What is Product Led Growth (PLG) and is it relevant to B2B?

Doug CavinessDoug Caviness VP, B2B Strategy & PartnershipsMember | Scholar ✭✭
edited November 21 in Sales & Revenue Growth

What is Product Led Growth (PLG) and is it relevant to B2B?

This is a topic that has come up in a number of my conversations of late and I wanted share in case of interest. This is really about the digitization (and consumerization) of B2B that we hear about from the TSIA.

The market cap of Product Led Growth (PLG) companies like Zendesk, Atlassian, Docusign and Zoom, now exceeds $200b and PLG has proven highly effective in B2B. Many of these companies have CAGRs exceeding 30%.

My belief is that PLG companies like these provide a lot of insights on what the future of digital products, customer experience and sales will look in the future.

Here's a recent blog post that I wrote: https://www.cleverbridge.com/corporate/product-led-growth-in-b2b/

How are you using PLG strategies?

(Source: Fanning, Sean, and Kyle Poyar, "2020 Expansion SaaS Benchmarks", OpenView, 2020)

Best Answer

  • Laura FayLaura Fay VP & Managing Director, Research & Advisory Member | Guru ✭✭✭✭✭
    edited November 23 Accepted Answer

    Love the results chart @Doug Caviness and agree generally with the sentiments expressed above @Steven Forth .

    Two years ago, i did a webinar on Product Led Growth Strategy: The Key to Unlocking XaaS Profitability which is still available on de-mand for those interested in this topic.

    Once we accept that PLG is a viable and attractive strategy (for many of the reasons above and more), it's important to point out that actually developing these models, requires the product teams to understand and operationalize around of a number of foundational concepts that the product can very prescriptively & surgically impact -

    · The recurring revenue (ARR) formula

    · The sales and marketing cost drivers

    · The LAER customer engagement model and related cost drivers,

    · The adoption framework for driving sticky adoption patterns

    · Platform economic engines (many of the above listed companies are expanding their value through platforms)

    Many product teams are challenged in these areas, particularly those on a journey to XaaS business models.

    If you are reading this and executing a Product Led Growth or Product Assisted Growth strategy, I encourage you to share your experience and learnings with the TSIA community at the next TSIA Interact conference at the link - CALL FOR SPEAKERS

Answers

  • Steven ForthSteven Forth Managing Partner Founding Partner | Expert ✭✭✭

    OpenView has done a great job of formalizing and proselytizing the product led growth model. I work with Kyle Poyar from time to time, in January 2020 we co-authored a piece Pricing Transformations in 2020 (I am looking forward to reviewing this to see how gently the pandemic has treated our predictions).

    There are many themes from product led growth we should be studying and applying. The ten key themes of

    • Solving user pain (rather than organizational pain)
    • Building self-serve workflows
    • Free trial
    • Growth experiments
    • Collect usage data by user
    • Use usage and customer survey data to inform product functionality investments
    • Ask customer to pay after value is established
    • Map value communication, delivery, documentation across the customer journey
    • Only sell to customers who will get value
    • Provide open user communities

    (I inferred these from the self assessment on the OpenView website.)

    I think most companies need to be doing all of these things, at least in certain circumstance. Companies that are building their entire strategy around them are engaged on product led growth.

    This is not the only credible growth model though. It tends to be capital intensive and is not actually all that good for truly transformational offers. Another option os services led growth. I have shared an image for this elsewhere in this community. The basic idea is to lead with services and build understanding, trust and establish value, transitioning these into subscriptions and then gathering the data that informs additional services. Well executed this can lead to good growth, though not as good as frictionless product led growth, with much less capital at risk.

  • Doug CavinessDoug Caviness VP, B2B Strategy & Partnerships Member | Scholar ✭✭

    @Steven Forth and @Laura Fay thanks for your comments. Laura, thanks for the pointer to your webinar and I agree with your point that to fully capitalize on the promise of PLG your product team(s) need to be onboard ("understand and operationalize around of a number of foundational concepts"). This is unfortunately still a big gap in many organizations. Looking forward to PLG stories members might share at the next TSIA Interact.

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