Discover the secrets of rapid business growth from a growth marketing expert. What people to hire, how to manage a team, launch experiments, what tools to use, and a list of proven examples to inspire you.
Part 5: How to produce growth hypotheses
Part 6: Your growth marketing strategy template, guide, and examples
In this article, we have collected an extract from the article by Mark Roberge, Managing Director of Stage 2 Capital, former CRO (Chief Revenue Officer) of HubSpot, and a professor at Harvard Business School, and our own experience.
Mark teaches the course ‘Secrets of Silicon Valley Growth’ at Harvard. The goal of the course is to understand how product-led growth works. After the course, Mark compiled his observations on Product-led Growth (PLG) into this step-by-step guide.
The article contains the following:
That’s why we shared the shortened guide version and our PLG experience at Dashly. We follow some of the tips from this article to a T, adapt the others to the Dashly specifics, and are currently reshaping the rest, following Mark’s recommendations.
But first, let’s figure out the PLG meaning.
Product-led Growth is a business methodology in which user acquisition and retention depend primarily on the product. Following this approach, a company understands that the product is the most significant sustainable and scalable business development source.
When it comes to product-led growth strategy, there are two interesting observations regarding the metrics:
When you have just started working on growth marketing, make sure you have a lot of new users for experimentation, learning, and optimization. The more, the better. A more significant user flow facilitates faster learning.
To quickly acquire the desired user base, paid channels are optimal. It’s up to you to focus on user acquisition or monetization. Your goal here is to acquire as many users as possible for experimentation.
So, lead growth is the first step in your product-led market map.
Read also: 25 Growth Marketing Books to Skyrocket Success
After establishing the process of attracting users, evaluate if your product delivers the promised value. There are two ways to find out, and Mark Roberge recommends PLG startups use both.
He proposes calculating user retention by cohorts based on the acquisition date. Begin by defining a user retention metric (e.g., DAUs/WAUs/MAUs) or use a metric tailored to your product. This LinkedIn article covers choosing the ‘Quality Registration’ metric as a benchmark. It can be calculated instantly and is highly correlated with long-term user retention.
Belfour’s approach displays user retention in a chart, dividing users into cohorts based on the acquisition period. When user retention drops off, growth flattens.
If retention remains sufficient over time, as shown in the graph on the right, the product will grow. Your PLG business can move on to the third step only when your graph looks like the one on the right.
He suggests asking them a simple question, “How would you feel if you could no longer use our product?” and offering three answer options:
Ellis considers it a good result when more than 40% of users answer that they would be “Very upset.”
When using both methods, it is crucial to segment users. The goal is not to maintain retention at a stable level or to obtain 40% of firmly attached users to the product. Instead, a product-led company aims to keep a large segment of the user base in the product. This segment used to be “quality users.” In contrast, B2B companies in the IT sphere call it the Ideal Customer Profile (ICP).
18 business growth experts you should follow this year
What are Growth Loops? How It Can Scale Your Company
A Comprehensive Guide to Customer Led Growth (CLG)
At the end of 2021, we at Dashly conducted a Sean Ellis-style survey. Our product manager and head of product launched it in our service. Also, they called some users to interview over the phone. As a result, we received 200 responses and were able to evaluate our Product-Market Fit — how well our product meets market expectations.
We also found that users who would be upset if Dashly no longer existed worked in different types of businesses, such as SaaS and eCommerce. We then began to study how satisfied representatives of each of these groups are with our service and what features they use.
The interview became the starting point for a new iteration of Jobs to be Done research. We interviewed our most loyal users and determined what jobs they perform using our product.
As a result, we better understood our target audience’s pain points. We considered these ideas when creating a product roadmap for hacking business development.
Thanks! Here’s your copy of 100 growth ideas
After identifying the audience segment for your product, find a scalable acquisition channel with quality users at an acceptable CAC.
To calculate a reasonable acquisition cost for your PLG, estimate the conversion rates of paid channels and the user revenue per year (ACV) you can achieve.
At this stage, product led companies strive to find budget-friendly channels, often choosing virality and content as their primary acquisition methods. Cold calling and paid promotion require large budgets, so they are rarely used at this stage.
You identified the “quality users” and the acquisition channel. Now focus on turning free trial users into paid ones.
At Dashly, the growth department was formed a few years after the product creation. During that time, we had already learned how to:
Read also: Growth marketing vs performance marketing.
However, we faced a challenge: we wanted to grow by five times annually, but we only achieved a 1.5 times increase. Therefore, we needed to scale user acquisition.
Previously, our primary sources of the acquisition were content and virality. We realized that we could attract more new users by mastering paid channels. We tested various channels, dozens of offers, and creatives to find the best combination.
Throughout this time, we stuck to the PLG business model and kept in mind our North Star metric — the cost of one demo conducted for a customer. This is Mark Robberge’s North Star metric from the list.
If you want to master the hypothesis generation, check out this article:
It should include cross-functional specialists:
Most B2B startups striving for the PLG model separate their marketers and product people. This is wrong. Fragmented structure leads to local maxima, e.g.,
Cross-functional growth marketing team, on the other hand, have a common goal: attracting/retaining quality customers.
A fragmented structure splits responsibilities between marketing (acquisition and monetization) and product (retention) departments, but both can influence others’ tasks. Alignment leads to optimal resource allocation & North Star metric improvement.
In the early stages of a company’s development, this department typically consists of 2-3 specialists with multi-faceted skills, e.g., developers with design expertise or product managers with PPC know-how. As the company develops, product-led hackers focus on specific functions, buyer personas, and features.
The fastest-growing PLG companies divide developers into a Core department responsible for product development and developers working to improve the funnel. It allows better resource allocation beyond the product roadmap i.e. relieving bottlenecks.
Get your free example of growth marketing playbook with 40+ templates for successful experiments
Now, let’s look at product-led growth vs. marketing led growth.
In most IT companies, the product department has more power, so marketing cannot get resources and limits experiments at the top of the funnel, which they can influence.
Thus, the streamlined work of other departments with the product is one of the most valuable growth-marketing tips.
How it works in Dashly 👇
Our grow hackers were born within marketing. Again, this was related to our North Star metric — to attract more end users sales. In addition, it was much easier to conduct experiments at the top of the funnel. We could quickly achieve statistically significant results.
In contrast, experiments inside the product required much more time and resources.
For some time, this way worked great. We collected consumer experience information and data from:
And we quickly launched experiments using various no-code tools:
Thanks! Here’s your copy of 50 growth hacking tools
About 7 months after starting work, we realized a need for more resources and synchronization with the product people. The growth department receives a lot of inspiration about customer experience during experiments:
However, it took a lot of work for us to convey insights to the product department. Unfortunately, they could not implement it due to an overloaded roadmap and sprints. So now we are actually rethinking the growth-managers’ tasks based on this article’s recommendations.
We at Dashly want to help you build a compelling growth department. So here are a few tips based on our own experience:
Customers initially meet sales managers. However, they rush to qualify and close the deal. So according to the PLG strategy, a support manager should introduce the product, as they understand how to help users best utilize it.
Now, let’s consider PLG in sales. Customers prefer to learn about the product themselves. Once they see that the product solves their problem, they can bring other departments from their company into it.
The traditional reward model for bringing new customers forces sales managers to convince users to implement the product throughout the company.
The goals of the sales manager and the client conflict with each other. If the manager sells the whole package, the client pays for functions that are not used, and they do not see any benefit from it. Thus, a customer who could bring more end users from their company to the product reduces the check or even leaves.
Encouraging sales managers to increase the average bill allows them to connect the goals of the client and the sales manager and not kill the power of PLG.
How Dashly works 👇
Dashly has two funnels: self-service and high-touch.
Within this assistance, a department consisting of a personal manager, designer, analyst, and developer is assigned. The manager analyzes the customer’s funnel and, together with the team, tests trigger scenarios to increase conversion.
Read also: Your Growth Marketing Strategy Template with guide and examples
Both funnels start the same way:
The sales manager can conduct a product demo during the free trial period. It follows specific rules:
The best growth teams test multiple product-led hypotheses daily. Conducting experiments and implementing successful practices comprise a significant part of the team’s work within PLG principles. It can be challenging for a B2B startup to put experiments on stream, but you should strive to test at least 2-3 hypotheses weekly. Here are a few tips that will help you conduct quality experiments:
Plan the experiment. Here is an example of a well-planned experiment:
Plan weekly meetings
Discuss PLG experiments from the previous week, their results, insights, and ideas for the following experiments. Btw, you can find even more experiment ideas in our growth-marketing playbook.
John Egan from Pinterest recommends the “bottom-up” idea generation model. Following the PLG strategy, startups can encourage all employees to contribute during the idea-generation stage. Different teams have different experiences interacting with customers, which helps get more ideas.
Keep a journal of experiments
This motivates the team to analyze and document the results of PLG experiments deeply. It helps develop your growth strategy further. It also serves as a valuable source of information for new team members who have just started working with product-led growth.
Invest in developments that will facilitate experimentation
The best growth teams invest up to 50% of their resources in R&D (Research and Development). Let’s call it product-led development 😉
How best to use a developer’s time: ask them to launch a few notifications in the app to test a product-led hypothesis or invest their time in developing infrastructure so that other team members can test any message without the need to change the code?
You are on the right track if your developers spend time implementing growth marketing services to allow “non-technical” specialists to conduct quick and quality experiments.
We follow each recommendation from this list:
We have also noticed that the growth department needs to strive for independence from other teams. It is geared towards working quickly, while other teams may be unable to keep up.
Most often, if another team is involved in testing a hypothesis, we cannot experiment. Therefore, we try to plan a PLG hypothesis only if the inputs from another team are still being prepared. We reserve the time of the guys from these teams in advance if we need their help.
Want more ideas for your growth experiments? We’re ready to help 😉
Product-led growth framework provides a rare opportunity for B2B companies to create a sustainable competitive advantage.
Typically, IT companies make products hoping they will take off and be sold at a high price. However, there is always a risk that a group of talented developers from Silicon Valley will enter the market with a similar product at a lower price.
To check if a company has a competitive advantage, I ask: “Imagine talented developers teamed up, received investments from Sequoia Capital, reproduced your product, and sold it for half the price. Will you still be the market leader?”
Product led strategy is a business model that gives a competitive edge when preventing competitors from dominating your market. It’s challenging to beat rivals by cutting prices when they’re already zero.
PLG approach provides research and development teams with many users for experiments, studying, and iteratively changing product features and UX components.
If product-led growth model applies to your business area, but you do not use it, someone else will. If your company does not have a strong competitive advantage yet, there is always a risk of market capture by a competitor.
So, all startup led companies, act now and gain a competitive edge!
Software companies focusing on product-led growth strategy increase their chances of finding their Product-Market Fit. Many B2B startups prioritize revenue early on, but the product-led growth model suggests creating value first, increasing the chances of Product-Market fit and successful scaling.
It isn’t easy to implement a product-driven strategy after scaling. Many companies tried to add PLG after reaching $10 million ARR using a sales-based model, but none succeeded. And here’s why:
The main takeaway is that time is crucial. If you are at an early stage, think twice before trying to earn a few million ARR before turning into a product-led company. At this point, the chances of success are significantly lower.
Even if you test the product-led growth strategies and find that it does not apply to your business area, you still have a very suitable product and a customer acquisition funnel with high conversions and revenue. This is a good foundation for transitioning to a sales based model.
Read also: RevOps vs Sales Ops.
PLG guide for B2B startups in one picture:
Whether you’re a newbie or an experienced growth hacker, these must-read books will help you unlock the secrets of user acquisition, retention, and engagement. Think of them as power-ups in your arsenal.
Thanks! Here’s your list of must-read books on growth hacking
Still hesitating? Here are PLG stats to inspire you
There is a list of research and survey data that demonstrates the effectiveness of product-led growth model:
These companies are great examples of how product-led growth marketing can help businesses grow by offering value to users, building customer loyalty, and driving revenue growth.
If you want more examples and inspo for your business growth, subscribe to a growth marketing newsletter for a regular dose of insights
PLG means product-led growth. It’s a business strategy where user acquisition and retention depend on products usage. Hence, the product becomes a driving force for the company’s sustainable and continuous development.
There’s a product-led companies list. For instance, SaaS companies like:
To successfully implement a Product-Led Growth (PLG) strategy, you must incorporate self-service to allow your product to sell itself. However, this doesn’t mean there is no room for sales since pairing self-service with modern product-led sales can enable closing more significant deals without sacrificing PLG.
We have identified five primary characteristics of successful product-led growth companies. For a product-led growth strategy to be effective, some of the following criteria must be met:
PLG metrics are key performance indicators used to measure the effectiveness and success of a product-led growth strategy. Product metrics framework typically include:
They help product-led business quantify the impact of their PLG efforts and identify areas for products improvement.
Product-led growth business model should track and analyze key performance indicators (KPIs) for user adoption, engagement, and retention to measure product-led growth. This includes:
It is also essential to track revenue-related PLG KPIs such as:
Here are some examples of PLG tools: