The "upgrade path" mentioned here, step 3, is where I'm getting bogged down with conversion of free to paid. Need more bells and whistles- good thing I'll be releasing a podcast soon! Thanks for this in-depth article Lenny.
I’ve seen PLG crash and burn for a exactly the reasons mentioned in the article. For me, the most important step is making sure the metrics tracking is accurate. Further, product usage has to be automatically piped to sales for PQLs.
Hi Hila, I'm unable to listen to the article on Substack. It's starting but getting stuck soon -- I've been listening to many other articles and they're working just fine. Could you please check the audio file for this piece? Would love it if I can listen to it and beat the traffic blues 😅
Hey, Sachin from Substack here. If you're game, email me a screenshot from the app where the player is getting stuck? We'll take a look. sachin@substackinc.com
Thanks Sachin, but it's not any one place. It's just playing like a broken record and after many pauses/gaps, it stops. If you press play again, it reloads from start, and the same thing happens. Try listening in the Android app (just this one -- others are loading fine) and see if it's true for you too or just me
Nice post. You mention that "PLG is probably the only viable way to grow efficiently given the low average customer value". I'm curious if there is quantitative data comparing the relative values of prosumer vs enterprise customers. Is an enterprise customer 2x as valuable as a prosumer customer? Much more than that (e.g. 5x or even more)? Appreciate any thoughts.
This is an excellent question. While these numbers might change with inflation, but in general,
Enterprise companies average contract value is greater than $100K;
Mid-market companies span $10K-$100K;
SMB companies generate less than $1k to $10K per year per customer;
For prosumer, I would guess between $100 ~$1k
This impacts your growth strategy prefoundly, with Enterprise, you can afford hiring expensive sales team and paying commission. But that is changing because it is harder and harder to do direct cold sales with Enterprise and PLG product is "cheating" the system by acquiring prosumer and then getting to companies & enterprise
Thanks so much for the detailed reply, really appreciate it! The differences are massive which makes sense. Definitely makes one want to think long and hard about positioning and what kind of product/which kind of customers you want to go after.
Thank you very much for the great reading. I enjoyed it and benefited from it very much.
Have a quick question if that's ok. I would appretiate a lot if you could drop a few words as an answer. I have a product with cost-per-transaction monetization model plus my product is a combo of digital tools and offline service (impact of which is quite big). May you know of any successful adoption of PLG for similar products?
Hi Maria, this is a great question: does product-led growth apply to non-digital/offline product?
I think the core growth principles and methods apply to any product: identify key metric, design experiments, measure progress via data, but the main hurdle offline product faces is the difficulity to collect data and launch experiments, and to reach a large user pool quickly.
But I think you can still apply many PLG strategy into part of your business creatively, a few examples came to mind:
1. Airbnb: they did a lot of "offline growth experiments" in the early days on photographers and around popular conferences/events. @Lenny probably knows more.
2. Lululemon: the "Lululemon" logo behind every yoga pants is a viral loop, they also offer special discount to Yoga teachers to seed the loop. They all also very sophiscated with their ecommerce channel
4. Casper Matrress: they are very data-driven, did a bunch of experinments to encourage sharing after opening box, and also test a lot on their checkout flow https://www.heap.io/customer-stories/casper
Amazing article!! Thanks a lot for sharing. I want to ask. In step 2, "Pick a starting point," there is no description for the last category of "Product-led retention/expansion." Is it intentional?
Michal, great question! I explained a little bit in the post, I didn't go deep mainly due to the complexity of these 2 areas. Product-led retention/expansion is very important, but it usually requires deep understanding of use case + usage data, building habit loops/upsell paths, structure pricing tiers right. These 2 are very important PLG focus areas, but they are usually not an ideal starting point, comparing to acquistion, activation and conversion, it is harder to find "quick wins". Plus if you nail activation and conversion, you usually gain a lot of understanding of how to drive retention and expansion too, because many insights and tools are similar.
Since the post is already super long, I decided not to include them in this one - maybe a part 3 will cover them in the future:)
Excellent read. Thanks for putting it together..
Glad you find it helpful!
The "upgrade path" mentioned here, step 3, is where I'm getting bogged down with conversion of free to paid. Need more bells and whistles- good thing I'll be releasing a podcast soon! Thanks for this in-depth article Lenny.
🖕
I’ve seen PLG crash and burn for a exactly the reasons mentioned in the article. For me, the most important step is making sure the metrics tracking is accurate. Further, product usage has to be automatically piped to sales for PQLs.
Exactly - my hope is that sharing these challenges/traps can prevent some PLG crash and burns!
What is PLG?
I should have been clearer about this in the title: Product-led growth
Agreed - lessons learned :)
Didn’t read this until now
Hi Hila, I'm unable to listen to the article on Substack. It's starting but getting stuck soon -- I've been listening to many other articles and they're working just fine. Could you please check the audio file for this piece? Would love it if I can listen to it and beat the traffic blues 😅
How are you listening to this? We don't have an audio version in the post.
From the listen button on the post in the Substack app (right on top)
oh wow didn't even know that was a thing!
Unfortunately don't think we can do anything to make it work in this case, no idea what's wrong.
Cool, thanks for checking. I'm anyway reading it and I'm half done. It's brilliant 😍
Hey, Sachin from Substack here. If you're game, email me a screenshot from the app where the player is getting stuck? We'll take a look. sachin@substackinc.com
Thanks Sachin, but it's not any one place. It's just playing like a broken record and after many pauses/gaps, it stops. If you press play again, it reloads from start, and the same thing happens. Try listening in the Android app (just this one -- others are loading fine) and see if it's true for you too or just me
Nice post. You mention that "PLG is probably the only viable way to grow efficiently given the low average customer value". I'm curious if there is quantitative data comparing the relative values of prosumer vs enterprise customers. Is an enterprise customer 2x as valuable as a prosumer customer? Much more than that (e.g. 5x or even more)? Appreciate any thoughts.
This is an excellent question. While these numbers might change with inflation, but in general,
Enterprise companies average contract value is greater than $100K;
Mid-market companies span $10K-$100K;
SMB companies generate less than $1k to $10K per year per customer;
For prosumer, I would guess between $100 ~$1k
This impacts your growth strategy prefoundly, with Enterprise, you can afford hiring expensive sales team and paying commission. But that is changing because it is harder and harder to do direct cold sales with Enterprise and PLG product is "cheating" the system by acquiring prosumer and then getting to companies & enterprise
I also loved this post from Chris about Elephant and Mouse which was written many years ago http://christophjanz.blogspot.com/2014/10/five-ways-to-build-100-million-business.html
Thanks so much for the detailed reply, really appreciate it! The differences are massive which makes sense. Definitely makes one want to think long and hard about positioning and what kind of product/which kind of customers you want to go after.
Thank you very much for the great reading. I enjoyed it and benefited from it very much.
Have a quick question if that's ok. I would appretiate a lot if you could drop a few words as an answer. I have a product with cost-per-transaction monetization model plus my product is a combo of digital tools and offline service (impact of which is quite big). May you know of any successful adoption of PLG for similar products?
Hi Maria, this is a great question: does product-led growth apply to non-digital/offline product?
I think the core growth principles and methods apply to any product: identify key metric, design experiments, measure progress via data, but the main hurdle offline product faces is the difficulity to collect data and launch experiments, and to reach a large user pool quickly.
But I think you can still apply many PLG strategy into part of your business creatively, a few examples came to mind:
1. Airbnb: they did a lot of "offline growth experiments" in the early days on photographers and around popular conferences/events. @Lenny probably knows more.
2. Lululemon: the "Lululemon" logo behind every yoga pants is a viral loop, they also offer special discount to Yoga teachers to seed the loop. They all also very sophiscated with their ecommerce channel
3. Squre card reader: they have a growth team, and actually did a bunch of experiments on the recepits printed out (copy, offer etc.)to drive deeper adoption https://producthabits.com/how-square-became-a-30-billion-company-by-reimagining-payments/
4. Casper Matrress: they are very data-driven, did a bunch of experinments to encourage sharing after opening box, and also test a lot on their checkout flow https://www.heap.io/customer-stories/casper
Amazing article!! Thanks a lot for sharing. I want to ask. In step 2, "Pick a starting point," there is no description for the last category of "Product-led retention/expansion." Is it intentional?
Michal, great question! I explained a little bit in the post, I didn't go deep mainly due to the complexity of these 2 areas. Product-led retention/expansion is very important, but it usually requires deep understanding of use case + usage data, building habit loops/upsell paths, structure pricing tiers right. These 2 are very important PLG focus areas, but they are usually not an ideal starting point, comparing to acquistion, activation and conversion, it is harder to find "quick wins". Plus if you nail activation and conversion, you usually gain a lot of understanding of how to drive retention and expansion too, because many insights and tools are similar.
Since the post is already super long, I decided not to include them in this one - maybe a part 3 will cover them in the future:)
This makes sense, and also doesn’t apply to regulated spaces like fintech.
🖕
You can reach out to me on Linkedin!