THE WORLD IS NOW PRODUCT-LED
The State Of Product-Led Growth - 2019 Edition
Editor’s note: This research publication was first published on Reinventgrowth‘s blog, in the Spring of 2019.
To uncover the challenges and competing strengths Product-Led organizations employ, we embarked on a mission to define Product Led experience in the SaaS landscape. To achieve this, we surveyed 40 SaaS organizations and 50 executives who own or lead Product-Led Growth practices.
The goal of our effort is to map, through real examples, Product-Led Growth techniques used and estimate how they affect the customer journey. We strongly believe that our massive data sample and thorough analysis will enable organizations to align internal teams and optimize product delivery.
Our commitment is to help reshape the SaaS growth mindset via the lens of Product-Led Growth GTM practices. The survey’s results guide those efforts, and this extensive report will highly reflect on them.
- Product-Led Growth Research Key Points of Analysis
- Product-Led Growth as a concept. Introduction and analysis of Product-Led growth pillars, challenges, and limitations.
- Product-Led Experience (PLX) ™. Introduction of the term and how it impacts fundamental elements of a Product-Led growth GTM strategy.
- Product-Led Onboarding ™. Introduction of a remodeled onboarding definition – direct outcome of Product-Led growth GTM practices.
- Product-Led Growth Metrics. Introduction of Product-Led growth metrics, SaaS organizations can consider when assessing product experience.
- Product-Led Growth KPIs & Analysis. Extensive analysis of Product-Led Growth and Product-Led experience KPIs & benchmarks
Overall more than 40 leading saas organizations like Hubspot, Intercom, Drift, Segment, Wistia, Userlane, Gainsight, Pendo, Bynder, Amplitude, Clearbit, Leadfeeder, Prodpad, Close, Typeform, Chargebee, Appcues, Lemlist, Yesware, Traveleperk, Filestage, Gosquared, Helpcrunch, Vuestudio, Hiver, Salesflare, Lemlist, Infogram, Supporthero, and Vidyard were examined.
Product-Led Growth Research List of Participants
At Product-Led Growth Hub, we believe research is the best way to provide insights about the fast-paced ever-changing SaaS landscape. Feel free to distribute and use this report in your own content and republish any charts or findings with the caveat of providing ReinventGrowth as the source of the original research.
If you would like to learn more about Product-Led practices we regularly share more insights, on product management, onboarding, growth, and SaaS practices on our blog.
The Product-Led Growth Challenge
Developing a product is hard. Delivering it efficiently to many customer segments is an ongoing challenge. It is one thing trying to increase a customer base and another retaining it for the long run.
Finding the optimal point that will make customers keep coming back for more, is a rather complicated task. Especially when we refer to B2B solutions applying to a range of personas and industries.
For a while now, the emerging Product-Led Growth practices, having as panacea products’ superpowers raise the one million dollar question: What defines customer experience?
While optimized product delivery comes first into mind, the challenges following product-led transformation are far greater.
Product-Led Growth Challenge 1: The Dominance of IT Consumerization
The surge to deliver flawless product experiences in B2B is rising. This occurs by the major challenge IT consumerization brings to the table. The frictionless, seamless experience B2C solutions provide is now expected in B2B too.
That shift in the customer acquisition process elevates the product as the primary growth driver. A fact that disrupts the ever-changing SaaS landscape once again.Is not enough anymore for a product to deliver. Product features, should onboard users and sustain engagement levels. Even beyond that first experience, Product-Led organizations retain and expand their user base by exploiting product features. While keeping retention and support costs low.
On the other side of the spectrum, inconsistencies in GTM practices, limited experimentation, and infinite handholding still have their fair share across the SaaS industry. The more organizations deny optimizing product experience, the harder it will become for them to drive accounts towards retention and expansion.
Product-Led Growth Challenge 2: The Rise of the Customer
The abandonment of long-term contracts has liberated customers. The subscription economy enables them to make up to 12 buying decisions within a year. If we add on that:
- The reduced switching costs
- Fierce competition
- and the strength of customers’ voice on social mediums
We have the rise of an era where a sole user can hold all the cards under his sleeve. This shift has raised customer expectations. Any product is now supposed to enable them to grow while offering a stellar experience at the same time.
Products’ complexity and their delivery across an array of devices make things worse. Context, of usage, is no longer optional. Quite the opposite. It is the one ingredient that should follow a Product-Led Growth strategy. Its absence can be detrimental to any SaaS offering. An effect that becomes stronger in case a systemic process delivering personalized and tailored experiences is not in place.
Product-Led Growth Challenge 3: The Abandonment of Silos
Getting rid of silos’ domination is the first step organizations’ should take when striving to deliver a Product-Led Growth Strategy. Customer-facing teams along with Product Management need common metrics when evaluating product experience.
Only the employment of a unified agenda and alignment across departments will bring clarity and optimize product delivery across the board. In the opposite scenario, confusion, misalignment, and decreased ROI will prevail.
Product-Led Growth Challenge 4: The Emerging Role of Product Management
Product Management is also changing face. Gut feelings are not supposed to lead to any more product management decisions. Not when a Product-Led Growth agenda is in place anyway.
Product leaders, have to evolve into data-driven experimenters. Experimenters relying both on qualitative and quantitative results. This shift will enable them to get internal buy-in from internal stakeholders and come closer to customers’ needs. The ongoing monitoring of passive feedback, user research, and investment in data will help them better understand the context of usage. Continuous Investment in a customer-centric approach enables the delivery of optimized experiences. While at the same time Product Management is able to build features compatible with products’ vision and customers’ needs.
The State of Product-Led Growth
The first reference we get on Product-Led Growth as a GTM strategy is from Asana back in 2013. As a term, it was later on analyzed by Nick Bonfiglio and Mickey Allon, founders of Gainsight PX, in “Mastering Product Experience in SaaS” back in 2017. If you are into the product-led realm for a while though, you most probably are familiar with everything Product-Led Growth (PLG) entails from Openview which coined and evangelized the term.
What is a Product-Led Growth GTM Strategy?
A Product-Led growth GTM strategy puts the product at the center of the organization. Product-Led organizations deliver products that anticipate and answer customers evolving needs. They achieve that by delivering stellar, customer-centric product experiences.
Representation of Product-Led Growth Ownership
In this instance, the product is not a part of the customer experience. In a Product-Led growth GTM strategy, the product is the experience. An experience so strong and optimized that converts accounts, in a matter of minutes. While it keeps delivering value on a consistent cadence in order to retain and expand them.
Product-Led Growth main pillars
Besides having their departments consider the product as the main growth lever, in a Product-Led growth GTM strategy there are other elements to consider. Most of them are also considered as challenges as we mentioned at the beginning of this paper.
Product-Led Growth Pillar 1: Company-Wide Alignment
“Customers attach value to products in proportion to the perceived ability of those products to help solve their problems.”
– THEODORE LEVITT, THE MARKETING IMAGINATION Part II
With the rise of digital transformation and the popularity of digital mediums across the spectrum, customer expectations are shaped way before they went ahead and try a product. Whenever those expectations do not align with the product offering, customers experience a value gap and abandon the product for good. The value gap represents the difference between expected and delivered (or perceived) value.
Product-Led organizations avoid that by reorganizing their strategy around the product’s mission and vision to improve collaboration across the board. They sustain their go-to-market messages across any medium and abandon silos for good.
Product-Led Growth Pillar 2: Investment in Product Analytics
A Product-Led growth strategy invests radically in product analytics to enable teams to understand where prospects leave their journeys and optimize positioning. However, this is only one facet of their role. Product analytics can also improve onboarding, embrace in-product engagements’ experimentation and prove what needs to get on the roadmap. With one way or another, product analytics become the single source of truth within a Product-Led organization.
Product-Led Growth Pillar 3: Barriers to Entry are Eliminated
In a Product-Led growth GTM strategy, the pricing model delivered should be a free trial or a freemium. This allows the customer to realize value sooner and accelerates the sales process. Put simply, in a Product-Led growth model organizations deliver a bottom-up approach. Ideally targeting users who in turn will promote the product to buyers.
Product-Led Growth Pillar 4: From MQLs to PQLs
Marketing Qualified Leads (MQLs) are replaced by Product-Qualified Leads (PQLs). Unlike the Marketing-Led model, where online analytic prevail in a Product-Led Growth GTM model product usage takes the lead.
One of the earliest mentions of the PQL concept is in an article by Tomasz Tunguz where the natural progression from MQLs to PQLs is described. The term, however, was coined by Gainsight PX in 2017 and is described as a prospect that signed up and demonstrated buying intent based on product interest, usage, and behavioral data.
Product-Led Growth Pillar 5: Product Virality
Organizations investing in a Product-Led Growth GTM strategy have products that include a virality component. They achieve that by investing in user research, UX and UI design, product marketing and building product features to engineer vitality.
Product virality is when the product users realize more value by inviting more users in their network or by sharing and evangelizing a product to grow awareness within their network.
Some popular product virality examples are:
- LinkedIn’s “Connect to Your Address Book” feature.
- Slack’s social virality.
- Intercom’s viral effect via the “powered by” link on its chat widget.
- Drift’s as with Intercom it takes advantage of its chat widget to create a viral-loop
- Typeform’s viral link on each form
The benefits following product virality? Lower acquisition costs and the creation of an eternal viral loop that is embraced (when the product meets its promises) by strong word-of-mouth-virality.
Product-Led Growth Pillar 6: Intuitive Product Features
One of the most important elements, of Product-Led growth, is the need to deliver intuitive products. Product features need to market, sell, and onboard users seamlessly by capitalizing at the same time on a self-serve sales approach. The ongoing value provided to users leads to increased levels of retention and expansion. As explained above the trend IT consumerization brings along is perceived as a challenge for SaaS organizations. Users desire to manage products that are not followed by a steep learning curve – the likes of Facebook or Slack.
Representation of Product-Led Growth Hierarchy of Needs
Product-Led Growth Misconceptions
Product-Led Growth Misconception One
Product-Led growth is supposed to be achieved only when end users realize initial value via a bottom-up approach. While we agree and believe that end-users should become product evangelists within their organization, internal teams need to also consider that this effect may reflect on buyers too.
A fact also supported by “The State of Product-Led growth” a recent research Openview conducted, where it was proved that 80% of companies have adopted in-product tracking and analytics.
Those data can be used to:
- Streamline the PQL segments and discover sales opportunities in disguise.
- Invest in a tailored JTBD onboarding framework that will accelerate time-to-value (TTV) for buyers.
- Streamline the onboarding journey by investing in team onboarding (breadth of use) that will deliver value to both buyers and end-users.
Product-Led Growth Misconception Two
Prospects are supposed to convert seamlessly only by product features, without Sales reps. intervening in the process. A fact supported by Forrester claims that 75% of B2B buyers are leaning towards a self-serve model.
While we agree with that claim and encourage the delivery of intuitive products, for solutions offering multiple value points (eg. Marketo) things can get more complicated. Furthermore, when enterprise deals are at play strategic decisions will eventually have to be taken. So Sales will have to eventually be implicated in the buying process.
To find the middle ground in those situations organizations should:
- Alter their pricing and offer free value that will make users keep coming back for more. Successful Product-Led organizations, like Hubspot and Gainsight PX, achieve that pretty successfully:
- They both invest in a freemium model. (Gainsight PX was also doing that at the time this research was conducted)
- They offer human assistance during the activation phase but only when a prospect has proved to be a PQL.
- While intuitive features are paramount to adoption, organizations need to invest in ongoing in-product guidance at scale, to lead accounts to retention and eventually expansion.
The kind of guidance that will be reinforced by insights product analytics and customer-facing teams provide. Put simply product experience should replicate as much as possible human assistance to accelerate growth and reduce associated costs.
This realization does not downgrade organizations’ imperative investment to keep creating products customers love. It only means that product guidance, when delivered in conjunction with usage, should sustain engagement levels and lead users successfully to upgrades.
Product-Led Growth Misconception Three
Product Qualified Leads are the sole point of reference in regards to in-product segmentation. While Product-Qualified Leads refer to prospects showing serious intent into buying a product they are limited to the acquisition and activation phase. Users fall into many different buckets post-purchase. It only makes sense that internal teams need to define which bucket goes to each user category and how usage will be assessed.
Representation of Product-Led Growth Misconceptions
What is Product Experience?
In a Product-Led growth strategy, the product becomes the vehicle delivering value to customers and summing up their perception about a company’s offerings. Always by considering all touchpoints, interactions, and engagements. When delivered right, product experience increases customer lifetime value, drives differentiation, and accelerates growth.
According to Gainsight, stellar Product Experience (PX) is delivered when organizations:
- Make data-driven product decisions and leverage analytics for anything that goes on their roadmap.
- Streamline onboarding and adoption by using product engagements that lead users to their desired results.
- Align the impact of product investments with new feature adoption, retention, conversions, and expansion.
- Achieve company-wide alignment and consider different business metrics per department but define ownership and accountability.
What is Product-Led Experience?
In many ways, Product-Led experience (PLX)™ complements the definition Gainsight provides. It capitalizes the same technology and relies on Product-Led growth to optimize its outcomes. But, what does this mean exactly?
Product-Led Experience (PLX) Foundations
- Serious investment in a Product-Led onboarding strategy throughout the customer journey. In this instance, onboarding drives the Product-Led growth GTM strategy at play and is one of the main differentiators in regards to growth.
- Investment in product analytics solutions like Gainsight PX, Mixpanel, Pendo, Heap, Amplitude and others. Those solutions provide real-time product insights and don’t rely on engineering resources to extract data. A fact that leads to:
- Reduced costs on engineering spend.
- Internal teams get product insights on time, constantly iterate the customer journey and promote Product-Led growth across their organization.
- Customer feedback is monitored on an ongoing basis and can be leveraged to the very end. Please note that depending on the product features each of those solutions provides product feedback can also be considered alongside product analytics.
- Onboarding can take infinite in-product paths, tailored to user-roles, and lead to initial and true value.
- Real-time product insights, allow heavy data analysis and the establishment of associated metrics that complement business KPIs. Product-Led Growth metrics prevail among those organizations. They extend the Product-Qualified Leads model to Product OQLs (Product Onboarding Qualified Leads), which rely on onboarding as a point of reference.
- The growth team is collecting input from internal organizations and act as the Product (Led) experience gatekeeper. It achieves that by putting together the insights provided by internal teams alongside Product-Led growth metrics and business KPIs. This fact alone results in a feedback loop and the optimization between high-touch and high-tech touchpoints.
Product-Led Experience as a concept
Product-Led Experience (PLX) ™, a term coined by ReinventGrowth, is delivered when organizations adopt a set of Product-Led growth metrics that go beyond acquisition. Those metrics are considered in conjunction with business KPIs and user mapping and their outcomes lead to an end-to-end representation of the customer journey. PLX has as its backbone Product-Led onboarding and serious investment in a technology stack that enables product data analysis on a day-to-day basis.
Representation of Product-Led Experience Delivery
Product-Led Onboarding (PLO)
As a business function, the magnitude onboarding has for SaaS organizations renders it more critical by the day. Especially now that customer experience needs to be stellar and user satisfaction established in the early stages of the customer lifecycle. When effective, user onboarding helps new users become proficient, and customers grow within a service. A poor onboarding experience on the other hand disappoints buyers, infuriates users, and leads to churn.
Being subject to the GTM practices, onboarding changes attributes with the ease a chameleon adapts to a new environment. On a Self Serve onboarding strategy it is fast and to the point, camouflaged behind scalable practices. On a Customer Success one, it becomes a thorough systemic process embraced by the hand-holding humans provide. Depending on its design, onboarding can include different attributes, basic setup help, training, and lead to experiences that create proficient and habitual users. When delivered right, it becomes a scalable and tailored educational framework, enabling accounts to grow and moving them down the customer lifecycle. When executed wrong, it delivers out-of-context messages, creates friction, and encourages drop-offs.
The Ever-evolving Onboarding Funnel
The multivariate nature onboarding successfully replicates Sales practices. The ongoing feature releases discourage the iconic sales funnel taxonomy. When a new release is up onboarding kicks in to deliver initial value and lead to account expansion. This process abandons the traditional sales model archetype, ending onboarding prevalence during activation. Being a continuous process, onboarding can now be assessed at every stage of the customer lifecycle.
The sales funnel has evolved into a circle where onboarding stands in its epicenter. Always waiting for the next feature release to be triggered again. The industry’s transition to Product-Led Growth practices also plays its part in this evolution. Onboarding no longer includes invasive, out-of-context in-app interactions presented at large in front of users. Product data analysis overrules the assumption implying that product engagements cannot supplement human activations. Quite the opposite. Onboarding now becomes the connective tissue between the two.
Product-Led Onboarding as a concept
Product-Led onboarding (PLO) ™, a term coined by ReinventGrowth, is a set of data-driven product engagement practices, that consider behavioral notions and users’ proficiency. As a strategy, it avoids random feature introduction to users. Instead, it exploits historic data and considers users’ skill levels when exploring a product for the first time. Contextual guidance is its main pillar. It enables organizations to double down on product experience and users’ workflow early on.
Representation of Product-Led Onboarding Loop
Following in that way, their progressive route to excellence. Before, even when a tailored experience was at play, the work was not done. A viable monitoring process following users’ in-app progression could not be established. Marketing Led practices may have introduced the use of analytics to track prospects’ online behavior. But failed to provide organizations with an extensive analysis of in-product behavior.
Product-Led organizations already capitalize on PLO practices. They combine insights from prospects’ online presence with those the product itself provides. Product managers are at the forefront. They are now able to pinpoint which features are sticky and where drop-offs occur.
Onboarding is finally able to be measured end-to-end and pinpoint where growth lies or churn lurks. In a SaaS world, where stellar customer experience is now synonymous to optimized product delivery, user onboarding acts as the Jack of all trades. It takes users by the hand, helping them accomplish what needs to get done.
Product-Led growth practices transform onboarding in a data-driven force. One that fills in the gaps humans are unable to, by eliminating confusion and sustaining engagement.
Eventually, it all comes down to what game is at play. The one ruled by humans, or the one led by machines.
Assessing Product-Led Experience
To make products competitive and an investment reflecting customers’ expectations, product teams ship feature changes and improvements daily. The word “agile” is part of their DNA, a quality following the onboarding process too. In-app educational practices introduce those changes on time, by providing the right context. Product management should measure those interactions on a day to day basis to reassure they yield the necessary results. Each department has a different set of business metrics for its input to the customer journey. Following this logic, Product-Led growth metrics need to supplement those insights.
They will add value to existing KPIs by assessing activation, retention, and engagement levels. Capitalization on product data, make this possible and delivers insights on every move a user makes in-app. Their learnings can pinpoint on which interactions humans should intervene, or the product can pave the way. In the always-online era where the power of a sole user can now jeopardize an otherwise “done” deal, onboarding is no longer measured as it should or lacking personalization. It becomes the single source of truth when referring to products’ capabilities. It is able to predict the anomalies caused by users having different context or skillset
Product Onboarding Efficiency (POE): Product Experience Evaluation Framework
In the foreseeable future, new terms will describe the User-Product intimacy levels. The first associated term established so far is the Product-Qualified lead (PQL). PQLs refer to prospects that demonstrated buying intent based on product usage. The term, however, is limited up to the point where a paid conversion takes place.
Product managers, need to create benchmarks associated with onboarding interactions, in order to assess product engagement levels. Having a dual mission, Product-Led Onboarding needs to deliver both initial and repetitive value. Thus, it needs terms like Product Onboarding Efficiency (POE)™, to assess its effectiveness. Those calculations can track and guide onboarding efficacy throughout the customer journey. Depending on which stage of the customer lifecycle a user is in, the POE relies on four product variables:
Product-Led Growth Metric: Breadth Of Use
Product breadth is an alternate form of (team) activation. It helps product managers realize the extent to a product is being used on an account level. It monitors account health and helps PMs proactively manage churn.
Product-Led Growth Metric: Depth Of Use
How many key features are utilized is something that always troubles product managers. Onboarding should enable users to progressively exploit product features to their maximum extent. Depth of use is about adoption, both on a user and account level.
Product-Led Growth Metric: Efficiency Of Use
The difficulty level to complete common tasks is a critical onboarding evaluation. To assess the efficiency levels product teams need the total number of users per account who begin a task versus those who complete it.
Product-Led Growth Metric: Frequency Of Use
Frequency of use shows how often and for how long users engage with product features. Reminding users why a specific feature is there in the first place or how it may optimize their workflow is also something reliant on onboarding activations.
The Product-Led Growth Adoption Loop
All things being equal, Breadth, Depth, Frequency, and Efficiency of use form an adoption loop.
Representation of Product-Led Growth Adoption Loop
The loop’s implementation is viable:
- when an account’s users exploit a product (breadth)
- by using its features extensively (depth) in an efficient manner (efficiency)
- and repeating those actions frequently. (frequency)
Again, the decisive role initiating this process is (team) activation. But for the adoption loop to be consistent, at every stage of the customer journey, all four metrics should be considered.
Product-Led Growth Research Overview
Product-Led Growth Research – Onboarding Strategies Examined Chart
- 40 SaaS Onboarding Strategies: In total, 40 Self-Serve (55%) and Customer Success (44%) onboarding strategies were examined.
Product-Led Growth Research – Industry Segments Examined Chart
- All three main industry segments were surveyed. Those segments were 52% Small-Medium businesses, 48% Mid Market and 11% Enterprise.
Product-Led Growth Research – Participants Business Roles Chart
The executives surveyed were:
- Product Managers(48%)
- Customer Success Managers and Growth Managers by (24%)
- and SaaS Founders (20%).
Participants were interviewed on their responsibilities, effectiveness, and organizational structure. Always, under the spectrum of the Product-Led Growth techniques employed.
Product-Led Growth Research – Team Onboarding Chart
Product-Led Key Takeaways
- Only 22% (mean ratio) across participants focus on Team Onboarding
- 16% of Self Serve adopters onboard only sole users.
- The majority of organizations onboard both teams and sole users. With 66% preference on a Customer Success and 47% on Self Serve onboarding.
- 33% Human Assisted and 11% Self Serve adopters focus on Team Onboarding.
Onboarding By Persona
Product-Led Growth Research – Onboarding by Persona Chart
Product-Led Key Takeaways
- 68% of the participants onboard more than one personas.
- While most participants onboard many personas (68%), a limited 20% onboards two and 16% only one
Product-Led Growth Research – Product Delivery Method Chart
Product-Led Key Takeaways
- User Acquisition. Acquisition rates, with 43% of participants favoring a freemium and 22% a free trial model
- Customer Segment. Whether or not product delivery fits the needs of the customer segments served. With an equal 14,5% preference across free trial & freemium.
- Product Value. Optimized product Value delivery, with 14,5% mean preference across free trial & freemium.
- GTM Strategy. The Go-To-Market strategy, with 14% opting for freemium and 8% for a free trial.
Product-Led Growth Research – Onboarding Ownership Chart
Data Analysis & Product-Led Key Takeaways
On Self-Serve the ownership is dispersed across:
- Product Management (81%)
- Marketing (77%)
- Customer Success (68%)
- and Sales (40%)
On Customer Success onboarding:
- Customer Success (76%) and Sales (69%) take ownership.
- At the same time, Product Management (38%) and Marketing (23%) come last.
From the human resources’ allocation, it resonates that the KPIs following the two strategies vary.
Those results are not surprising since:
- GTM Transition: The industry’s transition towards Product-Led Growth practices causes discrepancies in GTM practices.
- Multiple KPIs: A challenge following Product-Led growth practices is the different metrics internal teams consider when assessing product experience.
- Buyer-Seller Dynamic: The increased involvement of customer-facing teams is inevitable since both sides need to make strategic decisions.
- High Touch vs. High Tech: The argument that scalable practices don’t apply to a Customer Success onboarding strategy is still at play. Thus, the decreased involvement of Product Management.
- Silos abandonment, Product Led practices bring on the table, will not be achieved until internal teams learn to think as a unified force. The deployment of a unified agenda will bring alignment and clarify which parts of the customer journey may be neglected or falsely handled.
- Product Management, being the product’s main gatekeeper, should be involved and align with internal teams on every step of the customer journey. This is how product experience will become an intentional effort across an entire organization.
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