Product-Led Growth (PLG): Adapted and Explained for Enterprise Software
Last updated: December 23, 2020
Product-led growth (PLG) accelerates the pace of growth just like DevOps accelerates the pace of product development and deployment. Very soon, running an enterprise software company without PLG will be as unthinkable as running one today without DevOps.
Definitions of Product-Led Growth
As with any emerging methodology, there is no universally agreed-upon definition of PLG. That does not mean, however, that it lacks any definition and is entirely open to interpretation. The definitions from product-led growth companies, agencies, and experts are beginning to converge and vary only in word choice.
My own explanation of PLG skews towards enterprise software companies:
“Product-Led Growth is a customer acquisition strategy in which the software product itself is used to attract, engage, and convert customers. The product is given the lead role in the enterprise marketing and sales efforts.”
A more general definition comes from OpenView Partners, the firm credited with coining the term:
“Product led growth is an end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion and expansion.”
What PLG is Not
PLG is a long-term strategy for bringing new products to market or accelerating growth for existing products. Although there are agile and iterative ways of executing this strategy, they require far more planning, resources, and time than a simple marketing tactic such as an email campaign.
Successful product-led growth motions require commitment and alignment from the entire organization: Sales, product, support, and yes, marketing. It is not merely a strategy that can be planned and executed by marketing alone.
Replacement for Sales
Although PLG could eliminate the sales motion, it works best in enterprise software companies alongside sales, generating more deals from informed users or providing the sales team with a qualified list (“product-qualified leads”) of active users.
How the Product-Led Growth Model Works
Enterprise customer acquisition before:
target audience +---+ +--+ | | | | | | +------------------+ +--+ +---+ +-----> lead | sales pipeline | customer +--+ +------------------+ | | demand-gen & +--+ outbound sales
Enterprise customer acquisition with PLG:
+------------------+ lead | sales pipeline | customer +------------------+ ^ target audience | +---+ ^ sales-assisted | self-serve +--+ | | | | | | | | +---+-----------------------+---+ +--+ +---+ | product (trial or | +--+ +---> | free/low-cost plan) | | | growth +-------------------------------+ +--+ marketing
PLG is not mutually exclusive with direct sales. It can feed and accelerate sales motion.
While DevOps accelerates development and deployment cycles and creates shared responsibilities between developers and operators, PLG accelerates growth and creates shared responsibilities between product and marketing.
Data and Success Metrics
The growth team should be aligned behind a single goal, such as self-serve revenue or accelerating learning.
What Problems PLG Solves for Enterprise Software Companies
Buyers’ behaviors and expectations are changing. They have neither the time nor desire to engage in weeks-long demonstrations and negotiations just to see what the product can do for them. They want to see proof of value within hours or days, so they can narrow their options, deploy rapidly, and ensure broad adoption within their teams.
One CIO and former VP at a multinational telecom company was asked what would make it easier for them to buy software from startups: “Time to value… Make it easy and fast to try it using [our] own data and information. Like, within days. [We] don’t have weeks to spend on the test.”
Enterprise sales deals stall without internal support from would-be users.
Deployments and org-wide adoption is slow and faces opposition from users, limiting or risking expansion deals.
Deals are lost or never materialize because the buyer doesn’t have enough information about the product and its value to include it in their shortlist, nor the time or patience to extract that information from the company.
Difficulty breaking through enterprises where individual contributors (would-be users) initiate or hold strong influence over purchasing decisions.
Benefits of Product-Led Growth
For the enterprise software company:
- Unlike an open-source strategy, the company can see who uses their product and how they use it, even if they are not paying for it. This visibility into usage helps sales/success teams by uncovering who is or isn’t getting value from the product. It also helps the product team with telemetry data.
- Reach buyers faster. Start demonstrating the product’s value to users without waiting for them to submit a contact form or show up to a demo. Get the product on more evaluation shortlists. The majority of research in the enterprise happens before the user or buyer ever talks to a sales person. Providing frictionless access to the product equips those users and buyers with information and visible value to inform their decision.
Product-Led Growth Playbook: Practices and Tactics
Many software companies offer 14–30 day free trials, some with a usage cap (eg, credits or limits). For example, Snowflake has a 30-day trial with $400 worth of credits. Domino Data Lab and Databricks do something similar. Splunk is 14 days with a 5GB/day usage cap. Datadog is 14 days with no limit. Sumo Logic and New Relic have trials for paid tiers and also offer forever-free tiers.
Forever-free may be a headache to support at an early stage. The easiest option is to offer a 14-day trial with no limit. If abuse becomes common or troublesome, then impose some limit. If someone needs more time to test the product then someone from sales or support should be able to manually extend it—while taking the opportunity to ask what the user is hoping to achieve in the extra time.
There is little difference between 14 and 30 days because if the user doesn’t accomplish anything or see value in the first 14 days, it’s unlikely they’ll get anything out of another 16 days.
Open-sourcing is a (mostly) irreversible decision that adds considerable risk and opaqueness.
If the intention is to provide easy access and obvious value to the user, then a free trial or free tier is the better option.
Open-sourcing makes it harder to push/pull deals from users because you don’t know who is using the product and how they’re using it. It also gives up control of the product, opening the door for other companies to use it for their own product-led growth channel.
Some people think open-sourcing is the only option for building up a userbase of developers and engineers. This isn’t true. As companies like Datadog, Splunk, New Relic, and Netlify demonstrate, it is absolutely possible to acquire hundreds of thousands of users without ever open-sourcing the product.
Buyers of enterprise software are starting to expect proof of value up front so they can make better decisions faster, and launch solutions sooner. The software vendors who can demonstrate value the quickest will win the deal. It’s not enough to have the best product. It needs to be the visibly best product.
From the vendor’s perspective, leading with the product can lower acquisition costs, increase customer engagement and product learning, and unlock new revenue channels without adding to operating costs.
This virtuous cycle will eventually make the product-led growth strategy ubiquitous and undifferentiated. Until then, enterprise software companies who deploy product-led growth swiftly and effectively stand to gain more shares of both established and new markets.