Our product led growth
Without leads there is no business
It had taken me two years of daily effort to design, build and launch my first app. Conxy is a game which I describe as Titris meets Candy Crush. I launched it onto Apple’s AppStore using the freemium pricing model, i.e. free to play with optional in-app purchases. Would anyone download and play it? I was not sure. To my surprise and delight, within 3 weeks, 4,000 people did. The day I got my first 99p in-app purchase, I was ecstatic. It worked.
I draw upon the ideas shared by Wez Bush in his book Product Led Growth.
Product or sales led growth?
A product led business grows by allowing potential customers to try the product for free before they buy. Either a free trial of part (or all) of the product is offered for a limited time or free access to part of the product with no time limit (the freemium model). A product led business uses the product itself as the main vehicle to acquire, activate and retain customers.
By contrast, a sales led business grows by engaging potential customers via a sales cycle, including a hands on product demo. Sales led growth is often required to secure large value customer contracts or address hyper-niche and new markets. Customer churn rates tend to be low.
Product led businesses tend to grow faster and have lower customer acquisition costs, but is not always the best choice. The MOAT framework can help decide whether a product led or sales led growth strategy is most appropriate. If product led then whether to offer a free trial or freemium (or a hybrid combination). The MOAT framework looking at our Marketing strategy, Ocean conditions, Audience and Time to value.
Our marketing strategy can be considered across two dimensions: 1. How well our solution gets the customer job done, 2. Whether we charge more or less than alternatives. We can consider the most suitable growth strategy (free trial, freemium and demo) for the following marketing strategies:
Differentiated strategy (Job done better and charge more): Addresses underserved customers. Demos and free trials work well.
Dominant strategy (Job done better and charge less): Address all types of customers, e.g. Netflix and Uber. Free trial and freemium work best, to keep costs low.
Disruptive strategy (Job done worse and charge less): Address over-served customers, eg Canva. Use free trial or freemium.
There are two ocean conditions to consider:
Red ocean: Try to outperform competitors to grab a greater share of existing demand. Use a product led model to widen our funnel and convert non-customers.
Blue ocean: Access untapped market space and create demand. Complex products require a sales led strategy to educate and create demand, e.g. Salesforce.
Whose attention are we trying to gain initially with our product?
Top down (selling to those at the top of an organisation). Sales led strategy is best.
Bottom up (selling to users). Slack starts with one user who invites colleagues and eventually the business invests in adding everyone. Product led strategy is best.
Time to value
For a product led strategy, quick time to value is key. New users need to be able to experience a key outcome in the product quickly and without direct assistance.
Building a product led business
Product led growth requires a testing mindset that’s very different from the sales methodology mindset. - Carilu Dietrich
To build a product led business we need to understand, communicate and deliver value to customers.
Understand our value
We need to focus on the outcome or benefit customers are seeking to achieve by using our product. These fall into three categories: 1. Functional outcomes are the core tasks that customers want to get done, 2. Emotional outcomes are what you want your customer to feel, 3. Social outcomes are how customers want to be perceived by others. Monitoring usage patterns helps determine if customers achieve these outcomes. Value metrics help and come in two types: Functional based, e.g. Slack messages sent, and Outcome based, e.g. PayPal customer revenue generated. A good value metric is easy to understand, aligns with the value that the customer receives and grows with the customers usage of that value. Charging per user is common apps, but often not the right value metric as it’s often not where the value is ascribed to the product. Use data analytics to see what best and churned customers do differently.
Communicate our value
Product led businesses need to communicate their perceived value effectively which is closely tied to pricing. A pricing page, based on our chosen value metric, should be presented up front and pass the 5 second interpretation rule, i.e. customers rapidly understand how it applies to them. The Secret to App Pricing post outlines pricing options and advocates value based pricing for apps. A fine balance needs to be stuck to ensure free trials/freemium offers enough value, but not so much that there is no incentive for many users to upgrade to the paid offering.
Delivered value should align closely with perceived (or expected) value. We need to understand why customers want to use our product and deliver against expectations. Monitoring customer engagement with our product, we can note key outcomes they want to accomplish, offer a helping hand and clear the path to improve the product.
Product Led Growth Framework Masterclass by Wez Bush
Scorecard Marketing book by Daniel Priestley
GTM 101 posts by Myk Pono
Conxy opened up the world of product led thinking to me. If you’d like me to write more about product led growth then I’d love to hear from you.