Product-led growth is hot – especially in uncertain economic times. Today, people are looking for ways to lower CAC while enjoying flywheel growth. While there’s no shortage of talk about the benefits of a product-led approach, very few people know how to get their PLG initiative off the ground.
But don’t worry; we sat down with Wes Bush, one of the most sought-after PLG experts in the world, to lend some insight on the topic. Wes is the Founder and CEO of Productled and the author of the best-seller, Product-led Growth: How to Build a Product that Sells Itself. After working for some of the world’s fastest-growing companies in the world, today he trains teams around the globe how to turn their product into a powerful growth engines.
- How a PLG company succeeds differs greatly from a traditional marketing-led or sales-led company. With Product-led, you need to figure out how to make your users successful, which requires a shift in your mindset.
- The leader of your PLG initiative should be able to thrive in uncertainty, have a growth mindset, have clout, and optimize for learning.
- Other important skill sets in your PLG team should include user experience design, user research, development, product marketing, and data analyst.
- Get clarity on these five questions before you start your PLG initiative – what game are you playing? What does it mean to win? Who is your hero? How will you help users win? What capabilities do you need to develop?
- Wes Bush’s organization offers a wealth of resources to help anyone get started with PLG – check out his free book, slack community and free online training. See the show notes for links.
Table of Contents
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Why PLG Companies Will Shine in the Current Economic Climate
Totally. So, if you look at like earlier, maybe like five years ago when PLG was initially coming onto the scene, it was this amazing way to grow business. People were super excited about some of the benefits. But what I love studying is macroeconomics. I looked at what are some of the big drivers. Before product-led growth, it was content marketing. Before content marketing, it was growth hacking. It’s like all of these evolutions of how we do business, it usually has a core reason why it happens.
So what I looked at back then, there were a few really big studies that were done around customer acquisition costs. And customer acquisition costs have been increasing by about 50% over the last five years, and it’s accelerated. So like, you’re seeing this side of things where customer acquisition costs are rising, and people are tired of ads. People are tuning that out way easier than before.
And part of what’s driving that, too, is there are many different competitors for every single category imaginable because it’s never been easier to start a company. So that’s one piece. The second piece is consumer willingness to pay is going down every single year. And this is part of the amazing thing. 50 years from now, we’ll be looking back at the tech we’re using. We’re like, my goodness, the tech we have now is everything we have for free, is what we were paying hundreds of thousands of dollars for. It will just be amazing, like so much of it will be free, and there is and like really is a good deflationary environment.
Technology has always been that way. So that’s decreasing. And so in a recession, whether you want to define it as like, okay, we’re going to the recession or not, I don’t want to be the doomsday person. But either way, product-led companies are positioned strategically right now to capitalize on this.
In a recession, people want to spend less. Companies are wanting to slash their customer acquisition cost because they’re realizing it’s less effective right now. So a product-led company has both of those benefits as one of the big things that’s more capital efficient even when it comes to things like onboarding users and stuff like that. One of the reasons why it’s so much more efficient is because the product actually does a lot of the heavy lifting that your team used to do.
So that’s not replacing your team. Your team can work on higher-value tasks, not necessarily manually onboarding every single person as an example. So that’s really why I truly believe in 2023 and in the future part of that, companies are just having a moment now where it’s like they’re here to stay and really shine in the light of a recession.
How to Get Started on Your PLG Journey Without Getting Lost
One of the things that we’re always thinking about products is where people typically start in this journey and a couple of years ago I was like, what is product-led growth? And now we’re seeing more and more companies are at this stage where we heard about product-led growth so much, but we’re still unclear about how to do it.
And this is really what we were talking about a bit earlier. You have to start with a product-led strategy, but before you even get to that point, one of the core things that you need to understand is why do product-led companies win? And that’s a tough question to answer because it’s, at least partially, about capital efficiency. And they can offer products at better prices. But what’s at the root of that?
If you think about the applications that you use in your day-to-day life and you also upgrade and pay for, what all of those most likely applications have in common is that when you signed up for them, you were able to get the value very quickly, you’re able to experience the value of the product, and you loved it enough so that you decided, hey, I want to continue using this product, and I’m willing to upgrade and the credit card to use it.
Cracking the Code of PLG – User Success
So that’s really at the core of what’s driving product-led companies. And this big shift is you need to tackle that part of your users’ needs to be successful. If you don’t create successful users in whatever free environment you have, it’s hard to make this work.
So you need to start by just asking the question: what is user success?
What does that look like for our specific users? What happens for a lot of sales-led companies that are trying to make this transition over to being product-led is sometimes they have to understand that there are different problems. They can give it some of their product away for free, while other parts should be gated. And this whole discussion of what to give away for free versus what to lock up behind a paywall is really useful.
In our program, we talk about your beginner problems. These are like problems earlier in the user journey. I’ll give you an example with Vidyard, the company I used to work at. So their whole mission was to enable people to use video throughout their entire business. So initially, when we had a free trial, you could upload your video, and then we would host it for you, and then you’d embed that video into your website, and then you had to integrate it with your marketing automation platform. And then I could see that you’re watching my video, which is creepy but cool for marketers.
So that is valuable. But actually, only a few percent of people would ever get to that point because it is a big ask. And so when we were making that transition, we had the first free trial box. And then, for the freemium model, what ended up working was it solved the beginner problems. And the beginner problem for the video was people don’t know how to create the video. And that part is hard. And so it was like, can we create a Chrome extension or something? So sometimes you might go into this and be like there’s a lot to do, but what it comes down to is how do we enable the user to solve something meaningful in their specific life so that when they’re ready to upgrade to more advanced problems, they’re already using our solution. We’re the best fit for them.
Hit the Bull’s Eye by Changing Your Mindset – Spark the Fire, Build it, and Keep it
And that is honestly one of the biggest pieces of it too. And there is the mindset. But then I also like to follow it up with the different metrics that are part of this.
So when there was the marketing revolution with marketing automation platforms, we heard a ton about marketing qualified leads (MQLs), which was the bane of my existence when I was in demand-gen. I was like, this white paper here’s 50 points, you go to our pricing points, 50 points or maybe 100 because that’s a higher intent, right? So like, it would magically get up to 500, and then boom, it’s like then they’re talking to sales.
This is a really weird kind of system. It is kind of like playing bingo or something like that. Oh, you hit the jackpot; you got the demo prize. So it was fun and all, but it lacked one core piece. I can measure intent. Yes. But it didn’t quite hit the bull’s eye. And that bull’s eye was it didn’t measure success. And that’s the part that is like, okay, one part is the mindset. Like the big mindset shift everyone needs, in order to be successful as a part of a business, your users need to be successful first.
And that revolution there is a bit different because it’s like, oh, actually, instead of just someone coming to our website, we need to have to sell them. We need to serve them first. And then once we’ve done our job of helping them see some success solving those beginner problems, it’s like, okay, now it’s time to have that conversation if you want to keep using it. So we are in business after all. So there’s that part.
But what I found to create that mindset that’s helpful is to start measuring what that user’s success is and then tying it to every single department. So for your marketing team, what you can do is – if you as an organization get clear on this is what a user being successful looks like in our product from the very first, kind of like getting set up with their account. So when you have that free model, the marketing team can then be measured on signups. How many people signed up for this, and then also, how many of them got to value? That’s great. As a marketer, I think you’ll love it too.
And then, the sales team can start measuring out those who see success in the product; what’s our track record? What’s our hit rate as far as how many of these can we close into paid opportunities if you do have to have that conversation with sales? And so, and then even for a product, they can start looking at this user success metric and start saying, okay, it’s at 10% right now, what could we do? Where are people getting stuck in this journey to see the value so they can start unblocking people throughout the rest of the product?
So when you have that measurement, it creates the mindset that lasts much longer than everyone’s user success is important, but it’s like, no, actually, like we’re measuring this. This is part of our company scorecard. This is part of everyone’s KPIs. That’s really how you do not just spark the fire, but you keep it, and you build it.
Leadership Traits for PLG Initiative
First, you need the driver for your PLG Initiative. And this person should have these leadership traits:
Thrive in uncertainty: The leader should thrive in uncertainty. They’re like, oh, there’s no proven SOP for this. Hell yeah, I love this. If you have a person who’s like, I need a process, do that. No, do not do that. Please do not put them on this. There is no clear-cut process because it’s different for every business. Before I get into the rest of the team, I want to focus on leadership traits because you have to pick this person very strategically.
Growth Mindset: Most of you identify with a growth mindset. That’s great. But the other thing is they have to love getting better every single day. Just have this growth mindset. They’re willing to fail and be okay with that because they don’t take it as a problem with their ego, or anything like that. It’s like, now this, this, there is no failure. It’s just learning. We’re learning faster. And I think just being scrappy like this has to be some an entrepreneur, or they have to understand like, okay, what would be going through someone’s head when they’re signing up for a free model? What would motivate them to understand how to upgrade them? What are some decisions they have to make outside of our product?
Optimize for learning and not for perfection: So that’s the leader characteristic that could be anyone within the organization. I’ve seen so many different examples. It could be like your growth product manager, your product manager, or your head of product CPO. It doesn’t even need to be within the product team.
Have Clout: I‘ve seen it from the marketing team as well. But the thing is, this person needs to have clout, they need to have resources as well and be able to take some swings. And in larger companies, sometimes they’ll get their team in a different room or maybe even a different location to launch this new free product because it is different. So having a different mindset on this team.
So that’s for the leader’s side of things. You want to be conscious of who you pick because that’s the biggest predictor of success.
Include these Key Skills in Your PLG Team
But then, for everyone else, the leader is only as good as the team. So you need to make sure you have the skill set.
User Experience: So one is someone who really understands the user experience. This could be a product designer and this could be a user experience designer. You need to have someone who can go through this. Let’s design something really quick, really crafty, and see if it works.
User Research: And then the other one is someone who’s researching and understanding the user during the user task usability test. And it really is the voice of the customer. And this in the early stages for companies, this could even be your customer success or customer support person because they’re already every single day they’re talking to people, and they’re understanding. That could also be someone in sales too. That would add some weight to conversations. It’s not just I have an idea. It’s like, no, the customer told us this. Let’s listen.
Developer: The other skill that you need is someone on the development side who understands and contributes to why we made some of these decisions. Because when you’re going through your onboarding flow, and you’re like having a rip, those are supporting beams, just like in a house, you know, like, don’t touch it.
So it would be best if you had app developers on that side too.
Product Marketing: And then product marketer as well is very important. Or having someone with that copywriting experience because you’re going to be testing on new things, you’re going to be launching new things, and you want to understand again what is going to hit home for people and what are truly those jobs to be done that we are solving? And let’s make sure we’re communicating that because nothing will derail this more than if that first impression is off. And I’m like, what is this free product? And be like, Oh, they get into it like they almost destroyed it. Could have been amazing, but, like, I had no clue what I was signing up for. So we will never be successful.
Data Analyst: And the last thing is just having that data analyst or someone who is really just in charge of the data and can really prove out, okay, this is working. This is not working. This is like the gap in the funnel. So for a start-up, some people could wear multiple hats here. That’s completely fine. But in larger organizations, you want to have one person dedicated to this.
The Biggest Challenge Going into PLG – the Lack of a Clear Strategy
Companies fail because they don’t have a clear strategy. And like I used to find strategies like it is about making choices with limited data, limited resources, and limited time. And so it’s just like, what is our strategy? But where I feel like most strategies, in general, fall short is a lot of them start with the basis of what we want to do as a company. What should our focus be? And that’s useful. It would be best if you still did that, but when it comes to how you win as an organization, that’s really where I see it changing for companies who want to be more product-led because how you win is different.
In a marketing-led company. How you win is, for example, is to say we’re going to get the most leads or we’re going to be the biggest brand here. Or the aspiration of we’re going to be Google. Our name is going to be synonymous with that. That’s the idea of success there, and that still is very successful. You can do that even as a part of that company. But in sales-led, that company is like, okay, we’re going to get the best, like top 100 accounts. But in a product-led company, we’re going to create a product that helps the user become the most successful.
Get Clarity on These Five Questions Before you Move Forward with PLG
And so, there are five questions you have to get clear on if you’re going to successfully build a part of that strategy.
What game are you playing as a business?
There are three games:
Are we playing a game of attention? We’re trying to entertain people, keep them here, like news sites or Netflix or something like that.
And then there’s a transaction – something like Amazon or E-commerce Star, which is trying to get people to predict what they want to buy.
And then there’s proactivity, which is most of B2B. SAS is like, okay, we want to help you do something faster. You could probably do this on your own, but here’s why you should think it will take you forever.
So get clear on what game you’re going to play, and then what does it mean to win?
What does it mean to win for you?
That’s the second part. So if you’re clear on this as an organization, it’s like, what does this mean to win for you? That’s the trick. It’s for your user. What does it mean for them to win it? This game, if your game is your product adoption platform ends, you know, winning for that person is like, okay, you saved them a ton of time. Their users are able to onboard. And half the time, like that, those are meaningful wins for the user.
Who is your hero – the ideal user?
And then the third part of this question and getting clarity on it for your product strategy, just like who is your hero? So every company is going to attract different types of users, and especially when it’s free, some people are never going to convert, and you have to be okay with that. That’s always going to happen. You’re always going to attract a broad swath, but you need to be clear about who is that ideal user who can really win at the specific game that we have right now; they’re the best at winning this. We’re going to focus on those people because they are going to be the most successful, and most likely, they’re going to stay the longest as a customer. They’re willing to pay the most as well.
How do you help users win
And then the two other parts are all about enablement. The last is, how will you help your users win? So in a product-led company, a lot of this is about, okay, how can we make our products have a faster time to value? How could we help people, you know, make the pricing discussion so easy? Maybe it’s your initial plan, ten bucks a month or something. It’s like it’s a no-brainer. Like you don’t have to think about it. So what are some of those ways you can enable the user to win?
What capabilities do you need to build in your organization?
And then the last part is, what are some of those capabilities you need to build in your organization? And so for a lot of companies, especially ones making this transition from sales-led to product-led, this is where it’s kind of like where there are growth opportunities. It’s like, okay, yeah, if we’re truly going to make our users win by having a fast time to value, maybe one of our capabilities we need to build as an organization is we need a master onboarding. We need to understand how to help users get that meaningful win very quickly. And so that’s a capability where it’s like, okay, let’s pick two or three of these per year. And eventually, this is going to look like it’s an actual team. It’s a team that understands exactly how to onboard users, and they’re adept at this.
And we can see throughout our metrics that we’re helping more users become successful. And so, yeah, that’s the first five things you need to do to build that product, that strategy, and then carry it out into something where it’s like, okay, we’re working on these capabilities to empower the user.
Wes Bush Product-led Workshop is Rad
One resource is to get free training on Productled.com. You’ll get a two-hour workshop. There’s a workshop component where you can go through it individually. And that’s what we recommend is that everyone goes through it like some of the best individual contributors on a team. They have the best ideas. And then whenever you do like a team, brainstorm and start with that.
We always recommend starting off going to these five questions individually in the workshop format and then having the team lead or whoever is driving this initiative host another team workshop where you all have your ideas; let’s see where everyone aligns. Let’s put all these in one spot and then look through and see, okay, where’s their overlap? And that’s awesome. We’re, we’re in alignment. And then there’s going to be some other things where I was like, Whoa, there’s like, that was way off. But maybe there’s something to that that we should consider, how do we help users win? And then what are those capabilities that we should work on? So that’s the best way to get that buying around your product launch strategy because everyone that way can contribute and be a part of the whole process.
What are the unrealistic expectations regarding PLG?
So this is coming from my own experience launching my book on product growth for free. So if anyone wants to check it out, it’s https://productledbook.com
I was looking through the page views back in March 2022, and we were deciding if we should give this away for free. So it was like 2000 or 3000 page views per month. It was decent, but it wasn’t substantial as far as overall traffic. So we’re like, okay, that’s like, all right, let’s what would this look like if it was for free and we just had it all to get it on the site. And so then we gave it away.
In April, we announced it’s like on all our channels as far as product content stuff, and it was more like 4,000 or 5000 page views at the end of that month, and then like May comes around, it’s back to 3000, and then June comes around, and it was 4000. So it’s going up, but it’s painfully slow. Oh, my goodness. And then by the time it got to, like, August, it was like 25,000 page views. I was blown away. Like, I was asking that as I check Google Analytics every time to ensure it wasn’t spamming traffic. Wow, there are always at least ten people who are reading this book at all times. This is weird but good weird.
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