Product-led growth describes a business strategy that puts a company’s product (usually software) at the heart of their overall customer experience. The product becomes the focal point of every interaction between the business and its customers, which in turn leads to more sales and revenue.
What is a Product-Led Growth Strategy?
The product-led strategy is based on the idea that if you build a product that people love, they will come back to it again and again. In addition, because they love your product so much, they’ll be willing to pay for add-on features or services that make their experience even better.
This creates a virtuous cycle where more satisfied customers lead to more repeat purchases and referrals, which then leads to more revenue for your business.
Product-led growth is often a good approach for early stage companies who are just starting out because it can help them get traction quickly. For software companies, it allows them to get their product directly in front of prospective buyers via a product demo who can then see exactly how your products solve their needs.
Why is Product-Led Growth so Important (in Today’s World)?
Product-led growth is an example of what’s known as “customer centricity,” which means focusing on your customers’ needs and wants above all else.
It’s also closely related to “customer experience management,” or CEM, which refers to how well companies understand their customers’ wants and needs, then use that knowledge to improve their relationships with them over time.
It’s becoming increasingly important because today’s consumers are smarter than ever and are becoming more and more distrustful of companies with a hard sales pitch. By making your product easily accessible, it allows customers to try it out for themselves without the fear of needing to speak to a sales person (introverts, looking at you here).
A positive product experience creates a loyal customer base who will not only purchase from you, but recommend you to others as well!
What are the Benefits of a Product-Led Growth Model?
Businesses that let their product lead growth have been able to create a variety of benefits for themselves, including:
Shorter sales cycles
When you can onboard your prospects yourself, rather than having to rely on a sales team, you can shorten their time-to-value and reduce their sales cycle.
Lower Customer Acquisition Costs
The price of your product should be low enough that people will buy it without thinking twice. Because they can so easily investigate your offerings, it requires less to convert them into a customer.
Higher Revenue Per Employee
Product-led growth creates higher financial productivity. The company saves money because it does not have to spend as much on sales, marketing, and customer service.
Product-Led Growth vs Sales-Led Growth
If you rely on customers to come to you when selling a product, you’re using a sales-led strategy.
Even if you have a marketing engine that generates thousands of leads, you still need to rely on your sales team to convert those leads into customers.
In product-led growth, you let your users self-educate and in essence sell themselves as they use your product to attempt to solve their specific needs.
Whether or not you’re aware of it, using the traditional structure of marketing > leads > sales is a sure way to add friction and bottlenecks to the buying process, resulting in both less sales and higher operating expenses.
A good sales team can be expensive, and most marketing leads don’t convert. In fact, according to SiriusDecisions, most leads that qualify as “marketing-qualified leads” (MQLs) never result in closed business.
Why Product-Led Growth Is the Future
When your organization leads with sales and follows with the product, you’re forced to move upmarket and are continuously forced into a pattern seeking large sales contracts rather than improving your product itself.
The result is that your organization will be constantly chasing its tail. You’re never really able to focus on what matters most — creating a great product.
When you find success with an inferior product, you’ll quickly become pressured to advance your products to appease your customers before the old product is ever truly ready.
This can put your organization at risk if you don’t have enough cash flow to support the cost of developing new products, or if you become too dependent on one client for revenue without having any fallback plans in place if they leave or cancel their contract with you.
In short: product-led growth is more efficient, and leads to better products. Better products create better businesses. And better businesses attract and retain better customers.
The best solution for getting started with product-led growth? Consider a product demo software that makes it easy for you to get your product front and center for your customers today.