The 6 Engines of Product-Led Growth
The massive growth of SaaS-companies is not just based on a freemium model. Behind it lies more...
Hello friend 👋
Product-Led Growth (PLG) is being hyped quite a bit right now. In my role as Strategic Product Lead at Staffomatic, I wanted to take a closer look at it.
It quickly became clear to me that I was starting with a completely different understanding of PLG than how it is defined in most sources.
It seems to be common sense that PLG is essentially a freemium model.
However, I came to conclusion that PLG is not only freemium. I believe that successful PLG companies have become big through several different effects. I call these "PLG engines"
Together they define a product-led growth flywheel (PLG Flywheel)
In this post, I present my research findings and give you practical tipps on how to create a PLG motion yourself.
So what can you take out of this post?
👉 An overview of different PLG-Engines
👉 Examples how famous companies used these engines
What is Product-Led-Growth (PLG)?
In classical Sales-Led Models, the product provides a solution. Marketing & Sales are responsible for distributing this solution. In this world this means: Remove Marketing & Sales, and your customer growth immediately stops.
With Product-Led Growth, the product itself becomes the marketer and distributor. It is designed in such a way that the product can independently generate leads, activate them into users and ultimately convert them into customers.
I follow the simple and clear definition of OpenView:
“Product-led growth (PLG) is a growth strategy where the product itself acts as the primary driver of acquisition, retention, and expansion”
What Product-Led Growth is not
As some sources suggest, Product-Led Growth is not an organizational model, where the product is at the center of the organization’s thinking and actions. The problem with this definition is that this would only move more resources to your product without answering how features contribute to growth.
Also, Freemium is not (exclusively) Product-Led Growth. It is one of many instruments how you can achieve product-led growth.
Product-Led Growth Engines
Besides Freemium, there are different methods how a product can grow the user-base by itself. If several engines are linked together in a meaningful way, a PLG flywheel can result.
How Do I know if I have PLG-Engine?
I’ve found that this leading question is helping to answer if there’s a product-led growth engine in your product:
“Could you acquire a significant amount of new users if you’d have zero activity in marketing and sales?”
If the answer is “Yes”: You probably have one or more PLG-Engines in place.
If the answer is “No”: You are Sales-Led. You can’t grow without investing in Marketing & Sales.
The Six Engines of Product-Led Growth
1️⃣ Freemium
Freemium is a model in which the basic product is offered free of charge (in reduced capacity or reduced features), while the full product and extensions are chargeable. The idea behind this is to “active the user first” and charge money if she is convinced.
Typically individuals solving own problems and promote this later to bigger teams.
2️⃣ End-User Involvement
Someone buys the product and introduces it to your company. The product then get’s used by many people within the company on a daily basis. When end-users are switching jobs they might be the promoters of this product. (“We worked with XY in my old company. So let’s use it here.”)
This PLG-Engine has the potential to bring in a lot of growth, but not explosive, immediate growth. End-users must first use the product themselves for a while and get into the situation of introducing it somewhere themselves.
How can this PLG engine be expanded? By thinking about the product experience not only from the perspective of the buyer, or the team, but of the individual end-user.
3️⃣ Content Operating Systems
Non-Users interact with the product through the created content on that product. So this is a working engine of products which enable people to create/ share things.
This is a very strong PLG-Engine, especially when combined with a Freemium Model.
The product has high advantages for the creator (user) but has less relevant advantages for the consumer (non-user). That’s why these PLG-engine typically needs a “powered by”-Slogan which you can remove in a premium plan.
Example how this works: I don't care whether I consume my content on Medium, Substack or Notion. But when I want to create content myself, I will remember which platforms I have consumed content on.
4️⃣ Co-Experience
This might be the PLG-engine which can create the fastest growth momentum of all.
In difference to the “Content Operating System” the user is not only consuming something which was created with the product, they co-create the outcome with your customer.
You get the “AHA-effect” immediately.
Calendly: “Wow, I never scheduled a meeting so easily.”
doodle: “Wow, what a good method find group meetings.”
Zoom: “Wow, what a smooth video call … and these fancy backgrounds!”
DocuSign: “Wow, the sign-off process was never so easy.”
5️⃣ Usage Observation
Have you ever seen an ad of the online game “Among Us”? Probably not, because they’ve never done one. But here comes the crazy fact: Among Us has grown their user base by 1.600 % in 8 Months! How did they do it? The answer is the PLG-Engine “Usage Observation”.
This is how it works: I don’t interact with the product, but through the usage of others I get exposed to it. Essentially, I see the product (in usage) and my curiosity is aroused: “What is this? This looks interesting!”. With successful growth, this effect becomes stronger: "I see this everywhere now. Something must be good about it!”.
6️⃣ Free Promotion
In this PLG engine, your product produces a result or experience that is shared with the world by your users.
Usually, a basic need is adressed here, e.g. recognition, pride … or just sharing your excitement.
Product experience (Enthusiasm): “I’m stunned how amazing this experience is”
Food/ Travel experience (Social Status) “I experienced something that I care about”
Personal Achievement (Pride) “I achieved something that I care about”
Product Achievement (Trust) “I achieved something that you care about”
Interesting fact: The entire certification industry is based on this PLG-Engine.
🌀 The PLG Flywheel
When I looked at all the example companies, I quickly became aware that the most successful ones always use a combination of different PLG-engines:
They generate new leads organically by acquisition engines such as End-User Involvement, Content Operating System, User to Non-User Functionality, Non-User Observation and Free Promotion.
They convert new leads into users easily by lowering the barriers to using the product through a freemium model.
These free users convert into convinced customers and (here’s the magic!) fuel the acquisition engines from step 1 again.
Example: Miro’s PLG Flywheel
With a valuation of $ 17.5 billion Miro is a prime example for product-led growth. According to techcrunch, miro has grown it’s user base by 500 % in 2020-2022, from 5 million to 30 million users!
Let’s have a look at their Miro’s PLG Engines.
1. End-User Involvement: Miro has 130.000 clients, but they have more than 35 million users! Each client has 269 users. This impressive ratio shows how quickly the product was able to spread among end users through habituation effects.
It happens too often in software, that you focus all your efforts on the buying user. Here’s the lesson:
See every user as a potential multiplier.
If you incorporate this mindset, it will move your prioritization decisions into new directions.
2. Co-Creation Experience: What was the typical first touchpoint to Miro for every User? Very rarely was it an advertising campaign, much more often it was an invitation to a board by an existing user. Boards are created together in the context of creative processes such as workshops, strategies or retrospectives.
3. Content Operating System: The community of Miro creates thousands new boards every day. The best templates are curated and will then be consumed by non-users which find them via google.
4. Freemium: All of the above engines spark the interest of new users to Miro. Now the power of the freemium model comes in place: Freemium lowers the entry barrier to sign up. At the same time, freemium users fuel the other engines: new content is created, team members are invited, and so on.
This all together creates a beautiful symphony of product-led growth.
Final Thoughts
I have the feeling that there’s much more in the Product-Led Growth space which we haven’t really discovered yet. Let’s explore it together! 👨🚀
If you have comments or questions to this, feel free to comment or send me an DM at Linkedin. 🤙
Icon Attributions: Sir Vector, Canticons, Nuricon, Freepik
One of the best article about PLG engine. Thanks for sharing.