Currently, every company wants to be the next Slack or Netflix, looking for a silver bullet that will increase sales and attract loyal customers and brand ambassadors. It doesnt happen overnight, but there is a proven path to ensure long-term, sustainable business growth: product-led growth.
Product-led growth, similar to growth hacking a decade ago, is a popular but often misunderstood term. Not only within your product or sales organization, but across the whole organization. It is a business transformation that follows the traditional growth model.
Product-led growth means letting the product stand for itself.
Product-driven growth veers away from our previous reliance on marketing and sales teams to drive growth. Instead, the internet has altered this, allowing people to look at their options, read customer reviews, and do a free trial, and determine for themselves if the product is worth the spend. More recently, weve entered the phase of freemium subscriptions, where customers can use the product at no cost but with limited usage.
The first step in achieving a product-led growth strategy is having a good product that people want to use, or better yet, find essential. The product must be straightforward to navigate and use immediately, because customers will not stick it out if its not working.
What do you know if your product is adequate?
Most businesses fail to focus on metrics that provide insight into customer behavior, including what they love, what they need work, and where they are becoming stuck. Despite the fact that marketing and sales are still essential for growth, many companies fail to focus on something that is inadequate or unpromising. Heres what you should look for:
- User activation. A good product should be easily accessible by non-technical customers. There shouldnt be any hand-holding from a support team or complicated account set-up requirements. The people using your product should see its impact almost immediately.
- Product stickiness and user retention. Your product should be an essential part of your customers work or daily habits. Whether a new customer downloads your product to buy stock or to order their Friday night dinner, you want the product to solve their initial need so well that they keep coming back. For example, someone may first download a food delivery app when theyre in a pinch for quick takeout. But if they have a good first experience and you solved their problem, theyll come back to you the next time they want to order dinner, until eventually you are their default food delivery app. Product-led organizations constantly ask how their product can produce more value and become something people cant live without.
- Monetization. While activation, stickiness, and retention are all imperative, a good product also needs to be monetized easily. This could be through upgrading to a paid or higher-tier subscription, making initial or repeat purchases, or in-product advertising.
Team alignment is vital to success, and it starts at the top.
Your organization must adopt a comprehensive culture shift to assist product-driven growth. It starts with the C-suite.
Product success must no longer be measured by outputs, rather by outcomes, a concept that may require some adjustment for C-level executives. Being output-oriented typically involves constructing new product features without understanding the impact or value of those features for the employees who use them. Ideally, focus on outcomes, such as on-time deliveries for a grocery delivery company.
Leaders must create a top-down organization that is focused on outcomes, meaning everyone, not just the product team, would adopt a product-led approach. For example, a senior product officer I know was brought in to move a business from being marketing-led to being product-led. It wouldn''t have worked. You need to have both top-down and cross-functional buy-ins to improve product development.
To become product-led means by investing more money in research and development (R&D), which allows more frequent releases and product expansion. Atlassian, for example, was investing more than 40% of its revenue in R&D for a period of time, which contributed to year-over-year growth for its suite of products.
Convert freemium users to paid subscribers
It''s important to keep the transition from free to paid, but it''s important for growth. Instead, companies should focus on increasing the number of users using your product to understand and gain insight into new features, ultimately transitioning from the freemium program to paying customers. This is the first step in ensuring that customers are aware of what other options may be offered to them, and how to improve their experience.
Several companies increase their engagement curve by providing additional features and improving the product experience for paying customers. For example, some digital media companies offer exclusive content for paid subscribers that isn''t available to freemium users, while delivery businesses may offer shorter delivery times or reduced service charges for paying customers.
While increasing value is a common strategy to climb this ladder, a different, often overlooked monetization and growth strategy is to remove pain points. Often, removing tension points that exist in the freemium model may be an even more powerful way to convince your customers to begin paying for the product.
Maintaining accountability for product-led growth is key to putting your organization in charge.
Continual product improvement is critical for a sustainable product-led growth strategy, but vanity metrics will not shield organizations failures. Product-led growth is rooted in product science, but is aiming at hypotheses to identify the best solutions for a company''s target market.
Understanding your products strengths and weaknesses and, most importantly, how your customers can benefit from your product is essential to the future of business. Unlike the digital revolution, organizations must adopt and hold themselves accountable to a product-driven approach.
At Amplitude, Justin Bauer is the vice president of manufacturing.