What is a Product Led Growth Strategy, and how can it help Your Business Succeed?
For example, let's say you have an idea for software. You build and market this software, and sales are great in the first few months.
Businesses today face more challenges than ever before, with the biggest being how to get customers to notice them and want to buy their products or services. While marketing your business can effectively reach these new customers, product-led growth strategy can be an even better solution.
This strategy focuses on improving your product so that it stands out from competitors, which attracts more attention and generates more sales from existing customers, and brings in new ones.
Understanding the benefits of this strategy will help you decide if it's right for your business.
Introduction
Here's why you should use a product led growth strategy to grow your company.
The advantages of a product led growth strategy
This has several advantages: In general, products are easier to sell than services because there's an actual product customers can touch and experience firsthand.
Products also tend to result in long-term profits for companies because once you create something great that customers love, those people will probably come back for more. So you have a potentially lifelong customer relationship from one sale. Product innovation often results in higher profit margins than services do, which means more money for your company.
Products are easier to scale than services are because they don't require as much time or training on behalf of an employee. This means that when you sell a product, it's easier to grow rapidly without hiring new employees or expanding into new markets.
Product innovation can be used across many different verticals within an industry, and product innovation strategies often work well with other strategies like marketing automation and CRM.
What makes product-led growth unique?
Why does every growing company have to focus on product-led growth? Shouldn't every organization focus on customer acquisition and retention, not just new products?
The reality is that many companies are doing great with customer acquisition and retention. But still aren't seeing explosive growth because they haven't focused on building products customers actually want—and finding ways to get them in front of new customers.
Product-led strategies need to work in tandem with advertising campaigns or other means for customer acquisition. Otherwise, there won't be anyone for your product to engage with over time (much less convert). In today's marketplace, it's really tough to differentiate yourself using traditional channels alone.
How do you determine what products will bring you success?
Start by building an inventory of all the products you currently sell, including any you plan to create in the future. Then, categorize each product into one of four categories: core product, support product, enhancement product, or sunset product (i.e., one that should be phased out).
A core product helps define your company's value proposition; if it were to disappear from existence today, your company would no longer be viable.
A support product helps extend and enhance a core-product offering. However, its success often depends on its relationship with other products that complement it or require it for maximum effectiveness.
An enhancement product adds value to an existing product by increasing customer satisfaction. Still, it doesn't necessarily affect your company's viability if removed from existence.
A sunset product no longer adds value to your company. Therefore, it should be phased out if possible (or at least not actively marketed).
The goal is to identify which products fall into each category. So you can focus more time, energy, and resources on products that will bring you more revenue and profit. And let go of products that are detracting from your bottom line.
For example, let's say you sell sporting goods equipment online. Your core product might be your website, which sells all of your products. Support products could include free shipping or free returns; these services are crucial to helping customers complete their purchases because they increase customer satisfaction.
Enhancement products might include things like clothing or accessories that complement an existing product line; for example, if you sell baseball bats, you might want to offer protective gear for players who use them.
Sunset products could include things like clearance items that have been discontinued; customers may still be interested in buying them at a discount, but they don't add value to your company in any way.
How does marketing fit into this approach? Product led growth marketing
Product led growth focuses on creating new products instead of bolstering your existing ones. Instead of marketing to customers, product-led marketers market to prospects by listening to their needs and wants in order to identify opportunities where they could solve problems or make people's lives easier with new products, ideas, or services.
When you use product led growth marketing tactics, you're looking at what value you could provide to customers rather than focusing on who they are.
This way of thinking encourages us to think big picture: What do we really want our organization's place in society to be? Once you figure that out, product-led growth marketing will let you know what steps need to be taken next once you figure that out.
Product Led Growth vs Sales Led Growth
Sales-led growth is often seen as a safer bet for early stage startups because it doesn't require them to invest in developing products, but product-led growth has several advantages: it helps founders build their brand; it allows them to set prices according to market demand. And it makes customers happier because they feel like they have more input into product development.
How does product-led growth reduce customer acquisition costs?
A good user experience also keeps customers from churning out of your product, keeping CAC down in that regard as well.
As customers use your product, their frequency and spending go up. So, you're getting revenue from existing users instead of needing to continue spending on new users. This will keep your CAC even lower over time!
Examples of Product–Led Growth
1: OpenView, an enterprise software company based in Massachusetts, offers its products as software-as-service (SaaS) and sells primarily to large corporations. In 2009, however, CEO David Krakauer decided he wanted his company to double in size within five years—but he didn't want to do it by focusing solely on existing customers; rather he wanted a product led approach that would allow him to acquire new customers without alienating his existing ones.
In other words, he needed something that could accelerate his company's growth without jeopardizing its ability to retain existing customers over time.
The company's product-led growth flywheel ultimately consisted of the following parts:
Products: The first step was developing products that solved big problems for large organizations. The idea was to create products that were designed for corporate executives who were looking for ways to solve big problems but didn't have time or expertise to solve them themselves. Because these products solved real needs for organizations, they helped open doors with CIOs across North America—allowing OpenView to go from having no presence in many companies in 2010 to being present at 90% of Fortune 500 companies today.
Partnerships: Once they had created a product people loved, they focused on building relationships with partners who already had access to these companies and knew how best to sell their products there.
For example, when Wal-Mart approached OpenView about selling its products through its retail stores, rather than trying to set up a new sales force to handle direct sales (which would have been very expensive), OpenView partnered with existing VARs (value-added resellers) who already sold technology products through Wal-Mart.
This not only saved money but also enabled customers like Best Buy and Costco to offer an expanded selection of products without increasing overhead costs.
2. Salesforce has achieved product led growth by expanding beyond its core CRM products and developing other products that complement them well—and by partnering with other companies in ways that make sense for both parties.
In 2011, for example, Salesforce purchased Heroku, a cloud platform as a service company that allows developers to build applications quickly using open source languages like Ruby and Java. The acquisition made sense because Salesforce was already seeing an increase in interest from software developers looking for ways to easily connect their apps to CRM data; meanwhile Heroku's platform allowed Salesforce's internal developers to focus on other projects while third-party developers could now more easily integrate Salesforce data into their own apps.
The product led flywheel at Boxed Wholesale works similarly: when customers first visit Boxed, they are able to order only groceries online—but by offering products like household goods and pet food (which are high margin products), Boxed has been able to grow faster than Amazon Prime Pantry without cannibalizing its grocery sales.
Conclusion
Product-led growth isn't always easy to achieve, but when done right, it has a huge impact on companies that want to grow without sacrificing their relationships with existing customers or putting pressure on margins.
By understanding what product-led growth looks like in practice, you'll be able to make smart decisions for your own company that will have long-term positive effects on its ability to expand—without sacrificing customer retention.
In other words, product led growth is an effective way for startups and small businesses to enter new markets while minimizing risk and avoiding costly mistakes made by others in their space—all while staying true to their core values.
Bonus tip!!!
