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Product-led growth: what it is, how it works, and examples

Whether you’re launching a new product or pivoting an existing business strategy, product-led growth can help you grow your customer base and keep costs low by focusing on one core principle: delighting users.

Last updated

1 Jun 2022
Product-led growth: what it is, how it works, and examples

In this guide, you’ll learn what product-led growth is, how it works, and why it’s worth doing—with examples from real companies.

Insights to power product-led growth

Hotjar Heatmaps, Recordings, Feedback, and Surveys help you fuel product-led growth by putting users first.

What is product-led growth?

Product-led growth (PLG) is a go-to-market strategy that focuses on the product as the primary way to attract, convert, and retain users.

Product-led growth is achieved by optimizing the user experience (UX)—making it easy for customers to sign up, quickly get value from the product, achieve their jobs-to-be-done (JTBD), and share their positive product experience (PX) with others, fueling word-of-mouth growth.  

A product-led growth strategy isn’t executed in a vacuum, and using this approach doesn’t mean you can’t employ other customer acquisition methods like direct sales or marketing campaigns. The led part of PLG simply means that more growth is driven by the product—and therefore how users interact with it—than by anything else

Who can use product-led growth?

Most product-led growth is found in the digital or SaaS (Software-as-a-Service) space, but it won’t necessarily work for every type of online business or product. Hotjar’s CEO, Mohannad Ali, believes there are four main criteria a company must meet to have success with PLG:

  1. Market: your product needs to serve a large market (i.e. not be enterprise-only).

  2. Model: users must be able to sign up and pay online with credit cards/PayPal/etc. (self-service customer acquisition), and pricing must be accessible (i.e. not expensive) and transparent. You want to give people an easy way to try your product for free, so you need a freemium plan and/or free trial.

  3. Channel: focus on low-cost marketing channels like word-of-mouth, content marketing, or cost-effective PPC advertising.

  4. Product: you need a product with a broad value proposition, and very quick time-to-value (i.e. low product complexity).

To see how real PLG companies meet these criteria, check out the examples section at the end of this guide.

Mohannad-Ali-Product-led-growth-quick-time-to-value

Why is product-led growth important?

Product-led growth has several business benefits over other growth strategies (like a sales- or marketing-led approach), including:

  • Lower customer acquisition costs (CAC): with the majority of customer growth coming from word-of-mouth referrals, attracting new customers is cheap.

  • Higher retention, lower churn: since products are designed to provide immediate and continuing value to users, product-led growth can lead to lower-than-average churn rates.

  • Higher revenue per employee (RPE): with a focus on self-service sales and support, a PLG company can achieve high recurring revenue with low employee numbers.

  • Higher Customer Satisfaction (CSAT) and Net Promoter Scores® (NPS): with more time spent looking at user data and improving product experience and UX, product-led companies can achieve customer delight, which turns users into fans and feeds back into word-of-mouth growth (known as the product-led growth flywheel).

  • Innovative decision-making: product-led growth forces traditional decision-makers (i.e. C-suite executives) to widen the decision-making process to a larger and more diverse group of stakeholders, leading to more innovative ideas and business decisions that include product, engineering, and support teams. 

For more ways to measure the benefits of product-led growth, read our guide to product-led growth metrics.

Product-Led Growth means that every team in your business influences the product.

Wes Bush
author of ‘Product-Led Growth: How to Build a Product That Sells Itself’

How product-led growth impacts product teams

Product-led growth affects every team in a business. While PLG doesn’t mean product teams are running everything, it does make them responsible for:

See it in action: the team at Spotahome, an online home rental platform, uses Hotjar Highlights to organize and share important session recording clips that show where users get stuck on their pages. By reviewing clips alongside developers, product managers find bugs they would have missed, and the engineering team gains empathy by seeing how real users interact with the product.

#The Spotahome product and engineering team watching a Hotjar Recording together

The Spotahome product and engineering team watching a Hotjar Recording together

5 ways to drive product-led growth

Assuming your product already hits the main PLG criteria (mass-market, freemium, self-service, low complexity), here are five impactful ways to start building product-led growth into your workflow right now:

1. Optimize the onboarding experience to deliver immediate value

#Ryan Badger uses Hotjar Recordings to improve the onboarding experience on Shoprocket
Ryan Badger uses Hotjar Recordings to improve the onboarding experience on Shoprocket

In a product-led approach, users need to get value from a product as quickly as possible, because it’s the customer onboarding experience that will convince them to activate or continue beyond a free trial period. 

One way to quickly improve onboarding is to use session recordings to watch where new users are getting stuck; filtering recordings for rage clicks will show you where users click repeatedly in a short period, letting you know something isn’t right. Once you see what’s causing the frustration, you can implement a fix and remove friction and barriers from the onboarding process, improving time-to-value. 

See it in action: ClassHero, a math learning platform, used Hotjar Recordings to troubleshoot an onboarding rate drop from 75% to 39%. By watching session recordings from many users, Sales Operations Manager John Gilmore spotted the issues holding users back.

Using Hotjar Highlights, John tagged and shared clips demonstrating the problems with his Chief Product Officer, and the issues became a top priority fix. Onboarding completion rates quickly went back to over 75%.

Shareable session recording clips created with Hotjar Recordings and Hotjar Highlights

Shareable session recording clips created with Hotjar Recordings and Hotjar Highlights

2. Understand your users’ JTBD

#A question from a JTBD survey created with Hotjar Surveys
A question from a JTBD survey created with Hotjar Surveys

Knowing your users’ jobs-to-be-done (JTBD)—the tasks your product was ‘hired’ to do—will help you focus on optimizing and delivering features that solve key pain points.  

The best way to find out why users need your product is to ask them directly. You can trigger an on-site survey after a successful sign-up to learn what issues people faced before deciding to use your product, like in the survey example above.

Similarly, triggering an exit-intent survey on a sign-up page will allow people to explain, in their own words, what is missing from the process or what reservations they still have. Combine survey responses with session recordings to see the actions users took just before they exited, alongside feedback explaining what they were trying to accomplish.

Pro tip: try our free product discovery survey template if you’re not sure which survey questions to ask. Analyzing user responses to questions like “Why did you start using our product?” and “How does this tool make your life easier?” will reveal your users’ JTBDs so you can optimize your product’s messaging and functionality to maximize adoption.

3. Add shareability to your product

#Dropbox offers users more storage space when friends sign up
Dropbox offers users more storage space when friends sign up

Shareability is crucial for product-led companies, because it encourages word-of-mouth growth. Team-wide communication tools like Slack and Zoom have a natural advantage, but even if a product isn’t super shareable on its own, you can still add a sharing loop into the experience to build momentum.

#An old Hotjar Survey with a “Not using Hotjar yet?” link
An old Hotjar Survey with a “Not using Hotjar yet?” link

For example, in the early growth years at Hotjar, all surveys had a “Not using Hotjar yet?” link at the bottom. Since surveys were viewed by lots of people (and not just Hotjar customers), the link helped new users discover the product.  

4. Optimize the self-service purchase experience

#Hotjar Heatmaps show you which aspects of your website draw users in (and which don’t), so you can improve  key customer touchpoints like CTAs
Hotjar Heatmaps show you which aspects of your website draw users in (and which don’t), so you can improve key customer touchpoints like CTAs

Self-service purchase is a big part of product-led growth, because it’s instant and scales without sales or customer success teams. Conversion Rate Optimization (CRO) will help you optimize your landing pages to increase sign-ups and remove friction from the customer journey

Analyze heatmaps to see which elements attract the most clicks (and what’s ignored), and where most users scroll to. Using heatmaps on key landing pages helps you find out which calls-to-action (CTAs) need optimizing and can give you ideas on how to make it simpler for users to sign up.

See it in action: Yatter, a lead generation agency, used Hotjar Heatmaps on a client’s website and found that 60% of users clicked menu icons on the checkout page. Removing the menu led to a 20% increase in conversions. Not bad for a single heatmap 🔥.

Yatter and Hotjar

5. Share product insights company-wide

Since PLG companies generally have a wider range of stakeholders than traditional businesses, product insights need to be clearly communicated so everyone can keep the product—and how it serves your users—at the heart of decision-making.

Here are some of the features we’ve built into our own product, Hotjar, that make it easy to share product experience insights with your teams and stakeholders:

  • Heatmap, Recording, Survey, and Feedback data can all be shared and exported, even for users on the free plan.

  • Hotjar Highlights let you capture Recordings and Heatmaps snippets, group them into Collections, and share them with your team.

  • Hotjar integrates with Slack to send updates from Recordings, Surveys, and Feedback straight into your team’s Slack workspace.

3 examples of product-led growth companies

1. Hotjar

Hotjar (hey there! 👋) is a product experience insights platform, co-founded in 2014 by David Darmanin.

Product-led growth was built in from the start: the market was broad (anyone with a website could use Hotjar) and word-of-mouth growth was a major part of the public beta—users got quicker access to the product by sharing it with others (driving 60% of total sign-ups). 

#Hotjar’s public beta waiting list encouraged people to get friends to sign up
Hotjar’s public beta waiting list encouraged people to get friends to sign up

Hotjar’s pricing is typical for a product-led company: there’s a ‘free forever’ plan anyone can sign up for without a credit card (which means low friction for new users), and premium plans that scale as your business grows (i.e. as you need to capture more sessions or survey responses).

Our team also uses Hotjar’s tools—Heatmaps, Recordings, Surveys, and Feedback—in-house to continuously optimize the product for end-users, ensuring you always have a delightful experience 😉. 

Hotjar's cycle of putting product users first led to fast growth: from idea to 60,000 beta sign-ups in the first 6 months, to €1M ARR after one year, to around $40M ARR when Contentsquare acquired Hotjar in 2021.

When we launched Hotjar, we said: ‘Here’s technology that can have a big impact on your role, on your job, on your business, and the experiences that you’re creating. Here’s access to it. No friction. No barriers. You don’t need to fix the sales. You can self-serve. Just put in your credit card if you want more advanced features or to collect more traffic, and you do that on your own.

David Darmanin
Co-founder and former CEO @ Hotjar

2. ConvertKit

ConvertKit, a creator marketing platform founded by Nathan Barry in 2013, is a great example of a company that chose to pivot to a product-led growth approach after a few years.

I want to build the largest company I can with the fewest people. I want to serve hundreds of thousands of customers, hit a hundred million in revenue, and I want to do that with a really small team. Product-led growth and freemium are really important to that concept.

Nathan Barry
Nathan Barry, CEO @ ConvertKit

ConvertKit’s early growth was fueled by its affiliate program, which still exists today. However, in January 2020, the company moved to a freemium pricing strategy that led to 800–1000 daily sign-ups, with a conversion to paid customers of around 4.5%. 

Today, ConvertKit has an MRR of over $2.5M ($30M ARR), a user churn rate of just 3.4% (low for a SaaS business), and a team of fewer than 70 people. 

#ConvertKit’s user churn rate is around 3.4%
ConvertKit’s user churn rate is around 3.4%

3. Buffer

Buffer is a social media management platform, co-founded by Joel Gascoigne in 2010. Buffer has been a product-led company from the beginning, leading them to their current RPE (revenue per employee) of over $200k. 

#Buffer has an ARR of around $19M and over 60,000 customers
Buffer has an ARR of around $19M and over 60,000 customers

Buffer has had a freemium pricing plan since it launched, and shareability is built-in: social media content posted via Buffer is tagged with the product name, helping with word-of-mouth growth. 

#Buffer’s tweet source label helps people find the product
Buffer’s tweet source label helps people find the product

Buffer has a team of around 85 people, no sales staff, and strategically hires for product-led roles. For example, as of May 2022, a Growth Product Manager at Buffer is responsible for owning the freemium experience, delivering value to customers, and understanding why users upgrade (or not). 

Next steps for product-led growth

Whether you’re already working for a product-led company or simply want to add more product-led growth to your approach, the simplest way to begin is to focus on your users. Learning how they navigate your product, what annoys them, and what’s giving them joy is the first step to optimizing their product experience.

And if you need a partner in growth, give Hotjar a try: it’s free to get started (that’s the product-led way, after all 😉).

Insights to power product-led growth

Hotjar Heatmaps, Recordings, Feedback, and Surveys help you fuel product-led growth by putting users first.

Product-led growth FAQs