How to Use the PLG Motion to Drive Growth
What is a PLG motion? And how can your SaaS business use them to facilitate product growth?
These are the main questions that the article tackles, so if you’re looking for the answers, we’ve got them!
Let’s dive in!
- A PLG motion is a growth strategy focused on using the product itself as the main driver of growth.
- In contrast, a sales-led motion relies on sales teams to nurture leads and make deals. It’s a popular strategy in the enterprise software space.
- No companies are 100% PLG. Even the most successful ones have sales teams to close deals with high-value customers.
- A successful PLG motion allows organizations to reduce customer acquisition and support costs while continuously driving growth by leveraging WOM, product virality, and referral schemes.
- Users prefer the self-service model of PLG to the traditional sales-led approach.
- Start building your PLG motion by mapping out your funnel.
- Next, assign responsibilities at each stage of the journey to the right team, for example, acquisition to marketing and activation to product and customer success.
- For each stage, choose the metrics to track performance and decide which team owns them. For example, the sales could own the revenue metrics like MRR or CLV.
- Next, put your teams to work on implementing their corresponding playbooks and driving key metrics.
- As they do so, use product usage analytics to track their performance and optimize processes.
- Examples of companies that have successfully harnessed the PLG model include Loom, Slack, Groupize, and Canva.
- If you want to see how Userpilot can help you implement your PLG motion and track its success, book the demo!
What is a product-led growth (PLG) motion?
A product-led growth (PLG) motion is a growth strategy that focuses on the product itself as the main growth driver.
PLG companies use a range of user acquisition strategies like word-of-mouth marketing or free trials to attract new users. Once this happens, they ensure that users experience the product value to convert them into paying customers.
This reduces the importance of sales teams, as the product does the selling.
Product-led growth (PLG) vs. sales-led growth?
Product-led and sales-led are often considered two extreme approaches to growing product growth. They are indeed based on very different principles.
In sales-led companies, the sales team and sales reps nurture and convert the marketing-qualified leads using sales techniques like demos and presentations to close the deals. It’s an approach that is often preferred when selling software to larger enterprises.
Product-led growth relies on the product as the primary growth driver.
The idea is that if you manage to get the potential customers inside the product, they will realize how valuable it is and subscribe to the paid version, ideally using self-service solutions and without even talking to the customer-facing teams.
However, it’s a common misconception that PLG companies don’t need marketing or sales teams. They are still necessary to acquire customers before the product has a chance to work its magic and some high-value customers often need a bit of extra love before they buy.
That’s why we often talk about product-led sales, a hybrid approach that combines PLG and traditional sales processes.
Why should you use a PLG motion strategy?
Product-led growth is a very attractive concept for SaaS companies because it offers a number of benefits.
Firstly, it has the potential to reduce the customer acquisition costs. By offering free trials and freemium plans, a product-led company can grow its customer base rapidly without putting an unnecessary burden on its sales and customer success teams.
And once you put the PLG wheel in motion, it won’t stop. Satisfied customers promote the product for you through WOM and referral schemes, which drives further growth.
The self-service model, which enables PLG, is not only more scalable than traditional sales processes but also more appealing to modern buyers. They prefer exploring the product themselves in the purchase process instead of talking to a sales rep.
Most importantly, PLG motivates organizations to build better products. If the business’s success depends on customer satisfaction, you need to make sure that it addresses customer pain points and needs.
How to build a successful product-led growth motion?
Building a successful PLG strategy consists of 5 main steps. Let’s see what happens at each of them.
1. Map the funnel
As mentioned, companies are never 100% product-led, so your funnel may have elements of both self-serve and sales-assist funnels.
That’s how they turn into product-qualified leads (PQLs), that is, those who are likely to convert to paying customers but aren’t ready just yet. That’s where your sales reps step in, nurture them and ultimately close the deal.
Most of the freemium or free trial users, however, convert through the self-service funnel.
2. Build teams and assign parts of the funnel
Once you have the funnels mapped out, build the teams to support each stage.
You will most likely need the:
- Marketing team – to acquire customers and drive account expansion
- Product team – to design onboarding experiences at the activation stage
- Customer success team – to help with user onboarding, prevent user churn, and drive adoption
- Sales team – to nurture PQLs and identify account expansion opportunities
3. Set metrics to track at each stage
Having assigned roles to teams across the organization, set relevant growth metrics for each team. Make sure that only one team owns each of the metrics.
What metrics should you track?
Relevant acquisition metrics include:
- Customer Acquisition Cost (CAC) – the average cost of attracting new customers
- Average revenue per user – the average income generated per customer
At the Activation stage, you should track:
- Activation rate – the percentage of users who have achieved a pre-defined activation stage
- Product-qualified leads (PQLs)- activated users on the freemium plan or free trial who are likely to convert
The key Retention metrics to watch are:
- Retention rate – the percentage of users from the beginning of a period who are still customers at the end of the period
- Churn rate – the percentage of users who have abandoned the product during a period of time
One possible metric to track at the Referral stage is the Net Promoter Score (NPS). The score shows how likely users are to recommend the product to their peers.
The metrics to track at the Revenue stage include:
- MRR – Monthly Recurring Revenue generated by the product
- Expansion revenue – the additional revenue generated from existing customers
- Customer Lifetime Value (CLV or CLTV) – the total revenue a business can expect to earn from a customer over the entire duration of their relationship
4. Implement playbooks to increase metrics
As you have your funnels and metrics mapped and aligned with the appropriate teams, it’s time to put them to work and implement your playbooks.
Acquisition stage playbook
At the acquisition stage, the marketing leads all the efforts.
Here are some of the tactics they might use:
- SEO content marketing – creating valuable and engaging content that ranks high in search engine results and attracts customers.
- Paid advertising – targeted online advertising campaigns on platforms like Google Ads and social media.
- Influencer partnerships – collaboration with industry influencers or thought leaders to leverage their audience and credibility.
- Email marketing – lead generation campaigns and email sequences to capture and convert leads into customers.
Activation stage playbook
Driving customer activation is usually the domain of the product team but they’re often aided in their efforts by the marketing and customer success teams.
What tactics do they use?
- User onboarding – flows that guide new customers through the initial setup and use of the product.
- In-app messaging – tooltips, modals, or hotspots that provide real-time guidance and remove friction.
- A/B testing – to optimize the performance of the in-app experiences.
- User training resources – video tutorials, knowledge base modules, and webinars to help users make the most of your product.
- User experience personalization – using customer data to tailor user and product experiences to their unique needs.
Retention stage playbook
The customer support and success teams are responsible for driving customer retention.
Here’s a breakdown of common retention tactics:
- Customer sentiment monitoring – using in-app surveys to identify signs of dissatisfaction early on.
- Customer engagement tracking – leveraging product analytics to evaluate user engagement and identify users at risk of churning.
- Secondary onboarding – using in-app messaging to help users discover new and more advanced features and keep them engaged.
- User communities – creating communities where users can collaborate, seek advice, and share their resources to build long-term relationships.
Referral stage playbook
As the referral stage is about acquiring new customers, it’s usually the domain of the marketing teams. They do it through:
- Word-of-marketing (WOM) – users sharing their positive experiences and promoting your product.
- Referral programs – rewarding existing customers for referring new customers.
- Customer advocacy – identifying and nurturing product advocates who will promote the product through reviews and testimonials.
- Partner collaborations – establishing partnerships with complementary businesses for cross-promotion and mutual referrals.
Revenue stage playbook
Generating and growing revenue streams belongs to the marketing and sales teams. In a PLG company, they do it via:
- Upsells and cross-sells – encouraging customers to upgrade to higher plans and purchase add-ons.
- Pricing strategies – analyzing and reviewing pricing plans to stay competitive and maximize revenue.
- Win-back campaigns – re-engaging inactive or churned customers to regain the lost revenue.
5. Analyze product usage data to track performance
As your teams are implementing the playbooks at different stages of the funnel, use product usage analytics to track their performance and optimize the funnel.
What kinds of analysis could you carry out?
- Funnel analysis – to track conversions from one stage of the funnel to another and identify bottlenecks
- Flows analysis – for granular insights into user engagement with onboarding experiences
- Paths analysis – to map the exact paths customers take at each stage of the user journey
- Trend analysis – to track key metrics like MRR or CAC and look for correlation/causation relationships with other events
- Custom event analysis – to identify early warning signs of churn
- Heatmap analysis – to assess user engagement with different features and UI elements and identify friction points
- Cohort analysis – to analyze user retention and churn over time
PLG companies with successful PLG motions in place
Curious how successful product-led companies implement their PLG motions? Let’s look at a few examples.
Loom created FOMO through its reverse trial
When Loom first launched its AI functionality, it automatically gave users access to the feature but for a limited period only.
When the trial period was coming to an end, users got a message prompting them to upgrade. By this time, many users had experienced how brilliant the feature was and didn’t want to lose it.
Slack leverages the freemium model to drive product-led growth
8,000 users signed up for Slack on the launch day, and the number almost doubled in the next couple of weeks. How did the company achieve it?
Through a combination of two factors.
First is word-of-mouth marketing – the beta testers promoted it effectively before it was even available.
Second was the freemium model.
The pricing strategy is tailored carefully to give users enough functionality to help them realize the product value but not enough to satisfy all their needs. For example, the message and file history are limited in the free plan to 90 days.
Slack also offers its new users a robust onboarding experience that allows them to discover new product features.
Groupize used gamified onboarding to drive activation
G.G. offers user support via product tours, onboarding checklists, live chat, the Groupize LinkedIn page, and email. This allows users to discover the relevant features and learn how to use them effectively to achieve their goals.
Canva increased expansion revenue through upsell messages
Canva, like many PLG companies, offers a generous free plan to its users. The free functionality allows them to achieve pretty much everything they need.
However, the free plan doesn’t include many templates, stock images, or more advanced features. Whenever a user tries to use one of them, a pop-up modal prompting them to upgrade appears.
Such contextual prompts allow Canva to convert free users into paying customers.
A well-implemented PLG motion can help companies grow their user base and drive revenue expansion while reducing customer acquisition and support costs.
If you want to see how Userpilot can help you take your business on the PLG path, book the demo.