Product-led growth is at the heart of marketing growth. Spreading the word about your product is integral to gaining new customers and clients, but marketing a new tech product is different than selling the latest Nike kicks or a new cereal. Slick magazine ads and product coupons aren’t enough for people and companies to invest in technology.
Not only are you starting from scratch regarding awareness, but you likely have a tight budget and a niche market. Let’s explore the challenges of marketing a startup product and the best ways to overcome these challenges.
Product-led Growth Builds Bottom-up Adoption
You have spent countless hours planning and building your product while ensuring a good market fit. Now, it’s time to let your product do the talking. In fact, product-led growth (PLG) focuses on end-users, which ultimately allows your product to act as the primary growth driver. Specifically, customer acquisition, conversion, and expansion rely on ensuring your product can convincingly attract and engage new users.
Moreover, this approach seeks to seamlessly move them from an introductory freemium model to becoming paying customers. Ultimately, by prioritizing user experience, you can foster lasting relationships and drive sustained growth.
“The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.” Peter Drucker
Do you use Slack? How about Dropbox? If you signed up for the free version before upgrading your subscription, you know first-hand how PLG works. You may not know these companies grow more efficiently and quickly with this model.
“Today, there are 21 large public companies with a PLG model—including all of the top IPOs in 2019,” according to OpenView Partners. “That number continues to rise as more PLG companies IPO annually.” Evidence also suggests that these companies perform better after their IPOs, scaling faster. “For typical SaaS companies, high growth is key. But our data suggest that PLG businesses often have lower growth rates than their peers until they reach the $10 million ARR mark—after which the inverse is true. Metrics emphasizing growth rate too early could detract from the promising high-growth engines at the heart of a PLG business.”
Laying the groundwork for this level of success all starts with a simple but intuitive product hook.
Set the Hook for Bottoms-up Adoption
What’s your hook? If you can’t answer that question, you’re not ready to go to market with your PLG strategy. Knowing what sets your company apart and how it solves your customers’ pain points is critical to facilitating bottom-up adoption.
Once you’ve set and baited the hook, it’s time to make it as easy as possible for a mass audience to adopt your product. Hint: That means making it free! But it also requires you to prioritize ease of installation, out-of-box functionality, and a stellar user experience. Ensuring your customers see the quick time-to-value clarifies your value proposition and why they should upgrade to a paid subscription.
Part of achieving this goal is understanding what buyers want. As Vivek Saraswat, a Bay area product leader, advisor, and investor, points out, “Your buyer is not necessarily the same as your user, so understanding the buyer’s value proposition is crucial for the sale.”
Follow the data, and it will lead you to the features that are your selling points and show you where to focus your R&D for future iterations. And with a PLG strategy, reinvestment in your product is the key to everything.
Metrics that Don’t Work for Product-led Growth Companies
The money that PLG-led companies save on marketing and sales budgets is reinvested into product development, allowing the companies to create new features and respond to user needs. These investments pay off in the long run, leading to better customer retention and new customer acquisition. But OpenView also points out that many metrics companies are used to focusing on may not work for PLG.
- Growth Rates — “Metrics that emphasize growth rate too early could detract from the promising high-growth engines at the heart of a PLG business.”
- CAC Payback: “Public PLG businesses spend 44% more than their SaaS peers on R&D costs (product and engineering). Lower sales and marketing expenses partially offset that, but it is incredibly difficult to calculate the return on investment for the product itself.
- LTV/CAC: “This classic SaaS metric doesn’t work for PLG companies, mainly because it doesn’t consider some of the core pillars that make PLG businesses attractive: low churn and the chance for revenue expansion from accounts.”
- Logo Retention — “How do you measure logo retention in a bottom-up adoption model in which you may have…dozens of individual users from an organization, each with their account?”
So, what should PLG companies be focused on?
Keep an eye on your Natural Rate of Growth (NRG) — the speed at which your company grows organically. It’s also wise to monitor organic signups and incremental recurring revenue that doesn’t include the involvement of your sales team to understand this KPI.
Calculate Your NRG
Natural Rate of Growth = 100 x Annual Growth Rate x Organic Signups (%) x ARR from Products (%)
Increasing Your Reach Through Your Website
Making a PLG strategy work is all about reach. You must cast a wide net to find buyers, drawing from a vast pool of users. And in the digital age, achieving this goal means driving traffic to your website. Website traffic growth is a crucial marketing KPI that needs to be monitored closely. According to Geckoboard, “a monthly growth rate of 10–20% is generally considered a good benchmark.”
A functional, mobile-friendly website is table stakes — a startup cannot function without one — but with so many site-building tools and experienced web designers available, web design is the easy part. Getting people to visit is where it gets tricky. Driving traffic to a new product site often means paid ads, but organic traffic is king in a product-led model. That means your content matters.
Not only does your web copy need to be clear, concise, and SEO-friendly, but it must also address the core issues your product solves for future clients. In other words, when potential users turn to Google looking for an answer to your problem, your website needs to surface to provide the solution. Unless you’re in a tiny niche, the competition will be fierce, and a few pages of web copy may not be enough to win the search battle.
Content marketing can help. Creating and distributing valuable content establishes your company as a thought leader, boosts your SEO rankings, and gives you something to share on social media. Pulling potential customers to your site with well-executed, SEO-friendly content is the first step; you then need to convert them.
Website Design Elements That Boost Conversions
- Clear navigation — Make it clear where you want your users to go and what action you want them to take.
- Content layout: People browse, and you need to make it easy for them. Clear headlines and bold headers are vital to drawing visitors’ eyes to your most important site elements.
- Strong, recognizable branding: Your website sets the tone for your branding everywhere else — from Instagram to your packaging (if you have any), so design with that in mind.
- Intuitive, intentional color palette — Choosing a color palette is more than choosing your favorites. “Your color palette should highlight key information and make it easy for visitors to navigate to the places on your site where they can make a conversion.”
- White space — No one likes an overly busy website. “Today’s consumer can look at about two or three lines of text at a time.” Wisely used white space can keep users moving through your site without getting overwhelmed.
- Responsive design — Meet your customers where they are. In a mobile-centric world, your website must be responsive and work seamlessly on every screen size.
(Source: Evenbound)
Super-Charge Conversions with These Site Elements
- Clear value proposition — You’ve got them to your site; now it’s imperative that “site visitors should feel you have something of value to offer them and know right away what makes you stand out from the competition.”
- Fast loading times — Slow sites kill conversions. Research shows pages that load in 2.4 seconds have about a 1.9% conversion rate — at 5.7+ seconds, the conversion rate was just 0.6%.
- Social proof — Your users exist in a world where they can Yelp every restaurant and dig through Amazon reviews for the best products. Having testimonials from existing customers, writing case studies, featuring industry experts, and showcasing your awards and achievements can help make the sale.
- Strong CTA: Your potential users must know what you want them to do. Your CTAs are not the place to sell soft!
- Inbound links: Getting inbound links is one of the most challenging parts of SEO optimization, but it is also essential. One great way to get inbound links is to contribute thought-leadership pieces to outside blogs and publications with links to your site.
(Source: Evenbound)
Implement these tips to make your website the hub of all your marketing efforts and place your product at the center.
Get to Know Your Customers with the AARRR Framework
Acquisition. Activation. Retention. Referral. Revenue.
These are the keys to the AARRR framework — which is, in turn, the key to understanding your users, their journey, and your funnel. This section will break down each part of the acronym to make sense of this critical marketing framework.
Acquisition
Where are your users coming from? This is the question at the core of fine-tuning acquisition. Unfortunately, this question is becoming more challenging to answer. Apple’s decision to deprecate IDFA and replace it with App Tracking Transparency (ATT) and SKAdNetwork (SKAN) has made mobile attribution on iOS difficult. Third-party tracking cookies are also on borrowed time. The challenges of tracking the customer journey have grown — but it’s not impossible.
Ultimately, there are three fundamental questions startups must answer to understand acquisition:
- What channel drives the most traffic?
- What channel is driving the most traffic that converts (i.e., the most valuable traffic)
- What channel is the best value (i.e., has the lowest customer acquisition cost)?
To find these answers, Melanie Balke, CEO and founder of The Email Marketers, suggests using the Bullseye Framework to identify the best channels to focus on. As Balke says, “After brainstorming every channel, focus on one channel and test its success for your business in a small-scale version. Suppose you see success, scale that channel. If not, move on to testing another channel. It’s an acquisition channel testing version of the MVP process.”
Activation
We all know that signing up for a product — or even downloading it — doesn’t mean you use it. How many unused apps are on your phone? How many games have you deleted shortly after downloading them? In other words, the acquisition does not equal activation.
[callout] “The time between when the user signs up and when he says ‘Holy cow, I love this,’ that is an activation in a nutshell.” — Melanie Balke
Consider your onboarding process to improve your activation rate. By guiding users through your product, teaching them how to use it effectively, and, importantly, providing valuable tips and tricks, you can ensure users move smoothly from acquisition to activation. Additionally, depending on your product, offering extensive customer support may, in fact, be worth providing. Ultimately, these strategies can significantly enhance user experience and engagement.
As Balke points out, “SaaS businesses usually give extensive onboarding support and provide an account manager/customer success manager (or whatever you want to call it) to walk you through the platform and show some standard solutions to get you started.”
Monitor your data closely to identify user pain points and enhance the experience. As Archana Madhavan, Instructional Designer, states, a quantitative approach to onboarding can boost conversion from sign-up to activation.
Perfect onboarding to get the user journey started right.
Start simple — “Introduce concepts and vocabulary that might be new to your users and explain how they bring value to their business.”
Show and tell — “Video is also a powerful medium, especially for complex products requiring more explanation.”
Be contextual — “Onboarding at its core is a learning process, so use education techniques to teach users and build their confidence.”
(Source: Intercom)
Retention
Retention is the (not so) new black! After years of spending money on user acquisition, marketers realized that retaining those users makes good business sense. Increasing customer retention by just 5% can boost profits by 25% to 95%, according to Harvard Business Review — but retention is even more integral to PLG strategies. Satisfied customers help spread the word.
Harvard Business Review also says that “it’s 5 to 25 times more expensive to acquire a new customer than to retain an existing one.” Investing your time and budget into understanding how to retain users is good for the bottom line. But what do you look for, and how do you optimize for that action?
Dig into your user data and listen to what it tells you, then get creative! When Twitter realized that users who follow 30 people are more likely to return to the app, the company began suggesting popular accounts to new users at sign-up.
Perfect the user journey to keep users longer
- Map out the user journey from sign-up to activation
- Create a version of this funnel in your analytics tool
- Identify your biggest drop-offs
- Find opportunities for experimentation
(Source: Amplitude)
Referral
At the heart of product-led growth lies customer referrals. Satisfied customers are your best salespeople — spreading the word about your product to friends and colleagues. And the best part is you don’t have to pay them.
[callout] “If you build a great experience, customers tell each other about that. Word of mouth is very powerful.” — Jeff Bezos.
Retention rates can give you a good idea of customer satisfaction, but understanding their willingness to advocate for your product is another matter. Knowing your Net Promoter Score (NPS) is an excellent place to start. The NPS is a simple way to understand customer experience by asking users how likely they are to recommend your product to someone on a scale of one to ten.
Another way to look at this is to know your customers’ viral coefficient, or the number of users a customer refers to you. “A viral coefficient of two would mean that one customer on average refers two new customers to you,” according to Balke. “Your viral coefficient needs to be larger than one to grow.” The compounding growth of your viral coefficient has the potential to escalate quickly.
(#) invitations sent per user X (%) conversion rate = (#) Viral Coefficient
Revenue
Ultimately, everything you do is about increasing your revenue. The most efficient way to pad your bottom line is to increase your Customer Lifetime Value (CLV). Taking retention seriously and keeping your users around for longer while decreasing your customer acquisition cost (CAC) will maximize the profit from each user.
Build a Community — Add Value to Your Users
Having an enthusiastic customer base is great for many reasons. Still, if you can successfully turn that user base into a community capable of supporting one another and sharing knowledge, you will have a home run. “Traditionally, the playbook for building network effects has been the following: Get users onboard, connect them, and have them create content and conversations,” according to Platform Revolution. Following this playbook can help you amplify your product among organic users.
With relatively little effort from your startup, a community can add exponential value to your users. Establishing a community may be as simple as setting up a Facebook group for verified users to talk with each other. Companies like Anchor.fm and SquareSpace have gone this route. But even if you choose to build a bespoke option, ease of use is imperative: “Since a critical mass of connections is required before users experience value, the key to building a successful network is minimizing the friction in creating connections. Contact-list integration helped social networks like Facebook and LinkedIn gain initial traction by removing sign-up friction.” Monitoring the amount of user-generated content and the number of members will give you a window into the community’s health.
Tips for ensuring a healthy user community
- Make content creation easy
- Grow your creator base
- Don’t neglect search and curation
- Provide incentives to creators
Take Your Startup Marketing Up a Notch with Automation
Even PLG companies eventually move beyond grassroots marketing. Users will always remain at the core of your growth. Still, leveraging AI and automation will help kick your team’s efforts into overdrive — working more efficiently to communicate with customers, new and old. With the right tools and strategies, you can grow and hack better, smarter, and faster to optimize the right KPIs.
Supercharge Your Optimization
When your marketing team wants to understand what works and what doesn’t, start with A/B testing; changing a single element — such as an email subject line or the color of the text in your ad — can significantly impact marketing. However, A/B testing has some limits. It requires a large sample size — at least 1,000 contacts for an email — and with hundreds, or even thousands, of elements to be optimized, it can be a tedious, manual process. But AI is here to help.
Machine learning (ML) can turn your A/B testing into an iterative process—learning from each new test and applying it to the next. If your goal is to continually optimize your marketing and sales funnel, you’ll need AI and automation.
ML technology can recognize and optimize granular behaviors humans just don’t recognize.
- Track hovers and scrolls, as well as clicks
- Act on historical behavior patterns in real-time
- Observe micro-interaction patterns
- Automatically optimizes for the type of device used
- Perform next-click optimization
Whether you want to increase return on Google ads, target lookalike audiences, or provide a personalized customer experience, you’ll need the help of AI.
You see AI in action whenever you open the Starbucks app on your phone. Driven by data from 17 million active users, Starbucks uses ML to personalize the user experience. AI powers this top-rated app, from menu updates to targeted marketing, to determine the viability of new store locations.
“Personalization wasn’t supposed to be a cleverly veiled way to chase prospects around the web, showing them the same spammy ad for the same lame stuff as everyone else sees. No, it is a chance to differentiate at a human scale, to use behavior as the most important clue about what people want and, more importantly, what they need.” Seth Godin
Over at eBay, “Hiring copywriters worldwide to process emails for millions of users and billions of projects was not feasible,” according to Morph. “They turned to an AI-powered copywriting tool. ML-enabled them to automate the process of writing optimized email subject lines and Facebook ads.”
Of course, unleashing a machine on your creativity is a long process that involves some human intervention. Morph reports, “Before launching the tool, eBay automated a cascade of A/B tests to refine the subject line, email, and ad copy. The A/B testing helped ensure natural language use that satisfied eBay customers.”
The key takeaway here is that, ultimately, personalization—an expectation in today’s marketing landscape—simply is not possible without the help of AI-powered automation. Therefore, it is essential to find your tools and put them to work. By getting to know your customers will encourage them to share their positive experiences. As a result, they will go out into the world and actively help you sell that experience.
Bold Claims:
- Build a small in-house team. Empower them with help from agencies, contractors, and tech stacks for execution. No one externally has a magic pill, and they do not understand your brand and product as well as you do.
- Visual design and product marketing are skills we highly recommend you build within the core marketing team.
- Social media marketing isn’t a cure-all. It takes time, patience, and just as much effort as other forms of marketing.
- Don’t waste precious resources on branding early on. Focus on building a great product or service and leveraging a community to help spread the word.
Pro tips:
- Identify a tone or character of your brand and ensure you represent that across every channel.
- Don’t underestimate the power of copywriting.
- Answer the critical questions by building an avatar of your customers and understanding the market’s sophistication level.
- Automate the campaign management and execution process to increase your testing velocity across the entire AARRR funnel.
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