. For instance, business products that scale with organizations might give users lengthy access to a limited version. Once the customer reaches a certain data storage limit or number of users, paying for the full product is a no-brainer. 

Offer trials in terms of usage, not time period, if it makes sense. For instance, an exercise app might give users 10 free workouts rather than a month free trial. Whatever you do, don’t be stingy. Netflix only abandoned its free 30-day trial in 2020. Unless you’re as successful as Netflix, you can’t afford not to offer a generous free experience. Remember, you’re not grabbing a sale – you’re building a relationship.

Finally, clear out barriers to trialing your software. Customers should be able to start using it for free in a few clicks. If your product provides real value, you don’t need user payment information. Get a name and an email now and a credit card at step 3.

3. Conversion and monetization

Once your customers have developed a relationship with your product, the next step is to purchase it. Ask:

  • Why would a user pay for our product? 
  • What level of access will they pay for and what is it worth? 
  • Are there additional monetization opportunities? 
  • Do our subscription tiers provide value at all levels while sufficiently incentivizing upgrades? 
  • Are upgrade benefits clear to anyone using the product?

If your product is amazing and the right customer has found it and used it, they’re ready to pay to keep using it. If your software has a free and a paid version, it needs to be clear to the customer why the paid option is worth it. If there are multiple paid options, keep them simple. It shouldn’t take customers more than 30 seconds to compare tiers or options. Ideally they can do this at a glance.

Scope out competitors, experiment with pricing, and pay close attention to conversion rates. Most customers won’t tell you why they left after a free trial, so listen to those who do. What do your 2-4 star reviews say? Where is your value proposition only partially fulfilled? Return to the product with this information and keep developing it.

4. Retention and growth

Once your target customers are on board and paying for the product, your goal is customer retention and sustainable growth. Ask:

  • What makes users continue paying for our product? 
  • How will it provide ongoing value and maintain relevance over time? 
  • Are customers excited enough that they’re spreading the word to other potential users? 
  • Are we facilitating them to do that effectively?

Product-led growth means the product experience is what retains users. Think of the app you pay for that you wouldn’t consider living without. The $5 or $10 a month is more than worth it because of how much value it brings. You actively promote the product to people every time the topic comes up – even though the company doesn’t pay you to. Maybe it’s exciting, fun, educational, or just incredibly helpful for organizing your work or personal life.

Do your users feel this way about your product? Pay attention to usage analytics, direct user feedback, rising competition, and customer drift. Ask what insights this data holds for your company about product development.

Which brings us back to the main point of product-led growth: when your product provides exceptional value, it sells itself. Your best salespeople are your current users. Keep them happy, continuously improve your product, and they’ll spread the word.

Product-led growth with Whiteboards

As you focus your business around a product-led growth strategy, you’ll need excellent tools for product management. Whiteboards’ visual collaboration platform facilitates your team to gather and strategize next steps.

Video chat with your team as you collaborate on a shared board, or invite guests to the space to explain your value propositions. Create professional presentations on the virtual canvas and deliver them to product stakeholders. Screen-record short demos for customers to show off your product features. Chat with team members on the whiteboard between meetings by leaving comments and mentioning people you want to loop in. 

Throughout these collaborative processes, unparalleled native Jira integration keeps your project management smooth and friction-free. Import and update Jira issues while you’re working in Whiteboards, and create new issues from virtual sticky notes or template fields. All your changes sync instantly in Jira.

Watch our short demo to see how a virtual whiteboard with Jira integration keeps you on the path to sustainable product-led growth.