3 tactics for product led growth
Product led growth is the idea that you put the end-user first, deliver value before you capture value, and you invest in the product with a go-to-market intent.
Earlier this year, I wrote about three things product managers need in 2021 to succeed: purpose, wartime, and product led growth. Now, let’s take a closer look at what could drive product led growth for a SaaS company serving SMBs.
This post was originally written for the Mono Solutions blog.
Product as a growth lever
The way product led growth works is quite simple. Imagine a campaign brings you 100 new customers. What you need to figure out is this: How do you get as many of those 100 customers to bring in new customers for you?
Let’s imagine that you find that magic mechanism that makes half of the customers you acquire bring in 1 new customer each. See the chart below.
The first campaign gets you from 0 to 100 customers. Those 100 customers bring in 50 new customers, who in turn bring in 25 new customers etc. This mechanism means that from the first campaign you get around 196 new customers in total— almost double what the initial marketing push brought! As you see the patterns keep repeating for each campaign.
Of course, your mileage may vary and it’s very possible that your scenario is completely different than what was outlined above. Maybe you get 10% of the customers to bring in 2 new customers each. But the mechanism stays the same: a product driving growth serves as a multiplier to your marketing efforts. Can you afford not to try to achieve that?
3 ways to drive product led growth
For most, it’s far from simple to figure out a magical mechanism for product led growth. Here are a few multi-purpose ideas, that may be useful in your line of business.
Reward sharing with a better product
Dropbox is famous for achieving product led growth by offering its customers additional storage for each customer they bring in. The Dropbox referral program enables users to increase their storage with an additional 500 megabytes for each friend they invited. And in 2017, Dropbox announced that it had reached $1 billion in revenue — faster than any other SaaS company at the time. It’s fair to say that the product led growth strategy paid off.
To repeat the success Dropbox saw from rewarding sharing with a better product, the problem you’re solving should be easy to scale. Storage is very easy to understand, most people will need more than the 2GB for free as time progresses and thus people will keep having an incentive to want more storage and thus share. Easy to scale benefits could be interruption-free streaming, access to premium features, or access to reporting and insights.
Collaboration
Another way to drive product led growth is by enabling collaboration on your platform. By sheer nature, collaboration tools require users to invite their colleagues, customers, network, friends, and the like to get the full value of your product. A few examples of tools enabling collaboration could be Google Workspace (Drive, Docs, Sheets, Forms, etc.) or GitHub where millions of developers build, ship, and maintain their software.
If you think about it, most things require collaboration. Accounting software, marketing technology, website builders, you name it. They all require people in different roles to collaborate whether it’s accountants and CFOs or marketers, copywriters, and photographers. All needs for collaboration or sharing of work are opportunities for collaboration and thus product led growth.
Tupperware: Target businesses with customers themselves
A third way to drive product led growth would be to choose a target audience that themselves target someone with a need for your product. This approach has been made famous by Tupperware who in the 1950s enlisted housewives to sell plastic storage containers to their friends at the so-called Tupperware Home Parties — clever because it rewarded the customers financially and got them to bring more customers in.
If you are working in the B2B SaaS space, you can adopt the idea and think of targets in segments that themselves have customers in need of your solution. If you’re doing accounting software, one way to start would be to get accounting companies to use your solution for their business, and if you’re building marketing technology a good place to start would be to target marketing professionals as your first vertical.
If you are looking for ideas for verticals to target, the growing force of freelancers might be just what you are looking for. In a recent study amongst freelancers from April 2021, Localogy and Mono Solutions found that 62% say they recommend software solutions to their clients, notably websites (35%), accounting (27%), and marketing (25%).
