Product-Led Growth: Is that what your company needs?
In 2008, Sean Ellis got a call from Drew Houston, the founder of Dropbox. Dropbox was just one year old then, but the fan base the small startup had built that early was impeccable. Houston had built a product people truly loved. Interestingly, when Sean joined as an interim Head of Marketing to tap into the growth opportunities for Dropbox, he discovered that a full third of Dropbox users came from the strong word of mouth of current users of the product. So they built a referral program on top of that, where the user gets an extra 250 megabytes of space in exchange for a referral. The program worked like magic, and by early 2010, Dropbox users were sending more than 2.8 million invites per month, and the user base had grown from 100,000 users to more than 4,00,000 users.
Dropbox leveraged its product to the extreme and hit $10B in 10 years, which explains its superstar title, “the poster child of Product-Led growth.”
While Dropbox started setting its foot in the new growth game, the software industry’s landscape around the same time was at odds. We’ll talk in detail about that.
In conversation with Rishen Kapoor, the Co-founder, and CEO of Toplyne.io, we dived deep into some interesting stories on Product-Led growth. Toplyne helps sales teams at Product-Led companies convert their freemium users.
We gave Rishen a hard time with a bunch of questions, and here are his answers.
What is Product-Led Growth?
If you go ten years back in time, the purchase decision of any software was in the hands of the executives, say VPs or CXOs. Just imagine the distance between the buyer and the end-user in such cases. It was literally beyond the horizon. However, the distance has been shrinking like a balloon in cold weather in the last decade. And interestingly, in the past couple of years, several categories have emerged, leading to products where the buyer and the user are the same.
Today, it’s the product manager who decides to use Notion, it’s the designer who chooses to use Canva, and it’s the marketer who decides to use HubSpot. Sounds like so much progress now, TBH it’s a fleeting emotion to get to decide what you actually want rather than what you are just given.
When you get to decide what tool or product you want to use, you are more likely to weigh down all the pros and cons, consider all the available options, and most importantly, try before you buy. The whole trying before buying seems to work well for both parties because, as a seller, it is the easiest way to convince the user. And as a user, trying out the product allows you to figure out what the product offers and whether it satisfies all your needs. This is the reason why we are seeing the emergence of the freemium model lately. And this is what is called Product-Led growth.
Product-Led growth is a business notion where your product becomes the protagonist in helping customers discover you, see value from you, and pay.
Why is Product-Led Growth taking off recently?
There lie many reasons behind any shift in trend. However, I think there are three important reasons why Product-Led growth has taken off recently, and here are they.
1. Eight years ago is when I started working in SaaS. I was working in the space of Product analytics and marketing automation. Only two out of ten companies already had a marketing automation solution then, whereas now, there is hardly any company without a marketing automation tool.
Saying that, you can notice that software categories have become mature now. As the category becomes mature, people within the category become familiar with the software, and when that happens, they like trying out something themselves instead of being sold to.
2. Over the last couple of years, the cost of building software products has decreased exponentially. And when it becomes cheaper, easier, and faster to build a product, the odds that you’ll be willing to give for free are higher.
3. The rise of the knowledge worker is also another important reason. When the impact of each employee in an organization grows, the organization becomes more conducive to them, with software to amplify their efforts.
Who needs to be Product-Led?
You don’t want to compare your behind-the-scenes to someone else’s. So, before you get into how part of it, ask yourself, Should I be product-led in the first place?
Here are a few questions to think of before you decide to board the product-led train.
- Can the end-user be the buyer of your product? Say your product helps with revenue forecasting. The person who benefits from revenue forecasting is typically the VP of revenue operations. Now, there aren’t enough VP of revenue operations in the world for you to take a product-led approach because a regular revenue operations person will not benefit from the software. So it’s likely that your buyer is different from your user.
- Can you give people gratification early enough in their journey?
For instance, you have an ERP system, and you can provide value only in month six, it’s doubtful that you can be product-led because no one’s going to try your product out for six months without realizing its value.
- Can the person see gratification by themselves? Or do they need extra hands from other stakeholders to see gratification?
- Is your UX/UI serious enough for people to onboard themselves, discover, and see the value by themselves?
If your answer to more than one of the above questions is yes, then you are all set to go with your product-led journey.
Favorite Product-Led Company
Slack is bringing into play a robust product-led growth strategy. As Kelly Watkins, the Head of Product Marketing at Slack mentions
“It starts with the product first and the product experience first and by the nature of that product experience itself having substance and providing value to people, that is where the benefit comes in of it selling itself, or of it being the mechanism that propels the success forward with other aspects of the company assisting in that. “
The future of business is product-led. So to play your game to your best, check out how the top companies are molding their Product-led growth strategy, read about them, pick what you think is best for you and keep experimenting with that.
Originally published at https://zeda.io on January 21, 2022.