- A product-led growth strategy was an effective sales tool when money was flowing freely. Now it can open even more doors.
- PLG is a win for software firms because it holds down cash burn and minimizes spending on sales and marketing.
- While offering a free or freemium version is part of PLG, that’s not the whole story.
As restrictions on economic activity begin to relax, it’s tempting for software providers to revert back to the same business practices that worked in 2019. That’s a risky approach. I recently discussed why in more depth and suggested ideas for grabbing emerging opportunities — like the move by restaurants to delivery — that will remain relevant long term.
It’s also important to take a close look at pricing and packaging. That includes a profitability analysis and a discussion about discounting. Tempting as it may be to offer attractive deals, it’s difficult to recover margins when you’ve cut too deeply. A better idea is to increase ARR and inexpensively expand your customer base by growing or adopting a product-led approach.
Product-led growth, or PLG, has long been associated with frugality: Small, bootstrapped firms rolling out minimum viable products with lean marketing and, often, a focus on consumers. But that’s not even close to the big picture. Gaining users by offering a free or freemium version of your software is really about one simple reality: It’s the product that drives growth and, eventually, revenue.
By getting your entire (now probably working remotely from home) team on that same page you can build a solid PLG play that will get your sales team highly qualified leads, increase ARR and lower churn.
Just as important, it will increase customer intimacy at a time when it’s nearly impossible to connect through more traditional channels, like events, live sales calls or even ads given that many campaigns had to be completely scrapped.
And, PLG isn’t just for small software firms. Even before the pandemic, evidence suggested that product-oriented approaches work for providers moving beyond startup mode, including makers of complex applications.
Because PLG is all about direct end-user adoption without big spending on marketing and sales, it keeps cash burn low, a prime consideration for many CFOs right now.
PLG advocate and software-focused VC firm OpenView has some advice for success. Start by benchmarking your PLG maturity. OpenView offers a free assessment questionnaire that provides advice on which paid features to add and ways to lower barriers to trying your product.
Anthony Stames helps manage NetSuite’s go-to-market strategy for the software industry, collaborating with development, product management, sales, marketing and business development.