Product-Led Growth Framework for SaaS: Build a Product That Sells Itself, Step by Step

Imagine this: No more cold calls, no more pushy salespeople, no more endless sales cycles. How about a steady stream of customers who sign up and pay for your product all by themselves?

Sounds too good to be true?

It's not. Product-Led Growth (PLG) is a new approach to growth that's already helping SaaS companies of all sizes achieve amazing results. With PLG, your product becomes your growth engine.

And the strategy is simple: Users discover your product, try it out, and find value in it without your intervention. And, as they find more and more value, they naturally upgrade to your paid plan and even tell their friends about your product.

But how do you build a product that sells itself?

That's what you will learn here. In this in-depth article, you'll learn what Product-Led Growth is, how to build a Product-Led Growth marketing strategy for SaaS, examples and the key metrics to measure success.

Let’s start – but first download your Product-Led Growth framework (action sheet)

Product-Led Growth (PLG) is a business strategy that focuses on the product itself to drive growth. This means that instead of relying on traditional sales and marketing tactics, PLG companies focus on creating a product that is so valuable and easy to use that users will discover it, try it out, and find value in it.

In short, PLG is about making your product so good that it sells itself.

To achieve this, PLG companies typically use a freemium model that allows users to access the basic features of the product for FREE. This allows users to try the product and see its value before committing to paying for it. Once users have signed up for a freemium account, PLG companies use a variety of tactics to help users then realize the value of the product and upgrade to a paid plan.

There are many benefits to this concept, which I will show you in a moment. But remember that Product-Led Growth is about demonstrating your value to potential customers as quickly as possible. Once they discover that value, they will naturally upgrade to a paid plan.

Instead of relying on pushy salespeople, PLG lets the product do the talking (and the selling). So, if you have a great product that delivers value and solves a customer pain point, you have a potential growth engine.

It's what every SaaS company has been trying to deliver ever since. And the Product-Led Growth strategy solves the mystery of how to deliver such products. And it does so by prioritizing the user experience over traditional sales and marketing tactics.

Here are the 2 major advantages that Product-Led Growth brings:

Have you ever bought a car without a test drive? Have you ever rented a flat without checking it out first? Probably not.

One of the key benefits of Product-Led Growth is that companies that follow this strategy can grow faster because their free product creates a user base right from the start. If the product is valuable, these free users will convert to paying customers.

Because there is almost no barrier to trying your service's free product, your customer acquisition costs (how much you have to pay to get a new customer) are automatically lowered - great!

Remember, it costs more to acquire new customers than it does to retain existing ones. That's why it's so important to have a great product. If people like your free version, they will stick with it and see no reason to switch to a competitor.

PLG improves customer retention by delivering a seamless user experience and aligning the product with the customer's goals.

The more information you have about your customers, the more refined your strategy can be. As you build your PLG business, Personas are one of the most important elements you need to have in place. Personas are fictional characters that represent the different types of users who might use your solution. Even though they are fictional, they will help you understand your users' needs and help you create a valuable solution that people will love.

But not only that. The more realistic your Personas are, the better you can understand their motivations and goals. And that is the most important part. Remember, understanding your audience is critical to the success of your business.

Check out this in-depth Persona Guide to learn who your customers are.

Each product has a primary metric called the North Star Metric. This metric shows the relationship between the customer pain points you are solving and how this correlates to your long-term business success. Typical North Star metrics for a freemium PLG business model are MAU (monthly active users), free to paid conversion rate or revenue growth.

Your goal for your North Star metric is this: from the moment your customers start trying your service, educate them on the benefits and features of your service and drive them towards your North Star metric. Avoid any unnecessary hurdles along the way, such as useless pop-ups or notifications that have no value.

A strong value proposition tells customers why they should choose you over all the other options out there. It helps you stand out in a crowded marketplace, establish credibility and build trust with your target audience.

If your value proposition is unclear, potential customers may not understand what makes your product special and why they should choose you. Ultimately, I'd say the downside of an unclear value proposition is that it hinders your ability to attract and retain customers.

When you live PLG, every part of your business influences the product and aims to create the best possible customer experience.

For example, the customer success team will be thinking about how to add value to existing customers to help them succeed. The design team will think of ways to improve the overall user experience and make the UX as flawless as possible. The product team will look at new ways and features to further support customers and increase the value of the product.

Each team is focused on the product.

The goal of inbound marketing is to attract potential customers through high-quality content such as blog posts, infographics and webinars that demonstrate the value of the product and address the needs of the target audience.

In PLG, you don't usually have a dedicated sales team. That's why a marketing strategy such as inbound marketing is so important. Without a sales representative from your company, potential customers should naturally find and download your free offer.

Okay, this is probably the most important part of any PLG business:

Getting people to the AHA moment quickly.

The AHA moment is when customers first realize the value of your service. When they say "oh, this is exactly what I was looking for, this is super valuable". The AHA moment is an emotional event that should happen super early in the user journey. But how do you know what your AHA moment is?

To find your AHA moment, start by reaching out to your top customers and asking them what is most valuable to them. Then make a list of behaviors that correlate with retention (retention means keeping customers in your business).

Ask yourself - did customers who converted…  
‍
• Complete the onboarding process?  
• Interact with the core feature?  
• Connect with other customers?  

For example, if you find that most people who did not interact with your core feature leave your service after a short time, then your goal is to get more people to experience your core feature.

After evaluating customer feedback and your analytics, it should be clear where people find value in your service. Remember this: You want to reduce the time to value - the time it takes for customers to get to the AHA moment - as much as possible.

Onboarding plays a crucial role in building a strong relationship with your customers. Onboarding is about introducing users to your service and helping them quickly find value in your service. It's the first step in showing them how your product can help them achieve their goals and overcome their challenges. And it's a great way to lead customers to their AHA moment.

A well-designed onboarding process can lead to long-term product usage and customer satisfaction, while a poor onboarding process can lead to user churn.    

People have limited time (and attention span), so use onboarding to show people how to get the most out of your product. To create a great onboarding experience, think of it as a 3-part process:

1. Get users to the magic moment, the AHA moment, quickly.
2. Reduce the complexity and barriers to your service as much as possible
3. Use multiple channels to guide users to success.  

To really make the most out of your onboarding and get people to stay with your business, check out this in-depth customer onboarding article.

A free trial means people can try your service for a period of time, while a freemium model offers a basic version of your product completely free. People can then upgrade to higher tier plans when they are ready.

Offering a free trial or freemium version is a great way to allow people to experience your product and understand its potential benefits first hand. This works particularly well in a B2C context, as no one wants to buy a pig in a poke. Without any commitment, users can try out the software and later decide if they want to upgrade to a paid plan.

To get people to buy what you have to offer, your onboarding needs to be spot on, as we have already covered. An excellent way to improve your onboarding (and your overall product experience) is through product demos and tutorials.

You can use them to guide users to your most valuable features and show them what they can do with your product. Product adoption is the key word here.

Whether it's a freemium or trial pricing model, transparency should be at the forefront. If you are not open and transparent, potential customers will not trust you. The same goes for hidden fees. You should never try to make a sale and hide any fees, as customers will immediately churn and you will also get a bad reputation. So always communicate clearly how much your service costs - whether it is the free version or the paid plan - and show them that there is no upfront commitment on their part.

If you are honest with your customers and show them what they are getting for what price, they will thank you later by upgrading to your paid plan and staying with you for a long time.

Oh, and about your pricing plans. Don't overcomplicate things. Show one final price at checkout and make it easy for them to take the next step.

We have already covered this: In PLG - most of the time - you offer a free option so people can try your service before they buy. But as users become more engaged with your product and find more value in it, you should always consider introducing additional features behind a paywall.

It's fine to offer lots of valuable features for free, but eventually you'll need to make money to keep offering those features. The goal is to strike the right balance.

Determine the mix of free and paid features, and ensure that free users get enough value, while enticing them with exclusive offers. At the same time, make it clear to users what additional value they get from your paid plan, while still allowing them to get initial value from the freemium model.

Knowing your Personas and asking for customer feedback is essential to identifying which features should be free and which should be paid for.

Viral loops are a great thing and they work very easily. They consist of 3 simple steps:

1. A customer discovers and uses your service
2. The customer tells a friend about the service
3. The friend becomes a customer

Viral loops work particularly well for services that become more valuable the more people use them. Communication and social media platforms like Facebook, Instagram or Skype already have viral loops built in. Mainly because it makes little sense if you are the only one using them.

Best practices for massive growth include social media share buttons or the famous Dropbox incentive, which rewards you for every friend you invite. Keep in mind that just because these techniques have worked before doesn't mean they will work for your service.

Before adding generic social media share buttons, think about the ways people want to share your service and how you can encourage them to do so.

In Product-Led Growth, your product is critical to your success. Regularly gathering and analyzing user feedback is therefore key. With user feedback, you can improve your product and deliver even more value, reduce customer churn and increase customer retention.

Just what you want!

You can get user feedback through many channels, including surveys, in-app feedback mechanisms and user interviews. But you need to do it right. Here is a comprehensive guide to making the most of user feedback.

A strong community can be the reason why potential customers choose you over your competitors. And PLG companies know it. Nurturing an active online community around the product encourages user engagement, knowledge sharing and peer-to-peer advocacy.

If you don't track your numbers, you don't know if you're going in the right direction. PLG companies know their key metrics and track them to gain insight into user behavior and turn that insight into new features and ways to deliver more value.

We will cover the metrics that matter to PLG in a moment, but here is a complete list of all the important SaaS metrics that could be relevant to you.

Product-Led Growth is not the only Go-To-Market Strategy that companies use. Two other popular approaches are Sales-Led Growth and Marketing-Led Growth. Let's take a quick look at how they compare.

Sales-Led Growth is a growth strategy that relies on your sales team as the key revenue driver. Companies with B2B customers often use Sales-Led Growth because their sales cycles are long and customers need hands-on guidance with the product itself. With this growth strategy, your company's success is directly linked to the performance of your sales team. The marketing team tries to generate leads with campaigns, but in the end, it is the sales people who close the deals.

The problem is that this depends on how well these two teams work together. If your marketing and sales teams are not in sync and roles are unclear, you will lose dozens of hot leads due to poor communication. Therefore, these teams need to work in close alignment.

Another challenge with Sales-Led Growth is that the whole process lacks a focus on customer success or their product. Many salespeople try to close the sale and over-promise. If there is a value gap between what the sales team promises and what your product delivers, customers will churn.

Here is the thing: I am not saying that all Sales-Led Growth companies disregard their customers, but hitting your quota at the end of the year/month is a real concern. As a result, a sale may be made even though your product may not be a good fit for the customer.

One way to solve this problem is to combine Sales-Led Growth with other growth strategies, such as Product-Led Growth or Community-Led Growth. There is nothing wrong with Sales-Led Growth in itself, and very successful companies like Microsoft or Salesforce have used this strategy. However, if you want to achieve sustainable growth and reduce customer churn, you need to stop overpromising and start showing your prospects the value you offer.

Marketing-led growth means relying on marketing to acquire new customers through content marketing via blogs on your website, social media marketing or advertising. The key to Marketing-Led Growth is to engage your customers early and make them remember your service.

The aim of Marketing-Led Growth is to make people aware of your product, get them to your website, provide unique content and show them the value you offer.

Often marketing led growth starts with a lead magnet. A lead magnet is valuable information that potential customers can download in exchange for their email address. These email addresses are then used for lead nurturing campaigns (email marketing).

If you choose Marketing-Led Growth as your primary growth method, remember to track your individual marketing campaigns to see which one is delivering the best results. For example, if you try one channel and do not see the results you expected, try another. Stay in this experimental mindset and you will find the channel that works best for you.

Let's look at the differences between these growth strategies side by side:

If you can measure it, you can improve it. So it is imperative that you measure the most important metrics in your business. I like the way Alex Theuma, CEO of SaaStock, puts it:

In SaaS, there are over 50 important metrics to measure. But if you try to measure them all, you will get lost. It's better to focus on the most important ones that have a real impact on the business.

Let's look at the most important metrics in Product-Led Growth:

Revenue metrics are critical to assessing the financial health of your business. These metrics provide insight into how effectively the company is converting users into paying customers and generating recurring revenue.

Key revenue metrics for PLG companies include

• Customer acquisition cost (CAC)
• Months to recover CAC
• Customer lifetime value (LTV)
• Free trial conversion rate
• Average revenue per user
• Monthly recurring revenue (MRR)
• Expansion revenue
• Gross revenue churn rate

Customer and product experience metrics are essential for understanding how users interact with the product and their overall satisfaction with your product. By tracking these metrics, you can identify areas for improvement and enhance the user experience, leading to increased customer loyalty and reduced churn.

Key customer and product experience metrics for PLG companies include

• Time to value (TTV)
• Customer churn rate
• Retention rate
• Viral coefficient
• Net promoter score (NPS)

Here are two examples of companies that have made the most of Product-Led Growth: Slack and Dropbox.

When you think about why you started using these services, it wasn't because you read long pitch decks or had a sales pitch with one of their representatives.

Instead, I suspect you downloaded the software and tried it for yourself. If the freemium model is valuable, you will continue to use it and upgrade to a higher plan when you need to. So, the basic version (freemium model) has to provide enough value to keep people using it. Additional features should then add value so that people upgrade to higher plans.

Dropbox is the champion of Product-Led Growth, having reached a whopping $1 billion in revenue in less than 10 years. Their secret sauce?

A crystal-clear mission to build an easy-to-use product for seamless file sharing. But here's the kicker - Dropbox's ace in the hole is virality (viral loops)!

By offering a free plan with a teaser of storage (2GB), they turn users into promoters by giving more space for every referral. It's a win-win situation that brings in new users and makes existing ones even happier.

To successfully implement a freemium model in PLG, start by creating a killer free option that already provides enough value for customers to stick with your service. Regularly review key success metrics such as customer engagement, daily active users (or monthly active users) and session times.

Once you have your killer free product, create your premium version with advanced features that your customers would benefit from even more. Then, make sure you upsell your premium product by demonstrating its value - but this is important: make the upselling process natural and don't be pushy.

The biggest obstacle in moving to a PLG strategy is probably the mindset. Everything revolves around the product. So you need to align your teams, redefine your success metrics and adapt to a user-centric mindset.

But don't be intimidated. You don't have to make this change overnight. Just remember what PLG is all about and take it one step at a time.

One of the best known examples is Adobe. With the introduction of Adobe Creative Cloud, the company moved from a traditional sales model to a PLG approach. This transition allowed users to access Adobe's suite of products through a subscription model, rather than buying the new version time and time again.

User feedback is essential in all business models, regardless of the specific strategy you are pursuing. By listening to users' suggestions and concerns, you can iteratively improve your product, which leads to an increased user satisfaction and, therefore, higher customer retention.

Since PLG is all about the product, I would say that gathering user feedback is even more important than in other strategies.

The best way to find the right balance between free and paid features is to define your Personas and then simply ask your users. But you have to ask them the right way, otherwise they will tell you they want everything for free. Ask yourself...

• What is your core feature?
• What do people find valuable?
• What problem are you solving?

Your free product should only focus on solving this main problem for your customers. That's why they should stay with you in the first place. Your paid features should solve additional problems for your customers or make their lives easier overall.

Product-Led Growth is a powerful business model that lets users try your product for free and then converts them into paying customers - without you having to do any selling. Let the product do the selling. Compared to Sales-Led Growth and Marketing-Led Growth, PLG stands out for its customer-centric, data-driven approach.

So PLG is definitely worth a try if you are looking for a proven business model for your endeavors. Talking about proven business models. I have got something for you:

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