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How to choose between a product-led funnel or flywheel

Are you following a product management or business framework because it’s the status quo—but you didn’t actively choose it? Sales funnels are so ubiquitous that the obvious choice can feel like the right choice. But that may not be the case for product-led companies. 

For example, a product-led growth funnel can work in some scenarios, but in others, a product-led growth flywheel could be the best approach.

Last updated

16 Jun 2022

This guide compares product-led growth funnels and flywheels to help you decide which method is best for your team and business. 

Let users show you the way

Confidently enable product-led growth with user insights from Hotjar Heatmaps, Recordings, Feedback, and Surveys

3 types of leads in a product-led funnel or flywheel 

The goal of a product-led growth (PLG) funnel or flywheel is to drive user acquisition and engagement. But since you don’t encounter one-size-fits-all users, certain frameworks help group people into buckets based on what they’ve seen and done to interact with your brand or product. 

A person is a 'qualified' lead when they’ve seen an item, like an ebook, and have taken action, like downloading the content. Common lead types you’ll encounter in PLG funnels and flywheels include:

  • Marketing qualified lead (MQL): someone in your target audience who has seen marketing materials. For example, someone who reads your blog post about how your product can help them overcome a challenge in their role. 

  • Sales qualified lead (SQL): someone with a need and budget for your product who has looked at promotional materials, like a demo video, and believes the product is a potential solution for them.

  • Product qualified lead (PQL): someone who has experienced your product's value, e.g. by using a free trial or signing up for a freemium account, and already knows your product works for them. 

Acquiring product qualified leads is the goal for PLG companies, because the idea is that once a person uses your product, the product itself increases user engagement and retention.

Don’t trust website analytics (to tell you the whole story)

Website traffic data from Google Analytics tells you how many potential users (or leads) view your marketing, product, or sales touchpoints. But are they really absorbing the information? Adding Heatmap data to your analysis gives you a more holistic understanding of users. 

For example, Bannersnack used Hotjar Heatmaps to increase landing page signups by 25% after learning their CTA button was lost in the shuffle of their previous design.

Bannersnack’s Heatmaps taught them how people interacted with their website, so they could improve design for comprehension and action.

Bannersnack’s Heatmaps taught them how people interacted with their website, so they could improve design for comprehension and action. 

What is a product-led growth funnel?

A product-led growth funnel is a strategy to move potential users through various touchpoints toward a sale. Clearbit identified four types of PLG funnels based on user types and company goals:

  1. Self-serve funnel: product-led growth at its purest form, with a user who buys without hands-on sales assistance

  2. Sales-assisted funnel: users get most of the way to the sale independently, and the sales team helps close the deal with low-touch interactions

  3. Bottom-up funnel: the sales team works with existing accounts to increase engagement and spend

  4. Top-down funnel: a ‘white-glove’ sales relationship with large accounts

While the specifics of the different PLG funnels vary, they all begin with a broader audience and then filter users toward conversion. 

In its simplest form, a product-led growth funnel could consist of three steps: free trial signup, use of the product, and conversion. Depending on user and company preferences, you can also add layers to measure qualified marketing leads or target customer subsegments.

In its shape, a PLG funnel is like a traditional sales funnel, with its wide top and narrow bottom, and clear milestones that let you track progress and find problem areas. For example, if your team hits their product signup goals, but product adoption is consistently low during free trials, you can review session recordings to learn what’s holding users back at that stage of the funnel. 

Traditional and product-led funnels diverge in their use of the product: 

  • The product experience exists in the background with a conventional sales funnel, while marketing and sales touchpoints drive conversions.

  • A PLG funnel, on the other hand, uses the product experience as a stopping point in the journey. While you might still have product-led marketing and sales touchpoints, a free trial or freemium account is a dedicated layer to measure and optimize.

What is a product-led growth flywheel?

A product-led growth flywheel is a method to utilize user engagement to grow your customer base. Mohannad Ali, Hotjar’s CEO, says a product-led growth strategy is “about bringing your customer acquisition cost as close to zero as possible,” which is exactly what a flywheel does. 

A PLG flywheel has an inner and outer segment

  • The inner segment is all about the users: evaluators (learning about the product), beginners (trying it), regulars (using it), and champions (promoting it)

  • The outer segment represents user actions: activate (review and choose the product), adopt (become a regular user), adore (grow in their use/engagement), and advocate (share it with others) 

While a sales or marketing funnel focuses mainly on the touchpoints leading up to using the product, a PLG flywheel spends most of its time on the moments after signup. 

After the evaluation phase of the flywheel, the goal is to create consistent product engagement that creates brand ambassadors (think: high Net Promoter Scores® (NPS). User insights from tools like recordings and in-app surveys help you understand where opportunities exist, so you can decide what to work on next for maximum impact. 

You need to know to go with the flow

A successful flywheel has momentum and amplification. As users become more invested in the product, their usage increases, and they recruit more new users to try it out. 

But cross-departmental friction can bring the flow to a screeching halt. Just imagine how disjointed a product experience would be if the sales, marketing, leadership, and product teams had different ideas about which goals matter, and how to achieve them. 

Organizational awareness brings everyone’s understanding and preferences together, so you can move forward consistently. 

Learn more about working together in harmony from our organizational awareness guide

How to choose the best approach for your PLG business

To choose the product-led approach that best suits your business, identify your goal: a funnel is helpful for product-led conversions, while a flywheel focuses on true product-led growth.

You may want to use a product-led growth funnel if you’re easing into PLG, have a complicated product, or have a customer base that still values high-touch sales interactions. For example, if you’re an enterprise SaaS who works with large buyers and multiple stakeholders, a PLG funnel can help you attract more accounts. 

In contrast, a product-led growth flywheel benefits companies with strong PLG pillars that want to use their product to improve retention and expansion. For example, a company that uses low-cost acquisition channels and transparent, self-serve pricing to get users ‘in the door’, and has designed a product experience to encourage growth and advocacy. 

Here are some pros and cons of PLG funnels and flywheels to better understand how each method serves different scenarios: 

Pros and cons of a product-led growth funnel

Pros: 

  • Funnels seem easy to plan and track because they have a clear beginning, middle, and end

  • They're a familiar concept for companies or teams who are reluctant to be product-led

Cons:

  • Funnels don’t necessarily follow how people behave, and you risk trying to fit the user experience into a box

  • They don’t account for growth and engagement after the sale

  • Funnels make the product a supporting player in growth, but aren't really product-led

  • Current users are not thought of as an acquisition channel

  • They can lack cross-functional alignment if marketing and sales teams don’t collaborate on anything beyond the hand-off point 

Pros and cons of a product-led growth flywheel

Pros:

  • PLG flywheels shift attention to how people interact with and grow within the product

  • They leverage customers as an acquisition channel, which leads to exponential growth

  • They create space to consider, learn about, and analyze users throughout their journey

  • Flywheels are more in alignment with design thinking, since you design for goals and challenges

Cons:

  • PLG flywheels don’t have a designated space for interaction between the sales team and potential customers if that's part of your buying or upselling cycle

How to use PLG funnels and flywheels together

Product-led companies that cater to different market segments, such as SMB and enterprise, might not be able to use only one of the frameworks. Since different customer segments have varying needs and goals, it could be hard to fit them all into a single process. If that’s the case for your company, you can use product-led funnels and flywheels together:

  • Use a product-led sales funnel if you still require sales involvement with some accounts, or are actively engaging and tracking other channels, like content marketing for lead generation

  • Use a flywheel for everything after the free trial signup to amplify product usage and promotion

It'll take some trial and error to find the workflow that suits your team and organization, and that's okay: product-led growth isn’t a strategy you can implement overnight, and it’s harmful to fall into the mental trap of one-and-done. 

As long as you stay close to users and product insights, you can make incremental changes to create an intuitive and impactful product that inspires engagement and growth.

Let users show you the way

Confidently enable product-led growth with user insights from Hotjar Heatmaps, Recordings, Feedback, and Surveys

FAQs about PLG funnels and flywheels