To PLG or not PLG?

That is NOT the question.

I’ve created a new B2B Product-Led Growth & Product-Led Sales Course with Reforge. Check it out:

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Slack's $27.7B acquisition by Salesforce, Miro's last valuation at $17.5B, Figma's pending $20B acquisition by Adobe, and Atlassian's $50B market cap have highlighted the potential of the Product-Led Growth (PLG) model in the B2B sector. The glitz and glamour of these figures have sent B2B boardrooms into a frenzy, all clamoring about this 'Product-Led Growth' (or was it 'Peculiarly Lucrative Goldmine'?). Everyone wants a piece of this ‘PLG’, but most teams are thinking about it in the wrong way. 

Let’s fix that. But first…

WTF is “Growth”?

Casey Winters describes it best: 

“Most product and marketing teams are built to create or expand the core value provided to customers. Growth is connecting more people to the existing value.”

To drill in, growth is about answering the following questions in the most predictable, sustainable, and competitively defensible way: 

• How do we acquire customers?

• How do we monetize customers?

• How do we retain customers?

Just as important as the questions themselves is a related challenge: Who in the organization should be answering or addressing these topics? Some companies sabotage their own success by relying on an outdated pirate framework where growth is divided into silos: Marketing handles acquisition, Product takes care of retention, and Sales is responsible for monetization.

However, in today's environment, this framework doesn’t work:

1. Not defensible: Competition in marketing acquisition channels has become so intense that access to these channels has been commoditized, leading to a barrage of similar messages and short-lived campaigns. Traditional marketing channels are no longer effective, turning most marketing strategies into a battle of budgets.

2. Not predictable: Success in marketing acquisition does not necessarily translate to activation and engagement of the product. Furthermore, activating a customer doesn't guarantee monetization. By allowing departments to remain accountable for only a single stage, leaks across the entire funnel (especially in transitions between the stages) get worse and go unnoticed. This makes building consistent, forecastable revenue almost impossible. 

3. Not sustainable: Resources tend to be poured in at the top, with little understanding of how this actually translates to revenue at the bottom. Instead of an engine that can largely run itself, the organization must continually ‘feed the beast.’

What if we abandon this traditional mindset and explore a more open question:

What is the best way for us to acquire, retain, and monetize a customer, given our product's unique functionality and market conditions?

This broader approach, without the limitations of traditional departmental alignment, is at the heart of the modern “Growth” function. And with this open-ended perspective, we can see the value of a growth model menu, where Product, Marketing, or Sales can each answer our distribution questions in different ways:

The truth is that these options are not either-or: they create a variety of self-reinforcing systems that allow companies to create increasingly  defensible positions. While earlier-stage companies may focus on a single motion for each growth lever, later-stage companies almost always incorporate elements from each section of this grid. The key is to not try to do it all at once. These elements should be methodically layered until the company operates effectively across all areas.

So, should you invest in Product-Led Growth?

This is not the right question. Instead, you should be asking when and how to invest. If you don't, you leave an opening for competitors to step in.

Getting started with PLG

Product-Led Growth means that your product has the ability to acquire, activate, engage, or monetize without human intervention. Your product doesn’t have to work independently across each of these growth areas, instead, you might have product-led acquisition, and sales-led monetization for some or all customers. 

Now that you’re convinced that you need it (right?), here are some practical steps to get going with Product-Led Growth:

Step 1: Decide if you’re playing Offense or Defense

First, determine whether PLG is an offensive or defensive strategy for your company. If it's an offensive strategy, the product is uniquely designed and positioned in the market to inherently drive growth and essentially sell itself. In contrast, a defensive approach to PLG means that while the product can be adapted to drive some growth, most of the growth will primarily stem from other strategies.

For instance, companies like Figma and Slack inherently won because they deployed PLG. They rely heavily on their products to acquire, retain, and essentially sell themselves. Their acquisition success can be attributed to strong virality, referral programs, and user-generated content strategies. They also offer straightforward self-service activation processes, habitual engagement experiences, and robust self-service monetization mechanisms. In essence, PLG is integral to their unique market proposition and significantly influences their overall business performance.

On the other hand, while Salesforce does deploy PLG strategies, it's more of a defensive tactic to counteract competitors. They offer free trials and self-service pricing options, which allow users to activate and monetize without needing sales. However, their primary growth driver is a sales/partner-led model, which has proven quite effective for them. Salesforce utilizes PLG mainly to cater to the lower-tier market segments and to deter competitors from making inroads.

A defensive play is when you focus on an area where your product can replace or expand your target audience. An offensive play is when you have to be more strategic about where and how you start.

Step 2: Build your escalator

The B2B PLG concept seems simple at first: acquire individual users, activate and engage them through intuitive self-serve product experiences, and then use their activity to monetize the companies they work for. However, there's a challenge: how do you convert individual user activity into an enterprise-level contract?

Back in my SurveyMonkey days, we had instances where companies had over 800 individual paying customers, but our sales team struggled to upsell these organizations to enterprise contracts. The reason? The individual end-users were content with their current plans. The prospect of transitioning to an enterprise plan—with its additional security, permissions, and data retention features—was not enticing. In fact, they often resisted our efforts to promote the enterprise plan because there wasn’t enough end user added value in doing so.

What I gleaned from those experiences at SurveyMonkey is crucial: to truly prosper with B2B PLG, you must not only acquire individual users but also activate and engage a *team* before selling to a *business*. Essentially, you need to construct an escalator:

For B2B businesses, the benchmark for success is often their ability to land those substantial contracts in the ballpark of hundreds of thousands of dollars. And it's a pitfall for B2B companies to focus solely on individual usage because a multitude of satisfied end-users doesn't necessarily equate to the ability to secure enterprise deals. Essentially, users get stuck on the first stair, and the escalator is not going up.

Here are a few practical ways to avoid this trap:

1. Define metrics for acquisition, activation, engagement, and monetization at the team level rather than at the individual level.

2. Embed company-wide distribution into the activation metric. Take Miro as an example: 'activation' implies collaboration on the whiteboard with at least one other participant. Frequent individual use doesn’t equate to activation in this context.

3. Monitor user growth at the team level, as this is a significant indicator of potential monetization.

4. Create network effects within teams so that every additional user in the product amplifies benefits for everyone.

5. Structure the product to give users multiple roles, within their team or across the org.  For instance, many platforms focus on content creation, but providing org-wide ability to edit, approve, or even view the content can be a crucial value for a potential account.

To put it in simpler terms, a company won't shell out $50K for value perceived by just one employee. However, they would be more inclined to invest that amount if a significant portion of their workforce derives value from the product. This not only indicates that your product addresses a more widespread issue but also heightens the perceived value of your solution.

Step 3: Map it out

The quickest way to fail with a Product-Led Growth strategy is to slap a freemium or trial version on a product and hope users will flock to it. In PLG, it's crucial to assess every phase of the escalator, considering the users’ motivation, ability, and permission.

Let's begin with acquiring the first user: 

• Motivation: What issue is the user eager to address?

• Ability: Can the user seamlessly activate or use the product?

• Permission: Does the user have the necessary approvals or permissions within their organization to use the product?

  

Failing to meet even one of these criteria can halt a PLG initiative before it gains any momentum.

What many successful companies tend to do is dissect the main problem into specific tasks or "jobs to be done" for every step of the escalator. This approach can be visualized as "hooks" that initially engage individual users. Once the individual user is acquired, the value proposition is then elevated to showcase the benefits for an entire team. Finally, the emphasis shifts to demonstrate the overarching advantages at the enterprise level. 

Here is Miro’s example of use case escalator:

• Individual use case: I need an open format space to brain-write and organize my thoughts.

• Team use case: I need an easy, engaging, and effective way to brainstorm and ideate with my remote team. 

• Company use case: I need to improve productivity and accelerate innovation.

That’s just the beginning… 

If you’re feeling like this is a lot… you’re right! PLG is an incredible (and necessary) component for sustained B2B growth, but it’s complicated. There are a lot of moving parts and approaching it the right way can make all the difference.

Want to solve the PLG puzzle for your company? 

I’ve partnered with one of the other top PLG experts in the world—Kelly Watkins (Slack, Github)—to build an amazing B2B PLG Program for Reforge. In this series, we’ll cover everything you need to know, structured around the following chapters:

If you’re a B2B product or marketing leader looking to get PLG right for your company, this course for you. ​​In 4 weeks, you’ll get actionable, real life tested frameworks to frame PLG and PLS strategies to either get started or scale your growth efforts.

Let’s grow 🌱 together! 

📣 Edited with the help of Jonathan Yagel, a storytelling magician.