The software industry changes at a rapid rate, and it’s not just the technology and coding that’s been undergoing lightning iterations. How you approach the market, the way you sell and think about your product, has also changed.
It’s now the era of product-led Go-To-Market (GTM) initiatives that drive scale, adoption and revenue growth.
Here at Tiny, we’ve been following a product-led growth strategy for a number of years. We’re now recognized as one of the leaders within the product-led growth space of SaaS companies, who are reinvesting and reinvigorating their product line and brand.
What is product-led growth?
Often, in conversations around start-ups, investors and others, the product-led growth terminology has become somewhat of a buzzword – where brands claim to be undertaking product-led SaaS growth strategies, but in reality, very few execute it authentically.
In simple terms, according to recognized experts – the productled.org group – product-led growth is:
“...a business methodology in which user acquisition, expansion, conversion, and retention are all driven primarily by the product itself. It creates company-wide alignment across teams – from engineering to sales and marketing – around the product as the largest source of sustainable, scalable business growth.”
What does that mean? Instead of different teams and departments moving in different directions and working on conflicting things, it’s about centralising and organizing your teams. Your entire Go-To-Market strategy, operational components and R&D efforts are aligned around the goals of product adoption and their monetization.
Another way to think about it, is that you’re viewing and operationalizing everything through the scope of your product – thus helping to orientate every team’s thinking around the philosophy of putting the user first.
In theory, product-led SaaS companies orientate their thinking and decision making around a larger group of stakeholders, whereas traditional companies' decisions may have been narrower. For example: traditional decision = Marketing and Sales decide how to take something to market A product-led decision = the Product and Engineering teams are also closely engaged, to ensure complete alignment across the four departments.
When it’s all said and done, product-led growth is about helping your users to experience the value of your offering, product or platform as fast as possible – without needing to go through any gates set up by marketing and sales.
The faster it’s in their hands, the quicker they fall in love.
The different eras and benefits of growth strategies
Every founder or CEO knows that scaling and growing a SaaS company is an expensive exercise. That challenge often leads businesses to undertake shifts, iterations and adjustments to their growth strategies.
Over time, there’s been several growth strategy eras. Once something changes in the market, society or technology, what used to work no longer does. Then better, more exciting and efficient ways to emerge to grow your SaaS company. Here's a quick run-down on the three key eras and their benefits.
Sales-led growth strategies
The classic and always popular, is the sales-led growth strategy. It helped build many of the early tech legends, such as Microsoft and Salesforce.
What’s a sales-led growth strategy?
Sales-led growth strategies are where sales is in the driver seat. It’s where the sales team, it’s processes and people, act as the main driver for growth. In other words, your company is either made or broken by your salespersons’ sword.
What are the benefits of a sales-led growth strategy?
- Can be a great way to get paying customers in the earlier stages of growth
- Great sales people can significantly increase revenue and drive growth
What are the negatives of a sales-led growth strategy?
- Can create silos in the business, with less of a focus on customer success and support
- Reduces the value of Marketing and Product as strategic drivers of business growth, who instead are seen as support functions of the sales machine
- Significantly higher initial acquisition costs, due to a person heavy process
How do I know if a sales-led growth strategy is right for my SaaS company?
Employing a sales-led growth strategy for SaaS is incredibly common. Even today they’re a common (and valid) tactic for many SaaS organizations. However, it’s generally considered best for service-based companies that rely on high-touch methodologies to get customers onboard and sold.
It’s also a great strategy when you’re launching your product and don’t yet have a successful product-market fit. The ability to have conversations with each and every customer (or potential customer) gives you valuable insights into your product's strengths, weaknesses and benefits – thereby helping you to further refine and enhance your product.
Marketing-led growth strategies
You want leads? You got leads! You want another, here’s another 1,000.
Although that's a slight exaggeration, a marketing-led growth strategy is perhaps one of the more unpopular options when it comes to driving SaaS growth. But maybe that could be due to a lack of quality marketing talent and a non-strategic focus on how it can be a driver of company growth.
What is a marketing-led growth strategy?
A marketing-led growth strategy for SaaS, is about trying to create rapid growth through advertising, SEO and other marketing tactics to get people to sign-up and buy your product. It does not focus on adoption, it focuses purely on top-level points of metrics such as initial revenue to get results.
As a reminder, the golden days of marketing-led growth for SaaS, hark back to the days of the “Growth Hacking” trend.
Marketing-led growth can almost be considered the precursor for product-led growth – which shortly after, took over in popularity. Given that, it must be said… perhaps product-led growth strategies may never have developed, if we hadn’t already had marketing-led growth strategies.
What are the benefits of a marketing-led growth strategy?
It’s a way to rapidly scale, with lower overall costs than sales-led and a focus on driving down initial cost to acquire leads. There's also a focus on short-term driven payback periods – with a heavy focus on acquisition
The ability to do rapid testing with constant pivots and shifts in line with market feedback to the Product team
What are the negatives of a marketing-led growth strategy?
- You enter the high-cost world of spending more than you anticipated on lead generation
- Does not focus on the deeper level of engagement and metrics
- There’s generally not a lot of focus on activation and retention
- May focus more on short-term metrics instead of long-term investment growth gains
How do I know if a marketing-led growth strategy is right for my SaaS company?
You’re more likely to see marketing-led movements these days in the world of B2C than SaaS companies. Marketing is an integral and strategic department for growth, but an obsessive focus on growth at all costs might not be the right move. It could however be right if your product has a broad appeal to a large audience and a world-class marketing team who wisely walk the line between investment and wasteful spend.
It may also be a great idea if you’re in a very early stage, looking for product-market fit. Why? This approach can return both customer insights and data incredibly quickly to the Product team – about what is and isn’t resonating – so further adjustments and developments can occur.
Product-led growth strategies
The details about product-led growth strategies for SaaS have already been covered, so we let’s jump straight into the nitty-gritty.
What are the benefits of a product-led growth strategy?
- More holistic focus on both acquisition, activation and retention
- Can be more cost-effective in terms of advertising, if product-market fit has been reached
- Forces strong alignment between all departments
- Ties the value of the platform back to revenue, thereby reinforcing innovation and customer-first features
- Aligns customer success and retention with the product and other departments – creating a flywheel
- Gives equal focus and value to Sales, Marketing, Product and Customer Success as drivers of growth and value
What are the negatives of a product-led growth strategy?
- An obsession with growth via product utilization can lead you to ignore other important aspects of growth, such as brand
- A lack of proper integration between core teams could mean silos and worse communication
But wait, that sounds familiar to sales-led and marketing-led growth strategies – how is that possible?
With product-led growth being the ‘new kid on the block’ it carries with it the big benefit of innovation – whilst still being able to learn from the mistakes of the other growth models – and taking the best parts of everything.
The product-led growth model still values Marketing and Sales (including Customer Success) but adds Engineering and the complement of Product (including strong product leadership and adoption) as other key pillars. With these five pillars aligned, you’re able to grow and scale with an unshakable foundation.
What are the hallmarks of a product-led SaaS company?
While the practical aspects of how you implement your product-led strategy may differ, the fact is that successful product-led companies have several core things that tie them together. Those core attributes are:
- Strong onboarding processes tied to activation, retention and revenue growth and making the time-to-activation as short and straight forward as possible
- Communicate succinctly about their value proposition, across all touchpoints and facets of the brand and aligning all teams on what they’re trying to achieve
- The Product team have a seat at the table and help drive real change across the business
- Data is key in core decisions across the entire organization
- Everyone prioritizes the customer experience throughout everything they do
“The future of growth is product-led. Data shows that companies leveraging a Product-Led Growth strategy perform better on average – faster growth, higher margins, lower burn and stronger valuation multiples. Product-Led Growth will soon become the norm, making it table stakes for SaaS companies that want to win in their markets. What is your company doing to adapt to the product-led growth revolution?”
~ Blake Bartlett, Partner, OpenView
Determining if product-led growth is right for you
Product-led growth may sound like it’s the right solution for your SaaS company. But making (and implementing) such a strategic change within your organization, isn’t something to be taken lightly.
Product-led growth and funding size
Product-led growth has been touted as the way of the future by companies such as Survey Monkey and Slack – mainly because they were able to grow rapidly, despite bootstrapping and being low on funds. It’s the exact reason why it’s been adopted by so many SaaS companies and start-ups – because in theory, it takes a lot less capital than sales-led or marketing-led growth strategies.
The real truth though, is that product-led growth is no longer just for small companies.
The important thing to note is that even when companies reach their unicorn status and become major global players within their space, product-led growth has continued to work. And they’ve retained their product-led go-to-market model. Indeed Survey Monkey (now Momentive) didn’t start off with a product-led approach, but adopted it later in their growth journey. It was the same with Tiny.
Customer touch points and insights
Another benefit of product-led growth is that it enables you to build processes around continuously talking, listening and enveloping customer feedback and customer-first practices – across the entire organization. In turn, the product and go-to-market approaches are more closely customer oriented and focus on solving pain points and problems.
Embracing product-led growth focuses on improving the “stickiness” of your product – by actively encouraging the customer to return again and again – thus leading to less churn.
Embracing agile development for product-led growth
Product-led businesses are also a great fit for agile development practices. Strong representation from Product and Engineering adds greater focus on the customer experience and helps all the teams involved, to focus on code – and how it directly impacts end users.
It’s believed that product-led growth can actually help decrease development costs and hold down the cash burn. Why would that be? By engaging directly with users – through freemium versions of their product – it helps them spend less on marketing and sales, which supports them through a slower growth period.
Product analytics must be ingrained in the business
The real core of product-led growth is adoption of the product.
So it makes sense that product analytics are key. If you’re thinking about adopting product-led growth strategies, you need to be prepared to also invest in the analytics to support it.
Here at Tiny, we’ve invested into many custom analytics solutions, to measure our usage. By investing into adoption and usage analytics, you start tying all your efforts back to creating value. You also understand where developers are working with your product, so you then invest more Engineering resources into improving it – which in theory, further increases adoption.
This creates a flywheel effect that drives and supports growth – all the while reacting to real data and usage information.
Key tactics for product-led growth
We’ve covered a lot of ground. Most of it has been centred on why you’d adopt product-led growth strategies. But we haven’t looked at the tactics that are hallmarks and most common traits of SaaS product-led growth strategies:
- Freemium/Free offering
Creating a free tier or limited free trial of your product, is the classic product-led growth strategy that gets your product into users hands quickly – helping them experience the value you offer, from the outset.
- Enhanced targeted onboarding experience
Hand-in-hand with the free/freemium tactic, a great user onboarding experience is key to helping people get started and embedding your product into their workflows. Fast.
- Scalable value-based pricing metrics
Pricing is always a tricky topic and something product-led companies spend a lot of time perfecting. They work through the data to find the best pricing model that represents the value they provide, while also making it frictionless for customers.
- Obsessive focus on the pain of customers and users
A bit of a broad tactic, but generally a product-led growth company website features lots of content that’s focused on helping customers solve their problems.
- Creating immersive stories that communicate their value
As humans, we all love stories. A product-led organisation spends a lot of time, money and effort on communicating their value and story to you... at every chance. They are focused on talking your language and reminding you how they help solve your problems and provide value.
- Developing and implementing referral programs
Word-of-mouth (WOM) is king in product-led growth companies. Every company develops and is working on referral programs that focus on converting their users, from customers to evangelists, within the wider community.
- Branded freemium/free versioning
Powered by Tiny. Powered by Calendly, Powered by SurveyMonkey. We’ve all seen these banners around the web. Branding your free and freemium offerings can help you expand your reach and introduce your products via tools and platforms that you don’t traditionally have access to.
The above is certainly not the ultimate list of product-led growth strategy tactics, but they’re some of the most popular ones. As an industry, SaaS is always innovating new ways to scale and grow, so we’ll see how it changes over the coming year.
Product + Engineering + Marketing + Sales = product-led growth
Product-led growth for SaaS companies is definitely the ‘flavour of the month’, but it’s likely here to stay. By focusing on your users first and embracing a holistic process to revenue growth, product-led companies are leading the pack when it comes to hitting big-time success..
Are you taking the plunge to become a product-led company?