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How to create a product-led growth strategy
You can’t dip your toe into product-led growth; you have to take the plunge. The strategy requires alignment across the entire organization and a commitment to the process that you can’t achieve with a small, quick effort.
To be truly product-led takes time and dedication.
Last updated7 Sep 2022
This guide reviews the foundational pillars of PLG and product-led frameworks to get you started when you’re ready to jump into the deep end of a product-led growth strategy.
Less guessing, more growing
You can’t lead with your product if you don’t understand how users interact with it. Hotjar’s product experience insights give you the context and information you need to make product-led decisions.
The 4 pillars of product-led growth
Being product-led isn’t just about creating a great product. (If only it were that simple.)
Mohannad Ali, Hotjar’s CEO, says a product-led growth strategy is “about bringing your customer acquisition cost as close to zero as possible.” And to do that, he shares four pillars of product-led growth (PLG) that companies need to embody: market, model, channel, and product.
Being a big fish in a little pond isn’t fruitful for product-led companies. Your industry and audience need to be large enough to support PLG since you’ll invest time and energy in lowering activation barriers. If you’re only selling to a few buyers, there’s no use in trying to create a scalable operation.
Is anybody out there?
Startups must understand their addressable market before investing too much time in product creation. Look for a combination of audience size and willingness to pay, and be ready to pivot if needed.
After finding the right audience, you need a business model suitable for PLG. "You need to sell primarily online and self-serve to go after a very large market. This means accessible pricing (not very expensive), transparent pricing (prices are there for people to see), and paying online with credit cards/PayPal/etc. You also need an easy way for people to try your product for free, so you need a freemium and/or free trial," Mohannad says.
There’s data to back him up, too, since 87% of tech buyers want a self-service buying option.
At what price would you consider the product so expensive that the benefits fall short? (Too expensive)
At what price would you consider the product to be priced so low that you would worry about the quality of the product? (Too cheap)
At what price would you consider the product is starting to get expensive, but is still worth the price? (Expensive/High side)
At what price would you consider the product a bargain given the available features? (Cheap/Good value)
Since successful product-led growth requires low acquisition costs, you need to choose scalable channels. “If you're selling for relatively low prices, you need to have low-cost channels like word-of-mouth, content marketing, or low-cost CPC advertising,” says Mohannad.
One simple and cost-effective way to improve the effectiveness of the content you create is to lean on the knowledge of existing and potential customers, that ideally sit within your ideal customer profile (ICP).
Consider running a survey to better understand the content formats and topics your ICP wants to see more of, and to discover how you can truly aid them with their jobs-to-be-done (JTBD). You can also run customer interviews to get closer to the needs of your audience.
“To use low-cost marketing channels and go after a large market, you need a product with a broad enough value proposition and very quick time-to-value,” Mohannad notes. And how do you do that? Constant research and improvement.
For example, SaaS company CCV Shop used Hotjar Heatmaps to make landing page improvements that increased conversion rates by 38%. The Heatmaps revealed where customers lingered on a page, and after reviewing Recordings, the CCV team found issues they could A/B test and improve.
5 product-led growth frameworks to choose from
While the pillars noted above are high-level guides to a PLG business strategy, they aren’t detailed enough to plan your work. For that, you’ll need a product-led growth framework.
Here are five frameworks to choose from, depending on how customers use your product, your company’s objectives, and your team.
While each framework is different, they share the same goal: to give your product team a way to conceptualize and prioritize work.
1. Activate, start, discover, convert, scale
Your users go through a multi-step product journey, but the way they interact with your company doesn’t necessarily align with your top priorities. The ‘activate, start, discover, convert, scale’ framework prioritizes steps in the user journey out of order:
For example, the ‘discover’ phase relates to a person's time to learn about your product (preferably through those low-cost channels we mentioned earlier). At that moment, the product itself is the turning point between "I’ll give this a shot" and "I’ve gotta have it."
While 'discover' is undoubtedly a critical phase in product-led growth, it isn’t where you should apply most of your attention. Instead, this PLG framework rates activation, or the 'a-ha moment', as the most crucial product-led moment.
Re-prioritizing steps in the user journey lets teams implement the heavy-hitting PLG tactics first. Think of it like the 80/20 rule; you can make more PLG progress in less time if you focus on the most impactful points first.
In action, this could look like filtering recordings to see what steps your most engaged users took in their first days. Once you find their ‘a-ha moment’, you can adjust your product to drive new users to that point quicker, increasing adoption.
Too many ideas, too little time
Maybe there’s an alternate universe where your product team has plenty of time, resources, and support to power through your entire product backlog. On this timeline, though, teams have to carefully decide which products to work on, and when.
To make these decisions easier, teams can use a product prioritization framework to strike a balance between:
2. Hook model
Another way to drive product-led growth is to create strong user habits. The hook model framework is a habitual loop between four stages
Trigger. This catalyst kicks off user engagement. For example, a notification on your Instagram app.
Action. A user’s first step is to respond to the trigger, like opening the Instagram app.
Reward. Something motivates the user to keep going, like finding new friends.
Investment. This is a cumulative reward that connects a user to the product, like earning more followers.
The hook model is helpful for products that need to be habit-driven or used frequently. For example, a task management app needs users to log in daily, while payroll software has a stronger monthly use-case.
If your company isn’t ready or willing to commit to self-serve product sales, you may opt for a product-led growth funnel.
A funnel can still have self-serve elements, but will include touchpoints to serve different goals. For example, you might start accounts via a self-serve channel, but bring in the customer success team to expand or upsell the account.
Since the product-led funnel more closely represents a traditional SaaS sales model, it can be a useful entry point for PLG. You might opt for this model if your organization is reluctant to adopt a product-led growth strategy or makes changes at a slower pace because of its size or stage.
You can learn more about this method in the product-led funnels vs flywheels chapter of this guide.
The flywheel framework is similar to the hook model, but it focuses on user growth over engagement. The process relies on the product and user experience to turn lookers into buyers into raving fans.
Image via Product-Led Growth Collective
We now pronounce you Product and User
To make your users feel like your product was made for them, never stop chasing product-market fit.
“You want to have customers who pay you because they value what you’re doing; anything else will lead you away from where you want to go. Product-market fit works in both directions: don’t just accept anybody that comes your way. Learn to say 'no' to prospective customers who don’t fit your vision and values."
5. Single point of truth
As the saying goes, "if you want to go fast, go alone. If you want to go far, make sure your entire organization is committed to user-centricity."
Or something like that.
The single point of truth framework places your product and customers at the center of all operations.
To make this framework work, you need user analytics and data democratization. Learning about users—and giving everyone access to those learnings—keeps the organization close to the people it services, both functionally and emotionally.
Getting everyone on the same page also makes cross-functional collaboration easier, since everyone is working from the same place of understanding.
Invite everyone in product & engineering to a one-hour call
Sara prepares 3-4 interesting Hotjar Recordings and Heatmaps to share with the group
Attendees make notes on compelling insights they see
Every attendee can expense pizza and drinks (it’s a party, after all 🍕)
Want to host your own Hotjar Watch Party? Check out our Hotjar & Chill guide here.
Product-led growth takes time to implement, and that’s okay
As Mohannad mentioned, being product-led is about more than just having a great product. You need alignment across your teams and organization to create a structure and culture for the product-led growth strategy to flourish.
It takes time to get everyone on board, change your workflow, and rearrange priorities and perspectives. It’s okay if PLG takes time, though, because it was never meant to be one-and-done: as your users and industry change, so will your product.
The insights your product-led growth strategy needs
Hotjar’s product experience insights give you the context you need to make product-led decisions. Review Heatmaps and Recordings and hear directly from users with Feedback and Surveys.