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Why Product-Led Growth is the future of SaaS Growth during and after COVID-19

Holly Chen
April 12, 2020

Product-led growth, consumerization of the enterprise, B2C2B, and the prosumer audience have been topics of interest of late with success stories like Slack, Zoom, Figma. In the time of the coronavirus crisis, PLG will become even more important for SaaS business growth.

But first, what is Product-led Growth? The term PLG is coined by OpenView Partners:

Product Led Growth (PLG) is an end user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion, and expansion.

How does it work?

PLG companies typically use a bottom-up approach to go after the end-user first and focus on delivering consumer-grade user experience so that users actually engage with and love the product to an extent to become product advocates. Existing users invite new users in a viral loop, reducing user acquisition costs. Users are more likely to upgrade and expand, increasing LTV and net-dollar-retention. When IT or Procurement departments get involved, the end-users already have been using the product actively, making the sale of enterprise plans a lot smoother and faster.

With COVID-19, many enterprise B2B companies that rely on the sales-driven motion are facing tough challenges.

In-person conferences are canceled, salespeople are grounded from visiting prospects, in-person demos are no longer possible. The age-old “Let’s meet in a conference room at your office and I’ll bring wine, cookies, and corporate swag to the meeting to build relationships” or “Let’s meet at our box at the Giants game and we’ll drink beer and be best buds” is no longer working. What now?

More business buyers will want to experience the product on their own before considering purchasing.

This is already happening — in fact, nearly 50% of B2B buyers already made up their minds before talking to sales reps (source). The social distancing during the coronavirus crisis accelerated and accentuated the need. When a user can sign up for the product for free, get to the AHA moment fast, really understand the value of the product on their own, and establish a habit of usage, they’re that much more likely to want to continue using the product and even advocate it to their IT department. When that user is a business buyer, you have struck gold.

As a growth team, more than ever, it’s important to deliver on the expectations of your prospects, and create an effective onboarding and activation experience to ensure the new users understand the product value right away. “Time to value” is key here.

Retention and monetization will become even more of a focus for SaaS product growth.

While some SaaS leaders have already been focusing on their retention and monetization curves, many companies still put the acquisition of new users as their sole focus in their growth strategy. Now with COVID-19, on the user side, companies will start tightening SaaS spending and cutting products that don’t have sufficient usage. On the seller side, the acquisition budget and volume will be lower, and cost and ROI will be put under the microscope during this time of contraction. Companies will realize more acutely the issue with a leaky bucket and start to focus on retaining existing users. In the same vein, monetization will also become more of a focus as investors and leadership pay more attention to overall company profitability and payback window.

As a growth team, it’s critical to have the right retention metrics, understand the engagement triggers, and really hone in on key moments of monetization.

Why would someone start paying for your product? If a user never pays for the product in your freemium model, do they still have value? Are they viral agents that invite other people to the product and the latter end up paying for the product? If so, how do you measure and attribute?

On the flip side, how much does each new free user add to your operating cost? Will at any point the cost of servicing and hosting the free users and teams overweight the value of referral to the paid users? These are all the questions to test and understand in your journey of establishing a B2C2B product-led growth model.

In summary, the coronavirus crisis will challenge the traditional sales-driven growth model now and will have a long-lasting impact.

It’s prime time to consider establishing a bottom-up self-serve growth model to empower your end-users to experience and understand your product’s value, in order to lower your acquisition cost and increase the probability of converting to active and paid customers. Onboarding, activation, retention, engagement, monetization, customer success, and lifecycle marketing are all key components that require persistent experimentation, careful orchestration, and innovative thinking to break out of the box.

We’ll likely see more SaaS businesses transition from a “Sign a multi-year contract and forget the customer until renewal time” model to a “Try the product for free and you’ll love it so much to continue the subscription forever” product-led growth model to keenly focus on the end-user experience and delivering consistent and ever-increasing value.

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