Product-led growth does not equal "freemium".
That's a myth. A common industry misconception. A red herring.
The truth? There are MULTIPLE motions you can add to your PLG ocean that'll attract and convert users into paying customers. You can even mix 'n match Burger King style to create a unique strategy that works for your business.
Ready to find the Big King Sandwich to compliment your chicken fries?
Let's tuck in.
What is a PLG motion?
A PLG motion is a bottom-up GTM approach. Your product takes center stage and is responsible for attracting and retaining end users.
In a nutshell, it turns the traditional role of sales on its head.
- Your enterprise sales team doesn't need to hustle to get a demo meeting with C-suite executives.
- There's no lengthy sales funnel and onboarding process.
- You don't need to secure the sale before users can experience your product.
Instead, the buy-in comes from the end-user first. With no barrier from upper management, users can test drive your product immediately and self-serve to a paid plan.
In fact, 67% of U.S. customers prefer self-service to dealing with a sales rep.
Let's look at an example.
You're a social media manager for a mid-market organization. You need to create high-quality social media graphics but don't have the design skills or access to high-end programs like Adobe.
A quick Google search leads you to Canva, a free-to-use online graphic design tool. You sign-up for the freemium plan and start creating your images. Soon, you need to collaborate with other members of your team as well as different departments on designs.
To collaborate on internal visual content like strategy presentations and customer-facing social media posts, you need to upgrade to Canva For Teams, a paid tier. You have a meeting with your department head and pitch the idea of upgrading everyone's individual accounts to access the team features and other important features like ISO 27001 certification and compliance.
You get the green light, and Canva goes from a handful of individual end users to multiple paid seats in a single click.
6 PLG motions to supercharge your SaaS strategy
As mentioned earlier, finding the right PLG motion for your business is a mix 'n match process.
What might work for one company won't be the best option for another. You need to look at the pros and cons of each motion and select the one that makes the most sense for your business strategy.
The good news? You are not stuck to the same mix 'n match order for life.
You can create a unique blend of motions that'll work together to help you achieve your end goal and set your SaaS business up for the next evolution, product-led sales.
Create a freemium version
You don’t need to implement a freemium strategy, but it’s always good to know why it is such a popular path for PLG companies.
A freemium PLG motion is a customer acquisition model where you give users partial access to your product for free without a time limit.
While it can help lower your customer acquisition cost (CAC), generate plenty of qualified leads, and reduce your marketing spend, there are some drawbacks.
|Freemium pros||Freemium cons|
|There is a low barrier to entry. Users are more willing to try something when it costs nothing.||Free users have low conversion rates.|
|Free users can act as powerful word-of-mouth product champions and grow your customer base.||There might not be enough incentive for a free user to convert to a paid plan.|
For some companies, like Zipline, a mobile game development company, the freemium model is profitable. Unlike its competitors, Zipline chose freemium to gain market share from its competitors, who charge $0.99 to download the game and monetize via in-app purchases and mobile advertising.
However, the freemium model doesn't work for everyone. If you're not careful, you can quickly burn through your reserves by supporting a large number of freemium users.
Then, there is the numbers game. You could have 18 million daily users but only 156,000 paying customers. If you don't have a healthy self-serve flywheel to convert your freemium users, your business will never be profitable.
Product-led growth companies often fail to nurture new prospects, onboard them efficiently and provide a clear path for a user to grow towards a paid subscription.Kyle Poyar, Operating Partner at OpenView
If you're leaning towards freemium, here's how to make sure the motion will create paying customers:
- Give users an incentive to convert: Don’t give away all your features. Keep some of the good stuff gated and use it to increase your free to paid conversion rate. For example, Toggl Track, gives a way a ton of value with its free plan. However, it limits the capabilities that would benefit teams. You can use this same tactic to limit feature usage for free users. Slack, prompts you to upgrade when your workplace hits 10,000 messages and you’re trying to search your chat history.
- Create a sense of urgency: Highlight and educate your premium features to draw attention to missed value. How do you do that? Schedule a pop-up or an email campaign to remind users of the freemium plan limitations and create a sense of FOMO by showing users what features they’ll unlock with a paid plan. ProdPad uses this strategy by creating masterclass videos and tooltips for each feature.
- Improve your onboarding process: It's critical for driving adoption and helping active users understand your product value. Use a SaaS onboarding checklist to help your customer success team point new users to the feature’s that’ll get them to their “aha” moment. When you sign up for Buffer, a social media scheduling tool, it prompts you to choose where you’d like to start within the onboarding process. Creating this choose-your-own-adventure scenario helps the user see the value in Buffer faster and decreases churn.
When implemented correctly, freemium can boost your growth rate in the early stages and help secure your spot in the market.
Offer a free trial
A free trial is a customer acquisition model where you give the user partial or complete access to your product for free with a time limit.
It's a quick win-win for both you and the user. You get to show off what makes your product amazing, and users can see what all the fuss is about without any risk.
It's a popular motion with top product-led companies like Datadog. You get complete access to their product for 14-days with caps on some of the features.
However, a free product trial is not a perfect solution. Here are some pros and cons to consider before making a decision.
|Free trial pros||Free trial cons|
|It gives you a competitive edge if free trials aren't standard in your industry.||If free trials are standard in your industry, users will expect to be able to test-drive the product.|
|It creates stickiness and encourages users to invest time into your product.||There are no guarantees triallers will use your product after signing up.|
Hubstaff is an excellent example of a freemium failure and free trial success. When the time tracking company began, it used a freemium model in hopes that its users would become word-of-mouth champions.
However, that didn't happen. The free plan was costing Hubstaff money, and not enough users were converting onto a paid plan.
Hubstaff switched to a free trial model, changing the free plan to $15 per month, and the results are astounding.
Despite losing some users, the company made an additional $7,895 MRR from previously free accounts. The increase in MRR reduced costs, freed up resources to invest back into the product and sped up Hubstaff's growth rate to $500k MRR.
You shouldn't worry about driving away users by asking them to pay for what you've built. If you've built something useful and unique, put a fair price on it, and people will pay.
Dave Nevogt - Co Founder at Hubstaff
Try usage-based or per-seat pricing
Usage-based or seat pricing is a go-to strategy for SaaS pricing models.
It tethers your profits to your customer's success and can lead to faster growth and profits. If your customer increases usage, that means their business is growing, and so does yours as a direct result.
It's also a one-two punch for retention. B2B software companies that implement usage-based pricing have a higher retention rate than traditional subscription-based models and have a 137% net dollar retention.
However, it’s not an ideal option for everyone. Here are some drawbacks that you'll need to consider.
|Usage-based pricing pros||Usage-based pricing cons|
|Users find it appealing to only pay for what they’ll use and directly links value to the price paid.||Sticker shock can cause self-serve users to churn if usage unexpectedly increases.|
|There's little friction to adoption with low start-up costs.||Usage-based pricing lacks the same upfront commitment as an annual contract.|
|When usage increases, you'll experience a surge in revenue in a short period of time.||Your revenue can fluctuate as users can change their usage, and you're not guaranteed a steady flow of income.|
Let's look at how a successful usage-based motion can grow your PLG company.
Datadog attributes much of its success to a usage-based pricing motion. It removed friction for adoption and made getting started with the product a no-brainer.
Datadog allows customers to adapt their usage according to their business needs. This helps to balance the business's need for predictability with the customer's need for flexibility.
Scott Buxton, former VP of Finance, Datadog
Create interactive product tours
Here's the thing.
Setting up a free trial or freemium structure takes time and resources. Often, that comes at the cost of your engineering team, who are distracted from improving the main paid product.
If you're not ready to take the plunge with one of the other product-led motions, an interactive product tour is your ticket to slowly moving towards a product-led growth strategy.
It's the best way to show off your product's value without giving away anything for free.
Front, a customer communication hub, uses this strategy to sell its products. When you sign up for the Front product tour, it takes you through the useful integrations and allows you to test drive the features before asking you to fill out a contact form.
It works because the end-user knows what to expect, and the product feels tangible before entering any credit card information.
Give users a taster
You're in the grocery store on a Saturday morning. As you turn the corner into the sweets aisle, a woman greets you with a chocolate platter from a new brand.
She's offering free samples with no strings attached.
It's irresistible. You're getting something for absolutely nothing.
…But why would a brand want to hand out free chocolate? Because getting a product into a consumer's hands is more valuable than pushing a sale. You're allowing the person to experience your product and form an opinion on your brand.
If you've done a good job, that taster will whet their appetite, and you'll make a sale.
Many studies show how tactile touch can alter our purchasing decisions, but how do you replicate that with a SaaS product?
By creating user experience tasters.
Hubspot uses this tactic with the Website Grader Tool. It's free, only requires your email address, and will audit the SEO of your website in seconds. Once you have the report, it prompts you to take the next step to improve your website - signing up for the freemium version of HubSpot CMS.
Why does this technique work?
You're getting a "yes" each step of the way and lowering resistance. It slowly builds trust and makes saying "yes" to a paid plan feel like a natural progression, not a massive hurdle to overcome.
How to further monetize users through PLG tactics
A part of product-led growth is the land and expand motion.
The key to its success?
Finding the right accounts for expansion revenue opportunities.
You'll automatically know when a user is likely to buy, expand, or churn.
How do you find your product-qualified leads that are most likely to convert?
1. Connect Breyta's integration with your CRM
2. Configure your customer fit score
3. Breyta will surface the top users and accounts based on product usage and engagement data
By connecting your CRM to Breyta, you can quickly identify your hottest leads in real-time, save time, and focus on nurturing leads with high buying intent signals.
The best part?
Your data is no longer living in a silo.
Breyta is your single source of truth. It combines all your customer data from CRMs to product analytic platforms to give you a holistic view. In the blink of an eye, you'll know if a user is showing churn behavior (low product engagement) or the perfect candidate for a land and expand motion.
Wrapping it up
There is no one-size fits all PLG motion.
You need to experiment and find the growth motion that suits your business and where you want to go.
If you're an early-stage PLG start-up and can't afford to build a freemium product, don't. Create an interactive product tour and use it to funnel leads until you can afford the engineering cost.
Your pricing should always be an ongoing and iterative process. It's how you learn what works and how to stop absorbing extra costs preventing your growth.