If you’ve heard a lot about ‘Product-Led Growth’ (PLG) but aren’t sure what it is exactly, this post is for you. In this post, I’ll summarize what PLG is, what it means on a practical level, when it makes sense to use it, and what pitfalls you should avoid.

Because this is just an introductory post, you’ll need to set your expectations straight. You’ll definitely understand what PLG is after reading this post, but you won’t be an expert on the topic. Becoming an expert on PLG will require more effort on your part – acquiring much more theoretical knowledge and then applying this knowledge in your day-to-day work and experimenting.

With this introduction in mind, let’s dive in.

What is PLG?

As always – ChatGPT summarizes it pretty well:

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Product-Led Growth (PLG) is a business methodology where the product itself is the primary driver of customer acquisition, expansion, and retention. In a PLG approach, the product is designed to sell itself by offering a superior user experience, which in turn drives organic growth and reduces reliance on traditional sales and marketing methods.

“

Let’s break it down to the core components. We’re talking about a methodology for product development in which:

• You don’t rely on a traditional sales team for driving acquisitions and activations for your product.
• Instead, you let the product sell itself by offering it for free, as part of a bigger freemium model (most of the time).
• You rely on built-in viral mechanics for its growth in terms of acquiring new users.
• You design your premium-tier features to offer attractive added value, so a meaningful portion of your free users will convert to premium ones, which is your main business model.

When you read this, you may ask yourself whether I’m just describing the old traditional ‘freemium’ model. If that question comes up, it’s totally understandable. However, they are not the same.

To begin with – ‘freemium’ is a business model and that’s it. It just means that your product is offered in paid tiers and one of the tiers is free. Simple as that.

PLG is a full product methodology, which leverages the freemium model, but with very clear characteristics, such as:

1. The conversion from the ‘free’ tier to the paid tier is done by the product itself, rather than other marketing techniques such as email campaigns, sales calls, etc.. Or, in other words – the product itself educates you on the next level, and it should become obvious to you, as a user, that you want that and are willing to pay for it.
2. There are other mechanics in PLG that are crucial for its success and are not part of the freemium model, such as built in virality (or network effects), true value for the free tier, self service onboarding and more. We’ll touch those soon.

Some well known examples of companies which have applied PLG successfully are Zoom, Canva, Slack and Dropbox. We’ll talk about some of these later.

The key characteristics of PLG

The product sells itself

The main characteristic of the PLG is the state of mind you need to be in. In this state of mind we’re talking about a product which sells itself.

Think about it for a second.

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You put a product out there and you expect people to just use it.

Potential users need to know it’s out there, so you will have to invest in marketing to spread the word. However, once people hear about it, they can immediately start using it without talking to any sales representative or scheduling a demo call. This means the value proposition your product offers is quite valuable and attractive, so there is no need for any further convincing.

I already mentioned some of the other characteristics of PLG. Let’s go over them:

The product is also the primary growth engine

That’s interesting. 

While we still pay for marketing, we don’t rely solely on our marketing budget for acquiring new users. The product is expected to do a great majority of it on its own. There are generally two ways that a product can achieve that:

1. Virality features
2. Network effects

Virality means that the users are so excited about the product that they feel the urge to share it with friends/colleagues, and the product provides very easy means/incentives to do so. For example, Dropbox used a famous referral program to increase its user base. More common means of virality are easy and inviting sharing options.

While virality is good to have, it’s generally much better to have network effects built in into your product. I covered network effects in length here and here. However, in short – network effects mean that as a user, you are incentivized to invite other users to try the product because you will get more value from it. 

For example – any communication software has network effects built into it. You can’t really extract any value from Whatsapp if your friends are not using it as well, right? Therefore, you have an incentive to make your friends and family install Whatsapp so you can communicate with them.

Whatsapp is not a PLG product, however, Slack is – and Slack enjoys a network effect as well, because it’s useless for you if your peers are not using it together with you.

We mentioned that Dropbox had strong virality via its referral program. However, Dropbox also has a built-in network effect. Although you could use Dropbox to share files across several devices of yours (and hence, you don’t need any ‘company’) – its true value shines when it’s used as a platform for sharing files with others. Hence, you have an incentive to bring your peers along.

Circling back to the original point – true PLG products need to have at least a strong virality element built-in, but ideally – network effects.

Self service installation and seamless onboarding

Since we want our product to sell itself it needs to the following requirements:

1. It can be installed by any individual without needing to contact a sales person or any person at all.
2. It needs to be truly self-explanatory. The onboarding should be seamless, and the path to value must be very clear.

This simplicity is not easy to achieve. Simple products are challenging to design – but hey – if you want your product to sell itself – this is quite mandatory.

The free tier must provide true value

Even your non-paying users need to receive a true value from your product. That’s one of the cornerstones of PLG.

The users want to get the hang of your product and understand its potential before they pay a dollar (try before you buy). And yes, some of them will never pay during their lifetime.

If properly designed, though, many will open their wallets eventually and upgrade, because they fully understand how their life will become better with the upgrade.

Let’s take some examples from the companies I mentioned before:

• Zoom – You can use the product for free and get tons of value from it. There is no trial period, and if you’re fine with a 40-minute meeting cap, then you’re good. Many users stay on the free tier forever. However, in a workplace, this cap can become a serious nuisance. Additionally, it’s not you who is paying, but your company. Hence, applying pressure on your company to upgrade starts to make sense.
• Spotify – like Zoom, you can use it for free as much as you want. However, you’re going to see ads from time to time and you can’t skip songs. To me that’s more annoying than Zoom’s free behavior, because it’s highly disruptive to the experience. Both Zoom and Spotify are applying an approach of ‘pay for convenience’ but with Zoom many people can stay on the free tier forever, while on Spotify it’d be much harder. In fact, I’m not familiar with any person who is actually using the free version of Spotify. Still – most of us didn’t test Spotify right with the premium version, right? We tried the free version for a period while trying to figure out how music streaming works. Once we were convinced that all the songs we know are there and the streaming works great, even if we’re not under Wifi coverage – then most of us switched to the premium version.
• Canva – I like Canva a lot. A true fan. Canva lets you experience plenty of features and templates for free, indefinitely. When do you need to pay? When you wish to use the more advanced templates, or when you wish to use their AI features, such as removing background from objects (that’s what brought me to pay). The free version delivers true value, to the point where you actually start believing that you have some future as a designer. You know exactly how your future is going to be upgraded when you’ll be paying, and I gladly paid (‘take my money!!’).

There are plenty of other examples I can provide, but I think you got the hang of it. Your product must deliver a true value on its free tier if you wish to apply PLG properly.

One pitfall to avoid here – you need to be careful not to give too much on your free tier, or your users will have no reason to convert to paying users.

Bottom up approach

For B2B products, PLG often means relying on end users to pressure the decision-makers to pay for the product. For example, Slack offers most functionality for free but restricts access to archived conversations. As Slack takes over an organization, users find it hard to manage communication without premium features, pushing the organization to upgrade.

Data driven product iteration

This is hardly a new concept, but it’s crucial for PLG based products.

The chances of you nailing it down on your first release to the public is very slim. Therefore, and since you want your product to sell itself and have a great smooth onboarding – you need to plan for:

1. Proper data collection. Your product needs to log everything that is happening in terms of its usage so it can be used for future analysis.
2. Easy data analysis. Have a proper data strategy in place and make sure the data is logged in a way that makes sense and it’s easy to analyze. Also – plan for dashboards and proper visualizations for the main KPIs you track.
3. Agreed upon measurements of success. Agree on what ‘success’ means (your north star) and what KPIs you’ll be optimizing for. 
4. Experimentation infrastructure. This is very important since your ongoing reality is going to involve a lot of optimizations. You should therefore make sure your infrastructure is built in a way which is easy to conduct A/B tests and analyze their results. Running experiments should be straightforward, not a ‘project’.

If you planned for the above then optimizing funnels, reducing friction and shortening the way of your users to the value is going to be a much smoother process and with higher chances of success.

As I see it – the characteristics above are the main ones when it comes to PLG. However, there are things you should consider if you are leaning towards adopting this methodology.

Other considerations

If you are getting serious about applying PLG with your product here are some additional considerations:

Product market fit with your free tier

My observations show that PLG is not different when it comes to product market fit (PMF). Your way to growth must go through PMF or you’ll be wasting your money and time in vain.

With PLG this is becoming extra challenging – because it means you need to get to PMF on your free tier. The users must ‘get’ your product and they must understand how their life is going to be better by using it.

You can’t treat the ‘free’ users as negligible and plan to get PMF only on your paid tier. As we observed before – many of your free users would be willing to convert to the paid tier, but only after they fully grasp what your product does and why it’s helpful.

It means that you are probably not going to see a lot of revenue on the first phase of your product – and you need to be ok with that. But it’s not only you. If you are an entrepreneur then you’ll need to set proper expectations with your investors. If you are a product manager and you want to apply PLG on your product – then you need to set your expectations with your manager, and sometimes even with the executives.

They will need to understand that an investment is required for you to reach PMF with your free tier, before you can focus on growing your audience and start focusing on the premium users.

Enterprises and tier 1 customers might still need a sales team

The vision of PLG is great, and I truly like this approach. However, like any other methodology – it’s not a silver bullet that will replace every approach that came before.

There is a good chance that if you applied PLG properly then your product will never need a traditional sales team. Needless to say that this is very true for B2C products (since most B2C products don’t need a sales team).

However, if your product is B2B, or B2B2C and you’re selling to all types of organizations – tiny, SMB and enterprises – then there is a good chance that your enterprise tier will require a sales team after all.

You see – enterprise customers are used to being treated differently. They expect someone to hold their hand during the sales process (and after) and the sales cycle can be quite lengthy. Additionally, because of the high amount of licenses you can potentially sell to them – they expect some sort of discount. Usually a major one.

This is why you can often see on all these self service products pricing web pages a special tier for enterprises with a ‘contact us’ button.

Mckinsey has released research on PLG companies and  their performance. I strongly recommend that you read it here.

There are several conclusions there, but for me the following two were the main ones:

1. PLG companies are not necessarily outperforming traditional SLG (sales-led growth) companies.
2. They strongly recommend an approach they call PLS (product-led sales) which combines PLG with SLG. Where PLG is taking the bottom-up approach and SLG takes top-down with focus on enterprises.

A very interesting read, and something you need to definitely consider if you are serious about PLG.

PLG state of mind must go beyond your product team

If you wish to be successful with PLG you need to understand that it won’t work if the other internal stakeholders in your organization or business unit are not aligned on your vision.

In fact – the whole team in your business unit or organization will need to be structured in a way which supports PLG.

With the engineering and QA team it’s relatively easy – because it’s you who instructs them what to work on.

However, alignment is required with the data science, UX, data analysts and the marketing teams. They all need to understand that you are all part of a big optimization game and they all must be aligned on what you’re optimizing for.

Insights and observations that you made based on observing the current behavior of your users and changes that you’ll need to make to the story, funnels, flows and KPIs need to propagate the whole chain.

If someone complains that things are changing very fast on the product, then either you didn’t explain to them what’s happening and what to expect or they don’t belong in your group.

Additionally, it will make total sense to hire a ‘growth’ team focused purely on running experimentations and applying the conclusions in short loops. 

Summary

PLG is an interesting product methodology that you should definitely look into if your product fits the criteria. The minimal requirements are that it needs to be a Saas product and you can divide its features set to tiers. It should be also possible to design a self service with full onboarding flow that is easy to grasp.

If your product fulfills these requirements and you believe you can design a free tier which is meaningful enough and yet doesn’t give away too much – then you might have something here.

That being said – PLG is not a silver bullet, and it’s very easy to get wrong. You and your team need to fully understand the state of mind you need to be in, before you explore this venue.

Good luck!

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