PLG: One-Act Play in Three Scenes
What is PLG, and what does its future look like?
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Product-led growth is one of the most predominant go-to-market strategies software companies are embracing now. And yet, it is in its infancy.
We recently had the chance to discuss this subject with Vic Davis, SVP, Customer Experience at Inflection.io, and we learned so much about the past, the present, and the possible futures of PLG that the best way to write this piece is in chronological order. But before we go into that, let's start at the fundamentals... what exactly is a product-led growth motion?
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Play 1: PLG - The product at the core.
Some claim Blake Bartlett initially coined the PLG concept in this insightful LinkedIn post. What was essentially fascinating in that article was the idea that product-market fit is insufficient (at least as it was understood by most back then) unless the product grows like a weed.
Bartlett continues developing his idea and clarifies that what he means by that is that the product must sell itself and naturally fit the environment. While this concept is not particularly innovative or essentially different from what others were doing even before this was published (AKA Atlassian), it does crystalize the idea that products must lead sales. Not marketing, not sales, just the product.
PLG spaces and companies have matured since then. And today, we can think of PLG as the ideological shift of pairing growth (revenue) with the product and its ability to provide value to users, with little friction.
This go-to-market motion requires a cultural shift from departmental divisions to orchestrated company focus on leveraging product as a primary growth engine. That means that in addition to having a dedicated marketing team building a pipeline, a sales team calling leads non-stop, or a CX team listening to users' problems, PLG is a cross-functional approach that forces teams to over deliver value with their product.
If you are a user, you love this seamless experience. You sign up, you usually get to try the product for some time, or you get a free-forever version, or you may even pay a small fee because the value you receive feels massive (this last option is much less common). You could finally skip purchasing expensive software products, only to discover that the experience was clunky while using them. In this scenario, products work well and deliver value quickly because that perceived usefulness will naturally lead us, the users, to become additional sales associates.
Back then, however, it took a lot of work for PLG teams to move away from sales-led or marketing-led models to develop a cohesive organizational structure. The usual revenue tech stack included a CRM that worked based on the number of users per database (too expensive for PLG). Plus, a marketing automation platform that honestly was not the primary value driver in PLG motions (you want to get the value directly in-product / not via email).
On top of that, to access product activity data, you had to reach out to specific teams internally. And, to action on customer activity data, you had to talk to entirely different areas of your company. So how are you supposed to run a PLG company if there is no single view of the customer?
Play 2: Functional PLG
Having the end-user as the new center of gravity deeply affects how companies, particularly marketing teams, function. Currently, we have a traditional funnel-like untouchable model (or a flywheel that is essentially the same but in a circle), that is built upon technologies and organizational models that have hardly been challenged in the last couple of decades. To do marketing you need a CRM and an automation platform, and you need marketing teams (market openers) and sales teams (market closers) to make sure your company grows. We know this is a reductionist way to think about the complexities of sales, marketing and growth, but, whether we like it or not, these are the fundamentals upon which we have built an entire set of companies. PLG, under these principles, however, is at best, functional.
As mentioned by Inflection.io, there are new pillars when it comes to thinking about products in a PLG model:
Pillar 1: Data warehouses - Unlike when people used CRMs as the central user activity repository, in a PLG model, where you have large numbers of non-paying users, this model becomes obsolete. Data warehouses that are shared by the entire organization (product, marketing, sales, etc.) are becoming the new single source of truth that allows companies to make the best decisions.
Pillar 2: Product activity data - Today, we use insights platforms to better understand customers' product activity. However, they are add-ons to a system built around a traditional organization that works in silos (not in a PLG-orchestrated model). In a functional PLG motion, this product activity data becomes key to turning users into advocates by over-delivering value through user experience. The more product activity data you have, the easier it is to improve the user-product relationship.
Pillar 3: Horizontal growth - Being in a traditional organization with siloed objectives doesn't work in PLG. Everything you do must be focused on understanding how people use your freemium product and the routes they must follow to buy your premium product. There doesn't need to be a dedicated marketing team creating MQLs, and a sales team closing SQLs regularly. Instead, the funnel disappears, and growth becomes a symbiotic task in which everyone in the company is ultimately responsible for nurturing users into loving and publicly recommending your product.
Once we come to understand that product-led growth requires a different cultural and technical system to run efficiently, we can see how it changes the way we think about marketing and growth in general.
Yet, as we claimed at the beginning, given the software and cultural infrastructures upon which we build companies, PLG remains at best, functional. In a PLG model the following gets redefined:
Use a CRM as your core data store: Not because you do not track users, but because you have so many users that the economics don’t add up (CRMs charge per number of users and free users in PLG motions make it unsustainable). Data warehouses are the better solution.
Think of marketing, sales, customer service, and growth as different teams: In a PLG motion cross-functional growth teams lead the way. Your job is to make sure the product delivers enough value to all users, and then to identify the signals that tell you which users can upgrade their plan and do everything to help them make that decision.
Think that there is such a thing as a professional PLG marketer: This remains a relatively young and unexplored space. At this point most marketers and salespeople will openly recognize that user-centric, service-centric models are great, and therefore PLG becomes the intuitive model to go after. However, the cultural and technological jump to get there takes time.
Remember that PLG is still in its infancy. As Elena Verna, Interim Head of Growth at Amplitude, mentioned on her LinkedIn, leveraging several growth motions in parallel with PLG is vital. Just because you are doing PLG doesn't mean you forget about all the benefits of other growth motions.
Finally, remember that many people in PLG companies will come from a more traditional organizational mythology that will require them to adjust to this new paradigm. As discussed with Vic, many people who come to PLG organizations probably used to work in traditional sales/marketing roles and are just making the jump. Leverage that.
No traditional salesperson could dislike calling a user who already loves the product.
Play 3: Integrated PLG
Imagine a world in which your internal teams no longer exist, nor the traditional platforms that we are so familiar with in marketing and sales. Instead, you have a PLG tech stack that does not require signal capturing add-on technologies, and a work culture that streamlines value delivery to users as the main growth lever. What does that even look like?
Here are some ideas:
1. Data capturing is 100% sorted: This means that users´actions are properly logged into a data system. More importantly, it means there is an internal consensus in terms of event tracking and that this information is available to all teams in the organization in real time.
2. Properly identified growth loops: You know exactly how many people are using your product and what features they are using the most, when trialists have reached meaningful adoption of your product and are ready for conversion to paid, and what are the golden-paths users travel to achieve value realization. Whatever your loop is, what matters is that you understand exactly how the behaviors are connected with the product, and how those signals translate into propensity to buy or expand.
3. Experimental mindset: PLG, just like in traditional platform economic models, heavily relies on experimentation and iteration. It is in this capacity for organizations to quickly run experiments and determine what works that you can beat your competitors. But, before you can run successful experiments, it is crucial to make sure that the systems you have in place are flawless.
4. Openness: As we already mentioned, PLG is not simply a new strategy to grow, it is a complex cultural shift that requires buy-in from multiple areas and professions. It is crucial to have an open culture where all insights are shared between departments to make sure all efforts are aligned and are ultimately represented in terms of value for the users using your product.
5. Embracing a startup-like mindset: Eric Ries mentions in The Lean Startup Guide that “A startup is a human institution designed to create a new product or service under conditions of extreme uncertainty.” Running a PLG model that is fully integrated and efficient requires a paradigm shift where teams research, experiment, test and iterate quickly given the feedback loops given by actual user behavior hoping for virality as a key growth component.
Note: Virality cannot be engineered, but by enabling and making the most out of the feedback loops you track via product usage you can definitely improve your chances of success because you know what is valuable. And, you can push it to all your users quickly.
PLG is a bit scary because it requires more than just buying a tool or changing a keyword. But, in a world where no one knows what is going to strike a chord with the end users, a more fluid and experimental vision of the product is essential for companies that wish to thrive in a highly competitive space.
Would you rather buy the premium version of a product you already enjoy using? Or talking to sales to figure out what the deal is with a product? Chances are, the solution that figures out how to provide value first, will win.
Flawless PLG implementation is nothing else than a startup-like ethos joining a B2B market. We’re not saying you have to aim to build the next unicorn, but, the days where value is simply transactional are counted.
Inflection.io is the first B2B growth automation platform built for product-led companies to drive more revenue, accelerate product usage, and speed up onboarding and value realization. To see Inflection in action, visit our interactive product tour here!