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In this series, we dive into product-led growth (PLG) and share insights from across General Catalyst’s network. Our first article explores the foundations of PLG, tapping the expertise of incredible product leaders. We hope this offers an introduction for how to think about PLG at the earliest phases of building a SaaS product. Stay tuned for more in-depth content as we explore PLG frameworks and tactics in upcoming articles.
When I partner with enterprise founders, one of the primary topics we discuss is go-to-market strategy. Founders often have questions about product-led growth (PLG), whether they’re building in the 0-1 phase or scaling and fueling growth. I draw from my operating days at Amplitude, where I led product growth from Series D to a direct listing and beyond and also at Lime, where I helped with the first market launch and international expansion. I also love sharing insights from the experts in General Catalyst’s network.
I recently discussed all things PLG with three of those experts at a panel event we hosted in our San Francisco office. The event brought together many early-stage founders and growth operators, including our three panelists: Janie Lee, Head of Product at Loom; Caroline Mack, COO at Spline and former product leader at Canva; and Lauryn Motamedi, Head of Product Growth at Notion. Janie, Caroline, and Lauryn are product-led champions and amazing PLG practitioners in B2B SaaS.
What is PLG?
PLG has become a common term, but it’s one that many people don’t fully understand—perhaps because the definition can vary, depending on who you ask. Janie Lee defines PLG as “being able to acquire, retain, engage, and monetize customers without a human touch.” Caroline Mack defines it more broadly, as a strategy rooted in “providing something valuable to your users and letting that value speak for itself,” which often manifests in viral sharing loops that encourage users to share the product with other people.
What are different PLG models?
Loom, Spline, Notion, and Canva each offer a great example of PLG businesses. Their models are all variations of freemium, which is often what comes to mind first when talking about product-led companies. Free trial and reverse trial are also common models.
Freemium: A mix of free and paid tiers, with the free tier limited by product features and/or usage. With a freemium model, free product access is not time-bound.
Companies like Canva, Spline, Amplitude, and Notion drive free usage with a tier that includes limited product features; they encourage users to upgrade for access to premium features and higher usage limits. This model works best for companies whose time-to-value might be unpredictable or highly varied between customers. With freemium, customers can get value from the product at their own pace.
Free trial: Users have free access to the full product for a certain period, usually 14 or 30 days. At the end of the trial, users must decide to upgrade or stop using the product.
Companies like Spotify Premium and Shopify use a free trial model. Free trials tend to work well for companies that have a relatively short time-to-value window. The nature of a time-based trial drives urgency for users to upgrade.
Reverse trial: A combination of freemium and free trial. A reverse trial gives users time-based access to the paid product, and at the end of that period, users have the option to either upgrade or downgrade their access.
Companies like Loom, Asana, and Airtable have free trials of their paid tiers on top of their freemium model. The trial gives customers a taste of the value of the premium features as an incentive to upgrade. It’s an increasingly popular way to balance the two models.
What is PLS?
Product-led sales (PLS) is a GTM practice that layers sales on top of the PLG motion. PLS has gained traction over the past several years—especially among more sophisticated SaaS companies that sell to a mix of market segments across enterprise, mid-market, and SMB that warrant differentiated strategies depending on LTV and needs.
Like PLG, PLS is rooted in a deep understanding of how users are engaging with the product. But PLS involves a human touch in the sales process and leverages product engagement and firmographic data to decide which customers are ready for a sales conversation and have a high enough potential LTV to be worth a sales touchpoint.
Here’s a hypothetical example of how PLS could work, based on Airtable’s product. Say five people at the same company are using Airtable and working together on a CRM. That’s a good signal that a salesperson should have a conversation with the customer about an enterprise plan. To build a PLS motion, you need to track and share data signals like these with sales (or your product specialists) so they can quickly get in touch with the customer. You can often spot revenue opportunities earlier than if you were to wait for them to proactively reach out to sales.
How are PLG and PLS different?
Textbook PLG motions tend to be self-serve, whereas PLS involves human conversations. PLG is about making the product’s value as clear as possible, so a user can experience the product and convert or upgrade without talking to a salesperson. PLS is about tracking product engagement for qualified users and enabling sales conversations at the right moments to discuss upgrades. In general, PLS tactics work best for mid-market or enterprise sales and are less relevant for companies that sell to the lower end of the market.
Many companies, including Notion, Loom, Airtable, and Canva, combine PLG and PLS tactics. You might have a PLG motion that uses a self-serve approach to drive initial conversion and a PLS approach to better convert higher-LTV customers. For example:
- For SMB customers, you might have a freemium model that encourages customers to self-upgrade to a paid plan when their usage exceeds the free limit or they want to use premium features.
- For enterprise customers, you might layer on PLS to monitor enterprise usage of the free plan, and reach out when the customer has built a habit around the free product and is gaining traction among their team.
What’s the best org design for PLG?
With PLG, there will typically be some degree of product involvement and some degree of marketing involvement.
- Centralized ownership: Often PLG sits under a head of growth, with marketing and product reporting to that leader. If there’s no separate growth function, PLG tends to sit within marketing for earlier-stage startups and shifts toward product as more engineering resources are required. The benefit of this structure is alignment and velocity: you have aligned goals and can move fast without too much coordination overhead.
- Decentralized, cross-functional squads: In this model, growth team members usually report into their respective functions but work very closely together with shared goals. When Caroline was at Canva, PLG was owned by different “squads” that sat within different product teams. Each squad had a data analyst, a front-end engineer, a PM team, and a designer. At Loom and Amplitude, growth responsibility is shared between product and marketing, with teams jointly owning growth outcomes but reporting into their respective functions.
Companies typically evolve their org structure as they progress on their PLG journey. Often, companies will start with a centralized team to optimize for velocity and alignment. They’ll shift to a decentralized squad structure when the company wants to scale the success with a centralized team to the broader organization and make growth a shared responsibility across the company. It’s not uncommon at all to see companies boomerang between these structures as the company’s PLG maturity evolves.
For more about hiring and structuring your growth team, read this article which I co-authored with Elena Verna, an accomplished PLG advisor and Head of Growth at Dropbox.
How do you measure the success of your PLG motion?
Your measurement strategy will depend on factors like your PLG model, product, and market. It will also depend on the maturity of your company. Don’t expect a one-and-done process; any significant change to your goals or the macroenvironment should trigger a reevaluation of your metrics.
Common categories of PLG measurement are conversion, distribution, virality, customer value, and efficiency. Here are some approaches that were implemented by these growth leaders.
Conversion: Free-to-paid revenue
The revenue generated from free customers upgrading to paid is one way to measure how impactful PLG is to your business.
But very often, product usage is not the only reason your customers end up converting. When your GTM motion involves product, sales, and marketing, you can leverage a weighted attribution method to account for influences from marketing and sales in influencing the sale. At Amplitude, we did this by systematically tracking campaign influences along the customer journey to roughly figure out each team’s contribution to overall revenue.
Distribution: Number of active customers using the free product
Many companies view PLG as a strategic play to gain mass distribution in the market, versus a way to optimize for short-term revenue. The free user base should be continuously growing in the hope that they will convert to revenue down the line as the customer companies grow. So a good measure of that strategy working is the growth of the free user base.
Virality: Number of users referred by existing customers
A great way to know if the product is delivering enough value is assessing the rate at which your existing users are inviting new users. When they refer others, they’re doing the acquisition for you, versus you acquiring customers through marketing and sales efforts.
Customer value: Activation rate, expansion rate
Caroline underscores time-to-value as an important signal of PLG success. When a user comes into your product, how quickly are they finding value? How long does it take them to get the output they need, or do something they’ve never been able to do before?
Time-to-value is difficult to quantify, but the first step is to define the value moment (typically, these are critical features that create a “wow” factor and encourage users to start building a habit around your product). There are points in the user journey you can measure, including initial activation rate, team creation rate, and team expansion. Caroline also suggests looking at qualitative measures. For example, what are your customers saying when you launch a new product? How much hype are you generating? Gauge their response to understand whether you’re delivering meaningful value.
Efficiency: Cost of acquiring and serving paid users
As your company and go-to-market strategy mature, you may want to measure efficiency alongside growth metrics. Ultimately, PLG is supposed to help you scale customer acquisition and lower cost-to-serve to help you grow more sustainably and efficiently.
Janie notes that inefficiencies come into place as your PLG motion scales. At Loom, Janie and her team closely look at efficiency metrics like CAC by channel and CAC payback. A PLG model should help you reduce the cost of acquisition and increase LTV relative to CAC.
Is PLG right for your business?
While you might think of PLG as the solution to your customer acquisition and efficiency problems, it’s not the right motion for every B2B product. “Don’t just opt for PLG or PLS because your investors told you about it, or because you’ve seen it work well for another company,” Lauryn advises. “Talk to your customers and do what’s right for your product and go-to-market.”
If you’re an early-stage founder thinking about your initial GTM motion, consider the following questions:
- How intuitive is the product experience? Is it conceivable that someone could come across the product as it is today and understand how to get up and running by themselves? Is the product’s value evident, or does that discovery process require a human conversation? This can change over time as you invest in improving the product experience, but it can entail product development costs and time.
- Who is the target buyer and what are their buyer habits? Some buyers won’t want to talk to a sales rep or hop on a Zoom for a demo. If you’re selling to developers, they might want to organically discover the product and use it on their own before deciding whether or not to adopt it. A Chief Finance Officer, on the other hand, might want to talk to a sales rep and understand how the product could work best for their organization.
- How much consideration does the price point warrant? The more expensive your product is, the higher-touch your sales process might need to be. If you’re at a lower price point, a user may not think too much about putting it on their credit card, and a self-serve checkout experience will likely work better.
Remember that “product-led” isn’t a binary concept. Your go-to-market will fall somewhere on a spectrum between product-led, marketing-led, and sales-led, and you’ll tune that dial over time based on what’s working best for your customers, while you will always have a dominant motion that works best for your product. And your North Star should always be helping your users get as much value as possible from the product.
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Explore our PLG series:
- The Early-Stage Founder’s Guide to Product-Led Growth
- Experimenting with Product-Led Growth
- Sales-Led vs. Product-Led Growth
