Learn the fundamentals of Product-Led Growth from the bestselling author of Product-Led Growth in this practical, no-fluff course.
Here’s what you’ll learn:
✅ What it truly means to be product-led
✅ Why product-led growth is becoming of rising importance
✅ What the main benefits of product-led growth are
✅ How you can become product-led
✅ The role every team plays in creating a successful product-led business
And more!
Best of all, if you pass the exam at the end, you’ll get a PLG Fundamentals Certificate that you can show off to your colleagues. ????
Wes Bush:
All right, so now we're going to be covering the main benefits of product-led growth. Now, one of the main reasons why so many businesses have already opted to become product-led is because they wanted access to a dominant growth engine in their business. So I'm going to explain what that really means, but here's a few things that feed into building a dominant growth engine in your market. And one of the first ones is a wider top-of-funnel. And this is very interesting, because one of the first things I hear every time a company launches a free trial or a freemium model and they previously only had a demo request on their website is, "Wes, I now have 20% to 30% more sign-ups than I did before," and I've even heard as high as 100% increase in sign-ups versus the previous month. Why do you think that's the case? Why are these companies, as soon as they flip the switch and become product-led, why are they seeing so many more sign-ups for their product?
Wes Bush:
If you scratch your head, try to think of one thing or maybe two things that might be contributing to this skyrocketing amount of sign-ups you're going to get. Now, part of this reason is because you're capturing people in your funnel who are earlier in their customer journey. They're not quite ready to request a demo, but they'd actually love to test out your product and see if it's a good fit. And if you have an incredible onboarding experience, you can actually turn these evaluators into happy paying customers before they spend time evaluating your competitor's products. Now, while your competitors are also busy hiring new regional sales reps, you can actually focus on improving your onboarding to service customers around the world in a fraction of the time. So that's one of the other big factors that plays into building a dominant growth engine for your business.
Wes Bush:
And the third one that's really interesting is when you start looking at how you're growing. Is it compound or linear growth? And I'll explain them in a bit. When we think of a sales-led company, for example, your main lever of growth is hiring new sales reps. So for every additional sales rep, you hope you're going to get a certain bump in revenue. Whereas in a product-led business, you might only have a 1% month over month increase in your free to pay to conversion rate, but that growth compounds without necessarily investing a lot more into the business. And in a product-led business, your growth isn't dependent on adding more head count. It's actually dependent on how methodical you are about building your growth engine. Now, as a business, this means you can operate more efficiently and pay top wages to retain the best talent.
Wes Bush:
Let me just give you an example of this. In 2020, at the height of the COVID-19 pandemic, millions of businesses were forced to figure out how to operate virtually over night. Had Zoom not had a product-led model during the COVID pandemic, there was no way it would have been possible for them to go from 10 million to 200 million daily active users in just three months without spending a fortune on hiring countless sales reps. Can you even imagine how many demos Zoom would have to do per day to close and get those 190 million daily active users during that three month period? So, because I was curious, I did the math for you. If Zoom gave everyone a demo, they'd have to do over two million demos per day, and that is, yes, including weekends. So if they had a sales force that didn't mind not doing anything on the weekends except demos, and they did 16, 30 minute demos every single day of the week, they would still need a sales force of 131,944 people.
Wes Bush:
Now, that's a lot of sales folks and that's a lot of overhead to cover. Even if Zoom did pull that off, you would be footing the bill for that expensive sales organization. And here's why. Because the more expensive it is for you to sell something, the more expensive it is for someone to buy. And that's actually one of the other core, main MOATs of building a product-led business, is that you can actually operate more efficiently than your competitors, because, well, I'll get into in a bit, but you can save a lot of money when it comes to helping people experience the value of your product. So I say all this, this is the second most important benefit of product-led growth is just capital efficiency. And this is all pale in contrast to the fact that, well, your customer acquisition costs have actually, and are still, increasing for the last five years.
Wes Bush:
But actually, for many product-led businesses, they've seen a significant reduction in their customer acquisition costs. And this isn't because their marketing channels are getting more affordable. Just take a company called Vindasta as an example. When they were purely a sales organization, their acquisition costs were hovering at $12,000. Now, their customer acquisition costs hover around $3,000. Just imagine what your business could do if it saved $9,000 on acquiring each customer. You could put more money into R&D, you could recruit the best in class talent, or even create a company wide profit sharing and have more higher retention for employees. And this is largely because they're saving a mountain of cash by handholding their users less. Instead, they're actually investing a lot of this capital in creating a better user and product experience that helps users see the value from the product without talking to anyone.
Wes Bush:
And instead of hiding their pricing behind a conversation with a junior sales rep, they're actually putting together a pricing page that helps users self select which plan will work best for them. So people can quickly know in under five to 10 seconds which plan they're going to choose for your product, and that's the end of the pricing discussion for them. All of this leads to faster sales cycles and building trust much faster than you could typically do in a more sales-led organization. Because remember, at the beginning, when you show people the value of your product, they are convincing themselves why they need your products. Whereas when you're simply just telling them about the value of your products, you have to spend a lot more time building trust, because you're trying to convince them why they need your product. And that, my friend, is more risky to them because they don't actually know at the end of the day if your product can deliver on its value or not.
Wes Bush:
And all of this cost savings leads to having a business that can have a very high revenue per employee. There is Ahrefs in Singapore. They have 50 million in a recurring revenue business with just 50 employees. And same thing with ConvertKit. They're doing equally amazing things with focusing on growing a sustainable growth engine for their business while not necessarily having to increase the amount of employees. Because, once again, it comes back to they're not focusing on linear growth, where you have to add more sales reps to grow your revenue. You can grow more methodically than that. And so to really recap here, here are the main benefits of product-led growth. What's your main motivation behind becoming product-led? Well, it's great to take a second to review these benefits here. I encourage you to complete the worksheet for this lesson to really map out what your main motivation is behind potentially becoming product-led.
Wes Bush:
All in all, there is a lot of reasons why companies make the jump to being product-led. But it's honestly not for everyone. As Rob Walling, former CEO of Drip, would say, "Freemium is like a samurai sword. If you don't know what you're doing, you can cut your arm off." And as your guide, I just can't let that happen. Arms are pretty useful things, aren't they? Now, in the next lesson, I'm going to break down a decision framework that will help you decide whether you should be product-led or not. I'll see you in the next lesson.
