PLG (Product Led Growth) Is the Hottest Trend – Here’s Why

With client acquisition costs soaring, a new go-to-market strategy referred to as product-led growth (PLG) has emerged. Typically, software sales and marketing methods have been somewhat rigid. The prospect goes through the initial meeting to see if they are a good fit, and if they are, they go through an even lengthier process to purchase the product. Often, these meetings involve generic sales presentations (such as pre-recording product videos) that do not cater to the individual wants and needs of the prospect.

As sales experience platform Walnut’s CEO Yoav Vilner points out, “most companies demonstrate their products in a generic and “boring” matter. The problem with this approach is that prospects tend to come from different verticals, companies, and all have varying use cases, which means they should not all see the same sales demo, or even slightly changed variant, for that matter.”

In many ways, PLG is changing the status quo. Instead of telling prospects about the value proposition, organizations allow them to try the product, so it can do the talking for them. Consider it the software equivalent of “try before you buy.” While this concept isn’t exactly new, it is starting to transform how SaaS companies do business.

What is PLG?

To put it simply, product-led growth is a company strategy that focuses on the product as the primary driver for acquiring, activating, and retaining customers. This places the product at the center of everything the company does, thus making it critical that the user experience is of high quality). Thus, rather than investing money in advertising or sales outreach, the software serves as the company’s marketing engine.

Most product-led models focus on the end-user being capable of accessing the product easily so that they can get their hands on it and give it a try. The objective is to directly demonstrate the product’s value to the buyer without making them jump through multiple hoops to get there. Once the user has experienced the value first-hand, they are far more likely to make the purchase and convert from a lead to a paying customer.

Walnut is a sales experience platform that ensures smooth sales experiences. With this platform, sales teams can deliver a consistent experience to prospective customers, since the customized demos are hosted on the cloud, ensuring zero downtime.

“A smooth sales experience means that your potential customer has understood what your product is about from the first point of contact. This means your prospect is much more likely to advance to the next stage of the sales funnel,” says Walnut’s Vilner.

Second, due to viral loops and network effects, the product markets itself organically, making PLG an incredibly cost-effective growth strategy. As a result, companies that employ PLG models do not have to rely heavily on human labor when expanding, which frees up resources to be invested in other areas (mainly product development).

Why is PLG trending in the SaaS industry?

Overcoming high acquisition costs

While the SaaS industry has been flourishing in recent years, it is becoming increasingly difficult for start-ups to succeed. That’s because the traditional sales-led strategy is becoming too costly. The low barriers to entry into the market mean that there are tons of companies competing over the same consumer dollars. This results in skyrocketing customer acquisition costs, which make it more challenging for all players in the space to turn a profit.

Fortunately, PLG overcomes this issue by having prospects onboard themselves. This means that companies can significantly reduce their prospect’s time-to-value and sales cycle. Once people experience the value of a product, the next logical thing for them to do is make the purchase. This results in a higher revenue-per-employee (RPE) by lowering costs and increasing overall profitability.

The product experience is an essential part of the buying process

Since PLG companies focus most of their attention on product development, the typical outcome is a vastly superior user experience. And when you boil it all down, the company with the best product tends to outperform competitors with inferior products.

Hyper-growth scaling

Scaling is the ultimate goal of every start-up. However, scaling has proved extremely difficult amongst fledgling SaaS companies due to rising customer acquisition costs. With that said, those who employ PLG models tend to scale considerably faster than their peers, especially after they hit the $10M ARR mark.

This transpires for a variety of reasons, the most obvious of which is that PLG techniques are not constrained by labor-intensive lead generation and other human-driven procedures. As a result, they have unrestricted hyper-growth scaling potential even as they ramp up operations. Furthermore, PLG enabled enterprises are able to pay off client acquisition costs more quickly, which is one of the primary reasons they have a 2x greater median enterprise value (EV) than the public SaaS index as a whole.

B2B customers prefer to self educate

“Buyers are smarter than ever these days. They have done their research on you, and they expect a quick and predictable process,” explains Yoav. In light of this, it’s best to allow B2B customers the opportunity to educate themselves by gaining first-hand experience with the software rather than holding their hand through the process. In fact, according to a Forrester study, three out of every four B2B buyers would prefer to self-educate themselves when it comes to assessing a new product, rather than learn about it from a salesperson.

Final word

Product-led growth models enable B2B organizations to overcome mounting client acquisition expenses by gaining access to an organic, dominant growth engine. Instead of relying on sales teams to do all the legwork, PLG organizations use a wider top-of-funnel to demonstrate the value proposition to as many potential buyers as possible. At the same time, the money saved through not having to spend on marketing and recruitment can be returned to product development to improve the user experience and serve a broader range of customers.