Product-led Growth, or PLG as it's known, is an extremely popular topic these days; it seems like it's the next big thing since the wheel and sliced bread.
Though it's talked about a lot, PLG is often ill-defined.
So, let's give it a shot.
What is Product-led Growth (PLG)?
Product-led Growth, or PLG, is a Go-to-Market strategy in which the methods of acquisition, retention, and expansion are built around the product. In this model, the end-user experience is the driver of Growth through every stage of the funnel from awareness, consideration, and then finally to decision.
Key components of this strategy include accelerating the customer's time to value and a self signup or freemium version of the product.
How Can a RevOps Team Support a PLG Motion?
Revenue Operations, as a function, is responsible for the processes, systems, reporting, and enablement that support the entire revenue organization, including Marketing, Sales, and Success.
While many companies use a traditional CRM and a marketing automation platform to manage the processes and data associated with their go-to-market motions, PLG hinges on end-users having a successful experience with the product.
This adds a layer of complexity to the overall processes and systems.
Since the RevOps team generally owns the GTM tech stack, they will be a key part of operationalizing the PLG GTM motion (two acronyms in one sentence; it wouldn't be a B2B SaaS article without that, right?).
An important idea comes from Eliyahu M. Goldratt's The Goal, a book all about process improvement written in novel format; if you are in RevOps, you're going to geek out on it.
It's called the Theory of Constraints.
What is the Theory of Constraints?
The Theory of Constraints states that "a bottleneck is any resource whose capacity is equal to or less than the demand placed upon it. A non-bottleneck is any resource whose capacity is greater than the demand placed on it."
According to this theory, if you can identify a constraint (or bottleneck) in the system and improve it, the system will become more productive.
Going through a PLG motion, you will need to measure your entire system to find that weakest link. From there, you use the data to figure out where something isn't working as well as it should (do I smell a feedback loop?), make improvements, and repeat.
It's all about ongoing improvements focused on the overall GTM process, not just its individual components.
What is a more productive GTM system? One that generates more revenue faster.
How does RevOps Help Operationalize PLG?
The framework for a PLG motion supported by RevOps includes four steps.
The RevOps Framework for PLG
- Processes: Defining which business processes that support PLG are essential.
- Systems: Aligning internal systems to support those processes.
- Reporting: Providing reporting and insights
- Enablement: Training and enabling GTM teams on your systems and processes.
If this sounds familiar, it's because RevOps supports PLG just like it supports any other GTM motion.
Let's dive into each step of the RevOps PLG Framework.
A PLG motion differs from a traditional sales-led motion due, in part, to the freemium component in which users can sign up for a product and maybe even get to the decision stage without ever talking to a representative from the company.
This can lead companies through a series of questions.
- How does this impact the inbound lead process?
- How are leads qualified through product usage and actions?
- At what point do end users need to engage with a sales or account manager?
- What is the user onboarding process?
- What is the customer support process?
- How do users escalate bugs and requests to the organization?
RevOps' job will be to steward the design, documentation, and implementation of these processes to support the product-led motion.
The Mobile Spoon illustrates what a Product-led Growth funnel looks like. For RevOps, this helps us when thinking about the processes with the Marketing, Sales, CS, and Product teams.
Having RevOps focus on the process will also drive the scalability of PLG.
When it comes to systems, it's important to note that traditional CRM, MAP, and CS tools can still be used in a PLG model; it's in the configuration of those systems and what information is pushed where and when that will be different.
There is a multitude of tools these days on the market, with more popping up every day. But there is a place for additional tools when employing a PLG motion.
One critical tool for any PLG motion is a Customer Data Platform (CDP), such as Segment. CDPs are used to connect behavioral data to accounts so the GTM teams can take appropriate actions.
When considering bringing on a new tool like Segment to your organization, you can check out this tool evaluation framework.
Connecting all your systems and ensuring the correct information is surfaced to your teams is one of the well-known responsibilities of RevOps.
The key when integrating systems is properly identifying which product signals are meaningful and should be pushed downstream into a CRM.
From there, create workflows and automation to alert the right teams at the right time.
Let's take an example case.
You have a user who has utilized five widgets in your product.
That data is then captured in the product and pushed to Segment (or another CDP) as an event. From there, it syncs to the CRM as a data point, and an automated process sends a Slack message to the account owner to reach out.
Another core function of Revenue Operations is collecting data and providing insights to other teams.
And, revenue will always be a KPI, no matter which go-to-market strategy is used.
But what are the critical data points around product and usage to inform whether product-led motion is successful?
You'll want to look at the classic GTM metrics:
- Acquisition – Signups and Qualified Leads
- Activation – Activation Rates and Daily/Weekly/Monthly Active Users
- Retention – Customer Churn and Revenue Churn
- Referral – Referral conversions and % of Customers who become referrers
- Revenue – Annual/Monthly Recurring Revenue and Average Revenue Per User/Customer
But there are some additional metrics to consider with a PLG motion:
ARR Return on Cash Burn
This metric represents the amount of incremental ARR generated for every $1 burned.
Free-to-Paid Conversion Rates
This metric will represent conversions from either a free trial with or without a credit card or a freemium product.
After Processes, Enablement is arguably the most critical component of the framework.
For a go-to-market strategy to be successful in its implementation, all teams must be operating in lockstep.
RevOps teams should document processes, definitions for metrics and distribute these among the Marketing, Sales, and Success teams. Each team needs to understand how a user progresses through the funnel (or flywheel).
This will enable the revenue teams to focus on revenue generation and keep everyone aligned with the same information.
So there you have it.
PLG is now a household word (if one or two people work in SaaS at the dinner table). The question now is how to empower the revenue and go-to-market teams.
Number one is to get the Revenue Operations function established.
The core competencies of the RevOps function - process, systems, reporting, and enablement - will empower the revenue-generating teams and operationalize the next big go-to-market strategy.
Now, I'm hungry—time for a PLG sandwich.