How does Product Led Growth Work?

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Product Led Growth (PLG) focuses on ease of acquisition, irresistible retention and monetization through the compounding benefit of using your most engaged users to bring new users.  

Taking behavioral psychology into account and reducing the time it takes for new users to experience the value of your product, products built with a product led approach are designed to elicit moments of joy in your user base.  An experience they can’t help but queue up for, tell others about and ultimately increase adoption of your product.

This is very different to how we created products ten or twenty years ago.  Functionally we’d build a great product, solve a real (functional) user problem then hand it off to marketing to create a go to market plan to grow adoption.

That was Growth

But sustainable growth?  

Not so much.

Want to know the real secret to growing your product adoption and getting viral take up?

How does Product Led Growth work?

A Product Led Approach to Growth

Organisations that have put into practise Product led growth use compounding loops to acquire new users, instead of linear funnels. This allows constant growth in acquisition and understanding who their users are. 

The new user starts using the product, realises value within a short time and drives new users into the ecosystem. Your users become your sales and marketing team. 

Product Led Growth Examples

One of the most common Acquisition loops is the Word of Mouth loop, where your new user uses your product, loves the experience and tells others.

Other loops, like Survey Monkey, start with the New User creating a Survey, Collecting responses.  Respondents, who are exposed to the Survey Monkey experience, later become future survey creators.  As a casual Acquisition loop, a percentage of the survey respondents become new users of the product.  

You see Apple subtly doing the same each time you reply to an email on your iPhone and this message “Sent from my iPhone” automatically appears in your email signature.

Miro uses a product led growth loop when new users first create a whiteboard.  To experience the full collaboration benefit of the product, they need to add new users to the board.  All users are able to use the product and experience the value first hand before upgrading to a paid service.

Building for Product Led Growth

First thing is first, you need to understand your end users and what their motivations to participate in your Product Led approach to Growth.

User Motivation

There are three reasons your user is motivated to participate in your acquisition growth loop:

1. Personal 

By having others use the product, the user gains personal utility.  The product is only valuable when it’s shared and other users are on the platform with you.  

Consider any communication product (phone, SMS, Zoom, Whatsapp, Slack, Facebook, MS Teams, Miro, Figma, Jira, Notion). The more people you know using this product, the more utility it has for you.  Sharing family photos on Facebook is only fun when your friends and family are on there too.  Collaborating on a piece of work in Jira, Notion or Miro, is only valuable when the rest of your team is on the same platform.  

The more users using the product, the greater value there is for the user.  To get the most out of the product, new users are personally motivated to share the product with their friends, family, colleagues or peers.

2. Financial 

Otherwise known as incentivised referrals, the user is financially rewarded for referring others to the product.  The financial motivation is traditionally the most used and has been around for a long time.   

Motivation is artificially created through programs like Friend Get A Friend, where Mobile Providers would offer existing users something of value (credit on their account, more data or $X) when they successfully referred a friend.  

Other organisations, like Uber and Lawpath, offer their users their own personal referral code or link that provides them a financial value when they bring a new customer through that link.  

3. Social 

Social or word of mouth referrals are when the user gains social capital by inviting others. Being the first of their friends to discover the product (in a consumer context) or gloating to their peers in their community that they found this product first (in a business context).

Knowing your user well is key to being able to design your product to tap into what will motivate them to share your product to new users and grow adoption of your product.

The most sustainable however, is looking at how your existing customers use your product, removing friction in the customer journey, creating an experience which allows them to experience the value of your product (solving their problem) faster, cheaper, easier than any alternative and making it easy for them to share the experience with others.  

That is, building your product for those Aha! moments of happiness that precedes the act of sharing, reviewing, recommending, referring or any other growth activity needed to increase product acquisition.

Designing with Product Habits

Pairing a reason for your customers to act and share your product with others, is designing your product with habit creating triggers.


Basically that means, from the onset, designing your product with alerts and notifications that help your user by letting them know it’s their friend’s birthday (Facebook) or that their colleague just posted (Linkedin) or there has been a new comment to their design (Miro, Figma) or that their task has a new update (Jira).  

These alerts trigger your user to come back to the product to complete an action.  This could be posting a Happy Birthday message to your friend (Facebook), participating in the discussion your colleague started with their post (Linkedin) responding to the comment on your design (Miro, Figma) or completing a task (Jira).

Mapping the customer journey and designing habit triggering alerts into your product, helps bring your user back into the product increasing Retention.  Though, these habit triggers should be relevant and help the user complete their task rather than driving users back to boost a retention metric without creating value for the customer.

Product Led Go To Market Approach

Product Led Growth has created a new way to acquire customers and Go To Market approach.  

1. Self Serve – 100% Product Led

Where users purchase the product and onboard themselves, the Product team is often accountable for the whole Self Serve experience.   Using Self Serve as a Go To Market strategy is effective where the cost of a sales team is high and the target segment is relatively small with a lower willingness to pay.   An example is your Netflix subscription.

2. Bottom Up – Starts Product Led, PQL for Enterprise Sales Teams

Where the Sales team acts on expansion opportunities on top of a user’s self serve experience.  The Product team is accountable for acquisition, retention and monetization but the Sales team receive Product Qualified Leads (PQL) that they can close as an enterprise contract.  An example is Salesforce.

3. Sales Assisted – Product Led User Discovery. Sales Led Conversion

This is often the channel introduced by enterprises moving to Product Led. Users evaluate the product themselves as self-serve and the Sales team assists in closing the sale. The customer acquisition cost is less than the top down enterprise process and the Sales team complete the monetization side.


4. Top Down – Traditional Sales Led

In a traditional Sales Led approach, the Sales team works on pipeline generation with customer prospects to sell the product to.  Mainly enterprises or large companies, the buyer and their users rarely experience the product before purchase.  The end user doesn’t experience the product or realise the customer value through self serve.  

Product Led Pricing Strategy

Once the product has been designed for growth with acquisition loops or flywheels and retention habit triggers built in, it’s time to consider your pricing strategy.  

In a product led approach, we’ve designed a product that allows users to experience the value of the product, share with others and realise they can’t live without the benefits our product provides. 

Product Led Pricing Approach

With customer value realised, there are three ways that your pricing strategy or monetization can scale in a Product Led model:

1. Feature based 

This is where the customer purchases a plan or commits to a pricing package that includes a list of features.  As they want to add more features, they need to upgrade their plan.  Examples include Shopify or Figma.  

2. Usage based 

Usage based pricing is based on the customer’s usage metric.  This could be the number of users, licences, usage of a feature, data used or other usage variable.  Slack is an example of the number of users.

3. Outcome based 

This is one of the most aligned pricing approaches to the core motivation or value the end user is seeking from your product.  Based on this alignment, it is the most scalable for growth. An example is the per ticket sale pricing that Eventbrite offers.  Both your company motivation and the customers motivation (get more sales, get more attendees) is aligned.

In Product Led Growth organisations, Indirect Monetization is more important than direct monetization. 

These indirect monetization opportunities come from utilizing your customers to bring new users to the product.  Your users bringing new users is the most competitively defensible business monetization model over paying external advertisers where you’re competing with other businesses for those same users. Moreover, new users getting referred from people they trust is more powerful than being interrupted with an ad.

In product led organisations, Product has accountability for Acquisition, Retention and Monetisation.   

Growth culture and process is about

Making an observation → asking question → forming a hypothesis → making a prediction →  testing the prediction → Making another observation 

Want to Unlock Your Organisation’s Product Led Growth?

Get the support you need from experts with 10+ years experience in Product Management and Product Led Success.  Hire a Product Rocket Product Consultant or Upskill Your Product Team with Tailored Product Training.

Irene Liakos

Irene Liakos

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