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13 benefits of product-led growth for your users, your team, and your business
Product-led growth (PLG) shifts the way you think about your team, your product, and your users. In the process, it delivers a range of benefits that help you re-evaluate (and improve) the relationship between the three.
Last updated15 Jun 2022
This chapter reviews the benefits of product-led growth and why you should implement this strategy to grow your business by using what you already have: your product.
Make the right product-led decisions
Use Hotjar’s product experience insights to put your users first and make improvements that fuel product-led growth.
Laying the foundations of product-led growth
PLG has been hailed as the future of growth strategies. Its go-to-market approach enables companies to grow faster and more efficiently by leveraging their tools to create a flow of users who convert into paying customers.
But why are so many SaaS companies betting on product-led growth?
Before we get into the product-led growth benefits for your users, team, and business, let’s consider three crucial aspects of PLG, and the foundations that can be laid for product-led growth to be built upon.
PLG benefits extend to teams and their users
Having the product drive your company's growth is a great way to attract, convert, and retain users. But users aren’t the only ones who benefit from this go-to-market strategy.
Here's how product-led growth is beneficial for everyone:
Letting the product do the talking for you allows your company to shift focus away from being the loudest in the market to being the most effective.
Adopting a self-serve model takes the pressure off your sales team. Customers can experience meaningful value in your product without any hand-holding.
An improved product experience means users find value before paying. A great user experience encourages free-to-paid conversion and makes the time-to-value (TTV) journey smoother, which means customers are not only more likely to renew, but also more likely to share positive feedback.
In the short and long term, PLG is a more cost effective and results-oriented approach to sustainable and consistent growth across the board.
PLG is good for business
In 2019, every top SaaS IPO was a PLG business—which may have something to do with product-led businesses being valued more than 30% higher than the public-market SaaS index fund.
Recent studies by Clearbit, Public Comps, and OpenView showed that on average PLG companies at IPO have higher revenue growth, gross margin, net dollar retention, and implied ARR. On top of that, PLG companies tend to perform better post-IPO too.
But SaaS companies need to perform well to launch an IPO in the first place—which is where the benefits of a great PLG strategy really kick in.
PLG shifts focus from features to experience
The benefits of product-led growth partially come from a company understanding they aren’t just selling tools—they’re selling an experience.
Yes, your product needs to have great features and benefits. But, to create a product that instantly attracts customers by itself, you’ll need more than that: you'll need to deliver on outcomes and experience.
In a product-led growth strategy, the product alone is accountable for acquiring, retaining, and growing new and existing customers. This strategy depends on the product—its features, performance, and virality—to do the heavy lifting.
To achieve adoption, your product must produce outcomes that are of immediate value to the user, so a stellar product experience is the only avenue to success.
For example, Hotjar’s (hi there 👋) product experience insights information is the experience we sell, whereas our tools—Heatmaps, Recordings, Surveys, and Feedback widgets—are the components of our software. Our own user experience experts think beyond the user interface of each tool, and work with customer experience experts to integrate the product with all the touchpoints that affect the user experience.
If you can put together a successful product-led growth strategy, you’ll reap some incredible rewards. Now let’s look at the key benefits of product-led growth.
13 benefits of product-led growth
Product-led growth has several business benefits over other growth strategies (like a sales- or marketing-led approach). Each of these benefits ultimately comes down to your users, your team, and your business.
1. Faster and more efficient growth
The product-led growth approach enables companies to grow faster and more efficiently by lowering barriers to entry and giving users access to the product for free. This creates a pipeline of active users, who are then converted into paying customers.
Companies like Slack, Calendly, and Dropbox give their users the keys to using the product (freemium or free trial) and enable customers to upgrade when they want (self-onboarding). This helps users experience a more meaningful outcome and encourages them to distribute the product over and over again (positive word-of-mouth).
2. A wider reach
The freemium model that comes with a product-led growth strategy helps you attract more users and widen your reach.
A free trial streamlines the user's experience with your product, since they find value before paying. User onboarding is more straightforward and users can pay when they feel it’s warranted. Value isn’t just promised—it’s delivered to the user right from the very start, which attracts more users and sends them down the path to conversion.
The sooner you convince your users to try your product, the less time you have to spend generating leads and convincing them to finally pay for it.
3. Better user value
Product-led growth allows you to show—not tell—users that your product is the best solution. Providing value is crucial to any product, but users want to see value, not just trust that value exists.
If your users don’t understand or get instant value from using your product, you’re not going to be on the market for long. A good PLG strategy helps you discover where the real value in your product lies—and how best to showcase it.
4. Lower Customer Acquisition Cost (CAC)
Product-led approaches can drastically reduce your CAC. Here’s how:
Scaled-down customer acquisition needs: companies that use PLGdon’t need to attract as many new customers, because they’re lifting every customer’s lifetime value.
Lower marketing budget: since customer acquisition channels are built into the product, there’s no need for a costly marketing budget. Along with the majority of customer growth coming from word-of-mouth referrals, this means lower costs for attracting new customers.
More qualified leads: product-led growth is all about product qualified leads (PQLs). Since they’ve already indicated they’re interested in using your product, these users are more valuable and reliable than prospects who are just discovering it for the first time.
More revenue from existing customers: product-led strategies directly impact your user experience. This, in turn, ignites more revenue from existing, delighted customers, by enhancing their experience with your product.
Combined, these aspects reduce acquisition costs. As customer lifetime value increases, your acquisition needs and costs naturally fall, leaving your company even more money to put back into the user experience.
In the end, that means more profit for your bottom line, and more resources to propel your product team forward.
Many SaaS businesses strive for $0 customer acquisition cost (CAC) and yet most still end up spending a small fortune acquiring each new customer. If you want to get to $0 CAC, product-led growth is the only way you're going to make it happen.
Pro tip: Hotjar highlights points in the user journey where adding built-in methods of driving acquisition and retention would really make a difference.
Once you outline the user journey with a customer journey map, mixing and matching Hotjar product experience insights tools helps you:
Visualize the ‘Interest/intent’ stage with heatmaps. You can reduce bounce rates on your main pages and identify which page features work to your advantage.
Understand the ‘Engagement’ stage by creating post-purchase surveys. This starts building a long-term relationship with your customers and helps you identify opportunities to better serve them in the future.
5. Focused product development
Product-led growth gives product teams the reasons, time, and resources they need to focus on product improvements that matter.
Rather than coming up with marketing tactics and campaigns to boost sales, your team can focus on developing what drives the most revenue: your product.
For example, free users will pay for the product after they deem it worthy. This forces teams to create products that their users deem worthy (and find useful) right away, rather than focusing their energy on things like pricing strategies.
6. Powerful feedback for better products
Working with your users and within your product leads to many more opportunities to collect direct and indirect user feedback. You can then use these insights to build better products.
Feedback helps your team make better decisions about what features to build, how to improve existing ones, and which complimentary products to put on your roadmap.
Pro tip: listen to customer feedback and use their suggestions (or complaints) to further enhance and improve your product.
Hotjar lets you watch your users and ask them direct questions as they interact with your product. These interactions will have them tell or directly show you what they like and don’t like about your product.
Each tool can help generate unique, actionable product experience insights:
1. Session recordings help you:
See where users get stuck on their pages and find bugs you would have missed
Gain empathy by seeing how real users interact with the product
Optimize the onboarding experience and improve time-to-value
2. Surveys help you:
Identify user needs by asking them directly
Understand ease of use, user satisfaction, and barriers to purchase
Optimize product messaging and functionality to maximize adoption
3. Heatmaps help you:
Generate ideas on how to make it simpler for users to sign up
Optimize the self-service purchase experience
4. Feedback helps you:
Understand how customers feel about certain parts of the product experience
Identify new features and fixes to prioritize
Address and remove blockers, and identify and repeat what works
Identify new ways to delight your customers, who are more likely to give thoughtful feedback that supercharges product-led growth
7. Shorter sales cycle
Forget the traditional slow-moving sales model. PLG speeds up the sales cycle by:
Providing a wider top-of-funnel by removing the barriers to entry for your product. For your users, freemium or free trial options allow them to sample the product and appreciate its value.
Implementing a simple sign-up and onboarding process. This reduces the TTV, speeding up the time taken for users to upgrade and convert into a paying customer. It’s a win-win!
A more efficient sales process. Remember the PQLs? These leads have used your product and love it. They give your sales team a way to look at how users engage with the product during a free period and then use that information to pick out users who are actually interested.
A user-centric growth model isn’t just good for customers, it’s also good for business. That’s because product-led businesses grow faster at scale.
Since they’re not constrained by labor-intensive lead generation, sales, and customer success processes, these companies can stay in hyper-growth mode as they evolve their business.
With a wider top-of-funnel, users can access your product earlier in the customer journey. This is powerful because, instead of prospects filling out your competitor’s demo requests, they’re evaluating your product.
Then, while competitors are focused on building their sales organization, you can use your resources towards expansion efforts, focusing on improving your onboarding process to serve more customers around the world in a fraction of the time.
9. Better budgeting
Making the move from focusing on marketing and sales with marginal results to organic and exponential growth through a product-led strategy can save you money—and earn you more.
PLG companies shift their focus from driving traffic and leads that only convert 2–5% to improving their product andgetting organic attention and growth by keeping users happy and leveraging their success to drive more leads.
By focusing efforts on interacting and supporting customers, communicating the value of your product, and expanding features, you save on sales and marketing costs. Eventually, with happy customers, you reap the benefits of them doing sales and marketing work for you.
10. Higher retention and lower churn rates
Products are designed to provide immediate and continuing value to users, so product-led companies experience better user retention and a lower churn rate all around. Here’s how:
Better user fit: product-led growth means users understand the value of your product faster. This ensures that user expectations are better aligned with your product’s capabilities.
More successful users: in a product-led growth model, the focus is on how users interact with the product. Customer success teams have more data on user engagement, which they can then use to better tailor their upsell and churn reduction activities.
The freemium advantage: customers already know how your product works when they make a purchase, which leads to lower-than-average churn rates and increases the chances of retention in the long run.
A better product: PLG allows your company to focus on product development. As the product improves and evolves with customer needs, the number of satisfied customers increases exponentially, leading to a lower churn rate.
Pro tip: smart data = smart decisions
By understanding how individual users interact with your product, you can track their engagement and offer them upsells they’ll find useful. You can:
These product experience insights effectively help you build a base of product-qualified leads—customers who already enjoy the product and are more likely to try additional services.
11. Higher Revenue Per Employee (RPE)
Two of the defining features of a product-led company are self-service sales and support. Combined, these help a PLG company achieve high recurring revenue with low employee numbers.
With PLG, the product is doing the legwork. Less hand-holding means you can do more with fewer people on your team and achieve higher profit margins per customer. With the product doing the heavy lifting, each employee can focus on specific roles that help drive company growth.
In short, PLG makes employees and departments more efficient, boosting a company’s RPE.
12. Higher Customer Satisfaction (CSAT) and Net Promoter Scores® (NPS)
This is where you reap the benefits of spending so much of your time looking at user data and improving product experience and UX: customer delight, which feeds back into word-of-mouth growth (known as the product-led growth flywheel) and translates into higher CSAT and NPS scores.
Satisfied customers can be your most powerful product-led growth marketing and sales asset. Reviews and peer recommendations drive sales online, since many users are looking for validation from others like them. Other consumers then read those reviews and opinions, creating an acquisition cycle.
If the product is good, one or several users will share it with teams both in and outside their organization. And so the product spreads—all by itself.
🔥 If you’re using Hotjar
With a product-led growth strategy, the goal is to improve your NPS score so you can use your most satisfied customers to bring in new users.
To track NPS, use a simple survey via email or within your product. As the Hotjar NPS tool collects data, it offers you a visualization to get a wider look at how your Net Promoter Score® is trending over time.
When your team has a clear view of your NPS and how satisfied your customers are with your product, you can focus on generating true product-led growth.
13. An optimized user experience
PLG plays a critical role in a good user experience. Since your product is built for people to use and onboard themselves, your focus is on making it the best it can be. This means:
Ensuring users can experience meaningful value in your product without any hand-holding.
Solving user pain points and making a tangible difference to their day.
Making sure the product is easy-to-understand and enjoyable-to-use.
Delivering meaningful value in the short- and long-term.
Pro tip: keep user feedback at the center of everything you do
No customer success department can ever match the feedback you receive from tracking customer engagement with your product. Start with:
Heatmaps, which help you identify and eliminate friction and improve UX so you can build customer delight on top of a product that’s already easy to use.
Session recordings, to deepen your understanding of blockers and pain points and build empathy for the customer.
Then, use surveys and user feedback tools to gather VoC data that brings customer voices into your product-led growth strategy.
You can then use these learnings to enhance the product in relation to customers’ preferences, boosting customer experience and retention.
Final thoughts on the benefits of product-led growth
The secret to getting value from a product-led growth strategy is not just building a great product—it’s taking action based on what your users do with and think about it.
Each of Hotjar’s tools can help generate unique, actionable product experience insights that can be used to reduce costs and drive product-led growth for SaaS—and every other type of company that sells online.
When it comes down to it, your product is for 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.
Make the right product-led decisions
Use Hotjar’s product experience insights to put your users first and make improvements that fuel product-led growth.