A Guide to Product-Led Growth: Examples, Advantages, and Disadvantages

Intro

At its core, product-led growth is a go-to-market strategy centered around the product as the main driver for customer conversion and revenue growth.

While the glamorous definition focuses on the product “selling itself”, the main idea is to make the product so intuitive, useful and well-designed that it drives adoption organically. Instead of traditional tactics, the product experience takes center stage as the sales and marketing mechanism for product-led companies.

The term PLG was coined by Openview’s Blake Bartlett in 2017, though companies like Dropbox were already running the PLG model before it got a specific name.

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Interestingly, roughly 58% of SaaS companies now use the PLG model — according to a survey by ProductLed. The same survey found that PLG companies perform better post-IPO, compared to non-PLG SaaS companies.

This post will cover:

• The 3 common PLG models
• Examples of SaaS companies using PLG
• The benefits of product-led growth
• The drawbacks
• Tips for adopting PLG

3 Common PLG Models

1. Freemium
2. Free trial
3. Mixed model

1. Freemium

A freemium model allows customers to use the product for free, but with limited functionality. To access more features, users will need to upgrade to a paid plan.

With freemium, users:

• get to use the product
• see why they need the product
• upgrade to a paid plan when they need to

Dan Martell, an Angel Investor and Founder of SaaS Academy, highlights four rules for assessing if the freemium model is the right fit for your product. According to him, only go freemium:

1. If the potential number of users for your SaaS is in the tens of millions – otherwise it won’t scale

2. If free distribution is an advantage

3. If your product has a straightforward value proposition

4. If the cost of serving additional users is negligible

1. The potential number of users for your SaaS is in the tens of millions — otherwise, it won't scale.

Let’s do the math:

Say your software costs $100/yr, and you have a total of 25 million customers. If only 4% convert to the paid plan, that's 1,000,000 customers. Multiply that by $100, and you've got $100 million in revenue.

Depending on your goals, you may not need that many paying customers; however, if you plan to scale to around $100 million in revenue, this is a good rule.

2. Free distribution is a competitive advantage

“Only go freemium when it is a competitive advantage to do so.”, he states. Free distribution:

• Removes the friction of a monetary transaction
• Makes it easy for customers to try your product
• Can help you scale quickly

However, free distribution also comes with downsides - it can degrade the perceived value of your offering and make it hard to monetize down the line. So you should only choose a freemium model when the benefits outweigh the costs.

3. Your product has a straightforward value proposition

Here’s a good example of Ranktracker’s primary value proposition:

If the product is complicated, difficult to use, or needs a salesperson to close, don't go freemium. Consider creating a simplified version.

4. The cost of serving additional users is negligible

If the marginal cost to add a user is low, freemium is possible. Companies can use freemium at little risk since each additional free user has minimal impact on their costs. This creates opportunities to grow the user base dramatically and build revenue over time through premium upgrades.

Having these questions in mind as you develop your business plan and go-to-market strategy can help you make smart strategic decisions upfront before you spend money on development. It might even make you rethink the product to develop and market to serve.

2. Free Trial

Free trial users can access all functionalities and features of a product for a limited time, after which they’re required to pay for access. This model works well since a sense of FOMO (Fear of missing out) is created once the free trial ends.

Although requiring credit card information may cause some friction, this strategy often improves conversion rates for free trials. This is because customers who provide payment details are often more invested and inclined to actively evaluate the full benefits of your product during the trial period.

According to David Axler, Chief Strategy Officer at Wave, free trial models can be optimized by following these tips:

1. Align your free trial to showcase your core value proposition.
2. Determine the right trial length based on your product's value cycle and what allows for a reasonable evaluation period. This could be 7, 14, or 30 days.
3. Identify the optimal trigger for when the trial starts - it may not be right when they sign up. Trigger it when they can properly evaluate, like downloading a file or running their first payroll.
4. Consider opt-in (no credit card upfront) vs opt-out (requires a credit card) models based on your user experience and goals.
5. Establish a trial nurture sequence with a welcome message, tips during the trial, reminders before it ends, and follow-ups for converters vs non-converters.
6. Tweak aspects like timing, length, nurture etc. over time as you learn what converts users best from trial to paid customers.
7. Treat your free trial as a product that needs optimization at every stage based on user data and behaviour.

3. Mixed Model

Companies using a mixed model offer potential customers a time-bound free trial of the full product experience. Users get complete access to all premium features and capabilities during the trial period, which typically lasts 14-30 days.

Once the trial period expires, users are downgraded to a limited freemium plan if they have not converted to a paid account. The freemium plan will allow continued use of the product, but users may:

• Face limits
• Lose access to certain features
• Get served ads

However, the key advantages of this mixed model are:

1. Users get to properly evaluate the product during the free trial, making them more likely to convert and stick to it long-term.
2. Downgrading to freemium allows non-converting users to still engage with the product in a limited capacity. This increases the chances of eventual conversion and better retention compared to completely blocking users after a free trial.
3. Freemium plans act as an educational marketing channel to upsell the benefits of premium plans. Users get a taste of the restrictions and are incentivized to upgrade.
4. Combining freemium plans and free trials leverages the strengths of both models. Trials reduce friction for user onboarding while freemium provides a continuous marketing channel.

Major products like Dropbox and Evernote use this mixed model successfully.

Examples of SaaS companies using product-led growth

1. Supademo
2. Dock
3. Missive
4. Numeric
5. TrustMary

1. Supademo

Supademo allows companies to create interactive product demos and trials without coding. Users can build multi-step product workflows, customize branding, restrict access permissions, and view analytics on engagement and conversions.

Their PLG strategy revolves around enabling product teams to quickly publish polished product demos that prospects can experience self-serve, driving more user engagement compared to static sales collateral.

Number of employees: 6

PLG model: Mixed model (Freemium & Free trial on paid plans)

Year established: 2022

Number of customers: 10K+

Revenue: 6 Figures ARR

2. Dock

Dock helps revenue teams create personalized deal rooms, onboarding plans, and client portals to improve the buying and customer onboarding experience.

It consolidates project plans, videos, proposals, and other sales and onboarding collateral into trackable workspaces that teams can easily share with prospects and clients.

Dock's product-led growth strategy centers around providing free access to its software to demonstrate value. Pricing tiers are strategically designed to convert users from free to paid plans. The Free plan provides enough value for small/mid-size teams. Then as needs scale, the Business and Enterprise plans upsell features like SSO (Single-sign-on), custom branding, and CRM integrations.

Number of employees: 13

PLG model: Freemium

Year established: 2021

Number of customers: 100+

3. Missive

Missive is a team inbox and collaboration platform designed to help teams communicate and work together more effectively through shared inboxes and conversations. It allows scoping of conversations into threads to prevent messages from getting buried and provides accountability with notifications so team members know who's handling

Missive's product-led strategy focuses on getting teams to experience the benefits of shared inboxes and threaded conversations firsthand. Once users experience the organization and accountability of Missive's intuitive interface, network effects kick in as they onboard fellow team members.

Missive then upsells paid plans for extra users and advanced features such as analytics and integrations.

Number of employees: 9

PLG model: Freemium

Year established: 2015

Number of customers: 3,250+

Revenue: 7 Figures ARR

4. Numeric

Numeric helps accounting and finance teams close faster, work smarter, and gain insights through workflow automation and real-time analytics on a unified close management platform. It provides tools to organize close management workflows, enable real-time reporting and analytics, and integrate with existing tech stacks.

Numeric's product-led strategy relies on a great free product to hook users and transparent in-app upsells to drive upgrades. Its generous free tier with core close management features allows users to experience the value of a simplified close process before committing. However, once deal volume and complexity increase, finance teams are incentivized to upgrade to a paid plan.

PLG model: Freemium

Year established: 2021

Number of customers: 100+

5. Trustmary

Trustmary is a software platform designed to help businesses showcase customer reviews on their website to build credibility and automate the collection of new reviews. It also allows the import of existing reviews from sources like Google and Facebook to consolidate in one place and enables the creation of stylish review widgets.

Trustmary’s product-led approach offers a generous free Solo plan with core features like review widgets, imports, and 200 monthly views. This allows businesses to experience the value of collecting and displaying reviews before seeing the need to upgrade as review volume increases.

Number of employees: 20

PLG model: Freemium

Year established: 2015

Number of customers: 10K+

Revenue: 6 Figures ARR

Advantages of product-led growth

1. It allows companies to expand into new markets

The self-serve and viral nature of product-led growth allows companies to efficiently expand and scale into new markets without heavy upfront investment.

Valterri YIlmaki, the Co-founder and CFO at TrustMary knows all about this.

“In our case…we have done business mainly in Finland and the Nordics and previously tried to scale the operations by hiring new salespeople.

However, the PLG approach opened a whole new world for acquiring new users and paying customers worldwide. It’s now easier and way cheaper to test new things, gather information from users, and use that information when developing the product.”

2. It’s cheaper than sales-led growth

Drawing on his experience with PLG, Michael Maximoff, the Co-founder of Belkins says, “I’ve realized how incredible product-led growth is when it comes to the financial aspect of growing a startup — money that would otherwise be spent on scaling marketing/sales processes went straight into product development.”

His view has merit, given that the self-serve model cuts down on costly sales efforts such as cold calls, account management, and sales commissions.

3. Product quality is much better

Michael Maximoff, who also co-founded Folderly, credits PLG with helping the company develop a more effective product. He states: “_We built Folderly, an email deliverability software to optimize outreach processes, and all of our teams worked together to ensure proper development and product-led growth. _

We noticed that the quality of the final product with multiple teams working on it at once was much better than when it was one team’s focus at the time.”

4. Customer acquisition cost is low

Having run a PLG model for more than 8 years, Philippe Lehoux, the CEO of Missive, explains:

“If you have success, the main benefit is your customer acquisition cost will be extremely low.”

5. Short sales cycle

Based on his experiences, Max Wesman, Founder and Ex-COO at GoodHire, says, “The long-term benefit of PLG is a shorter sales cycle which is often crucial to SaaS adoption and success.

Product-led growth models put the product first, and this helps speed up the entire development process and drive and improve customer experience, engagement, acquisition, and retention.”

6. It reduces dependency on sales and marketing teams

Product-led growth significantly lowers the burden on sales and marketing to manually generate every new customer through outbound tactics. With PLG, the product can attract and convert users without heavy lifting from sales and marketing.

7. Community building

“Successful PLG often fosters a community of users who share tips, tricks, and support, further enhancing the product's value.” — Ankit C.K. (Growth Lead at Supademo)

For example, there’s a community of over 23k Slack users on Reddit’s r/Slack subreddit.

In the screenshot below, a user asks for advice on how to set his Slack reply notifications to alert him only once for unread threads.

There’s also a subreddit, r/dropbox for Dropbox users to share tips and tricks, as well as ask questions.

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8. Simplicity

Simple in-product flows like one-click sign-ups lower the barrier to engagement. PLG also simplifies the user interface as well as the user journey, allowing more people to access and enjoy the product.

This simplicity powers viral growth and word-of-mouth referrals. Existing users can easily share and recommend the product without the need to explain complicated onboarding or features.

9. Word-of-mouth marketing

According to Parker Gilbert, CEO of Numeric, the foremost benefit of adopting PLG is word-of-mouth marketing.

“...We've observed a substantial increase in traction, particularly as users who've never interacted with us directly mention our product in webinars and other public forums.

This word-of-mouth marketing is incredibly valuable in a crowded market where otherwise we'd trail behind as a newer company, as it builds credibility and awareness organically.”

10. Collecting feedback is easy

Reaching out to users for feedback when you’re running a PLG approach is easy, and John Pennypacker, the VP of Sales & Marketing at Deep Cognition agrees with this.

He states, “…with a PLG model, we can gather valuable feedback directly from our users through in-app surveys and feature requests. This has given us an edge in continuously improving and evolving our product based on real-time user needs and preferences.”

Disadvantages of product-led growth

1. Saturation/Competition

According to Valterri Yilmaki, the competition amongst companies has increased because “Everyone wants to do it, so similar tools executing a similar PLG strategy are in every category. This can be seen as an advantage, but advertising, for example, is getting harder and harder.”

2. Absence of direct customer interaction

In PLG, Valterri also noted that the human connection is often missing. “_When doing outbound sales, you have possibilities to discuss with the customer and teach them how the product works, how it solves their problems and even help them to understand that they even have some problems that should be solved. _

But when doing PLG, the product has to be so good, that you don’t have to include human resources to teach customers.”

3. Supporting free users can be expensive

Michael Chen, the Head of Growth at Notta knows this too well. “Support and infrastructure costs are incurred upfront for users who may never convert. Managing these costs takes discipline.”

Parker Gilbert, the CEO of Numeric, echoes Michael’s experience: “Maintaining and updating the free tier demands considerable resources. Additionally, onboarding new users, who may or may not convert to paid plans, requires a careful balance of attention and investment.”

Remember Dan’s fourth rule for adopting the freemium PLG model? “Is the cost of supporting free users negligible?” If it’s not, you might need to restrategize.

4. Slow growth

Draven McConville, CEO of Klipboard, is especially familiar with this issue. “_One big problem is that you have to stick to it (PLG) for a long time. PLG requires patience and long-term investment, while standard sales-focused models tend to have quick effects. _

Making a product that people want to use and encouraging natural growth through product-led usage is a slow process that might not pay off right away.”

According to Philippe Lehoux, CEO of Missive, it’s important to acknowledge and prepare for how long growth can take.

“...It might take a long time before you find that solution which adds value to the customer. For us at Missive, we were prepared to experiment for a long time, regardless of whether we became successful or not.

5. Dealing with pricing could be a major headache

Unlike traditional upfront pricing, PLG requires an understanding of customers' usage patterns and willingness to pay over time. Gathering this data takes time, and Michael Chen at Notta agrees: “It takes time to figure out the optimal place to introduce payment and tiering. We had some false starts here before finding the right balance.”

At some point, figuring out the right pricing was also a challenge For Alex Kracov, CEO of Dock.

“I’ve changed pricing five times since we’ve started Dock. My biggest mistake was trying to overcomplicate pricing - at one point, we had an overly complicated a la carte model. Once we shifted to a simple per-unit model + platform fee then everything became easier. The platform fee was the best thing we did to increase our ACV and gate our premium features.”

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6. Requires careful onboarding design

In a sales-led approach, users are often led through the onboarding process by a sales rep - to understand how the product solves their problem.

On the other hand, PLG is mostly self-serve - so users figure everything out on their own. This means impatient customers would most likely churn at the slightest bit of friction.

The good news is, this problem can be solved. According to Debbie Moran, Marketing Manager at Recurpost, “Some users experience difficulties in the onboarding stage of the self-service mode. So we offer strong onboarding materials, tutorials, and user support to avoid problems for new users and ensure that they get the most out of RecurPost.”

Additionally, Philippe Lehoux mentioned some preventive measures the Missive team implemented.

“We’ve developed our product to allow us to address negative feedback on features or functionalities within the interface, and we strive to fix bugs early on — which are often a cause of support tickets. Likewise, we also have strong documentation in place.”

7. Finding product-market fit can be difficult

“Not every startup can adopt a PLG model; first, you need to build a product with an extreme product-market fit.”, says Philippe Lehoux, CEO of Missive. “_If you do find PMF, then you can adjust your pricing plan and marketing to embrace the PLG model. _

Even if you find PMF, you need to ensure you are offering a product in an industry where there is no large sales cycle and where all employees can make buying decisions. It's extremely hard to attain a product-market fit that can sustain a product-led growth model.”

8. Longer time to monetize

“As PLG often involves free or low-cost initial usage, monetizing users may take longer compared to direct sales approaches.” — Ankit C.K, Growth Lead at Supademo.

PLG relies on users discovering and adopting the product through self-serve models rather than big sales deals, so monetization often happens later in the user lifecycle.

Top PLG Metrics to Track

1. Customer Metrics

Churn rate - The percentage of customers that cancel or don't renew their subscription over a given period. Low churn indicates customers find ongoing value in the product.

Customer lifetime value (LTV) - Total revenue a customer contributes over their lifetime. High LTV proves the product's ability to generate long-term value from each customer.

Customer acquisition cost (CAC) - Cost to acquire a new customer. Understanding CAC ensures your margins and profitability per customer are healthy.

Net Promoter Score (NPS) - Metric gauging customer satisfaction and loyalty. High NPS means customers are happy enough to recommend your product.

. Revenue Metrics

Annual Recurring Revenue (ARR) - Total annual revenue from existing recurring contracts. ARR demonstrates overall business momentum and growth.

Monthly Recurring Revenue (MRR) - Total monthly revenue from recurring contracts. MRR shows ongoing momentum and trends at a granular level.

3. Engagement Metrics

Product usage frequency - How often customers use your product. High usage frequency indicates stickiness.

Time spent in product - Total time customers engage with your product. More time spent shows your product is valuable to users.

Feature adoption rate - Percentage of users that adopt and use new features. High adoption means new capabilities are providing value.

4. Growth and Conversion Metrics

Number of signups - Total new users signing up for your product. Signups quantify demand and market potential.

Activation rate - Percentage of signups that engage in core product behaviors. High activation proves market fit.

Conversion rate from free to paid - Percentage of free users that convert to paying plans. A high conversion rate validates that the product delivers the expected value.

Conversion rate from trial to demo - For sales-assisted parts of the funnel, high demo booking rates indicate user interest.

Tips for PLG Success

Here are 3 tips from Philippe Lehoux, CEO of Missive, for startup founders who are considering a PLG model:

1. Talk to your customers

You need to talk to your customers because sometimes, you add everything, but all you lack is a little feature that would set you apart.

When you have those conversations with your customers, your mindset will be about trying to understand their problems rather than trying to impose your solution.

_At Missive, we did not have an Assignment feature at the onset — in fact, we never designed the platform with it in mind, but talking to our customers helped us realize that for many, the pain point was about attribution of work, not just collaboration. _

So having Assignment made sense — and once we introduced the feature, more and more people found it valuable.

Pro Tip: Talking to your customers as often as possible would prevent you from lying to yourself.

2. Success might take a long time

Build your business and lifestyle around the fact that it might take a long time before you find that solution which adds value to the customer. If you accept from the get-go that you’re in it for a long time, and that it might take a long time, everything becomes easier. You might find yourself running experiments for quite some time, so it’d be good to prepare yourself financially.

This could mean;

– Having a full-time job, while you’re building part-time

– Having a part-time job, while you’re building full-time

– Taking on consulting gigs while you build

For us at Missive, we prepared ourselves to sustain our ability to experiment as much as we could, for as long as we could — without being in trouble financially.

3. Be realistic about your competitive advantage

Wherever you are, you always have some advantage. It could be economical, could be the fact that you have access to multiple resources, or the cost of living might be low. Find your advantage, and use it to your advantage.

Bonus tip: Introduce sales at the right time

Alexa Grabell, CEO at Pocus, discussed this extensively on an episode of the Grow and Tell podcast.

She stated,

"I feel like there's this cockiness that companies have when they're like, "We got so far without sales. We're amazing. We're the best." Honestly, every company hires sales at a different time. It really depends on what your product is, and what your company goals are. So if you are a company that says, "We have unlimited runway. We're not in a competitive market. We sell to developers," I would say stay PLG forever for as long as you can.

_On the other hand, if you're a PLG product but you're in a hyper-competitive market, or you find that your end users get locked out often on the journey, I would say go hire a salesperson. _

Put a human in there to figure out what the roadblocks are in the customer journey so that you can make sure that you are constantly iterating. There are so many people who say a PLG company isn't PLG if they hire salespeople before 10 million ARR. I think that's all BS (I don't know if I can curse on this). I think you hire a salesperson when it makes sense for your product, your ARR goals, and your company vision.”

Additional resources:

1. Reforge’s Product-led Growth Course, created by Elena Verna and Kelly Watkins
2. The Ultimate Product-led Growth Resources Guide, by Openview
3. Product-led Fundamentals Course, by ProductLed