Basics of Product-Led Growth
Product-Led Growth is a fairly new term to a lot of folks. Founders of early to late stage startups are now looking to learn more about this field and how the approach can potentially help them expedite growth. Here are some of the most common questions I have heard.
What is Product-led Growth?
PLG is an approach to use product experience as a way to drive outsized growth across the user ladder of acquisition, activation, engagement and monetization.
The whole company carries the burden of building product experience in a way that it drives sustained and exponential growth. At the same time, a specific PLG function can help amplify the impact.
When do you need a PLG function?
PLG function has limited value until you a company finds a good product-market fit. You want to hire your first PLG leader when the company starts to expand existing customer base in a repeatable way. This generally happens around your Series B raise. On the other side, it is never too late to start building your PLG function. Recently, I heard companies like Adobe and Cisco are starting their PLG motion.
In addition, PLG motion works better for SaaS companies targeting SMB and mid-market companies customers using bottoms up sales motion.
How is a PLG function different from a typical product team?
An obvious question I hear - isn’t it every product teams job to drive growth. So, how is PLG function any different?
There are definitely some overlaps across the two functions. The core difference is in their respective approaches and the goals they are trying to achieve.
Here are some core differences:
How should the PLG function be structured in an organization?
In order to understand structure, we will first need to define core characteristics of the function. A PLG function:
- Is built to drive business metrics in short span of time
- Cares more about outcomes versus output
- Uses high velocity execution to prove out impact
- Can pivot quickly based on impact potential of a project
In order to fulfill above characteristics, a PLG function needs to be self sufficient and cross-functional in nature. Here is core composition of the function
- Growth Leader - Often titled as Head/VP/Chief
- Software Engineers (1-6) — Number varies depending on stage and nature of the company
- Product Designer (1) - To help sort through user experience
- Data Scientist (1) - Growth is often numbers game. That’s where you find your opportunities.
- Product Marketing (1) - The projects are often optimizing on messaging in the app
- Email Marketing (1) - The team constantly uses multi-channel approach
- Product Manager (1) - When the team size grows to be more than a couple engineers on the team
While this is a idealistic composition, you don’t necessarily need all the people dedicated to just the growth function. They are often shared resources across multiple teams.
How do you hire your first Head of Growth or PLG Leader?
Obviously, goes without saying that you ideally want to look for someone with experience building and operationalizing PLG teams. However, there are limited people in the new developing field.
The closest field to PLG is product management. So, that becomes your backup plan. You want to look for people with following core skill set:
- Metrics and Goals driven: The primary difference for PLG leader is that they are manically business metrics focused and constantly driving towards exponential gains. So, you want to find people who have shown those instances in their past work.
- Comfortable with ambiguity and failures: Nobody has perfected the PLG motion and there is no standard playbook that works across companies. This function is a lot about risks, experimentation and varied outcomes. So, the person leading this team should be comfortable in ambiguous situations and should be able to take their failures well.
- Hustler: PLG gets really daunting when you have to constantly come up with new ideas and approaches almost every quarter. As a leader, you are supposed to show outcomes in a given quarter and then come up with more ideas in the next one and then again and then again. People who succeed in this role are hustling, figuring out workarounds and finding routes to execution.
- Leader: This likely goes without saying - you are looking for people who can motivate their team, manage people and play a part in overall company’s direction.
What are some core PLG metrics?
You want to think about the KPIs as Business Metrics and Product Metrics. At the end of the day, your goal is to drive outsized gains in business metrics. Product metrics are often leading indicators towards those goals. Some core business metrics are:
- Number of Signups (Daily/Weekly/Monthly)
- Monthly Active Users (You want to define activation point when a user has seen core value of the product)
- Upgrades to Paid (Across different tiers)
- Self-serve to Enterprise conversion
- Churn rate (Annual/Monthly)
What are core PLG IT tools?
The tools keep on evolving. So, I will say a few must-have areas and the tools we use today.
- Experimentation (A/B testing): PlanOut
- In-app notifications: Pendo, UserFlow
- Product Behavior Analysis: Amplitude
- Business Analysis: BigQuery/Looker
- Email Sequence/Campaigns: Marketo
- Sales Leads: Salesforce
- Project Management: Jira, Asana
- There's a group of tools that are looking to automate self-serve to enteprise lead generation but I haven't seen enough value yet: HeadsUp, MadKudu, Toplyne