The ABCs of Product-Led Growth: A Glossary of Terms

You probably know what product-led growth is by now, but do you know all those little nitty gritty terms you need to know to be fluent in product-led speak?

Maybe you do -- but I bet there's at least a few people in your organization who could use a helping hand getting up to speed.

We've listed the ABCs of Product-Led Growth terms below to help you map out your product-led strategy  and ensure your team is all on the same page.

Have fun diving in to this glossary of terms -- and if we missed any, leave your definitions in the comments below!

A

Annual Contract Value (ACV) is the average annualized revenue per customer contract. It excludes any one time fees. (source)

Average revenue per user measures the amount of money that a company can expect to generate from an individual customer. It’s calculated by dividing the total revenue of the business by its total number of users. (source)

Ability debt is the price you pay every time your user fails to accomplish a key outcome in your product. 

B

Blue Ocean companies access untapped market space and create demand, and so they have the opportunity for highly profitable growth. In Blue Oceans, competition is irrelevant. Yes, imitators arise, but experience shows there is a wide window of opportunity to stay ahead of imitators.

Bottom-up selling is the norm in the consumer market. Take Facebook, Twitter, or Evernote: each created a product that can be adopted in minutes. Unlike the top-down selling strategy, where it might take months or years to close a sale (and another year to understand how to use the product), bottom-up selling strategies demand quick adoption and simplicity. 

Best Judgement Pricing is when you and your team decide your price based on what you think would make a reasonable price.

C

Customer Acquisition Costs (CAC) is the cost of convincing a potential customer to buy a product or service. (source)

Cost-Plus Pricing works when you calculate the cost of selling and delivering the product, then add a profit margin on top. 

Competitor-based pricing is when you benchmark your pricing off of your competitors. 

D

Dominant growth is when you can do something much better than your market and can charge significantly less.

Differentiated growth requires you to do a specific job better than the competition and charge significantly more. This is not a one-size-fits-all model.

Disruptive growth is when you charge less for what many might consider an “inferior product.” Most people think this is a bad idea, but it’s not.

Conversational bumpers work to educate users, bring them back into the application, and eventually upgrade their account.

E

Emotional Outcome: how customers want to feel or avoid feeling as a result of executing the core functional outcome.

What we deliver in our product is the experienced value. 

F

A free trial is a customer acquisition model that provides a partial or complete product to prospects free of charge for a limited time.

A freemium model is a customer acquisition model that provides access to part of a software product to prospects free of charge, without a time limit.

Functional Outcome: the core tasks that customers want to get done.

A First-Run Onboarding Experience is the first time a user goes through your onboarding experience. 

G

A go-to-market (GTM) strategy is an action plan that specifies how a company will reach target customers and achieve a competitive advantage.(source)

L

Lifetime Value: (LTV) tells companies how much revenue they can expect one customer to generate over the course of the business relationship.  (source)

M

A Marketing Qualified Lead (MQL) is a lead who has indicated interest in what a brand has to offer based on marketing efforts or is otherwise more likely to become a customer than other leads. 

P

Product-Led Growth is a go-to-market strategy that relies on using your product as the main vehicle to acquire, activate, and retain customers.

Product bumpers are mission critical. They help users adopt the product within the application itself. 

What we promise in our marketing and sales is the perceived value.

A product qualified lead (PQL) is a lead who has experienced meaningful value using your product through a free trial or freemium model.

R

Revenue Per Employee (RPE) measures the average revenue generated by each employee of a company. (source)

S

Sales-Led GTM is when you rely on your sales team to close every single deal in your pipeline. You have no self-service offering.

Social Outcome: how customers want to be perceived by others by using your product.

A sales qualified lead is a prospective customer that is ready to talk to a sales team. Typically, this lead has expressed enough interest in your product or service, that they're ready to move into your sales process. Usually, they've been researched and vetted by your marketing department and then handed off to your sales team.

T

Total addressable market: (TAM) is the overall revenue opportunity available or foreseen for a specific product or service, taking into account the future expansion scenarios. (source)

Top-down selling is when your sales team targets key decision makers and executives. Typically, these deals include large product rollouts throughout an entire business.

R

Red Ocean companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for profits and growth reduce. Products become commodities, and cut-throat competition turns the bloody ocean red.

U

UCD framework stands for Understand, Communicate, and Deliver your value. Each element is a pillar in building a successful product-led foundation.

V

Value metric: A value metric is the way you measure value exchange in your product.

Value Gap: If you fail to deliver, your user experiences a nasty value gap.

Value-based pricing bases your price on the value you provide. You determine this by taking into account how prospects value your product.

What are some other core product-led growth terms you think should make this list? Share your suggestions (and definitions) in the comments!

Wes Bush
Wes Bush
Wes Bush is the bestselling author of Product-Led Growth. He’s a renowned Product-Led Growth pioneer and has challenged an entire industry to find a better way to approach SaaS growth.
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