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Product-Led Growth in SaaS: What You Need to Know

Product-led-Growth-in-SaaS

The key to a successful SaaS business is a great product. But what’s the secret the drives some SaaS products into overnight successes? The answer is product-led growth.

Companies that utilize a product-driven growth strategy tend to scale faster and have higher market values than companies that utilize traditional marketing and selling techniques.

In this guide, we’ll answer the most frequently asked questions about product-led growth, including:

Product-Led Growth: What Is It?

Product-led growth is a go-to-market strategy for SaaS products where product usage drives user acquisition, retention, and expansion.

What Makes Product-Led Growth Different?

Traditional go-to-market growth strategies are based on an outdated software sales model. Initially, four main components drove the process of building and selling software.

First of all, the infrastructure was important: where did the software live? Second, the cost affected a company’s willingness to purchase: how much does it cost to build and buy?

The next two components of that sales software process are all about the people. Third, the buyer is the critical piece of the puzzle: who evaluates (the CEO? the CIO?) and selects the software programs?

Lastly, distribution was a crucial part of the original software selling process: how do software products get in front of the buyer?

What-Makes-Product-Led-Growth-Different

So, how do these four components work together to sell software? By following a series of steps. Typically, the first step would be a long sales process involving many meetings at different levels. Then, once the company chose to purchase the software, the second step was a complex implementation process that took time.

The software would be rolled out to employees and successfully installed and calibrated with the company’s needs. The third and final step would end when the employees finished training, or certification, on how to use the new software most effectively.

Completing each of these steps adds up to a lot of time: months, quarters, and sometimes even years would pass by before the new software was fully utilized by the company.

These sales processes are still in use, but they’re losing ground to an important alternative: product-led strategies. Product-focused go-to-market strategies exhibit fantastic returns because they cut down on the length of your sales cycle.

How Is Software Sold in a Product-Led Company?

People want to educate themselves on a product. They don’t want to sit and listen to a salesperson explain the product features. They don’t want to watch a slideshow or a video explaining all the product details while a salesperson drones on forever. And they certainly don’t want to have a long phone call with a salesperson who’s saying the same old spiel.

How-Is-Software-sold-in-a-ProductLed-Company

In a product-led environment, most people who want to educate themselves on a product will try a free trial or freemium version before choosing to purchase it. Product-driven growth companies still need sales reps, but the product is the key to influencing users to decide to buy it.

So, how is software sold? The product sells itself on a free trial or freemium proposition, and then customers choose to purchase the paid version.

What are the Benefits of Product-Led Growth?

Switching to product-driven growth can lead to many benefits for your company. The two most evident benefits are that product-focused approaches create dominant growth engines and significantly lower customer acquisition costs.

What-are-the-benefits-of-Product-Led-Growth

So, how does a product-led model create a dominant growth engine? The answer: by hooking in many more customers. Since you start with a free trial or freemium model, more people will use your product (it’s free, after all).

When the product delivers on its promise, you have a wider pool of potential paying customers who might be willing to pay for the premium services. An additional benefit of this is that you can more quickly scale your customer support team to help paying customers if you’ve always had a product-led approach.

The second benefit is that a product-led approach involves lower customer acquisition costs, as the product itself (more than the marketing) is hooking the customers. That means that instead of investing in a large team of sales reps to convince your customers why they should buy the product, you can depend on your product to sell itself.

When you don’t have to hire as many sales reps, you can save that money for product development and customer support. The product should be so good that your customers need the features behind the premium paywall.

Ultimately, you should always lead with (and prioritize) your product, not your sales or marketing efforts – and they all should work together. The product is the top priority of the sales, marketing, success, and engineering teams, from its inception to its final production.

When your strategy is product-led, it allows customers to self-educate, protecting you from rising acquisition costs, and improves the product experience.

Schedule a demo today to see how Apty improves adoption for SaaS products.

Why are More Companies Taking this Approach?

The exponential growth of SaaS products is driving the growth of product-led marketing. While it isn’t overly expensive to start a SaaS company, the marketing costs skyrocket as more solutions compete for the same pool of buyers.

Why-are-more-companies-taking-this-approach

As more companies compete, they spend more on marketing while not necessarily receiving an ROI. Costs rise, and profit goes down. The competition is fierce.

Shifts in buyer trends are also driving the growth of product-led marketing. Consumers want to try products out before purchasing. It’s as simple as that. Do people want to go through the long sales process to determine whether or not the product works for them? Or do they just want to try the product out and see for themselves? Most people opt for a trial.

Product-Led Growth: Best Practices

Trying out a product with a free-trial is inexpensive and a more effective way of marketing your product, but only if you have the right onboarding and in-app marketing tools to drive product adoption.

best-practices2

When adopting a product-driven go-to-market strategy consider these best practices:

  • Solve Your End-user Pain points:- To attract end-users, you need to have a product that solves a common problem for your users. Your product could solve users’ pain points by saving them time or making a process easier. Whatever you do, make sure it’s obvious to the user. We call the moment your users recognize the value your product ads as the ‘aha’ moment. Revealing your ‘aha’ moment is a vital part of product-led marketing and why you need to solution to deliver product tours and walkthroughs. For more insights, review our blog post on Tips for Using Product Tours to Reveal Your Aha Moment.
  • Create a frictionless user experience:- A positive initial experience is critical in order to convert new customers and build a relationship where customers will start to recommend your product. Keep your product simple. You don’t want unnecessary complexity getting in the way of the users experiencing all the product has to offer. You don’t want them to get distracted by a steep learning curve and get discouraged from using your product early in the game. You want to create a product that is easy to get started on and hooked on with no obstacles.
  • Deliver Value Before the Paywall:- As a consumer yourself, how often to you pay for an app without at least trying the service first? You want to get the value before you are required to pay. End users expect this from business software as well. So, don’t put the paywall before the customer can experience the value and realize they don’t want to live without it.
  • Use Key Features to Drive Demand:- Just because you build it does not mean they will come. Having excellent features doesn’t mean anything for your company’s growth if people have no way of knowing that you have them, or if they are not able to access them and use them properly. So make sure that your key features are user friendly. Remember that different users have different needs. Consider building custom product walkthroughs with user segmentation so that only the users who are most likely to need a feature will see the product tour. Customizing your onboarding and in-app messaging can increase user engagement and drive demand.
  • Leverage Sales and Marketing With Application Usage:- If you want to use the best practices for product-led growth, gone are the days when sales and marketing teams operate independently from product and customer groups. You want your product to match the hype that the marketing team creates for it. In order for this to happen and not disappoint end users, you have to work in conjunction with sales and marketing. For example, marketers can trigger an upsell offer when users do something specific in an app; sales can also reach out and offer personalized onboarding when they are notified that a second user with the same company email address has signed on. Working with sales and marketing allows you to have a sound, accurate message and offer personalized services and offers.

Start your free trial to see how easy it is to create adoption-boosting product tours with Apty.

How a Digital Adoption Platform Supports Product-Led Growth

So you’re interested in product-led growth? Then you need a digital adoption platform like Apty. Apty helps you increase product adoption and engagement - two keys to a successful product growth strategy.

How-a-Digital-Adoption-Platform-supports-Product-Led-Growth

Apty offers on-screen guidance and product tours or walkthroughs in addition to in-app messaging. These tools combined allow your team to effortlessly onboard new users and introduce new features.

Apty makes using any web-based or mobile application easier so users can recognize the value your application provides sooner. The quicker they realize the value, the faster they’ll convert to paying customers. From that point, you can leverage Apty’s tools to drive users deeper into the product and convert them from a beginning users to a superuser or superfan.

If you can create a large base of super users, you’re more likely to get customer referrals. The cycle continues to repeat itself until you’re experiencing exponential growth from the growth engine you’ve built out of your product.

Why You Should Switch to Product-Led Growth

Why-You-Should-Switch-to-Product-Led-Growth

Ultimately why should you switch to a product-led growth strategy? The answer is simple: product-driven growth results in lower customer acquisition costs and faster customer growth.

As more SaaS solutions enter the marketplace, you don’t have time to waste on traditional go-to-market strategies. You need a strategy that quickly converts leads into paying customers. You users don’t have time to download a white paper and sit through a sales presentation. You don’t have time to waste either.

Schedule a demo today to see how Apty can be a vital part of your product-led growth strategy.

Originally posted on August 18, 2020

Nathan Altadonna
Written by Nathan Altadonna

A former journalist and product manager, Nathan is a proud tech geek who blogs about digital transformation, employee productivity, and enterprise software. In addition to his work with Apty, Nathan runs his own consulting company, Innate Digital, helping companies develop content and get the most out of their marketing tech stack.

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