There’s lots of writing about Product Led Growth (PLG). What is it exactly, what are the benefits, and how to get it right.
Yet I’ve read relatively little about the key question: when should a startup even try to take the PLG route? And I’ve heard many misconceptions about it.
As a PLG founder myself (quick plug for tagbox.io), it wasn’t at all an obvious choice, and I was personally surprised by so many aspects of it over the past couple of years, I wanted to jump into the conversation with this short post.
I’ll start off by saying that even though we went with PLG, I still don’t think it’s the best choice for most startups:
First of all, it’s not a good fit for many companies and products. Specifically, if you’re planning on enterprise contracts of $10k+ a year, those are almost impossible to do with PLG.
Second, It takes a looong time to create a working PLG pipeline. How long? It took us 9 months, but I commonly hear of companies that took 1.5 years and more to get any consistent flow of customers going.
The reason for that is that there’s no cheating in PLG. In order for a pipeline to work, you need to achieve all of the following at a high level:
- an ongoing lead-generation channel
- A website that conveys the value prop and converts users
- A good onboarding flow that explains the value within a couple of minutes
- A good product that can give long-term value
- Figure out a good business model that gets freemium/trial users to convert into buyers
With Sales-Led, you only need #4, and the rest can be plowed through with good salesmanship.
Getting all of these right takes time and multiple iterations, and time is exactly what early-stage startups don’t have a lot of.
At this point, you might be saying to yourself — hi, PLG sounds like a terrible way to get started! I’ll just start off with some good ol’ sales, and change my model later, once I have some time to breathe.
Both because it rarely gets easier after you fundraise, and mainly because as hard as it is to start with PLG, it’s endlessly more difficult to transition to PLG once you have a working sales pipeline going.
Why? Because it will mean shifting focus to a less lucrative model for that 1.5 years or so. It means saying NO to those enterprise customers that you’re so used to getting with additional services and customizations. It means telling your salespeople that you’re moving their leads to self-service, costing them money. And by that time, you’ve already built so much software that’s not suitable for self-service, because that was never a priority. Trust me — there are zero sales-led startups with good onboarding.
Okay okay — can we do both then?
I believe this thought goes through the mind of every founder who’s considering PLG. It certainly did for us, and we did try it for a while, until we understood that it’s basically impossible.
The reason it’s impossible is the different costs. With outbound enterprise sales, you need to reach out to many people to get some calls. You then need to make a lot of calls to get a serious prospect. Finally, you need to spend a lot of time with said prospect in order to close the deal. And actually even after that — customers won through sales will expect a lot more onboarding, training and support after the sales process is done.
To support those efforts, you’ll need to charge them accordingly. Unit-economics-wise, it adds thousands of $$$ to your CAC, meaning you’ll need to raise your prices substantially. If you’re pricing your product at $200/month — you’ll need to change that to $2,000/month.
If you’re doing PLG and putting that $200/month on your pricing page, it’s going to make it that much harder to explain to those enterprise prospects why you’re charging them such a premium. I’ve had many such conversations — turns out that just because they want to get extra, doesn’t mean they’d like to pay extra. People are strange that way.
Also, and maybe that’s where I should’ve started — there are just not enough hours in the day for a small team to do both PLG and sales. Each of them individually is just so unexpectedly time-consuming.
“Dang, son!” You might be saying to yourself at this point, “Sounds like PLG is terrible! Let’s put it in a box and lock the lid for good!”.
Wait, let’s give it a chance. PLG does have merit, and lots of it.
It can give you a serious competitive advantage. In our case, there were many expensive, complex, demo-gated enterprise solutions, and very few self-service solutions. As a PLG company, when a potential buyer googled solutions, they’d be able to try us out way before the competitors’ salesperson got them on Zoom. That made us the benchmark to beat.
Also, in some industries, talking to sales is just not what customers expect. If you’re selling to developers, that’s a no-brainer, but also when you’re selling to designers, marketers, and others — they usually like to just try things out on their own, not getting on dozens of sales calls with software providers.
Honesty is the best policy
A huge benefit of PLG is it’s impossible to lie to yourself about what your clients want. We started with two huge enterprise customers even before we had a product. It took us months to understand that they didn’t really have a burning need for what we were selling — they just liked working with us and being innovative.
With PLG, the fact that their response is unmediated makes it 100% honest and in-your-face feedback, every step of the way. There’s a saying that startups should optimize not for growth, but for learning. If that’s true, there is no better teacher than your no-touch analytics metrics.
PLG customers are the best
Since we did do PLG and outbound sales in parallel for a while, we do still have some sales-won customers. While I love each and every one of them, each of our PLG customers is a “better” customer — more engaged, faster to close, requires less support, provides better feedback, and is generally more committed to the success of the product.
It might be counter-intuitive, but I’ve learned that PLG actually drives more conversations with customers. Being highly engaged, they keep in close touch, email often and are usually not shy about getting on a quick Zoom call. They care so much about our product because it solves a deeper pain than it does for our sales-won customers, and so it’s important for them to let us know about every issue or idea they have to improve their work.
PLG allows for very low Cost-Per-Acquisition
As PLG is low-touch, the only costs of obtaining a client are the marketing spend and technical costs (which are usually very low).
This allowed us to price our product at about one-tenth of the price of our competitors — opening up markets that couldn’t afford a product like ours before, as well as giving us an advantage with those larger accounts. That’s a huge competitive advantage, especially if you’re the first to offer a self-service product in an otherwise sales-driven market.
Easy to scale
If and when your PLG takes off, scaling it is going to be much easier than scaling a sales-led product. After all, they’ll need to hire and train more salespeople; more customer success and support; more developers to be in charge of platform customization.
And you? All you’ll need is to crank your marketing up to 11, sit back, and enjoy. Well, maybe you’ll need to do a few more things, but you catch my drift.
PLG is fun
Founding a startup is not just science, not just cold analysis and execution. Startups have hearts, and they share DNA with the founders. If you’re passionate about product (as I am) — you’ll want to build a great product that people love. If you’re more salesy and like to handle those big-ass enterprise deals that take 15 meetings to close, you’ll might prefer to go the SLG route, and that’s perfectly fine.
I would definitely not recommend doing PLG without a strong product manager and UX designer. You have to get your product to be amazing, and that’s a huge ask even from the best of talents.
But if product runs in your veins, there’s nothing like the feeling you’ll get when you watch a user log in to try your product, instantly gets what you meant, get that ah-ha feeling, and then comes back again and again.